The best way to define the bottom-up approach economy is by contrasting it with trickle-down economics. Trickle-down postulates that if you grow the economy, even if it favors the top one 1% including big companies, the expectation is that the benefits will ultimately flow to the lowest part leading to economic growth and employment in general economy. Bottom-up is where you create economic rules focusing on the bottom end, in terms of the common citizen.
The bottom-up approach, has very little to do with the government or politicians providing goodies to the public but creating an enabling environment for the small and medium enterprises to thrive. This includes coming up with policies that decriminalise small traders; reduces the burden of taxation to SMEs; allowing small businesses, especially the millions in the informal sector, access cheap credit from financial institutions.
While the bottom-up approach is ideal, it will take some time before it takes shape. For it to work, there is need for change in the mindset of policymakers such as Treasury mandarins who believe that the economy is just about the modern sector, the industries, and banks. Those are the guys whose views determine the government policy to a large extent. Additionally, because the bottom of the pyramid comprises largely the informal sector, who do not have security to access credit, the government need to underwrite their loans so that banks can give them loans without fearing that they might default.
The bottom-up approach cannot be implemented in a country where there is high inequality with those at the bottom lacking the skills to even manage their own businesses. The majority of the people at the bottom, are quite miserable financially. They don’t have even skills of initiating and managing small-scale businesses, something that requires a lot of public awareness and civic education.
With political will, the trickle-down economics can be restructured by creating a layer in the middle and try to pump resources from where they can be able now to jumpstart the economy as a plane that is accelerating to take off and then the fruits will start trickling down. When you talk about bottom-up economics, the government largesse is delivered to the bottom-end of the economy. Which might not allow for the efficient allocation of resources.
The government, should not directly confer benefits and, in any case, should get out of business, as it is not good at efficiently allocating resources. There is a consensus even among the political class that there is a need to focus on the ordinary citizens, most of whom make a living in the ubiquitous informal sector. Unfortunately, most of those in these businesses have not been able to share in the national cake with the government, channelling most of its money to mega infrastructural projects in which small businesses and individuals have had no stake.
Failure to address the issue of corruption, sees policymakers continue to be obsessed with the large infrastructural projects which have decent kickbacks. One of the most effective ways of bottom-up is simply, making credit cheap and available so that the common citizen doesn’t need a million collateral documents to secure credit. The government of the day can come up with a policy in which banks undertake to lend a certain fraction of their money to SMEs as a condition of setting shop in the country.
Some people say that the surest form of bottom-up approach is devolution whose aim is to ensure that resources were channelled from the national government to the grassroots. Devolution is the only tax that the government pays to a third party other than debt repayment. It is compelled to pay it by the constitution or legislations. In any government there need to be some sort of mixture of a trickle-down and bottom-up approach.
For example, rural electrification in which homes and businesses in the rural areas are connected to the national grid can help those at the bottom in a major way. The bottom-up approach has been very popular in a lot of Asian countries. In the US, there is a divide in the Democratic Party where there is a faction that favours some kind of building from the middle, while there is the low-tax, pro-business wing.
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