Plenty of people are willing to describe themselves as ‘neoliberals’, but very few are willing to admit supporting policies based on ‘trickle down economics’. The term was coined by Democratic strategists in the 1980s to attack the idea that tax cuts for the rich would generate prosperity for everyone else.

Handing money to the rich in the form of tax cuts, while millions struggle to pay their rent and bills, in the vain hope that it will eventually generate prosperity for everyone else has never been a very popular policy idea. The term ‘trickle-down economics’ has, therefore, become a very popular attack line. And this is precisely why most neoliberals hate it.

‘Trickle-down economics’ is, they argue, a misleading term. The idea behind providing tax cuts for the rich is not to allow them to purchase more goods and services, nor to allow them to increase wages to augment the incomes of everyone else. The link between growth and tax cuts does not flow through higher consumption, but through higher investment. And investment is supposed to be good for everyone.

Private investment generates higher employment as businesses take on new workers when expanding production. Higher employment means higher consumption, which in turn supports production in a self-reinforcing cycle of rising economic growth.

But private investment does not simply increase consumption through higher employment; private investment is the basis of long-term economic growth in any capitalist economy.

Investment is the foundation of innovation. Innovative new technologies can help us to achieve anything from increasing efficiency of production, to providing ingenious new ways to tackle social problems like ill-health and climate breakdown, to simply developing desirable new products that meet human needs.

And in class-divided societies, this investment is undertaken by the heroes of the capitalist mode of production—entrepreneurs.

The early twentieth century political economist Joseph Schumpeter saw entrepreneurs as a higher calibre of human being—the heroic risk-taker who dragged society forward, kicking and screaming, into the future. The reward for these efforts is profit.

In Schumpeter’s model, which represented an important departure from previous models of general equilibrium, entrepreneurs should be able to generate temporary super-profits from their inventiveness. These profits derived from the market power a successful entrepreneur gains when they are the first to develop and roll out a new innovation.

Ultimately, however, such super-profits would always be temporary. If the business did not continue to innovate, new entrepreneurs would come along and eat away at the incumbent’s market share, ensuring that no one firm was able to dominate any market for too long.

Without these temporary super-profits, capitalism would stagnate. Entrepreneurs would have no incentive to invest, and innovation would simply stop. Schumpeter was concerned that the drift towards socialism he saw during his time would lead to the collapse of capitalism—not from the self-conscious organisation of the working classes, but through the crushing of the entrepreneurial spirit.

Taxes on corporate profits, and on the incomes of the wealthy (which are more likely to derive from investment than from labour), are some of the factors that are supposed to represent an impediment to innovation. If you knew that your profits would simply be taxed away were your project to be successful, then why would you take the risk of investing in the first place?

This is the argument that neoliberals make for tax cuts: that, without them, our economy would simply grind to a halt.

There’s just one problem with this argument—it has been proven entirely false by decades of empirical evidence. As a recent report from IPPR has shown, the UK continuously woefully underperforms its peers when it comes to rates of investment despite several decades of cuts to corporation tax.

And this is hardly surprising, because the Schumpetarian framework does not apply to the UK economy.

Our economy is not characterised by a large number of plucky entrepreneurs coming up with new innovations and bringing them to market before being outcompeted by new entrants. Our economy is characterised by pervasive rentierism and market power.

The UK’s largest markets are dominated by several massive firms—and largely the same firms that dominated it ten to twenty years ago. These firms often have some market power and preferential access to credit, as well as close links with the state, which mean they’re able to buy up or crush new competitors before they pose a threat.

Many of those markets—from finance and real estate, to commodities, to utilities—are characterised by extraordinarily high barriers to entry and pervasive rentierism. Many of the ‘innovations’ that are developed in these sectors have huge negative impacts on the rest of society.

Tax cuts that are designed to benefit these corporations and their investors simply exacerbate the problem that underlies the low levels of productivity in the UK economy: too much money stuck at the top.

There is little incentive to innovate in an economy like ours, when those with all the wealth and power can generate far higher returns by enclosing resources like land, housing, credit, and energy and selling them off to the highest bidder.

Tax cuts simply encourage these strategies, as was evident in the US when Trump’s tax cuts gave rise to a mini-boom on Wall Street as firms dished huge sums out to shareholders or undertook extensive M&A activity. The same thing happened after Thatcher’s tax cuts in the 1980s, the legacy of which was a permanent increase in inequality, a housing crisis, and several financial crashes.

Unfortunately for Liz Truss, in an environment like this one, she can’t even rely on a temporary boom in the City to shore up her support. Even investors likely to benefit from these tax cuts now look at the UK economy and struggle to see how it can grow sustainably into the future.

And this is why tax cuts don’t automatically generate investment. Because without sustainable economic growth, there’s not much point in undertaking any investment to begin with.