6.7.2.4 Ways of Redistributing Wealth
Politicians have several ways of redistributing wealth: by making financial interventions, providing services that are available to everybody, and addressing regional variations
Government attempts to directly control disparities in income are dysfunctional (3.3.6), but politicians can make other financial interventions to reduce overall economic inequality:
● It is possible to mandate changes in corporate governance to rebalance the negotiations by which wealth is shared (3.5.6.3), so that workers are better paid in what Democracy Journal referred to as “Post-Redistribution Liberalism”.
● Benefit payments (6.7.1.3) can help the poorest in society.
● Government spend must be paid for by taxation and, if the taxation is progressive (3.2.4.1), it reduces the differences in disposable income between rich and poor. White House analysis says wealthy Americans pay far less in taxes than others, so there is considerable room for manoeuvre without causing harm in the U.S.
● Corporations have become wealthier because politicians have responded to financial inducements (6.4.5). Politicians should prioritise the interests of the populations they serve, rather than lobbyists.
● An increase in the minimum wage (3.3.3.3) increases the spending power of low-paid workers.
Such steps to reduce overall inequality can be beneficial to society. As demonstrated in the book The Spirit Level, there is a better quality of life in more equal societies (6.7.2.2).
If more services are provided by government (3.2.3.1), they are available to everybody – so there is less inequality in people’s standard of living. And public services can also be indirect ways of redistributing wealth:
● Education is a major driver of inequality in both Britain and America. Private schools are described in one book, for example, as Engines of Privilege: Britain’s Private School Problem. Reviewed in the Guardian, the book describes how unaffordable the school fees are for ordinary families, and how their pupils have a much better chance of getting into university and having successful careers: “From judges (74% privately educated) through to MPs (32%), the numbers tell us of a society where bought educational privilege also buys lifetime privilege and influence”. Any attempt to suppress private schooling would be oppressive, and the schools would merely move overseas, but the resulting inequality could be mitigated by the State subsidising a few able pupils to attend them.
● Health and social care costs can drive some people into poverty if public services are not available free at the point of delivery. Such services also have an indirect impact on economic inequality: people can earn more if they can work instead of having to stay at home to look after other family members.
In addition to the policy measures itemised above, there can be a need to address regional variations in wealth – for example those caused by the movement of jobs overseas. Prospect Magazine published an article by Paul Collier in its November 2018 issue, entitled How to save Britain from London, which listed several ways of addressing regional disparities; these included active local government encouragement of new businesses, skills training with apprenticeships, and the movement of national government offices to provincial cities. Societies which have broadly benefited from globalisation can afford to compensate regions which have lost jobs, by redistributing wealth and reallocating power (6.6.7.1).
This page is intended to form part of Edition 4 of the Patterns of Power series of books. An archived copy of it is held at https://www.patternsofpower.org/edition04/6724a.htm.