Redistribution of income and wealth
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Redistribution of income and wealth is the transfer of
income Income is the Consumption (economics), consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be diff ...
and
wealth Wealth is the abundance of Value (economics), valuable financial assets or property, physical possessions which can be converted into a form that can be used for financial transaction, transactions. This includes the core meaning as held in the ...
(including physical
property Property is a system of rights that gives people legal control of valuable things, and also refers to the valuable things themselves. Depending on the nature of the property, an owner of property may have the right to Consumables, consume, alte ...
) from some
individual An individual is that which exists as a distinct entity An entity is something that exists as itself, as a subject or as an object, actually or potentially, concretely or abstractly, physically or not. It need not be of material existence. In ...
s to others through a social mechanism such as
taxation A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal person, legal entity) by a governmental organization in order to fund government spending and various public expenditures (regiona ...
,
welfare Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet Basic needs, basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refe ...
,
public services A public service is any Service (economics), service intended to address specific needs pertaining to the aggregate members of a community. Public services are available to people within a government jurisdiction as provided directly through pub ...
,
land reform Land reform is a form of agrarian reform involving the changing of laws, regulations, or customs regarding land ownership. Land reform may consist of a government-initiated or government-backed property redistribution, generally of agricultural ...
, monetary policies,
confiscation Confiscation (from the Latin ''confiscatio'' "to consign to the ''fiscus'', i.e. transfer to the treasury") is a legal form of search and seizure, seizure by a government or other public authority. The word is also used, popularly, of Tampering w ...
,
divorce Divorce (also known as dissolution of marriage) is the process of terminating a marriage or marital union. Divorce usually entails the canceling or reorganizing of the legal duties and responsibilities of marriage, thus dissolving the ...
or
tort A tort is a civil wrong that causes a claimant to suffer loss or harm, resulting in legal liability for the person who commits the tortious act. Tort law can be contrasted with criminal law, which deals with criminal wrongs that are punishab ...
law. The term typically refers to redistribution on an economy-wide basis rather than between selected individuals. Interpretations of the phrase vary, depending on personal perspectives, political ideologies and the selective use of statistics. It is frequently used in politics, where it is used to refer to perceived redistribution from those who have more to those who have less. Occasionally, however, the term is used to describe laws or policies that cause redistribution in the opposite direction, from the poor to the rich. The phrase is often coupled with the term ''class warfare'', with high-income earners and the wealthy portrayed as victims of unfairness and discrimination. Redistribution tax policy should not be confused with predistribution policies. "Predistribution" is the idea that the state should try to prevent inequalities from occurring in the first place rather than through the tax and benefits system once they have occurred. For example, a government predistribution policy might require employers to pay all employees a
living wage A living wage is defined as the minimum income necessary for a worker to meet their basic needs. This is not the same as a subsistence wage, which refers to a biological minimum, or a solidarity wage, which refers to a minimum wage tracking labor ...
and not just a
minimum wage A minimum wage is the lowest remuneration that employers can legally pay their employees—the price floor below which employees may not sell their labor. List of countries by minimum wage, Most countries had introduced minimum wage legislation b ...
, as a "bottom-up" response to widespread income inequalities or high poverty rates. Many alternate taxation proposals have been floated without the political will to alter the status quo. One example is the proposed " Buffett Rule", which is a hybrid taxation model composed of opposing systems intended to minimize the favoritism of special interests in tax design. The effects of a redistributive system are actively debated on ethical and economic grounds. The subject includes an analysis of its rationales, objectives, means, and policy effectiveness.


History

In ancient times, redistribution operated as a
palace economy A palace economy or redistribution economy is a system of economic organization in which a substantial share of the wealth Wealth is the abundance of Value (economics), valuable financial assets or property, physical possessions which can be ...
. These economies were centrally based around the administration, meaning the dictator or pharaoh had both the ability and the right to say who was taxed and who received special treatment. Another early form of wealth redistribution occurred in
Plymouth Colony Plymouth Colony (sometimes Plimouth) was, from 1620 to 1691, the British America, first permanent English colony in New England and the second permanent English colony in North America, after the Jamestown Colony. It was first settled by the pa ...
under the leadership of William Bradford. Bradford recorded in his diary that this "common course" bred confusion, discontent, distrust, and the colonists looked upon it as a form of slavery. A closely related term,
distributism Distributism is an economic theory asserting that the world's productive assets should be widely owned rather than concentrated. Developed in the late 19th and early 20th centuries, distributism was based upon Catholic social teaching princ ...
(also known as distributionism or distributivism), refers to an economic ideology that developed in Europe in the late 19th and early 20th century. It was based on the principles of
Catholic social teaching Catholic social teaching, commonly abbreviated CST, is an area of Catholic doctrine concerning matters of human dignity and the common good in society. The ideas address oppression, the role of the state (polity), state, subsidiarity, social o ...
, particularly the teachings of
Pope Leo XIII Pope Leo XIII ( it, Leone XIII; born Vincenzo Gioacchino Raffaele Luigi Pecci; 2 March 1810 – 20 July 1903) was the head of the Catholic Church from 20 February 1878 to his death in July 1903. Living until the age of 93, he was the second-old ...
in his encyclical ''Rerum Novarum'' and
Pope Pius XI Pope Pius XI ( it, Pio XI), born Ambrogio Damiano Achille Ratti (; 31 May 1857 – 10 February 1939), was head of the Catholic Church from 6 February 1922 to his death in February 1939. He was the first sovereignty, sovereign of Vati ...
in ''Quadragesimo Anno''. More recently,
Pope Francis Pope Francis ( la, Franciscus; it, Francesco; es, link=, Francisco; born Jorge Mario Bergoglio, 17 December 1936) is the head of the Catholic Church. He has been the bishop of Rome and sovereign of the Vatican City State since 13 March 2013. ...
echoed the earlier Papal statements in his ''Evangelii Gaudium''.


Role in economic systems

Different types of
economic system An economic system, or economic order, is a system of Production (economics), production, resource allocation and Distribution (economics), distribution of goods and services within a society or a given geographic area. It includes the combinati ...
s feature varying degrees of interventionism aimed at redistributing income, depending on how unequal their initial distributions of income are. Free-market
capitalist Capitalism is an economic system based on the private ownership of the means of production and their operation for Profit (economics), profit. Central characteristics of capitalism include capital accumulation, competitive markets, pric ...
economies tend to feature high degrees of income redistribution. However, Japan's government engages in much less redistribution because its initial wage distribution is much more equal than Western economies. Likewise, the
socialist Socialism is a left-wing Economic ideology, economic philosophy and Political movement, movement encompassing a range of economic systems characterized by the dominance of social ownership of the means of production as opposed to Private prop ...
planned economies of the former Soviet Union and Eastern bloc featured very little income redistribution because private capital and land income were restricted. To attain an efficient allocation of resources with the desired distribution of income, if the assumptions of the competitive model are satisfied by the economy, the sole role of the government is to alter the initial distribution of wealth – the major drivers of income inequality in capitalist systems – was virtually nonexistent; and because the wage rates were set by the government in these economies. A comparison between
Socialist Socialism is a left-wing Economic ideology, economic philosophy and Political movement, movement encompassing a range of economic systems characterized by the dominance of social ownership of the means of production as opposed to Private prop ...
and
Capitalist Capitalism is an economic system based on the private ownership of the means of production and their operation for Profit (economics), profit. Central characteristics of capitalism include capital accumulation, competitive markets, pric ...
Systems in terms of distribution of income is much easier as both these systems stand practically implemented in a number of countries under compatible political systems. Inequality in almost all the Eastern European economies has increased after moving from socialist controlled systems to market-based economies. For the Islamic distribution, the following are the three key elements of the Islamic Economic System, which have significant implications for the distribution of income and wealth (if fully implemented) and are markedly different from Capitalism. The Islamic system is defined by the following three key elements: Ushr and Zakat, the prohibition of usury, and the Inheritance Law. Ushr is an obligatory payment from agriculture output at the time of harvesting. If agricultural land is irrigated by rain or some other natural freely available water the producer is obliged to pay ten percent of the output as Ushr. In case irrigation water is not free of cost then the deduction would be five percent, while Zakat is a major instrument of restricting the excessive accumulation of wealth and helping the poor and most vulnerable members of the society, Secondly,
usury Usury () is the practice of making unethical or immoral monetary loans that unfairly enrich the lender. The term may be used in a moral sense—condemning taking advantage of others' misfortunes—or in a legal sense, where an interest rate is ch ...
, or charging
interest In finance and economics, interest is payment from a debtor, borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is ...
, is prohibited. Elimination of interest from the economic system is a revolutionary step with profound effects on all spheres of economic activities. Finally, the Inheritance Law Of Islam is the distribution of the property of a deceased person from closest family members and moving towards a more distant family. Son(s), daughter(s), wife, husband and parents are the prime recipients. This distribution is explicitly illustrated in Qur’an and cannot be changed or modified. Under varying conditions, the share received by different relatives accordingly changes. The important principle is that the owner at the time of his/her death cannot change these shares.


How views on redistribution are formed

The context that a person is in can influence their views on redistributive policies. For example, despite both being Western civilizations, typical Americans and Europeans do not have the same views on redistribution policies. This phenomenon persists even among people who would benefit most from redistributive policies, as poor Americans tend to favor redistributive policy less than equally poor Europeans. Research shows this is because when a society has a fundamental belief that those who work hard will earn rewards from their work, the society will favor lower redistributive policies. However, when a society as a whole believes that some combination of outside factors, such as luck or corruption, can contribute to determining one's wealth, those in the society will tend to favor higher redistributive policies. This leads to fundamentally different ideas of what is ‘just’ or fair in these countries and influences their overall views on redistribution.   Another context that can influence one's ideas of redistributive policies is the social class that one is born into. People tend to favor redistributive policy that will help the groups that they are a member of.  This is displayed in a study of Latin American lawmakers, where it is shown that lawmakers born into a lower social class tend to favor more redistributive policies than their counterparts born into a higher social class. Research has also found that women generally support redistribution more than men do, though the strength of this preference varies across countries. While literature remains mixed on if monetary gain is the true motivation behind favoring redistributive policies, most researchers accept that social class plays some role in determining someone's views towards redistributive policies. Nonetheless, the classic theory that individual preferences for redistribution decrease with their income, leading to societal preferences for redistribution that increase with income inequality has been disputed. Perhaps the most important impact of government on the distribution of “wealth” is in the sphere of education—in ensuring that everyone has a certain amount of human capital. By providing all individuals, regardless of the wealth of their parents, with a free basic education, government reduces the degree of inequality that otherwise would exist. Income inequality has many different connotations, three of which are of particular importance: (1) The moral dimension, which leads into the discussion of human rights. What kinds of reasons should a society accept for the emergence or existence of inequality and how much inequality between its members is reconcilable with the right of each individual to human dignity? (2) The second dimension links inequality to political stability. How much inequality can a society endure before a significant number of its members begin to reject the existing pattern of distribution and demand fundamental changes? In societies with very rigid forms of the income distribution, this may easily lead to public protest, if not violence. Authorities are then faced with the option of reacting to protests with repression or reform. In societies with flexible tools of negotiation and bargaining on income, smoother mechanisms of adaptation may be available. (3) The third dimension – in many cases the dominant pattern in the social debate – links inequality to economic performance. Individuals who achieve more and perform better deserve a higher income. If everybody is treated the same, the overall willingness to work may decline. The argument includes the scarcity of skills. Societies have to provide incentives to ensure that talents and education are allocated to jobs where they are needed most. Not many people doubt the general accuracy of these arguments – but nobody has ever shown how to correctly measure performance and how to find an objective way of linking it to the prevailing level of the income distribution. Inequality is needed – to some extent – but nobody knows how much of it is good.


Inequality in developing countries

The existence of high inequality within many developing countries, side-by-side with persistent poverty, started to attract attention in the early 1970s. Nonetheless, through the 1980s and well into the 1990s, the mainstream view in development economics was still that high and/or rising inequality in poor countries was a far less important concern than assuring sufficient growth, which was the key to poverty reduction. The policy message for the developing world was clear: one could not expect to have both lower poverty and less inequality.


Modern forms of redistribution

The redistribution of wealth and its practical application are bound to change with the continuous evolution of social norms, politics, and culture. Within developed countries income inequality has become a widely popular issue that has dominated the debate stage for the past few years. The importance of a nation's ability to redistribute wealth in order to implement social welfare programs, maintain public goods, and drive economic development has brought various conversations to the political arena. A country's means of redistributing wealth comes from the implementation of a carefully thought out well described system of taxation. The implementation of such a system would aid in achieving the desired social and economic objective of diminishing social inequality and maximizing social welfare. There are various ways to impose a tax system that will help create a more efficient allocation of resources, in particular, many democratic, even socialist governments utilize a progressive system of taxation to achieve a certain level of income redistribution. In addition to the creation and implementation of these tax systems, "globalization of the world economy asprovided incentives for reforming the tax systems" across the globe. Along with utilizing a system of taxation to achieve the redistribution of wealth, the same socio-economic benefit can be achieved if there are appropriate policies enacted within a current political infrastructure that addresses these issues. Modern thinking towards the topic of the redistribution of wealth, focuses on the concept that economic development increases the
standard of living Standard of living is the level of income, comforts and services available, generally applied to a society or location, rather than to an individual. Standard of living is relevant because it is considered to contribute to an individual's quality ...
across an entire society. Today, income redistribution occurs in some form in most democratic countries, through economic policies. Some redistributive policies attempt to take wealth, income, and other resources from the "haves" and give them to the "have-nots", but many redistributions go elsewhere. For example, the U.S. government's progressive-rate income tax policy is redistributive because much tax revenue goes to social programs such as welfare and Medicare. In a
progressive income tax A progressive tax is a tax in which the tax rate increases as the taxable amount increases.Sommerfeld, Ray M., Silvia A. Madeo, Kenneth E. Anderson, Betty R. Jackson (1992), ''Concepts of Taxation'', Dryden Press: Fort Worth, TX The term ''progre ...
system, a high income earner will pay a higher tax rate (a larger percentage of their income) than a low income earner; and therefore, will pay more total dollars per person. Other taxation-based methods of redistributing income are the
negative income tax In economics, a negative income tax (NIT) is a system which reverses the direction in which tax is paid for incomes below a certain level; in other words, earners above that level pay money to the state while earners below it receive money, as ...
for very low income earners and tax loopholes (tax avoidance) for the better-off. Two other common types of governmental redistribution of income are
subsidies A subsidy or government incentive is a form of financial aid or support extended to an economic sector (business, or individual) generally with the aim of promoting economic and social policy. Although commonly extended from the government, the ter ...
and vouchers (such as
food stamps In the United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, s ...
or Section-8 housing vouchers). These
transfer payment In macroeconomics and finance, a transfer payment (also called a government transfer or simply transfer) is a redistribution of income and wealth by means of the government making a payment, without Goods and services, goods or services being re ...
programs are funded through general taxation, but benefit the poor or influential special interest groups and corporations. While the persons receiving transfers from such programs may prefer to be directly given cash, these programs may be more palatable to society than cash assistance, as they give society some measure of control over how the funds are spent. In addition to having a progressive tax rate, the U.S.
Social Security Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet Basic needs, basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refe ...
system also redistributes wealth to the poor via its highly progressive benefit formula. Governmental redistribution of income may include a direct benefit program involving either cash transfers or the purchase of specific services for an individual. Medicare is one example. Medicare is a government-run health insurance program that covers people age 65 or older, certain younger people with disabilities, and people with
end-stage renal disease Chronic kidney disease (CKD) is a type of kidney disease in which a gradual loss of kidney function occurs over a period of months to years. Initially generally no symptoms are seen, but later symptoms may include pedal edema, leg swelling, feelin ...
(permanent kidney failure requiring dialysis or a transplant, sometimes called ESRD). This is a direct benefit program because the government is directly providing health insurance for those who qualify. The difference between the Gini index for the
income distribution In economics, income distribution covers how a country's total GDP is distributed amongst its population. Economic theory and economic policy have long seen income and its distribution as a central concern. Unequal distribution of income causes eco ...
before taxation and the Gini index after taxation is an indicator for the effects of such taxation. Wealth redistribution can be implemented through
land reform Land reform is a form of agrarian reform involving the changing of laws, regulations, or customs regarding land ownership. Land reform may consist of a government-initiated or government-backed property redistribution, generally of agricultural ...
that transfers ownership of land from one category of people to another, or through
inheritance tax An inheritance tax is a tax paid by a person who inherits money or property of a person who has died, whereas an estate tax is a levy on the Estate (law), estate (money and property) of a person who has died. International tax law distinguishes ...
es,
land value tax A land value tax (LVT) is a levy on the value of land (economics), land without regard to buildings, personal property and other land improvement, improvements. It is also known as a location value tax, a point valuation tax, a site valuation ta ...
es or a broader
wealth tax A wealth tax (also called a capital tax or equity tax) is a tax on an entity's holdings of assets. This includes the total value of personal assets, including cash, bank deposits, real estate, assets in insurance and pension plans, ownershi ...
on assets in general. Before-and-after Gini coefficients for the
distribution of wealth The distribution of wealth is a comparison of the wealth of various members or groups in a society. It shows one aspect of economic inequality or heterogeneity in economics, economic heterogeneity. The distribution of wealth differs from the i ...
can be compared. Interventions like rent control can impose large costs. Some alternative forms of interventions, such as housing subsidies, may achieve comparable distributional objectives at less cost. If the government cannot costlessly redistribute, it should look for efficient ways of redistributing—that is, ways that reduce the costs as much as possible. This is one of the main concerns of the branch of economics called the economics of the public sector.


Class analysis

One study suggests that "the middle class faces a paradoxical status" in that they tend to vote against income redistribution, even though they would benefit economically from it.


Objectives

The objectives of income redistribution are to increase economic stability and opportunity for the less wealthy members of society and thus usually include the funding of
public services A public service is any Service (economics), service intended to address specific needs pertaining to the aggregate members of a community. Public services are available to people within a government jurisdiction as provided directly through pub ...
. One basis for redistribution is the concept of
distributive justice Distributive justice concerns the Social justice, socially just Resource allocation, allocation of resources. Often contrasted with procedural justice, just process, which is concerned with the administration of law, distributive justice concentr ...
, whose premise is that money and resources ought to be distributed in such a way as to lead to a socially just, and possibly more financially
egalitarian Egalitarianism (), or equalitarianism, is a school of thought within political philosophy that builds from the concept of social equality, prioritizing it for all people. Egalitarian doctrines are generally characterized by the idea that all hum ...
, society. Another argument is that a larger
middle class The middle class refers to a Social class, class of people in the middle of a social hierarchy, often defined by job, occupation, income, education, or social status. The term has historically been associated with modernity, capitalism and poli ...
benefits an economy by enabling more people to be
consumer A consumer is a person or a group who intends to order, or uses purchased goods, products, or Service (economics), services primarily for personal, social, family, household and similar needs, who is not directly related to entrepreneurial or bu ...
s, while providing equal opportunities for individuals to reach a better standard of living. Seen for example in the work of
John Rawls John Bordley Rawls (; February 21, 1921 – November 24, 2002) was an American moral philosophy, moral, legal philosophy, legal and political philosophy, political philosopher in the Liberalism, liberal tradition. Rawls received both the Schock ...
, another argument is that a truly fair society would be organized in a manner benefiting the least advantaged, and any inequality would be permissible only to the extent that it benefits the least advantaged. Some proponents of redistribution argue that
capitalism Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, price system, pr ...
results in an
externality In economics, an externality or external cost is an indirect cost or benefit to an uninvolved third party that arises as an effect of another party's (or parties') activity. Externalities can be considered as unpriced goods involved in either co ...
that creates unequal wealth distribution. Many economists have argued that wealth and income inequality are a cause of economic crises, and that reducing these inequalities is one way to prevent or ameliorate economic crises, with redistribution thus benefiting the economy overall. This view was associated with the underconsumptionism school in the 19th century, now considered an aspect of some schools of
Keynesian economics Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomics, macroeconomic theories and Economic model, models of how aggregate demand (total spending in the economy) strongl ...
; it has also been advanced, for different reasons, by
Marxian economics Marxian economics, or the Marxian school of economics, is a Heterodox economics, heterodox school of political economic thought. Its foundations can be traced back to Karl Marx, Karl Marx's Critique of political economy#Marx's critique of politic ...
. It was particularly advanced in the US in the 1920s by Waddill Catchings and William Trufant Foster. More recently, the so-called "Rajan hypothesis" posited that income inequality was at the basis of the explosion of the 2008 financial crisis. The reason is that rising inequality caused people on low and middle incomes, particularly in the US, to increase their debt to keep up their consumption levels with that of richer people. Borrowing was particularly high in the housing market and deregulation in the financial sector made it possible to extend lending in sub-prime mortgages. The downturn in the housing market in 2007 halted this process and triggered the
financial crisis A financial crisis is any of a broad variety of situations in which some financial assets suddenly lose a large part of their nominal value. In the 19th and early 20th centuries, many financial crises were associated with Bank run#Systemic bankin ...
. Nobel Prize laureate
Joseph Stiglitz Joseph Eugene Stiglitz (; born February 9, 1943) is an American New Keynesian economics, New Keynesian economist, a public policy analyst, and a full professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sc ...
, along with many others, supports this view. There is currently a debate concerning the extent to which the world's extremely rich have become richer over recent decades.
Thomas Piketty Thomas Piketty (; born 7 May 1971) is a French economist who is Professor of Economics at the School for Advanced Studies in the Social Sciences, Associate Chair at the Paris School of Economics and Centennial Professor of Economics in the Int ...
's ''
Capital in the Twenty-First Century ''Capital in the Twenty-First Century'' (french: Le Capital au XXIe siècle) is a book written by French economist Thomas Piketty. It focuses on economic inequality, wealth and income inequality in Europe and the United States since the 18th centu ...
'' is at the forefront of the debate, mainly focusing on within-country concentration of income and wealth. Branko Milanovic provided evidence of increasing inequality at the global level, showing how the group of so-called "global plutocrats", i.e. the richest 1% in the world income distribution, were the main beneficiaries of economic growth in the period 1988–2008. More recent analysis supports this claim, as 27% of total economic growth worldwide accrued to the top 1% of the world income distribution in the period 1980–2016. The approach underpinning these analyses has been somehow critiqued in certain publications such as ''
The Economist ''The Economist'' is a British weekly newspaper printed in Paper size#Demitab, demitab format and Electronic publishing, published digitally. It focuses on current affairs, international business, politics, technology, and culture. Based in Lo ...
''.


Moral obligation

Peter Singer Peter Albert David Singer (born 6 July 1946) is an Australian moral philosopher, currently the Ira W. DeCamp Professor of Bioethics at Princeton University. He specialises in applied ethics and approaches ethical issues from a Secularit ...
's argument contrasts to Thomas Pogge's in that he states we have an individual moral obligation to help the poor. The rich people who are living in the states with more redistribution, are more in favor of immigrants than poorer people, because this can make them pay less wages.


Economic effects of inequality

Using statistics from 23 developed countries and the 50 states of the US, British researchers Richard G. Wilkinson and Kate Pickett show a correlation between income inequality and higher rates of health and social problems (
obesity Obesity is a medical condition, sometimes considered a disease, in which excess Adipose tissue, body fat has accumulated to such an extent that it may negatively affect health. People are classified as obese when their body mass index (BMI) ...
,
mental illness A mental disorder, also referred to as a mental illness or psychiatric disorder, is a behavioral or mental pattern that causes significant distress or impairment of personal functioning. Such features may be persistent, relapsing and remitti ...
,
homicide Homicide occurs when a human, person Death, kills another person. A homicide requires only a Volition (psychology), volitional act or omission that causes the death of another, and thus a homicide may result from accidental, reckless, or negli ...
s, teenage births,
incarceration Imprisonment is the restraint of a person's liberty, for any cause whatsoever, whether by authority of the government, or by a person acting without such authority. In the latter case it is "false imprisonment False imprisonment or unlaw ...
, child conflict, drug use), and lower rates of social goods (
life expectancy Life expectancy is a statistical measure of the average time an organism is expected to live, based on the year of its birth, current age, and other demographic factors like sex. The most commonly used measure is life expectancy at birth ...
, educational performance, trust among strangers, women's status,
social mobility Social mobility is the movement of individuals, families, households or other categories of people within or between Social stratification, social strata in a society. It is a change in social status relative to one's current social location ...
, even numbers of
patent A patent is a type of intellectual property that gives its owner the legal right to exclude others from making, using, or selling an invention for a limited period of time in exchange for publishing an sufficiency of disclosure, enabling disclo ...
s issued per capita), on the other. The authors argue inequality leads to the social ills through the psychosocial stress,
status Status (Latin plural: ''statūs''), is a state, condition, or situation, and may refer to: * Status (law) ** City status ** Legal status, in law ** Political status, in international law ** Small entity status, in patent law ** Status conference ...
anxiety it creates."The Spirit Level: how 'ideas wreckers' turned book into political punchbag"
Robert Booth, ''The Guardian'', 13 August 2010
A 2011 report by the
International Monetary Fund The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster globa ...
by Andrew G. Berg and Jonathan D. Ostry found a strong association between lower levels of inequality and sustained periods of economic growth. Developing countries (such as Brazil, Cameroon, Jordan) with high inequality have "succeeded in initiating growth at high rates for a few years" but "longer growth spells are robustly associated with more equality in the income distribution." The Industrial Revolution led to increasing inequality among nations. Some economies took off, whereas others, like many of those in Africa or Asia, remained close to a subsistence standard of living. General calculations show that the 17 countries of the world with the most-developed economies had, on average, 2.4 times the GDP per capita of the world’s poorest economies in 1870. By 1960, the most developed economies had 4.2 times the GDP per capita of the poorest economies. Regarding to GDP indicator, GDP has nothing to say about the level of inequality in society. GDP per capita is only an average. When GDP per capita rises by 5%, it could mean that GDP for everyone in the society has risen by 5%, or that GDP of some groups has risen by more while that of others has risen by less—or even declined.


Criticism

Public choice Public choice, or public choice theory, is "the use of economic tools to deal with traditional problems of political science". Gordon Tullock, 9872008, "public choice," '' The New Palgrave Dictionary of Economics''. . Its content includes th ...
theory states that redistribution tends to benefit those with political clout to set spending priorities more than those in need, who lack real influence on government. The socialist economists
John Roemer John E. Roemer (; born February 1, 1945 in Washington, D.C., to Ruth Roemer and Milton Roemer, namesake of Roemer's law) is an American economist An economist is a professional and practitioner in the social sciences, social science disc ...
and
Pranab Bardhan Pranab Bardhan (born 11 September 1939 in Calcutta) is an Indian economist who has taught and worked in the United States since 1979. He is Professor Emeritus of Economics at the University of California, Berkeley. Biography Bardhan received ...
criticize redistribution via taxation in the context of Nordic-style
social democracy Social democracy is a Political philosophy, political, Social philosophy, social, and economic philosophy within socialism that supports Democracy, political and economic democracy. As a policy regime, it is described by academics as advocati ...
, reportedly highlighting its limited success at promoting relative
egalitarianism Egalitarianism (), or equalitarianism, is a school of thought within political philosophy that builds from the concept of social equality, prioritizing it for all people. Egalitarian doctrines are generally characterized by the idea that all hum ...
and its lack of sustainability. They point out that social democracy requires a strong labor movement to sustain its heavy redistribution, and that it is unrealistic to expect such redistribution to be feasible in countries with weaker labor movements. They point out that, even in the Scandinavian countries, social democracy has been in decline since the
labor movement The labour movement or labor movement consists of two main wings: the trade union movement (British English) or labor union movement (American English) on the one hand, and the political labour movement on the other. * The trade union movement ...
weakened. Instead, Roemer and Bardhan argue that changing the patterns of enterprise ownership and
market socialism Market socialism is a type of economic system An economic system, or economic order, is a system of Production (economics), production, resource allocation and Distribution (economics), distribution of goods and services within a society o ...
, obviating the need for redistribution, would be more sustainable and effective at promoting egalitarianism. Marxian economists argue that social democratic reforms – including policies to redistribute income – such as unemployment benefits and high taxes on profits and the wealthy create more contradictions in capitalism by further limiting the efficiency of the capitalist system via reducing incentives for capitalists to invest in further production.''Market Socialism: The Debate Among Socialists'', by Schweickart, David; Lawler, James; Ticktin, Hillel; Ollman, Bertell. 1998. pp. 60–61: "The Marxist answers that...it involves limiting the incentive system of the market through providing minimum wages, high levels of unemployment insurance, reducing the size of the
reserve army of labour Reserve army of labour is a concept in Karl Marx's critique of political economy. It refers to the unemployed and Underemployment, underemployed in Capitalist mode of production (Marxist theory), capitalist society. It is synonymous with "industria ...
, taxing profits, and taxing the wealthy. As a result, capitalists will have little incentive to invest and the workers will have little incentive to work. Capitalism works because, as Marx remarked, it is a system of economic force (coercion)."
In the Marxist view, redistribution cannot resolve the fundamental issues of capitalism – only a transition to a
socialist economy Socialist economics comprises the economic theories, practices and norms of hypothetical and existing socialist Socialism is a left-wing Economic ideology, economic philosophy and Political movement, movement encompassing a range of econom ...
can. Income redistribution will lower poverty by reducing inequality, if done properly. But it may not accelerate growth in any major way, except perhaps by reducing social tensions arising from inequality and allowing poor people to devote more resources to human and physical asset accumulation. Directly investing in opportunities for poor people is essential. The distribution of income that emerges from competitive markets may be very unequal. However, under the conditions of the basic competitive model, a redistribution of wealth can move the economy to a more equal allocation that is also Pareto efficient.


See also

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Basic income Universal basic income (UBI) is a social welfare proposal in which all citizens of a given population regularly receive an unconditional transfer payment, that is, without a means test or need to work. It would be received independently of an ...
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Distribution of wealth The distribution of wealth is a comparison of the wealth of various members or groups in a society. It shows one aspect of economic inequality or heterogeneity in economics, economic heterogeneity. The distribution of wealth differs from the i ...
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Economic policy The economy of government A government is the system or group of people governing an organized community, generally a state. In the case of its broad associative definition, government normally consists of legislature, executiv ...
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Equality of outcome Equality of outcome, equality of condition, or equality of results is a political Politics (from , ) is the set of activities that are associated with making decisions in groups, or other forms of power relations among individuals, such ...
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Guaranteed minimum income Guaranteed minimum income (GMI), also called minimum income (or mincome for short), is a social-welfare system that guarantees all citizens or families an income sufficient to live on, provided that certain eligibility conditions are met, typicall ...
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Poverty reduction Poverty reduction, poverty relief, or poverty alleviation, is a set of measures, both economic and humanitarian, that are intended to permanently lift people out of poverty. Measures, like those promoted by Henry George in his economics clas ...
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Robin Hood Robin Hood is a legendary heroic outlaw originally depicted in English folklore and subsequently featured in literature and film. According to legend, he was a highly skilled archery, archer and swordsman. In some versions of the legend, he ...
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Robin Hood tax The Robin Hood tax is a package of financial transaction tax A financial transaction tax (FTT) is a tax, levy on a specific type of financial transaction for a particular purpose. The tax has been most commonly associated with the financ ...
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Social inequality Social inequality occurs when resources in a given society are distributed unevenly, typically through Norm (social), norms of allocation, that engender specific patterns along lines of socially defined categories of persons. It posses and cr ...
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Redistribution (cultural anthropology) In cultural anthropology Cultural anthropology is a branch of anthropology Anthropology is the scientific study of humanity, concerned with human behavior, human biology, cultures, societies, and linguistics Linguistics is t ...
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Wealth concentration The distribution of wealth is a comparison of the wealth Wealth is the abundance of Value (economics), valuable financial assets or property, physical possessions which can be converted into a form that can be used for financial transaction ...
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Wealth tax A wealth tax (also called a capital tax or equity tax) is a tax on an entity's holdings of assets. This includes the total value of personal assets, including cash, bank deposits, real estate, assets in insurance and pension plans, ownershi ...
* Lima Declaration * To each according to one's needs Lists: *
List of countries by income equality A ''list'' is any set of items in a row. List or lists may also refer to: People * List (surname) Organizations * List College, an undergraduate division of the Jewish Theological Seminary of America * SC Germania List, German rugby uni ...
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List of countries by inequality-adjusted HDI This is a list of countries by inequality-adjusted Human Development Index (IHDI), as published by the United Nations Development Programme, UNDP in its 2022 Human Development Report. According to the 2016 Report, "The IHDI can be interpreted as ...
Opposite tendencies: * Accumulation by dispossession * Primitive accumulation of capital *
Reserve army of labour Reserve army of labour is a concept in Karl Marx's critique of political economy. It refers to the unemployed and Underemployment, underemployed in Capitalist mode of production (Marxist theory), capitalist society. It is synonymous with "industria ...


References


External links

{{DEFAULTSORT:Redistribution (Economics) Politics by issue Taxation and redistribution Public economics Political philosophy Egalitarianism Social democracy