3 types of policies that could reverse income inequality in the United States


  • Paul Constant is a writer at Civic Ventures and co-host of the “Pitchfork Economics” podcast.
  • He spoke with Dr. Faiza Shaheen of Pathfinders for Peaceful, Just and Inclusive Societies.
  • Its latest report showed three types of policies used by capitalist countries to reduce inequality.

To many, massive and growing income inequality looks like a fatal flaw of capitalism that ensures the rich get richer while the poor get poorer. But in the latest episode of ‘Pitchfork Economics’, Dr Faiza Shaheen said that while income inequality has exploded in the US and UK, it is not soaring in other capitalist countries around the world. .

As Program Manager for the Grand Challenge of Inequality and Exclusion, Shaheen was tasked by the 39 countries of the UN sub-group Pathfinders for Peaceful, Just and Inclusive Societies to measure inequality around the world. and to propose political solutions to create a more equitable and sustainable world. by 2030. His organization just released a new report on economies around the world that shows that income inequality is not a necessary by-product of capitalism. On the contrary, according to the report, it is the result of certain political choices – and in fact, it can also be reversed by specific political choices.

The new report found that around a third of the world’s capitalist nations currently suffer from intense inequality, around a third have seen their levels of income inequality remain stable since the year 2000, and another third have actually reduced inequality, reducing the gap between the richest and poorest households in their country.

Shaheen admitted that some of this decline in inequality came from countries that started from high levels of inequality, such as Peru, Bolivia and Argentina. It is impossible to compare inequality in the United States to those nations, she said, that have thrived in the age of globalization and its increased diffusion of technology.

But she added that other middle-income countries, such as Botswana and Sierra Leone, had actively tried to reduce inequality and had succeeded in ways the US and UK could emulate. Specifically, Shaheen said, “the policy was undoing some of the inequities they had built up in their system.”

Shaheen said nations that have been successful in reducing inequality have used three specific types of action.

The 3 criteria for countries to reduce income inequality

The first type of action was “policies that bring about very clear and visible material change” for the majority of citizens, she said, such as social protection programs, affordable or free health care and, perhaps most important, “good job creation”. When people see government producing material benefits, it creates a positive feedback loop, she added.

The second action item is less straightforward economically, Shaheen said, but involved governments actively trying to bridge divisions between groups. Studies have long shown that racial and political unrest increases in areas where income inequality increases. The report argues that the opposite is also true: inequality is declining in nations with “active efforts to build solidarity between groups and challenge historical biases”, Shaheen said. These efforts can take many different forms, from politicians rejecting divisive and inflammatory language to serious police and criminal justice reform.

And finally, governments in regions with reduced inequality have rebuilt their credibility with the public by “fighting corruption”, Shaheen said. In unequal societies, people believe that wealthy elites have access to rulers and legal privileges that most citizens do not. Citizens of more equal economies, meanwhile, believe that the government treats everyone equally, and this belief is reinforced by mandates of transparency in government and the financial sector, and a free and strong press. .

One policy to rule them all: a solidarity tax

“Visible change, building solidarity and securing credibility” are key to reducing inequality, Shaheen said. But one policy that the report says promotes all three criteria simultaneously is the idea of ​​a “solidarity tax” – a short-term tax on wealthy individuals or corporations to rebuild infrastructure, the supply chain and social service programs that have been stressed and exhausted during the pandemic.

From German reunification to Japan’s reconstruction after World War II, Shaheen said solidarity taxes were used successfully for most of the 20th century “essentially to correct the inequalities that existed, and also to build a narrative of dependence on each other, of needing each other, of giving back to society to make things fairer.”

In the wake of the pandemic and one of the most politically tumultuous decades in our history, the United States desperately needs some kind of political intervention to reduce inequality and strengthen that national sense of unity. Even before the pandemic, the St. Louis Fed reported that income inequality in the United States was more in line with poor, politically unstable Third World countries than with similarly rich, developed countries — and that was before. than US billionaires rake in an extra $1.7. trillion during the pandemic.

It must be remembered in the United States that when societies are linked by understanding, purpose and prosperity, everyone is happier – not just the wealthy few at the top.

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