What can be done about inequality?
As we have seen, inequality exists both on a global scale and within countries. There is a wide range of policies to combat inequality, focusing on different forms of inequality. The following table shows an overview of inequality policies put together by Olivier Blanchard and Dani Rodrik. They cluster different policies looking at the stages of the economy targeted (column headings) and distinguishing according to the bottom, middle or top of the distribution.
For example, at the pre-production stage policies influence the endowments with which people enter the workforce, such as health, education and financial access policies. Amongst other policies, minimum wages, trade agreements, place-based policies intervene at the production stage. The post-production stage is all about redistributing income and wealth, for example through social transfers, progressive income taxation and wealth taxation. (36)
The following overview of different measures to deal with inequality can be used as a printout for the exercise “Measures to tackle inequality in times of climate change”.
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A minimum wage is the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period. |
Publicly funded healthcare is a form of health care financing designed to meet the cost of all or most healthcare needs from a publicly managed fund. It ensures that either everyone or everyone insured gets the health treatments they need. |
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Free public transport refers to public transport funded in full by means other than by collecting fares from passengers. In 2020 Luxembourg became the first country in the world to make all public transport in the country (buses, trams, and trains) free to use. |
Unemployment benefits are payments made by authorised bodies to unemployed people. The benefits are often funded by a compulsory government insurance system. Depending on the jurisdiction and the status of the person, those sums may be small, covering only basic needs, or may compensate the lost time proportionally to the previous earned salary. |
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A wealth tax is a tax on an entity’s holdings of assets. This includes for example cash, bank deposits, real estate, assets in insurance and pension plans, ownership of businesses and financial securities. Typically, liabilities (primarily mortgages and other loans) are deducted from an individual’s wealth, hence it is sometimes called a net wealth tax. Wealth taxes are in use in many countries around the world and seek to reduce the accumulation of wealth by individuals. |
Free public higher education is higher education funded through government spending rather than tuition funding. Many countries provide free higher education for all its citizens or in the EU for all EU citizens, some also for international students. |
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The current supranational market order promotes global tax competition, which leads to falling corporate taxes. For example, the average statutory corporate tax rate worldwide fell from 49% (1985) to 24% (2018) for fear of relocation. 40% of the profits of transnational corporations are shifted to low-tax countries and tax havens every year. An international minimum corporate tax rate is a proposal to reduce tax competition between countries and the avoidance of corporate taxes. In 2021, 130 countries backed an OECD plan to set a global minimum corporate tax rate of 15 per cent. It is a worldwide effort to keep multinational firms from dodging taxes by shifting their profits to countries with low rates. (38) |
Free child care is funded through government spending rather than directly by the parents themselves. |
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A frequent flyer levy aims at limiting aviation emissions while ensuring a more progressive distribution of flights. The levy applies a charge, starting at zero for the first flight, but increasing for every subsequent flight taken within a year. |
Debt cancellation is a legal measure to cut outstanding loan payments. Legally, a debt cancellation “…occurs when there is an agreement between the debtor and the creditor that an outstanding debt no longer needs to be repaid.” (39) Such a cancellation was recently demanded in the context of the covid-pandemic by several countries of the Global South who are significantly indebted in the North (40). Debt cancellation can also concern private households and specific indebted groups (e.g. students). |
The following chapter focuses on approaches to reducing inequality on a (sub-)national level in different welfare regimes and thereby puts a spotlight on the Global North.
36 – For more information on different policies see: https://www.piie.com/commentary/speeches-papers/we-have-tools-reverse-rise-inequality , 37 – Blanchard and Rodrik, 2019, 38 – The Associated Press, 2021, 39 – https://stats.oecd.org/glossary/detail.asp?ID=551, 40 – https://jubileedebt.org.uk/a-debt-jubilee-to-tackle-the-covid-19-health-and-economic-crisis-2.
