4.5: Can We Make the World More Fair?

Redistribution, Predistribution, and the Politics of Who Gets What

So...What Do We Do About It?

By this point, we have diagnosed the patient fairly thoroughly. Inequality is shaped by history, ownership, institutions, markets, globalization, technology, and political power. Wonderful. Now what? This is where discussions of inequality often become oddly vague. It is relatively easy to agree that extreme poverty is undesirable or that people should have meaningful opportunities to improve their lives. The conversation becomes much harder when someone asks what should actually change, because reducing inequality requires decisions about who receives resources, who pays, which institutions intervene, what trade-offs are acceptable, and what a society even means by “fair.” Those are not purely technical questions. They are political ones. The good news is that governments and societies are not powerless. The less convenient news is that there is no single lever labeled REDUCE INEQUALITY. Different forms of inequality are produced through different mechanisms, which means different problems require different tools.

Equality Is Not the Same Thing as Equity

Before we get into policy, we need to separate two terms that are often used as though they mean the same thing. Equality generally means treating people alike or distributing resources equally. Equity starts from the recognition that people may enter the same system from radically different circumstances, so equal treatment does not always produce equal opportunity.

Imagine three students preparing for the same exam. Giving each of them exactly four hours of study time sounds equal. But suppose one student has reliable internet, a quiet bedroom, private tutoring, and no employment responsibilities, while another works thirty hours a week and studies on a phone during a bus commute. The formal opportunity may be identical. Their actual ability to use that opportunity is not.

This is where Sen's capabilities approach becomes especially useful. Justice cannot be evaluated only by asking whether everyone received the same formal resource. We also have to ask what people were actually able to do with it (Sen, 1999). Equality asks, Did everyone receive the same thing? Equity asks, Did people have a meaningful chance to succeed? Those questions overlap, but they are not identical. A society can be formally equal while remaining deeply unequal in practice.

Redistribution: Fix the Outcome After the Market Acts

One familiar response to inequality is redistribution. Markets generate income through wages, profits, investment returns, property ownership, business activity, and other economic exchanges. Governments then change that original distribution through taxes, transfers, and public spending. Think about a paycheck. The amount a worker earns in the labor market is not necessarily the amount of resources ultimately available to the household. Governments may collect income or payroll taxes, but they may also provide public schools, healthcare, housing assistance, unemployment insurance, pensions, disability support, childcare subsidies, food assistance, or direct cash benefits. The final distribution of economic resources is therefore partly the result of market activity and partly the result of political choices about taxation and public spending.This can make a significant difference. OECD research shows that taxes and transfers substantially reduce income inequality across many member countries, although the degree of redistribution varies widely depending on the design of national tax and welfare systems (OECD, 2015). And here is where the arguments begin. How progressive should taxation be? Who qualifies for public benefits? Should assistance be universal or targeted? At what point does taxation discourage investment or work? At what point does inequality itself become economically or politically destabilizing? There is no government setting labeled FAIR. Societies have to decide.

Progressive Taxation: The More You Earn, the More You Pay

A progressive tax system generally imposes higher effective tax rates as income rises. The basic reasoning rests partly on ability to pay. Losing $1,000 means something very different to someone earning $20,000 than it does to someone earning $2 million. Progressive taxation can finance public services while also reducing disposable-income inequality, but the debate becomes much sharper when taxation reaches very high incomes, investment income, inheritance, property, or accumulated wealth. Economists disagree about optimal tax levels because taxes do more than raise revenue. They can influence investment, savings, entrepreneurship, relocation, tax avoidance, and even the way people classify or report income. Piketty (2014, 2020) argues that progressive taxation of high incomes, inheritance, and wealth can help prevent concentrations of capital from reproducing themselves indefinitely across generations. Other economists place greater emphasis on preserving incentives for investment, entrepreneurship, and innovation. The policy problem is therefore not as simple as “tax rich people more” or “taxes are bad.” It is how to reduce concentrations of economic advantage without undermining the productive activity that generates resources in the first place. Anyone promising you a completely painless answer is probably running for something.

Wealth Changes the Debate

Income receives most of the attention in everyday political debates, but Chapter 4 has already shown why income is not wealth. Two households can earn the same annual salary and occupy completely different economic worlds. One may own a home, carry no debt, hold investments, and expect an inheritance. The other may rent, carry student loans or medical debt, and have virtually no savings. The difference becomes especially important because wealth does more than sit there. It creates security. It generates returns. It can finance education, allow a family to survive unemployment, provide a down payment for housing, fund a business, or give someone the freedom to take a career risk. And unlike wages, assets can be passed directly from one generation to the next. Piketty's historical work documents how inherited and accumulated wealth can create durable economic advantage, while the World Inequality Report shows that wealth is distributed much more unequally than income at the global level (Chancel et al., 2022; Piketty, 2014). That raises a philosophical question sitting quietly underneath inheritance and wealth-tax debates: How much economic inequality should result from decisions made before a person was even born? There is no global consensus on the answer. But the question matters because a society can claim to reward hard work while allowing enormous advantages to enter the game before anyone starts working.

Predistribution: Why Wait Until Afterward?

Redistribution says, in effect, let the market generate the initial distribution, then adjust it afterward. Predistribution asks a more disruptive question: why not change the institutions that produce that original distribution in the first place? The term predistribution refers to policies that influence wages, bargaining power, access to opportunity, and ownership before taxes and transfers become necessary. Minimum wages, collective bargaining, labor protections, antitrust enforcement, education, childcare access, housing policy, employee ownership, corporate governance, and competition policy can all influence how market income is generated. Jacob Hacker (2011) helped popularize this distinction by emphasizing that governments do not merely redistribute what markets produce. Governments help create the rules under which markets operate. That brings us directly back to political economy. A wage is shaped by labor law. A housing market is shaped by zoning and property rules. A corporation operates within competition law. A worker's negotiating power depends partly on whether unions are protected. Even the supposedly “pre-government” market distribution already carries the fingerprints of government. Predistribution simply makes that fact harder to ignore.

Minimum Wage: Simple Policy, Complicated Debate

The minimum wage seems straightforward enough. Raise the wage floor and low-income workers earn more. Possibly. Traditional economic models warned that if employers are required to pay workers more than their productivity supports, businesses may respond by hiring fewer workers. The prediction makes intuitive sense: if something becomes more expensive, buyers may demand less of it. But labor markets are not always perfectly competitive. Employers may possess considerable power to set wages, particularly where workers have few alternatives or where a small number of firms dominate local employment. Under those conditions, modest minimum-wage increases may raise earnings without creating the dramatic job losses simple models predict.

Card and Krueger's (1994) influential research on fast-food employment challenged the assumption that moderate minimum-wage increases inevitably generate large employment declines, and decades of research since then have continued debating how effects vary by wage level, region, industry, and labor-market structure. So the useful question is not: Minimum wage: good or bad? It is: At what level, in what labor market, with what consequences for wages, employment, prices, and businesses? That answer is considerably less catchy but it is also considerably more useful.

Labor Unions: Bargaining Changes Distribution

Collective bargaining tackles inequality from another direction: power. A single worker negotiating with a multinational corporation may possess limited leverage. Thousands of workers bargaining together are operating from a different position. Through unions and other forms of worker organization, employees can negotiate collectively over wages, benefits, hours, safety, job security, and working conditions. Historically, organized labor played an important role in creating middle-class wages and social protections in many industrialized societies. Research on the United States has linked declining unionization with rising wage inequality, while comparative OECD research suggests that collective bargaining systems can influence how productivity gains are divided between labor and capital (OECD, 2018; Western & Rosenfeld, 2011). That does not mean unions are automatically egalitarian. Labor organizations themselves have sometimes excluded women, migrants, racial minorities, temporary workers, or people outside protected sectors. Strong protections for existing workers can also create divides between secure insiders and precarious outsiders. The lesson is not that unions solve inequality. It is that bargaining institutions affect distribution. Who negotiates, who is represented, and who has the ability to say no matters.

Education: Important, Necessary, and Not Magic

If there were an Olympic event for most frequently proposed solution to inequality, education would be on the podium. And for good reason.  Education can improve skills, increase productivity, expand professional options, raise earnings, and strengthen social mobility. Public education remains one of the most important institutions societies have for widening opportunity.

But education cannot carry the entire inequality problem on its back. Imagine everyone earns a university degree tomorrow. Hospitals still need cleaners. Farms still need workers. Warehouses still need staff. Restaurants still need cooks. Older people still need caregivers. Societies require enormous numbers of jobs that may remain poorly compensated regardless of how educated the person performing them happens to be. Education can change who occupies particular positions. It does not automatically change how those positions are valued or rewarded. Atkinson (2015) therefore argues that reducing inequality requires attention not only to education and skills but also to wages, employment, ownership, taxation, technological change, and social policy. Education is indispensable. It is not fairy dust.

Universal or Targeted?

Once governments decide to provide assistance, another debate appears almost immediately: should benefits go only to those who need them most, or should everyone receive them? A targeted program directs resources toward people below a specific income threshold or meeting particular eligibility criteria. That can seem economically efficient because scarce public funds are concentrated on the households facing the greatest need. The difficulty is that targeting requires bureaucracy. Someone has to define need, prove eligibility, verify income, process paperwork, and decide where the cutoff falls. People just above the threshold may receive nothing despite facing similar hardships. Eligible households may fail to participate because the system is complicated, inaccessible, or stigmatizing. A universal program uses a simpler rule. Every child might receive a benefit. Every elderly resident might qualify for healthcare. Every student might receive a school meal. Universal programs can be easier to administer and may create stronger political support because broad portions of society benefit from them. But universality costs more because public resources also go to people who could afford the service themselves. Neither design wins automatically. Many successful social systems combine the two, using universal programs in some areas and targeted assistance in others. Social policy is basically humanity spending several centuries arguing about how to answer the word “depends.”

Social Protection: What Happens When Life Goes Wrong?

Markets reward economic participation, but life has an annoying habit of interrupting economic participation. People get sick. Companies close. Workers become disabled. Parents have children. Recessions destroy jobs. Natural disasters hit. Technologies eliminate occupations. Eventually, everyone gets older. Social-protection systems exist because losing market income can occur for reasons that have little to do with effort or talent. Unemployment insurance, disability benefits, pensions, maternity protections, healthcare, and other forms of social insurance help households survive periods when wages disappear or expenses suddenly rise. These programs do more than protect individuals. They can also stabilize entire economies. During recessions, for example, unemployment benefits and cash transfers allow households to continue buying necessities even as private incomes fall. That spending can prevent an economic downturn from becoming even more severe. Social protection therefore performs two jobs at once: it protects people from shocks and helps prevent shocks from spreading through the wider economy. That is very Global Studies: the household and the system are connected.

Cash Transfers: What If We Just Give People Money?

Here is a policy idea so obvious that it somehow sounds radical: If people do not have enough money, give them money.  Cash-transfer programs do exactly that. Some are conditional, requiring families to meet expectations such as children's school attendance or health visits. Others are unconditional and simply provide income support. Latin America became particularly influential in the development of large-scale conditional cash-transfer programs, including Mexico's Progresa/Oportunidades and Brazil's Bolsa Família. Research has found that well-designed programs can reduce poverty while also improving outcomes such as school attendance, nutrition, and use of health services (Fiszbein & Schady, 2009). Critics have long worried that giving people cash could discourage work, create dependency, or lead households to spend irresponsibly. Yet empirical research has frequently found something much less dramatic: people use money for food, school expenses, healthcare, transportation, household needs, and productive investment. Sometimes a complicated policy debate really does contain the sentence: People need money. Not every problem requires a sixteen-layer flowchart.

Universal Basic Income: Everybody Gets a Check

Push the cash-transfer logic further and you reach Universal Basic Income, or UBI. Under a UBI, eligible individuals receive regular cash payments without having to demonstrate poverty or satisfy work requirements. Advocates argue that such a system could reduce poverty, simplify welfare bureaucracy, strengthen workers' bargaining power, support unpaid caregivers, and provide financial security in an economy increasingly shaped by automation. Critics immediately ask the obvious question:
How exactly are we paying for this? A genuinely universal program can be enormously expensive, particularly if payments are large enough to meaningfully support households. Critics also question why scarce public resources should be transferred to wealthy households and worry that financing UBI could require cutting more targeted public services. Experiments with guaranteed-income programs have generated useful evidence, but we still do not have a definitive answer about what would happen under a permanent national UBI operating at large scale. Effects on labor supply, taxation, wages, inflation, and existing welfare systems would depend heavily on program design.
Still, the debate is likely to become more important as artificial intelligence and automation transform work. Section 4.4 asked: If technology raises productivity, who owns the technology? UBI adds another question: Who should share in the gains?

Public Services Are Redistribution Too

Redistribution does not always arrive as money. A publicly funded school gives families an economically valuable service without depositing cash into their bank accounts. The same is true of healthcare, transportation, childcare, libraries, universities, housing, water systems, parks, broadband infrastructure, and legal assistance. Together, these services form part of what is sometimes called the social wage: resources that people receive collectively rather than purchasing individually. This matters because household income alone can give a misleading picture of economic well-being. Imagine two families each earning $50,000 per year. One lives in a society where healthcare, childcare, university tuition, and public transportation are affordable or publicly provided. The other must purchase all of those services privately. Their nominal incomes are identical.
Their actual standards of living may be nowhere close. This is another reason inequality cannot be understood through paychecks alone. What households have to buy privately depends partly on what societies decide to provide collectively.

Geography Makes Redistribution Global

Redistribution becomes much harder when we move from inequality inside countries to inequality between them. National governments can tax residents and spend the money domestically. There is no equivalent global government with the authority to tax humanity and redistribute income worldwide. Yet, as Milanovic (2016) emphasizes, where a person is born remains enormously important to economic opportunity. A worker doing similar work can receive radically different wages depending on the country in which the labor occurs. This means migration can itself become a powerful form of economic redistribution. A person who moves from a low-wage labor market to a high-wage one may increase their income dramatically, often sending part of that income home as remittances to family members. Those transfers have become a major source of household income in many lower- and middle-income countries. But migration also reveals why redistribution is politically difficult. The benefits and costs do not fall on the same people. Migrants may gain higher wages. Origin countries receive remittances but may lose trained workers. Employers in destination countries gain access to labor. Some local workers may worry about wage competition. Communities may experience new cultural, housing, or service pressures. So once again, the analytical question becomes: For whom? The most persistent question in Chapter 4 refuses to leave.

Global Taxes for Global Companies?

The mismatch between a global economy and national political institutions appears especially clearly in corporate taxation. Multinational corporations operate across borders, shift capital among jurisdictions, own intellectual property in one country while selling products in dozens of others, and may record profits somewhere entirely different from where those profits were generated. That creates opportunities for profit shifting, particularly toward low-tax jurisdictions. Research by Tørsløv, Wier, and Zucman (2023) suggests that a substantial share of multinational profits is shifted to tax havens, potentially reducing the revenue available to governments where economic activity actually occurs. In response, governments have pursued international cooperation through the OECD/G20 Inclusive Framework, including efforts to establish minimum corporate-tax rules designed to reduce incentives for moving profits largely for tax purposes. The negotiations are difficult because governments want different things. Some want to protect tax revenues. Others use low tax rates as a development strategy. Corporations seek predictable and favorable tax environments. Implementation varies across countries.
But the larger idea matters. Globalization created an economic problem that no single national government could easily solve alone, so states attempted to build a coordinated global response. That is practically the definition of a Global Studies problem.

Debt Relief: Redistribution Between Countries?

For heavily indebted countries, inequality policy can run into another constraint: money that governments might want to spend on education, healthcare, infrastructure, or climate adaptation may already be committed to debt service. Debt is not inherently harmful. Governments borrow because today's investment may produce tomorrow's growth. Roads, energy systems, schools, water infrastructure, and emergency responses often require financing that cannot be covered through current revenue alone.
The problem comes when debt becomes unsustainable. When large portions of public revenue go toward interest and repayment, governments lose what economists call fiscal space. Even a government strongly committed to social investment may have little room to maneuver. Debt relief and restructuring are designed to address this problem by reducing repayment burdens or extending the terms under which debt must be repaid.

The Heavily Indebted Poor Countries Initiative, launched by the IMF and World Bank in the 1990s, became one of the best-known international efforts to provide relief to countries facing unsustainable debt. Relief can create breathing room. It does not automatically solve the conditions that produced the debt. If governments remain dependent on volatile commodity exports, weak tax systems, expensive borrowing, or repeated emergency lending, yesterday's debt cancellation may simply become tomorrow's new debt. Debt relief can therefore be necessary without being sufficient. Sound familiar?

Development Aid: Help, Dependency, or Both?

Official development assistance represents another way resources move across borders. Aid can finance vaccines, schools, roads, humanitarian relief, climate adaptation, agricultural programs, public-health campaigns, government reform, and emergency response. Some interventions have achieved extraordinary results. Others have failed spectacularly. This is why arguments about aid tend to become arguments about which aid, not merely whether aid is good or bad. Jeffrey Sachs (2005) argues that extremely poor societies can become trapped in conditions where low incomes prevent the very investments needed to escape poverty. From this perspective, sufficiently large and coordinated investments in health, infrastructure, agriculture, and education can help countries cross important development thresholds. William Easterly (2006) is far more skeptical of large top-down development schemes, arguing that outside planners often lack the local knowledge necessary to design effective interventions and that decentralized experimentation and accountability may produce better results. Dambisa Moyo (2009) goes further, arguing that long-term dependence on foreign aid can sometimes weaken domestic accountability and distort government incentives. Students do not need to join Team Sachs, Team Easterly, or Team Moyo before lunch.
Instead ask what kind of assistance is being provided, who designed it, who controls the funds, what problem it is trying to solve, how success is measured, and what realistic alternative exists. A vaccination campaign and a foreign-designed national economic strategy can both be called “aid.” They are not remotely the same intervention.

What About Fair Trade?

Consumers sometimes try to address inequality through what they purchase. Fair Trade certification attempts to change the terms under which goods such as coffee, cocoa, bananas, or other agricultural products enter global markets. Certification systems may include labor standards, environmental requirements, minimum pricing arrangements, or community premiums intended to return more value to producers.

The appeal is obvious. Instead of waiting for governments or corporations to redesign global markets, consumers can reward production systems that claim to operate under fairer conditions. But Fair Trade has limits. Certification itself costs money. Not every producer can participate. Benefits vary by product and organization. And a label on a bag of coffee cannot, by itself, solve deeper problems involving land ownership, trade rules, bargaining power, commodity dependence, or global value chains. Ethical consumption can matter. It cannot substitute for institutions. Your coffee choice does not personally have to solve capitalism before 8:00 a.m.

Representation Matters Too

Economic inequality becomes even more difficult to change when wealth translates into political influence. People and organizations with substantial resources may have greater access to lobbying, campaign finance, policymakers, media ownership, professional advocacy networks, or other mechanisms for shaping political agendas.
Gilens and Page (2014), examining policymaking in the United States, found that economic elites and organized business interests had much stronger independent associations with policy outcomes than average citizens. Their findings come from a particular national context and should not be casually treated as universal. But they illustrate an important feedback loop. If wealth creates political influence, and political influence helps shape tax rules, labor laws, regulations, property protections, or public spending, then economic inequality can reproduce itself politically. Wealth creates influence. Influence shapes institutions. Institutions help determine future wealth. And around we go. At this point, inequality begins to look less like a static distribution of resources and more like a self-reinforcing system. Which, of course, is exactly what we have been arguing throughout the chapter.

There Is No Single Inequality Lever

We have now encountered an absurdly large collection of possible responses to inequality: taxation, unions, minimum wages, education, public services, cash transfers, UBI, migration, debt relief, international tax coordination, development aid, Fair Trade, competition policy, housing reform, and changes in asset ownership. That can feel overwhelming. But the variety is actually telling us something important. There are many solutions because there are many causes.

If low wages result from weak worker bargaining power, a cash transfer may increase household income without changing the bargaining relationship. If inequality is driven by poor schools, raising the minimum wage will not fix educational access. If land ownership is extremely concentrated, job training may improve individual skills without touching the structure generating wealth inequality. If multinational firms are shifting profits across tax jurisdictions, telling workers to get more education is almost comically unrelated to the mechanism.

The most important policy principle in this entire section is therefore: Solutions have to match mechanisms. The goal is not to collect as many good-sounding policies as possible. The goal is to understand why an inequality exists and then choose an intervention capable of changing that process.

The Inequality Policy Lab

When someone proposes a policy to reduce inequality, begin by identifying the inequality itself. Are we talking about income, wealth, education, health, gender, geography, political influence, or opportunity? Then identify the mechanism producing it. Is the problem low wages, unequal ownership, discrimination, tax avoidance, weak public services, historical dispossession, limited bargaining power, or something else?

Only after identifying the mechanism should we ask whether the proposed solution actually targets it. Then comes the part policy debates often try to avoid: who pays? Every intervention has costs somewhere. They may fall on taxpayers, corporations, consumers, workers, asset owners, borrowers, or future generations. Those costs do not automatically make a policy bad, but pretending they do not exist makes the analysis weak. Next ask who benefits and whether those benefits are actually reaching the intended group. Finally, think about what happens after the policy is introduced. Employers may alter hiring. Investors may move capital. Consumers may respond to higher prices. Families may change behavior. Political coalitions may form or collapse. Policy does not happen to mannequins.
People respond. That is why evaluating inequality policy requires thinking several moves ahead.

Fair Does Not Mean Everyone Gets the Same Thing

This chapter began by asking why the world is so unfair. By now, the answer should feel more complicated than it did at the beginning. Some inequality reflects different preferences, skills, effort, risk-taking, and choices. Some reflects luck. Some comes from inheritance. Some is produced by discrimination or exclusion. Some grows out of institutions built long before the people living under them were born. Some results from global differences in productivity, geography, political stability, or state capacity.
The difficult analytical task is distinguishing among them. A perfectly equal society is neither realistic nor necessarily desirable if achieving equality requires eliminating choice, innovation, reward, or diversity. But the opposite claim is equally weak: that any inequality produced through a market must therefore be fair. Markets operate through institutions. Institutions are created through politics. Politics reflects power. And power itself is distributed unequally.

So the better question is not: How do we make everyone equal?

It is: Which inequalities prevent people from exercising meaningful freedom and opportunity, which institutions reproduce those inequalities, and what would changing those institutions cost?

That question does not produce an easy answer but it produces a serious debate.

Final Global Studies Lens: Who Gets What and Why?

When you encounter an inequality, begin with the outcome: who has what? Then trace its history. How did this distribution emerge, and what events or institutions shaped it? Identify the mechanism that keeps reproducing the pattern and the actors who benefit from the current arrangement. Only then should you move to policy: what intervention actually targets the mechanism, who would bear the cost, and what evidence would tell us whether the intervention succeeded? In other words, move from outcome to history, from history to mechanism, from mechanism to power, and from power to policy. And throughout the process, keep asking the question that has followed us through this chapter: For whom? If you can answer that question while also explaining who pays, who benefits, and what might happen next, you are no longer simply describing inequality. You are analyzing it.