Redistribution—via the tax code—has been central to the progressive vision ever since the original Gilded Age. Let’s tax our wealthiest, this traditional approach urges, and use the resulting revenues to underwrite initiatives that can help “level up” those without much wealth at all.
But critics from the left see a fatal flaw in redistribution as traditionally practiced. This redistribution takes the inequality-generating economy as a given and essentially accepts that this economy will end up advantaging some and disadvantaging others. That acceptance leaves egalitarians playing a mop-up role: They work to even up outcomes, to smooth out advantages.
The advantaged, unfortunately, seldom cooperate. They push back against the smoothing.
The British economist Faiza Shaheen uses a medical analogy to describe what typically happens next. Over time, she explains, viruses can develop resistance to antiviral medications. The rich, like viruses, also develop resistance, in their case to redistributive taxes. They use their wealth and power to carve out tax loopholes and lower tax rates. Their fortunes balloon. Inequality grows.
Smart public-health officials stress prevention. Smart social and economic policy, says Shaheen, would stress prevention as well. This policy wouldn’t solely rely on our ability to tax income and wealth that concentrate at the economic summit. This policy would instead move to prevent income and wealth from concentrating in the first place. Inequality simply matters too much to let it dig in.
We need, in short, to battle for economies that generate less inequality, not just for redistributive measures that aim to clean up already-made messes. We need to place as much emphasis on the “predistribution” of wealth as its redistribution. We need to identify the institutions and policies that guide excessive rewards to the rich and powerful—and make them over.
But just how could we—how should we—“predistribute”? The predistributive focus is zooming in on the steady decline in the share of national income going to worker wages.
This shrinking share makes no rational economic sense. Fewer coins in worker pockets mean either less demand for goods and services or huge increases in household debt—or both. Firms in low-wage environments, meanwhile, have little reason to invest in productivity enhancements. With so much cheap labor available to hire, why go to that trouble? Low wages also mean fewer customers who can afford to buy the goods and services that productivity enhancements would help companies produce. So companies end up awash with cash that has no place productive to go, cash that ends up fueling an endless stream of mergers and acquisitions that enhance monopoly power—and ratchet up the profit share of national income.