Thursday, November 30, 2017

Redistribution Lives!

Most people on the left believe the right has succeeded in their maniacal quest to reverse progressive redistribution by the modern state. This gives the right too much credit. They have, in fact, failed to do this (though a reasonable case can be made that they have slowed the growth in progressive distribution). 

Peter Lindert, one of the great academic experts on inequality (his book with Jeffrey Williamson, Unequal Gains, is the definitive history of American economic inequality) documents this in a recent study that he summarizes on the VoxEU site (emphasis added):
·         Government budgets have shifted resources progressively, from the rich to the poor, within the last 100 years. The middle ranks are neither favoured nor disfavoured.  Before WWI, very little was redistributed through government.
·         The shift toward progressivity has not been reversed, contrary to allegations of a rightward shift since the 1970s.  Among democratic welfare states, the closest thing to a demonstrable reversal was Sweden’s partial retreat since the 1980s. Globally, the most dramatic swing has been Chile’s record-setting return towards progressivity after the regressivity under Pinochet. 
·         As a corollary, the rise in inequality since the 1970s owes nothing to a net shift in government redistribution toward the rich, despite the lowering of top tax rates.
·         Since the late 1970s, several governments have shown a mission drift away from investing in lower-income children and working-age adults, while concentrating social insurance on the elderly. Japan, the US, and some Mediterranean countries have missed an opportunity for pro-growth income-levelling. 
The full study is available in a working paper, The Rise and Future of Progressive Redistribution" (warning: much wonkery! But lots of great data).

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