The Pitfalls of Political Power

Abstract

Abstract The unstoppable progress that lifted living standards and dramatically reduced poverty in the second half of the 20th century failed, however, to solve the issue of inequality. Inequality is driven by different forces, rooted deeply within political power. This does not mean it cannot be dealt with, but in order to curb its incentives successfully we must set the target toward its causes. This is why, as Chapter 9 will uncover, progressive taxation and greater redistribution will not be successful in solving the problem permanently—they are focused on the consequences (unequal incomes), not the causes. Granting too much political power to individuals to solve the issue of inequality leads to personalization of governing institutions, adverse selection into politics, and eventually declining trust in public institutions. This is the opposite effect of what we need to contain inequality.