5 - Why Redistribute?

Summary

INTRODUCTION

Drawing from classical political economy, the framers of the U.S. constitution argued in favor of extending the suffrage only to citizens who were property owners. They believed that universal enfranchisement would have likely overturned the right to property.

In modern democracies political rights are distributed equally and actual income distributions are such that the median income is generally lower than the average income. Under these circumstances a majority of voters (i.e., the poorer 50 percent) may likely be expected to impose a transfer scheme that redistributes all income to the mean. However, history offers no evidence in support of this expectation: Universal suffrage did not lead to the expropriation of the wealthy by the poor. How is this possible? Why does inequality persist in democracies? Why does the majority of citizens with incomes below the median not form a cohesive block of voters to approve extensive welfare systems? To answer these questions we review the literature that explains the redistribution paradox in democratic systems. This line of research, though vast and articulated, shares the common view that income differences are, to a significant extent, an outcome of the political process.

We also know that income inequality is justifiable in democracies and that the poor majority does not expropriate the wealthy minority properties. However, governments of all hues design redistributive schemes to limit income differences. Such redistributive policies vary across countries. Why does this happen? Why do some countries spend more on welfare and others less?