Rising inequality is widely seen as a plague. But policy makers have been reluctant to take steps to reverse it, fearing that this would distort incentives and stunt prosperity and economic growth.
It is often said that political power is more equally distributed than economic power, especially in democracies, and that this creates pressure to tackle inequality. Some say it is the policy of redistribution, rather than inequality itself, that is antithetical to economic growth. For most policy makers, redistribution has a bad name: a false cure that may be worse than the disease of inequality itself.
Yet economists are divided on the issue. Some emphasise the disincentives to work and invest that result from high taxes and transfers. But others have argued that redistribution need not be detrimental to growth. If progressive taxation is used to finance public infrastructure, or health and education benefits for the less well-off, it may actually contribute to economic growth. Sharing wealth more equally may actually help produce more wealth overall.