Upward Redistribution

by Shihang

Really interesting article by Dean Baker arguing that policy in the world has often been covertly upward distributionist, that while politicians were debating progressive taxation with the moral artillery of self-reliance, they have been promoting policies which take money from the poor and middle class and give it to the rich.

I don’t think anyone would argue that this is a desirable policy in public. But Baker makes a very plausible case for his thesis and one idea I like is that we must look at policies carefully to see exactly what they entail. Often policies can be disguised with clever names. A free trade agreement sounds great to people with a basic understanding of economic theory but that agreement assumes free trade in some goods, but also protectionism in others. How do we decide which goods are protected by barriers and which are free? It is in these questions that the true ideological orientation and effects of policies lie. So while we haven’t been taxing the poor and giving it to the rich, it is still possible for subtle upward distribution to exist.

Are Baker’s examples convincing? The point about patent laws has been discussed often (here for a start) and the notion that patent laws can actually reduce innovation has also been brought into the mainstream. And given the monopolistic aspects of a patent, the notion that patents are bad for consumers is obvious, even more so if we realise that if the argument above is correct, then patents do not even generate new innovations for the market.

So I am willing to believe that patent laws bring profits to monopolist inventors to the detriment of everyone else. Increasing inequality may be a free market outcome, but it is also helped along by regressive policy. In any case, this is an idea that is worth looking into.