• Marzele Bosch (South Africa)

The role of redistributive policymaking in reducing inequality and promoting sustainable development

This document considers the impact, challenges, and opportunities of distributive, more significantly, redistributive policies. The document will focus on the role of redistributive policies in developing countries to deliver equity, growth, and sustainability. Distributive policies imply allocating resources to the equipment of broadly accessible infrastructure such as education or health care. Distributive policies are concerned with bringing about fundamental social and economic changes. Distributive policies are less contested, as most citizens are expected to benefit from these policies in some way or another. However, redistributive policies are needed to bring about meaningful change and inequality. Critics of redistributive policies often view their impact on economic growth. It is framed as a trade-off between economic growth and redistributive policies.

Redistributive policies are essential for reducing inequality and promoting sustainable development. These policies have three dimensions; (1) equity, (2) economic empowerment, and (3) sustainable development. All three measurements should be considered when assessing the impact of redistributive policies. These policies represent a powerful policy instrument for improving equality of outcome through redistributing income and enhancing equality of opportunity by improving the distribution of income-generating assets, such as human capital and wealth. Beyond their strong potential for reducing inequality, redistributive policies are also vital for promoting values that are consistent with sustainable development and for shaping a socio-economic context and incentives that are conducive to financial stability and economic development, political inclusion, gender equality, and social mobility, as well as environmental sustainability. The ability of redistributive policies in developing countries to tackle inequalities and economic growth remains questioned. The redistribution of income and wealth may achieve greater equality, faster growth, and poverty reduction.

Redistributive policies could also help narrow the gap between rich and poor in countries with high inequality, where social and political tensions or the rise of populist regimes might prove insufficient for growth in the long run. Shifting resources from those at the top to those at the bottom, in terms of access to health, education, housing, etc., may foster long-term economic growth and development and contribute to political stability. Having acknowledged the positive impact of redistributive policies, the following section will discuss challenges regarding policy implementation. Developing countries may face political opposition or lack the administration capacity and implementation tools such as progressive taxation, cash transfers, and investments in human capital for regulation and inclusive growth strategies. Tackling these shortcomings is imperative to reaching the redistributive policy objectives. Taxation and income transfers to the poorest segment of society are the most direct way to keep inequality in check and reduce poverty in the short term.

However, these interventions are often ineffective in bringing about effective change. Extending these programs requires more resources. Higher and more effective income tax on the upper-income scale could help raise the necessary funds. Thus, governments of developing countries will emphasize direct taxation and less on indirect taxation of domestic and imported goods and services. These taxes may be regressive because they tax consumption rather than income, and wealthier people save a higher proportion of their income. It may even increase poverty depending on the structure of tax rates and households’ consumption baskets at various rungs of the income scale. Strategies that promote greater equality and more robust growth rely on progressively raising resources and spending them on programs that benefit the poorest segment of the population.

Governments need the inclusiveness of their growth strategies, particularly by fostering the employment of unskilled workers. Besides straight redistributive policies, other redistributive policies may encourage sustainable economic development and equality. The following section will consider the impact of minimum wage laws, anti-discrimination laws, and anti-corruption strategies to strengthen redistributive policies. There are several policy options available to governments. The effect of redistributive policies on income inequality and sustainable development can be significant. Still, it varies across countries and over time as redistributive policies are shaped by domestic factors, such as demography, and economic and political conditions, and further influenced by the international strategic and ideological context. The final section will consider redistributive policies against the backdrop of the COVID-19 pandemic. The COVID-19 pandemic has caused a significant deterioration in public finances, adding to pre-existing strains from long-term structural challenges, including population aging, climate change, and rising inequalities.