Anti-inequality Policies and Globalization

Abstract

This chapter tackles the issue of governments’ policies facing growing inequalities within a globalized economy. Governments can firstly not intervene and let inequality rise. They can in contrast try to compensate the losers’ damages. If a partial compensation of the losers’ damages has been observed in most advanced countries, the implemented policies tend to generate (1) an inequality-unemployment trade-off, (2) a progressivity-redistribution trade-off and (3) a middle-class curse, a social-democracy curse and a rise of populism. In addition, the constraint on the funding of redistribution can lead governments to accept public deficits and to increase public debt. Finally, since globalization-driven inequality primarily hurts unskilled and middle-skilled workers, a longer-term solution to this problem consists in a general skill upgrading by expanding tertiary education. But globalization itself, and globalization-driven inequality in particular, can hamper the access to higher education.