Wealth Redistribution Policies

Dr. Shahram Yazdani

Wealth Redistribution Policies

Shahid Beheshti University of Medical SciencesSchool of Medical Education

Strategic Policy Sessions: 05

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“It’s Your money, not the government’s”

Ronald Reagan

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“As long as there existed a business owning, class oppression would continue. Private property is illegal.

Karl Marx

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What is an Ideology?

Generally speaking, it is a value system through which we perceive, explain and accept the world.

According to the political theorist Robert Dahl, all individuals are ideologues in the sense that we all map out our own interpretations of what the world is and how it should be.

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The Major Components of Ideologies

The state of human nature The role of the individual in society The role of the state The sources and limits of political

authority The preferred economic and social order

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Ideologies: The Preferred Economic and Social Order

Ideologies have to deal with the fundamental question of who controls the wealth in society. Should wealth be equally shared, or should some individuals be allowed to possess more wealth than others?

For communists, private ownership is not allowed. They are committed to providing an equitable distribution of wealth

For capitalists, people need to compete with one another in order to have an incentive for material gain. Economic and social inequities are allowed to exist

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“The Economy”

How politics and economics interact, and how they balance conflicting values of freedom and equality

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Components of Political Economy Markets – interaction between supply and

demand that functions to allocate resources Freely allow individuals to buy, sell, and

trade what they produce for what they will consume

Sets values, or “prices” for these goods and services

Markets arise spontaneously, and are difficult for the state to control

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Components of Political Economy

Property – ownership of goods and services State can choose to play a role in protecting

property rights – the right to sell property freely, or to not have it taken away In LDCs, frequently property exists without

a fundamental protection of property rights, due to the state’s inability to monitor instances of fraud

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Components of Political Economy

Public Goods – goods provided and/or secured by the state Examples (universal): Roads, lighthouses,

the military Examples (in some cases)

Health care in Britain, Canada Oil in Nigeria and Saudi Arabia Most businesses in Cuba

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Components of Political Economy

Taxation Means to provide for public goods and social

expenditures Subject of political battles, determined

partially by ideology toward the role of the state

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Components of Political Economy

Social Expenditures Commonly called “The Welfare State” –

redistribution of wealth through government taxing some, and paying others

Typically provided to the elderly, the unemployed, the poor, and the disabled

Often a subject of political battle, due to the question of who benefits from expenditures

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Components of Political Economy Money, Inflation, and Unemployment

States create and manage the money supply through a central bank

Creation of too much money in effort to stimulate the economy and reduce unemployment can cause inflation

Slowing the growth of money to control inflation can slow economic growth and cause unemployment to rise

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Components of Political Economy

Regulation – rules or orders to set the boundaries of given procedures States can ban production or sale of goods,

set safety requirements, outlaw monopoly control, etc.

Trade – access to goods and services from foreign states States can allow open trade, or restrict it

through tariffs, quotas, and other non-tariff barriers

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Tax Rates as % of GDP (2008)

Sweden: 54.2 % Denmark: 48.8 %  Finland: 46.9 %   Belgium: 45.6 % France: 45.3 %   Austria: 43.7 %   Italy: 42 %   Netherlands: 41.4 % Norway: 40.3 %   Germany: 37.9 % United Kingdom: 37.4 %

Russia: 36.9 % Canada: 35.8 % Switzerland: 35.7 % New Zealand: 35.1 % Australia: 31.5 % Ireland: 31.1 %   United States: 29.6 % Japan: 27.1 %   China: 17% Mexico: 9.7% Iran: 7.3% Nigeria: 6.1%

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Gini Coefficient for the 6 Countries

Sweden – 23.1 Germany – 28.3 U.S. – 40.8 China – 44.7 United Kingdom – 36.0 Russia – 31.0 Mexico – 54.6 Iran – 43.0 Nigeria – 50.6

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Priori + Experience = Posteriori

Success is one percent inspiration and ninety-nine percent perspiration

Where I was born

Who are my parents Inspiration

PerspirationHow I was developed

What is my IQ

Who am I now

What have I now+ =

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Wealth Redistribution

Revenue Model Logarithmic (Regressive) Full Range Increasing (Proportional) Increasing (Proportional) with Threshold Exponential (Progressive)

Payback Model Full Range Flat Rate Flat Rate with Threshold Full Range Decreasing Decreasing with Threshold Inverse Exponential

Full-Range Flat Rate

Flat Rate with Threshold

Full-Range Decreasing

Decreasing with Threshold

Full RangeIncreasing

Increasing with Threshold

Exponential

InverseExponential

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Thank You !

Any Question ?