Inequality: What Can Be Done?: Summary & Key Insights

To understand inequality today, we must begin with its historical trajectory. After the Second World War, many developed economies experienced an extraordinary decline in income disparities. Progressive taxation, strong labor unions, expanding welfare states, and full-employment policies together created what some have called the ‘Golden Age of Equality’. Economic growth was shared broadly, with wages rising proportionally across sectors. Yet, beginning in the late 1970s and accelerating through the 1980s, the pendulum swung back. Liberalization of capital markets, deregulation of labor, and reduced taxation on high incomes restored the steep gradients of wealth. The share of national income going to the top one percent increased dramatically in the United States, United Kingdom, and other OECD countries.

Inequality did not return because technology suddenly required it. It returned because our institutions changed. In the postwar era, societies saw government as the manager of social outcomes. Later, the narrative of market inevitability—‘there is no alternative’—took hold. My work challenges that doctrine directly. By comparing data across decades and countries, we can see that policy choice explains the difference between high-equity and high-inequality outcomes. Sweden or Denmark did not simply inherit equality—they built it, actively, through taxation, wages policy, and social spending. The United States did not lose equality because its citizens demanded it—it lost it through shifts in regulation and bargaining power.

This historical lens is vital because it establishes a moral and empirical foundation for change. If previous generations could significantly reduce inequality, so can we.

To address inequality, we must be clear about what we mean by it. Economists often speak of income inequality, but I argue we must also consider wealth inequality and opportunity inequality. Income measures tell us how much people earn per year. Wealth measures reveal ownership—the accumulation of property, investments, and inheritances. Opportunity captures whether individuals have meaningful access to resources that permit them to flourish.

Measurement is not a mere technical issue; it conditions how societies think about fairness. I have worked for decades on improving inequality measurement, developing the Atkinson Index, which expresses social aversion to inequality in quantifiable terms. This index helps us ask normative questions: what degree of inequality is society willing to tolerate? What trade-offs occur between efficiency and equity? Once we can interpret these distributions, we recognize that extreme inequality does not simply reflect productive differences—it undermines social welfare. Economically, it inhibits demand stability and long-term growth. Politically, it breeds polarization. Morally, it erodes the sense of shared citizenship.

I challenge the reader to move beyond abstract averages and explore how unequal outcomes translate into lived realities. When we talk of a ‘Gini coefficient’ or ‘income quintiles’, we are talking about children born into different neighborhoods, mothers balancing two jobs without security, and entrepreneurs struggling to access credit. Inequality, properly understood, has human faces.