Understanding the State’s Redistributive Function
Beyond correcting market failures, the state also plays a redistributive role. Most people believe that, without sacrificing efficiency, a more equitable allocation of resources is preferable to an inequitable one. This is likely because most individuals experience diminishing marginal utility when consuming goods and services: the first steak in a meal is enjoyed much more than the second, and it’s unlikely we’ll even reach the third or fourth.
State Intervention for Redistribution
When the state intervenes to redistribute income, it can do so through various means: taxes, consumption subsidies, transfers via social programs, tax exemptions, and public spending on healthcare or education.
The Desire for Equitable Distribution
In many cases, state intervention to correct inequality is entirely desirable. We live in a society where many hardworking individuals fail to improve their quality of life. Consider an extreme case: a homeless woman with limited resources who is pregnant will likely give birth to a child facing severe disadvantages, such as malnutrition, limited formal education, and lack of nurturing care.
While we may know success stories of individuals overcoming adversity, these are exceptions rather than the norm. Without state intervention, those disadvantaged will remain so indefinitely.
Mexico’s Efforts to Combat Inequality
The Mexican state’s efforts to combat inequality have not always been ideal, but data shows that over the past twenty-five years, inequality has decreased after state transfers and social programs. Paradoxically, there are countries where state intervention to correct inequality only exacerbates poverty. Examples include Bolivia and Guatemala, according to the World Bank (2017).
Despite this, most sources—official and from academic or multilateral organizations—agree that inequality in Mexico has decreased over the past few decades. However, Mexico still ranks among countries with high income inequality.
Effective Redistribution Mechanisms
The most effective way to correct inequality is through transfers and social programs, particularly those targeting disadvantaged groups. In fact, this approach has proven more effective than taxes and subsidies.
Social Mobility and John Rawls’ Thought Experiment
American philosopher John Rawls asked what country a newborn citizen would choose if they were unaware of their future social class. Likely, they wouldn’t choose countries without “social mobility,” or the ease of changing social classes. If given a choice, one would opt for a society where, despite misfortune, there’s a chance to improve one’s quality of life through hard work.
Unfortunately, social mobility in Mexico remains limited. According to the Espinosa Yglesias Center for Studies, 49 out of 100 individuals born into the lowest socioeconomic group remain there their entire lives. Of those who manage to climb, 25 fail to surpass Mexico’s poverty line.
Progress and Remaining Challenges
Over the past three decades, administrations have made progress in addressing income inequality. However, this deeply rooted and complex issue still requires significant work.
Key Questions and Answers
- What is the state’s redistributive role? The state ensures a more equitable allocation of resources without sacrificing efficiency.
- How does the state redistribute income? Through taxes, consumption subsidies, social program transfers, tax exemptions, and public spending on healthcare or education.
- Why is equitable distribution desirable? To help those who, despite hard work, fail to improve their quality of life.
- How has Mexico addressed inequality? Through state transfers and social programs, though income inequality remains high.
- What is social mobility? The ability to change one’s social class based on merit and hard work.
- Why is social mobility important? It provides opportunities for individuals to improve their lives regardless of their birth circumstances.
- What are the challenges in improving social mobility in Mexico? Limited opportunities for upward mobility and deeply rooted income inequality.
