Inequality and the Role of Redistributive Policy

Abstract

The EU amended social policy tasks in its treaties very late following complaints of citizens that the EU only is responding to capital demands. In addition, facing its ageing society and because of the enlargement with 10 new member states among which are very poor ones, the EU changed its course incorporating social cohesion and fighting poverty and unemployment as new goals. Yet being confronted with a harder global competition the political class in Europe cut social expenditures, deregulated the protection of labour, and reduced the tax load on profits and higher incomes to be an attractive location for the volatile capital. Nevertheless, the results remained poor. Instead of stabilizing economic growth these measures impoverished the states and contributed to a widening gap between rich and poor. Thus, there is a contradiction: on the one side the EU goals are addressed to fight poverty and unemployment but on the other side the political class favoured austerity policies which increased inequality and did not give space to act in the tradition of welfare states.