Inequality in income and wealth distribution, globalization and models of capitalism

Since its origin the economic science has granted a lot of attention to income and wealth distribution which are assumed to be the main economic determinants of inequality. But this simple sentence has to be qualified taking into consideration the typical logic that economists traditionally are used to follow. First, their effort has been devoted chiefly to develop paradigmatic models which have been mainly used to study the impact of distribution on crucial economic outcomes, such as growth and efficiency. Second, since income and wealth distribution have been considered among the main determinants of potential inequality in the economic realm, a deeper analysis of their impact on inequality has been left to the specialized interest and feelings of a few scholars in the application of their favored paradigmatic model. If we consider in retrospect the evolution that took place within this logic, we cannot be fully satisfied. Actually, this two-stage way of reasoning has encouraged the majority of economists to consider growth and efficiency neutral with respect to inequality. Today, due also to the process of global integration of markets, the influence of several layers of government on the operation of each model and the importance attached to sustainable and inclusive development, it is much more difficult to deal with inequality as a second-step issue. A new vision emerges which has to be seriously taken into consideration also by economists. Therefore, in introducing the subject of how income and wealth distribution theories have influenced the study of inequality we need to move forward dealing with four main points. In the second paragraph the traditional theories of income and wealth distribution will be shortly reviewed, trying to clarify their implications in terms of the interpretation of inequality. This is not only relevant from a historical point of view, but can be rewarding also for contemporary studies on inequality. We will also outline some of the major bias affecting mainstream economics. In the third paragraph the main changes in the reference framework induced by globalization and global crisis will be outlined, suggesting the view that the new globalized nature of inequality should be examined. In the fourth paragraph the multidimensional nature of inequality is explored and other elements useful to deeper in the study of the new vision are collected. In the fifth paragraph we will explore some of the reasons why the models of capitalism theory can be relevant for better studying globalized and multidimensional inequality. These paragraphs together emphasize that inequality is a global, multidimensional and cumulative phenomenon and it should not be conceived only as the result of the processes of personal and functional distribution of income and wealth, which, by the way, are intrinsically multidimensional on their own. The basic idea is that institutions, the cobweb of relations among them and their interaction with the economic structure define the model of capitalism which characterizes a specific country and this, in turn, affects the level and the dynamics of inequality. This approach is consistent with the sociological approach of Rehbein and Souza (2014), based on the analytical framework developed by Pierre Bourdieu. Concluding comments will suggest an agenda for further studies.