Predistribution vs. Redistribution

Why the Democratic Party Must Return to Its Roots

Earl R. Smith II, PhD

Your paid subscriptions help me devote the time and resources necessary to the newsletter. If you find value in the clarity and context Civil Discourse brings, I hope you’ll consider becoming a paid subscriber and tell your friends about it, too.

The United States once stood as a global beacon for middle-class prosperity - a nation that lifted millions from poverty through purposeful government action. Today, that vision is under siege. The growing chasm between the ultra-rich and everyone else, stagnating wages, and decaying infrastructure are not accidents. They are the result of policy choices: a long drift away from predistributive policies that empowered workers and built a broad middle class, toward redistributive policies that merely attempt to mop up inequality after the fact.

Predistribution vs. Redistribution

At its core, predistribution is about shaping the market before inequality takes root. It’s about structuring the economy so that income and opportunity are distributed more fairly from the beginning - through strong labor rights, public education, infrastructure investment, fair tax policy, and market regulation. Predistributive policies grow the pie and ensure that everyone gets a decent slice.

By contrast, redistribution assumes that the market will produce inequality and that government’s role is to redistribute income afterward - through welfare programs, subsidies, or tax credits. While sometimes necessary, redistribution treats the symptoms, not the disease. Worse, overreliance on redistribution signals a retreat from shaping the economy in favor of compensating the losers of a system rigged in favor of the powerful.

The New Deal: America’s Predistributive Golden Age

When President Franklin D. Roosevelt launched the New Deal, he didn’t simply hand out relief checks. He transformed the architecture of the American economy. He regulated banks and capital markets. He created Social Security not as a handout but as a universal right. He empowered unions through the Wagner Act, raised labor standards with the Fair Labor Standards Act, and built enduring infrastructure that provided jobs and raised productivity.

These were not giveaways. They were investments in people and in the foundations of shared prosperity. They made the economy more just before income was distributed. As a result, the decades following World War II saw the fastest-growing and most inclusive middle class in human history. Income gains were broadly shared. Working people didn’t need redistribution - they were paid enough to live with dignity in the first place.

Neoliberalism: Redistribution as a Poor Substitute

Beginning in the 1970s, the Democratic Party - and political elites more broadly - abandoned the predistributive vision. Under the influence of the Chicago School of Economics, policymakers began to deregulate markets, crush unions, and cut public investment. The idea was that growth would "trickle down," and the government would simply redistribute some crumbs to the poor.

This is the neoliberal model, most famously adopted by Republicans, but also embraced by Democrats from Bill Clinton onward. It glorifies the market, withdraws the state from shaping economic outcomes, and uses redistributive mechanisms like the Earned Income Tax Credit to paper over the resulting inequality.

The results? Predictable. Wages stagnated. Good union jobs disappeared. Infrastructure crumbled. Wealth concentrated at the top. Redistribution, no matter how well-meaning, could never compensate for the erosion of economic power at the bottom. Programs meant to "help the poor" became politically vulnerable, stigmatized, and underfunded. Middle-class voters, seeing themselves falling behind, lost faith in government altogether.

Why Predistribution Works - And Redistribution Doesn’t

Predistributive policies are inherently more productive, popular, and permanent than redistributive ones.

• Productive, because they grow the economy from the bottom up - through education, public transit, research, and workers’ purchasing power.

• Popular, because they benefit a broad swath of Americans, not just a targeted group.

• Permanent, because they are baked into the structure of the economy, not subject to annual budget fights or political scapegoating.

Redistributive policies, by contrast, often feel like sunk costs. They don’t build anything. They don’t raise wages or improve long-term opportunities. They make poverty slightly less painful without ending it - and do little for the struggling middle class. Worse, they feed the false narrative that government only serves the poor while the rich thrive unbothered.

The Role of Government: Keynes vs. Chicago

At stake is a fundamental question: Should government manage markets to serve the public good - or stand aside and let markets run wild?

John Maynard Keynes, the intellectual architect of modern liberal economics, believed that markets were useful but unstable. Government, he argued, must play an active role in smoothing business cycles, investing in public goods, and ensuring full employment.

By contrast, the Chicago School, led by Milton Friedman, saw government as the problem. Their vision was minimalist: low taxes, deregulation, privatization, and monetary policy over fiscal policy. In practice, this meant surrendering workers and communities to the brutal whims of global capital.

The neoliberal consensus, rooted in Chicago School thinking, rejected the New Deal legacy. And it shows. The American middle class has been hollowed out. Workers now face skyrocketing costs for healthcare, housing, and education while corporate profits soar.

A Path Forward: Reclaiming Predistribution

It’s time for the Democratic Party to reject the false pragmatism of redistribution and return to the visionary pragmatism of predistribution. That means:

1. Investing massively in infrastructure - transportation, broadband, green energy, water systems - that creates jobs and boosts productivity.

2. Rebuilding worker power by protecting and expanding union rights, raising the minimum wage, and enforcing labor laws.

3. Making public goods truly public - including education, childcare, healthcare, and housing - so that all Americans start from a fair place.

4. Regulating markets to prevent monopolies, exploitation, and environmental destruction.

5. Reimagining tax policy not just to redistribute but to fund investments that change how opportunity is created in the first place.

Predistribution is not about punishing the rich. It’s about empowering the many to participate fully in the economy they help build. It’s about creating the conditions where families can thrive without relying on government checks to get by.

If Democrats want to revive the middle class, they must stop trying to make neoliberalism kinder and instead return to the bold economic architecture that made America a middle-class nation in the first place.

The choice is simple: manage the market for the common good - or let the market manage us into decay. It's time to remember who the market is supposed to serve.

© Earl Smith