See Acemoglu and Robinson (2002) for a discussion on the dynamics between political institution and inequality. See Tsounta and Qsueke (2014) on how proactive policies can lead to a reduction in inequality in Latin America. At the same time, taxes, transfers and welfare systems provided a basic safety net for poor people and redistributed income for greater economic and social equity. If it were not for these profound reforms and prudent public policies, inequality could have remained persistently high in the now developed world, leading to social unrest, aggressive populist reforms, and economic stagnation as widely observed in developing countries.