How to Spread America’s Wealth: The Promise and Peril of “Pre-Distribution”
By Rana Foroohar
New Delhi, July 24, 2026
The wealth gap is a big political issue for Americans. According to a Gallup poll held in March, half of the country worries “a great deal” about how income and wealth are distributed. Perhaps that’s because about the same share of the population doesn’t have the resources to afford all the basics, like housing, food, medicine and healthcare [citation:original text].
The winner-takes-all AI economy has only exacerbated these concerns. That’s one reason that Donald Trump rang the bell for both the New York Stock Exchange and Nasdaq at the White House last week to promote his new “Trump accounts”. These would give every child born between January 2025 and December 2028 a one-time $1,000 Treasury contribution, as a way of, as Trump put it in his press conference, making a lot of kids “very, very rich” [citation:original text].
The Trump Accounts: A Small Step, Not a Solution
Will it? In a word, no. With a 5 per cent real annual return, that $1,000 would be $2,400 by the time the child is 18. Nice, but by no means transformative [citation:original text]. The Trump Accounts, officially known as 530A accounts, are a type of child IRA established under the Working Families Tax Cuts law . While they allow families, employers, and charities to contribute up to $5,000 annually, the federal seed money is a one-time pilot for children born between 2025 and 2028 . About 6 million children have already been enrolled .
Still, the fact that even Trump (who has done his best to increase the wealth gap in America) is concerned confirms the larger debate in the US over what some political theorists and economists call the “pre-distribution” as opposed to the “redistribution” of wealth – at a time when inequality is greater than it has been since the Gilded Age [citation:original text].
The Pre-Distribution vs. Redistribution Debate
Democratic socialists and many progressives would like to see redistribution, mainly in the form of wealth taxes. Conservatives and some middle-of-the-road Democrats argue that “pre-distribution” – meaning giving more people a bigger stake in equity markets and housing wealth up front, rather than aiming for mass redistribution via taxation – is a better idea [citation:original text]. The term “pre-distribution” was popularized a decade ago by Ed Miliband to contrast with redistribution. Redistribution addresses inequality after the fact, through taxes and transfers, while pre-distribution seeks to make the initial distribution of market incomes more equal .
Personally, I think some mix of both will be necessary to preserve social cohesion in a country that feels increasingly like an emerging market in terms of its wealth bifurcation [citation:original text]. However, both approaches have their limitations. Redistribution schemes like wealth taxes require sustained political will and can be subject to reversal .
The Need for a Bigger Approach
But in the short term, pre-distribution may be more politically tolerable. The US is, first and foremost, an asset economy. Markets are the tail that wags the dog, and more Americans are invested in them than ever before. Still, the top 10 per cent of the population owns 93 per cent of equity wealth. The asset wealth of the richest (who do most of the consumer spending) fuels inflation in crucial areas like housing. This is only going to get worse, as all the new AI multimillionaires drive prices up even further, particularly in the top markets [citation:original text].
If we read our Thomas Piketty and assume that the growth of asset wealth will almost always outpace the growth of income wealth, ultimately creating major political stress fractures in societies, we must think about ways to bring more people into the market in a bigger way. The alternative is Hobbesian. The only question is how best to do it [citation:original text].
One-time government contributions with voluntary additional contributions by families tend to simply replicate existing inequality: rich families can and will put more into the pot. Research has shown this to be the case with, for example, the UK’s now-abandoned Child Trust Fund. Although admirable, it did nowhere near enough to tackle inequality, according to the Institute for Fiscal Studies. Ditto similar experiments in Canada and Australia [citation:original text].
Models That Work: Land Reform and Sovereign Wealth Funds
The sort of pre-distribution that really moves the needle on inequality involves the ambitious transfer of productive national assets to a broad swath of the population, not small, universal government grants and voluntary family contributions [citation:original text].
Think of postwar land reforms in South Korea, Taiwan and Japan, which got rid of subsistence tenant farming, increased farmers’ purchasing power (which drove other areas of the industrial economy) and reduced overall levels of inequality [citation:original text]. Research shows that these reforms were responsible for at least half of the actual reallocation of labor out of agriculture in each of these countries .
One might also point to Singaporean housing policy as a good model of paradigm-changing pre-distribution – the state-driven model of near-universal home ownership increased intergenerational mobility significantly. There is also the sovereign wealth fund model. Alaska’s Permanent Wealth Fund, for example, helped reduce poverty by sharing annual income from oil revenues with all state citizens [citation:original text]. Studies have shown that the Alaska Permanent Fund Dividend (PFD) reduced the number of Alaskans with incomes below the poverty threshold by 20-40%, and has played an important role in alleviating poverty among seniors and children .
Universal Basic Capital: A 21st-Century Solution
The obvious productive asset to divide up today is intellectual property and data (which represents the bulk of corporate wealth) and in particular AI, which represents all net corporate capex. Big Tech’s wealth is based on information extraction from humans. So, it is no wonder that middle-of-the-road Democrats like California governor Gavin Newsom are calling not for universal basic income, but universal basic capital – or UBC – perhaps in the form of technology-based sovereign wealth funds of the kind proposed by OpenAI, the Berggruen Institute and others [citation:original text]. In May, Newsom signed an executive order directing state agencies to study universal basic capital alongside more traditional moves like expanding job training . This would give citizens a piece of the massive AI wealth being created today. As Newsom put it at an event in May, “We don’t need charity, we need ownership.” [citation:original text]
The idea of UBC is gaining traction in policy circles and Silicon Valley alike. OpenAI published a policy framework in April proposing the creation of a “public wealth fund” financed by tech companies that would give all citizens, including those who don’t own stocks, “a stake in AI-driven economic growth” .
The Danger of History Repeating
The last time America heard this much about the “ownership society” was back in the mid-2000s, when George W Bush pushed for broader home ownership. That ended in tears, as poorer, less creditworthy borrowers became the hardest hit in the financial crisis when those easy loans reset to no-shelved rates [citation:original text].
Pre-distribution, if it is to work, must not be about making the public a part of the economy. It must be about creating the wealth in a bigger and much more sustainable way [citation:original text]. For UBC to succeed, it must avoid the pitfalls of programs like the Trump Accounts. If the public is given stakes that can be easily sold to the wealthy, the program risks simply creating a new asset class for the rich to buy up. As one critic noted, “If I own OpenAI shares that I can never sell, we just made OpenAI last forever, whereas maybe I want to be able to sell my shares to buy Anthropic” .
Q&A Section
1. What are “Trump Accounts” and how do they work?
Trump Accounts, also known as 530A accounts, are a type of child IRA established under the Working Families Tax Cuts law. Parents, guardians, and relatives can contribute up to $5,000 annually, and employers can add up to $2,500. Eligible children born between January 2025 and December 2028 receive a one-time $1,000 seed contribution from the Treasury. The funds grow tax-deferred and can be withdrawn when the child turns 18 for purposes like education or a first home.
2. What is the difference between “redistribution” and “pre-distribution”?
Redistribution addresses inequality after the fact through taxes, transfers, and social programs. Pre-distribution works differently—it seeks to make the initial distribution of market incomes more equal by giving more people a stake in assets and wealth up front. Pre-distribution operates at the level of market design, before government redistribution enters the picture.
3. Why are programs like the Child Trust Fund considered insufficient for tackling inequality?
One-time government contributions with voluntary additional contributions by families tend to simply replicate existing inequality because rich families can and will put more into the pot. The Child Trust Fund in the UK and similar experiments in Canada and Australia did nowhere near enough to tackle inequality, according to research, because they did not fundamentally change the distribution of productive assets.
4. What is Universal Basic Capital (UBC) and why is it gaining attention?
Universal Basic Capital is a proposal to give every citizen a stake in assets like corporate stocks, bonds, or wealth funds. California Governor Gavin Newsom has directed state agencies to study UBC, and OpenAI has proposed a “public wealth fund” financed by tech companies. The idea is to give citizens a piece of the massive AI wealth being created, rather than just a cash payment.
5. What lessons can be learned from the Alaska Permanent Fund and postwar land reforms?
The Alaska Permanent Fund Dividend reduces poverty and has positive effects on health, employment, and fertility. Postwar land reforms in Japan, South Korea, and Taiwan eliminated tenant farming, reallocated labor out of agriculture, and reduced overall inequality. Both examples show that ambitious transfers of productive national assets to a broad swath of the population can move the needle on inequality more effectively than small, universal grants.
