The underlying research paper focuses on labour market policies and their effect on income distribution with the scope of providing an important insight regarding the view about capitalism: Capital should serve the well-being of the society, rather than the other way around. Most of the economists agree on the fact that globalization led to an increasing gap between rich and poor and that a large number of countries were affected by the recent global crisis. Among various reasons, there is a strong belief that the crisis is a consequence of flawed macroeconomic policy over the past decades and of “too liberal systems”. This paper will argue that recent high unemployment rates and increases in inequality were exacerbated by inappropriate policy making; thus, brings a reorientation of governments’ role in the economy and related political implications with general focus on labour market policies,whereby labour compensation should be seen not only as a cost factor, but also as the most important determinant of domestic demand. The foregoing theoretical research is strengthened in the last chapter of the paper by the empirical findings in Latin America countries.