Linking an analytical understanding of why people suffer from inequalities with the sphere of policy trying to fight such inequalities is a core ingredient of the livelihoods approach. However, its application is increasingly criticised for being apolitical and inspired by neo-liberalism. The present chapter argues, though, that these critics risk throwing out the baby with the bath water. Its core focus is to propose that the challenge is not the absence of attention to power or politics in livelihood-centred studies, but how power and politics are conceptualised in these studies, and how power and politics are then addressed in the sphere of interventions. Using Bernstein’s ideal-type juxtaposition of residual and relational ontologies in development studies, it shows that both, indeed, do address issues of ‘power to’, ‘power with’, and ‘power over’ – though in distinct ways. But mainstreamed readings of the residual (i.e. neo-liberal) and the relational ontologies (i.e. orthodox Marxist) – though both claiming to be political – equally fail to unravel the everyday production of inequality. Empirical insights from rural Sindh in southern Pakistan illustrate that both these takes operate with pre-conceived typologies of the rural social universe (the ‘small farmers’, the ‘state’, ‘the peasants’) and that both neglect a differentiated engagement with the actual practices of social relations as experienced by marginalised people in their everyday life. Therefore, the chapter calls for a re-energised critical relational livelihoods perspective that gives due attention to agency and structure, to a more differentiated and site-specific stratification of the rural populace as well as the heterogeneity of ‘the state’, and a context-specific understanding of inequality as an outcome of multifaceted social power relations between the multitude of social groups and the heterogeneous state system. Such an analysis also calls for more differentiated policies and practices to challenge inequalities, beyond the development industry’s mainstream.