If Elon Musk bought Luxembourg tomorrow, would you be surprised? Nowadays there some few who own wealth that is simply unimaginable – probably even to them. A prominent current narrative is the idea of the self-made millionaire. Through hard work and smart investment anyone can become rich and more importantly what you earn belongs to you! But is that true? I will essentially argue that any action that I do (and not do) involves and affects others. Therefore, I have a economic stake in any success and accountability for any failure of all others and vice versa. To realize this, we require a welfare system with high redistribution.

Why do some earn more than others? In theory it is quite simple. In modern labour markets it is simply supply and demand. Just like with some goods and services there are also skills that have a high demand and very little supply leading to high wages. This usually applies to skills that need a lot of predispositions and education and often involve higher risks. Not everyone is a charismatic speaker or has a master’s degree in applied physics. These skills are distributed mostly through luck and privilege (in the sense of privilege enabling one to even study) but in general have been learned and developed by the individuals. This enables them to claim that wages in general are justified through the fact that those who earn more generally put more work and effort in and require exceptionally high education and predispositions. How are taxes justified then?

Taxes do not contradict the argument in its essence. Some more than others but everyone profits from government spending. From infrastructure through healthcare to military defence and education the government essentially requires a fine for using its institutions so that it can keep them running especially when the free market cannot cover for them. It is fair in the sense that everyone is essentially paying for many projects the government is running. Although you have to pay for the entire package even if you do not use all services the government offers, on average it can still be considered a good trade-off for everyone. This is a rough summary of how high wages are justified, and taxes do not contradict this because generally everyone benefits from government spending. There is however something that is often overlooked which I will call externalities of social relations.

What I mean by that is the win or loss that are incurred through social relations. Let me put it this way. If I am employed in a job with hourly wage of 250$ only because throughout my education my friends supported and helped me with studies, pay rent etc. then they should have a stake in what I am earning. Without their help I would not have achieved certain things and therefore they should be compensated, in form of dividends if you like. In fact, even people I briefly interacted with might have influenced me in a way that led to a certain decision which later enabled me to get this high paid job or led to me messing up a job interview. When we go through life all social relations and interactions influence our state of mind and future decision. I do not want to get into a debate whether any action is made by ourselves or if it is just a result off dependencies to complex for us to understand. For the time being let’s assume that there is only a degree of influence of our social relations on our actions. There is therefore a gain or loss we incur ourselves or on others through social relations for which we can justly demand compensation. The idea that anyone becomes rich by themselves or is poor because of personal choice is absurd. There must be some sort of redistribution.

The dividends cannot be enforced on an individual level since it is hard to tell who contributed how much and even harder to calculate the size of the “dividends”. Therefore, the government has to step in with high redistributions to compensate for positive and negative externalities of social relations. No one is rich or poor solely by their own action. Social relations play a key role is however not considered in most tax systems.

“Aggression and forced redistribution of wealth has nothing to do with the teachings of the world’s great religions.” – Tamim bin Hamad Al Thani