Can/Must the Social Contract Change?
The previous post to this blog asked “Can/Must Capitalism Change?” The charge against current practices of capitalism is the priority of profitability over all other concerns, including inequality, human rights, and global warming. Institutions and laws facilitate the function of capitalism, and capitalists are reexamining what they owe to society in return.
Similarly, society provides benefits to individuals; what is expected of the individual in return? Responsibilities are split among individuals, businesses, civil society, and the state. The state is expected to provide a wide range of ‘public goods’ – highways and other public infrastructure, public education, intellectual property protections, legal enforcement of contracts, economic and financial stability. The massive United States economy would not be possible without these government-provided assets; innovation would not occur. As economist Dani Rodrik wrote in Straight Talk About Trade: Ideas for a Sane World Economy, “Plant Silicon Valley’s brightest minds in Southern Sudan and they would hardly be as productive.”
Public investment is key to a country’s economic growth, enabling people to achieve their potential as successful, productive adults and contributors to the common good. The give and take comprise what is called the social contract. But changes in the economy are leaving large portions of the workforce disappointed and angry with their “bargain” from the social contract. Many blame globalization and technology. Automation threatens to intensify the division within the workforce between workers in routine types of work and those with high level skills. Artificial intelligence, climate change, and aging workforce will bring further economic dislocation.
In a recently-published book, What We Owe Each Other: A New Social Contract for a Better Society, Minouche Shafik, an Egyptian-British economist and director of the London School of Economics and Political Science, contends the need for a new social contract is confirmed – by culture wars around race, the rise of populism, youth protests about climate change and lack of economic opportunity, and backlash against globalization, among other challenges.
In meeting these challenges, a new social contract should guarantee basics for a decent life for all. Beginning with children, Minouche argues for universal maternal and paternal leave for parents following the birth of a child. Affordable, accessible, and high-quality childcare, financed publicly, should be an “essential part of public-service infrastructure.”
Education must begin before age three for the best opportunity to equalize chances of lifelong success for all children. A combination of businesses, academic institutions and government must support training required for career transitions throughout adults’ working lives.
Government intervention in the provision of healthcare is crucial to improve the health of society and prevent spread of disease. Costs are expected to rise due to aging population and new medical technologies. A minimum of primary care and public health benefits should be guaranteed for all, but the social contract must recognize education and good quality employment are also prerequisites for a healthy life, just as a healthy population is a prerequisite for a productive workforce.
When economic dislocation occurs displaced workers require support until they can return to productive work. Unemployed workers should have enough income to provide food, shelter, and medical care. If former jobs have become obsolete, preparation for reemployment should include job placement assistance and training that meets requirements of employers.
Longer lifespans mean more working years and more years in retirement. To assure adequate funding in retirement, it will be necessary to increase retirement age, increase contributions to retirement, or reduce pension promises, or some combination thereof; fewer options exist for low wage earners.
Minouche summarizes her book’s recommendations with three principles: security for all through guaranteed minimum for a decent life; maximum investment in creating opportunities for citizens to be productive contributors to society; and efficient, fair sharing of risks such as sickness, unemployment, and old age.