New Social Contract

Once a domain of obscure political philosophers, the term ‘social contract’ has lately been popularised. The global financial crisis of 2007-08 led to increased usage of the expression ‘new social contract’, arguably needed to improve economic and social affairs within countries and regions and on the global stage.

Over the last decade, international donor organisations had also begun using social contract as an analytical and policy tool, especially in their peace and rebuilding efforts in the Arab world. In the aftermath of global financial crisis, many former champions of Friedman-Hayekian styled capitalism have also been invoking the need for ‘new social contract’.

Nobel winning economist Joseph Stiglitz, known for his critique of unchecked markets, demands a “new balance between the market, the state, and civil society,” otherwise referred as progressive capitalism. Fortune 500 CEO echoed similar sentiments last year when they downgraded shareholder primacy from being the raison d’etre of corporations. (Read: BR Research Denying shareholder primacy isn’t the panacea, 9 Oct 2019)

Last year, the World Bank also released a report called “Toward a New Social Contract: Taking on distributional tensions in Europe and Central Asia” which flagged inequalities and suggested principles for adapting the welfare state model as a response to create a new social contract. To that degree, the tree-huggers and those who demand de-growth have found common interest with the Bretton Woods’ child.

It is, therefore, of no surprise that the UN Secretary General António Guterres has also called for a ‘new social contract’ to deal with global and local inequalities exposed by Covid-19. In his widely popularised op-ed this week, the UN chief wrote that the “world is at a breaking point. But by tackling inequality, based on a new social contract and a new global deal, we can find our way to better days ahead.”

His conception of ‘new social contract’ will link together governments, the public, civil society, organisations, businesses and others in common causes. He pinned his hopes to education and digital technology as “the two great enablers and equalisers” coupled with “fair taxation on income and wealth, and a new generation of social protection policies, with safety nets that include universal health coverage and the possibility of a universal basic income extended to everyone.”

But his biggest leap of faith in humanity was what he called “a New Global Deal” which is to ensure “a fair globalization” with “global governance that is based on full, inclusive, and equal participation in global institutions”; and a life that guarantees the rights and dignity of all human beings living in balance with nature in respect for the rights of future generations.

In a world where nationalistic politics are gathering pace, and where Donald Trump leads the most powerful country with his devil-may-care attitude for rest of the world, the challenges to New Global Deal are daunting.

And in a world where the bulk of population resides in countries either marked by poor civic engagement, or poor economies, weak states, or caught in playing ‘catch-up’ with the developed West, the fruition of new social contract appears distant to put it euphemistically. In most such countries, the presence of power and elite capture cannot be ignored in the name of optimism and hope.

Earlier this month, some 83 world’s millionaires called for permanent increase in taxation of the wealthy to deal with Covid-19 and the post-Covid (hopefully green) recovery. Their open letter, now signed by 97 millionaires under the flag ‘Millionaires for Humanity’, made headlines around the world with a lot of excitement and hope.

The fact that of the 18 million millionaires in the US (about 40 percent of the world), only 71 of them have signed that open letter to-date was conveniently overlooked. As was the fact that until 1400 hours PST yesterday, the list did not contain anyone from China, India, Pakistan, Turkey, Middle East, Russia, Africa – basically anyone outside the US and Europe.

For Pakistan and many other countries around the world, it all boils down to the elite.

Do they want a country; do they want to redistribute wealth; do they want inter-generational climate justice? Do not expect a lot from the nouvea riche of developing and emerging economies for they are blinded by their pursuit of power! Sure, inaction is not an option, and there are no quick fixes, which is why new social contract and new global deals are good signposts to have, but those who benefit from the current system should not be expected to lose their grip easily.