Our social contract is tearing at the seams. What will emerge?

A protester with the "Black Lives Matter" slogan printed on her face mask joins a protest against racial inequality and police violence in Portland, Oregon, U.S., July 26, 2020

Image: REUTERS/Caitlin Ochs

Ayooshee Dookhee
Programme Specialist, Governance and International Cooperation, World Economic Forum Geneva
Abhinav Chugh
Content and Partnerships Lead, World Economic Forum
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  • Any attempt to write a new social contract will need to first untangle centuries worth of policies that have reinforced discrimination and segregation.
  • Here are some ideas about how we might begin to dismantle these systemic policy failures for the betterment of all.

Every person who is protesting in the streets with a “defund the police” placard is challenging the current social contract. What they are saying is that in failing to protect and offer equal opportunities to people of colour, the government has not held up its side of the bargain. And when that happens — as it has before, famously in the 1960’s during the Civil Rights movement — it forces a reckoning.

Will we come out of this crisis stronger, more equal and on a path to a fairer society? Or will we go down a darker road, one that for the time being is shrouded in uncertainty and fear?

The social contract has come to mean many things but ultimately and most implicitly it is an agreement between members of a society to cooperate under a shared set of norms, normally enshrined in the forms of laws and regulations.

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Dating back to Greek philosophy, but mostly associated with later thinkers such as Hobbes, Locke and Rousseau, the social contract upholds the notion that society is best served under an authority – whether a government or other institution. For a social contract to work, the governing authority must deliver, and members of society must consent. While this seems simple, the COVID-19 pandemic continues to spawn social and economic havoc globally, causing social contracts to be either broken or unfit for present times.

Importantly, our current context is highlighting that the social contract is not one but many.

In the last decade alone, we have witnessed the aftermath of the 2008 financial crash, the hottest temperatures for 140 years and now a global pandemic that has claimed more than 860,000 deaths while continuing to damage job markets. With a decade of accumulated inequities and public scepticism, the current crisis comes as a double-edged sword.

Historically, economic models have not been inclusive and given equal opportunity to marginalised communities. It takes a cursory view of Black history to know that Black people experienced extreme disenfranchisement on all fronts

In the absence of a legitimate social contract, rule of law and adequate social protection provisions offered by the state and employers, non-state actors are given the space to step in and provide services such as healthcare, education and potable water to citizens, thus undermining the established state-society relations. We find examples of this ranging from the Taliban in Afghanistan, the Mafia in Italy and the drug cartels in Latin America. In Italy for example, state inadequacies to provide social services have led the possible resurgence of the Camorra mafia and pawn shops to provide temporary liquidity, loans and food parcels leading to a risky shadow banking system.

Calls for reforming current economic models are many, from the Great Reset to the International Trade Union Confederation’s A New Social Contract campaign.

Rectifying historic systemic failures

First, a new social contract means repair and redress.

Historically, economic models have not been inclusive and given equal opportunity to marginalized communities. It takes a cursory view of Black history to know that Black people experienced extreme disenfranchisement on all fronts. In the US, new social policies under Roosevelt gave workers the first national minimum wage and the right to strike, unionize and engage in collective bargaining. Under those same policies, the Federal Housing Administration (FHA) served to undermine Black populations. The FHA used maps to determine the areas in which mortgages were guaranteed and often non-white areas were redlined; coded red because they were seen as hazardous. Cracking the mortgage industry meant wealth accumulation, which by the very nature of the FHA policies, favoured white people over Black.

Another US example is the Temporary Assistance for Needy Families (TANF) program (1996) designed to help families in need to achieve self-sufficiency as part of a big welfare overhaul effort under Clinton.

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Two decades later, TANF reaches fewer and fewer families. Researchers have used the TANF-to-poverty ratio (TPR) to examine and illustrate why and it has to do with where people live. For example, in America, states with a higher percentage of Black population suffer from less generous and more restrictive policies whereas whiter states tend to have the highest TANF-to-poverty ratio. We can see that these differences correspond to racial breakdowns, which ultimately have widened racial divides and limited socio-economic mobility for Black persons. Combined with the enduring legacy of redlining, TANF’s historically limited capacity to provide women of colour with access to direct financial assistance goes to show that welfare considerations and policies have continuously failed minorities.

"The master’s tools will never dismantle the master’s house."

Audre Lorde

Any aspirations for a new social contract will need to first untangle centuries worth of policies – most of the time, state-sanctioned – that reinforced discrimination and segregation. Today, protestors take to the streets amid a global pandemic, and they cannot fight in vain. The current moment urges all of us to come together to fight racial inequities in public policies.

Social protection interventions, both short and long-term, are essential elements of strategies and policies to reduce hunger, poverty and ensure livelihood continuity. In times of crises, social protections provide the safety nets for households to gain access to necessary utilities such as food, or the means to buy food. However, it is unlikely that social protections alone can lift households out of poverty unless complemented with sufficient livelihood programmes and the presence of rule of law to enforce contracts in the interests of everyone.

Redirecting public finance and expanding social protection

All over the world, the poorest groups, minorities and women – often unable to stay home, living in crowded environments lacking access to clean water and sanitation, and access to medical facilities – are the ones who suffer the most. Some countries such as the US and others have reduced fiscal spending and adopted fiscal austerity instead in order to manage budget deficits in their pandemic response. However, austerity in a slump does not work as it enfeebles the poor further while maintaining the status quo for the elite. While monetary policies and cash handouts can help with temporary liquidity constraints, it cannot fix solvency problems, nor can it ensure continuity or livelihood protection of disadvantaged communities and individuals.

Public finance and social protection policies should reflect our priorities. Conditions for bailouts and rescue packages for firms must include adequate social protection measures for their workers to be treated with dignity. This includes caveats of stakeholder capitalism which include higher minimum wages, improved workplace conditions, employee insurance with health coverage, worker representation on corporate bonds and restrictions on dividends, stock buybacks and executive bonuses. These ideas, once deemed radical, are already part of policy change – France, Poland, Belgium and Denmark, have blocked businesses linked to offshore tax-havens from receiving recovery bailouts and the United Kingdom has pressed for a temporary moratorium on dividends and buybacks.

Such conditionalities steer public finance resources strategically into productive avenues which build necessary safety nets for individuals and households but also are broadly able to be inclusive of greener recovery plans. Green stimulus policies, while not showing its impact in the short run, have been found to be particularly effective in creating jobs in the long run and reshaping the economy. As such, European policy-makers are looking to incorporate long-term decarbonizing goals into recovery packages to fundamentally move towards a climate-neutral economy, which could act as a critical factor in post-Covid-19 fiscal consolidation requirements globally.

Public services and safety net provisions were in tatters well before COVID-19. Rebuilding requires the great efforts of inclusion of everyone, regardless of race, age and sex, to ensure that cultural variation is fully integrated when it comes to rewiring the social contract. Writing about race, age and sex in 1984, the American writer Audre Lorde said “for the master’s tools will never dismantle the master’s house”. Her words continue to resonate today and can help shape cross-sectional thinking around response, recovery and rebuilding.

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