What does society owe each of us? And what do we owe in return?
Our answer to these inescapable questions – known as the social contract – shapes our politics, economic systems and every stage of life, from raising children and going to school to finding work and growing old. Yet today, many believe that this contract is not working for them.
In What We Owe Each Other: A New Social Contract, leading economist and Director of the LSE, Minouche Shafik, examines societies across the world and demonstrates that the urgent challenges of technology, demography and climate require a major shift in priorities – a social contract fit for the 21st century.
Our panel discussed these issues and more at this event in our Fair Society series with the Policy Institute at King’s College London.
- Minouche Shafik, Director of the London School of Economics
- Diane Coyle, Co-Director of the Bennett Institute for Public Policy, University of Cambridge
- Daniel Susskind, Fellow in Economics, University of Oxford, and Visiting Professor at the Policy Institute
- Ryan Shorthouse, Director, Bright Blue, and Visiting Senior Research Fellow at the Policy Institute
- Bobby Duffy, Director of the Policy Institute, King’s College London (chair)
Minouche Shafik summarised the main arguments from the book. The social contract has broken down in recent years, driven by factors including changing expectations around gender divides, technological advances, ageing populations and climate change, and it is broken in particular between generations. However, there are many ways to fix it. For example, education systems should invest more in the first 1,000 days and in lifelong learning; flexible labour markets need to provide more unemployment and retraining support, as happens in many Nordic countries. The social contract should provide a minimum floor, better investment in lifelong opportunity and capability, and better sharing of risk through collective schemes. The current, overly individualistic approach is not only unjust but also inefficient; if we invest more in each other, and expect more back in return, we will increase opportunity, security and efficiency. Today’s multiple crises provide an opportunity to shift our thinking and take action on these longer term issues.
Diane Coyle responded by arguing that we have failed in the past to introduce collective arrangements to protect people against risks, like automation, and we are poised to fail again in the future. The levelling up agenda is a response to previous failures to prevent multiple forms of disadvantage from clustering in particular regions. We need to make existing structures (labour markets, pensions and so on) work better, rather than bringing in schemes like universal basic income. Rather than simply focusing on economic efficiency, we need to provide a universal minimum level of public services and infrastructure. And we need to think more about risk and resilience, as well as growth.
Daniel Susskind introduced the idea that there is an important social contract between individuals and big tech, as well as between individuals and the state. Big tech’s power is no longer just economic, but is also political, in that it controls the information that we receive and how we relate to each other, with huge implications for democracy and social justice. The social contract is a crucial framework for understanding the importance of contributive justice as well as distributive justice; we need to give everyone the chance to contribute to society. But we also need to think about which individuals and groups are part of the political community that signs the social contract, and which are not.
Ryan Shorthouse voiced his agreement with many of the evidence-based ideas outlined in the book, such as enhanced parental leave and unemployment support in Scandinavian countries to the increased taxation of wealth and carbon emissions, while craving more detailed discussion of radical policy ideas such as capital endowments for young people, lowering the voting age, or making membership of pension schemes mandatory. Why not make early education compulsory from the age of two when the evidence shows that being in formal education from this age onwards improves outcomes, and why not make parental pay more generous when the evidence shows that being at home is the best environment for children under one? The book rightly points out that the state becomes bigger (e.g. taxation as a proportion of GDP) as economies mature, taking on responsibilities that were previously and unfairly the domain of families, but many of the book’s proposals are very statist; perhaps we need to think more about our individual obligations to each other, as well as our entitlements from the state?
A wide-ranging discussion followed. Minouche pointed to the factors supporting healthier social contracts in Scandinavian countries (they are smaller, proportional representation voting systems avoid big political divisions and policy swings, and tripartite industrial relations lead to better labour market outcomes). Contributive justice was linked to the idea of predistribution - you invest more in people, and then expect them to contribute more (including through more progressive taxation of property and other forms of wealth, as well as through their work). Universal basic income undermines the social contract because it assumes that people have nothing to contribute. Older generations can help younger generations by working longer, and paying more tax. A powerful idea for intergenerational fairness would be to give everyone a lifelong educational endowment, investing in human capital over the life course (everyone needs some form of tertiary education to thrive). One radical idea that didn’t make it into the book would be to weight votes inversely to age, so that younger people with more years ahead of them have more of a say when it comes to elections.