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Minouche Shafik spent more than 20 years of her career in international development and public policy making, working on ‘making poverty history’. In terms of standard of living, the facts are that human beings have never had it so good, yet research indicates that 4 out of 5 people said that the ‘system was not working for them’. The author’s view is that what is driving the dissatisfaction was that people felt that they were owed more by society.
Without a doubt, Minouche (Nemat) Shafik’s personal life and career have prepared her to take on such a complex and multi-faceted topic and to address it in her book What We Owe Each Other: A New Social Contract for a Better Society published in 2021.
Shafik was born in Egypt and immigrated early on to the United States with her parents. She studied economics on both sides of the Atlantic, in the US and the UK and earned her doctorate from Oxford University. Her academic background, coupled with her career at the World Bank where she became the youngest ever Vice President, then at the IMF as Deputy Managing Director and Permanent Secretary for the Department of International Development in the UK government and finally Deputy Governor of the Bank of England, have enabled her to examine the issues she writes about across all continents. She currently serves as President of the London School of Economics and Political Science (LSE) and she will be moving to the US as President of Columbia university this summer.
She writes: “We are living at a time when, in many societies, people feel disappointed by the social contract and the life it offers them.”
By social contract she means: “the rules that define what we owe each other in society and how we organize the delivery of those obligations.”
She goes on to highlight that the social contract answers questions/decisions such as:
– Do we raise children by mothers or grandparents or does society provide childcare centers or pay parental leave so both parents can raise children?
– Do we expect employers to provide sick leave and pensions, or do we expect individuals to carry the risks of unemployment and sickness?
– Do we expect the health care system to cover some of our illnesses or do we expect individuals to carry those risks?
Different societies organize their social contract differently. Generally speaking, in the United States, there is more emphasis on individual responsibility. In Asia the focus is on collective responsibility, while in Europe it is somewhere in the middle; a mix of both individual as well as collective responsibility. It goes without saying that each country has its specifics.
The book argues that the current social contract is broken, causing a lot of frustration.
The current social contract has not adapted to a changing world, where the role of women has changed due to their work outside of the house. The existing dysfunctional social contract assumed that women would be staying at home caring for the young and the old for free. Technology has also changed the way we work. Additionally, there are two more factors putting pressure on our social contract: aging and the fact that we live much longer compared to previous generations (which brings about issues around the provision and funding of elderly care and medical services), and climate change which is challenging the sustainability of our current economic model.
Some of the reasons behind the frustration in society is the increased expectations. Moreover, insecurity has gone up because employment conditions are less predictable (flexible contracts with unspecified hours). Additionally, social mobility has declined in many countries.
Shafik argues that she could actually call this book, ‘The anti-populist manifesto’ because it is a contrast to the politics which are nationalistic, protectionist, anti-empirical, loaded with identity and cultural wars. She agrees with politicians that the current social contract is not working and that many people feel left behind or not given a chance. On the other hand, she disagrees with the populist policies which are being proposed to solve the social contract. In her view, these policies are wrong and are simply not the solution. In contrast, she provides an evidence-based approach and specific examples of how other countries have provided solutions to adapt the social contract to today’s world.
For example, she provides the experience of the Nordic countries which are particularly successful in investing serious amounts of money on re-skilling workers and preparing them for the new jobs. This best practice is highly relevant to today’s generations across the globe as their careers are going to be much longer and they therefore need to re-skill often. So instead of fighting the reality of the need to do frequent hiring and firing and having flexible labor markets, you need to help people transition often and move to the industries and jobs of the future.
Another example of how the social contract needs updating based on recent research is the importance of the first 1000 days of life, “when brain development is highly influenced by nutrition, mental stimulation and social and emotional development”. Currently in many countries early intervention during the first 3 years of a child’s life is not universal across the world as in many countries this is not seen as part of the social contract. Should the social contract include this phase, this could have positive impact on social mobility and be much more efficient in contrast to later interventions which are aimed at fixing challenges related to the wellbeing and productivity of youth and adults at a later stage in life, rather than preventing them.
The book is global, addressing the topic of the social contract for all regions of the world, for countries rich and poor. It is focused on solutions, and it is not a book exclusively for policy makers and experts. In fact, it is personal in its approach as it is organized in a way that addresses the various life stages most people go through: raising children, providing education, health care, work and the final stage, retirement; and it goes into how the current social contract is broken in that specific aspect/ phase of life. She also adds a chapter about generations and cross generational issues.
Shafik cites John Rawls, the most influential twentieth-century philosopher to discuss “the social contract as the basis for creating a just society”. He proposed that “we should design our social contract behind a ‘veil of ignorance’ – meaning without prior knowledge as to what our own status in the society would be. Because if we did not know if we would start life privileged or a pauper, we would create a social contract that was just.”
Shafik does not offer a one-size fits all solution to the various challenges, but she puts across a menu of options to choose from, depending on the situation of each society. Her approach is not about increasing the welfare state, but about risk sharing and investing in people so everyone can be better off and more secure. In her final chapter she advocates for more pooling and sharing of risks together to reduce the worries we face while “enabling individuals to contribute as much as they can”.
It is worth noting that “periods of great instability can result in a radical re-ordering of societies”; in fact, the pandemic may have brought to the front how much we depend on each other and the need for a new paradigm fit for the twenty-first century.
A book review cannot do justice to all the important ideas and research in the book, but hopefully it entices the reader to invest the time to take a deep dive and explore the well thought-out arguments and proposals in the book. It is particularly interesting that her book is yet to gain the attention it deserves in Egypt, her country of birth, possibly because it is yet to be translated into Arabic. A recommendation I would wholeheartedly endorse.
In conclusion, I would like to echo Christine Lagarde, President of the European Central Bank and formerly Managing Director of the International Monetary Fund (IMF) who describes that the book “weaves economics, philosophy, wisdom and common sense into a social contract of simplicity, solidity and harmony. A must-read recipe for the improvement of our life together”.