A new societal contract

• Published in: Economics. The open-access, open-assessment e-journal Vol. 13; no. 2019-37; pp. 1 - 13
• Main Author: Snower, Dennis J
• Format: Journal Article
• Language: English
• Published: Kiel Kiel Institute for the World Economy (IfW) 01-12-2019; De Gruyter; Walter de Gruyter GmbH
• Subjects: Basic needs; Capitalism; Climate change; Consumption; Cooperation; Economic crisis; Economic growth; Economic models; Economic performance; Economics; Emancipation of slaves; Emerging markets; Empowerment; Free markets; GDP; Globalization; Government; Gross Domestic Product; Households; Income distribution; Inequality; Market economies; O31; P11; P12; P16; P41; P47; P48; P51; Political parties; Prosperity; Social cohesion; Social contract; Social mobility; Social solidarity; Society; Stockholders; Supranationalism; Upward mobility; World problems; United States > US
• ISSN: 1864-6042; 1864-6042
• DOI: 10.5018/economics-ejournal.ja.2019-37

This paper argues that the traditional social contract that underlies the free market economy has run its course and needs to be replaced by a new contract, based on a new conception of the 'empowering economy.' Whereas different social contracts are relevant to different societies, all these contracts have some features in common, addressing some basic human needs that are common to all. These are needs that every thriving society must satisfy. In the presence of current global problems - such as climate change and financial crises - satisfying these needs can also generate the popular approval for multilateral agreements to tackle these problems. The paper identifies three inconvenient truths for the existing social contract: (i) economic performance involves more than material prosperity, (ii) free markets naturally generate inequality, and (iii) human progress rests primarily on cooperation. In response, the paper proposes a new social contract that can be promoted through three policy approaches: (1) policy that focuses not just on material prosperity, but also on personal empowerment and social solidarity, (2) automatic stabilizers that reduce inequalities of economic power and (3) policy that develops the human capabilities of cooperation.