GlobalTalk

“Social Contract” Hits the Headlines

By Steve Clark

Spurred by President Obama’s call for a “millionaire’s tax” and the Republican counter-charge of “class warfare,” the social contract got a lot of well-deserved attention this week, what with Elizabeth Warren’s remarks and Paul Krugman’s column.

Politics, ultimately, is a populist enterprise, so with the 2012 elections only a year away, this spat of controversy was long overdue. Perhaps, Obama’s advisors finally let the poll numbers sink in. His were falling off the chart. Meanwhile, across-the-board majorities of 75-80 percent persistently favor higher taxes for the wealthy and the corporations.

But winning an election – assuming Obama and the Democrats can do it – is one thing; reforming the social contract is quite another. For very specific reasons beyond human control, it’s not possible to simply reconstruct the last one. If we’re ever going to have a social contract again – and if we don’t, only chaos lies ahead – we need one built on an entirely new foundation.

Why not the old one?

The last social contract was known as the New Deal in the US and Social Democracy elsewhere. It arose out of the conditions of the 1930s and 40s: the Great Depression, the anti-fascist war (WWII) and socialism in Russia. Basically, what happened was this: at a time when government-managed social safety nets did not exist, (a) the world’s industrial nations hit a huge crisis (the Great Depression – which, noticeably, did not impact Russia’s planned economy); facing broad social unrest, (b) some industrial powers (Germany, Italy, Japan) turned to fascism and war while (c) others (the western democracies) brokered a deal with industrial Labor to fight fascism in exchange for the immediate right of unions to bargain collectively and for movement toward government-managed social safety nets (which were set up after the war ended).

The key to the success of this social contract was the existence of a socialist state and industrial unions which, externally and internally, applied the pressure for social accountability from the banks and corporations and the means (collective bargaining and the right to strike) that enforced the deal.

Nature of the new

Today, while China is socialist in name, no genuine socialist (state-planned) economy exists; worldwide, market forces are in complete control. More importantly, within the US, Europe and Japan, industrial production – with its massified factories and workforces – no longer rules the economy. Instead, generally small-scale, service-driven and service-oriented business is the economic foundation. With small business predominant, industrial unions have lost their power and influence.

Thus, there is no outside and little internal pressure for government-managed social safety nets and no internal force capable of compelling such a bargain. That old social contract is gone, and it is not coming back.

Modern populism

The next social contract must be rooted in the realities of the modern economy which is (a) service-based and (b) global in scope (that is, transnational).

The vast majority of people in the US, Europe and Japan, as well as the majority of the most powerful people in all the world’s countries, are service-providers of some sort, working in a global economy that is dependent on the further development of service-based production. While governments and corporations are the most entrenched, powerful and organized structures in which these service providers work, they are not the most effective. Governments are focused on national concerns; corporations on profits.

The most effective service-providing organizations are known as civil society. They are mission driven, public-oriented entities that work locally and across national borders to address the key problems that the world’s developing service economy faces (primarily, issues of economic polarization and ecological destruction in all their manifestations). Civil society is woefully underfunded, but strategically, it is capable of mobilizing humanity to solve our great problems.

Unlike industrial unions, however, civil society will never have the kind of tight, mass organization that was required to compel a social contract four generations ago. Yet, a new kind of social organization is emerging to accomplish this task. It is global in scope, political by nature, knowledgeable, well-informed and socially organized through new technology and media. Though its political potential and power is still in its infancy, the times require and the technology enables its rapid development in the years directly ahead.

It is this social force that must compel a new social contract from the banks and corporations. The service sector can and will demand that nation states, their central banks and the banking industry in general establish a permanent revenue stream for global problem-solving led by civil society and conducted at the global grassroots. The means to do this is a bank-collected transaction fee on all electronic, corporate commercial transactions.

US Politics

Obama’s turn to class warfare, Warren’s endorsement and the Democrats’ inevitable drift along the same line is the first big step forward – however, spontaneous and lacking in strategic direction – in the battle for the new (not the old) social contract. While we welcome this advance, progressive leaders should help sharpen the public’s understanding of where this battle is headed.

Worst Case, Best Option

By Steve Clark

Worst Case…

Obama made his pitch last night. Unspecified billions (apparently $450 billion) for jobs, and it’s all to be matched by spending cuts. Not that it’s going to pass Congress – because the Republican opposition will not take the risk that anything Obama wants might work, giving him a campaign claim of progress – but if it did pass, it would only exacerbate the problem (we have a service-based economy, and government spending is a major part of that; if jobs spending is matched with other spending cuts, net increased demand for services is zero; no progress will be made, and the Democrats will look even more impotent).

The purpose of his speech was not so much to pursue enactment of its jobs program (since that won’t happen) as it was to define the parameters of his re-election campaign. On that score, his speech failed miserably (though it may have staunched the bleeding with his union base).

Obama’s Presidency has completely dissatisfied the majority that, hoping for change, elected him. Without a vision for change, he has succeeded in achieving virtually no change. The wars go on; middle class life is deteriorating. Black issues are ignored; Hispanics see no progress; young adults, despite good educations, are in debt and underemployed.

The only real base that Obama has is (a) Democrats, (b) union voters and (c) independent voters who are consciously opposed to the scapegoating, evangelical moralism, war mongering and fanatical budget-cutting that is the new creed of the Republican minority that controls Congress. Democrats, of course, will vote for him. Union voters mostly support him, but enthusiasm will be low so turn-out will weaken. As the default leader of the defacto anti-fascist coalition, Obama will get left-leaning independent voters, but most independents are not so socially conscious as to care. They will look at his bungling Presidency and, especially, his consistent drift to adopt whatever the fiscal conservatives advocate and say, “I might as well vote for a fiscal conservative.” Obama’s inability to address the continuing calamity of fractured middle class security in America means he is unlikely to be elected for another term.

Most likely, Republicans will increase their majority in the House, they will establish majority control of the Senate (though a minority, they already control it through filibuster politics) and Rick Perry will be the next President. Come January 2013, what was begun last winter in Wisconsin (and Ohio, Michigan, Florida and elsewhere) will be implemented at the federal level. Obamacare will be repealed. Domestic spending will be slashed (along with some military). The strategic rollback of Social Security and Medicare will begin. Immigrants and Muslims will be scapegoated. Federal unions will be attacked, and the right of collective bargaining will be mothballed. Government spending – local, state and federal – will fall off an historic cliff, and unemployment will shoot up. Private spending will drop; private sector hiring will end. A truly Great Depression will ensue. Anger and recrimination will explode (we haven’t seen anything yet).

The dismantling of the government as we have known it since the New Deal will be earnest and unimpeded, and it is not going to be pretty. The old social contract – long undermined, now tattered, bloated and ineffective – will be called on the carpet and banished. But no alternative will take its place because the Republicans have no forward vision. They actually think it is possible and preferable to go back, back to some imagined time before the New Deal.

With their deep roots in the Republican Party, the energy giants will press a more focused “war on terror” which, really, is war to control oil. They also will press for an end to environmental regulation. Meanwhile, the big banks will fend for themselves, hoarding cash for their investors and insisting on austerity from government. Absent the organizing function that factory production once provided – and the industrial unions that were it by-product – the majority of Americans will be defenseless, “free” to make it (or not) entirely on their own. Social dislocation will reach extremes unseen since the Industrial Revolution. Chaos will reign supreme.

It is unlikely that the Democratic Party will survive this crushing defeat of the social agenda it once championed. It will split, perhaps in several directions. The Republicans will have two years before the 2014 mid-terms, but the cascading denouement of American life will also threaten their opportunistic integrity. What was the oft-manufactured “anger” of the Tea Party will be magnified and amplified by the anger of the vast majority of Americans. Perry will be a hated President, and major splits in the Republican Party are inevitable. 2016 shapes up as the most decisive election in American history.

It will be, that is, if world events don’t intrude sooner on the scenario above. The famine in Africa isn’t going away; it’s going to spread. Youth-inspired rebellions in the Arab world aren’t going to be satisfied with ousting dictators; they’re going to demand the means to address the insecurity of their lives. Europe’s burgeoning financial crisis isn’t going to abate; it’s going to worsen. US and British banks aren’t going to be protected by the Atlantic and the English Channel; they’re going to be sucked in. Climate change events aren’t going to ease; they’re going to intensify, but the ability of government (the US or any other) to respond is going to diminish. The cost of oil isn’t going to stabilize; it’s going to soar, making both war for its control seemingly more worthwhile and undermining the global distribution of goods that is the hallmark of the US-China collaboration. China isn’t going to live off the interest on US Treasuries; it’s going to face a domestic industrial, environmental and health crisis of never-seen-before proportions.

Any of these situations – and many others – could intrude on America’s imagined “exceptionalism,” its go-it-alone mangling of its own lifestyle.

Best Option…

No, the alternative is not another New Deal, some massive federal spending program that restores the consumptive middle class lifestyle of America and, in the process, pulls the whole world up by its bootstraps. For readers who lack the economic foundation to fully appreciate why this is not possible – like it would take eight earths to provide the resources necessary to provide the equivalent American middle class lifestyle to all the world’s people – surely, you cannot believe that it is politically possible to restore the New Deal. Given today’s politics, that is simply fool’s gold (a fool’s goal), and the right’s view that it can restore 19th century American small business entrepreneurialism is even more fantastic (and hopeless). There is no going back in history.

On the other hand, history always has its own way out of its crises. Today’s way out needs to be discovered and heavily invested in. The sooner we get started the better, because the alternative, recurrent in history, is a dark age, and we’re skating dangerously close to the thin ice of no return.

We need to invest in service, and government should lead us in that direction. But big government is a poor service provider. Big and bureaucratic in the US and the West, it sucks all the energy out of the market by imposing a stagnant, ossified, hugely expensive infrastructure on its services and those that it purchases. In the world’s poorer regions, government is weak, ineffective and corrupt.

The best service providers are commonly known as civil society. They are local NGOs addressing local, social and environmental problems with resources from the global economy. Unfortunately, the global economy, due to the speculation, hoarding and greed of the corporate sector (particularly the big banks), provides only meager resources. Civil society does not have the funds necessary to actually tackle our world’s problems (in all their local diversity).

What we need is a global investment program that funds sustained, creative, social and environmental services provided by local people, especially young adults, working in community-based NGOs that are led by civil society. This is the most cost-effective way to employ people while simultaneously attacking the wide range of vital problems that now threaten and undermine human security.

The way to do this is to require social accountability from the global financial system (state treasuries and big banks). They should collect a small fee on every electronic commercial transaction that passes through the global banking system, and this revenue stream should be dedicated to local-global problem-solving organized and guided by the flexible, creative initiative of civil society. This will put people to work, locally, on the actual manifestations of our world’s great problems. And, by putting people to work, it will establish networks of security – personal and social – that arise from stable employment even if the wages of problem-solving are low (lower than what was the norm of union jobs in America). We – the world’s majority, even in the US – will not all (or many) have a middle class lifestyle (that is impossible), but we will have a means to ensure security and survival as we face the challenge of restoring our environment and reducing our population over the decades and centuries to come.

This is a future to which humanity can aspire with confidence that it is attainable and sustainable, and it must be upon this question that the 2016 election in America turns.

That’s the way to turn the worst case into our best option. And that defines the political objective of progressive Americans.