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.
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