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Minouche Shafik — What We Owe Each Other: A New Social Contract for a Better Society

What We Owe Each Other: A New Social Contract for a Better Society (book cover)

From one of the leading policy experts of our time, an urgent rethinking of how we can better support each other to thrive. Whether we realize it or not, all of us participate in the social contract every day through mutual obligations among our family, community, place of work, and fellow citizens. Caring for others, paying taxes, and benefiting from public services define the social contract that supports and binds us together as a society. Today, however, our social contract has been broken by changing gender roles, technology, new models of work, aging, and the perils of climate change.

Minouche Shafik takes us through stages of life we all experience — raising children, getting educated, falling ill, working, growing old — and shows how a reordering of our societies is possible. Drawing on evidence and examples from around the world, she shows how every country can provide citizens with the basics to have a decent life and be able to contribute to society. But we owe each other more than this. A more generous and inclusive society would also share more risks collectively and ask everyone to contribute for as long as they can so that everyone can fulfill their potential. What We Owe Each Other identifies the key elements of a better social contract that recognizes our interdependencies, supports and invests more in each other, and expects more of individuals in return.

Nemat Talaat Shafik, Baroness Shafik DBE, known as Minouche Shafik, is an Egyptian-born British-American economist who served as the Deputy Governor of the Bank of England from August 2014 to February 2017 and has served as the Director of the London School of Economics since September 2017. Born in Alexandria, Egypt, Shafik studied at the University of Massachusetts-Amherst and the London School of Economics before receiving her doctorate from St. Antony’s College, Oxford. Shafik served as the Permanent Secretary of the Department for International Development from March 2008 to March 2011, when she went on to serve as the Deputy Managing Director of the IMF — International Monetary Fund. She joined the Bank of England as its first Deputy Governor on Markets and Banking responsible for the Bank’s £500 billion balance sheet and served as a Member of the bank’s Monetary Policy Committee, Financial Policy Committee and the Board of the Prudential Regulatory Authority. She led the Bank’s Fair and Effective Markets review to tackle misconduct in financial markets.

Shermer and Shafik discuss:

  • her personal life story born in Egypt and growing up in the American south,
  • the relative role of genes, environment, and luck in how her life turned out,
  • what it’s like directing the London School of Economics and working at the International Monetary Fund (IMF) and the Bank of England and what they do to help developing and failing countries,
  • What about free riders, cheats, exploiters and fraud?
  • libertarian paternalism and the architecture of choice,
  • Who is the “we” in the question “What do we owe each other?”
  • modern monetary theory,
  • income inequality,
  • UBI & automation,
  • reparations,
  • private vs. public charity/welfare,
  • post-scarcity/post-poverty world
  • how she explains this observation (from her book):

    Humans really have never had it so good. And yet in so many parts of the world, citizens are disappointed, and this has revealed itself in politics, the media, and public discourse.

  • What is a social contract? From Hobbes, Locke, and Rousseau to the modern nation-state:

    When I refer to the social contract I mean the partnership between individuals, businesses, civil society and the state to contribute to a system in which there are collective benefits.

  • What is a welfare state? From Otto von Bismarck and William Beveridge to the modern welfare state (the insurer of last resort):

    When I refer to the welfare state, I mean the mechanisms for pooling risks and investing in social benefits mediated through the political process and subsequent state action.

    (The welfare state is ¾ piggy bank and ¼ Robin Hood.)

  • The impact of the Thatcher/Reagan era.

    “There is no such thing as society. There are individual men and women and there are families. And no government can do anything except through people, and people must look after themselves first. It is our duty to look after ourselves and then, to look after our neighbours.” —Thatcher

    “The nine most terrifying words in the English language are: ‘I’m from the Government, and I’m here to help.’”

Minouche’s New Social Contract

First, that everyone should be guaranteed the minimum required to live a decent life. This minimum should include basic health care, education, benefits associated with work and a pension that protects against poverty in old age, with the level depending on how much society can afford. Second, everyone should be expected to contribute as much as they can and be given the maximum opportunities to do so with training throughout life, later retirement ages and public support for childcare so women can work. Third, the provision of minimum protections around some risks, such as sickness, unemployment and old age, are better shared by society, rather than asking individuals, families or employers to carry them.

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This episode was released on April 27, 2021.

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