INTERVIEW: A new social contract

Mohamed Al-Kazaz and Yousra Al-Sharkawi, Friday 18 Mar 2022

Minouche Shafik, director of the London School of Economics and Political Science, tells Al-Ahram Weekly how the coronavirus pandemic has turned people’s anger into fear, and how communities can better support their members to build a new social contract.

A new social contract
Shafik photo: Mohamed Adel

Egyptian-born, British-American Minouche Shafik is a leading economist. She was appointed director of the London School of Economics and Political Science in September 2017.

Her CV is impressive. The youngest-ever deputy managing director of the International Monetary Fund, she has served in several leading international academic and political positions. She was permanent secretary of the UK’s Department for International Development and deputy governor of the Bank of England.

She was made a Dame Commander of the British Empire in the Queen Elizabeth’s Birthday Honours list in 2015, and in July 2020 was created a baroness, becoming a cross-bench peer in the UK’s House of Lords. She has worked with politicians from across the political spectrum, and is a member of the Bill Gates Foundation.

During a recent visit to Cairo, she talked to Al-Ahram Weekly about crucial economic, social, and development issues, as well as her thought-provoking book What We Owe Each Other: A New Social Contract. Published in 2021, the book explains how people can support and invest in each other to build a better society.

What impact will the Russia-Ukraine war have on the global economy, and what are your major concerns regarding the crisis?

The greatest impact will be on oil prices and inflation rates across the world. These two effects will linger until the rest of the oil-producing countries increase their production. Until then, pressures from the rising cost of living will persist.

What frightens me more in the long run, however, is increased military spending in Europe, the US, and Russia’s neighbours. Increased military spending means less money for infrastructure, education, health and other vital sectors. We saw a vivid example recently when Germany decided to increase its spending on the army from 1.2 per cent of GDP to two per cent, which is equal to €100 billion. This contradicts the previous trend based on investment in infrastructure.

Investing in infrastructure, education, and healthcare has been one of your primary concerns. Now that you are presenting the idea in a post-pandemic world, are you suggesting a new, global social contract, or that each country should draft its own?

I view the social contract as comprising concentric circles. The foundation of the social contract is the family. It is the most important and the strongest unit. There are people who serve and those who work. In the next ring come the communities in which we live, the village, and then the city. This is often a space occupied by voluntary groups, religious associations, community associations, and local government structures. Then the circle expands to include the state and the world.

This is how social contracts are built. They are strongest in the centre and grow weaker as we drift further from the individual. We owe each other the duties of citizenship: paying taxes, following the rule of law, voting, and engaging in public life.

There is certainly an international social contract, but my perspective is based on the many years I have spent working in international organisations. For a social contract to be transferred from one country to another, there has to be a strong social contract within one of the states. People will not be generous with others from outside their country unless the social contract inside their own country provides rights, security, and opportunities.

Who is responsible for drafting the social contract?

We are all responsible. We draft it, and practise it, daily. Citizens who are healthy, able to work, and pay taxes, have to raise their children to be good citizens. Communities are required to provide individuals with enough investments in education, healthcare, and job opportunities for them to play their role in the social contract. The individual and the state must each play their parts to produce a healthy society.

Could you clarify your concept of opportunity engineering?

Opportunity engineering is how a person takes advantage of opportunities to improve his/her condition. For example, in different countries each generation takes time for its income to increase, and for its poorer classes to move to a better condition. In north Europe, this takes two generations. In the rest of Europe and the US, it takes five generations, and in Brazil, South Africa, and Egypt it takes nine generations.

In the latter cases the poor person loses hope of rising to the middle class during his lifetime. This means that opportunity engineering is not sound. In my opinion, the goal of every society should be to improve the condition of its members within two or three generations.

One of the most important factors in shaping the engineering of opportunities is education at an early age. The first 1,000 days of life are particularly important, because it is this period that builds a brain that can benefit from education later on.

If the child’s food is not adequate, he doesn’t play with his peers in a healthy manner, or doesn’t have someone to read books to him he will lose many advantages, even if he is enrolled in the best schools later on.

The most important thing in opportunity engineering is that the state and the family invest in the individual during the first two years of his life.

A study I read about Jamaica focused on the weekly visits paid by social workers to families to give them advice on proper nutrition and how to play with children. Following up on these children, it turned out that after 30 years the income of children who were cared for in their first two years was 42 per cent higher than that of children who were not visited and fed properly. Attention given to children at this very young age has a big impact on the individual and society and it doesn’t cost much to provide this kind of care.

During my childhood and adolescent years in the US I experienced limited educational opportunities, especially in the south during the upheavals of desegregation. I moved between many schools, I don’t remember how many, but in some I was inspired by the teachers while in others my main purpose was to survive.

I found salvation in local bookstores, where my mother used to take me on the weekends. I was a member in a large number of book clubs, and spent countless hours on the sofa at home discovering the world. My curiosity about opportunity engineering led me to a career in economics and development that took me to the World Bank, the UK’s Department for International Development, the International Monetary Fund, and the Bank of England, but most of my career has been in the trenches of policy-making.

Women are integral to habilitating society. How can they help to create and benefit from opportunity engineering?

The most important factor in changing the social contract in general is to redefine the role of women. More women go to university than men, they excel in their studies and have the ability to work and do well in their jobs.

Yet the social contract in every country is based on the notion that the woman has to care for children, the elderly, the husband, and the family alongside her work — and all without additional financial reward. In every country, women work two hours more than men each day.

The social contract has always been based on the fact that the man is the only breadwinner in the family, while the woman takes care of the young and old. But the truth is that women have the same characteristics as men. When they graduate they get paid as much as men. It is only with the birth of their first child that their salary decreases and career advancement opportunities decline due to their absence from work to care for children.

The investment directed to women’s education is lost. We lose the benefits of her production, and struggle to find ways for her to continue to work and care for children and the elderly at the same time.

Society loses much when it fails to benefit from the production capabilities of accomplished and educated women. When the opposite applies, the production of both the state and men increases. Things will change in the coming decades as women’s education increases their choices. Women’s ability to work outside home has increased. It is important to realise that empowering women to become more productive requires a fairer distribution between family and society of the work she already does.

What We Owe Each Other: A New Social Contract explains the levels of anger in both developed and developing societies. Do you believe the coronavirus crisis has increased this anger?

The pandemic turned anger into fear. Polls conducted in several countries show that people — regardless of their social or economic background — are more fearful. At the same time, the coronavirus pandemic reinforced feelings of sympathy and support between people. The pandemic also highlighted the risks associated with unstable jobs during times of crisis.

People’s priorities and aspirations now focus on security. They long for more security, be it better healthcare services or safer jobs. I expect people’s demands from their governments in the coming period will focus on security in all its forms, across the health, economic, and other sectors.

The state of anger I try to explain in my book was primarily directed at economic conditions. There is a general feeling that current developments, particularly with regard to technology, generate anxiety and tension, raising the question of whether individuals are sufficiently abreast of developments to keep their jobs. Economic turmoil is likely to persist in the coming years, not only because of the pandemic and its repercussions, but because of the rapid technological shifts associated with the digital revolution and automation. Concern about these disruptions has already spilled over into the politics of many countries.

People are also concerned about the flexibility of work agreements. Some societies have begun to deal with this issue by creating mobile social insurance patterns that move with the individual from one job to another. This approach protects the rights of individuals who work in more than one job, work part-time, or move between jobs, whether by choice or as a result of other circumstances. Denmark is one country that has begun to adopt laws to implement mobile insurance.

Some of the reasons causing people to worry have to do with social conditions. There is worry about identity, and the capacity of traditional notions to withstand change. In some societies, such as Europe, there are worries about incoming migration and the possibility that migrants will compete in the labour market.

Has the coronavirus crisis accelerated shifts in the international labour market by eliminating some jobs and introducing others, necessitating changes in educational methods and models?

There is an increase in the global labour market’s demand for skills in areas such as digitisation and artificial intelligence, but there will still be a need for skills in arts and traditional knowledge, which may take an advanced form.

I believe that pursuing a field you are passionate about results in excellence and innovation. I recently met a woman who runs the UK’s largest cyber security company. She studied mediaeval history, which she loved, and which made her more fulfilled and enthusiastic.

In the British market, for instance, there is not a close relationship between the field of study and the field of work, except in specialised fields such as medicine and engineering.

Artificial intelligence will perform jobs individuals used to do. But people will continue to have the edge in fields that require innovation and the ability to develop skills, deal with crises, and solve problems. I recently visited a chemical factory in Germany and discovered much of the factory functioning with just two employees, with robots undertaking the routine jobs. I think this is the future of the labour market. Artificial intelligence will grow, except in areas that need creativity. I also think the retirement age will be pushed further, with people spending more years in the labour market. This will require systems to constantly support and develop people’s abilities.

In education, more attention needs to be given to training after the end of school. Universities and institutions should provide training programmes for workers to develop their skills or help them change their career should they want to.

At the London School of Economics and Political Science, for example, we design short and flexible study programmes to serve those already engaged in the labour market. We have noticed demand is no longer focused on developing skills that the individual already possesses. There are programmes that help achieve professional transformation, and that require an adjustment in general vision. Hence the importance of government support for continuous learning and training for individuals, either by providing loans or financial facilities to individuals, or through support for companies and organisations to provide the training and education programmes.

Climate change is yet another challenge to building a social contract. How can the burdens of climate change be shared more quitably?

We know $30 trillion of investments are needed in the next 10 years in infrastructure projects, such as electricity plants and transportation, and we should seize this as an opportunity. If these projects are done in a sustainable way, we can save humanity from the worst dangers of climate change.

For this to succeed, rich countries must support poorer countries. These investments cost a lot in the short term, but the long run benefits are inestimable. Solar and wind energy has become cheaper, and Egypt is now in a leading position in the field of renewable energy .

Rich countries should provide funding to poorer countries to reach zero emissions. Egypt’s hosting COP27 offers great opportunities, not least in advocating for necessary funding.

The weather in Egypt has become unstable. It is now very hot in the summer, and cold in the winter. In the UK and other European countries young environmental activists hold protests and organise marches against climate change. At the London School of Economics, I often hear students talking about climate change. It is the new generation that is demanding a new social contract.

Egyptians, across all social and age groups, need to think differently. We are all affected by air pollution and emissions, and many people die due to respiratory diseases.

You are a firm believer of Abraham Lincoln’s saying that “the best way to predict your future is to create it.” How have you applied this in your life?

It is possible to make things happen, and society can help you create, or obstruct, your future. It all depends on opportunity engineering in society.

I never had a plan to be in a certain position, but I was loyal to every place I worked in. Everywhere I have worked, there were people encouraging me and giving me opportunities. They always gave me bigger tasks and believed in my potential. They placed their bets on me, and when I stumbled they were ready to help.

The people I worked with dealt with a risk factor: I am a woman, an Egyptian, and relatively young. They gave me the opportunity and I engineered it.

*A version of this article appears in print in the 17 March, 2022 edition of Al-Ahram Weekly.

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