The Raging 2020s

What holds societies together is not just written laws or culture, but the unseen, powerful web of a social contract that dictates how citizens, governments, and businesses coexist.

1. Social Contracts Are the Framework of Societies

Social contracts are the unwritten and written agreements that define responsibilities and rights among governments, businesses, and individuals. These contracts underpin everything from laws that govern business practices to infrastructure projects improving daily life. Without them, societies cannot function cohesively.

Historically, these contracts adapt and evolve with societal changes like technological advancements or economic shifts. For example, during the first Industrial Revolution, outdated social frameworks caused widespread inequality and poor working conditions. It wasn’t until reforms like antitrust laws and child labor bans came into place that balance was restored. Today, many developed nations face a similar pause, leaving social contracts obsolete.

The United States and other developed nations are now experiencing their second "Engels’ Pause," where government deregulation has empowered businesses disproportionately. Examples include increasing wealth inequality: The top 1% in America gained $21 trillion over three decades, while the bottom 50% lost $900 billion. This imbalance highlights how evolving technology and unchecked capitalism have pushed the social contract to its breaking point.

Examples

• Workers in the 1800s struggled without labor laws, mirroring today’s gig economy struggles.
• Deregulation in post-Cold War America expanded business power without safeguards.
• Wealth inequality continues growing, demonstrating a broken social framework.

2. Companies Have Prioritized Profit Over Responsibility

The shift toward shareholder capitalism has turned corporate priorities into a single-minded drive for profits. According to Milton Friedman’s influential theory, companies exist solely to maximize shareholder value, sidelining other interests like employees, customers, or public well-being.

This mindset has produced troubling consequences. In the insulin market, for instance, three companies dominate and operate like a cartel, raising life-saving drug prices to exorbitant levels. In 2019, insulin cost $275 per bottle in the United States, leaving lives at risk due to unaffordability. This approach runs directly counter to the idea of businesses contributing positively to society.

Alternatives like stakeholder capitalism propose a model in which companies have broader responsibilities. Patagonia, for example, prioritizes environmental sustainability alongside its profits. This private company uses sustainable materials for its products, showing that businesses can adopt values beyond financial success.

Examples

• Historical medical patents focusing on public good rather than profit, like the insulin discovery.
• Insulin companies raising prices collectively damaging societal trust and health affordability.
• Patagonia demonstrating environmentally friendly business as sustainable and profitable.

3. Governments Are Losing Influence as Corporations Gain

Modern governments have become increasingly ineffectual at maintaining societal balance, weakened by corporate lobbying, deregulation, and strained resources. Hurricane Maria in Puerto Rico is a grim example of this decline. The US government fumbled with delayed aid and inadequate resource distribution, failing millions of citizens post-crisis.

Meanwhile, corporations are acquiring undue influence. Take minimum wage regulations, which the federal government has not updated since 2009. Public pressure recently led Amazon to voluntarily set a $15 minimum wage for its employees, filling a gap where the government failed to act. However, relying on corporate goodwill is neither sustainable nor reliable for ensuring societal progress.

Reigning in corporate lobbying and influence would allow governments to reassert their role in protecting public interests. Current lobbying practices often prioritize industry profit over public health or welfare, distorting the original balance intended by the social contract.

Examples

• Delayed disaster response after Hurricane Maria, showcasing government inefficiency.
• Amazon's wage increase driven by activism rather than policymakers.
• Lobbying-driven laws benefiting businesses over ordinary citizens.

4. Workers Need More Representation Through Modernized Unions

Worker power has significantly declined as union membership in the US has dropped. Organizations that once won wage increases and improved conditions are now weaker, contributing to record levels of income inequality. In 1978, the pay ratio of CEOs to workers was 30:1. Today, it stands at an alarming 278:1.

Nordic countries provide a model for renewed worker power. Across Finland, Norway, and Sweden, unions collaborate with businesses and governments to establish fair working conditions for entire industries. Such a structured approach ensures workers receive robust, consistent benefits and prevents exploitative labor practices.

Recreating strong, modern unions could help fix workplace imbalance and give workers a more significant voice in shaping their industries. Benefits once championed by unions—like sick leave and minimum wage guarantees—can be expanded in a way that improves fairness.

Examples

• Decline in US union membership linked directly to workers losing collective bargaining power.
• Nordic labor agreements benefitting workers across industries like manufacturing and retail.
• The United Auto Workers’ strike in Flint proving how union solidarity can achieve better wages.

5. Corporate Tax Avoidance Is Weakening Public Resources

Corporations today engage in elaborate schemes to dodge taxes, often funneling profits through international loopholes. The "Double Irish with a Dutch Sandwich" enabled Google to shift its profits to Bermuda, avoiding $3.7 billion in taxes in 2016 alone.

Tax avoidance deprives governments of money needed for infrastructure, education, or social safety nets. Multinational corporations operate like savvy chess players in a global game, exploiting different jurisdictions to maintain absurdly low effective tax rates. Meanwhile, small businesses or individuals do not enjoy such privileges.

Changing loopholes demands international collaboration. One reform solution is unitary taxation, which treats companies as cohesive entities, requiring them to pay taxes where they generate business. This shift would remove many existing tax advantages countries like Bermuda offer.

Examples

• Google saved $3.7 billion in taxes through offshore profits in 2016 alone.
• Ireland complicitly supported "tax haven" policies, boosting local economies yet harming global equity.
• Unitary taxation as a global solution to align taxation policies across nations.

6. Digital and Technological Influence Must Align With Government Priorities

Digital technology is a new frontier where businesses outpace governments in innovation. The US military and important state programs still suffer due to inadequate integration of modern systems. For example, issues with incompatible veterans’ medical records highlight bureaucratic inefficiency costing lives.

Cyber threats now outweigh traditional warfare in importance. Countries like China—using billions to develop AI capabilities—are surging ahead. The US must collaborate with its private tech sector to compete effectively and implement safeguards against misuse.

Public-private partnerships are critical. Transparent collaborations can blend innovation with accountability, addressing challenges before technology falls solely into unchecked hands, as illustrated by China’s burgeoning surveillance state.

Examples

• Veteran agencies delayed crucial medical improvements over incompatible data formats.
• China’s rise in AI and digital tools, such as facial recognition, threatens democratic stability.
• Cyberattacks proving damaging potential of targeted, state-sponsored hacking efforts.

7. Developing Nations Face Model Choices: Open or Closed

Emerging economies around the world must pick between an open Nordic-style social contract prioritizing inclusivity or a closed Chinese model aiming for efficiency through authoritarianism. Both systems have unique trade-offs regarding individual freedom versus collective benefit.

China’s model emphasizes stability and rapid economic growth but sacrifices political freedom. Conversely, Nordic countries thrive on liberty, providing social welfare and transparency. As climate change and population booms reshape nations like those in Africa, leaders face decisions on how to manage their growing economies.

Fostering open systems will entail empowering civil society, safeguarding elections, and creating safety nets. These efforts can lead to resilient, adaptable structures in the face of future challenges.

Examples

• China’s surveillance state prioritizing government control over individual rights.
• Nordic citizens enjoying free health care alongside economic freedom.
• Africa’s predicted population growth, potentially tripling by 2100, increasing systemic pressures.

Takeaways

1. Push for stakeholder capitalism by supporting companies willing to prioritize societal and environmental accountability alongside profits.
2. Advocate for tax reform at both national and international levels to ensure fairness among businesses and individuals.
3. Demand transparency and partnership between governments and the tech industry to address pressing challenges like cyberwarfare and misinformation.