We Need a New Social Contract: But What The UN is Calling For Creates More Problems Than Solutions

At the time of his arrest, Nelson Mandela was an armed freedom fighter. His 28 years in prison only hardened his resolve and socialist principles. Yet, as South Africa’s first post-Apartheid President, Mandela put aside “class warfare” rhetoric to build a rainbow South Africa; he turned to the free market not because he no longer prioritized the disenfranchised, but because he recognized that relying on free market principles was the best way to lift up the poor.

UN Secretary-General António Guterres may need to brush up on “Madiba’s” biography. On July 18th, Nelson Mandela Day, Guterres called for re-envisioning society after COVID-19. His speech advocated for a “New Social Contract” premised on a superficial redistribution of wealth to “ensure that power, wealth and opportunities are shared more broadly and fairly at the international level.” He called for higher tax rates and economic redistribution from the rich to the poor in a speech that lashed out at the wealthy.

Guterres, meanwhile, receives over $200,000 in salary, an income that is amply supplemented by an entertainment budget, a car and several other perks. He also lives alone in a 15 million dollar Manhattan home with river views. Not to mention, his salary is un-taxed. If he is true to his principles, he could start by taxing himself. After all, Guterres resides in the United States and the U.S. Department of Treasury has had an account to accept donations since 1843. All of that sounds rather unlikely of course.

Not that Guterres is not wrong about the need to do more to fight poverty around the world after COVID-19. But his calls for higher taxes is both beyond his remit and more importantly – will likely result in the opposite of what he hopes for. Merely raising more money for governments will not work if the bureaucracies in question are fundamentally ineffective—and far too many are. Guterres should know this from his vantage point. The root problem is not money, it is the absence of good governance and strong mechanisms of accountability between state and citizen.

Guterres has had a front-row seat from which to watch governments around the world respond to this pandemic. Even powerful governments – ones with well-functioning and well-funded bureaucracies, have been unable to stop the catastrophic fallout from the virus. For example, the United Nation Security Council’s five permanent members are supposedly amongst the world’s most powerful and advanced nations.

Yet three of them (the USA, Russia, and Britain) are in the top ten global list for number of reported COVID-19 cases. Conversely many private sector businesses have stepped up with new humanitarian initiatives just as their profits shrivel. In my forthcoming book, The Broken Contract: Making Our Democracies Efficient, Representative, and Accountable, I elaborate on this distinction to make an urgent point:

It is true – we do need a new social contract. But I believe we need to channel more from Mr. Mandela. The problem with most governments across the world today is not that they don’t have enough money. It is that they use the financial and legal resources they have already extracted from their citizens ineffectively and with too little accountability.

Our bureaucracies don’t need more taxpayer dollars to inflate them —what they need is to adopt private sector ethos of accountability to increase efficacy, promote responsibility, and achieve positive, universal outcomes. Each year, for example, underperforming bureaucrats in the bottom 2% of any given department should be fired. At the same time, the top 5% of performers should be rewarded for going that extra mile in what are often vital yet thankless jobs far from the public eye.

This small step would go a long way towards making governments more accountable, responsible, and efficient. That, in turn, would contribute towards the building blocks of a new social contract, treating all citizens fairly and addressing the grinding pandemic of global poverty.

Mandela embraced the free market not because he was no longer passionate about helping South Africa’s poor and disenfranchised but because he realized that a system based on the price controls of the market, and not bureaucratic intervention, would result in more prosperity for all of its citizens, regardless of their skin color. Today, South Africa is a society beset with many problems, but it also enjoys one of the highest living standards in sub-Saharan Africa.

Mandela shed his ideological worldview when confronted with the challenging business of governing. It’s a shame Gutteres cannot shed his own in a similar manner.