Progress, Again.

‘A new social contract’ — Part 4

“People think that stories are shaped by people. In fact, it’s the other way around.” – Terry Pratchett

A diagram can be a dangerous thing. The moment we see the world differently, we have a new tool to engage with it differently. And the moment we have a new tool, it is hard not to see opportunities to use that tool almost everywhere we look. ‘To a man with a hammer, every problem looks like a nail.’

The diagram of ‘Democracy as a Platform’ is no exception.

The basic idea is simple; it is that the ‘state vs market’ diagram of the world is flawed. In reality, there is no such thing as The Market; there are many markets. Even the civil service is a market (for funding, promotion, reputation etc). Competition and collaboration are inevitable functions of any human system. Similarly, the concept of ‘big’ or ‘small’ government makes no sense. In the end, we are always taxed and regulated by someone, it is just a question of who, and to what end?

A better way to understand the relationship between ‘the state’ and ‘the market’ is to see nation states as platforms: makers and shapers of markets. They provide the land, infrastructure and set the rules and goals – in the same way that, for example, the App Store creates, regulates and taxes the market for iOS apps.

The moment you begin to look at government through this lens, two things immediately become clear.

First, a lot of what has been sold to us as ‘free market’ capitalism was in fact the opposite; the privatisation of the platform, creating a series of privately owned monopolies protected from competition, extracting taxation without representation, and profits without prosperity.

Second, it means we can take a very different approach to addressing the massive systemic failures we are experiencing today — poverty, injustice, climate collapse, escalating debt, flatlining productivity and wages, shrinkflation, economic stagnation, financial crises, overstretched public services, rising depression, declining wellbeing, the rise of the far right. Instead of spending billions mitigating the symptoms of failed systems, subsidising their failure, or compensating society for the damage they do, we can tackle them at their roots by redesigning the agreements that they are based upon. In other words, we can use the tools and principles of the digital era to upgrade the operating system on which capitalism runs. We can recode the rules of the game itself.

What’s remarkable about these system-level design interventions is that often they cost very little to implement – and in many cases they do not even require legislative change. Surprisingly often, new versions can exist in parallel with existing ones, and slowly outperform them; a kind of opt-in model of reform. They follow the spirit of Buckminster Fuller‘s adage:

“You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.”

There are thousands of examples of how this platform approach might be applied to specific issues, from new forms of home ownership, to new ways of funding green infrastructure, to new kinds of company. But let me focus on just one here, because it provides a neat illustration of how a ‘democracy as a platform’ approach can break political stalemates, and offer a new way forward for progressive liberalism.

One of the UK’s most long-standing political disputes has been over the expansion of Heathrow Airport; specifically, whether to add a third runway or not. On one side, the economic argument is that, in a globalised era, it is crucial to invest in national infrastructure to support the economic growth of the UK, and therefore the runway must go ahead. On the other side, the environmental argument is that the impact of such a runway on carbon emissions would be a catastrophe for the climate and therefore utterly unjustifiable, so the runway should be blocked.

Both sides are right.

But also, both sides’ positions are flawed. The flaw in the economic argument is obvious: there’s no point having economic growth if we have no habitable planet to live on. The flaw in the environmental argument is that it implies that we should all stop flying so much, stop taking overseas holidays, stop trading with each other, stop meeting and collaborating with people in other countries, that the world should be less connected — despite the unavoidable evidence that these things are inextricably linked with social progress: human rights, fewer wars, and people’s freedom from prejudice and oppression. Climate collapse is a planetary-scale problem, and it will only ever be tackled by a planetary-scale mindset. Furthermore, in making this argument, progressives are falling into the trap of confirming the basic premise of nationalism: that there isn’t enough for everyone. So someone has to come first.

The neoliberal ‘Third Way’ solution to the third runway argument wouldn’t really be a solution at all: it would just be to go ahead with the runway, and then offer tax breaks or subsidies to the incumbent aviation companies, encouraging them to reduce carbon emissions per mile a bit. Please.

But what if, instead, we were to schedule the construction of the new runway for, say, 2027, but with a binding rule that says it can only be used by aircraft producing zero carbon emissions. A kind of opt-in rule of access to the infrastructure. Sure, government would have to underwrite the risk that the tarmac may sit underused for a few years, but in practice, it’s unlikely to happen. The third runway would create a new market platform that would likely prove irresistible to investors. It would kickstart a new space (well, sky) race to develop workable biofuel solutions and perhaps all-electric aircraft within a decade. If the two main incumbent manufacturers (Boeing and Airbus) declined to rise to the challenge, other new (perhaps UK-based) companies would rush to fill the gap in the market. In a few years, the UK would find itself at the forefront of a green aviation industry, and before long we might be applying the rule to all UK runways, and profiting as other countries follow our lead.

But let’s pause and take a breath for a moment. Because this is what makes the diagram so dangerous: it works.

That makes it dangerous for two reasons. First, because the same playbook can be – and is being– used for much more regressive ends, to exert authoritarian control, to discriminate against particular ethnic groups, or to allow corporations to opt-out of regulation and competition, as well as to opt into it. Second, because the mistake that we could all-too-easily make here would be to leap straight into technocratic solutions, and miss, once again, one of the most important dimensions of the challenge that lies ahead; the emotional dimension.

A New Social Contract

So, to conclude this series, I want to return to where I began it; to our emotional relationship with industrial systems, and the profound, unwritten social contract that holds them together.

As I explored in part 1, by the end of the 2nd industrial revolution, society was held together by a deep social contract, with three identifiable layers.

The first layer was that basic promise of opportunity, security and progress: everyone gets fair access to free education and healthcare; if you work hard and play by the rules, you’ll get a qualification, and if you get a qualification, you get a job for life. Then, in turn, you’ll be able to afford a house, a car, a holiday, and a retirement, safe in the knowledge that everything will get steadily better and cheaper, and your children will inherit a safer world than you did. A world where there is enough for everyone.

As I explored in part 2, today, that basic promise has broken.

The second layer was the basic assumption of fairness, accountability and the rule of law – that is, if someone commits a crime, or fails to pay their taxes, or lies, or cheats, or are guilty of corruption, they will be held to account by society, irrespective of how wealthy or powerful they are. This was tied to the creation of institutions such as broadcasters and regulators who are independent from influence, and also held to a code of practice regarding neutrality and truthfulness.

That layer too has now broken, in very clear ways.

The third layer of the social contract was arguably the layer that liberals and progressives most neglected, and least understood. It was not about our economic prosperity, but rather our emotional prosperity. It was about our pride, dignity, identity, duty, autonomy, agency and purpose. The sense that, as well as being individually free to make our own choices, we are also part of something greater than ourselves; something that goes far beyond money. The writer Alex Evans calls it a ‘Larger Us’. It was about the sense that the work we do matters, and it means something more than just a way to pay the bills. It was about having a sense that there is something to look forward to. A sense that we all have skin in the same game; and society has our back. It was the story we told ourselves about who we are, what we’re striving for, and why.

Neoliberalism — and the version of globalisation it brought with it — offered no such story — instead it relied on fake wealth and cash incentives, and the promise of fulfilment through personal consumption alone. This is why, in the UK at least, when it comes to defining our national identity, and talking about patriotism we almost always end up conjuring up the image of the Second World War; because it was the last time that, as a society, we felt like we were all part of a coherent, common moral narrative.

That lack of an underlying story – combined with industrial and economic decline – fosters a deep sense of powerlessness, lack of purpose, anger and mistrust. It also leaves a void – making it easy for nationalists (and billionaire- backed charlatans masquerading as nationalists) to detach story from substance, peddling their own false framings and narratives; for example presenting themselves as restoring control of our land, borders, public services and national infrastructure, when in fact they intend to do the exact opposite: sell them off (largely to foreign buyers).

If we want to reverse this regressive downward spiral towards nationalism, the question we need to be asking ourselves is ‘what is the opposite of nationalism in the 21st century’?

How do we even begin to create a new version of that social contract for the digitised, globalised age in which we now find ourselves?

1. Create a market economy where there is enough for everyone

However you look at it, it begins with renewing that first layer: the basic promise of economic opportunity and progress. Putting nationalists out of business by creating an abundant economy, a society where there is enough for everyone.

As I argued in part 3, most of the technology we need to do this already exists, we’re just not deploying it. Where we are deploying it, the gains or savings are not being passed-on to workers, consumers and small businesses; they are begin hoovered-up by shareholders. Our ability to change that hinges not on being ‘anti-markets’ or ‘pro-markets’; not on being ‘anti-wealth’ or ‘pro-wealth’; not on taxing people’s earnings to be redistributed or cutting taxes, but on one thing: redesigning our markets to prevent economic rent-seeking. That is, all the means by which people can use money to purchase a monopoly — a position of power — from which they can then extract surplus value from others without doing any work themselves, or making any kind of contribution to the productive economy of goods and services.

There are many kinds of monopoly, from utilities to pharmaceutical patents, but the greatest – the ‘mother of all monopolies’ as Churchill described it – is land. Land rents are a weird leftover of the medieval feudal system: a privatised location tax that is suffocating every Westernised economy today. If you are under 50, I’m willing to bet that your single largest monthly outgoing is your rent or mortgage payment. Imagine the difference it would make to you if that was, say, halved. Or, if you are over 50 and fortunate enough to own your home, I’m willing to bet that it is the most expensive thing you possess. And yet you can’t access that its value without selling your home. Imagine if you could unlock half of that value as cash, and still own your home. What would you spend it on? Care? Travelling the world? Investing in green businesses? Helping your children and grandchildren?

Beyond land, there are other clear ways to take on rentier extraction. For example, by renewing the enforcement of antitrust laws (Matt Stoller is excellent on this), and by genuinely taking back control of national and community infrastructure and utilities. This doesn’t necessarily have to mean nationalisation, it could also include placing national infrastructure under the stewardship of well-regulated non-profits (in the same way that, for example, the National Trust serves as a custodian for historic buildings, and Wikimedia Foundation as a custodian for Wikipedia).

Put simply, societies that fail to break the grip of rentier extraction will find themselves in a downward spiral towards digital feudalism, flatlining real growth, privatising public services, declining wellbeing, corruption, zero-sum game economics and ever-rising nationalism and violence.

By contrast, societies that can design-out rentier extraction will find themselves able to unlock extraordinary levels of investment, competition, prosperity and technological progress, falling costs, ever-improving products and services, abundant public services, urban renewal and growing generosity and confidence towards others and the world.

If this challenge seems politically daunting, it is worth remembering that there is no political argument —Left, Liberal or Right — that even attempts to justify economic rent-seeking on the basis of principle. You will not find one in any book. Adam Smith was against it, Karl Marx was against it, Keynes was against it, Friedman was against it. Even Ayn Rand was against it. Economic rent-seeking survives only in the dark, by obfuscation, distraction, corruption and perverse incentives. It endures only because it has not been part our political language for the last century, and in the tussle of everyday life, we are all susceptible to quietly putting our own short-term convenience ahead of our principles if we can get away with it (then justifying it to ourselves later).

This, strangely, is good news, because it means we can form very broad political alliances. We do not need to persuade anyone to change their fundamental values, we just have to insist that they actually uphold them, and make it as easy as possible for them to do so. We need the clarity and confidence to identify where economic rent-seeking is happening, to shine a bright spotlight onto it and to design it out. Surprisingly often, we can do that in ways that soften the landing for many vested interests, (who, unless given ‘a golden bridge to retreat across’ or a weaning-off process will otherwise fight tooth and nail to defend their position. Given their inability to defend that position on the basis of reasoned argument or principle you can be sure they would fight dirty.) The invitation to a more prosperous version of capitalism needs to be extended to everyone; both the many and the few.

2. Restore basic trust

An additional benefit of tackling monopolies and rent extraction is that it also takes a step towards restoring the second layer of the social contract: the sense of basic fair play.

The challenge of trust in a digital age is a hugely complex one, and I am not going to attempt to go into it much here. I hugely recommend the work and writing of If , ODI and DotEveryone. However, there are some very basic, foundational things we could do to restore trust and fairness in democratic societies.

• Build new, transparent, rules-based tax infrastructure to close-down the tax gap (the amount of tax that is lost to tax evasion or avoidance) which is estimated to be around £90bn per year (or £1.7bn per week). Not only would this mean that everyone has to pay their stated fair share of tax, it would also make it much harder to launder dirty money (i.e. the proceeds of illegal activity, to which the UK is an accessory). The boost to the public purse would surely offset the loss of revenue that might result from no longer serving as a clearing house for the proceeds of criminal activity (not least because much of that money goes into UK land and property speculation anyway, not jobs or productive enterprise). In the unlikely event that the large companies who currently avoid paying taxes in the UK (Amazon, Boots, Starbucks etc) do decide to stop doing business here, that will simply leave the market open to new UK-owned startups who will. If, as a nation, we then decide we want to have ultra low tax rates, we should do so through the front door, not by turning a blind-eye to tax avoidance and evasion through the back door.
• Modernise and strengthen the Electoral Commission to properly regulate elections. First, by introducing rules prohibiting campaigns from knowingly spreading misinformation or disinformation (with sensible criteria to leave space for reasonable subjective interpretation). Second, by increasing the penalties for breaking electoral rules generally. At present, the maximum fine that can be imposed for breaking electoral law is a mere £20,000. To foreign donors who may be seeking to influence a UK election result, or to any political party considering cheating to win an election, this amount is seen as merely the cost of doing business; and to them, it’s a very low cost. When compared with the penalties that, for example, athletes face if they test positive to drugs, the penalties for breaking electoral rules are laughable. As well as increasing the maximum fines, a sensible change might be to introduce meaningful deterrents: for example, issuing retrospective 5 year, 10 year or even lifetime bans from holding or running for public office to campaign leaders whose campaigns are found to have knowingly and repeatedly broken electoral law.
• Regulate social media platforms as we do other media companies, such that any company that profits by knowingly promoting misinformation or disinformation will face fines that amount to a significant portion of their turnover. Again, in the unlikely event that any large social media platforms do decide that this is too-great-a-cost to doing business, it will open up the market for new competitors to develop better solutions.

What’s notable about these suggestions is that they all enjoy huge support, from readers of the Daily Mail as much as readers of the Guardian. You will not read articles or books advocating for more tax avoidance, or for more cheating in elections. The only people who will object to these proposals are those who consciously intend to cheat the electorate / other taxpayers, or to profit from allowing others to do so. The very opposite of patriotism.

3. Create a new story of work

The third layer of the social contract, I believe, is the final, critical front where the struggle to save liberal democracy will play out.

If you ask most liberals today how we should respond to the increasing pace of automation and globalisation, they will probably suggest the idea of a Universal Basic Income (UBI); a regular, unconditional payment made to every citizen. In principle, it aligns with the liberal idea of protecting and encouraging individual liberty. But it has some pretty fundamental problems.

First, because unless we also take steps to close-down rentier business models, introducing a UBI would be pointless. For example, if Birmingham were to issue every citizen a monthly UBI of £500, Landlords would simply increase their rents by £500 a month, and pocket the cash.

Secondly, it is predicated on the myth that we are heading into a future where ‘we will all be made unemployed’ by automation. This is often referred to as the ‘luddite fallacy’, and it is one that has been around for centuries. The reality is that for every civil service analyst sitting at their desk worrying about how to deal with the sudden unemployment caused by automation, there is another down the corridor worrying where all the future carers, teachers, counsellors and data scientists are going to come from. Think of it like this: there will always be something that can be improved, some need, or some means by which, through work, it is possible to contribute or gain advantage. So people will always be working, whether you like it or not. Put bluntly, the question is, do you want them working for criminal gangs or do you want them working to cure cancer? If the latter, you need investment and institutions in place to allow them to. So the real challenge presented by automation is one of resilience, re-training and re-investment, not one of providing a permanent subsidy for unemployment. Put simply, we need to make sure that society is creating new jobs as quickly as technology is destroying old ones, we need to help people create and transition to new work that they love, and we need to make sure that if, overall, wages are falling, then so are living costs.

The third problem with the idea of UBI is that is still essentially framed and structured as a form of state welfare payment, paid for by taxpayers. This leaves it exposed to attack by those who do not rely on it themselves, and therefore see it as just another form of ‘money for nothing’.

Proponents of UBI would counter this by saying that the unconditionality is part of the point. The original idea of basic income is to fund people to do the kinds of work that are not currently sufficiently monetised: care, learning, creativity, volunteering, social enterprise.

But that’s not the story that UBI implies. It is actually another kind of methadone-style compensation, aimed to subsidise those left behind by the digital industrial revolution, not invite them to be part of it. The implied message of UBI is ‘here, take this money and go away, society has no further need of you.’

What UBI misses are all the other fundamental reasons why humans work: passion, purpose, pride, reputation, vocation, friendship, fellowship, mastery, dignity, the feeling of providing for your family, or leaving a legacy. To be part of a larger story.

So what might that larger story be? Well, of course, that’s up for debate, but there is one obvious candidate: the thread of climate collapse, and the huge industrial revolution that is going to be needed to avert it. That is our generation’s equivalent of World War II; an existential threat to our values, and to human wellbeing. And like WWII it requires global leadership and cooperation. Also like WWII, the sheer scale of economic transformation involved — to transform our energy systems, our constructions systems, our cities, our transportation systems, our agricultural systems, our monitoring systems, our financial systems, our knowledge systems, our care systems, our infrastructure — is going to require more than people’s democratic consent. It is going to require the effort, ingenuity, inventiveness and perseverance of every single one of us.

In other words, what’s needed is the exact opposite message: ‘your country needs you, and the world needs your country to take the lead’. A new alignment of patriotism and global citizenship.

So, in the context of this very different story, what might alternatives to basic income look like? I’d like to suggest three ideas.

• A citizens’ dividend This would probably work best at the scale of individual regions, towns or cities. It would involve the introduction of measures to allow the community to recapture ground rent increases, of which a small percentage is then passed back to residents. So, as the neighbourhood improves and property values rise, every household receives a dividend: a percentage of the common wealth that they have helped to create. Essentially, it would be an antidote to neighbourhood gentrification. In practice however, it may be that residents would prefer to see all proceeds of ground rents invested directly into local infrastructure and services, such as schools or GPs, rather than being paid out as cash.
• A citizens’ stipend The citizen’s stipend would be a fund that anyone can apply to, regardless of their circumstances, suggesting a way in which they want to work for the community — be it at the local, national or global scale. They might be unemployed, or they might just be taking a few years out of their career. Their proposal might be anything, from putting in place a community initiative to improve the lives of old people, to building the next World Wide Web. As long as the proposal passes certain tests, the applicant will be paid a basic wage for maximum 3 years; just enough to take the cost of living off the table, so they can focus on the intrinsic rewards of the work. Any individual or group that is receiving a citizens’ stipend will be personally accountable; every few weeks they will have to present their work to a group of peers and mentors. The fact that some of these projects may fail is not important. Those that succeed would have a huge impact, and those that fail would still help to foster a culture of proactive citizenship, inventiveness, social renewal, and a basic social guarantee that says ‘no one will be left behind. If you are willing to work for everyone, everyone will support you.’
• Strategic investment When it comes to building and scaling new kinds of digital or physical infrastructure, or new kinds of zero carbon technology, or innovations aimed at improving people’s health or wellbeing, the policy of recent decades has been to leave it to venture capitalists (‘the Market’), who are motivated only by what makes most money for them, not what makes most value overall, or best serves our collective strategic interest as a society. The result has been, on one hand, the emergence of private platform monopolies, and on the other massive gaps and underinvestment in open and public sector platforms. The few that have been created—for example, the World Wide Web, Wikipedia, Gov.uk, Firefox, Linux — have had a huge impact on society and the economy, for a relatively tiny amount of money. And yet they are the exception, not the rule. Most such fledgling innovations are either left by the wayside, or forced down the path of taking VC investment. Before long, the original founders’ good intentions start getting squeezed out by the de facto legal purpose of the company: to maximise shareholder returns. Grant funding and social impact bonds are a good initial response to this problem, but are woefully insufficient. What is badly needed is an equivalent scale of investment infrastructure (mission-based-capital, startup accelerators etc) offering investment and support that is predicated on certain rules-of-engagement, for example, that solutions must be open source, or that the enterprises must be non-profit, or otherwise legally structured around a purpose other than maximising shareholder returns. One simple but powerful example of this is the idea of ‘capped returns’ investing. There are so many entrepreneurs today — young and old — who passionately wish this kind of investment was available to them, but it isn’t. Most people simply cannot imagine how much untapped potential there is for this kind of enterprise and innovation, motivated not by what makes money, but what needs doing.

The common theme to these suggestions is obvious. It is the idea that we can no longer afford to see people only as ‘consumers’ or ‘workers’ or ‘owners’ or ‘voters’, but rather, we must see them first and foremost as citizens: members-of, and contributors-to a community and a society, working towards objectives that go beyond just earning money. After all, money is just another technology.

And this, I believe, is the big plot twist.

When we first turn our minds to the idea of ‘A New Social Contract’ for the 21st century, our first instinct is to think of how that new contract needs to offer a better deal to middle and working class families. Which is right; it does.

And yet, I would suggest that if we seriously want to save liberal democracy, and to restore the progress in the 21st century, the key lies not just in what is offered to a nation’s population, but what is asked of them. JFK style.

In ancient Athenian democracy all citizens, upon coming of age, were expected to take an oath of allegiance, called the Ephebic Oath. Today, in most democracies, it is only new citizens who we ask to do this, not native-born ones. The Ephebic Oath contained this line:

“I shall leave my society not diminished, but greater and better than when I received it.”

Our industrial systems may have changed beyond recognition, and today the term ‘society’ (also translated as ‘native land’) encompasses not only the local and national but also the global, whether you like it or not. But the essential principle is timeless.

Any society, if it is to survive and succeed, must treat its future citizens as an asset, not a liability. And, when it comes to this fundamental civic responsibility to leave our society greater and better than when we received it, we must be asked to live up to that responsibility more than once every four years at the ballot box. Rather, we must expect — and equip — everyone to inscribe that purpose into their everyday lives and work, and into our institutions.

It is a sad lesson of history that this kind of civic and institutional renewal only usually tends to happen in the aftermath of great tragedies or shocks, such as wars, famines or epidemics.

In 2020, as we emerge, wide-eyed into an increasingly unstable, post-Brexit world, the question is, do we have to wait for things to get that bad? Or can we summon the intelligence and bravery to act now; in our personal and professional lives as well as our political ones? Can we interrupt this downward spiral into nationalism, fear and feudalism by addressing the systemic failures that are driving the crisis, and building working prototypes for a better, more liberal, more democratic, more prosperous, and more appealing global economy and society in the 21st century; one that can win by simply outperforming its alternatives.

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This is the final part of a four part series, titled ‘A New Social Contract’. You can read Part 1 here.