With the world on fast-forward we cannot afford to be left behind. We need new social contracts that bring new options and better solutions

CatalystInvestment, Lifestyle, Planning

When will our lives get back to normal? They won’t, because normal was the problem. Our lives function on social contracts between citizens and their government. These are broken. They have been for a while. It has nothing to do with the coronavirus. This has been developing for a few years.

The world needed change on many fronts. The pandemic has suppressed trends and accelerated other changes to the social contracts that rule our lives. This is having an impact on our families, society, work, religion, health and the environment, not to mention democracy and politics.
The essence of a social contract between citizens and their government is that we will pay taxes and in return the government takes care of us. This includes keeping us safe with an army, police and legal system, providing health care, education, a transport system, an enabling business environment and anything else the citizenry requires to stay safe and prosper.
If you follow American politics you should have no doubt that the democratic system, which has been a beacon to the free world, is broken. It is teetering on the edge. Elsewhere too there are serious problems. Take a look around us and reflect on the past few years. There have been riots and social unrest in Hong Kong, Germany, France, Spain, Venezuela, Chile, Lebanon, the UK, US and many more.

Some of these are regarded as the leading lights of democracy. Yet citizens are saying their governments are not taking care of them. They are not holding up their side of the social contract, and people are concerned about their futures. They are losing confidence that life will be better and are seeing their standards of living dropping.
Globalisation and other initiatives did a good job of reducing poverty and closing the gap between the haves and have nots over many decades. But since the start of the 21st century this gap has started to open up again, reversing that trend. This is mostly due to technology. Tech billionaires are now commonplace as they have harnessed the possibility of engaging with the planet through their technology.
Simply enabling friends to connect has made Facebook shareholders obscenely wealthy. The same for the pioneers of other tech-enabled businesses such as Netflix, Amazon, Alibaba, Tencent, Google and many more. At the other end of the spectrum, those who have not been able to access or harness technology have been left behind, in a different world.

While these technology businesses add value, they also break the convention of how our old world systems work. Over the past 250 years society was been built on businesses with productive real person labour, who get paid, pay taxes, live and spend their money, mostly within one country. Now there are businesses that operate globally, don’t employ legions of people and earn their income in countries where they don’t pay taxes. This is not sustainable to maintain the existing social contracts.
While of the biggest tech companies earn huge amounts of revenue all around the world, they pay no tax to the governments in most of those jurisdictions. To make matters worse, in instances they are destroying local taxpaying businesses in those countries. Technology is also replacing humans, which means fewer people are working, and those who are working are starting to earn less — and therefore spend less. All of this erodes the tax base in each of these countries and their governments cannot deliver the services the social contract demands.  
That is why people feel poorer and threatened about their futures — and they are blaming their governments. As a defence to this, governments are confronting tech companies to find a solution. Other governments are losing power to leaders who are exploiting the real fears people have by driving isolationist and nationalist agendas. That is not the solution, because it does not address the problem. We need new social contracts that bring new options and better solutions.
These emergencies are fast-forwarding historical processes. They will evolve much faster than we can imagine. Vladimir Lenin understood this when he said there are decades where nothing happens and then there are weeks where decades happen.
Through human ingenuity we will fix and improve what we have. It will need new perspectives and possibly radical departures. The problems are easy to identify but the solutions are challenging. This is forcing innovation, which will cause change in different areas.
Similar inflection points in history have generated incredible opportunities and long-term implications. If we sit on the sidelines waiting, it might all be over before we know it and the opportunities could be missed.

• Bradley is CEO of Fiscal Private Client Services.