The argument for a tripartite social (fiscal) contract: to include or exclude corporations?

By: Lyla Latif

Domestic and transnational revenue mobilisation as part of a state’s post pandemic recovery strategy is now under scrutiny. The role to be played by finance towards the economic and fiscal stabilisation of African economies on one hand, and its role in facilitating resilient moves towards sustainable development on the other, must now be critically examined. The drivers and producers of finance, these being corporations, must be looked at and included in government responses to the new normal economic, social and fiscal eventualities that will require funding. Such inclusion necessitates revisiting the social contract. In this blog, I want to speculate about the inclusion of corporations as part of the social contract – a very controversial perspective in light of the scolding that corporations have received as a result of the inequalities that emerged out of their liberal capitalistic tendencies and their role in advancing illicit financial flows. 

But is it fair game to include corporations as part of Africa’s quest under Agenda 2063 to align development with the state’s capacity to mobilise revenue locally? In light of the unpaid billions in taxes due to tax evasion and avoidance strategies employed by corporations, can they be trusted to help states meet their development needs? Relatedly, would including corporations as part of the social contract result in a political move that fits within the centre left political ideology or strengthens the hegemonic influences of the far right? As a political agenda, the far-right position is underpinned by capitalism and the free market rhetoric seeking to maintain social hierarchies by representing the dominant groups and protecting private property. The centre left seeks to ensure a balance between maintaining a degree of social hierarchies and at the same time promoting social equality through redistributive socio-economic policies.  So, are corporations Africa’s saving grace against debt crises and the litmus test to strengthening DRM?

Corporations cannot be ignored in defining the post-pandemic economic and social order. Recession, austerity, unemployment and growing debt crises alongside structural inequalities, market informalities, race and gender discrimination, human rights violations and geopolitical disparities, have resulted in the question of the corporation as a party to the social contract to begin looming around. The social contract, conceived by Locke, Rousseau, Hobbes and others rests on a bi-lateral, governance compact that has undergirded Western societies for three centuries and recently, the post-colonial African states following their decolonisation (1960s onwards) and democratisation. Arguably, under the contract, citizens freely delegate certain roles and responsibilities to government which, in return, provides collective goods such as the rule of law and protection of socio-economic rights, against the imposition of taxation. 

The unprecedented scale at which corporations are involved in industrialisation, mineral extraction, cross border trade and digitalisation (subject to the social contract and corporate social responsibility) has not only impacted the world’s economy but has also given corporations considerable political influence. Corporations are capable of shaping the social order merely on the basis of their economic, political and financial power (for example, Bill and Melinda Gates Foundation donating billions towards driving narrative on global health law across developing states, tech companies negotiating double tax agreements for greater tax incentives based on research and development etc). The annual revenue of certain corporations (such as Apple Inc, Alphabet, Microsoft etc) tops the GDP of many African states. Relatedly, corporations are responsible for the employment of millions of people globally. The global economy itself is constituted by corporations. Should we then think of renegotiating the social contract with the aim of integrating corporations as part of supporting the rights and duty reciprocal relationship between the state and society? Is this what it will take for a drive towards resilience as states emerge out of the pandemic imposed fiscal, economic and social shocks? 

Corporations, facilitated by decades of capitalism and the free market rhetoric on economic liberalisation and tech innovation following (a) post-war, (b) decolonisation and (c) democratisation have strengthened their national and transnational influence economically, socially and also politically. In light of this, does the social contract warrant an update and expansion? If for argument’s sake, we were to agree to broaden the social contract to include corporations, the next question would be on how and who would harness private interests to serve public interests? Would corporations take responsibility to mitigate systemic risks if they were to become part of the social contract? Would corporations become responsible for repayment of debt on condition of privatisation of public goods? Would this not result in inequalities between those who would be able to access the privatised public goods and services and those who would be unable to? Or would there be a negotiation on what public goods and services can be privatised leaving out education, health and social security? These are not easy questions to answer. It is envisaging a future where government will be replaced by corporations — a sort of Corporate Republic. What would this mean for democracy? 

Digitalisation is already demonstrating the disruption in the way in which healthcare is going to be delivered – the use of telehealth where an African patient speaks to a US based doctor online, who then prescribes medication to be delivered by drones, operated by a local intermediary, to the patient’s residence. A subtle shift towards private healthcare despite the global push for universal health coverage to be provided by the government with regard to the ability or inability to pay. Corporations have shown resilience in going beyond economic policies to take leadership roles on social issues where many African states are out of step. For example, zoom, google meets and microsoft teams available for free public use have been developed by corporations and not governments, yet the latter are advocating for these platforms to be used as alternatives to remote working and learning during the pandemic. This clearly demonstrates the important role corporations play in development goals. 

It is important to emphasise that the agenda of corporations is not to provide the public good but will only invest where public goodwill can increase their profits. Hence, social responsibility under corporations may promote inequality and economic policies that may devastate the working class. Would a commitment to SDGs counter this assertion? Would achieving SDGs by corporate fiat be equal, fair and methodical? Corporations at the intersection of economic and political power would have undue influence over public policy and such dominance may give rise to new market dynamics that may work for or erode African socio-economic livelihoods. Can corporations guarantee provision of basic housing, education and healthcare in return for acquiring government debt? Can the public accept for corporations to dictate socio-economic policies with the role of government as an ombudsman to protect human rights against corporate violations as the basis upon which the social contract is updated? These questions should be examined before a decision is made on the role of corporations in reducing debt and strengthening DRM. 

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