Does the Twenty-First Century Need a New Social Contract?

Richard Haass and Minouche Shafik, director of the London School of Economics, assess the future of the labor market and examine how to provide workers with the skills and training they need in an era of ongoing technological change.

December 16, 2021 — 35:14 min
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Host

Richard Haass

President, Council on Foreign Relations Full Bio

Episode Guests

Minouche Shafik

Director, London School of Economics and Political Science

Show Notes

About This Episode

 

How can countries rightsize the role of government in modern economies? Will the social contract evolve as the nature of work changes? In this episode of Nine Questions for the World, Richard Haass and Minouche Shafik, director of the London School of Economics and Political Science, talk about the future of the labor market and discuss how to give workers the skills they need amid nonstop technological change. 

 

This podcast series was originally presented as “The 21st Century World: Big Challenges and Big Ideas,” an event series in celebration of CFR’s centennial. This episode is based on a live event that took place on July 15, 2021.

 

See the corresponding video here.

 

Dig Deeper

 

From Minouche Shafik

 

What We Owe Each Other: A New Social Contract for a Better Society,” Princeton University Press

 

From CFR 

 

Anshu Siripurapu, “Is Industrial Policy Making a Comeback?” 

 

Melanne Verveer, “Gendered Disinformation, Democracy, and the Need for a New Digital Social Contract” 

 

A. Michael Spence, “Beyond Unemployment” 

 

Read More

 

Veena Dubal and Juliet B. Schor, “Gig Workers Are Employees. Start Treating Them That Way.,” New York Times

 

Gerald F. Seib, “Revolutionary Change or Practical Help? Democrats Struggle With the Difference,” Wall Street Journal 

 

Henry Mance, “Minouche Shafik: ‘I don’t have to be the smartest person in the room’,” Financial Times

 

Watch and Listen

 

Should Central Banks Be Responsible for Saving the World?,” Stephanomics 

 

Close

Transcript

Hello. I’m Richard Haass, the president of the Council on Foreign Relations, and this is Nine Questions for the World, a special limited edition podcast series. 

In each episode, you’ll be hearing me in conversation with some of the best thinkers of our time, as we ask fundamental questions about the century to come.  

For those of you who don't know, the Council on Foreign Relations or CFR is an independent, non-partisan membership organization, we are dedicated to informing the public about the foreign policy choices facing the United States and other countries. We're also a think tank, a publisher, and an educational institution.

Today’s episode features a conversation that took place on July 15, 2021. I spoke with Minouche Shafik, she’s Director of the London School of Economics or LSE, and the conversation was about how to right-size the role of government in modern economies.

Baroness Shafik took on some big questions about the 21st labor market. What will work actually look like in the 21st century? How will the social contract evolve as the nature of work changes? What must governments and employers and schools all do so that workers will have the skills they’ll need, amidst nonstop technological change. 

I hope you enjoy hearing this conversation as much as I enjoyed having it. 

Richard HAASS: So Minouche, first of all, thank you for taking the time to do this. I have some idea what it's like to run an academic institution normally, in the age of COVID and pandemics it's abnormally. So thank you, it's great to have you, and I can't think of a better person to take us through some of the big questions of the day.

Minouche SHAFIK: Oh, it's a pleasure to be here, Richard. 

HAASS: Thank you. So I want to start out looking at some of the big issues about the relationship between the government and economies and societies. So my first question is, when I look around and I looked at what's working its way through the US Congress, if anything can be said these days to work its way through the US Congress, but this new Competition Act basically gets the government involved in a degree of, if you'll pardon the expression, industrial planning. And then we look at all sorts of things about American competition policy. We also look at certain reactions about supply chain uncertainties, in part because of resilience issues, dealing with the pandemic. Also again, competitiveness issues or security issues dealing with China. Are we at something of a turning point? If we were to put on a historian's hat, if you will, and imagine looking back on today in 10 or 20 years, is it your sense that we're at something of a turning point narrowly in the relationship between governments and economies in the western, largely capitalist world?

SHAFIK: I think we are at a turning point, and I think that turning point has arrived for a number of reasons. Partly, it's the long legacy of the 2008 financial crisis compounded by the pandemic. And I think the underlying reason why the turning point is here is because I think our social contract is broken, and it's broken because people feel that the current setup of the relationship between markets and governments isn't delivering enough security and it's not delivering enough opportunity, and a fair sense of opportunity. And the examples you just gave around say competition policy is an example where there's a sense that markets are no longer fair and that needs to be addressed. And of course, the pandemic I think has really highlighted the fact that many people feel incredibly insecure over healthcare, over precarious work, and those challenges have been highlighted by recent events. So, yes, I think we are at a turning point.

HAASS: I want to get to the question that you highlighted in a minute, which is inequality and security, the safety net, and basically helping people deal with all the challenges of the 21st century, and whether there's enough cushion and what has to be done. But let's sort of take a step back though and first just focus on the economic. Isn't there a danger though? I mean, the word industrial planning is freighted, it's loaded. One often thinks of Japan trying to pick winners and losers. The Obama administration had some unfortunate experiences in the green energy space. Why do we want the government to play a large role? Why is it happening? Because one could argue, if one looked at what happened with Moderna and Pfizer, the great breakthrough on the vaccines intellectually, put aside production questions, was private sector. If one looks at technology in the IT space, if one looks at the Googles and Facebooks and Apples and Amazons, the government didn't do those, the private sector did that. Silicon valley did it. This nexus between universities and businesses, these enormous venture capital pools in the United States. It just seems to me, on the surface of it, a slightly odd time to be saying the government has to play a larger role in the economy when things seem to be working pretty well in the area of innovation and productivity.

SHAFIK: I would take a slightly different view. I am not a fan of industrial policy. When governments try and pick winners, it usually ends up being losers picking the government for subsidies, and that often usually doesn't work. In fact, I used to teach a whole course at the Wharton Business School on competitiveness and industrial policy. So I think that sort of more traditional industrial policy picking sectors or industries where you think your country has a comparative advantage, rarely works.

HAASS: Can I steal that phrase from you, whenever the government tries to pick winners, it turns out that the losers pick government?

SHAFIK: You can.

HAASS: That's a fantastic capsule of the criticism, so that's no longer yours.

SHAFIK: Fine, I don't have copyright on that phrase, so you can share it Richard. But what I would say is, let's look at the Pfizer, Moderna pharmaceutical successes, that was built on a foundation of decades of government funding of research, of core R&D. And it was topped up in the context of the pandemic by lots of additional government funding of those companies to accelerate development of those drugs. And so I think that sort of upstream R&D funding of things that industry won't do, is highly desirable, and similarly competition policy is highly desirable. There's a lot of evidence, in the US for example, that competitiveness has fallen massively. That actually, many, many sectors pharmaceuticals, banking, transport, a whole bunch have become much more concentrated and less competitive. And of course, platform economics around Facebook, Google, et cetera, is another really good example of concentration. And where does the productivity come from? It comes from innovative ideas and competition, and that's where I think government has an important role to play.

HAASS: I agree a hundred percent on the idea that government needs to fund, in many ways, basic research, companies tend to focus more on the applied. And something that we'd allowed to shrink in this country is our percentage of our GDP, and now it's good to see more people understanding. I wanted to follow up on something you just said, does that mean we're basically in the early days of a period that's likely to see greater regulation and greater antitrust as a dimension of competitiveness policy?

SHAFIK: I think yes, because I think the emergence of platform economics as we call it, the gig economy, has raised real challenges for conventional competition policy, and I think we're at a moment of change. We used to think about competition as having to be driven by consumer detriment, consumers had to be worse off as a result of the way a particular market was organized. And you could argue that some of these recent innovations have actually made consumers better off, but the question is also what is the long-term consequence of high levels of concentration in these markets? Will those companies at some point extract rents from the fact that they have these incredibly privileged positions? And are consumers worse off because new potential entrants are not even entering because as soon as they start to grow, they get bought up and swallowed up by these other companies? And so I do think we're at a moment where competition policy is being rethought and additional regulation, including around things like green and carbon issues, will be on the rise.

HAASS: Given that there’s very few large corporations that are any longer domestic only, does this suggest that this whole area of competition policy, regulation and antitrust and the like is necessarily going to have to be an international, cross border undertaking?

SHAFIK: Well, that's a difficult question because the only place that has tried to do competition policy on a cross-border basis is the European Union, and they regulate competition at a pan-European level. And it's probably the most powerful part of the European Commission in terms of its powers to enforce its decisions, and it's very controversial. So it's hard for me to imagine any global authority having that kind of power across many countries, so I think for now competition policy will remain primarily a national issue. But I think there are other issues like corporate taxation, for example, has emerged as a big global issue. And the recent decisions that were taken at the G7 and the G20 are a really good example of a move toward a higher level of international cooperation on a global economic issue.

HAASS: Yeah, we're seeing that and we're also seeing growing interest in cross border taxes to deal with climate related concerns. So my hunch is those of your students who are specializing in cross border taxation, they have promising futures.

SHAFIK: I agree with you. I agree with you. And it's complicated, the issues around cross border issues and carbon taxation could potentially be a great source of future revenues for international lawyers and accountants.

HAASS: Yeah, no, it's building in this country where there's a desire and principle to introduce it. The question is, how in practice is it actually applied, shall we say? We haven't quite gotten to that point.

SHAFIK: I mean, the similar answer is that we're going to have a minimum carbon tax globally, but that will be so difficult to implement and achieve. And so what you're going to end up instead is countries having border taxes, which will be very complicated to implement. I mean, I think the impact is greatest for a few sectors, things like steel and cement, and so it may be simplest to just concentrate on those very high carbon sectors initially.

HAASS: The other way to do it would be in between, would be say through regional trade agreements. One can imagine that something like the CPTPP, they could introduce something of a collective levy based upon the fuel used to produce a certain item or lifecycle fuel estimates, that would be an in-between option. We're not there yet, but I don't think that's inconceivable at some point.

SHAFIK: Yeah, I agree.

HAASS: Let's talk about the other half of this, which in many ways is the subject of your book, which is the larger government role in society and this whole question of the social contract, so what do you see one, as emerging? And to what extent do you see that as still inadequate? And what would you like to see emerging? what does a 21st century contract either look like, or need to look like?

SHAFIK: Yeah. So I think our 20th century social contract was broken by two things, technology and the changing role of women. Technology fundamentally changed work and made the possibility of much more flexible working more common, and it also changed what we need from our educational systems. The changing role of women has changed with our ability to rely on women to take care of the young and the old for free. And our whole social contract was premised on the fact that that's what women will do, but now that women are increasingly educated and employed, we see in many countries, huge challenges around childcare and around old age care, and all of this is compounded by aging and climate change. And so I think those are the big forces that have meant our old social contract is broken. What do we need instead? Well, in my book, which is called “What We Owe Each Other” I sort of go through the different stages of life and show how a different social contract could deliver more. I'll just give two examples. In the area of education, our current educational system is premised on people getting educated from about age six to their early 20s, and then that's supposed to be sufficient for your lifetime. But what we know is that the years zero to three are the most important for achieving social mobility and equity. That's when the brain development happens, if you don't get kids good nutrition and good mental stimulation at that age, no matter how good a school you send them to, they'll never catch up. And so a better social contract would invest more way upstream for equity reasons and much more downstream, because the idea that a career is going to last 30 years is no longer valid, careers in the future are going to be 40, 50 years. And so people will need to retool often, and so the whole shape of our educational system needs to change. The same with work, I believe in markets, I think the increased flexibility in our labor markets has been a big contributor to productivity, but the pendulum has just swung too far in the direction of insecurity. And so going forward, I think we need to move to a social contract where flexible workers get benefits in proportion to how much they work. And so if you work for three or four employers during a week, each of those employers should be contributing to your social security, your pension, and your sick pay. And I think that the costs of not doing that have become so apparent in this time of the pandemic. When I grew up working in international development, we used to talk about something called the informal sector. Well, the gig economy is just a fancy word for the informal sector and it comes with all the perils of informal working, and I think that's another area where the social contract needs to change.

HAASS: It seems to me listening to you, and I agree with almost everything you said, the pandemic will be an accelerant, because suddenly this idea of a nine to five or whatever the equivalent is in the UK, five days a week, that that working model is out. And this whole debate, we did a whole task force on it at the Council on Foreign Relations a few years ago, about the future of work, about tech productivity increases, the inexorable modernization of these technologies. Again, it's going to be accelerated because a lot of people are going to be looking for ways not to be quite so worker dependent if and when there's a future pandemic. So it seems to me, one of the consequences of it, and you mentioned it, is increasingly separating the social safety net from a particular job. 

SHAFIK: Absolutely.

HAASS: If you're right, the average person's going to have, I don't know, 15, 20, 25 jobs as part of a career and might actually have three or four at once, neither being full-time. The idea that your pension or your healthcare would be job-related seems increasingly archaic.

SHAFIK: Completely agree, and de-linking it from employment is key. One of the other things I worry about is that we currently tax labor a lot. The additional top up you have to pay to hire someone in terms of benefits, it really adds a lot to the cost of labor, and we probably tax capital too little. In the US, just to give you a ballpark, capital is effectively taxed at the rate of 5%, labor is taxed at the rate of about 25%, when you add everything in, which biases the willingness of people to create jobs. And I think taking some of those labor taxes off of employers, having them funded through general taxation and de-linking health benefits, pension benefits, et cetera, from an individual job is really essential to deal with the labor markets of the future. I think it will also, in the end, help create more jobs.

HAASS: We may have an interesting test case in this if the tax rate in this country on capital gains heads north, 

SHAFIK: Exactly.

HAASS: we may see some of that. One of the candidates in both the presidential election and in the New York mayoral election, Andrew Yang, he was a great advocate of a so-called universal basic income. What is your sense of that? Because you talk about benefits not being linked to jobs, and that each employer would say, pay a chunk of certain things. Well, what if someone doesn't work? What is your sense of the social contract and UBI? And whether we are likely to have a floor that is unrelated to one's willingness or ability to work? And if so, whether that is a necessary but also in some ways corrosive idea by not linking individuals to work?

SHAFIK: Yeah. So in the book I talk about universal basic income, and I am not a fan, and I'll explain why. I have personally, actually worked on cash transfer schemes in low-income countries where you deliver cash, very small amounts of cash to the poorest households to put a floor on consumption, and those work very well. But in any advanced economy that has the capacity to target, the idea that you would raise taxes by, let's just say, 20% of GDP, to cycle all of this money through the government to then distribute it to people who don't necessarily need it is incredibly inefficient. I think the more profound reason why I don't like universal basic income is because I think work is part of the social contract. In every society, the deal is that when you're young you're looked after, when you're an adult you contribute, and when you're old you're looked after. And work is the way that we contribute to the social contract. And so I would much prefer, if someone is not very productive and can't earn enough to live at a decent level, that you would top up their wages with say earned income tax credits, but you still ask people to work and contribute. I think universal basic income is like giving up on people and saying you have nothing to contribute to society.

HAASS: I agree a hundred percent, and I think there's also questions about dignity, about the sense of the individual and identity and dignity and where they come from in the absence of labor, I think is part of it. What about inequality and all this? To what extent do you see the new social contract that it either is evolving or needs to evolve, smoothing out inequality? In the United States we're coming out of the pandemic, not as much as we perhaps could or should, given resistance to vaccination, but we are where we are, but inequality it seems has been exacerbated. We had significant inequality going in, 18 months ago, and we have even greater inequality coming out. And part for what you were just hinting at, that those whose incomes or wealth is capital based have fared better than those whose income is labor based, whatever the Gini coefficient of the United States was, it's moved as a result of COVID. To what extent is smoothing out or reducing inequalities a desirable or necessary part to do you believe, or an inevitable part, for that matter, of a 21st century social contract?

SHAFIK: Yeah. So I think every society in the world can guarantee everyone a minimum amount to have a decent life. And that minimum includes a minimum level of income, preferably based on work, a minimum amount of healthcare and access to education, and also a minimum pension to avoid destitution in old age. But beyond that, I think the real solution to inequality is not so much redistribution of income, but what economists call pre-distribution, investing in people in their education and investing in parts of the country that are deprived and poor, to increase opportunity for those people. If you have to redistribute a lot at the end, your pre-distribution has failed. And so in the book I talk a lot about how pre-distribution could operate. I'll just give you a small example from the US with some fantastic research, which is called Lost Einsteins. And what they did is they looked at US data of kids in fourth grade who had exactly the same math and science skills in fourth grade. And they looked at how many of them as adults had patents and were innovators. And what they found is that if you happen to be born in a rich family, you were 10 times more likely to have a patent. If you happen to be born in Silicon Valley, you were 10 times more likely to have a technology patent than a child born elsewhere, even if you had the exact same math and science skills in fourth grade. And the gap, those lost Einsteins, those kids who happened to be born into a poor family or in a poor place, if you could get them to innovate at the level of those other children, you would quadruple the rate of innovation in the US economy with huge benefits for productivity. And so those are the kind of pre-distribution policies that I think are the ultimate answer to inequality. And what I basically argue is, let's move into a society where we have high rates of investment in pre-distribution, and that is how we're going to make ourselves both more equal and rich.

HAASS: I like that, pre-distribution as opposed to redistribution. That's the second thing I've got to steal from you. I figured if I'm open about it, I'm not sure it still constitutes theft, but I just want to announce it for all to hear here. So part of what I take from this, I listened to you about a larger government role in the economy, a larger government role in ensuring a certain foundation, both of an opportunity, but also outcomes for citizens, particularly early life and late life. That is in some ways the United States, how do I put this, moving in a slightly different more "European" direction, if you will, forgive me. Is that fair, that in some ways we're becoming a little bit more like you all, one, and then two, are there ways in which Europe is or is not becoming slightly more like us? Because there have got to be things here that Europeans have said, "Look, look at this American performance economically and other ways, they are doing things that we are not." What's your sense of that? Is there a bit of American European convergence or not?

SHAFIK: It's a good observation. I mean, I do think there are many areas where the US has under invested in itself, under invested in education, under invested in infrastructure, and also under invested in its safety net. Let's face it, healthcare is the obvious area, but early years education would be another one I would list. And so we are, I think, appropriately entering a period in which the US will invest more in social goods in those areas. You're right, that Europe, I think there still remains a very strong consensus in Europe about the so-called European social model and not much appetite to unpick that, but at the same time, I think Europe is deeply concerned about its competitiveness and its place in the world. And it's geostrategic place in the world is also clearly dependent on the competitiveness of its economy. I think in European circles Europe's nightmare scenario is that it becomes a sort of museum for the world, which is inhabited by old people and people come and visit these kind of beautiful relics, but it is not a dynamic economy. And so I think that is a preoccupation in Europe with a big emphasis on investment in R&D, why don't we have any global tech companies, why aren't we at the forefront of innovation? So, yes, that is a preoccupation, and there is a lot of looking both to be honest, looking both west and east to try and learn from elsewhere.

HAASS: Well, I was going to raise the question to the east, so you beat me to it, so let's raise that. 20 years ago, roughly when China was brought into the international financial institutions, particularly the bank, there was hope, to put it bluntly, that they would become more like us, that this would be something of a socializing experience become more market oriented, they phase out, at least at a large part the state owned enterprises, that they would also become more politically open. And needless to say that in the last 10 years, any of that has been walked back, and then some. And China now looks more statused economically and more closed politically. So what do you derive from that? Does that sort of simply, in your sense, this is Xi Jinping's hallmark? But when he goes, these kinds of changes inevitably have to resume? That he will be a kind of an interlude in Chinese history, that in order to succeed China or any society has to become more mixed? Or do you think there really is a more top-heavy alternative to what we've been discussing here?

SHAFIK: Yeah. I mean, they are definitely experimenting with a different model, which tries to marry a market economy with more authoritarian politics. What I think is really interesting at the moment is that even though China wasn't a democracy, there was a selectorate, there wasn't an electorate, but there was a selectorate in the party, there was some internal competition and kind of merit based appointments. And so the political system, while not democratic, at least had some competitive and performance-based elements to it. If that disappears, you have to wonder if it will be as successful as it has been in the past, because I think that that model has served them pretty well in recent decades. But from an international perspective, there are just too many interdependencies to not engage. And so I think the challenge will be to identify those intersections of common interests, climate is the obvious one, the pandemic is the other.

HAASS: I'm just going to interrupt for a second, if I could? If climate and the pandemic are the two areas of common interest, one would have to flunk the international community on both. I mean, climate, the earth is heating more than we're acting to counter it. And the gap between those who are, or soon will be vaccinated, and those who need to be vaccinated is enormous, and I don't see any serious plan for quickly closing that gap. So I mean, you're in the business of giving grades, you run an academic institution, but I would think for both climate and the pandemic one would have to give the world a failing grade in both.

SHAFIK: I have to say, I would agree with you. I mean, the pandemic is a really troubling example, because if you were writing a textbook case of a situation where you would need global cooperation, the pandemic's pretty much it, you couldn't ask for a more clear example. And the IMF has put a plan on the table to vaccinate all the vulnerable groups in the world, essentially 40% of the population, the most vulnerable all over the world, it costs about 50 billion. And UK alone has spent 300 billion domestically to deal with the pandemic, the US has spent well over a trillion. 50 billion is rounding error in those numbers, and these are individual countries, right? Why has the world not been able to put 50 billion on table to deal with vaccinating the most vulnerable when we know perfectly well that new variants will come and get us. I'm hugely frustrated and disappointed, and aggrieved, we failed. And it's a lack of leadership, frankly, at the moment, that hasn't been able to solve it. And it doesn't all go well for our ability to deal with climate change. So I agree with you.

HAASS: So let me connect what we've just talked about to the previous conversation. So we've been talking about a social contract in two ways, between the government and the economy and the government and the society. And so whether there then also needs to be something of a social contract internationally between individual countries and other countries to deal with these common challenges like climate, like pandemics. It seems to me that there's a gap, that we've got a world that is largely organized around sovereign entities. And no one's making an argument against sovereignty, but what we are saying is that in order for individual entities to prosper or thrive, they have got to pool their efforts, and what we're seeing is a failure to do just that. The irony that you've had this pandemic, which began in Wuhan, however it began, that has killed, I would estimate now, what, 10, 12, 15 million people worldwide, whatever the official numbers, they're seriously under-counted. Yet almost the entire response for better and for worse has been national. We see some countries having done extraordinarily well, we see some countries having done extraordinarily poorly, but this disconnect between a global challenge, and what are essentially national responses for the most part, seems to me a real indictment of the absence of a social contract between individual nation states and the world they happen to inhabit.

SHAFIK: Yeah. One of the things I think is that part of the problem is that when national social contracts fail, you cannot persuade people to cooperate internationally. So I think, you know, the US is a really good example, many Americans feel that internationalism has cost the U.S. too much. It's too much of a burden, we should focus on home, on our needs. I would argue that actually few countries have benefited more from globalization than the US, but the problem is that the American social contract has failed to share those benefits domestically, well enough. And so I actually think a good national social contract is a precondition to internationalism, which is partly why I wrote this book because I spent 25 years of my life in the international economic system and was incredibly frustrated at the movement away from multilateral cooperation. And I think it's the failure at the national level for social contracts to work well. I think if we think about how should an international social contract work, I tend to think of it as concentric circles. You know, we owe the most to our immediate family, and then our community, and then our nation state, but we also owe something to people in the rest of the world, especially when problems like climate change and pandemics mean that it's actually in our interest to collaborate with them.

HAASS: The only area I would take issue with you is, I would think that part of the problem here, a big part of it, and indeed it's the reason that this institution, the Council on Foreign Relations has launched an enormous educational enterprise, is not so much the failure to share the benefits of internationalism as to explain them. And if you look at the last 70, 75 years, the United States has benefited broadly from an absence of great power conflict. The wealth of individuals in this country is going up astronomically. The lifespan of individuals and health have gone up tremendously, at least until the last couple of years. Democracy around the world, again until the last decade or so, has grown. So I would actually say we've gotten an enormous return on investment, that it's been not a form of philanthropy, though at times it has been, but really a form of enlightened self-interest, but people don't connect the dots. And that I think we have failed to explain why our international efforts are not simply things we do for other folks, but actually are things we do for ourselves as well.

SHAFIK: I agree that connecting the dots is part of the issue, but I also think that US policy failures have been also part of the problem. The more open your economy is, the more you have to cushion the shocks for people. So I think of something like the Trade Adjustment Act in the US, which was intended to cushion the impact on American workers of initially the Free Trade Agreement with Mexico and Canada. And on paper, it looks really good. It provides worker re-skilling, severance payments, mobility assistance, all the rest of it, it was never funded properly. And so it's a classic example of where the US economy benefited from that free trade agreement, the pie grew, but we didn't look after the people who were adversely affected. And that's what I mean by the social contract failing to create support for internationalism.

HAASS: I hear you. For so long, you and I worked in a world of the so-called Washington Consensus, and I'm not quite sure where we are now, are we somewhere between that, which had a bias towards much reduced government roles in economies and societies? Do you sense that we are pretty close to, I don't know if you call it the post-Washington Consensus, or however you name it, that that will be, if you will, the new package or standard of what societies either will be judged by? What is your sense?

SHAFIK: So I think that the Washington Consensus had an important flaw. The philosophy was, you liberalize trade, you have competition, you privatize, you globalize supply chains, you get big efficiency gains. And of course, some people will lose out, but you compensate the losers. And the problem with the Washington Consensus was the losers were never compensated. And more importantly, who wants to be a loser? And I think those two problems, the fact that people who lost out weren't looked after, but also people who lost out weren't given new opportunities and re-skilled and retrained and experienced the benefits of pre-distribution. And so I think a new consensus has to address that issue, it has to address making sure the benefits are shared properly, but also making sure that opportunities are enhanced for everyone so that the benefits accrue to everyone.

HAASS: No, I think that's a sensational point. I would actually argue, in this country, too much of the debate has been on the tail end about the distributional aspects, and not enough has been about how we equalize opportunity.

SHAFIK: Exactly.

HAASS: Because this is a country that was based upon not equal outcomes but equal opportunities, and to the extent we failed to make opportunities genuinely equal, we'll obviously have increasingly unequal outcomes and the pressure will grow to deal with that. I wish more of our conversation were about what we need to do, how would I put it, to make the American dream a reality. And I don't hear quite enough about that in our politics, it's much more again at the caboose, if you will, rather than the engine.

SHAFIK: Exactly. 

HAASS: Minouche Shafik, thank you so much both for all you’ve done and for being with us today.

SHAFIK: Thank you Richard, it’s been a pleasure and delightful, and thank you very much.

HAASS: Thank you so much.

SHAFIK: Goodbye.

Thank you for joining us. I hope you enjoyed the conversation.

If you’d like to learn more please visit CFR.org/9questions where you can find a transcript as well as additional resources on this topic. Have a question or some feedback? Send us an email at [email protected]

Subscribe to the show on Apple Podcasts, Spotify, Stitcher, or wherever you get your audio. 

And with that I ask that you stay informed and stay safe.

 

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Richard Haass and Stanford University Professor Fei-Fei Li discuss how to contend with technologies that can do both good and harm.

Richard Haass and Stanford University Professor Fei-Fei Li discuss how to contend with technologies that can do both good and harm.

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Richard Haass and Margaret MacMillan, one of the world’s foremost historians, discuss how best to apply history to better understand current global challenges, inclu...

Richard Haass and Margaret MacMillan, one of the world’s foremost historians, discuss how best to apply history to better understand current global challenges, inclu...

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Richard Haass and Michelle McMurry-Heath, president and CEO of the Biotechnology Innovation Institute, discuss the future of biotechnology and its potential impact o...

Richard Haass and Michelle McMurry-Heath, president and CEO of the Biotechnology Innovation Institute, discuss the future of biotechnology and its potential impact o...

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Richard Haass and economist Nicholas Stern, chair of the Grantham Research Institute on Climate Change and the Environment, discuss the realities of climate change a...

Richard Haass and economist Nicholas Stern, chair of the Grantham Research Institute on Climate Change and the Environment, discuss the realities of climate change a...

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CNN Host Fareed Zakaria and Richard Haass examine the concept of “world order” and what to do to promote it in an age of revived great-power rivalry and global chall...

CNN Host Fareed Zakaria and Richard Haass examine the concept of “world order” and what to do to promote it in an age of revived great-power rivalry and global chall...

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In the face of democratic backsliding around the world, Pulitzer Prize–winning author Anne Applebaum and Richard Haass discuss what needs to happen for democracy to ...

In the face of democratic backsliding around the world, Pulitzer Prize–winning author Anne Applebaum and Richard Haass discuss what needs to happen for democracy to ...

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By all accounts, China is sure to have an outsized impact on the world over the next 100 years. Richard Haass and Elizabeth Perry, director of the Harvard-Yenching I...

By all accounts, China is sure to have an outsized impact on the world over the next 100 years. Richard Haass and Elizabeth Perry, director of the Harvard-Yenching I...

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The world is changing, and its future is forming around high-stakes challenges such as climate change and shifting geopolitical power. In this limited series, Counci...

The world is changing, and its future is forming around high-stakes challenges such as climate change and shifting geopolitical power. In this limited series, Counci...

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Top Stories on CFR

World Trade Organization (WTO)

WTO members confounded expectations last week by concluding a deal on fisheries subsidies, the first major multilateral agreement in nearly a decade. But the trade body is not out of the woods yet.

Saudi Arabia

The United States and Saudi Arabia both stand to benefit by renewing their central strategic partnership, argue Steven A. Cook and Martin S. Indyk.

China

David Sacks, research fellow at CFR, sits down with James M. Lindsay to discuss the Biden administration’s strategy toward Taiwan amid growing threats from China.