The Social Contracts

Every society has its rules. They are like a roadmap to ‘the way we do things here.’ This is true in both primitive and civilized societies. Sometimes the rules are unwritten and sometimes they are written and highly codified.

Not all rules are created equal. Some rules can promote and lead to good behavior and some to bad. But whatever the rules may be, they are the underpinnings of the society. They are like the roots of the tree. The rules will influence and largely determine the direction and ultimate outcomes of a society.

Good things don’t happen by mistake. When schools, sports teams and companies are transformed from losers to winners by a new principal, coach or CEO, it’s because those leaders introduced new rules – effective methods and principles that, when followed, will produce graduates, wins and successes.

The best rules are free and fair.

Organizations that fairly and equitably reward hard work and doing the right thing will produce a good outcome. Those that reward based on wrong principles will reap something else entirely.

Though not perfect, the American system has generally been the former – its social contracts were set up to reward, fairly and equitably, hard work and doing the right thing. But that is changing.

Examples given:

Consider GM. When a company is in bankruptcy proceedings, by law, the investors (particularly the bondholders) have first right to recover. But in the case of GM the government stepped in. The rules had changed. The bondholders lost most of their investment. And that lesson was not lost on GM’s investors and the investment community at large.

Consider BP. The Gulf oil spill was a tragedy. But what government did next was an even bigger tragedy that will have a longer lasting effect on the U.S. economy. Officials from BP were invited to the White House and came out $20 billion dollars lighter. The Constitution guarantees that government cannot take anyone’s property without due process. But the rules had changed. And that message was not lost on BP and companies around the world.

These are just two examples. I could go on.

By the roots:

The American social contracts have traditionally been based on the rule of law, not the whims of men. Americans have a Constitution and a Representative Republic, not a King. There is no ‘transformation of America’ we can undergo that will make us a better country, a better people or a better society.

These ‘changed rules’ have broken America’s social contracts. They are like weeds in the fertile soil of a fair and just society. If they are not pulled out by their roots, they will do what weeds do – destroy the garden.