What are Social Contracts?

Social contracts can be understood as the implicit, mutual bargaining over what citizens expect from the state, and what the state can legitimately demand of citizens in return. The World Bank has identified broken social contracts as causing development challenges in client countries and proposed solutions to help societies reshape their social contracts. Yet while some countries with dysfunctional social contracts are undergoing social contract transitions, other countries’ social contracts remain unmovable.

World Bank emphasizes the importance of social contracts to eliminate poverty and boost shared prosperity.

In the 2014 World Bank Group Goals, the World Bank calls for social contracts that prioritize the poor while creating the conditions for equitable growth.

This learning-oriented evaluation generates lessons from the World Bank’s experience using social contract diagnostics to help countries reshape their social contracts. It does this by:

  1. evaluating the quality and value added of social contract diagnostics;
  2. assessing how social contract diagnostics are translated into operations;
  3. identifying the risks and challenges of integrating social contract diagnostics into operations; and
  4. drawing lessons on how to overcome these challenges.

At the country level, this evaluation identified 21 Systematic Country Diagnostics (SCDs) that use a social contract framing to diagnose and explain complex development challenges such as entrenched inequalities, poor service delivery, weak institutions, and why decades of policy and institutional reforms promoted by external development actors could not fundamentally alter countries’ development paths.

Main Findings

Social contract diagnostics are useful analytical innovations with relevant operational implications, especially in countries where social contracts are in transition.

Diagnostics

  • This evaluation finds that social contract diagnostics add significant value to the World Bank’s work, provided they are carefully selected, executed, and disseminated. Such diagnostics help teams understand policy failures, local political dynamics, and intractable development challenges and contribute to building partnerships.
  • Well-executed social contract diagnostics share similar features: they were conducted by multidisciplinary teams with governance, social development, and political economy experts; they relied on nontraditional data sources, including barometer surveys and perception-based data; they analyzed historical social contract change, and identified social contract stakeholders involved in the bargaining and the power imbalances that lead to dysfunctional social contracts.
  • However, the World Bank misses opportunities to engage key counterparts when it does not disseminate social contract diagnostics.

Operational Implications

  • The World Bank’s ability to translate social contract diagnostics into operations depends on whether social contracts are in transition or static.
  • The 2015 Middle East and North Africa (MENA) strategy represents the World Bank’s most ambitious attempt to translate social contract diagnostics into country operations during a social contract transition. Anchoring the MENA strategy around social contract renewal created new policy reform opportunities and improved the World Bank portfolio’s coherence.
  • The World Bank has also shown agility in responding to emerging social contract opportunities outside MENA.
  • In countries where social contracts are static, the World Bank’s ability to align its lending portfolio with social contract diagnostics is limited. In these “status quo” countries, citizens tend to be disengaged, have low capacity to mobilize, and have low expectations of the state’s ability to deliver services and enhance citizens’ wellbeing. In these situations, the World Bank has yet to develop a concerted approach to ensure its lending does not exacerbate broken social contracts.

Tensions with the Business Model

The World Bank faces multiple challenges and constraints when helping countries renew their social contracts—challenges shared by other donors who use governance diagnostics to guide their operations.

  • First, social contract interventions are in tensions with the World Bank’s current engagement approach, which prioritizes interventions requested by borrowing central governments’ executive. In turn, social contract thinking must consider other parties to the contract besides the central government, such as state and nonstate actors, citizens and other societal forces.
  • Second, social contract transitions are long-term processes that do not fit into shorter-term country programs and lending instruments.
  • Third, engaging in social contract transitions poses risks to the World Bank’s reputation as a trustworthy government partner.
  • Fourth, staff with the skills to translate social contract thinking into operations are scarce, which is an obstacle to implementing social contract changes.

Lessons

Defining the World Bank’s role in social contract renewal, specific to each country’s social contract dynamics, can improve the World Bank’s coherence. This evaluation identifies three sets of conditions that the World Bank should take into account to gain traction on social contract issues.

These conditions include the following:

  • The presence or absence of a social contract renegotiation within the country.
  • The nature of the country’s social contract bargaining. This includes whether the social contract benefits the few or the many; whether it relies on corruption and clientelism; whether citizens and civil society can participate in the bargaining; whether the state is responsive to citizens’ social contract demands; and whether the state has the capacity and legitimacy to fulfill these demands.
  • The World Bank’s comparative advantages in specific social contract situations. This includes its positioning compared with other development partners and its reputation and social capital among citizens and civil society.

To derive more value from social contracts diagnostics within the constraints of the World Bank’s operating environment, the World Bank must think critically about the conditions under which a social contract diagnostic can effectively guide its country engagements. This also requires more focus on citizen engagement, building partnerships, and building staff’s social contract–related capabilities.