Abstract
This paper introduces the Social Contract Ratio (SCR) as a diagnostic measure of institutional moral capacity—the proportion of government expenditure devoted to human empowerment relative to institutional maintenance. Using cross-national fiscal data from the IMF (GFS), OECD (COFOG), and Eurostat, the study argues that prosperity depends less on institutional form than on moral equilibrium: the symmetry of reciprocity between citizens and the state. When SCR < 0.9, institutional spending crowds out human investment, weakening productivity and civic engagement. When SCR > 1.3, excessive social expenditure financed by debt produces a Generosity Trap that erodes fiscal sustainability. Within the equilibrium corridor (≈ 0.9–1.3), reciprocity and legitimacy reinforce one another, sustaining both institutional capacity and workforce participation. Comparative evidence across five regions (Europe–North America, Latin America, East Asia, MENA, and Sub-Saharan Africa) demonstrates how balanced fiscal structures yield stronger labor markets and more adaptive governance. The findings recast development as moral calibration—aligning what governments spend on people with what they expect from them. Integrating SCR analysis into policy diagnostics could enhance World Bank frameworks on institutional capacity, fiscal sustainability, and inclusive labor systems.
Details
Presentation Type
Paper Presentation in a Themed Session
Theme
KEYWORDS
SOCIAL CONTRACT, MORAL ECONOMY, INSTITUTIONAL CAPACITY, GOVERNANCE, RECIPROCITY, POSTCOLONIAL DEVELOPMENT
