This article argues that market-based reforms reduce traditional conceptualizations of the social contract between citizens and government to a social subcontract between citizens, government, and private sector interests. Market based reforms include changes that reduce the scope and influence of governmental agencies (e.g. privatization and downsizing) or improve agency administration itself with the creation of market-like incentives.[1] 

A social contract framework is used as a heuristic device to examine the historical development of public administration, the role of government in society, and the citizen-government relationship of the past century. 

This analysis demonstrated three significant trends:

1)      a growing government obligations sphere relative to the private market sphere,

2)      a growing administrative sphere, and

3)      the movement of the administrative sphere into the market sphere.

The authors conclude that although reforms of earlier periods affected the size and the scope of the administrative apparatus, these changes did not fundamentally change the relationship between citizens and government. However, they did find that the relationship is considerably changed under market-based reforms. 

Considering these trends, they posit three fundamental implications for the citizen-government relationship and the social contract, which form the conditions that convert the traditional social contract into a social subcontract:

1) Accountability arrangements are altered. 

The legal contracts between the government and the private sector entity will, to some degree, provide the accountability linkages to the citizens.  Moreover, with the blurring of the government and market obligations, the citizen-government relationship is also blurred. The social subcontract (characterized by the intrusion of the administrative apparatus into the market) makes it more difficult for citizens to monitor their government or even know where responsibility lies.  Citizens will only have power as consumers.

2) The government paradoxically co-opts the market by extending its administrative apparatus, and thus its scope, into the private sphere.  

While the formal institutions of government may remain constant or decrease in size, the increased number of informal institutions involved with public service delivery will only extend the scope of government oversight of the market.

3) The legitimacy of public administration in particular, and government in   general, may be threatened because of these changes.

Without the extension of the administrative apparatus the accountability linkages would be completely diminished and the social contract and citizen-government relationship would undoubtedly suffer. Are the gains from economic efficiency worth the potential costs of lost government accountability and legitimacy?

Social contract model terminology:

Government obligations sphere: Based on the social contract, the government provides services and goods for people that would otherwise be difficult for people, acting as individuals, to provide for themselves. Ethical obligations include upholding less formal societal rules, which are largely determined by citizens moral standards, common law, and historical precedent.

Private market sphere: A system where the allocation of resources [is] determined by individual decisions between consumers and producers, without any central direction.

Administrative obligations sphere: Carries out government obligations through the execution and implementation of laws and rules.

Citizen obligations: Legal obligations of citizenship are the rights and obligations that are bestowed on citizens through legal statues and constitutions. Ethical obligations derive from broader political, social, and economic obligations to community, which are influenced by community norms, values, and culture.

Accountability linkages:  Basic political process, checks and balances, public interest groups, adherence to rules and ethical codes, etc.

Market transactions: Private contract-based provision of goods and services that emphasizes the role of the citizen as a consumer.