How Productive is Social Policy?

In a speech to the 2008 ACOSS national conference, Deputy
Prime Minister Julia Gillard was on shrewd message:

For too many Australians, access to experiences and opportunities that
are fundamental to their wellbeing and dignity are simply not available. In a nation as prosperous as ours this is both morally and economically unacceptable… In fact we believe that fairness and prosperity are inseparable…[Our policy is] a new framework for national policy based on the powerful idea of social inclusion.

The ideal of social and economic integration is one to which few object, at least in public (what is moot is the kind of integration we’d accept). For social democrats "fairness" and "prosperity" are a passable shorthand; and ‘social inclusion’ an adequate policy framework. Clearly, though, these terms have to be unpacked and their practical applications spelled out, as there is an inherent tension between the two elements of the putative integration.

This is no better illustrated than by the pronouncements of Ms Gillard’s colleagues. Not the Prime Minister himself, who veers between micro-detail and hypo-Platonism, but two people directly involved with the government’s social inclusion agenda.

Writing in Eureka Street just after the 2007 election, the new Parliamentary Secretary for Social Inclusion and the Voluntary Sector, Senator Ursula Stephens, explained the focus of her

Labor has adopted social inclusion as an objective and organising principle of the nation’s social and economic policy. Social inclusion is about recognising that economic prosperity in and of itself is not enough: it is central to the work of government to make sure that this prosperity leaves no-one behind … Social inclusion seems to me to be about implementing social conscience in the work of government.

By contrast, Minister for Small Business Craig Emerson has proposed a "unifying political philosophy" for the Rudd Government (in a speech to Sydney Institute in June this year) which is captured in the
following sentences:

In our political philosophy the role of policy makers is to allow the
market to create prosperity and out of that prosperity to expand opportunity, not the welfare state … Traditional Labor values of prosperity, fairness and compassion fit well with supporting an open, competitive economy that rewards effort, risk-taking and entrepreneurship and where opportunity, not welfare, is available to all.

Dr Emerson calls this "market democracy". In it, welfare is framed by opportunity. The disadvantaged should not be subject to "the experiments of social engineers" but empowered to make their own way in the world:

Governments must not imprison the disadvantaged by subjugating them to the state, robbing them of self-esteem and condemning them to a life of dependency; governments must liberate them by providing opportunity for all in a truly fair society.

What prevents this open, competitive economy degenerating into a free-for-all is "the morality of self-interest". Emerson invokes Adam Smith ("a true humanitarian") to stress the need for institutional, civil and cultural constraints on market behaviour and the dangers of conspiracy among business groups and between them and governments. To ensure opportunity for all, government must intervene at a number of points and in a number of ways: for instance, in education, health and competition policy. Even as it moves decisively away from "welfarism", this is not a prescription for complete laissez-faire; but, as British Prime Minister Blair put it (and as Emerson acknowledges), a "Third Way".

Let us take Senator Stephens’ word for it that social inclusion is "an objective and organising principle of the nation’s social and economic policy". On the face of it, her own "implementing social conscience in the work of government" and Dr Emerson’s "morality of self-interest" are quite distinct means of embodying this principle. The only way in which they can be made compatible is to suppose that social conscience is a function of the morality of self-interest – rather than being independently grounded – and that its intuitions are always therefore aligned with whatever results from an open market competition. This is necessarily the case as economic activity itself is constrained by the morality of self-interest. Which is itself a function of social conscience, which in turn is…

Circular reasoning is one thing. But the only alternative – to propose, in effect, that an independently grounded social conscience and the fruits of competitive economics are always, contingently, consistent – verges on the Panglossian.

Ms Gillard herself leaves little doubt that she is far closer to Dr Emerson than Dr Stephens. While always stressing the congruence of social and economic interests, she is at pains to reassure us that she has her priorities right. As she put it to the Australian Industry Group, when referring to her mega-ministry of Education, Employment, Social Inclusion and Workplace Relations: ‘I’ll be happy to be referred to simply as "the Minister for Productivity"’.

Government practice to date bears Ms Gillard out. The only workforce participation that cuts the mustard is employment in the market economy. All training, an official discussion paper noted, "must not be for its own sake, but must address the needs of employers". Employment services reform – notably with regard to people with disabilities and mental health problems – is premised entirely on the objective of making as many people as possible ‘productive’ in the narrowest sense. (Or in the sense, perhaps, that most financial services have shown themselves to be industrious wealth creators?)

For all the concern about rental and mortgage stress, and the initiatives on homelessness and rental affordability, government policy continues to focus on housing as real estate rather than a home; as a means of speculative and illusory accumulation rather than a merit good. No commitment to social inclusion is likely to undermine the provisions of negative gearing and capital gains tax that have stoked the housing bubble and its consequent inequalities of opportunity.

Even early childhood development policy has been explicitly premised on leveraging children for future economic gain. For Dr Emerson, "Expanding opportunity in a market democracy starts with wiring the brains of infants through the nurturing care and attention of loving parents", with state intervention where necessary. And according to Ms Gillard: "[W]e can look at the education system and say, "What can we do for national productivity for tomorrow?""

There are two reasons this emphasis should bother us. First, it is based on an exceptionally tendentious picture of the country’s debt-fuelled prosperity and the likelihood of this continuing. One does not have to be a professional pessimist or deep ecologist to have doubts about the "Go for Growth!" strategy that, pace Senator Stephens, Labor evidently shares with the Coalition.

But secondly, the very instability of the economy, both national and international, might give rise to the hope that something like Labor’s social inclusion agenda could set off a genuine public debate about the wisdom of giving priority to (a very limited conception of) the economic over the social. While the rhetoric so far has demonstrated rather better intentions than analysis or argument, it nonetheless provides a medium through which alternative values and policy priorities may be articulated: on matters like public goods and ownership, intergenerational responsibilities and, naturally, the fairness of the
tax-transfer system.

Given the dismal record of Third Way politics almost everywhere they have been tried, it is evident that new ideas on such topics are overdue. "New" not in that they have yet to be formed – on the contrary, there are numerous pertinent discussions well under way – but as part of the mainstream government conversation. The possibility is there and the Prime Minister’s penchant for inquiries does throw up the occasional genuine opportunity, like the Henry review. A focus on social inclusion may well serve as more than just a hook by which to change the established terms of reference.

We may try, in other words, to ensure Ursula Stephens’ approach is the one that prevails, and that even Craig Emerson might realise that all is currently not for the best in this best of all possible social democracies.