Reform without principles of empowerment will never lead to meaningful social change

Opinion Article

2012 November, 9

Adam Creighton's commentary in this newspaper ("Ideology-based policy is what this nation needs", Nov 9) is a cracking, if somewhat strange, highlight of the week, given the reascendancy of contrary ideology with President Barack Obama's victory in the US elections on Tuesday. 

Associated with the country's leading free market think tank, The Centre for Independent Studies, a former writer for The Economist and senior economics adviser to Tony Abbott, Creighton is the most interesting of the market liberal commentators. 

His writing is whip-smart and bracing, an important provocation, whatever one thinks of his ideological view. 

Creighton articulates my own umbrage with the paucity of principles shaping the policy architecture of Australia's political leaders and parties. The economic and social policy structures of the country are the product of a political and policy history of accretion and evolution, of ideological spasms and pragmatism. Liberalism mixed in with socialism mixed in with conservatism. Reform ramshackled with sclerosis. 

Political liberals built middle-class welfare, democratic socialists sold off public assets and deregulated. Then the other way around. The resulting structure is quite a farrago. If we are concerned with reform, it is time to go back to first principles. Creighton wrote: "Calls for more 'evidence-based policy' in Australia are routine. For former prime minister Kevin Rudd, under whose watch very little reform occurred, it was 'at the heart of being a reformist government'. But more 'ideology-based policy' is what this country needs. Evidence is useless without underlying principles to guide what to do with it." 

Amen to the last sentence.

I do not believe we will overcome poverty and social misery if we do not get thinking about the "underlying principles" right. 

Unlike some market liberals, I do not believe the poor will always be with us. Poverty in real terms, as opposed to relative, is extant in our country and unnecessary. The extent of social misery among the lowest black and white Australians is wrong, and must and can be put right. 

We will continue to fail in our endeavours to secure a better Australia if we do not realise the policy constructions around problems of poverty and disadvantage do not work. All we have done is manage and ameliorate the problems, within some limit of tolerance. 

The arguments of the market liberals, I would suggest, are a useful starting point for re-architecting the reform. 

The reform of the welfare state might be thought of in two parts. The first part concerns what is sometimes called the classical welfare state, the state that takes our taxes and provides an array of public services and facilities that are our common wealth. I accept the social democratic argument that the classical welfare state has served us more or less well. The policy question is the extent to which it will bloat, and whether the social ends we want government to secure may be better achieved through liberal means. Could we achieve the same public ends through private means? 

Policy reforms in this country have gone some way towards finding liberal means to social ends. I have two thoughts on this. First, we have far from exhausted policy innovation in this area. Second, policymakers should distinguish between those with capabilities and the vulnerable who are still on the road to developing capabilities. Government should retreat from universal provisioning to the capable middle classes and instead ensure their taxation treatment leaves them able to choose their own solutions to social ends. 

Australian governments have created middle-class welfare by expanding social provisioning that should really be confined to those who do not yet have the capabilities to make their own choices. Let the capable classes keep more of their income so they can choose their own solutions. A two-tiered approach to social provisioning across appropriate policy areas need not be inconsistent with the social end we seek: solutions for everyone. 

The second part of reform concerns what we now call passive welfare. It is in these stony fields that I and my colleagues in Cape York Peninsula have been ploughing. We believe that poverty and social misery can be overcome.

Our belief will be delusional if reforms do not proceed from clear first principles. We have identified three dimensions to the passive welfare policy challenge.

The first is the corrosive effect of unconditional support. In the Cape York Welfare Reform, we introduced the principle of conditional welfare: that there are certain basic obligations recipients have in return for social support. Minister for Indigenous Affairs Jenny Macklin has taken this principle and expanded it to the mainstream. Macklin has been courageous and principled in her leadership in this.

The second dimension concerns the disincentive effect of welfare on recipients taking economic and social opportunities. This is not just a matter of people failing to take work, but extends to failing to take advantage of opportunities to build their skills to take available work.

Governments have been grappling with the welfare to work challenge for decades, with the first serious reforms in Paul Keating's Working Nation. However, like elsewhere throughout the Western world, we are far from having solved this challenge.

While conditional welfare reforms have progressed in Cape York, we have made no progress with this second dimension. Policies that pull and push people off welfare require universal reform, and there is still little appetite for that in the wider community.

The third dimension concerns government service provisioning, which reinforces passivity. Much of this intervention by government services displaces responsibility and creates dependency.

Families can be usefully supported in four basic areas: earning and managing their income; taking charge of the education of their children; attending to the health of family members; and having real skin and pride in their family home. It is these building blocks that vulnerable and less capable families need supported. But support must be premised on personal responsibility.

We have made good progress in our Cape York Welfare Reforms working out how to support vulnerable families to rebuild and take charge of their children's futures. There has been good progress with policy, and program design and implementation. Much remains to be done but a model of genuine family empowerment has emerged from our reform work. 

The principle underpinning our reform model is that the self-interest of families desiring a better life for themselves and their children is the strongest driver of development and the road out of poverty.

Reform without principles of empowerment will never lead to meaningful social change