Risk, Welfare and Work
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In Risk, Welfare and Work, editors Greg Marston, Jeremy Moss and John Quiggin bring together contributors from diverse disciplines to explore these questions and examine shifting risk in historical and contemporary Australia—including implications for groups such as young people and Aboriginal Australians—and views of Britain and the United States.
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Risk, Welfare and Work - Melbourne University Publishing Ltd
Risk, Welfare and Work
mup social justice series
Series Editor
Dr Jeremy Moss
The Social Justice Series (SJS), issued by MUP in collaboration
with Melbourne University’s Social Justice Initiative, aims
to contribute to public and scholarly debate by providing
critical insights into contemporary issues concerning social justice.
The series also aims to highlight the value of interdisciplinary
approaches to problems of social justice.
Risk, Welfare and Work
Edited by Greg Marston, Jeremy Moss and John Quiggin
Contents
Introduction: Shifting Risk?
Greg Marston, Jeremy Moss and John Quiggin
Part 1: Historical and International Developments
1. Risk Shifts in Australia: Implications of the Financial Crisis
John Quiggin
2. Welfare Regimes and Risky Speculations
John Murphy
3. Demographic Change in Australia and Its Social Consequences
Peter McDonald
4. Risk and US Social Policy: The Road from the New Deal to the Bad Deal
Howard Karger
5. Welfare Reform and Provision for Old Age in Australia and Britain
Myra Hamilton
Part 2: Critical Reflections on Risk, Responsibility and Autonomy
6. Autonomy: Individualistic or Social and Relational
Catriona Mackenzie
7. Two Conceptions of Risk and Responsibility
Jeremy Moss
Part 3: Consequences of Individualising Risk: Work, Welfare and Education
8. ‘The great risk shift at work in Australia?’
Barbara Pocock
9. Tertiary Education as Insurance against Risk: What Are the Outcomes? For Whom?
Leesa Wheelahan
10. Very Risky Business: The Quest to Normalise Remote-living Aboriginal People
Jon Altman and Melinda Hinkson
11. Risk Management and the Human Services: A Case Study of Risk Transfer as Risk Management
Catherine McDonald
Part 4: Managing Risk More Effectively and Equitably
12. Policy Design Issues for Risk Management: Adverse Selection and Moral Hazard in the Context of Income Contingent Loans
Bruce Chapman
13. New Social and Economic Risks
Brian Howe
14. Working It Out: Young People and New Risks in the Labour Market
Suzette Fox
Contributors
Index
INTRODUCTION
Shifting Risk?
Greg Marston, Jeremy Moss and John Quiggin
Over the last twenty years, an expanding social science and popular literature has examined social institutions in terms of the way in which they manage and allocate various kinds of risks. Government funded unemployment benefits and public health systems that developed in the 20th Century, for example, have been seen as ways of sharing or pooling risks that may affect members of society over the course of their lifetime. There is also considerable discussion in contemporary social theorising and in social commentary about a profound change in these institutional arrangements, in particular the individualisation of collective responsibility for managing risks and insecurities.¹ While there are many institutions and practices where the discussion of risk has played a role, none perhaps better exhibits the impact of risk analysis than that of the welfare state.
Changes in the treatment of risk have played an important role in setting the parameters for a series of changes to welfare systems associated with the resurgence of ideas variously referred to as market liberalism, neo-liberalism and economic rationalism. A central feature of this process has been a reallocation of the risk of disadvantage (of the costs of unemployment, health and child rearing) from the state to the individual, household or charities. This transfer of the burden of risk is what has been called the ‘great risk shift’.²
The central argument in favour of such a transfer is that individuals are best qualified to judge their own circumstances and should, therefore, be free to choose their own risk management options. This might mean providing a mechanism for citizens to choose whether to take out private health insurance or remain within the public health system. In one sense, this is an intuitively plausible argument; the importance of exercising autonomy over one’s life is widely recognised as having intrinsic value. However, critics of the market liberal approach have argued that, in practice, providing incentives for private insurance, for example, is really just a way of transferring risk and costs to individual workers and households.
Some writers³ have seen this ‘great risk shift’ as heralding a fundamental transformation of society. Others⁴ have pointed to the resilience of the welfare state, noting the persistence of most of the main institutions developed during the social-democratic era (public health and education systems, pensions and other forms of income support and so on) and the absence of any sustained decline in the ratio of public expenditure to national income. There are other scholars who argue that the distinctions between past and present offer over-unified accounts of a stable and settled past, against which can be set a view of the present as dynamic, mobile and fluid.⁵ Whether or not this shift has had as large a negative impact as these writers make out, it is nonetheless true that a trend of shifting risk from traditional institutions to non-state agents and agencies has resulted in a huge change to people’s experience of welfare and how the welfare system is understood.
This shifting of risk through a mix of social and economic policies raises important moral and political questions for policy makers, the public and the social sciences. Should we design welfare states to provide sufficient financial security so that individuals are supported to take economic and social risks? What risks are generated by transferring responsibility for welfare and wellbeing to individuals and non-state providers? What are the costs and benefits of turning citizens into entrepreneurial risk managers?
This book engages with these questions on both a theoretical and empirical level by interpreting and evaluating the role that risk plays in institutional change in the Australian welfare state. Our aim is to foster interdisciplinary engagement and debate among the social scientific and policy making communities about the dynamics and consequences of economic and social risk, as well as to introduce a more nuanced tone to the populist political discussion on risk and responsibility.
What is noticeable for this discussion is the necessity of an interdisciplinary approach to these questions. The shifting of risk that is taking place requires both an understanding of the interrelationship of different disciplines and institutional settings as well as the policy context. In introducing this book we provide some brief comments on the debates about risk and responsibility in the social politics of welfare and we provide an overview of the book itself.
Risk and the welfare state
Risk talk is not new. Welfare provision over past centuries has always been, at least to a certain extent, about the management of risks. However, the social politics concerning the struggle over public and private responsibility for managing risk have certainly changed over time, as have the human and non-human technologies governing risk. Knowledge about the risks we face collectively and individually has grown exponentially with the development of scientific inquiry and the availability of information and communication technologies that assess and calculate risks of various kinds.
Scientific knowledge and its relationship with risk management can be very contentious. A government’s decision to add fluoride to the drinking water of a given population, for example, is based on scientific evidence about the public health benefits. At the same time, there is counter scientific evidence that suggests adding fluoride to the drinking water does more harm than good. Add to this the frequent protests from individual citizens that they should have a choice about whether they should be drinking fluoridated water and we can see that risk management decisions become increasingly fraught in light of the increasing availability of contested scientific knowledge.
The moral dimension of risk is also in a constant state of flux. Risk taking by individuals and organisations can be publicly rewarded in certain times and spaces, and yet these same practices can be decried when the risk taking behaviour of a few negatively affects many others. The Global Financial Crisis is a case in point. A popular explanation of the financial crisis is that irresponsible lending and the failure of key US investment banks caused a liquidity crisis and loss of confidence in financial markets. In an essay for the December 2008 edition of the Monthly magazine, Judith Brett⁶ reflects on what we can learn about the nature of risk from the global financial crisis:
The big lesson of the past few months of financial crises is that government is the ultimate risk manager. When all else fails, be it the weather, our marriage, the banks, or even our child care provider, we turn to the state. Natural disaster relief is a regular feature of Australian politics, income support for single parents is now well entrenched and many people have always thought that child care was an essential service best provided by governments, but it is a long time since any of us have thought about whether our money is safe in the bank.
Judith Brett’s assessment of government as the ‘ultimate risk manager’ echoes the thesis developed by the political economist David Moss⁷ in When All Else Fails, which deals with these issues in an American context. The thesis of Moss’s book is that there is a cultural disjuncture between, on the one hand, the image of American politics as a laissez faire celebration of freedom from government interference and on the other hand, the reality—where governments have become increasingly involved in the regulation of social and economic life in the United States.
What is also apparent is that a shifting of risk from state institutions to non-state agents often has dramatic consequences for individuals. Welfare policies that require more activity from recipients often lead to increasing numbers of the disadvantaged with reduced benefits. This raises important questions about whether this type of shifting of risk can be morally justified.
Risk regulation by governments in western countries began with finance and trade, but with external shocks (such as economic depression and world war) spread to the population at large. It is the twentieth century where the collectivisation of economic risk comes of age. Convinced by the principles of Keynesian economics, governments across the western world sought to demand-manage the economy through policies that would increase aggregate demand, which would in turn increase economic activity and reduce unemployment. These sets of institutional arrangements were dependent on centralised fiscal policy, and protectionist policies in the area of trade and immigration.
The guiding assumptions in the post-war period about the role of governments in regulating risk came under fire during the mid 1970s as a result of rising unemployment and inflation and the subsequent loss of faith in Keynesian prescriptions for economic and social security. Since the 1970s economic policy turned away from demand side job creation and welfare state expansion. From the late 1970s, mass unemployment started to be more or less accepted as ‘fighting inflation first’ became the mantra of economic governance in countries such as the United States, the United Kingdom and Australia.
The significance of this paradigm change must not be underestimated in terms of its impact on economic and social policy. The Australian economist, William Mitchell⁸ argues that in less than thirty years in Australia the ‘full employment vision’ had been transformed into the ‘full employability model’. In this model, risk is understood as something that has undergone an historical transformation, from something that has been more or less collectively managed through the institutional arrangements of state responsibility and regulation to a system where managing the social and economic risks of life is devolved to individuals, households and civil society. In practice, Australia has always had a mixed economy of welfare where responsibility for social protection varies across different policy fields and over time.
The narrative about collective responsibility to individual risk management is only one of the meanings that risk has in social policy. There are other discourses of risk, each of which operates at a different level of abstraction from the social reality it seeks to interpret or amplify. While Hacker’s description of the Great Risk Shift and Moss’s account of historical change are embedded in national contexts, the contribution of Ulrich Beck and Anthony Giddens on the conditions of the ‘risk society’ is more ambitious in its scope and more optimistic in its assessment of how individuals manage risk in late modernity. While Beck acknowledges that more social and economic risks accumulate for those at the bottom end of the income scale, he is also keen to promote the idea that there is a certain form of freedom that can be found in individualisation. For Beck⁹, individualisation is different to individualism associated with neo-liberal social policy. Individualisation is about reflexivity. In a similar vein, the sociologist Anthony Giddens¹⁰ believes that the social institutions of family, work and education offer a multiplicity of identity projects that are now less prescribed by tradition. According to Giddens, this state of ‘reflexive modernity’ opens up greater possibilities for individual citizens to be the author of their own biography. While some of this interpretation appears to be an accurate reflection of social change, particularly in relation to the relationship between knowledge and self-guided action, others have criticised both Beck and Giddens for failing to take sufficient account of social class and the nation state.¹¹
In contrast to Beck and Gidden’s sweeping account of risk and the welfare state are the micro-relations of risk management, which focus in on the level of citizen-client management in specific contexts through risk profiling and risk indicators. In areas such as child protection, health and unemployment policy there are a multitude of risk management tools being applied to ascertain the inherent ‘riskiness’ of individuals, as either a harm to themselves or a harm to society. In these spaces, categories of risk are constructed on the basis of statistics and observation, facilitated by the use of Information and Communication Technologies (ICTs).
The relationship between human and non-human actors in the management of perceived and real risk is an area that is receiving some attention in the social sciences. A critical dimension to research into these practices has been introduced by scholars using governmentality as a theoretical framework to highlight how citizens are being constituted and governed in these spaces.¹² Inspired by Foucault, Mitchell Dean’s¹³ work on ‘administering the unemployed citizen’ highlights how different forms of social scientific knowledge constitute the unemployed subject. This line of research is able to show how social problems are being turned into private and therapeutic concerns.
In some cases, these risk categories may themselves produce unintended negative consequences for the target population. As Bessant, Hill and Watts¹⁴ argue, the use of an ‘at risk’ discourse in empirical social scientific research can contribute to a stigmatisation of certain populations. Matters like family status, heredity, socio-economic circumstances, psychological dispositions are treated as ‘risk factors’ and are said to ‘cause’ problems, now called ‘risks’—like ‘crime’, suicide, ‘delinquency’, unemployment, drug use, sexual activity, violence, school-based activities, gang membership, computer hacking and graffiti and so forth. The elucidation of these kinds of ‘risk factors’ in turn ‘explain’ the persistence of populations at risk—like ‘youth at risk’. Bessant, Hill and Watts¹⁵ argue that this talk about ‘risk’ and the way it sanctions the use of numbers to convey an impression of precision, objectivity and credibility, is at best highly ambiguous, and at worst highly problematic.
What these different discourses of risk highlight is that we need to be critically reflexive about the categories we use to understand transformations in the welfare state. While the concept of risk has utility in thinking about the shifting boundaries between public and private responsibility for welfare and wellbeing, it becomes more contentious when used as a grand narrative to describe new relations of power, authority and autonomy in modern society. Similarly, the use of risk factors in social research can create a form of probabilistic thinking about the causes and consequences of social problems, which can end up resembling the ‘sociology of deviance’ that was popular as a mode of social inquiry in the 1960s. As the contributors to this volume illustrate in the chapters that follow, risk talk has many different variants, with different moralities and modalities. Contributors have all taken a critical stance towards the concept of risk, but at the same time they are not seeking to prove or disprove its conceptual or empirical worth.
Organisation of the book
The book is divided into four sections. The first section considers historical and international comparisons on risk discourse and welfare states. The chapters in this section provide a context for the more specific case studies that appear later in the book. These chapters also serve the purpose of unsettling the taken for granted assumptions about the perceived newness of risk talk and the inevitably of a linear risk transfer from the state to citizen and households. One of the themes that is brought to light in this section is that the risk shift metaphor can sometimes downplay the friction between dominant policy agendas and citizen resistance.
The second section of the book takes a step back from history and political economy and considers the philosophical principles at stake in debates about risk, individualism and society. Both of the chapters in this section ask probing questions about the sort of citizen that is constructed in debates about risk, autonomy and welfare. Questions are raised about the appropriate mix of obligations, rights and responsibilities in social assistance, particularly as this assistance is extended to different population groups with different expectations about what is expected in return. Here we are reminded that social justice must be concerned with both the distribution of benefits and burdens across society. The myth of rugged individualism is also taken to task. The argument is persuasively made that the rhetoric of maximising choice in the name of individual autonomy has not only provided a justification for the individualisation of risk and responsibility, but has also lead to a de-emphasis on the social factors that constrain choice.
These philosophical themes are revisited in the third section of the book in relation to specific case studies covering some major policy domains where these issues are being played out. Higher education policy, human services management, mainstreaming economic risk for Indigenous communities and labour market reforms are all covered in a critical and engaging manner by the contributors. In each case, the authors are making the point that the adoption of a risk framework has been problematic for different constituents, including clients, citizens, community organisations and workers. In each case the reader is reminded that the policy implementation has very different outcomes than what is espoused in political statements about the benefits of maximising individual choice. One of the conclusions to be drawn from the chapters in this section is that risk management frameworks can lead to a legitimation and ‘naturalisation’ of structural inequalities.
In contrast, the fourth and final section of the book takes a more optimistic tone in terms of the proliferation of risks and the role of the welfare state. Here concrete policy proposals for managing risks are considered in more detail. Time accounts and learning accounts are discussed in terms of their value for managing risks over the life course. The value of extending income contingent loans to other social policy domains beyond the higher education sector in Australia is carefully considered. The value of these discussions is that it reminds the reader that there are no shortages of good ideas for managing life transitions, some of which have been found to be very successful policy instruments in other national contexts. The final chapter in the volume considers the way in which young people are embracing uncertainty, while holding onto the importance of economic security. The arguments covered in this final chapter neatly sum up the paradox that lies at the heart of the concept of risk. Arguably, in order for citizens to willingly take risks requires a degree of ontological security, which in itself is furnished by economic, cultural and social security. Perhaps in the final analysis, risk and security are two sides of the same coin.
Clearly ‘risk talk’ is going to be part of the social and political discourse well into the 21st Century. This book provides a space to think critically about how this multidimensional concept is constituted and deployed by social scientists, politicians and policy makers and the likely effects on citizen-state relations. We are confident that readers will find something of both intellectual and practical value from the thoughtful and original papers that are brought together in this volume.
Bibliography
Beck, Ulrich and Beck-Gernsheim, Elisabeth, Individualization: Institutionalized Individualism and its Social and Political Consequences, Sage Publications, London, 2002.
Beck, Ulrich, Risk Society: Towards a New Modernity, Sage Publications, London, 1992.
Bessant, Judith, Hil, Richard and Watts, Rob, Discovering Risk: Social Research and Policy Making, Peter Lang, New York, 2003.
Brett, Judith, Comment, The Monthly Magazine, December 2008 – January 2009 edition, 2009, p. 10.
Clark, John and Janet Fink, ‘Unsettled attachments: National identity, citizenship and welfare’ in Wim van Oorschot, Michael Opielka and Birgit Pfau-Effinger (eds), Culture and the Welfare State: Values and Social Policy in Comparative Perspective, Edward Elgar Publishing, Cheltenham, 2008.
Dean, Mitchell, ‘Administering asceticism: Reworking the ethical life of the unemployed citizen’ in Mitchell Dean and Barry Hindess (eds), Governing Australia: Studies in Contemporary Rationalities of Government, Cambridge University Press, Cambridge, 1988, pp. 87–107.
Garrett, Michael, ‘The trouble with harry: Why the New Agenda of Life Politics
fails to convince’, British Journal of Social Work, vol. 33, 2003, pp. 381–397.
Giddens, Anthony, Modernity and Self-Identity: Self and Society in the Late Modern Age, Cambridge, England, Polity Press, 1991.
Hacker, Jacob, The Great Risk Shift: The Assault on American Jobs, Families, Health Care, and Retirement, Oxford University Press, New York, 2006.
Henman, Paul, Governing Electronically: E-Government and the Reconfiguration of Public Administration, Policy and Power, Palgrave, Basingstoke, 2010.
Marston, Greg and McDonald, Catherine, ‘Workfare as welfare: Governing unemployment in the advanced liberal state’, Critical Social Policy, vol. 25, no. 3, 2005, pp. 374–401.
Mitchell, William, Dangerous Currents Flowing Against Full Employment, Newcastle, NSW, The University of Newcastle, 2002.
Moss, David, When All Else Fails: Government as the Ultimate Risk Manager, Harvard University Press, Cambridge, 2004.
Pierson, Paul (ed), The New Politics of the Welfare State, Oxford University Press, New York, 2001.
Notes
1 Beck, Risk Society; Beck and Beck-Gernsheim, Individualization.
2 Hacker, The Great Risk Shift.
3 Beck, Risk Society; Hacker, The Great Risk Shift.
4 Pierson, The New Politics of the Welfare State.
5 Clarke and Fink, ‘Unsettled attachments’.
6 Brett, Comment, p. 10.
7 Moss, When All Else Fails.
8 Mitchell, Dangerous Currents Flowing against Full Employment.
9 Beck, Risk Society.
10 Giddens, Modernity and Self-Identity.
11 Garrett, ‘The trouble with harry’.
12 Marston and McDonald, ‘Workfare as welfare’; Henman, Governing Electronically.
13 Dean, ‘Administering asceticism’.
14 Bessant, Hill and Watts, Discovering Risk.
15 Bessant, Hill and Watts, Discovering Risk.
Part 1
Historical and International Developments
1
Risk Shifts in Australia: Implications of the Financial Crisis
John Quiggin
Introduction
‘Risk’ has become a central theme in 21st-century policy thinking. In particular, there has been considerable discussion of the ‘Great Risk Shift’, that is, the process by which the burden of risk has been shifted away from governments and employers and onto workers and households. The financial crisis that began in 2007 has fundamentally transformed the problem of social and economic risk management. The outcomes remain hard to discern, but the central ideas of economic liberalism, dominant since the mid-1970s have clearly failed.
This chapter begins with a brief discussion of theoretical views of risk and inequality, a historical survey of the role of government as a risk manager, and consideration of the revival of economic liberalism since the 1970s. The next section of the chapter covers the same issues with a detailed focus on Australia. Finally, the implications of the financial crisis are considered.
Background
Theory
Changes in theoretical understanding of risk and uncertainty have had important implications for our understanding of social justice and the role of government. The development of expected utility theory by von Neumann and Morgenstern¹, along with models of subjective probability² made it possible to undertake formal analysis of risky choices, considered as acts yielding different outcomes in different possible states of nature.
There is a natural analogy between risky distributions of income or goods over possible states of nature and unequal distributions of income or goods between individuals. Harsanyi³ treats the two situations as being part of the same problem and derives (expected) utilitarianism as the optimal social response. Rawls⁴, using the device of a ‘veil of ignorance’, where individuals choose social structures without knowing their own social position, derives the ‘difference principle’ as the basis of his theory of justice.
Rawls’ difference principle, in which social structures are compared on the basis of the welfare they allocate to the worst-off members of society was developed as an alternative to utilitarianism. However, as in Harsanyi’s analysis, Rawls’ conclusions about the justice of a social structure are derived from consideration of individual choices under uncertainty. Ebert⁵ observes that, in place of expected utility, Rawls’ model of choice under uncertainty may be interpreted as a form of rank-dependent utility⁶ in which a high weight is placed on the worst possible outcome.
Moving from abstract political philosophy to more immediate policy choices, the use of formal risk analysis to evaluate alternative policy choices has become increasingly important, both for benefit-cost evaluation of particular public policy projects and for evaluation of the overall performance of public policy.
More recently, the limits of formal risk analysis have been the subject of increasing attention. A central point in this analysis has been the observation, reflected in Donald Rumsfeld’s famous remark about ‘unknown unknowns’ that we can never be aware of all possible risks. Both popular works such as Taleb’s The Black Swan and formal decision-theoretic analyses such as those of Halpern and Rego and of Grant and Quiggin, have addressed the problem of managing risk in the presence of unforeseen contingencies. ⁷
The problem of representing unforeseen contingencies is a challenging one, and at this stage the literature has produced few firm conclusions. Nevertheless, it seems reasonable to conclude that decision makers who (correctly, in most cases) believe that there exist possibilities they have not considered, will employ risk-reducing heuristics such as the Precautionary Principle and will search for policies that are robust to violations of the model on which they are based. In the context of public policy, this goal might be promoted by retaining some discretion to respond to unforeseen contingencies rather than seeking to plan in advance for all possible risks.
The role of the state
The interpretation of the welfare state in terms of risk and uncertainty may be illustrated by considering some of its core functions. For some of these functions, such as various forms of social insurance, the risk management function has always been emphasised. However, concern with risk has traditionally been a subsidiary theme.
For instance, the public provision of retirement income and of services like health or education have commonly been justified with reference to notions of redistribution, public goods and the provision of basic needs. However, these interventions may equally be supported in terms of risk management. Giddens observes:
the welfare state, whose development can be traced back to the Elizabethan poor laws in England, is essentially a risk management system. It is designed to protect against hazards that were once treated as at the disposition of the gods —sickness, disablement, job loss and old age.⁸
A risk-based analysis may be extended to encompass more general programs of income redistribution. In a risk-based view, redistribution may be seen as providing insurance against a particular kind of risk, namely the risk of being born poor, socially dislocated and without access to human and social capital.
Moss surveys two centuries of American history, in which he presents the state as ‘the ultimate risk manager’.⁹ Moss distinguishes three phases of public risk management in the United States. Although the United States is atypical in important respects, Moss’s three-phase model provides a useful framework for discussion.
Moss’s first phase, ‘security for business’, encompasses innovations such as limited liability and bankruptcy laws, introduced in the period before 1900. Moss’s second phase, ‘security for workers’, was produced by the shift from an economy dominated by agricultural smallholdings to a manufacturing-based economy in which most households depended on wage employment. Historically the phase includes progressive initiatives such as workers’ compensation and the core programs of the New Deal like unemployment insurance and social security.
The third phase, ‘security for all’, began after World War II and includes such diverse initiatives as consumer protection laws, environmental protection and public disaster relief. These may be seen as responses to the ‘risk society’.¹⁰ Risks of environmental degradation and natural disaster are inherently social in their nature, and the success or failure of a society in responding to these risks is a measure of the capacity and responsiveness of its government.
The great risk shift
In the last quarter of the twentieth century, there was a reaction against the welfare state, associated with the movements variously known as ‘Thatcherism’ in the United Kingdom, ‘Reaganism’ in the United States, ‘economic rationalism’ in Australia and the ‘Washington consensus’ in developing countries. Since most of these terms have (or have acquired) pejorative connotations, I will use the more neutral description of ‘economic liberalism’.
Economic liberals criticised the welfare state as a costly, inefficient and ultimately inequitable drag on economic performance. One influential way of framing this critique was the claim that by socialising the risks faced by individuals and households, the welfare state necessarily reduced incentives to pursue risky opportunities. Hence, it was argued that reductions in welfare benefits would reduce welfare dependence and create a more enterprising society.
Economic liberalism affected not only the explicit institutions of the welfare state like social welfare benefits, but also the implicit contracts between workers and employers, under which employers would seek to preserve jobs, except in circumstances where the viability of their business was threatened, and to reward the loyalty of long-term employees through the maintenance of career paths. From the 1980s onwards, businesses routinely dismissed employees in large numbers, not as a last resort, but as a preferred method of making already substantial profits even larger.
The rise of economic liberalism was driven by, and helped to drive, a massive expansion in the size, scope and international integration of financial markets, which began when the economic crises of the early 1970s derailed the system of fixed exchange rates and Keynesian macroeconomic management established at the Bretton Woods conference in 1944. As financial markets became more complex and sophisticated, the view that risk was best managed through financial transactions rather than through social insurance became dominant. It was widely argued that the transformations of economic and social structures associated with the increased importance of risk rendered social democracy obsolete. It would inevitably be replaced, it was argued, by the emergence of a new global turbo-capitalism.¹¹
With the advantage of hindsight, it is evident that the transfer of risk from government and business to workers and households was the most significant outcome of the era of financialised capitalism that now appears to be approaching its end. Hacker describes this process as the ‘Great Risk Shift’.¹²
Australia and the great risk shift
The development of social risk management in Australia, and the reactions against it followed a path broadly similar to that in other developed countries. It is useful to consider Australia as a specific example of this process, with its own distinctive features.
In focusing on Australian experience, it is important to avoid the exceptionalism that characterises much discussion, in which Australia is presented as an anomalous special case. A useful corrective to such thinking is the observation that exceptionalism is anything but exceptional. Every country has its own narrative in which its experience is presented as special. In fact, there are typically two such narratives in competition: one in which the country concerned is presented as a beacon of light to the rest of the world and another in which economic and social problems experienced throughout the world are presented as unique failures due to particular social institutions.
The Australian settlement
Exceptionalism, in its negative form was particularly popular in the wake of the collapse of the postwar boom. Henderson¹³ and Kelly¹⁴ were the most prominent Australian contributors to the literature which focused on institutions associated with the formation of the Australian Federation in and shortly after 1901.
Kelly coined the term ‘The Australian Settlement’ as a description of the particular institutions under which capitalism achieved broadly based social support in Australia. Kelly’s list of crucial institutions (industry protection, Arbitration, State paternalism, White Australia and Imperial Benevolence) reflects the context in which the term was introduced, that of a polemic against the Australian Settlement and in favour of the reform program of the 1980s supported, in different forms by both major institutions.