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Myths about
the Welfare State
by Mark Latham
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Policymakers should forget
about grand theories of sociology and the ideologies of old
politics and pursue an evidence-based approach to welfare
reform
One of the problems with modern
politics is its disconnection from the poor. The people who
work in the political system lead a life totally removed from
the experiences of disadvantaged suburbs. Machine politicians-the
spin doctors, opinion pollsters and party bosses who dominate
the system-have no interest in public housing estates, for
instance, as these suburbs are not within marginal seats.
The disconnection of the political
system is also evident in the work of its opinion makers:
the media, the academy and the bureaucracy. Journalists, academics
and senior public servants do not live in disadvantaged neighbourhoods
and rarely have cause to visit them.
My interest in welfare reform
comes from 35 years of experience with public housing estates,
first as a resident and now as a Member of Parliament. I represent
several broadacre housing areas in Sydney's southwest with
unemployment rates of 50% and welfare dependency rates of
80%. This has given me a different attitude to poverty from
most people in politics. The things that people say in poor
suburbs are completely different to the way in which the issues
are debated in parliament and the media. Public life has become
abstracted from the day-to-day practice of poverty.
The myth of government spending
The welfare debate in Australia
primarily involves an argument about government spending.
It is a myth, however, to believe that governments have the
capacity to spend their way out of the welfare problem. The
era of tax and spend politics has ended. Huge increases in
welfare spending are not likely.
Welfare reformers need to look beyond the limits of the welfare
state. Society's most entrenched problems require a cross-sectoral
approach-harnessing the creativity and resources of the public,
social and business sectors. These social partnerships between
governments, corporations, community organisations and welfare
recipients are the best way of creating successful communities.
In public housing estates this
is seen as a commonsense strategy. Contrary to the rhetoric
of Left-wing politics, poor people have little faith in the
role of government. They already live in the equivalent of
socialist suburbs, with 90% of the income and assets owned
by government. Unhappily, this is a sign of their poverty
rather than a solution to it. The hatred of the bureaucratic
failings of the Department of Housing, Social Security and
the Child Support Agency is palpable. The organisations with
the greatest public support lie outside the public sector.
Non-government agencies such as St Vincent de Paul and Anglicare
are well respected for their pastoral role. Based on the evidence,
more resources of this kind need to be mobilised. Government-first
welfare strategies are a recipe for failure.
The myth of government intervention
Even if governments had more
money to spend on welfare, this is not necessarily a good
starting point for poverty alleviation. The debate between
Left and Right has overlooked the social or moral dimension
of poverty.
In my experience, the chief
demand in public housing estates is not for more government
intervention or more market forces. It is to normalise the
neighbourhood-to give people a stronger sense of community
and cooperation in their relationship with others. People
want to feel safe and secure on the streets; they want to
be able to trust their neighbours and work together with a
feeling of common purpose.
These social foundations are vital. All the evidence shows
that when people have a high level of trust and self-esteem
they are more likely to make good use of government support,
such as training programmes and welfare payments.1
Some sceptics will argue that
the first priority for poor people is employment. While jobs
are crucial, it is also true that the first step towards labour
market success is a normal social environment. My most depressing
experience in public life has been to hear the principals
of disadvantaged schools report on their career counselling
sessions. When asked about their career aspirations, some
students say: 'I'm going to do what my dad and grand-dad did-go
on the dole'.
The emergence of long term
and inter-generational unemployment in the 1980s has had a
crippling social impact. With the loss of the regular habits
and dignity of work, society's norms and standards have fragmented.
This phenomenon has eroded self-esteem and given people a
perverse sense of their own interests. It is not possible
to get people back into work without first fixing the social
dimension.
This insight exposes the problem with traditional welfare
strategies. Governments usually think of exclusion in terms
of financial capital, through finely calibrated measures such
as the Henderson poverty line. It is assumed that the machinery
of the state can dispense enough money to lift people above
the line.
The key step in dealing with
poverty, however, involves the creation of strong lines and
relationships between people. This task is beyond the reach
of government agencies. While the state is skilled in the
redistribution of financial resources, its community development
projects are rarely successful. Bureaucracies rely on standardised
structures and procedures. Communities rely on a diffuse set
of social relationships. It is impossible to standardise trust
and self-esteem. Whenever bureaucracies intervene in community
life they tend to smother the essential sparks of social capital
and creativity.
This is one of the reasons why inequality and social exclusion
have become so entrenched in Australian society, despite high
levels of welfare spending. The welfare state has been built
around bureaucratic structures instead of the capacities of
people. It has placed a dead hand on innovation and self-help
in disadvantaged neighbourhoods. The paternalism of welfare
policy needs to end.
The myth of static poverty
Traditionally, welfare policy
has taken a snapshot view of poverty, measuring the number
of people below the poverty line at a particular point in
time. Governments have concentrated on the recurrent payment
of income support as a way of responding to this problem.
This static analysis takes
no account of variations in economic and social circumstances
over time. For most people poverty is not a permanent condition.
It is estimated that 30% of society experiences occasional
bouts of exclusion-falling in and out of the workforce, struggling
with workplace restructuring, adjusting to changes in family
and community life, and so forth.
Most of the trends in our society,
especially the emergence of a new economy, point to greater
fluctuations in life's circumstances. Compared to the relative
certainty of the 1950s and 1960s, an average working family
is now 50% more likely to experience an unexpected decline
in its living standards.2
This reflects the pace of economic and social restructuring,
with the rise of job insecurity and family and community fragmentation.
It also presents a more realistic view of economic exclusion,
with people moving above and below the poverty line on a regular
basis.
For people in these circumstances
the welfare state is inadequate. Recurrent transfer payments
were never designed to deal with continuous variations in
life's conditions and the insecurity this brings. The benefits
system was developed at a time when society was more stable
and predictable. New welfare strategies are needed to ensure
people at risk of poverty can cope with the inevitability
of change (see box on next page).
The myth of public administration
One of the consequences of
rapid economic and social change has been a new geography
of poverty. As people move up and down the income ladder they
more readily change their place of residence. Society has
become more mobile and communities less stable.
This process has generated
a significant level of population churning, with people moving
in and out of poor suburbs as their economic circumstances
dictate. It has also produced something of a paradox: even
though a limited proportion of society is permanently trapped
below the poverty line, a large and growing number of neighbourhoods
display the characteristics of permanent poverty. Research
has shown that the problems of disadvantaged neighbourhoods
are much greater than the personal characteristics of their
residents.3
Networks of social exclusion feed off each other and compound
the problems of poor areas.
The evidence indicates that
welfare policies need to be place-specific. This explains
the growing interest in the concept of place management-an
attempt by policymakers to focus the work of government agencies
on particular locations. While this work is still at an early
stage of development, it nonetheless recognises the need for
new responses to poverty.4
Traditionally, public sector
departments have been organised around functional responsibilities-transport,
education, health and family services-rather than the needs
of locations. Yet the problems of disadvantaged people and
places do not easily fall into each segment of government.
A poor education, unemployment, health issues, domestic violence
and other social problems invariably overlap and reinforce
each other.
The welfare state has struggled
to respond to this reality. It does not have a 'Department
of Poverty' or other mechanisms by which its programmes can
be closely coordinated at the local level. The public housing
estates in my electorate, for instance, feature 17 different
government agencies providing 23 different programmes and
support schemes.5
While each agency is significant in its own right, no one
has responsibility for the neighbourhood as a whole. This
produces a high level of buck passing and frustration within
the agencies themselves. Overcoming this
deficiency is one of the key tasks for welfare reform.
COPING
WITH THE INEVITABILITY OF CHANGE
Asset-based
welfare reform policies aim to respond to the growth of social
and economic insecurity. People who oscillate in and out of
poverty need to be able to smooth out their income fluctuations,
drawing on a range of assets during periods of disadvantage.
The purpose of a modernised welfare state should be to assist
this process.
In the
old system, governments tried to redistribute economic resources
through tax and spend strategies by emphasising recurrent
income transfers rather than assets. But transfer payments
are not a good way of generating economic and social participation.
Instead of fostering self-reliance and security, they force
people to rely on the benevolence and fiscal capacity of governments.
The only
way to leave poverty on a permanent basis is to save and accumulate
assets, whether in the form of financial, education or social
resources. One of the mistakes of the welfare state has been
to underestimate the capacity of disadvantaged people to save.
Programmes overseas, for instance, have shown that the poor
can save and invest, once they receive the right kind of incentives.a
This process, in turn, creates spin-off benefits in terms
of self-esteem, healthcare and career prospects.
The new role for government is to facilitate asset accumulation
in the following ways:
- Disperse
the ownership of economic assets, especially through participation
on the stock market. The federal government, for instance,
should introduce a First Shareowners Scheme to strengthen
AustraliaÕs credentials as a share-owning democracy, especially
among low-income groups.b
- Establish
a network of welfare savings accounts, with strong incentives
for poor people to put money aside and accumulate assets.
The accounts would be available for a range of purposes,
such as education, home ownership and equity investment.
- Create
a highly skilled and capable population through Lifelong
Learning Accounts. This means ensuring that people have
access to a bank of resources from which they can meet the
costs of lifelong learning.c
- Develop
new and innovative ways of creating social capital in disadvantaged
communities. This means creating an alternative welfare
system based on social entrepreneurs and social venture
capital.
The myth of abstract rights
One of the basic principles
of disadvantaged areas is that socially responsible behaviour
is valued ahead of social rights. While millionaire media
commentators such as Phillip Adams and trendy Left politicians
such as Natasha Stott Despoja focus solely on the rights agenda,
the people who live and work in poor areas have a different
set of priorities. They know that there can be no end to the
poverty cycle without effort and responsibility.
Social rights and freedoms
can only be exercised in the context of a mutually responsible
society. People can be well off financially, yet they will
not be free if they cannot walk the streets with a sense of
safety. People can benefit from a strong social safety net,
but they will not be free to achieve in society unless they
are willing to seek new skills and work opportunities. Children
can spend a lot of time at school, but they will not be free
to realise their potential in life unless work and education
are valued in the home by their parents.
Rights alone are not enough.
They need to be matched by responsibilities. This is the central
failing of contemporary Left-wing politics. It has dished
out a plethora of rights without demanding a corresponding
set of social responsibilities. It continues to talk about
a good society but without any reference to the relationships
and morality between people. Yet in practice this is all the
poor themselves want to talk about. The core demand in disadvantaged
areas does not involve the extension of social rights. It
is to make the neighbourhood normal-to ensure that people
act responsibly and respect each other's interests.
It is a fallacy to believe
that poor people are opposed to the mutual responsibility
agenda. In fact, more than any other part of society, they
appreciate its benefits. But it does not have to be a top-down
process. Instead of imposing programmes like Work for the
Dole in an authoritarian fashion, the federal government should
ask poor neighbours to develop their own programmes of mutual
responsibility. This act of empowerment would not only achieve
substantial results, it would help expose the myth of abstract
rights.
Evidence-based solutions
The pressing need for welfare
reform is evident. The welfare strategies developed in the
postwar decades are not suited to the modern challenges of
poverty. If the welfare state were being created today, it
would need to respond to a vastly different set of economic
and social circumstances. Based on the evidence, it would
need to:
- form partnerships and mobilise
resources from across society;
- create social capital as
a necessary precondition for poverty alleviation;
- bypass bureaucratic structures
and back the capacity of poor communities to fight back;
- develop a new system of
welfare support in response to the growth of economic insecurity;
- focus on the unique problems
of disadvantaged places; and
- get serious about the fulfillment
of social responsibility.
The Information Age is demanding
cross-sectoral and multi-disciplinary solutions. It is rewarding
organisations that place a premium on collaboration and networking.
The public sector still needs to provide basic services and
support, but in a different sequence to the traditional approach.
It needs to act as a junior partner to communities, intervening
with special programmes and resources only once the foundations
of social capital have been laid. Its new role is to identify
and nurture successful community projects. This is what we
call the enabling state.6
Conclusion
The myths of the welfare state
are based on old ideological ways of thinking, a struggle
between government-first and market-first policies. It is
now clear that both approaches are flawed. The world has moved
on. Welfare policymakers need to look beyond the old Left
and the new Right to those evidence-based policies that can
end the human tragedy of poverty.
Endnotes
1 Amitai Etzioni, The Third Way to a Good Society (London:
Demos, 2000), 16-17.
2 Will Hutton, 'High-Risk Strategy is Not Paying Off',
The Guardian Weekly (12 November 1995), 13.
3 Boyd Hunter, 'Is There An Australian Underclass?',
Urban Futures 18 (1995), 20.
4 See, for instance, Mark Latham, Civilising Global
Capital (Sydney: Allen and Unwin, 1998), 214-220.
5 Figures presented by Craig Knowles, NSW Minister
for Planning and Urban Affairs, at a WSROC local government
conference (Merrylands: 22 November 1996).
6 Peter Botsman and Mark Latham (eds), The Enabling
State: People Before Bureaucracy (Sydney: Pluto Press, 2001).
Breakout box
a See Michael Sherraden and Robert Friedman, 'Asset-based
Policy in the United States' in Asset-Based Welfare: International
Experiences, ed. Sue Regan and Will Paxton (London: Institute
for Public Policy Research, 2001), 6-34.
b See Mark Latham, 'Stakeholder Welfare', Quadrant
(March 2001), 14-21.
c Mark Latham, What Did You Learn Tod@y? (Sydney: Allen
and Unwin, 2001), 86-100.
Author
Mark Latham MP is the Federal member for the seat of Werriwa,
an outer-metropolitan urban electorate in SydneyÕs southwest,
and co-editor (with Peter Botsman) of The Enabling State:
People Before Bureaucracy (2001). This article is adapted
from a paper delivered to CISÕs annual public policy conference,
Consilium, in May 2001.
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