STAKEHOLDER WELFARE.(Australian social policy)

PERHAPS THE GREATEST weakness of left-of-centre politics has been its reluctance to adapt to changed circumstances. The passion of the left for a good society has often translated itself into a dogmatic approach to public policy. Policies which seemed appropriate at the end of the Second World War--such as Keynesian economics, public ownership and social planning--were allowed to outlive their usefulness. Means were seen as ends, no matter their relevance to economic and social conditions. This was one of the reasons why the neo-liberal revolution in the 1980s was able to marginalise traditional social democratic politics. Our ideological stocks had grown decades out of date.

The origins of this problem are not hard to identify. Throughout its history, the left has treated capitalism as a static entity. It has failed to recognise the inherently dynamic nature of the market system.

Most of us grew up--in our families, at university, in our grass roots activism--accustomed to the stereotype of "robber baron" capitalism: the image of greedy industrialists exploiting workers and consumers at every opportunity. This view of market economics continues to inform the values and policies of many on the left. It is a feature, for instance, of the militant campaigns against globalisation.

In reality, however, capitalism is in a constant state of evolution. In Schumpeter's famous phrase, markets constitute a perpetual exercise in "creative destruction". This not only involves the destruction of old products and industries, it involves the creation of new economic and social conditions.

If the purpose of social democracy is to civilise capitalism, to knock the rough edges off market-based inequality, then to be successful our policies also need to be in a constant state of evolution. In particular, this is how left-of-centre parties should approach the task of welfare reform.

When people spoke about the establishment of a welfare state at the end of the Second World War, they said two things: it would end insecurity and give people peace of mind; and it would end poverty--shielding society from what William Beveridge famously described as "the five giants of Want, Disease, Ignorance, Squalor and Idleness".

For three decades up to the 1970s these two goals were substantially met. But then, as one would expect in a dynamic market system, things changed. The old world of full employment, routine production work, steady career paths and stable family and community life came to an end. The information revolution has produced a new economy and, as a consequence of these changes, new social relationships and expectations have also emerged. The welfare state is yet to adjust to these circumstances, and this is why its original goals are no longer being met.