Social Service Futures Dialogue: Toward an Inclusive Governance Reform Agenda (Part One)

By Paul Smyth

Power to Persuade’s dialogue on the future of the social services and community sector could hardly be more timely.  As the Treasury-Productivity Commission line up for their big push into the marketization of those institutions designed to foster and sustain a just and inclusive society, the signs are that History may be finally calling time on what Mark Considine has humorously dubbed the ‘reform that never ends’.  These signs are not so apparent in the current debates over the Harper - PC competition governance model(e.g. will marketization somehow work in the NDIS when it has failed in other sectors?).  But - and more importantly for the future of governance – they are very apparent in the new critiques of the 80s and 90s economic policy model upon which the Treasury-PC governance approach has always depended for its authority.  Across two decades of PC inquiries the social sectors have dutifully submitted their policy wisdom only to find that nothing was allowed to seriously disturb these basic assumptions of the market agenda.   But now a new economic policy mode is demanding forms of governance which privilege social wellbeing and fairness, equally with economic efficiency.  While those pressing on with ‘the reform that never ends’ may think that nothing is changing, it is inconceivable that governments in Australia will long avoid the demands for a new agenda based on what the OECD calls ‘Inclusive Governance.


As in the wider field of economic and social policy, model change does not happen overnight.  For those in the social and community sectors the immediate question is how to respond to this radical push to fully marketise education, health and welfare. It is important to engage critically with the experience of the market model as it continues to be implemented and, as I understand it, PtP has numerous contributors preparing to do just that.  But I believe it is equally important for the social sectors to begin now to look over the limited horizon of current government thinking on social administration and to embrace the challenge of constructing the new principles, institutions and practices which will make up the future inclusive governance reform agenda.


In Part One of this background briefing I sketch that wider economic policy shift from the ‘80s/90s’ model to inclusive growth highlighting what are seen as the broad implications for questions of social governance.  In Part Two I will show how the PC approach to the reform of social institutions was thoroughly embedded in the old model; and will reconnect with the largely ignored social sector critiques of that model submitted to various PC inquiries in order to suggest some starting points for the new reform agenda.


From the ‘80s/90s model’ to Inclusive Growth

Smyth and Buchanan (2013) offered an early account of the evolution of the ‘social investment for inclusive growth’ paradigm among both developed and developing economies since the turn of the century.  Since then, as the World Economic Forum (2015) observed, there has been a major exercise among the international economic policy agencies including the OECD, World Bank and IMF aimed at translating the broad aspiration for more inclusive and sustainable growth into Actionable Policy Frameworks.  In Australia, the newly launched social policy agenda of the Australian Labor Party, Growing Together, demonstrates how the new social policy rubber is hitting the political road.


For the social sectors it is important to grasp that the reasons for this change are as much economic as social.  Certainly rising inequality (now at a seventy five year high in Australia) is seen as creating a crisis of legitimacy for states perceived to be serving the interests of the ‘two per cent’.  Telling this to social scientists, of course, is like teaching granny to suck eggs. But in recent decades any demurral on social grounds was always trumped by the Treasury-PC line that markets freed from state intervention would always deliver a bigger pie as the basis of greater ‘community-wide’ welfare.  With inclusive growth this central justification for the PC model has imploded.  Not only do we need robust social institutions to counter excessive market inequality as a basis for flourishing societies but also for sustainable economic growth.  More generally in the economy, governments are urged to abandon the laissez faire ‘nightwatchman’ (or - in the contemporary Harper jargon - ‘market steward’) role and actively intervene where such intervention is likely to improve on pure market outcomes.


For us in the social sectors it is important to be aware that these new intellectual movements are also now in evidence in Australian economic policy communities.  The Labor Party’s Growing Together social policy review is soon to be joined by a complementary Economic Policy Report also reflecting inclusive growth  -or, ‘shared prosperity’ - principles (see the Chifley Institute).  The wider ferment has been canvassed in several articles by leading policy thinkers.  In ‘Time for a new consensus’, J West and T Bentley (2016), Griffith Review 51 nicely captured the kind of policy ice age into which the old economics had settled.  The economic challenges of today, they say, demand that we snap out of the policy torpor created by the exhaustion of the ‘80s\90s model’ according to which passive governments should be nothing but market stewards.   We need an active government, they write, which can lead strategies to create ‘comparative advantages’.  While their focus is the traded sectors of the economy they note that ‘a similar capability building agenda is required for the successful redesign of social investment, health, education and welfare …rather than veering between incremental funding increases …and ineffective attempts to increase ‘efficiency’ by more ‘contracting out’.  In somewhat similar vein, G Megalogenis (2016) ‘Balancing Act’, Quarterly Essays 61 writes of the need for a shift from the ‘open model’ of the economy (80s and 90s) to one for an ‘economy in transition”.   He too recognises that much of the vital government intervention embraces social policy in areas such as education and infrastructure, gridlocked cities and growing inequality.


It would be hard to exaggerate the importance of this reassertion of the need for active government in economic policy for questions of social governance.  Before the full onset of the 80s/90s model in the late twentieth century nobody seriously contemplated the marketization of our social and community institutions.  Its entire credibility rested on its neoclassical fundamentalist assumptions that market mechanisms were always to be preferred to government intervention.  Now that the economic mainstream looks to reassert the positive economic impacts of social intervention in the market, the way lies open for a social policy agenda which can roll back the misguided colonisation of the social institutions by the market. It is time to begin the task of creating inclusive governance structures for the social and community sectors.


Inclusive Growth and Governance after the ‘ice age’

A distinctive feature of the new economics informing inclusive growth is its emphasis on the importance of governance institutions.  For example, one of the key factors leading to the overthrow of the Washington consensus in development economics was the exemplary role of active state institutions in engineering the East Asian economic successes.   In terms of developed economies, the OECD has observed how the emphasis on efficiency in the 80s\90s model marginalised objectives of fairness and equality leading to a new emphasis now on institutions for inclusive governance.  Good governance is one of the key domains of the new policy frameworks for inclusive growth.  However it must be said after two decades of framing institutional reform in terms of marketization, the reform agenda remains very much aspirational.  Nevertheless, we have some sense of the broad direction as well as indications that some in countries like Australia are readying for change.


In the 1980s we became familiar with the idea of ‘structural adjustment’ as nations felt the full impact of the push towards neoliberalism.  Now we must ready for a new round of structural adjustment but this time towards a more inclusive pattern of economic development.  In her presentation to the UNCTAD conference on trade and development Ortiz (2014) summarised the UN agenda on ‘development for all’ listing a range of key policy differences between what was the ‘1980s-90s Orthodox Policy Advice’ and the new UN Agenda.  Here we select a few of the key social policy shifts which are indicative of the restructuring of the development agenda.


  • 1980s-90s Orthodox Policy Advice
  • UN Agenda Development for All
  • Residual social policies – a cost (minimal, targeted to the poor), safety nets
  • Social policies as investment. Universal policies (for all), redistribution back in the development agenda
  • Commercialisation of social services, cost recovery (fees for services)
  • Universal public services, e.g. UNICEF School fee abolition initiative, WHO-Bank Universal Health Coverage
  • Reforms social security and welfare systems, targeted safety nets, pensions privatization
  • Social protection Floors for all and universal public social security systems, reversing pension privatization
  • Privatization of public assets, services/ minimalist government
  • Building state capacity to promote development, public investment, technology



The new ‘structural adjustment’ envisaged here will clearly demand very different theoretical approaches and institutions for policy development than that which we have experienced in Australia over the last two decades.  A defining feature of that period was the intellectual rigidity and inability of the Treasury-PC policy community to engage creatively with the worlds of social and political (and economic) knowledge beyond the narrow confines of what now appears as neoclassical fundamentalism.   In Part Two I shall show how this seeming rigidity was part and parcel of its original remit to assume that social institutions might be treated just like economic markets in the quest for greater productivity.


By putting social and political goals on a par with the market, Inclusive Growth will change these rules of inquiry fundamentally.   In this context government does have to seriously consider whether the Productivity Commission will be fit for the new challenges of inclusive governance.  We already have indications that this potentially dangerous anomaly of economists presiding over social governance reform may well be ending.  The New Zealand Productivity Commission for example recommended that social service governance reform in that country be led by a ‘Ministerial Committee for Social Service Reform’ heading up agencies representative of the social services; while the ALP’s Growing Together proposes an ‘independent social policy oversight body’.


Unravelling the current, belated, Australian push for dissolving social services into ‘human service markets’ will almost certainly require the creation of some such social service agency with the appropriate knowledge base, links to social sector practice, authority and resources to replace the Productivity Commission as the agency best placed to advise governments on how to progress inclusive governance.     

This piece has been written as part of the Power to Persuade Social Service Futures Dialogue


Australian Labor Party (2016) Growing Together Labor’s agenda for tackling inequality. ALP, Canberra.

Megalogenis G (2016) ‘Balancing Act’, Quarterly Essays 61, pp.1-67.

Ortiz I ‘(2014) ‘Tackling Inequality for Inclusive Development and Structural Transformation’, prentation UNCTAD Conference on Trade and Development.

Smyth P and Buchanan J (2013) Inclusive Growth in Australia, Allen & Unwin, Sydney.

West J and Bentley T (2016), ‘Time for a new consensus’, Griffith Review 51, pp.4-51.

World Economic Forum (2015) Inclusive Growth and Development Report, Geneva.