Infrastructure Investment for Full Employment: A Social Democratic Program of Funds Regulation
Ramsay, Tony, Lloyd, Christopher, Journal of Australian Political Economy
Where the rate of growth declines, whether because of internal or external forces, the future of social democracy will depend on its capacity to guarantee that adequate levels of investment are maintained, whether or not private capitalists are willing to accept the responsibility. It is doubtful that social democracy will be able to avoid, at one time or another, socialising the investment function (Esping-Andersen, 1985: 35-36).
Since the election of the Rudd Government in 2007 and the Global Financial Crisis (GFC) from 2008, a new debate has begun in Australia that links social democratic socio-economic policy, infrastructure inadequacy, and retirement incomes. (1) These issues can indeed be reexamined together in the light of the quasi-Keynesian state activism that has erupted in response to the GFC. Residual Keynesianism has come to the fore again in the advanced western capitalist countries, in the forms of deficit financing, increased state regulation, and nationalisations in the banking sector. Politically, this suggests that Social Democracy remained alive (although driven into temporary retreat) as the alternative regulatory framework throughout its period of supposed eclipse by Self-Regulatory (or Neo-Liberal) Capitalism since the 1970s. (2) Perhaps we are now witnessing a significant shift in the dominant political economic regime in response to the GFC. This paper tries to make a contribution to this debate by examining the centrality of managed funds to the development of a social democratic strategy.
As Esping-Andersen (1985) understood, social democratic economies are in part a state-directed developmental project that rests, in the ideal form that is best (although imperfectly) approximated in the Nordic region, upon a high degree of national consensus around collective industrial relations, efficient markets, and generous state provision of welfare, health, education and public infrastructure. Such a structure, built in the 1940s-70s era, remains partially in place in the Anglo countries even if eroded and under pressure.
Recent policy responses to the GFC by the Obama, Rudd, and Brown governments (plus others), the new role of the G20, and many contributions to policy debates by leading scholars and commentators, could be seen as evidence of a move back towards a more social democratic regime. Nevertheless, such a move must be much more than a few tinkerings and rhetorical expressions. A well-developed social democracy has not yet re-emerged in the leading Anglo countries. Without adequate taxation, a fiscally capacious state, a strong program of both public and private investment in human, social, and physical capital, and state-co-ordinated national competitiveness, a SDWC regime, with its high degree of domestic co-operativeness and legitimacy around the enhanced role of the state, cannot easily develop and maintain economic strength within a capitalist world economy that has grown accustomed to lower taxes and less regulation in its heartlands. It is especially difficult in circumstance of severe recession and an unstable economic and geopolitical transition from West to East.
For social democracy to be viable as an economic alternative to neoliberalism, the restoration and maintenance of full employment is fundamental. Without full employment there cannot be a meaningful claim to have established a foundation for social democracy. 'Full employment' in this context is defined as employment for all with a high rate of labour-force participation and with frictional unemployment as the only tolerable form of temporary joblessness.
The global nature of the current crisis and its social effects and the discrediting of free market solutions to economic, social, and environmental problems creates an opportunity to re-examine and re-defend social democratic/Keynesian policies. These policies centre on the socialisation of investment. Within such a framework, then, this article develops an argument about how the large and growing pool of pension and other managed funds that are now available in Australia can better be utilised for necessary infrastructure provision and to solve the persistent problem of unemployment, two of the fundamental tasks of any social democratic program, while at the same time providing adequate retirement incomes for an aging population. …