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November 24, 2003
Over the last two decades the increasing shift by the liberal state to economic policies as a response to the effects of globalization has involved a double pronged strategy.
There is the economic strategy to open up the Australian market to the world economy.This has been coercive change that has broken down Australia's historical protectionist institutions to allow the market to regulate the allocation of resources and place constraints on public policy.
Then there was the political strategy to lower citizen's expectations about the role of the state and to establish public acceptance of the need for continual adjustment to the world political economy. This policy of persuasion has tried to establish an ethos of self-regulating adjustment to the global market.
The increasing shift to economic policies in response to the effects of globalization show the real constraints upon social democratic states to govern in the traditional manner. Thus greater trade openness and increased capital mobility have made life difficult for a social democracy that is based around intervention in economic life. The power of world's financial markets has increased, and social democratic states in response have retreated towards shaping society and domestic markets so that they conform to the neo-liberal international economic order.
Hence the Hawke/Keating Labor Government in Australia embraced privatisation, deregulation, public sector cuts, opened public utilities up to market forces, linked welfare benefits to compulsory training and job seeking for the unemployed and allowed a major redistribution of income that produced one of the highest levels of inequality in the developed capitalist world. The priority was the market rather than full employment.
Despite this policy shift to the right in the 1980s and 1990s the ethos of social democracy is still relevant. Markets are not self-constituting, they are not always maximally efficient and they often fail. Hence the need for social justice in the form of the welfare state. Alas the conception of democracy was technocratic, centralized and bureaucratic.
Social democracy is in crisis. It is finding it difficult to marry social justice to economic efficiency as well as make the policy shift to ecological sustainability. It finds itself squeezed by neo-liberalism on the right and the left libertarianism of the Australian Greens. Egalitarian policies can crash into a wall of global finance. Social democracy is on the defensive and many of its old instruments of governance (long-term planning and public ownership) have been dumped, and it has retreated from from its goal of equality.
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