I’m just back from a conference in Boston where there was a great deal of discussion about the idea of the ‘social investment welfare state’ which I found really fascinating. Many countries have moved in recent years to go beyond ‘passive’ social transfers and to ‘activate’ their labour force. But there are many different ways of doing this. The interesting thing is that the policies that are the most socially equitable are now turning out to be the most economically effective too. New books (1) by Nathalie Morel, Bruno Palier, and Joakim Palme and by Anton Hemerijck show that the countries that invest heavily in early childhood education, in continuous education opportunity, in high-quality training schemes, and in making it easier for women to take part in the workforce, have both higher growth and productivity rates and less inequality and poverty. An important part of the package is to have high levels of secure benefits as transition measures when people are not in employment or in training. And it seems we don’t already have to be Sweden or the Netherlands before we can start to do relevant things at all.
However, one of the implications of work in this field is that our standard ways of doing national accounts work against adopting the right priorities. Relevant expenditures are counted as transfer or consumption spending rather than investment spending. So it’s all too easy for governments to cut them back in recessionary times.
Remember Sarkozy’s Commission on the on the Measurement of Economic Performance and Social Progress, prepared by Amartya Sen, Joseph Stiglitz, and others? It opened up the question of what growth is for anyway, and what we count when we measure GDP in ways that prioritized ‘societal well-being, as well as measures of economic, environmental, and social sustainability’. The Institute for New Economic Thinking sponsors lots of interesting initiatives in economic theory and comparative analysis.
In historical terms, we are still in a very early phase of response to the latest global crisis. We don’t yet know if it will prove to be a turning-point in the dominant economic paradigm. Lots of people are starting to do the necessary thinking. They need to get out into the wider political debate.
(1) The first of these book is expensive*, but it should be in paperback edition by summer; the second will be published in the autumn. *Update – the Policy Press website quotes what may be the best price to date.