Crikey might be known to carp and take the piss, but occasionally we say something positive and in our view this recent speech by Labor backbencher Mark Latham is one of the most thoughtful and well-researched efforts we’ve read in a long time.

So too, we have entered an era of political disengagement. The hierarchies of organised politics have generated enormous public distrust and dissatisfaction. Indeed, it is difficult to think of a government policy that still fosters a strong sense of collective interest and collective responsibility. We are losing the battle for public mutuality.

Not surprisingly, the foundations of community life are also weak. Society is experiencing exclusion at the top as well as the bottom. The trend towards walled housing estates and gated communities erodes social capital, no less than the exclusion of poor neighbourhoods. There is a thing called society but unhappily, we are losing it.

This is the crisis of Left-of-Centre politics: the widespread decline in collective institutions and collective ideals. Unless this crisis is addressed, our hopes for social democracy will hollow out. We will become a cause for power, rather than a cause for a good society. While from time to time we will still win elections, we will not know what to do with our electoral success.

As a starting point, we need to face up to the uncomfortable truth. Too often on our side of politics there is a tendency to pretend these problems away:

to pretend that the post-war welfare state is still a viable instrument for collective action

to pretend that economic markets can still be dragged into the orbit of government planning and control

to pretend that old industrial institutions, such as trade unionism and working class solidarity, are still in good shape

to pretend that the electorate still supports the concentration of political power at a parliamentary and party level.

Keynes famously remarked that when the evidence changed he was inclined to change his mind. This is the challenge now confronting Left-of-Centre politics. Globalisation and the information revolution are remaking our society and its economy. A new politics is in motion, opening up new fault-lines and issues in the public arena.

We can either face up to this reality or be swept away by it. Old agendas based on the politics of statism, unionism and class are fading away. The challenge is to develop new strategies, to create the new policy tools by which we can reinvent collectivism.

This does not require a loss of Labor values. Our commitment to social co-operation and social justice is, in fact, timeless. What is in dispute is the means by which these goals can be achieved. This is an argument about policies and reform technique. It is not a debate about Labor values and beliefs.

Over the past decade, a group of social democrats have moved down the reinvention path. They have developed a distinctive political project, exploring the new institutions and forums of a collective society. In the United States, Bill Clinton called it the Third Way. In Britain, Tony Blair has made it the work of New Labour.

Its ideas have been forged by think tanks such as the Progressive Policy Institute, the Institute for Public Policy Research and Demos. Its thinking has been influenced by scholars such as Tony Giddens, Tom Bentley, Charlie Leadbeater, Amitai Etzioni and Robert Putnam. I prefer to think of it as the new social democracy.

Unfortunately, a number of misconceptions have arisen concerning the nature and purpose of the project. Some are likely to be aired at this conference. It is often argued, for instance, that the Third Way is nothing more than a soft compromise between the role of government and the market. This is, in fact, an old argument. The notion that an open, competitive economy can coexist with the welfare state has been well accepted and practiced by social democratic parties for decades.

In this country, of course, it underpinned the reform program of the Hawke and Keating Governments and has now become part of our political orthodoxy. Indeed, many of those voting for the first time at the Federal poll later this year were not even born when the Hawke Government was first elected. They have grown up experiencing no other type of economic policy than free trade and deregulation.

The new social democracy involves much more than the management of an open, mixed economy. It is an attempt to answer the core challenge of Information Age politics: is it still possible to practice the shared bonds and responsibilities of a good society? Is collectivism still viable?

The Third Way believes that it is. It is a true believer in collective action. But not through the centralised power of government bureaucracies. Notions of economic planning, state control and class struggle are foreign to the new social democracy. It aims to create a new type of collectivism, based on the following five principles:

1. A new politics is required to meet the needs of an increasingly complex and fragmented society. Political leaders need to foster partnerships and collaboration across economic and social boundaries, creating new communities of interest and common purpose. We need to reconnect society.

2. This is not likely to be achieved through the large bureaucracies of government. There are now binding limits on the role of public sector, forcing social democrats to pursue new, non-state forms of collective action. With the decline of state socialism, we need to embrace the virtues of civic socialism.

3. The reconnection of society also needs to cross national boundaries. This is why the Third Way sees globalisation as an opportunity, more than a threat. Only by bringing people closer together, through the constant exchange of commodities, cultures and ideas, can we create a more cohesive and co-operative society.

4. Economic change has other opportunities. Capitalism has evolved into a mass system, with a wider spread of ownership, skills and entrepreneurship. Social democrats need to take advantage of this process, creating a stakeholder society in which all citizens enjoy the benefits of financial capital, human capital and social capital.

5. In the past, social democrats have relied on large, massified institutions (such as government departments, trade unions and political power) to achieve their goals. In the Information Age, however, hierarchical institutions are losing support and relevance. The new politics requires the dispersal of power: enabling citizens and communities to form new networks of mutual interest and mutual support.

The Politics of Reconnection

In a recent edition of the New Statesman magazine, Etzioni argued that:

“The Third Way is not merely a potent recipe for gaining power; it is also a solid public philosophy. True, it has a somewhat blurred margin – and thankfully it is far less detailed than a Soviet dogma or a Catholic doctrine. But it has a clear core. Part of that core is to make opponents who used to hobble each other into productive partners.”

This is a very perceptive point. The Third Way involves the politics of partnership and reconnection. It offers social democrats a new way of thinking about political issues. This is best demonstrated through a series of practical examples:

In schools policy, Left-wing politics has tried to achieve its goals through the creation of large education departments, while Right-wing politics has emphasised the need for individualised vouchers. A Third Way solution is to encourage parents to run community or charter schools.

In the current school funding debate in Australia, the government sector has been pitted against the non-government sector, a situation in which schools are fighting schools. A Third Way solution is to require the top non-government schools to assist struggling government schools – a mentoring plan that builds bridges and collaboration across the school sectors.

In the welfare debate, the Left has advocated large increases in government spending, while the Right has emphasised the need for personal motivation and responsibility. A Third Way solution is to support the work of social entrepreneurs: innovative projects that create new social and economic partnerships in disadvantaged neighbourhoods.

In the past, Left-wing politics has been hostile to the free market system, while the Right has strongly supported the profit motive. The Third Way, by contrast, sees the reform of capitalism as an ethical question. It wants the corporate sector to meet its proper social responsibilities, reconnecting global economics with local communities.

Finally, in the law and order debate, both sides of Australian politics have engaged in a bidding war for tougher sentencing laws. Our State election campaigns have become a contest to build more prisons and to put more people in gaol. A Third Way solution is to focus on rehabilitation and restorative justice programs, making offenders face up to the social consequences of their crimes.

These diverse issues reflect a common Third Way methodology. In each case, the objective is to create new connections and associations between people: to bring parents and teachers together in the management of neighbourhood schools; to create new networks of support between government and non-government schools; to foster new forms of collaboration and enterprise in disadvantaged communities; to close the gap between the corporate world and civil society; to give the justice system a social dimension, not just a legal framework.

This is what the Third Way is all about. It aims to cross over institutional boundaries, to build relationships of trust and cooperation, to turn opponents into productive partners. Throughout society, new information technologies are flattening hierarchies and opening up new partnership agendas. People are now talking about the need for multi-disciplinary and cross-sectoral solutions. The Information Age is an era for boundary crossing and networking. Social democrats need to take advantage of this opportunity. We need to become agents of reconnection.

The market economics of the Right and the government bureaucracies of the Left have weakened society’s connectedness. They have not been effective forums for collective action. For Right-wing politics, this is not much of an issue. It has always believed in the supremacy of individual freedom and individual action. For the Left, however, it is a huge problem.

The post-war welfare state was a fine act of compassion, an attempt by governments to eliminate poverty and suffering. For all its achievements, however, the welfare state has not been good at creating collectivism. It has not fostered a feeling of mutual interest and support between people. It has, in fact, delivered an individualised form of compassion.

Left-of-Centre politics has always regarded the state as a collective institution. In practice, this has been a delusion. Most of its work is directed at individuals, discharging rights and entitlements to citizens, rather than communities. At the heart of the welfare state are transfer payments, paid directly from large departments to individuals. In my experience, the relationship between Centrelink and its clients is one of open hostility, not mutuality.

Likewise, our health system is highly individualised. Primary health care is discharged by doctors operating in isolation from each other. Secondary care is based on the treatment of individual patients by large public hospitals. The welfare state has wiped out the Friendly Societies and other mutual organisations that formed the basis of the Australian health system prior to World War II.

In education, it is difficult to find a practical expression of collectivism. Our large State education departments have not been open to community involvement in the management of local schools. Through their lobby groups, schools are often positioned as fighting each other for public funding, rather than working together for public purposes. This is the sickness of the State aid debate which, unhappily, has now re-emerged as a poisonous force in Australian politics.

The same criticism can be made of the housing, transport and legal services of government. In my electorate, I cannot find an example of government bureaucracies generating mutualism and social capital. The welfare state has succeeded in the mass production of rights and entitlements. It has failed, however, in its most important task: the creation of a collective society. No less than the free market, it has practiced an ethos of individualism.

This is the curse of Left-of-Centre politics. It has fostered social division instead of social cohesion. Historically, the Left has followed the grand narrative of class struggle: the divisive politics of labour versus capital, workers versus bosses. In recent decades, it has embraced a rights agenda, subdividing society into a collection of single identities based on the politics of race, gender and sexuality. Far from creating social connectedness, this process has generated social resentment, especially among those groups excluded from positive discrimination programs.

The new social democracy deals with this problem by fundamentally reforming the role of government. It positions the state as a facilitator of social partnerships. In every area of public policy, the purpose of government must be to bring institutions and individuals closer together, to create the circumstances by which co-operation becomes possible. We need to practice compassion of a collective kind.

The Third Way has adopted the following strategies to achieve this goal:

1. Ensuring that the creation of social rights is accompanied by the exercise of social responsibilities. Right-wing politics has used the responsibility agenda for punitive reasons, especially within the welfare system. The Third Way, by contrast, emphasises the need for collective responsibility. Rich people, poor people and everybody in between have a basic responsibility to assist each other and to put something back into the community.

2. Using the allocation of government resources as a catalyst for partnership creation. Only organisations that are willing to collaborate and draw in new partners should be eligible for public funding. Society’s most entrenched problems require cross-sectoral solutions, harnessing the skills of the public, private and voluntary sectors. The funding power of the state should be used to leverage organisations closer together.

3. Fostering the collective effort of communities, whether defined by geography or shared interests. In the past, government expected civil society to fit the bureaucratic mould of the welfare state. Its new role is to identify and nurture successful community projects. This is what we call the enabling state.

The objective is to create a new kind of social solidarity, one that crosses economic and class boundaries, one that goes beyond personal identities and prejudices. Piece by piece, we need to rebuild the values of a collective society. Collectivism, of course, is a learned habit. Unless people are given the space and opportunities to practice these habits – the habits of trust and cooperation – then our society will continue to fragment. The new social democracy overcomes this problem through the politics of reconnection.

The Limits of the State

The biggest story in late 20th century politics was the erosion of government power. Each of the assumptions underpinning Left-of-Centre politics – Keynesian economics, central planning and mass welfare – was swept away by the pace of economic and social change. On every front, the social democratic promise of interventionist government is under siege. The state of the state is weak.

The increased mobility of capital has eroded the economic powers of the nation state, especially with respect to macroeconomic policy. It is no longer possible for governments to spend and regulate their way to economic success. Internationally, the need for economic competitiveness has weakened the public revenue base. Footloose capital has forced governments to bid against each other for jobs and investment. Whereas companies used to pay money to governments, the reverse is now true. These fiscal limits have restricted the size of the public sector. Policy makers now face the dilemma of overloaded government: so many funding demands on the welfare state, yet so few funding sources in the globalised economy. At the next Federal election, for instance, the ALP is committed to spending less and taxing less than the Howard Government. At the bottom line, we stand for a smaller public sector. The era of tax and spend politics has ended.

For Labor Parties around the world, the biggest question is how we can reform the welfare state so that it can deliver social justice within the budgetary constraints imposed by membership of the global economy. This requires a different approach to public policy. Increasingly, our side of politics needs to look to non-state and even non-parliamentary means to satisfy its goals. This is what the Third Way aims to achieve, to liberate Labor from the limits of the state.

The new social democracy is deeply sceptical about the traditional role of government. It looks beyond the pillars of the old politics – state intervention and market forces – for new forms of collectivism and social justice. This is what makes it such a radical notion: that Left-of-Centre politics can achieve its goals without following the statist road.

This approach uses civil society as the primary agent of social democratic reform. It regards social capital as the number one issue in public life. It sees social poverty, the loss of the fraternity between people, as no less important than financial poverty. With the decline of traditional institutions, society has entered a period of moral confusion. People are longing to belong, to rediscover the shared values and trust of a good society. They want to focus on questions of community and morality, not just economic policy.

The old ideologies positioned politics as a struggle for ownership, the historic battle between socialism and capitalism. The Third Way, by contrast, sees politics as an exercise in communitarianism: rebuilding the relationships and social capital between people. It aims to put the social back into social justice. This is an important strategy for combating individualism and generating a sense of collective responsibility in society. These things do not have to be done by government alone. There is a public sector beyond the role of the state. It lies in the collective work of communities.

Ultimately, the choice between government services and market forces is fundamentally flawed. It neglects the space in the middle where people come together in voluntary and community action. It ignores the mutual interests and associations that make up civil society. The neglect of this vital middle ground has led to serious problems, such as youth alienation, street crime, family breakdown and social isolation. Decades of celebrating personal freedom have weakened the bonds of community and the ideals of collective action.

The new social democracy aims to address these issues through a new form of governance. It is not possible to create social capital unless people have things to do in common. This means winding back the dominance of states and markets and creating the space within which civil society can thrive. While, to some extent, this reflects a work in progress, a number of distinctive themes have emerged. The Third Way relies on 10 strategies for community building:

1. Instead of controlling and directing the delivery of services, government should play the role of a facilitator or enabler. It needs to act as a junior partner to community effort.

2. Service provision needs to be devolved to a community level. When we talk of the public sector we need to talk of charter schools, adult education programs, community housing associations and social cooperatives, rather than government departments.

3. Public policy needs to prevent the incursion of market forces into civil society, especially within the domain of sport, voluntary associations and family life. There is not a market solution for every social problem.

4. The corporate sector also needs to act with a stronger sense of social responsibility. In the past, government pursued the financial regulation of capitalism. It now needs to improve the ethics and morality of market behaviour.

5. More generally, social rights need to be matched by social responsibilities. So far, Australia has only dealt with a small part of this agenda. Mutual responsibility needs to be extended into the education, health and housing sectors.

6. As noted earlier, our serious social problems require a cross-sectoral approach – harnessing the creativity and resources of the public, private and third sectors. Social partnerships are essential to the creation of social capital.

7. Governments also need to harness the work of social entrepreneurs, the emerging band of community brokers who combine the best of social and business practice. Social entrepreneurialism involves the use of social capital to generate human and financial capital. It is finding fresh solutions to the curse of long-term poverty.

8. The yearning to belong in society extends well into the domain of democratic governance. Most people value the process of participation no less than the political outcomes it produces. Politics needs to open up many more avenues for meaningful participation and moral dialogue. In particular, it needs to develop new forums for deliberative and direct democracy.

9. Lifelong learning is also vital to the creation of social capital. It teaches people the habits of tolerance and cooperation: how to understand the needs and interests of others, how to cross social boundaries and place their trust in strangers. In short, a learning society is a good society.

10. As part of their education investments, governments need to provide improved public access to information technology. The Internet, for instance, allows housebound and other isolated people to create new social contacts and networks. The information revolution needs to work for the benefit of society, not just its economy.

These strategies are crucial to the quality of our society. They reposition Left-of-Centre politics as an exercise in civic socialism. Most importantly, they offer fresh hope for winning the war against poverty, in both its old and new manifestations.

Across all demographic, geographic and income groups, Australia is experiencing a new type of poverty, the poverty in human relationships. This is one of the paradoxes of our time: the growing number of people who are materially well-off, yet socially poor. No matter the size of someone’s bank account, if they cannot walk the streets with a sense of safety, enjoy public places and share community spaces then they lack the essence of social capital. None of us can live by financial capital alone.

The Third Way is particularly important for poor neighbourhoods. Part of the failure of the old politics lies in its disconnection from disadvantaged communities. The chief demand in poor areas is not for more state intervention or market forces. It is to normalise the neighbourhood – to give people a sense of security and common purpose, to build the connections of a trusting community.

All the evidence shows that when people have a high level of social capital and self-esteem they are more likely to make good use of the material gifts of government: training programs and social welfare. The success of the welfare state relies heavily on the success of civil society. Without trust and social cohesion there can be no end to the poverty cycle.

Traditionally poverty has been defined in terms of economic capital. The first and most important step in dealing with financial deprivation, however, concerns the creation of social capital. This reality must be at the core of all our efforts and strategies for ending exclusion. Social justice has become synonymous with social capital.

The Growth of Globalisation

Internationalism was once an important theme for Left-of-Centre politics. It was said that the working people of the world needed to work together to end the exploitation of labour. The current campaign against globalisation, however, reflects a feeling of ultra-nationalism within elements of the Left. The new social democracy aims to restore the primacy of internationalism to our economic and social policies.

Globalisation and the Information Age are tailor made for a new era of progressive politics. The knowledge economy has freed the labour force from the heavy machines and degrading work of industrial capitalism. Highly skilled workers have a strong economic bargaining position. In effect, they now have ownership of their surplus value. The purpose of social democracy must be to deliver these opportunities to all workers, to give everyone a stake in the new economy.

Globalisation has also delivered benefits to the Third World. Over the past 30 years, trade liberalisation has generated the greatest poverty reduction program in the history of humankind. The embrace of economic openness and export production in East Asia has lifted 150 million men, women and children out of abject poverty.

The social benefits of internationalism are also strong. Only by bringing people closer together, through advanced communications and the crossing of cultural boundaries, can we create a more tolerant and co-operative society. Imagine the good that comes from millions of school students from different countries communicating and working together on the Internet each day. Globalisation of this kind is the natural enemy of bigotry. It is the future for our side of politics.

The challenge for modern citizenship is to cross the boundaries of prejudice and parochialism. Our loyalties to the local, the regional and the national now need to co-exist with the ideals of good international citizenship. So too, the identities of modern life – racial, gender and sexual characteristics – need to sit easily together, without prejudice.

The problem with economic nationalism is that it promotes a narrow, inward-looking kind of citizenship. Tariffs and other forms of protection are the economic equivalent of racism. They encourage Australians to think poorly of people from other countries and to believe that we would be better off isolated from the rest of the world. If the Labor movement is willing to discriminate against other nations on economic grounds then what credibility do we have in arguing against social discrimination?

Protectionism is not a viable option. No nation has ever prospered by aiming at economic self-sufficiency. No society has ever advanced its culture through an ethos of isolationism. No community has ever become more capable by locking itself away from the new frontiers of technology. Just as much, no political movement can succeed in the coming century by turning its back on the possibilities of internationalism.

This is not to suggest, of course, that globalisation is perfect or that the role of government is irrelevant. Globalisation is not an outcome. It is a process, full of threats as well as opportunities. Its impact depends on how well nations respond to this reality. In a world of constant change and uncertainty, the role of public policy is all-important. New strategies and policies are needed to maximise the benefits of globalisation.

Our first priority must be to strengthen the role of international economic governance. If nations are to successfully regulate global capital then they need to co-operate in global forums. The European Union offers a good example of this process. The integration of political power is a logical response to the global integration of economic power. This is why the Third Way takes an internationalist stance.

At an inter-governmental level, the work of the WTO and the ILO needs to be more effectively linked. It is absurd, for instance, that the WTO bans imports made by prison labour, but not those produced by slave labour or child labour. The IMF and World Bank also have a role to play in lifting labour and social standards in developing nations. It is possible for free trade to co-exist with civilised corporate behaviour.

For part II of this great speech, just click here.