September 2004: A New "Social Architecture" For Canada?

Planned redesign of social programs could spur privatization
September 1, 2004

Policy-makers are quietly and stealthily planning to redesign Canada’s social programs—or, in the jargon so popular in social policy circles, they are trying to develop a new “social architecture” for Canada. And, no, it has nothing to do with the recent election—although, if the outcome of the vote had been different, we might have seen an acceleration of the process. As it is, changes are likely to be implemented more gradually, and probably through the back door. It’s the old familiar “social policy by stealth.”

But we’re already on the road to change, and progressive people may want to keep a watchful eye on the process. The end results could be the very antithesis of social democratic principles. Think: Tony Blair’s Third Way comes to Canada. It’s what Ontario’s Mike Harris and other like-minded politicians liked to describe as “a hand-up instead of a hand-out.” But make no mistake: the idea is still alive and well and is being developed in several major social policy research projects now under way—pilot projects sponsored by the federal government, and even by tax measures in recent federal budgets.

You can bet we will be hearing more about “asset-based social policies” that help people accumulate assets so they can finance their own income support needs during training or lifelong learning, spells of unemployment, retirement, child care, or other forms of care-giving. Remember the Canada Learning Bond, announced in the federal government’s 2004 budget, to give children in lower-income families a kick-off bond of $500 and another $100 a year until they’re 15 to help fund their education? That’s just the latest example. You’ll certainly hear more about “lifetime accounts”—the mechanism to help people save on their own to cover any future emergencies they might face.

Behind the movement for a new social architecture is the view that Canada’s social programs—public pensions, unemployment insurance (to use its old name), and other social support systems—were developed in a very different era. The world has changed dramatically since those times—so the argument goes. With the advent of globalization, the knowledge-based economy, and other changes in our economy and society, we may even need to go back to first principles and start over, according to some influential policy wonks.

Sociologist Jane Jenson, until mid-2004 director of the Family Network of the Ottawa-based Canadian Policy Research Networks (CPRN), argues that, in light of the new realities of Canada in 2004, the roles and responsibilities of market, family, state, and community need to “catch up.” At Jenson’s initiative, CPRN launched an ambitious series of nine Social Architecture Papers designed to look at how the world has changed since Canada’s social programs were established, and what new model is allegedly needed for the future.

In developing the case for a new social architecture, Jenson claims that Canada, like many other countries, faces a moment of fundamental choice. “The social knowledge that informed both the first three decades after 1945 and the years of neoliberal politics that followed is being re-evaluated,” she says. “Whereas for Keynesians social policy was a support for widespread well-being, for neoliberals social spending was a burden, to be minimized as much as possible. Now a third position is taking hold,” according to Jenson. “We recognize that social policy makes contributions to well-being in the knowledge-based economy and society, but also that there can be no simple return to previous policy formulae, precisely because so many socioeconomic situations are profoundly different from what they were in the post-1945 decades.”

Sociologist Ken Battle, president of the Ottawa-based Caledon Institute of Social Policy, refers to this new social policy model as the “post-welfare state.” According to Battle, the post-welfare state model is based on a critique of key social programs—especially UI and welfare—that sees them as costly, inefficient, and ineffective. The new model seeks mechanisms that are more effective and better suited to the changing economic, social, and political realties of the new century. Instead of “civilizing capitalism,” as the old welfare state approach did, the post-welfare state, says Battle, is seen as “nurturing capitalism” by providing social and educational infrastructure that enhances economic growth and investing in human capital.

The old welfare state, constructed between the 1930s and 1970s, emphasized protecting people from the market. The new approach, the “Third Way” of Tony Blair’s New Labour, emphasizes programs that provide incentives and help people to succeed in the market.

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Progressive observers have been scathing in their criticism of the Third Way approach to social policy. World-renowned sociologist Gosta Esping-Andersen says that, following the predominance of neoliberalism in the 1980s, the Third Way of the 1990s heralded the arrival of “a second grand formula for the post-industrial Good Society.” No doubt it succeeded better in catching the mood of the times, Esping-Andersen says, “in large part by retaining some of the more credible and popular aspects of neoliberalism, including its accent on individual responsibility and a more competitive reward structure, while fusing these with a concomitant public responsibility.” But, contrary to the extreme transparency of neoliberalism, says Esping-Andersen, the Third Way is broadly viewed as “an emperor with no clothes.”

The Third Way may be criticized for its unduly selective appropriation of social democratic policy, Esping-Andersen says. Among other things, “it has a tendency to believe that activation may substitute for conventional income maintenance guarantees.” First and foremost, he says, “it proposes one sharp break with the past: rather than tame, regulate, or marginalize markets so as to ensure human welfare, the idea is to adapt and empower citizens so that they may be far better equipped to satisfy their welfare needs within the market. At its core, it is a supply-driven policy attempting to furnish citizens with the requisites needed for individual success. Hence, its flagship policies are training and lifelong learning. The assumption seems to be that the social risks and class inequalities that emanate from markets can be overridden if we target policy so all compete on a more equal footing.”

Along with other leading scholars, including Canada’s John Myles, Esping-Andersen was given the task of developing the ideas in the European Union’s report on A New Welfare Architecture for Europe. The resulting book, Why We Need a New Welfare State [Oxford University Press, 2002] is well worth reading for anyone interested in progressive alternatives and ideas—including a child-centred social investment strategy, a new gender contract, a new social contract for the elderly, or the quality of working life in welfare strategy.

But current policy objectives in Canada don’t seem to be intended to “invent a new welfare state.” Instead, policy development seems to be firmly on track to develop the “post-welfare state” model of social architecture. For example, the federal government’s Policy Research Initiative, operating under the auspices of the Privy Council Office, is working on a major study of Population Aging and Life Course Flexibility that emphasizes “choice” and “flexibility”—often code words indicating a shift of responsibility to the individual away from society as a whole through state institutions.

The idea of the flexible life course is that people should be encouraged to allocate their activities in different ways over the course of their lifetimes. According to the project’s first director, policies must support the medium-term goal of increasing the total time over life that is devoted to work, learning, and more flexibility over life in care-giving, with the increase in learning being primarily in the middle years of life and in early childhood; with more flexibility in how care-giving, including both child care and elder care, is mixed with work and learning; with most of reallocated time coming from a reduction of leisure in retirement.

The project is big on lifelong learning; helping people to improve their “social capital”—more social policy buzz-words—so they can compete in the market; and persuading people to go on working instead of taking early retirement. Following the Third Way approach—the “hand-up” rather than the “hand-out”—people would be given opportunities, for example, for access to education, help to accumulate financial assets or establish lifetime accounts, to make different choices and establish a more flexible life-course for themselves. And there would be a strong emphasis on equality of opportunity for the future, marking a shift from equality of outcomes for the present.

It’s an approach that should sound alarm bells for women in particular. Like other disadvantaged groups and equality seekers, their long experience has taught them that providing “equal opportunities” for those who start from a disadvantaged position does not result in equality of outcomes. This is the very reason that affirmative action and head-start programs were initiated: so that those who start from behind can at least catch up to the starting line before the race begins, when equal opportunity for everyone has some meaning.

Nevertheless, pieces of the strategic framework are already falling into place. High on the list are specific measures that now seem to be getting much attention in social policy circles. For example, asset-based social policies are now being seen as a way to provide poor families with a way out of poverty, but also potentially another way to help individuals support more flexible life-course arrangements.

Public programs to support older people, and other social programs such as unemployment insurance, have traditionally focused on income transfers from governments to those requiring support. But in the post-welfare state or Third Way, such policies are seen as fostering dependency. The new approach now being promoted in social policy circles is based on helping people accumulate assets—not just financial assets, but assets in the form of human capital, housing, information resources, community resources, and social capital. (“Social capital,” loosely defined, refers to social support networks individuals may have, their contacts and involvement with the community in which they live, and so on). Having these assets enables people to become more self-reliant, or so the theory goes. That fits very well with Third Way market-oriented ideas and would be particularly suited to facilitating a flexible life-course, according to the advocates of this approach.

Asset-based social policies are generally promoted as a way of lifting people out of poverty. The philosophy behind this approach is the view that “income meets immediate needs, but assets help build futures.” Proponents of asset-based social policies also emphasize that they are intended to supplement essential income support strategies, not to replace them. But the possibilities of substitution are clearly there. Some participants at a recent conference on asset-based social policies sponsored by the Policy Research Initiative apparently believed that asset-based policies offer a different look at poverty and provide a more strategic approach for thinking about the long-term future of social policy. For example, they asked, “Would an asset-based stakeholder account—a kind of guaranteed lifetime account that combined income and assets—be a good replacement for the traditional Utopian goal of a guaranteed annual income?”

Canada already has some experimental programs to promote asset accumulation by poor families, administered through Social and Economic Development Innovations (SEDI), which describes itself as a national charitable organization dedicated to enabling poor, unemployed and under-employed people to become self-sufficient. It advocates Individual Development Accounts (IDAs) to help low-income families and individuals build savings by matching each dollar saved over time with a savings credit.

SEDI is currently involved in a demonstration project, funded through the Applied Research Branch of Human Resources Development Canada (HRDC) known as learn$ave, operating at various sites across Canada. A total of $35 million over nine years has been earmarked for the project, which is part of the branch’s work on measures to enhance lifelong learning. Low-income participants enrolled in the program receive from $2 to $5 of federal funds for each $1 saved (up to $1,500 in savings) over a 1-3-year period. The funds can be used to finance a learning opportunity through adult education, training, or micro-enterprise start-up.

Similar programs using IDAs are now in effect in the U.S. and the U.K. Asset-based policies directed at the poor could obviously be expanded and adapted to provide an opportunity for more people to acquire assets at different stages in their lives. For example, one of the objectives of the U.K. government’s asset-based policies is developing savings products suitable for each stage in a person’s life cycle. As the scale of saving increases, proceeds from one product may be rolled into the next, helping people to progress up the savings ladder. It is almost a given that we will hear more about asset-based policies as aging policy moves to a greater emphasis on the flexible life-course.

Advocates of the privatization of public pensions have suggested that individual savings accounts, such as RRSPs, might replace public pensions, thus absolving society generally of the responsibility of supporting its older citizens and shifting that risk and responsibility onto the individual. Similar proposals have been made for unemployment insurance. The suggestion here is that, instead of contributing to a public social insurance program to protect themselves against job loss, individuals would contribute to a personal (“lifetime”) unemployment insurance account. Funds could be withdrawn if the person becomes unemployed. There could also be features that would allow the person to borrow from the account if accumulated funds were not high enough to cover the expenses—for example, if a spell of unemployment came early in a person’s career when not much had been accumulated in the lifetime unemployment account—with the loan being repaid later.

It is easy to understand the attraction of lifetime accounts to the proponents of the flexible life-course approach. With funds in such an account, individuals would then be “free” to “choose” how they spent their accumulated savings: whether on financing a maternity leave, a return to further education, a sabbatical leave in mid-life, or a spell of part-time work to allow care for an older dependent family member. The flexible life-course might then become a reality—at least for those who had been able to save enough in the relevant account.

But of course the price of “flexibility” and “choice” would be the loss of security and even of social cohesion, so beloved of social policy practitioners these days. Inequality and polarization would almost certainly result. Canada’s key social insurance programs, represented by public pensions and unemployment insurance, are programs whereby the risks of providing for retirement income or for income support when a job is lost are pooled among all members of society to ensure that all citizens are equally protected. That equality and security are no longer assured when the risks are transferred from society as a whole to the individual.

And, while the flexible life-course people seem to be intrigued by the idea of lifetime accounts, they also admit that the potential gains for such accounts would depend greatly on the particular designs adopted. Some designs are highly redistributive; others are regressive. That, too, raises concern because either design might be adopted, depending on the political bent of the government implementing the policy. According to Peter Hicks, who has been directing the PRI project on population aging, “They can be used to privatize existing public policies or to strengthen collective social cohesion, depending on design features.”

And that’s why progressive people should be especially vigilant about the direction some of these proposals are taking. We could be facing privatization on a massive scale.


(Monica Townson specializes in social policy and is the author of many books and studies, including the CCPA best-sellers Health and Wealth and Pensions Under Attack. She is a CCPA Research Associate and a member of the CCPA’s Board of Directors. She can be reached by e-mail at [email protected])