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Part I
Theoretical frameworks
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ONE
Social investment, inclusive growth that is sustainable and the new global social policy
Christopher Deeming and Paul Smyth
Introduction
Over the past two decades, there has been a fundamental reappraisal of the economic value of social policy, coming from a number of different directions. The first is the adoption of the 'social investment perspective' (OECD, 1997a: 14) in the advanced economies, as the old post-war welfare states were reformed in an attempt to address the 'new social risks' associated with post-industrial society. The social investment perspective in social policy appeared to offer a plausible alternative to neoliberalism and the neoliberal critique of welfare (and the discussions about 'permanent austerity' and 'welfare state retrenchment' that proliferated during the 1990s and early 2000s). The second major shift was the transition from the so-called 'Washington Consensus' towards 'pro-poor growth' policies and 'inclusive growth' policy frameworks for reducing poverty in developing country contexts in the Global South (with an 'emphasis on increasing the opportunities for the poor to contribute and benefit from the growth process', as the World Bank observes, 2008: 7). Third, and related, is the shift in policy perspective at the OECD in response to rapidly rising inequality in the advanced economies (OECD, 2008, 2011a, 2015b), as international organisations and epistemic communities began to diffuse ideas for inclusive growth (OECD, 2013a). Finally, there is the environmental imperative of 'sustainability' that is shaping the new global development agenda (Sachs, 2015). Today, we find that socially inclusive models for sustainable growth and development offer policymakers in the Global North (as well as the South) a plausible remedy to address rising social inequality. Although initially quite independent, these intellectual movements and literatures, orientated towards investment and inclusion, have now begun to converge and coalesce and are increasingly seen to contribute towards a single analytical framework and shared policy agenda for human development and flourishing.
In this chapter we consider the emerging global social policy frameworks for inclusive growth and social investment, and draw out the sometimes similar and sometimes quite distinctive insights that these two policy perspectives now bring to our understanding of the relationship between economy and society in the 21st century, and for the future development of global social policy more generally. While global social policy is in the process of being reframed, this chapter, and the other contributions to this volume, make clear some of the key challenges that collectively all societies now face, but we also hope that readers of this volume find some grounds for fresh optimism in today's efforts to humanise global market capitalism, to the benefit of all.
The social investment perspective
The idea of 'social investment' (Midgley, 1999) and the 'social investment perspective' (Jenson and Saint-Martin, 2003) in social policy represent the latest justification for social spending of the investment type to guide the development of the economy and society in the 21st century. With the emphasis on investment it refocuses attention on the productive function of social policy for economic development, as James Midgley (1999) notes, eclipsed for some time by the emphasis on 'welfare state' building and the focus on social protection and compensation roles. Social spending in the post-war period had been insufficiently focused on anticipated investment returns, or so it was claimed (Smyth and Deeming, 2016). A core defining feature of the social investment perspective then is the focus on the 'productive' contribution that social policy can make to the economy, that is social policy as a 'productive factor' (European Commission, 2000: 5). From this perspective, the 'challenge is to ensure that the returns to social expenditures are maximised' (OECD, 1997b: 5). The definitions of social investment in Box 1.1 by some of the leading international organisations show how social policy is being reframed for the 21st century.
Box 1.1 Definitions of 'social investment' in the work of international organisations
The Organisation for Economic Co-operation and Development (OECD) advocates a social investment approach when assessing social programmes. The challenge, according to the OECD, is to ensure that the returns to social expenditures are maximised, in the form of social cohesion and active participation in society and the labour market. This approach stresses interventions that take place early in the life cycle or that support those contributing to their own welfare. Particular attention needs to be directed to supporting those who have low earnings but are working or in training, and to those who are caring for others. A social investment approach also requires a realistic assessment of whether provision of welfare services through public sector institutions are always appropriate. Other social and economic agencies may fulfil the same functions at lower cost, the OECD notes.
The European Commission argues that 'social investment is about investing in people. It means policies designed to strengthen people's skills and capacities, and to support them to participate fully in employment and social life. Key policy areas include education, quality childcare, healthcare, training, job search assistance and rehabilitation'.
The Economic Commission for Latin America and the Caribbean (ECLAC) defines public sector social investment – unlike compensatory policies, which address the effects of an incident or a hazard that has already occurred – as aims to help prevent or prepare for adverse events, and to support and equip people for coping with them, rather than to compensate those affected by, for example, market deregulation. From this perspective, public spending is not a cost for the economy but rather a series of investments that are necessary to ensure strong, lasting and shared growth, meet new social needs and safeguard economic, social and cultural rights. Social investment strategies set priorities with a view to supporting people throughout their life cycle, focusing on groups that are subject to social exclusion (including women, young people and children) in fundamental areas of human development (such as education, health, employment and housing). Social investment can encompass spending in both the public and the private sectors. However, public spending, particularly public social expenditure, makes up the bulk of it.
Sources: Adapted from OECD (1997b: 5–6), the European Commission website ( http://ec.europa.eu/social/main.jsp?catId=1044) and ECLAC (2014: 50).
In Chapter Twelve, Jane Jenson examines some of the ideational work behind these 'quasi-concepts' (see also Jenson, 2010, 2015) – 'social investment' and 'inclusive growth' – and explores their ideational linkages. Having entered the language stream of the social sciences, these emerging concepts and policy perspectives have clearly gained traction in recent years. Figures 1.1 and 1.2, for example, show the number of 'hits' retrieved from the Social Science Citation Index after entering these terms. Despite growing popularity, these emerging concepts are subject to many interpretations, because like all 'concepts' in the social sciences they are dynamic historical constructions, as Béland and Petersen (2014) observe.
Figure 1.1 'Social investment' as a key phrase within the social sciences, 1998–2016
Source: Web of Science (Social Science Citation Index)
Jean-Claude Barbier argues that social investment is a problematic concept with an ambiguous past (Barbier, 2014), that is open to alternative interpretations, and with ongoing uncertainty about what social policy inspired by social investment thinking might or might not encompass (see detailed reviews by Morel et al, 2012; Hemerijck, 2013, 2017; Leibetseder, 2017; Midgley et al, 2017). Nevertheless, we find certain core defining features that may be observed in the development and dissemination of policy ideas and reports from the leading international organisations:
Figure 1.2 'Inclusive growth' as a keyword within the social sciences, 1998–2016
Source: Web of Science (Social Science Citation Index)
•a child-centred focus, exemplified in OECD policy documents and work streams such as 'Babies and Bosses' (OECD, 2002, 2003, 2004, 2005a, 2007; see Mahon, 2008, 2009), involving publicly funded early childhood education and care policies and programmes (OECD, 2011b) as well as UNICEF and World Bank documents (Jenson, 2010; Mahon, 2010).
• state-led investment in human capital policies for skills and lifelong learning (OECD, 2006a, 2013b).
• active labour market programmes and policies (ALMPs) to increase employment and boost employment growth (OECD, 1994, 2006b, 2013c), and employment policies that invest in human capital, remove obstacles to employment and prevent the depletion of human capital during long periods of unemployment (European Commission, 2016).
• supporting innovation systems and learning in the knowledge-based service economy (OECD, 2015a).
Some of these themes and ideas behind social investment thinking in social policy may be observed in works from the late 1980s (some point to the work on the 'enabling state' for example; Gilbert and Gilbert, 1989). However, the new 'investment' perspective in social policy began to be more formally identified with the work of Anthony Giddens (1998) advocating the 'social investment state' and that of Gøsta Esping-Andersen, Duncan Gallie, Anton Hemerijck and John Myles, who also argued that welfare states needed to adopt a child-centred perspective in order to adapt to the new social and economic conditions associated with the transition to economic globalisation and a shift from industrial to the post-industrial knowledge-based economy (Esping-Andersen et al, 2002). These changes in the economy and society had created 'new social risks', adversely affecting the opportunities of low-skilled workers, women, young adults and children (Armingeon and Bonoli, 2006). As Anton Hemerijck claims in Chapter Two, this now demands a new social investment welfare state architecture based on three functions to cope with the new risks: raising human capital 'stock', easing labour market 'flow', supported by a safety net 'buffer'.
Thus, ideas about the 'productive' role of social policy and a 'social investment' approach to policymaking began to be diffused by international organisations from the late 1990s onwards (Jenson, 2010; Mahon, 2010; 2013). The new thinking inspired political platforms across many of the advanced nations and developing economies (for example, Lister, 2002, 2004; Jenson and Saint-Martin, 2003; Taylor-Gooby, 2004, 2008; Dobrowolsky and Jenson, 2005; Jenson, 2010; Deeming and Smyth, 2015; Hemerijck, 2017). Social investment initiatives were embraced by policymakers at the European Parliament (European Commission, 2000, 2013, 2015) who also saw the promising future of the social investment approach now being reflected in notions of 'active social policy' (OECD, 2005b: 27–40) and the OECD (1988, 1989) watchword of an 'active society' more generally (Jenson and Saint-Martin, 2006). Giuliano Bonoli has also mapped the 'active social policy' turn (Bonoli, 2013). The overall perceptions then of 'new welfare' (Lister, 2002; Taylor-Gooby, 2004), 'new welfare states' (Powell, 1999; Esping-Andersen et al, 2002; Taylor-Gooby, 2008), and 'changing welfare states' (Hemerijck, 2013), fashioned out of a new welfare state architecture for 'preparing' society rather than 'repairing' it, are still relatively recent as Anton Hemerijck (2015) suggests.
The strength of the social investment approach, or so it is claimed, is the successful redefinition of key social service expenditures as investments in human capital; something that was said to be lacking in the social policy tradition, at least in the British tradition of social policy analysis established by Richard M. Titmuss and T.H. Marshall. It was also thought to be largely absent in the preceding period of R.H. Tawney, when in fact the productive value of social policy was keenly appreciated (for a reappraisal see Smyth and Deeming, 2016, and Morel et al, 2015, who focus on the early origins of social investment thinking in the work of Alva and Gunnar Myrdal). In the post-war period of the 'neoclassical' synthesis in economics, the rationale for state intervention was understood primarily in terms of a macroeconomic imperative to maintain full employment. Today, the economic arguments for social investment hinge more on arguments about the potential, future returns on human capital spending. Here the work of the American economists and Nobel Laureates Gary Becker (1964) and James Heckman (for example Heckman and Masterov, 2007) on human capital and education investment in the early years of child development is very important and has lifelong effects, as Jon Kvist illustrates in Chapter Nine. However, this particular view of social policy, largely defined by the logic of 'returns' and 'investment', has attracted critics.
Jane Jenson and Ruth Lister were prominent early critics of 'the social investment state' associated with a 'third way' politics that was increasingly future-orientated and accepting of 'equality' of 'opportunity' as a political ideal, rather than any notion of fairness in the here and now (Jenson, 2001; Jenson and Saint-Martin, 2003; Lister, 2003, 2004; Dobrowolsky and Jenson, 2004, 2005, 2008). The political rhetoric of social investment (framed in terms of 'human capital' development in children, as future workers) has increasingly masked or diminished the equality claims of women (Jenson and Saint-Martin, 2003; Dobrowolsky and Jenson, 2004; Jenson, 2009), people with a disability (Cantillon and Van Lancker, 2013), and older workers in ageing OECD societies who now appear to lack a productivity argument in the 'Heckman Equation' that underpins social investment thinking (Deeming and Smyth, 2016). A second critique acknowledged the legitimacy of social investment orientated social policy but saw it as crowding out traditional redistributive and compensatory functions of social policy and social protection. A number of studies have noted the coexistence of social investment strategies with rising poverty and inequality (Cantillon, 2011; Vandenbroucke and Vleminckx, 2011; Pintelon et al, 2013). Social investment policies appear to have benefited those who are least disadvantaged (the so-called 'Matthew effect'), and so run counter to the goals of the social investment approach.
Then, as Brian Nolan (2013) observes, there is the near impossibility of separating out social policies that are about 'investment' (those looking for rates of 'return'), from those about some form of consumption with little or no 'return' – not to mention the causal uncertainty and issues involved in calculating the social return on social investment (also see Anton Hemerijck's discussion on the economics of social investment, Hemerijck, 2012: 51–56). The notion that compensatory social policies like unemployment benefits are 'passive' with little or no social return is highly problematic. For example, out-of-work benefits help to support livelihoods, aid workers in their search for new employment, and are straightforward crises management instruments during a downturn (Starke et al, 2013). Unemployment benefits as much as education then have a dual social and economic function as James Midgley argues in Chapter Eleven. But, of course, to affirm their productive value is not necessarily to diminish their social protection function. As Hemerijck observes of Nolan in Chapter Two, the latter's main case against the social investment approach appears to be rather that an emphasis on justification in terms of mainstream economic arguments will diminish the case based on progressive social values.
These criticisms, however, draw our attention to the major question in the literature regarding the future of the social investment perspective: namely the possibility of a trade-off between the new investment agenda to raise economic participation and productivity and the traditional emphasis of social policy on social security and social protection. This issue has shadowed the social investment agenda since its early articulation by Anthony Giddens where investment policies could indeed be read as substitutes for income maintenance. Gøsta Esping-Andersen's alternative case argued the success of investment initiatives actually required a strong welfare state with an emphasis on social protection (Esping-Andersen, 2001). Social protection is of paramount importance even in the most productivist of welfare states he argues. The human capital based investment strategy will inevitably lea...
