With a detailed description of the history of retirement incomes policies in Canada and Australia, particularly since the Second World War, Karimi argues that the divergent approaches taken reflect wider political and national identity factors than are usually highlighted in comparisons of national social welfare systems. In particular, he suggests Australia's homogeneity explains this country's more unified labour movement and in turn its emphasis on full employment and industrially negotiated welfare with a more residual, means-tested welfare system provided by government; Canada's greater heterogeneity and more fragmented labour movement was unable to exercise such industrial power and development of the government welfare system was primarily negotiated through inter-governmental forums where concern for national unity led, somewhat paradoxically, to a more universal system.
The book begins with an exploration of theoretical perspectives on the welfare state before describing the pension systems in the two countries. Karimi then presents his views on the national settings involved and the roles of class forces and Keynesianism in shaping the different welfare systems in the initial postwar period. The following two chapters set out in considerable detail the postwar developments in each country. These lead to a chapter on ‘restructuring’ the welfare state from the 1980s with the rising influence internationally of neoliberalism, followed by separate chapters describing in detail the measures taken in each country. A final chapter summarises Karimi's thesis about the key factors that have shaped the two countries’ contemporary arrangements.
The book also has an impressive bibliography, detailed end notes for each chapter and a comprehensive index.
There is considerable evidence to support Karimi's view that national identity has played a substantial part in the development of Canada's welfare state. Keeping Quebec in the confederation has required meeting that province's strong demands for generous and universal welfare programs. Medicare, even more than the retirement income programs, has become synonymous with Canada's national identity, including its distinctive character contrasting with that of its southern neighbor.
Karimi's chacterisation of Australia's welfare system in terms of its industrial relations links also has considerable backing, drawing in particular on Frank Castles’ work. Overall, however, the analysis of the forces behind the Australian system's design is not convincing. He gives too much emphasis to ideology and too little to pragmatic responses to prevailing circumstances and path dependency. The ideological emphasis reflects Karimi's own strong views that are constantly voiced: that universality and social solidarity are essential while means tests are demeaning; that reliance on the market is regressive, reflecting the interests of business and neoliberal think-tanks not the public. There is little analysis of the impact of the different measures taken or of the significant debates within both sides of politics, particularly in Australia, about the most efficient, effective and equitable approach to retirement income policy.
In Australia, support for means tests has come from both the Left to concentrate assistance on those most in need, and from the Right to constrain government expenditure. Support for universal age pensions has also come from both sides, the Left emphasizing social solidarity and absence of stigma, the Right concerned that means tests might discourage self-help and limit middle class access to support. The politics of national superannuation in Australia has also crossed ideological lines, the scheme legislated but never implemented in the 1930s was initiated by the conservative side keen to promote thrift, while a somewhat similar scheme was advocated by Labor in the Whitlam years to deliver better retirement incomes to retiring workers who lacked occupational superannuation.
Arguably more important than ideology in Australia has been pragmatism in response to external forces including global and local economic circumstances and social demographic change. To present the Hawke-Keating Governments' initiatives as ‘retrenchment’ of the welfare state in line with neoliberalism is to ignore the measures that complemented the re-introduction of an assets test, such as increased rates of benefits and the introduction of Medicare. That these Governments placed caps on spending and taxation as a percentage of GDP, and limits on government debt, was not some neoliberal ideology but orthodox economic policy responses to stagflation and recognition within Labor of the excesses of the Whitlam Government.
Certainly, the reforms in Australia in the 1980s and 1990s did give much greater emphasis to markets, but against the background of a century of inward-looking protection and regulation on a scale not experienced by Canada and that could not be continued in the modern global economy. Neoliberalism? Yes, I suppose it could now be called that, but few in government at the time saw the changes through such an ideological lens; rather, they saw them as practical responses to the real world problems they were facing at the time. Karimi quotes Michael Pusey's epithets about the ‘economic rationalists’ in the bureaucracy, but the reformers in government at the time were simply looking to ‘manage for results’ where the results sought by the elected government were very often more equitable distribution of resources and greater equality of opportunity as well as greater efficiency and increased economic growth.
The prevailing economic and budgetary situation did not allow for a Whitlam-style national superannuation scheme to supplement the age pension. Demographic projections also posed high risks into the future from any government-managed benefits-promise system. But the desire for improved retirement incomes for the working population could be met responsibly by mandated employer contributions effectively paid for by employees through wages restraint. This was not ‘retrenchment’ but enhancement of the welfare state as it then existed in Australia. Yes, it would also in time reduce growth in age pension outlays, but the Keating Government expected most future retirees would still receive some age pension as part of their improved total income and standard of living.
Pathway dependency also helps to explain the continuing divergence of the two countries' retirement incomes policies. Having established after the Second World War a national benefits-promise superannuation scheme additional to a universal tax-financed age pension, it was always going to be hard for Canada to move away from that structure. Nonetheless, Canada like Australia has had to respond to global and local economic pressures and its age pension is now not quite as universal as it was, as a consequence of the tax clawback introduced when means-testing proposals were rejected. Similarly the national superannuation scheme now has increased contribution rates and some limitations on benefits, though not as stringent as originally proposed and certainly without the ‘privatisation’ some had suggested by replacing the benefits-promise design with defined contributions and market-based investment.
Karimi refers to the role played by the World Bank and the OECD in promoting more market-oriented approaches. There was indeed a long debate between these organisations and the ILO, in part reflecting different philosophies, the ILO strongly defending social insurance and the WB/OECD encouraging a more limited role for government via minimum income support supplemented by mandated and/or voluntary savings, the latter seen to promote national savings and investment and economic growth. The debate was largely resolved, however, when the ILO agreed in 2012 the importance of minimum income support recognizing social insurance alone failed to help many of the poor in developing countries and the WB/OECD acknowledged their favoured approach did not remove risks but shifted them between governments and individuals – the risks still needed to be carefully managed and it was not necessarily the case that individuals were better placed than governments to do so.
In other words, resolution of the debate was not achieved ideologically but pragmatically, both sides highlighting the importance of the basic minimum income support ‘pillar’ while noting the different choices open for the other ‘pillars’ aimed to facilitate maintenance of living standards in retirement and the need for careful management of the associated risks by governments and by individuals.
The Australian approach most closely follows the WB-preferred mix of pillars with no government-managed social insurance pillar. It made sense in the circumstances and given our history, limiting the risks to government and future generations of taxpayers and providing an increase in national savings; it also offers more opportunity for tailoring savings and retirement income products to individual needs and preferences. However, we are now grappling with the fact that some of the risks we leave to individuals are not easily managed by them, particularly around the provision of secure incomes in retirement from accumulated savings (i.e. managing longevity and inflation risks) and ensuring savings, with any entitlement to the age pension, are sufficient for adequate income maintenance (i.e. managing market risks and understanding tax and means test rules). Our system is also very complex and involves substantial administrative costs.
Karimi may well be right about his central thesis regarding the distinctive drivers of the pension systems in Canada and Australia, particularly the role of national identity in Canada and the role of the labour movement in Australia, but he overplays the role of ideology and underplays the role of pragmatism.
Nonetheless his is a well-written and researched book with a wealth of detail and excellent notes, bibliography and index.
