Social Investment in Aotearoa/New Zealand: Meaning and Implications

Round 1

Reviewer 1 Report

The contents of the paper are potentially of value to an international audience, but they need to be re-cast in a form which is relevant to them and does not take a considerable amount of background knowledge of NZ for granted.

I suggest the author starts with a short sharp consideration of social investment in an international context, then moving on to consider NZ similarities and differences in a much more linear historical manner at the very beginning.

I think there would be some value in the author explicitly addressing the following implicit questions more explicitly: 1) why and how has NZ has been different? and 2) what lessons can be learned internationally from the 2011-2017 NZ experience?

In my view, the main NZ differences were in 1) extensive use of actuarial analysis for resource allocation purposes, on the accountant's assumption that welfare transfers are an economic cost (basic public economics 101 says they are not) and 2) use of PRM for allocation of investment. Why did these differences arise?

The paper correctly identifies a (it should be "the" - see below) primary goal of the approach as reduced public expenditure - and by implication taxes, yet this is, amazingly, tucked away in brackets, rather than central to the paper.

The political economy - why NZ did what it did, and why it might have differed from approaches in other countries - needs more explicit exploration. This story, in my mind, is fairly simple in the context of the central goal the author identifies. Under the pre-1996 first past the post electoral system, the centre-right could generate an absolute parliamentary majority to directly drive their ideological vision of a lower tax, smaller government state. Post introduction of proportional representation, it simply could not, on the same share of the popular vote (the Bolger/Richardson government attracted about the same percent of popular support, and had over 60% of Parliamentary seats, as the Key/English government, which had fewer than half the seats. I would argue that it is that Parliamentary arithmetic that has been the political driver). Equally, the consequence of pre-1996 slash and burn were not widely popular within the marginal voting public that was necessary for generating a centre-right coalition government. But ideologues do not give up their ideology. The conundrum of being a minority government plus an ideological desire to implement a smaller state under such conditions led to Bill English's technocratic solution of a centre-right social investment state, whereby ideology was not to the forefront (cleverly capturing international centre-left rhetoric about social investment and the dignity of paid employment and, in a Rawlsian sense, notions of policy apparently helping the least well-off, which at least confuses marginal voters as to intent), and state working age welfare spending and hence taxation could be further reduced (note that much of the centre-right tax cuts post-MMP have been funded out of long term non-indexation of working age welfare benefits to inflation, so enhancing social protection was clearly not on the agenda), the ultimate ideological goal, but by technocratic as opposed to directly political means.

An issue in my mind is whether Bill English genuinely believed his social investment rhetoric of lower government spending plus better outcomes for the worst off and was simply logically confused in designing social investment (I think, largely, he did, it goes with the conservative concerns of his Catholicism, and politicians in my experience do not tend to inquire too carefully when being sold policy win-wins by policy activists) or was supremely cynical (as I suspect some of his economic advisers, who were more on top of the technical detail, were).

The article needs some explicit explanation of New Zealand society and politics for it to connect internationally. That need not be long but it needs to be well-thought out and consistent. Few internationally will know what "Aotearoa" is, nor what its use is intended to politically signal when it is not an official name of the country. Ditto "Pakeha". Equally, "National" and quite possibly "Labour" are meaningless to most readers internationally.

The article makes far too much of the apparent work focus of social investment in NZ. In NZ, a strong paid work focus goes all the way back to at least the 1938 Social Security Act, enacted by Labour, and is in all subsequent versions of the Act. In addition, a focus on paid work is an important part of centre-left traditions of social investment internationally, including the Nordics. In addition to claiming a smaller state was central to social investment in NZ (absolutely correctly - see above - but needing far more emphasis), the article incorrectly claims employment to be central to social investment in NZ. This, in my view, is wrong. Social investment paid lip service to paid employment as a rhetorical goal for political reasons - paid employment being a goal valued across the political spectrum - but paid employment was not actually valued in the actuarial social investment algorithm - only time off welfare benefits, which may or may not involve stable paid employment. Look at what they are doing, rather than what they are saying. You manage what you measure, and the NZ investment approach was supremely uninterested in measuring paid employment, which tells one something very important about it!

The article discusses ethical issues with PRM, assuming readers know what these issues are. A brief discussion of those issues would be of value.

A further factor in social investment as a policy phenomenon in NZ is the rise of big data and unit data and the push to use it in evidence-based social policy. This phenomenon is not really given the attention it deserves in the paper.

Lastly, I think the author needs to give a clearer picture of what has happened to social investment in NZ over the last 3 years - it has been quietly dropped. Why?  A clearer, more explicit potted history for an international readership would again be valuable.

Author Response

Many thanks to the reviewer for the detailed and thoughtful commentary. I have extended the discussion of the international literature but have not attempted to locate the New Zealand work in that literature in any detailed way. To do that would I think require a different article and is beyond the scope of what can be satisfactorily undertaken here. It can certainly be the basis for a further piece of work. As I have noted here I have drawn on the international literature to inform that discussion.

I have added appropriate footnotes to ensure that the New Zealand terminology is understood internationally.

I have reviewed the discussion in the article around the use of analytic data as a core part of the New Zealand approach and I think that is now adequately covered with both the description and the discussion of the statistical issues in the data. I have also briefly added to the discussion on the ethical issues in predictive risk modelling.

I have reviewed the original documents and associated policy decisions on social security changes in the light of the reviewer's comments about the over-emphasis on paid work. In the light of that review I have not substantially altered the discussion because that emphasis was key to those changes and provided much of the political, discursive and ideological framing for the changes. The article notes on different occasions that the approach embeds a residual model of welfare which by definition means less state, lower expenditure and, as I note, reduced citizenship rights. The reviewer is right that the changes were not interested in the quality of or nature of the employment - I have developed that point and noted too that the subsequent research shows significant churn in those moving/moved from benefit to work.

As noted in the response to reviewer 2 I have added a paragraph at the end about what has happened to social investment since the change of government. 

Reviewer 2 Report

Paper is an important contribution to the literature providing a much-needed documentation of the development of the A\NZ social investment approach and very usefully drawing out its neoliberal framing.  To this extent it will provide a very useful supplement to the largely European focussed study of social investment which while recognising the neoliberal tendency of the social investment paradigm does not have such an extreme ‘working example’.

The policy details of this story are substantial and well organised.  The paper also brings together relevant secondary New Zealand source materials. 

The only problematic area in terms of writing\presentation   was the relative lack of paragraphing.  Not sure if this may have been a technical problem with downloading the manuscript but paras were often way too long to my mind.

A couple of areas where real value could be added were first the references to the wider international literature were very sparse.  Some major texts were missing e.g. Hemerjck’s Uses of Social investment; and a more substantial discussion of the literature on neoliberal versus social democratic strands of social investment really should be included.  Also there was a tantalising reference to the earlier A\NZ approach to social investment\ development )Lunt) a comparison of which would greatly locate\enrich the understanding of the more recent policy paradigm.  Also A\NZ has more recently become noted internationally for its pioneering of the ‘wellbeing’ budget approach and it would be good to know what implications if ant this has had\ might have for the social investment approach.

Author Response

Many thanks for the feedback and comments. The paragraphing issue arose from the processes at the publication end. I have redone the paragraphs and broken up some of the existing paragraphs. I have drawn on Hemerijck (2017) in the resubmitted text and have added a comment about the directions of the Labour-led government at the end of the article. I have also elaborated further on Lunt's work from the Labour period 1999-2008.