Path Dependence and the Stagnation of Australian Social Policy Between the Wars

The interwar years are conventionally described as a period of stasis in Australian policy development. The energy that produced major social reforms at the turn of the century was lost, and this is frequently the period in which is located a transition from being a "social laboratory" to being a "welfare laggard."¹ While these were years of crisis, "hard times" as Peter Gourevitch called them, they did not produce a major realignment of forces such as he analyzed in the American New Deal, the best of his examples of an alliance between agrarian, labor, and some business groups leading to new possibilities. As he argued, "The big policy and political shifts in the thirties came where 'deals' or bargains were made—where diverse societal actors were willing to make major trades that took them away from their traditional political as well as policy attachments."²

There was no such fundamental shift in political alignments in Australia. Conservative governments ruled at the federal level, other than the tragic interlude of the Scullin Australian Labor Party (ALP) government, winning power just as the Depression hit and falling two years later. The ALP split in 1916 over conscription, and split again in 1931, over adherence to orthodox austerity policies. Each time, the party regrouped, and although weakened it continued. And each time, the non-Labor side of politics was the beneficiary, re-forming into new parties, first as Nationalists and then as the United Australia Party (UAP), with Labor defectors providing their leadership. Despite upheavals, these non-Labor parties were also continuous, as coalitions of conservatives, remnants of the social liberalism that was powerful at the turn of the century and Labor defectors. In addition, the Country Party had emerged to influence after 1922, representing rural and conservative interests, and was in a formal governing coalition for most of the period.³ The major political forces had not fundamentally realigned during the interwar years, and in Gourevitch's schema this might seem to explain the stagnation of policy. Yet there were significant forays into social policy development from these conservative governments, despite the modesty of their reforming zeal, and their failure tells a story both of their internal divisions and of the institutional inertia described by path-dependence analysis.

This article argues that these failures can be understood by extending Jacob Hacker's characterization (following Paul Pierson) of path dependence as "developmental trajectories that are inherently difficult to reverse." Hacker's description of American policy showed how early choices shaped later options, and how a mix of public and private provision was fashioned by state policies rather than by default. He emphasized how "timing and sequence are crucial," because past decisions establish institutions and build interests, lead to "long-lived commitments on which beneficiaries make choices," and preclude other options. Hacker's argument was not that change cannot occur, but that it is "channeled by the self-reinforcing mechanisms that propel the existing path of development."⁴ Similarly, Peter Baldwin's description of European policy history noted how alliances between liberal and agrarian interests in Scandinavia meant that welfare developments began with the solidaristic, tax-financed character later—teleologically—associated with Social Democracy. Initiatives for aged pensions (Denmark in 1891 and Sweden in 1913) were funded from taxation, and targeted with means-tests because farmers objected to alternative proposals for an insurance model that they feared would increase their labor costs. As Baldwin put it, "The cornerstone of the unique Scandinavian welfare edifice was set in place already during the late nineteenth century."⁵ It was the subsequent abolition of targeting that most came to characterize the Nordic model, distinguishing it from social-insurance welfare states and from the Australasian system of tax financing with means-tests.

Hacker has argued that "path-dependent processes imply a strong element of institutional inertia. Once past a certain threshold of development, what exists is likely to persist."⁶ In Australia, the interwar period is book-ended by the initiatives at the turn of the century establishing wage arbitration and the aged pension, and then by Labor's...