A Third Way for Australia 

Paper for The Third Way Conference

Hosted by Mutuality Australia and the Australian Fabian Society 

Melbourne, 19 November 1999

Mark Latham - Member for Werriwa

Mutualism is the number one issue in Australian politics.  While this may not be clear to the party professionals and spin doctors, it is the common thread running through public concerns as diverse as globalisation, regional development, community decline and law and order. 

It is the one universal issue on the public agenda.  This is because it concerns the relationship between people.  Not the relationship between economic players in the market.  Not the relationship between government and its citizens.  But the relationship between people: acts of trust and cooperation; the reciprocated bonds of a mutual society. 

Mutualism is the one issue in which we all have a stake.  It puts all of society's interests in the same basket.  It is not a contest between the economic haves and have-nots.  It is not a question of parochialism or nationalism.  It is not an attempt to subdivide society into the tribalism of identity politics and sectional interests. 

Indeed, there can be nothing sectional about the politics of mutualism.  It is the issue which, above all others, defines the core of our social contract.  Mutualism is in the relationship between people - all people.  People at the top of society as much as people at the bottom.  When the rich build a gated housing estate, this is an act of social exclusion - no less damaging to mutuality than the insecurity and isolation of the poor. 

In fact, our society is experiencing a new type of poverty - the poverty in human relationships.  This is one of the paradoxes of our time: the growing number of people who are materially well-off, yet socially poor.  No matter the size of someone's bank account, if they cannot walk the streets with a sense of safety, find public places and enjoy community spaces then they lack the essence of social capital.  None of us can live by financial capital alone.   

Public policy needs to build a virtuous circle in public life - striking the right balance between the market economy, the role of the state and the strength of civil society.  If the emphasis tips too far in one direction, governance starts to break down. 

For some time this balance has been moving against society.  While throughout the 20th century, market forces have thrived and the size of government has grown substantially, networks of community and the trust between people have been lost.  It is not difficult to understand why.  As markets and governments have become more prominent, they have taken over many of the things people used to do for themselves. 

In particular, we have lost a lot of public morality and trust.  These are the informal rules of society, the obligations people work out between themselves, without interference from governments and economics.  Morality, trust and obligation: these are the things that tell us what sort of society we have become. 

Both markets and governments have a habit of treating people as rule followers, rather than rule makers.  If this influence becomes too strong, people can lose the habit of working out rules and obligations between themselves.  This is when morality and mutualism start to break down.  Society begins to turn on itself.   

This appears to be Australia's unhappy lot.  The relationship between government, markets and society has become imbalanced.  While this century government has grown in its capacity to educate, transport and care for the health of its population, society has lost much of its mutual trust and harmony.  While global economic markets have been able to create huge amounts of wealth and technological progress, society itself has been downsized. 

Few things seem to happen anymore without a government law or market transaction to guide them.  This is how record levels of GDP in Australia now sit alongside record levels of crime, social stress and family breakdown.  The political balance needs to swing back towards civil society. 

This task, in fact, requires a new type of politics.  The Left and Right have been as bad as each other.  The Left has allowed its distrust of markets and endless faith in government to obscure the importance of civil society.  The Right has been so focussed on replacing the state with markets that it has forgotten how to cultivate a trusting society.

This is the politics of the absurd.  The Left identifies with the good society but rarely talks about the mutualism and trust between people.  The Right recognises the importance of moral obligation but gives the impression of trusting market transactions more than civil society.

Each side blames the other for destroying community bonds when in truth, both are culpable.  This narrow debate points to the need for a Third Way - one which produces a stronger economy and stronger government through the creation of a stronger, more trusting society. 

Mutualism is the key to this virtuous circle.  As Francis Fukuyama and others have argued, mutual trust creates a more productive economy.  It lowers transaction and checking costs; it builds workplace cooperation and productivity; it allows collaboration and competition to co-exist.    

Mutualism also underpins the success of government.  It lowers the costs of authority and enforcement; it places cooperation at the centre of the social contract; it allows moral order and personal liberty to co-exist. 

States and markets, of course, are here to stay.  It is just that their effectiveness is interdependent with social capital.  The Third Way is neither anti-state nor anti-market; it sees both sides of the old politics as a positive force for progress.  It simply seeks to balance them against the virtues of mutual trust and shared obligation.  It is, uniquely in the politics of our time, pro-market, pro-state and pro-civil society. 

The Third Way is not, as its critics sometimes say, a neat compromise between Left and Right.  It is committed to issues beyond markets and states.  It introduces a third sector, the social sector, into public policy.  It addresses the universal concern in society about the loss of social capital and social cohesion. 

In this era of unlimited change - what some have described as the acceleration of history - each of our institutions and traditions are under stress.  Society now faces the challenge of moral confusion - how do we relate to each other, what are our obligations to each other, what are the values and interests we might share in common.   

Globalisation and the Information Age, with their constant widening of life's experiences and life's responsibilities, are asking us to place our trust in strangers; to make connections with people we have never met, and are never likely to meet.  The circle of trust and goodwill is being stretched from the local to the global, plus across a wide range of life's values and identities.   

These challenges can only be met by a mutual society.  This is why the Third Way is so important:
          - to give new meaning and relevance to mutualism;
          - to give people new things to do in common;
          - to reinvent mutualism for the Information Age. 

The New Mutualism

The idea of mutualism, of course, is not new.  It can be dated to the Scottish Enlightenment 200 years ago.  What is new is the social environment within which these ideals might be expressed.   

Mutualism now needs to cover wide distances, from the local to the international.  It needs to cross social boundaries - across national, racial and other identities.  It needs to cater for social diversity while also developing a shared morality and social norms.  It needs to co-exist with the other values of a modern society: innovation, education and the inevitability of competition. 

Just as the Information Age is remaking society, we need to remake the concept of mutualism.  We can not go back to the future.  Many of the institutions with which we associate mutualism, such as cooperatives and Friendly Societies, are struggling to adapt to the new economy and new society.

In many ways, they were creations of the Industrial Age, specific in their purpose and local in their design.  Yet the Information Age is demanding institutions which are multi-purpose and multi-located.  As with all parts of politics, mutualism can not afford to fence itself off, either in its geography or its scale.

Mutualism needs to swim with the tide of history, not against it.  We need to treat the Information Age as an opportunity, much more than a threat.  We need to use its technologies as a way of creating new certainties, a new common purpose in civil society. 

The Internet, for instance, is allowing its users to establish new networks of contact and association. Research in the United States has shown how these 'virtual communities' are able to generate connectedness and trust between people, no less than face-to-face contact. (1)   Indeed, for housebound people - such as the disabled, the sick and non-working parents - the Internet is able to expand their circle of social contact.  

New systems of governance also need to be harnessed to the cause of mutualism.  The internationalisation of capital has produced forums of international economic governance, such as the European Union and APEC.  This trend in economic policy needs to be balanced by the devolution of social policy.  As economic governance continues to move upwards (to global forums) social governance needs to push downwards (to mutual forums). 

This matches the social agenda of our time.  Race Mathews' research has shown how mutuals arise from "a pressing need in society”. (2)  The most pressing need of our civilisation is social capital.  People are longing to belong - to rediscover the shared values and trust of a good society.  They are looking to new types of governance to fill this gap in their lives.  

We need to replicate in the work of the public sector the things which are already working well in civil society.  After all, not all forms of social capital are declining.  The problem lies in a certain kind of institution, those built on hierarchy and centralised power.  These are the "vertical" structures of the Industrial Age, dominated by patron/client relationships.   

Show me an institution which tells people what to do and I'll show you an institution in decline.  This can be seen in the dwindling membership of trade unions, political parties, churches and service clubs. 

Yet other institutions are moving against this trend, growing their support base and social capital.  These are the freely formed, casual networks of civil society.  Landcare, Clean-up Australia and informal sporting activities, such as touch football and indoor cricket, are examples of this process.  They are distinctive for their "horizontal" organisation, flattening the hierarchy of power and fostering mutual relationships between people. 

The Network Revolution 

These networks of association and common purpose hold the key to the new mutualism of the Information Age.  We need to join the network revolution. 

Networks are the natural mode of organisation for an information society.  This can be seen in the global alliances emerging in industries as diverse as the airlines and financial services.  It can be seen in regional economies as diverse as the high-tech of Silicon Valley and the high fashion of Northern Italy. 

In the social sector, it can be seen in the work of social entrepreneurs, with their capacity to create mutual networks of community development.  In public life, it can be seen in the success of communitarian politics as a way of developing networks of moral dialogue and consensus.   

Networking is inherent to the nature of the new information technology.

Advanced IT allows the centre of an organisation to communicate directly with each of its component parts.  This collapses management hierarchies and decentralises know-how and administrative control to all parts of an organisation. 

Hierarchies concentrate knowledge and authority at the top of the administrative pecking order.  Know-how only ever passes downwards.  Thus, as one gets closer to the bottom of a hierarchy, people are increasingly engaged in specialised and repetitive tasks. 

Networks, by contrast, flatten this pecking order and establish mutual relationships of trust, negotiation and reciprocity.  The wide spread and value of information in our society means it can no longer be hoarded at the top of an organisation.  It needs to be dispersed, thereby opening up networks of cooperation and self-governance. 

This is the defining feature of a network: it has no centre of authority.  Rather, it relies on a dense web of collaboration and creativity for its success.  It meets the demands of the Information Age for adaptable and multi-disciplinary organisations. 

Networks have a unique capacity for capturing the benefits of both competition and cooperation. They are good at accommodating diversity, while harnessing the skills and resources of their members.  They can cover wide distances and interests, while creating common values and purposes between people. 

Networks are a good fit for the new politics.  As a society we have lost our faith in people and power at the centre of things.  We are rebelling against the manipulation and misuse of institutional power.  Hence our distrust of organisations as diverse as parliamentary democracy, talkback radio and SOCOG.   

We want our institutions to rid themselves of "Richo's disease" - doing whatever it takes to get their own way.  The key to Information Age politics is to cut out the middle person - to open up new forums of transparency and direct democracy, to disperse all forms of economic, social and political power.   

The Third Way

In terms of organisational theory, it might be thought of this way.  The first way lies in the individualism of the market.  The second way lies in the hierarchies of the state.  A Third Way can be found in the mutualism of network organisations.  It is the coming way. 

The Industrial Age was characterised by the aggregation of economics and governance.  This was the era of massification and standardisation - big industrial corporations, big government departments and big interest groups.  The Information Age is turning these principles on their head.  It is an era of disaggregation and demassification, hence the stunning growth of small businesses and niche markets. 

This trend in the new economy is now seeping into social governance.  It is placing a premium on the relationship between people: the importance of collaboration in the marketplace; the significance of social capital in civil society.  Through the theory and practice of networks, mutualism is now swimming with the tide of the Information Age. 

Public policy, so often the last to move during a period of rapid change, has much to learn from this trend.  Mutualism needs a fresh program of reform; a fresh platform of ideas under seven headings:

1.     Mutualism in the co-operative sector

In the past, mutualism has had a split personality.  Last century it promoted economic cooperatives as a distributive device - allowing labour to hire capital, rather than the reverse.  In recent decades, however, many of these cooperatives have become institutionalised, losing their identity and participatory governance.  Australia's agricultural and financial cooperatives, for instance, are private sector hierarchies by another name.  In their mass scale and management, they rarely foster mutualist ideals. 

This defies the proper role of a mutual: the creation of mutualism as a social process.  Social capital is unique in that it can not be stored away.  Either people use it or they lose it.  The cooperatives of the Industrial Age should not be discarded.  They need to be repositioned and rejuvenated.  They need to practice social mutualism, as well as economic distributism. 

2.     Mutualism in the market sector 

In its right and proper place, the market is a creative force for economic prosperity and efficiency.  There is not, however, a market solution for every social problem.  Part of the art of good public policy is to know the limits of the market.  It creates problems of inequity and alienation whenever it gets hold of social capital.   

Public policy should aim to make the market as mutual as possible.  This means implementing policies for workplace bargaining, workplace unions, employee ownership and good corporate citizenship.  It also means limiting the reach of market forces. 

The creeping commercialisation of sport, for instance, needs to be replaced by the mutual ownership and governance of sports clubs and sports codes.  So too, public competition policy needs to be limited to physical services, such as gas, water and electricity.  Market competition is not a good way of dealing with the relationship between people - the human services of education, health and child care. 

3.     Mutualism in the state sector 

This century the organisation of society has been split in two.  The market has been the dominant form of individual provision.  The state has been the dominant form of collective provision.  Each has squeezed out the rule making functions of civil society.  People have been positioned as clients both to the market and to the state. 

There is, thankfully, nothing immutable about this type of social organisation.  As Michael Taylor has argued, "hierarchy is not the only form of governance, not the only remedy of market failure and not our only defence against the many destructive effects of the market". (3)   It is possible to break down the hierarchy and scale of government and empower the networks of civil society.  

This involves a fundamental redesign of the way in which the public sector works.  Big things still need to be done in our society.  It is just that they need to be achieved by a smaller, more virtual scale of governance.  The public sector needs to get into the habit of devolving power and giving people things to do.  It needs to act as a facilitator of social capital, rather than a controller of social outcomes.   

This requires a new division of responsibility in modern governance.  Governments need to maintain their functions as a funder and regulator of public services.  The actual delivery of services, however, needs to be devolved to a network of mutual, non-government providers.  In the new politics, charter schools, health consumer groups, family partnerships, public housing cooperatives and mutual municipal services need to become as common as the government agencies of the Industrial Age. 

4.     Mutualism in a network society 

Devolution is a powerful agenda for changing the organisation of government from vertical hierarchies to horizontal networks.  It positions civil society as the natural agent of a network society.  Yet more needs to be done in public policy.  Governments need to use their funding leverage to bring organisations closer together, to facilitate network relationships.   

This requires a new way of thinking about the role of the state.  It means moving beyond supply-side and demand-side methods of public funding.  In the past, Left-wing policies have allocated public funds to the monopoly supply of services by government agencies.  Right-wing policies have emphasised demand-side entitlements, such as individual vouchers.  

Network relationships require a Third Way: funding policies which act as a catalyst for the formation of partnerships.  Governments need to create a dense web of “budget-holders”, each with an incentive to negotiate and collaborate with other organisations.  These funding connections are integral to the networking process.  Examples of this approach include:

·        small business scholarships as a way of creating mutual relationships between industry clusters and university researchers;

·        special funding programs to encourage families to pool their resources and establish mutual support groups for the care of disabled children; and

·        local government rates concessions for residents who take over the management and care of their local facilities, such as parks and sports grounds. 

Partnership funding can be applied across all parts of the public sector.  In a network society the distinction between state institutions and the non-state public sector begins to blur.  The focus of public life shifts from institutional rules and boundaries to new networks of mutual support and mutual provision.  This is the great opportunity of Information Age politics. 

5.     Mutualism in a learning society 

Education is vital to the prospects of a mutual society.  It serves as a bridge between the old and new institutions of social capital.  In the local village, through personal contacts and cooperation, people were able to develop associations of trust.  In the global village, people are being called on to trust and understand the position of strangers.   

This process requires a particular way of looking at the world.  It requires the type of enlightenment and self-knowledge associated with education: people understanding themselves, the broader society in which they live, plus the needs and interests of others.

Mutualism and education are two sides of the same coin.  They sit at the centre of the virtuous circle of public life: a strong economy, a strong state and a strong, trusting society.  Lifelong learning is the one public investment capable of producing both a productive economy and a fair society.  It aids economic efficiency by meeting the skill needs of the new economy.  It aids the strength of society by teaching people the virtues of cooperation and tolerance. 

Education and mutualism hold another important property in common: increasing returns.  Orthodox economics works on an assumption of decreasing returns: the more an economic resource is used, the lower the return from it.  Education and mutualism reverse this principle.  The more someone learns, the more likely they are to want to learn in the future.  The more someone practices social trust, the more likely they are to want to trust in others. 

This is a special property.  It establishes a powerful synergy between learning and mutualism.  It gives an insight into the economic growth potential of the Information Age.  Importantly, network organisations also display this property of increasing returns.  They have a special capacity for harnessing additional resources and partnerships among their members. 

More than ever, a good and productive society relies on these three concepts working together: mutualism, lifelong learning and networking.  It is the key to increasing returns – economic, social and educational – in the Information Age.  The Third Way has no higher purpose than the realisation of this goal. 

6.     Mutualism in a democratic society

Mutualism has a role to play in the revival of our democratic institutions.  Caught up in the rebellion against institutional power, representative democracy is in the worst possible shape.  It has been swamped by the scale of economic and social change.   

Globalisation is forcing the convergence of economic policy and limiting the power of the nation state.  An increasingly self-reliant and information-rich electorate has no time and no need for the nanny state.  At the other end of the scale, social democracy has lost its way in dealing with the new sources of social injustice.  It is difficult to think of a Left-wing policy which still works. 

These shortcomings have diminished the public’s faith in parliamentary democracy.  Politics is now viewed with vilification, rather than a public expectation of problem solving.  Democracy has become the antithesis of mutualism.  It features the worst aspects of hierarchical power. 

Democracy was founded on the idea that everyone should have a say in the decisions of government impacting on their lives.  The sheer size of the modern state, however, has forced governments to replace direct democracy with representations from sectional interest groups.  Community involvement has thinned out to the interaction between government and these peak bodies.  This has added to the revolt against centralised power.   

Mutualism and democracy are in need of each other’s assistance.  The ideals of social capital need to be converted into democratic practice. Governments need to do more than just stand and deliver their views to a waiting public.  They need to position civil society as an agent of moral dialogue, encouraging people to reassess and redefine their obligations to each other.   Public policy needs to emerge from what amounts to civic conversation.  

This reflects a communitarian approach to politics. (4)  It attempts to disperse political power and establish networks of direct democracy and public involvement.  Once more, the technologies of the Information Age – such as electronic town hall meetings and Internet democracy – need to be enlisted to the cause of mutualism. 

7.     Mutualism as a social movement 

We have entered an era of passionless politics.  The formal institutions of public life – its parties and parliaments – show no sign of matching the scale of reform in society itself.  The clinical professionalism of modern politics – the opportunism, the spin doctoring and the capture of politicians by opinion pollsters – has drained the system of its conviction and creativity.  No wonder it is universally disliked. 

On my side of politics, we draw our talent and thinking from the old institutions of the Left: trade unions, political families and machine politics.  There is not a radical among them.  The innovative ideas of social democracy are emerging in other forums, in the networks of creative small business and social entrepreneurs.   

This is why the arteries of policy entrepreneurialism in Australian politics have run dry.  With its limited interests and intelligence networks, modern politics has become insoluble.  The Right and Left have become as conservative as each other. 

Thus mutualism needs to be advanced as a social movement, no less than as a parliamentary cause.  The Third Way is grounded in social practice, the innovative work of economic and social entrepreneurs.  Mutualism is at the core of its problem-solving policies, especially in tackling the curse of social exclusion.  Much can be gained from embedding these policies in the third sector, the associations of civil society. 


Let me finish with a note about the politics of mutualism.  This is a very challenging concept in public life.  It is subversive, in that it requires politicians and bureaucracies to give power away.  Most people enter politics to grab hold of power, not to disperse and devolve it away.  I know of only a few in the Federal Parliament who think this way. 

Politicians have grown used to seeing the world as a battle between states and markets.  With its emphasis on social relationships rather than economics, mutualism is foreign to this Left/Right divide.  The struggle between markets and states among the old ideologies has contributed to the downsizing of society.  It is a long while since ideology has concerned itself with society's struggle for trust and moral obligation. 

For these reasons, it is difficult for mutualism to gain traction in the political debate.  It is outside the worldview of most politicians and parties.  The system is analogous to Peter Weir's film, The Truman Show.  Its main character has no conception of the world outside the TV show in which he artificially lives and stars.  Unfortunately in Australian politics, questions of trust and mutuality are external to Truman's world.   

This experience confirms the importance of ideas in politics.  Mutualism lacks an ideological framework within which the cause of a more trusting society might be advanced.  Conversely, markets and states have well established ideologies from which the language and methods of their politics logically flow.  Neoclassical economics provides the theoretical underpinning of the free market.  The role of the state is usually expressed through social democratic thinking. 

There is a pressing need to popularise an ideology of mutual trust.  This is why the Third Way project is so important.  It demands the dispersal of economic, social and political power.  It embraces the potential of network organisations.  It looms as the first ideology of the Information Age.  

Make no mistake.  The Third Way threatens the authoritarianism and conservatism of the old politics.  The Left and Right enter this debate in a state of denial.  In their world there is no Third Way, just the politics of the state and the market.  The Third Way, of course, is happy to be criticised by both sides - it makes the point perfectly. 

In every instance, the critics on the Left give themselves away.  If you asked them about their approach to politics it would always involve a bigger role for the state - more economic intervention, more money for more programs, more concessions to the insatiable appetite of identity politics.  They have just one methodology in public life: the hierarchies of government.

Prove me wrong, name one Left-wing critic of the Third Way who thinks in any other way.  Words like mutualism and social capital are not in their dictionary.  They practice a social democracy without concern for social relationships.  On the flip-side, the Right also practices a single methodology: the centrality of the market. 

Both sides of the old politics ignore the Third Way: the politics of networks and mutualism.  Like Truman, they are yet to discover the outside world.  Conferences such as this and the work of Mutuality Australia are part of the discovery process.  They confirm the significance of the Third Way, not just as a political cause but as a social movement.  I get the feeling that mutualism and the Third Way are here to stay. 


1.      Amitai Etzioni, The New Golden Rule, Basic Books, New York, 1996, page 113.
2.      See Race Mathews, Jobs Of Our Own, Pluto Press, Sydney, 1999.
Michael Taylor, “Good Government: On Hierarchy, Social Capital and the Limitations of
         Rational Choice Theory”, Journal of Political Philosophy, vol.4, no.1, 1996, page 2.

See Etzioni, The New Golden Rule.