Economic rationalism has little left to offer

Trust and social capital are phenomena that have a collective quality. They cannot be fostered by individuals acting alone or in competition.

In contemporary Australia, the fundamental limit of economic rationalism is that because it is principally focused on the efficiency of markets and the minimisation of costs, it has very little to say on innovation or competitive advantage some of the core challenges facing the nation.

In a global economy, competitive advantage increasingly derives not from low costs, but from the development of unique niches in the marketplace, often located in particular places.

Thus, Silicon Valley specialises in computer technology and Hollywood specialises in movies.

In this context, the things that matter are the education levels of its people, linkages between firms, and lifestyle.

Rather than an activity undertaken by individuals or firms acting alone, current research shows that innovation is more commonly found where there are dense networks of individuals, firms and institutions cooperating as well as competing.

For example, recent research in Victoria has shown that all things being equal, there is more innovation in communities with stronger local networks.

Some aspects of economic rationalism have clearly become normalised, such as budget surpluses and competitive exchange rates.

However, for the most part, other pillars of economic rationalism such as free trade, privatisation, deregulation, union busting, an insistence on individual responsibility and cutting welfare have been put on hold, abandoned or reversed.

There is nearly consensus among the major parties that the key economic challenges facing Australia are about human capital, innovation, liveability and sustainability. Economic rationalism has nothing to contribute to any of these issues.

Although it proposes tax cuts, Labor's economic agenda focuses on investing in education, skills and infrastructure, along with water security, action on climate change and fostering innovation.

The Liberal Party's policies emphasise "a highly progressive tax-welfare system" and propose investment in education, skills and infrastructure. Like Labor's, they articulate strategies to deal with climate change, energy and water security.

Although the Liberals may perhaps support economic rationalist policies in principal, the prevailing policy and political climate does contain a space for them, and they are noticeably absent from Liberal Party plans for the next term.

Thus far in the campaign, the major parties have not planned a single privatisation, cuts to welfare haven't featured, and notions of the public good and "community" feature strongly in both parties' policies.

In Australia at least, economic rationalism is looking increasingly irrelevant.