Tony Blair’s idea of finding a Third Way in politics has not enjoyed a good press in the UK. Guardian journalist Polly Toynbee described the Third Way as ‘an escape from self-definition – a butterfly always on the wing’. Others have compared it to the Loch Ness monster: much talked about, but never seen.
Such observations, however, reveal more about the superficial nature of political debate in this country than anything else. Reading them one would never imagine that the idea of the Third Way has been influential all over the world, or that every left-of-centre government in Europe has adopted a version of it. But such is the case.
The term ‘Third Way’ is best looked at simply as a label for the modernisation of social democracy, or the centre-left. It was not only the Labour Party that found itself out of touch and out of power for a long period in the 1980s and 1990s. The same was true of most Continental left-of-centre parties too. The German Social Democrats, for example, were in the electoral doldrums for almost as long as was Labour.
To get back into power, centre-left parties had to break away from the two positions that dominated postwar politics up to the late 1980s. One was Keynesian-style social democracy, with its assumption of an ever-expanding welfare state. The other was the ‘counter-revolution’ of Thatcherism, or market fundamentalism. Each has become largely obsolete – hence the term ‘Third Way’.
The Third Way has nothing uniquely to do with New Labour, which pioneered one version of it. The eminent German political scientist Wolfang Merkel has suggested that, rather than thinking of a single Third Way, we should recognise that a variety of ‘third ways’ have been created by different centre-left parties.
Among EU countries, the closest to the New Labour programme is the ‘polder model’ developed in the Netherlands. In the 1980s, as in Britain, the Dutch economy was in poor shape, and the welfare system was creaking. Reforms were made to reduce the high levels of state debt, combined with tax reductions to stimulate employment and encourage job creation. Greater flexibility was introduced into labour markets, combined with welfare to work schemes. The result was something of a virtuous circle of good growth rates and high employment levels, together with a strong – but restructured – welfare system.
Lionel Jospin’s centre-left coalition in France seems on the face of things to want nothing to do with the Third Way. There are indeed some differences between Jospin’s approach and that of most other European social democrats. The French are alone in Europe in introducing a policy to limit the length of the working week, to 35 hours. The labour market in France otherwise remains largely unreformed. But what is striking in most policy areas are the similarities of Jospin’s policies to those of centre-left governments elsewhere. Jospin has adopted a pragmatic approach to privatisation; he has introduced tax reforms to help business; reforms have been made to the welfare system and pensions; and he has sought to cut back on public debt.
There may be different versions of the Third Way, but there is also a solid core of policies that successful centre-left governments have been following across Europe. In place of tax and spend they stress fiscal discipline and balanced budgets across the economic cycle. Most believe in the reform – but not the wholesale deregulation – of labour markets, in the interests of job creation. A strong welfare state, it is accepted, is needed to produce a just society, which cares for its weaker members. Welfare restructuring, however, is essential in order to cope with unsustainable commitments and with new risks. There are new sources of inequality today, needing new policy responses. Thus one of the problems in most industrial countries is the increasing numbers of children living in poverty. Innovations such as the Labour Party’s Working Families’ Tax Credit and Children’s Tax Credit can have a major impact here, and parallel policies have been introduced in other countries.
The Third Way has been very successful. It helped propel Bill Clinton to power in the US in the early 1990s and keep him there for a second term. New Labour under Tony Blair has emulated this achievement and looks set for a third term of office. Those countries in Europe that have fared best economically over recent years have followed Third Way prescriptions most closely. They include Holland, Denmark, Sweden, Spain, and Portugal. Countries where Third Way policies have been adopted more ambiguously – such as France or Germany – are struggling with continuing high unemployment.
But is the appeal of the Third Way fading? Only a couple of years ago not only was there a Democratic President in the White House, but left-of-centre parties or coalitions were in power in eleven out of fifteen EU countries. Since then Clinton has ceded power to George Bush and rightwing governments have been elected in Austria, Italy and Denmark. Moreover, the Third Way came to prominence in a period of economic prosperity. How well will it stand up during one of economic downturn?
I believe that the answers to these questions are clear. While some policy adjustments might be necessary, by and large Third Way governments should stay firmly on the course they have charted. Most of the policies developed by New Labour and other Third Way parties are correct and should stay in place. They are just as relevant in a time of economic downswing as at other periods. The reasons why a Third Way had to be constructed – to respond to social change and to win broad electoral support – are still there. If Labour increases taxes at some point, it should be in order to meet spending commitments the government has already made, not to shift course back to its old ways.
The centre-left has good reason to worry about the recent electoral successes of the right. But these results should be kept in perspective. They do not signal a generic revival of conservatism. While few centre-right parties are in as sorry a state as the British Conservatives, most are struggling to achieve an effective ideological outlook: ‘caring conservatism’ did not amount to much. George Bush is not in the White House because he carried all before him, but courtesy of Ralph Nader (plus some dodgy electoral counting). In Italy, also, the left became divided while the right under Silvio Berlusconi managed to put on a united front. There is a lesson to be learned here. To remain in power, left-of-centre governments will have to contain the divisions within their own ranks. If they can do so, the left-of-centre dominance of the EU may continue for some while yet.
Anthony Giddens is director of the London School of Economics and author of The Third Way: The Renewal of Social Democracy