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The Third Way: where is it leading?

When both capitalism and socialism became unpopular with the electorate, New Labour began to espouse the notion that there was a Third Way, a middle road which would lead to new thinking and innovative policies.  

The ideas of the Right, dominated by Margaret Thatcher's total belief in the free market, fell into disrepute when the selling off of the state-owned industries, such as coal, gas, water, electricity and the railways brought huge wealth to a few and increased bills for everyone else. The two decades of Thatcherism proved that right-wing policies encouraged economic inequalities and chronic unemployment.  

Meanwhile the ideas of the Left had become discredited by the fall of Soviet Communism and its attempt to control the economy through state-owned industries. Both Right and Left had failed, it was argued, because they espoused extreme models of economic theory which no longer applied to modern societies. The modern state had come to see that some regulation of the market was necessary and yet total state control stifled and killed growth and progress.  

New Labour claimed there had to be a Third Way between Right and Left which would provide a modernising agenda for the modern world. If the ideas of the Right and of the Left were both wrong, then the Third Way had to be the only correct one.  

The Third Way thinkers thus denounced the 'old certainties' as obstacles to progress. Totally new policies and ideas were essential. In line with this belief, New Labour jettisoned Clause Four, which advocated state ownership of the means of production, and claimed its removal would allow the emergence of new ideas and policies designed for a modern Britain. 

 Initially, however, there was no consensus about what policies would be found by the Third Way. Anthony Giddens, in his two books, Beyond Left and Right (1994) and The Third Way (1998) has tried to clarify where this new road is leading us. His books also illustrate one of the characteristic qualities of Third Way thought: namely its extraordinary dependence on clever phrases which tend to describe political problems rather than prescribe political solutions. He tells us that the Third Way is about 'democratising democracy'. People must be given power through its devolution to local regions. This is the idea behind New Labour giving Wales, Scotland and Northern Ireland their own parliaments. It is to make government more accountable and relevant to the people. This idea is also the philosophy behind the reform of the House of Lords, with the slogan 'No authority without democracy' being the operative one here. 

The Third Way is also about the control of the free market to prevent inequality and excesses. The failure of Right and Left proved, according to this theory, that the only alternative to capitalism is regulated capitalism. Each national economy must therefore develop 'a synergy between public and private sectors, utilising the dynamism of markets, but with the public interest in mind'. The government's role is to achieve a 'balance between regulation and deregulation - the economic and non-economic.' 

What exactly this policy boils down to is best illustrated by John Prescott's plan to sell off 49 per cent of the London Underground, with a view to bringing private money into a cash-starved and run-down asset, yet allowing 51 per cent state ownership to prevent excessive profit-taking. This same philosophy has led him to promise better controls over privatised services such as the railways and water.  

 The Third Way states that the international free market must also be controlled. It argues that excessive economic power must be countered by 'transnational systems of governance', by which Giddens means the setting-up of international controls aimed at 'regulating the world's economy, attacking global economic inequalities and controlling ecological risks.' Again this idea is very commendable, but how such controls are to be achieved is left unclear. The International Monetary Fund is supposed to control national economic follies, yet notoriously it has financed ecologically-damaging projects for short-term profits. Equally, loans from western banks have been made to poor countries in a token effort to spread wealth from the richer to the poorer nations. The interest on these loans, however, has added to global economic inequalities. The Third Way thinkers have said nothing about this abuse of power. It would appear that 'transnational systems of governance' must always first prioritise profit and economic growth.  

The Third Way belief that democracy works through devolving power also states that it functions best through bottom-up decision making. Its slogan here is the phrase, 'Equality is inclusion, and inequality is exclusion.' Individuals must be stake-holders in society, summed up by the aphorism 'no rights without responsibilities'. Mrs Thatcher said there is no such thing as the state. The Third Way says the state is everyone included in it, with the welfare state designed to create 'a common morality of citizenship'. This has several consequences. The state must protect its citizens from crime, but the community must be involved in crime prevention. Parents have the right to expect help with parenting, but only if they uphold the child's right to care and protection. The unemployed have the right to get state aid, but only if they participate in work programmes for the good of the community.  
  
New Labour's answer to Thatcherism's denunciation of the 'Nanny State' is to say that the function of the state is only to act as guarantor, not as nanny. People must provide for education, health-care, pensions and unemployment benefits, but the state must step in if those provisions fail. In line with this thinking, New Labour introduced a loan system for higher education, something that even the Conservatives did not dare do, because the Third Way asserted that people must contribute to society in order to be included in it. 

Equality stems from inclusion in the community; people are excluded at the bottom by poverty and the rich exclude themselves at the top through tax avoidance. Thus the Third Way demands employment for the poor and laws to plug tax loopholes and destroy offshore tax havens. It accepts, however, that society needs wealth, so it cannot alienate the wealthy. Therefore taxes must remain low. This has led to a very real problem in Third Way philosophy. It can be openly hostile to the theories of socialism, because the Third Way accepts state ownership has failed, but it cannot attack the economic powers that are still strong in society, even if they lead to manifest inequality, because these economic powers have survived as part of the process of evolution.  

The Third Way, therefore, has to retain some of the core beliefs of Thatcherism, such as taxation and state spending is always wrong, because they interfere with the free market and the money supply: and therefore the dynamics of human productivity. Such thinking led New Labour to give pledges not to increase taxes, even though the health service and education system manifestly demand proper state financing through increased taxation. 

The Third Way emphasis on new ideas has prevented it from bringing back old policies, even good ones. The Victorians believed it was the duty of the community to provide the basic necessities for its citizens. They financed the construction of sewers and free water supplies because they saw it as immoral to allow entrepreneurs to make money by selling these essential services to people who had no choice but to buy them. Conservative heroes, such as Joseph Chamberlain, spent vast sums of money raised by local taxation to give these services to the community. This policy made cities like Birmingham wealthy and great and comfortable for all. Thatcher destroyed this achievement, selling off these services to wealthy people who could then make more money by supplying basic human needs. Indeed, Thatcher's policy of rate-capping would have prevented local authorities from building sewers and reservoirs in the first place. The way the Victorians raised and spent rates was a real example of the 'common morality of citizenship' yet it does not feature in New Labour's policies, because it has bought the Thatcherite belief that people should keep as much of their money as possible, spending it only on themselves. 
  
The Third Way is proving to be above all the politics of language. Clever phrases, at their best aphorisms and at their worst mere soundbites, have replaced coherent political philosophies. These phrases soon go out of fashion, (already the term 'stake-holder' has lost its currency), but new ones quickly find their way into the speeches of Blair and Clinton. The new Third Way vocabulary has buried even those old certainties which were eternal moral precepts. Tom Paine was uttering such a precept when he wrote 'When it shall be said in any country in the world, my poor are happy, neither ignorance nor distress is to be found among them; my jails are empty of prisoners, my streets of beggars; the aged are not in want, the taxes are not oppressive - when these things can be said, then that country may boast its constitution and its government.' Paine's thinking led eventually to the creation of the welfare state, with free healthcare and free education for all. There is nothing in the verbosity of the Third Way thinkers which would lead us inevitably in the same direction. The welfare state demanded generosity from the wealthy, each giving according to his means. The low taxation policy of New Labour encourages a morality of meanness and may lead only to cheap misgovernment.  

 Ireland has escaped the destructive results of unadulterated Thatcherism. It has a traditional mixed economy, with the market being kept separate from the state-owned services. Shops are run for profit, but water and electricity are still seen as essential needs to be provided as cheaply as possible by the state. Similarly, the postal system, telephones, roads and an efficient public transport system should go on being seen as the responsibility of the government, part of its contract to look after the people. The free market, with its emphasis on profits, has no place here. 

Marx said of the bourgeoisie that it had 'resolved personal worth into exchange value, and in place of the numberless indefeasible chartered freedoms, has set up that single, unconscionable freedom - Free Trade.' For Marx, the middle-class revolution set up the social and political structures to foster free competition, making the world a vast marketplace. Unceasing improvement in trade and productivity had become the central purpose of social life. Marx would find this same middle-class morality running through Third Way philosophy. It asks the individual to take responsibility for himself and his own family. The old socialist belief that the rich and healthy should take care of the poor and the sick is pushed into second place. The haves are simply to act as 'guarantors' for the have-nots. If all the people did take responsibility for themselves, then the rich can all keep their money for themselves. It is a morality that allows selfishness and meanness. Dr Doolittle, in Shaw's Pygmalion, said 'What is middle-class morality? Just an excuse for never giving me anything.' He would have said the same thing about the morality of the Third Way. 
 

Fred Lowe lives and works in Dublin 
 

See also Paul Hirst's review of The Third Way 
 

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