Salt of the Earth: December 1999 social justice news

Social justice news
December 1999

The School of the Americas—revisited
WTO's uninvited guests stir up Seattle
The Third Way or the highway?
A new call to end the death penalty

The "Third Way" or the highway? (news analysis)
"We have moved past the sterile debate between those who say government is the enemy and those who say government is the answer," President Bill Clinton recently remarked. "My fellow Americans, we have found a Third Way. "

Clinton's statement may suffer from the oversimplification inherent in political speech, and the term Third Way may not be on the lips of every American, but its proponents have advanced it as a label for what Clinton and a crop of new leaders in Europe have been trying to do with their governments and their people. Says Robert B. Reich, the former Secretary of Labor in the Clinton administration, the Third Way "has been the conceptual force behind administration proposals" involving many social policies ("We Are All Third Wayers Now, " The American Prospect, March-April 1999). But the meaning of the Third Way seems to raise as many questions as it provides solid ideas.

The term originally referred to Sweden's social democratic course between capitalism and communism, but in the 1990s it has become the umbrella term for the "political philosophy" practiced to varying degrees by the administrations of Bill Clinton, Prime Minister Tony Blair in Great Britain, Chancellor Gerhard Schroder of Germany, and Prime Minister Lionel Jospin of France.

Why "Third"? First Way governments—meaning the New Deal and the "welfare state" in the United States, the Labor Party governments in Great Britain, and social democratic regimes in other European countries—tried to achieve prosperity through job and trade protection, subsidies for old industries, safety nets, and other policies—especially tax policies—that tended to redistribute wealth.

The "Second Way," exemplified by the Reagan and Thatcher administrations in the US and Britain, sought to reduce government's control of the market's economic impact. Thatcher, as Rudolf Klein and Anne Marie Rafferty have written ("Rorschach Politics," The American Prospect, July-August 1999), persuaded British voters that government "could create the right conditions in which market forces could operate—but only the market could deliver." These conservative governments pursued their free market vision by an open global economy, deregulation and privatization of industry and public services, flexible labor markets, smaller safety nets, and fiscal austerity.

Examine the policies of Third Wayers, however, and you will find these same principles at work.

According to Reich, the Third Way believes in "flexibility" in labor markets: wages should be allowed to fluctuate in response to changes in demand and employers should have wide latitude in hiring and firing. In addition, global trade and investment are not only inevitable but desirable—hence Clinton's support for the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT) and its consequent reorganized World Trade Organization (WTO), meeting as of this writing in Seattle. Third Wayers also seek to limit the social safety net, for example making the welfare state more flexible, even smaller (witness "welfare reform"). Also, instead of heavy government taxation and spending, proponents of the Third Way counsel fiscal discipline, especially balanced federal budgets and deep cuts in budget deficits to keep interest rates lower for consumers and countries.

So what makes the Third Way different from its Reaganite and Tory predecessors? What puts the "new" into the New Democrats, Blair's New Labour, and Schroder's New Middle? As Reich puts it, "The distinct theme uniting Blair, Clinton, Schroder, and Jospin is that the economically displaced must be brought along. . . . The idea is to make it easier for them to obtain good jobs and thus become economic winners. The central faith of the Third Way . . . is that economic growth spurred by its free market policies can be widely shared if those who are initially hurt by them are given the means to adapt."

In other words, when Tony Blair talks about equality of worth, opportunity for all, and responsibilities that rights carry, he is trying to go beyond the conservative notion that an unrestricted market will eventually float all boats, and those hurt will be forced to swim or sink. The Third Way pushes open markets but "for New Labour, markets are seen as tools of—rather than driving forces of—policy" (Klein and Rafferty). According to Reich, "It's not the old left's activist government, which preserved and protected. It's not the right's absent government, which let people drown. It's a Third Way."

So, even if the Third Way is legitimately "third," why the need for it in the first place? The answer may be as much about politics as policies.

Over the last two decades or so, the decline in numbers and influence of organized labor drained a traditional source of political power for both the Democratic Party in the US and the Labor Party in Britain. In Britain, the failure of the nationalization of major industries to produce prosperity, ongoing labor-management conflict, and the growing criticism of the welfare state from across the political spectrum produced a sense that big, social democratic government had failed. Similarly in the US, enthusiasm for New Deal- and Great Society-type policies waned. In both countries, however, electorates had had enough of years of conservative leadership. Voters believed the First and Second Ways had ceased to deliver and thus had become less politically viable. People looked for an alternative, an approach to government resulting in sustained economic growth but at the same time mitigating the pain and inequality of that growth.

Policy and politics almost always intertwine, and the Third Way is no exception. As a new approach to government—or at least as a new combination of old approaches—it does not yet have any natural grassroots constituencies. In fact, it seems only to alienate existing constituencies. Those who benefited from the First Way, like organized labor, old industry, aid recipients, and people on the short end of tax obligations, fear they will bear most of the burden of economic change and enjoy few of its benefits. "Their resistance," says Reich, "will take the form of support for (and support of candidates who promise) job protection, trade protection, subsidies for old industries, and cushy safety nets." For the beneficiaries of the Second Way, primarily globalized corporations and the affluent, the question becomes, "Who's going to pay for all this?" because even cost-cutting policies cost money.

To pay, governments can borrow, but borrowing makes credit markets nervous, which leads to higher interest rates, which to Third Wayers is definitely a bad thing. An alternative, however, hits the better-off where it hurts: higher taxes for the wealthy. How to persuade them the Third Way is a better way? Appeal, say some, to the moral dimension of the Third Way: Just as those who work hard will receive rewards of living-wage jobs, and just as those who have to move from "welfare to work" actually do so, so has the upper class a responsibility to do their part. "In return for giving the winners what they need to do even better—further moves toward deregulation, privatization, free trade, flexible labor markets, and smaller safety nets—the winners must agree to apply a portion of their added booty to equipping the losers" (Reich).

First questions, then, about the Third Way: Are the financial and political costs it requires feasible? What will happen when now-booming economies slow down or reverse or if tax revenues decrease? Have Third Way policies actually had something to do with producing and sustaining the current prosperity? Whatever the answer, if the good times many western democracies are now experiencing continue, Third Wayers can keep patting themselves on the back. If things go sour, no doubt the electorate will blame Third Way economics.

But some critics charge the Third Way is nothing more than a campaign slogan in search of public policy—"political expediency in need of intellectual and moral justification." Klein and Rafferty argue: "Politically the Third Way is a strategy for repositioning left-of-center parties in order to ensure electoral survival. Intellectually, it is a strategy for justifying that repositioning with a coherent program of action and a set of criteria against which that program can be assessed".

Third Wayers may have sold majorities of the electorates of the United States, Great Britain, Germany, and France on the notion that the old regimes did not serve them well, and good economies in some of these countries seem to be proving them right. But if "Third Wayers" can't sustain success and thereby demonstrate the wisdom of their policies, people will likely begin looking for another way.—Joel Schorn

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