The Rise, Fall, and Legacy of the Third Way

Coming into prominence following a decade of corporate oriented neoliberal economic policy pushed by political conservatives Ronald Reagan and Margaret Thatcher, “The Third Way'' is a modern and centrist political economic theory popularized in the late 1990’s by British sociologist Anthony Giddens and British Labour Party leader and Prime Minister Tony Blair, along with 42nd US Democratic president Bill Clinton. It sought to set old, presumably outdated and single-minded ideals of partisan economic righteousness behind in favor of an ideology that incorporates both aspects of left-wing and right-wing economic schools of thought, simultaneously promoting personal responsibility and economic growth as well as egalitarianism, social democracy, and promotion of equality of opportunity, setting the stage for the attempt to lead the world into an age of globalized prosperity. At its most popular in the modern era, it brought optimism and great interest to this new, revitalized, and reconfigured form of centrist social democracy that rejected state socialism practices, asserting that capitalism is a necessary component in today’s modernized world and putting an emphasis on global financial markets being the foundational institution in the modern economy. This influenced the political theory and base ideologies of many political parties around the globe, not only in the US and UK but stretching to other democratic countries like Australia, Singapore, France, and Italy. This new idea garnered interest from academics and the media alike for its fresh and balanced as well as conscientious take on economics, essentially seeking to deconstruct and extrapolate upon both free-market and left-wing socialist economic policy into a more moderate centrist economic theory devoted to rethinking how we perceive free-market capitalism, the welfare state, and our ideas on economic philosophy as a whole.

However, in the early years of the 2000s the movement lost a lot of its former glory and momentum. Many scholars believe this is because of electoral results such as the exit of both Clinton and Blair for more conservative government leaders and also market factors such as the boom of the internet businesses that sprouted into prominence alongside it, as well as other factors like opposition from the more extreme sides of the right and left who thought that this idea was an undesirable compromise to the opposing political side, specifically from post-modernist socialist thinkers and neoliberal laissez-faire capitalist conservatives. In this paper, I will be examining exactly how this political ideology gained so much traction to start, where and how it continues to work in our world and where it has met eventual obstacles and has subsequently fallen from popularity.

Brief History of the Term

While the notoriety of the “Third Way” in modern political economics came in with the likes of Blair, Giddens, and Clinton, the original use of the term “Third Way” has been around far longer, stretching back before even the turn of the 20th century with figures such as Pope Pius XII in the late 19th century calling for a Third Way to exist “between socialism and capitalism as a more human face on the free market”[1] which showcases an extent to which the inherent idea of finding a common ground in political economic tug-of-wars of ideology and discourse appealed to individuals even before the competitive rise of post WWII global economic superpowers such as the US and Communist Russia and China. Additionally, classical political economist Wilhelm Roepke asserted that the Third Way “consisted of free society, lying between socialism and classical liberalism.”[2] He references classical liberalism of course signifying the enlightenment period school of thought, the philosophy that sprouted out of the demise of feudalism and serfdom, transforming into the new idea of freed market trade, and here giving more lucidity to the idea of free-market capitalism on its face not being suitable for providing a prudent level of freedom in a moral society. The idea of the Third Way aptly comments on this. The term has also been used by some who perceive it quite differently however, using it’s ambiguous connotation to explain and label other more conservative modes of government such as with General Francisco Franco’s Spanish fascists, who delegated the term to taking a farther right than even classical liberalism definition in using it instead to label dictatorship and authoritarian rule. Eventually however, the term came into modernity with it’s contemporary use by US democrats in the 1990s who used it to “address the very new problems presenting themselves in a new era.”[3] These problems, such as growing influence of global financial institutions in national economies, widening income-gap inequality, and a changing economy that is more reliant on an educated population workforce, are major influences in the subsequent rise of centrism in America’s economy.

The Third Way as a Political Economic Philosophy

What neoliberal and socialist economic advocates and theorists lack in nuance and understanding for their political opponents and philosophical counterparts, the Third Way makes up for it in its political mutualism in the form of economic progression theory and political gradualism. The Third Way calls for a system which builds up the free market to bolster economic competitiveness and national growth, emphasizing civic and personal responsibility to the liking of fiscal conservatives, but also on the other hand advocating both for economic rights and equality of opportunity; upholding both individuals and the community; championing both big business and the working class; economic growth and conservatism, along with egalitarianism, social democracy. As is apparent, the Third Way is a philosophy which is quite slithery and difficult to pin down. It holds the philosophies of opposed lines of political economic thought and wishes to bind them together in a fashion that would align our society in a way that some would call inauthentic, optimistic, even quixotic. The main idea behind how this ideology could garner success would be through a process of changing economic policy over a span of time. Beginning first with economic growth and expansion so as to create a market that can support the people of a country and create money flow, expansion, economic surplus and a strong enough economy to create a thriving advanced and prosperous workforce. Giddens calls this new economy the “knowledge economy” as it brings into existence a new expectation that workers provide products and services based around new “knowledge-intensive” activities.[4] This new economy puts greater emphasis on intellectual capabilities rather than physical and natural resources creating an economy more increasingly reliant on education in the workforce, subsequently making equality of opportunity an even larger goal to aspire to. Then it opts to implement social democracy as a means to promote the general welfare, materializing these aspirations and overall creating the economic well-being of the laboring class of an economy after the economy has generated the wealth and production needed to ensure that taxes can be adequately high in order to support these programs. This kind of economic philosophy requires patience and fortitude from a nation's government and civilians, which often leads to it’s criticism. Unfortunately, the Third Way philosophy has been widely criticized and has been claimed to “fail to provide sufficient guidance to everyday policy challenges”[5] and has been even touted as being anti-ideological. What’s interesting about the Third Way economic philosophy is that even though it is largely considered a centrist social democratic idea, it can be taken both incrementally to the left and the right while remaining within it’s distinct philosophical realm, often to the dismay of these political left-wing and right-wing factions.

The Fall of The Third Way

While the Third Way ended up becoming only a pipe-dream for centrist left and right US politicians in the early 2000s, the Third Way crept into the economies of other developed democratic nations looking to implement a more balanced political economic scheme. Countries like Australia with Prime Minister Mark Latham, sought to fix the growing issues of concern in Australia’s economic climate including a widening economic gap between the wealthy and the laborers of society. Latham claimed that the right had no solution to these imminent threats to a healthy civil society and economy and that the left’s array of differing solutions all contributed to weak and ineffective governance. He argued that governments should “scale back their responsibilities to focus on what is needed… including that of monetary policies, corporatism, subsidies to and for the protection of industry”[6]. Australia’s mixed economy has become one quite similar to America’s in this way with both elements of private freedoms and central and government planning and intervention.

Additionally, countries like Singapore have taken up aspects of the Third Way but in a more conservative leaning manner. Singapore's economy is tailored towards government enforced and incentivized private egalitarianism. This means that the government is not the ones taxing high in order to generate the funding for expansive social programs, but they are implementing policies incentivizing private businesses to provide competitive wages, healthcare, and retirement pensions to their workers in order to promote the general welfare of the laboring class. Programs like Sovereign wealth funds are created by businesses for their workers in a manner similar to IRA’s paying 10% of a worker's gross pay into two accounts dedicated to retirement pensions and worker healthcare. Lee Yuan Yew, Singapore’s senior minister assumed that “economic development must precede political development, that long range successful economic development could only occur if there was political stability, and that political stability could be achieved and maintained only by firm government control.”[7] This has led to Singapore being one of the most major success stories for a relatively obscure nation out of southeast. The average income per capita is 54,530 USD and national growth has been on the rise since it gained its independence at an average of 7 percent per year, according to the world bank.

Overall, while the philosophy of the Third Way has largely been overtaken by more right or left leaning partisan economic policy, it has had a major influence in the world. Capturing attention back from the economically conservative neoliberal policies of the 1980s, it created a rise in political centrism that still largely dominates the political spectrum today. While it may not come back in full force as an adopted philosophy of a country's economic ideology, it still remains to influence the minds of political actors in developed nations and remains a valuable principle in our understanding of political economies.

Bibliography:

Leigh, Andrew. “The Rise and Fall of the Third Way.” AQ: Australian Quarterly, vol. 75, no. 2, 2003, pp. 10–40. JSTOR, www.jstor.org/stable/20638162.

Lipset, Seymour Martin. “The Death of the Third Way: Everywhere But Here, That Is.” The National Interest, no. 20, 1990, pp. 25–37. JSTOR, www.jstor.org/stable/42894677..

Powell, Walter W., and Kaisa Snellman. “The Knowledge Economy.” Annual Review of Sociology, vol. 30, 2004, pp. 199–220. JSTOR, www.jstor.org/stable/29737691.

Cox, James. “New Forms of Dependence? Mark Latham's 'Third Way'.” Agenda: A Journal of Policy Analysis and Reform, vol. 5, no. 4, 1998, pp. 495–500. JSTOR, www.jstor.org/stable/43199001.

Martin-Jones, David. “ECONOMIC DEVELOPMENT, ASIAN VALUES AND THE POLITICAL ORDERING OF CONTEMPORARY SINGAPORE.” Humboldt Journal of Social Relations, vol. 23, no. 1/2, 1997, pp. 121–145. JSTOR, www.jstor.org/stable/23263492.

[1] Patrick Basham, The Third Way; Marketing Mirage or Trojan Horse?, 7 [2] Patrick Basham, The Third Way; Marketing Mirage or Trojan Horse?, 7 [3] Patrick Bashan, The Third Way; Marketing Mirage or Trojan Horse?, 7 [4] Walter W Powell The Knowledge Economy, 22 [5] Andrew Leigh, The Rise and Fall of the Third Way, 6 [6] James Cox, New Forms of Dependence? Mark Latham's 'Third Way, [7] David Martin-Jones, ECONOMIC DEVELOPMENT, ASIAN VALUES AND THE POLITICAL ORDERING OF CONTEMPORARY SINGAPORE, 3