Whither the Third Way?, puhe Oxfordissa 20.5.2003

In May 1998 I was one of the keynote speakers at a seminar at the LSE arranged by the New Statesman and the Finnish Institute in London. The title of the seminar was ”Blairism – A Beacon for Europe?”. The seminar was held at a time when the prestige of Tony Blair and his Third Way ideas were at their highest, not long after the resounding electoral victory of New Labour, which ended the long rule Thatcherite and Tory policies. The culmination of the Third Way was, perhaps, still to come with the publication of the Blair-Schröder Anglo-German paper on The Third Way – Die Neue Mitte next year.

I was never unduly impressed by the Third Way. In my 1998 presentation I gave Blairism the benefit of the doubt as far as the UK was concerned, but I questioned whether New Labour’s slogans or policies had any particular relevance for continental social democrats in general and Nordic social democracy in particular. I was particularly put off by Giddens’s claim, how the welfare state had failed to eliminate poverty, when this is one undisputable success the Nordic welfare states have had, with comparable poverty rates falling under 4 %, while they remained well above 10 % in the UK. Before making claims about the failure of welfare states maybe one should try and establish one first.

Shorn of its high-flying rhetoric, the Third Way seemed to have little of genuine novelty to offer European left-wing parties, which had more or less already adopted many of its more concrete ideas or were in any way engaged in reforming their own policies on the welfare state. This was not, I said, because social democracy had failed or because its ideals and values had to be adjusted, ”but because the life-time full employment conditions of Fordist mass production and of Keynesianism-in-one-country on which the Nordic model was originally built do not exist any more”.

Many people have questioned the choice of name for the Third Way. It has, after all, been historically used for a wide-variety of purposes, including by some ideologues of the Fascist right in the thirties. Perhaps there is some kind of magic numerology involved too, as the rise (and fall) of such concepts as the Third Wave, Third World and Third Party, not to forget the Third Reich and Third International, attest to.

The Third Way was and is open to opposite interpretations. Its relation to neoliberalism, for example, has been variously described as being either the continuation of neoliberalism in a new form (e.g. ”Thatcherism with a human face”) or as its most relevant repudiation.

I cannot claim to have followed at any detail the debate about the Third Way in Britain since 1998. But as far as the international debate is concerned it seems that the Third Way has fallen almost out of sight and hearing. (Not to mention the Neue Mitte, which has simply vanished as a concept.)

Among the many reasons for the demise of the Third Way (as a rhetorical concept any way) we should not overlook the importance of the regime change in Washington in the last presidential elections. The Third Way was, after all, to a large extent conceived as a transatlantic exercise between the New Democrats in the US and New Labour in the UK. Given Tony Blair’s determination to continue the special relationship, emphasizing the Clinton connection would have been embarrassing with the republican right occupying the White House.

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I will now continue with an exposé of how I see the big picture of the ideological trends in our developed world. My central thesis has been, that we are currently experiencing the same kind of fundamental sea-change, or paradigm shift if you like, that we experienced after the end of the World War II and then again in the 1970’s.

With the end of World War II began what I would call the era of social democratic welfare policies in the industrialized countries of the western world. At the end of the war peoples views were not only shaped by the experience of war itself – both the deprivations, sufferings as well as the sense of solidarity which in the UK was reflected in calling the war the people’s war. People were determined to not see a return to the class divisions, poverty and mass unemployment of the great depression.

The almost thirty year period after the war is also sometimes called the Golden Age, both because of sustained economic growth with full employment and the social welfare reforms then implemented. To call this period social democratic does not necessarily imply that these policies were implemented by parties bearing a social democratic or labour label. To be sure, these policies were usually most comprehensively adopted in the countries where social democratic parties were strongest, in particular the Nordic countries.

Although the left made electoral-gains in most countries after the war this dominance of social democratic ideas cannot be directly read from election results. It was not a question of how electoral power was distributed,, but rather what and whose ideas and visions on the future direction of societal development dominated the political agenda. Thus parties formally of a non-socialist disposition – liberal, agrarian or even conservative – espoused these ideas with varying degree of commitment. This happened even in North America, in Canada more than the US, but even there a continium can be seen from the New Deal to the Great Society.

Obviously welfare models varied greatly from country to country. There is a great deal of learned literature on various models of the welfare state – Anglo-Saxon or liberal, Central European or corporative, Nordic or Social democratic etc – which I will not go into at more length. Some features were nevertheless common to all. Most important are the adoption of Keynesian demand management policies aiming at full employment and an extension of social security both in terms of income transfers and services. The state acknowledged its responsibility for regulating the economy and labour-market relations as well as for the provision of social welfare. In some countries this was sometimes explicitely called the Third Way – or Middle Way – between capitalism and communism.

This era came to an end during the first half of the 70’s. In the UK I would not identify the change with the electoral victory of Margaret Thatcher and the Conservatives, but rather with the moment when Prime Minister James Callaghan told the Labour Party Conference in 1976, how ”we used to think that we could spend ourselves out of a recession. I tell you in all honesty, this is no longer the case”.

Looked at from today’s perspective we can see how neoliberalism replaced social democracy as the dominant ideology of our societies. Once again it was not necessarily identical with the electoral fortunes of parties which explicitely espoused neoliberalism, even if was to a great extent personified by Thatcherism and Reaganism in the UK and US. In some ways the Labour government in New Zealand exceeded these bigger countries in neoliberal zeal.

I will not dwell on the well-known neoliberal agenda, with its emphasis on deregulation, privatization and markets. I do, however, want to emphasize that it also challenged political democracy, not in any authoritarian old right or semi-fascist sense, but rather through a devaluation of society. Regardless of what Mrs Thatcher actually said, or meant, with her famous words that there ”was no such thing as society”, it is an indication of the devaluing of citizenship from a participatory and emancipatory concept into a market relation of a consumer on the political market.

Why did this shift occur? I do not believe anyone has yet provided the definite explanation, if there is one. Many factors contributed. One was certainly the end of the happy combination of sustained growth and full employment. The first indication of this was creeping stagflation, followed and amplified by the effects of the first oil crisis. They put into question the relevance Keynesian policies in a world, which was being increasingly described as post-industrial.

A more subtle factor was that the welfare state had become a victim of its own success. Increasing affluence meant that more and more people could be choosy about the services provided by the public sector thus undermining the basis of universal services.

The basic features of social democratic policies had been conceived more in times of shortage and rationing than plenty. This is true not only concerning social, health or education services, but also about public service broadcasting for example, which found itself in an obviously different environment after technological development had lead to a situation where radio- and tv-wavelengths were no longer a scarce resource.

The spectacular development of new technologies, particularly information and communication technology, has had a huge impact on societies. In the communist world its impact was revolutionary. It was ICT, rather than the arms race initiated by the Reagan administration, which brought down the communist regimes. Contrary to what some thought with the advent of the first mainframe computers, this technology proved to be an instrument of decentralization, not centralization. Societies, which in the extreme example of Ceasescu’s Romania, were so suspicious of even very old information technologies such as the typewriter that they demanded that a type sample from every machine in the country had to be deposited with the Securitate, were doomed to stagnate and then collapse as their market-oriented democratic rivals made full use of the new technologies without any restirictions on their citizens access to it.

The fall of the Berlin wall gave a latter-day additional impetus for neoliberalism, as it made anything associated with collectivism, socialism or even anything social almost a dirty word. At a time when neoliberalism began losing ground in the West it gained new life in the former communist countries.

I will not claim that neoliberalism is dead. But it is no longer the unchallenged market leader in political and economic ideas it was at the height of its dominance. People everywhere have become wary of its promises, perceive it as creating more problems than it solves, and they no longer believe in the virtues of unregulated free markets and unlimited self-interest. They seek solutions to the problems and challanges we face, not from a futher weakening of the public sector, social institutions and communal values, but want to see them strengthened again.

Even if this to my mind signals an end to neoliberal dominance it does not, of course, automatically mean a return to social democratic ideals and policies. Nor does the pattern of election results during the past years show any consistent trend. I would nevertheless argue, that elections do show that neoliberal ideas as such are becoming more of a burden than a boost for parties seeking gain. Promises of futher tax-cuts, for example, tend to be more of a liability than an asset when electorates are clearly more interested in safeguarding and developing health and other services and are even willing to accept tax increases if these can credibly be associated with better welfare provision.

The rejection of neoliberalism does not necessarily mean gains for the left. In many elections the beneficiary has been the right-wing populism, which also often plays on racist themes. Studies indicate, that a significant part of the support for such movements comes from marginalized people, or those who fear marginalization, and who feel that traditional left-wing parties have neglected or even betrayed them.

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If neoliberalism as an ideology no longer carries the day it is less clear what will take its place. To claim – as I admit to having somewhat unguardedly done – that it will entail the thiumphal re-emergence of social democracy as the dominant ideology is, at least premature, if not wishful thinking. Here is, of course, the opportunity which many proponents of a third way have tried to exploit, since anything which is neither A or B is, by definition, a third way.

Social democracy can, however, at least present a convincing argument why it should and could be the ideology of the new millenium. But to succeed in this it needs to present credible and workable solutions and answers to the question if it can deliver on its promises – as it certainly was able during the post-war years – also in a new environment where globalization and the advent of new technologies in a post-industrial knowledge-based information society – to cram a few cliches into one line.

I will attempt to answer at least some of the questions. First of all the advent of the information society has not made social democratic welfare states redundant.

Sweden and Finland can claim to be two of the most succesful information societies today, as indicated by the high proportion of GNP used for R & D and the breath and intensity of ICT use. Finland for its part has once again been rated the number one country in the world in terms of competitiveness, as it has also been rated in terms of lack of corruption, the state of the environment, learning in schools, and so on. Sweden has also done well in similar beauty contests. (Perceptions matter in comparisons where objective criteria are not always available.)

This relative success has not come about, as neoliberals might argue, in spite of our countries also being welfare states with universal benefits and services, high taxes and large public sectors, which characterize the so-called Nordic model. Having succesfully steered our countries and economies through some very difficult times – and the recession of the 1990’s was nowhere in Europe as severe as it was in Finland – we can boldly state, that this success is largely due to our Nordic model of a welfare state.

The Nordic welfare state is based on universal principles: both income transfers and services are directed at the population as a whole, covering maternity services and daycare centers, primary schools and higher education, health centers and hospitals, childrens allowances, unemployment benefits and pensions. There is a guaranteed minimum, but benefits are as rule related to income. This results in relatively high tax-rates, but also in a very equitable distribution of income and wealth and particularly in the lowest degrees of poverty in the world. Macroeconomic stability reigns.

The attention paid to human resources and empowerment through universal and free education, which characterises the welfare state, is the key to our success as a knowledge-based information society. This view is shared also by Manuel Castells and Pekka Himanen in their recent study on the Finnish information society. (Published recently also by Oxford University Press.)

All is not perfect or even well in Finland; we are not talking about a ”Shangri-la”. Many local authorities have difficulties in providing the health and other services to which people are entitled to by law. Unemployement, although halved from its highest level eight years ago, remains unacceptably high. Bringing it futher down and increasing the rate of employement is necessary to guarantee the long-term sustainability of our pension systems and other items of social security.

But there is no sense of crisis, and rightly so. As far as one can have confidence in the future in todays world this is the case in Finland, at least to the extent that we do not foresee the need for radical change or questioning the basic tenents of our Nordic welfare model. But a recognized and essential feature of this model is also the willingness to engage in continuous reforms. The time-worn cliche of a cyclist needing to move continously forward in order not to fall down describes our situation and our own understanding of it.

Another basic truth is, that globalisation has altered the conditions in which any and every nation seeks its success. Finland, a small, open economy dependent on international trade and access to markets, is without doubt a winner in globalisation. But global challenges to welfare, economic development, social structures, democracy and security affect even the most succesful countries.

The lack of workable, multilateral global governance is a major threat to all of the above. It does not help either, that some of the existing forms and institutions intended to provide global governance are beholden to the neoliberal agenda, such as the Bretton Woods institutions and the OECD as far they reflect the so-called Washington consensus, or even the European Union as far a literal intrepretation of the Growth and Stability Pact of the EMU is an obstacle to Keynesian policies.

Some new way, however we number it, is indeed needed to copy with global challenges. I believe it should and can best built on the values and concrete experience of social democratic welfare policies, not on neoliberalism. This is broadly what a European consensus can be built on.

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Moving over to the international relations: perhaps more conspicuously than for a long time, it has been asked whether Europe is not only linked with a certain model of social and economic policy but also with a certain kind of outlook on world politics. Is it Europe and only Europe that believes in multilateralism and common global governance?

The principal reason for the debate is the pressure against Europe coming from the neoconservative school, which is spearheading the ideological debate in the United States and which seems to have an undisputable impact on, and a strategic role within, the government in Washington as well.

In its extreme simplification, the neoconservative narrative is that Europe as represented by the European Union is inherently incapable of decisive action when force is needed in coping with the world of realism or protecting Western democratic values. In their world of idealism, according to the neoconservative pundits, the Europeans believe that all issues can be resolved peacefully and with the help of common rules and institutions.

It is easy to rebut the claim that Europe would be culturally or politically insulated from the reality of war or have lost touch with the use of military force in international relations. Even leaving the violent history of Europe aside, one can refer to the considerable investment maintained by European states in national defence, either separately or jointly, and their commitment and contribution to peacekeeping and military crisis management in Europe and elsewhere.

The disagreement across the Atlantic is not about recognizing or denying the existence of violent conflicts in the world. The difference is philosophical and doctrinal in character, it is about how to create an international order which would best prevent and resolve such conflicts.

Indeed, in the present transatlantic debate it seems difficult to find common ground between the kind of American exceptionalism and patriotism that neoconservatism represents, including its connection with the religious right, and the European beliefs in communitarianism, integration and globalism. Despite their common roots in democracy and the enlightenment, America and Europe seem to have parted ways in their approach to world order.

Of course, what I have just said is a simplification since there are alternatives and rivals to the neoconservatives in the American scene, as there are different schools of thinking in Europe. However, there is no reason to believe that all the ideas that the neoconservatives have brought forward would go away just by waiting them out and expecting the next administration to bring about a completely different political atmosphere or government policy.

An alternative to the combination of radical liberalism and realism, which lies behind the most forceful advocates of the Iraq campaign, may not be traditional atlanticism or any other outward looking multilateralism. It may as well be inward looking ”jacksonian” populism of the American heartlands, which relies on the unilateral use of force and coming back home after a swift victory.

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It is not easy for someone from the Europe of established democracies to manage the cross pressures of a world where new threats and risks abound, unilateralism and ad hoc coalition building are in the ascendancy and established multilateral institutions and practices are in the defensive if not demoralized. What is our answer to a great power, which pursues a unilateralist policy as the answer to threats posed by rogue states or terrorists which do not respect any civilized rules of behaviour?

Europe or Europeans are not alien to force and violence in human conduct or state behaviour. There is enough history behind Europe to know what can and can not be accomplished by using force to solve conflicts. The principles of the Charter of the United Nations should be the basis for joint action in military coercion.

But there is also enough history to demonstrate the significance of cooperation and integration for building a sustainable world order. There is no reason for Europe to falter in its adherence to a policy of multilateralism and institutionalism for security management and global governance.

At the same time, it will be crucial for the credibility of the European Union to demonstrate the effectiveness of its common foreign and security policy, including the security and defence dimension. There are a lot of ideas and proposals presented in the Convention and elsewhere which may bring an added value to the capability of the Union as a global actor.

At the same time, a significant programme of action is already underway for building a common capability for civilian and military crisis management. To undertake and implement those commitments and projects will in themselves make the Union a respectable actor even in the most demanding tasks of conflict prevention and crisis management.

As crucial for the future will be the choices the United States will make in its attitudes and policies towards multilateral institutions and cooperative security. We know that the United States can be an effective leader in NATO but the challenge in building a sustainable security order is much larger. It will require a diversified role in non military aspects of security as well.

Above all, the challenge for the United States is to accommodate its strict concept of sovereignty and exceptionalism to commitment to binding rules and institutionalized forms of multilateral cooperation. Will the United States see them as constraints on its freedom of action or does it see them as useful and beneficial bargains with weaker states?

Will the leading American thinkers and political actors see multilateral institutions as vehicles for making the leading role of the United States more acceptable and legitimate? Or will they see them as platforms for unwarranted criticism by illegitimate or irrelevant actors?

It is paradoxical that such questions need even be posed, considering that it is the United States that was the leading force at the creation of most of the global institutions, in particular the United Nations system, after the second world war. But perhaps, on the other hand, such a discussion illuminates the extent of transformation underway in the world.

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When we question some of the American policies, it does not mean that we in Europe would be pleased with the state of the world or ignore the problems raised by the leaders of the neoconservative ascendancy as the basis for their activist strategies, such as the absence of democracy or the threat of transnational terrorism connected with weapons of mass destruction.

How does one spread democracy beyond what we call the West? Or should we rather talk about ensuring basic human rights and needs in different cultures?

It is possible and even likely that the enlargement of the European Union will help to spread and stabilize democracy eastwards in Europe and have effects even beyond the territory of its future member states. But the Union’s enlargement or proximity policies are not available for tackling political and security problems in the larger Middle East, Southern Asia, the Far East or Africa.

For its strategies in regions beyond the wider Europe, the European Union needs to define more clearly what its tasks and objectives are as a global actor and indeed a global power, which has a broad set of joint instruments, including even military ones, at its disposal. One vision that we certainly do not entertain is that of the European Union as a global military power of the kind of the United States.

The Union continues to influence events and developments by engaging partners and weak and unstable countries through a policy of assistance and conditionality, and by a stronger common foreign and security policy in general. The Union continues to count on the positive effects of globalization, which transform the world order not only economically but also by causing closer cultural and technical interdependence and closer interaction of all social systems and groups, including individuals.

But as we know, globalization can also work in reverse, opening channels of communication, recruitment and action for organized transnational terrorism with catastrophic consequences. It may also help to spread ideologies and ideas that we do not recognize as democratic.

The challenge before us is to fight transnational terrorism and the spread of weapons of mass destruction as part of our work for an equitable and sustainable world order and not as a deviation from that course. The threats involved are catastrophic but it would be a concession to terrorists if we let the remedies needed to counter those threats to distort the value basis of our societies or governments.

The main means for uprooting terrorism is respect between cultures and civilizations. There are human values and rights that all should respect. And there is international law that is binding on us all. The Union has the intellectual, cultural and political background to pursue a constructive and effective dialogue with Islamic and other cultures and civilizations that will help in the common task of preventing and eliminating transnational terrorism.

In cooperation for preventing the spread of weapons of mass destruction, the main focus should be on strengthening the multilateral institutions and regimes. Moreover, there is a lot of room for improving and enlarging cooperation in securing and dismantling weapons and materials of mass destruction in former Soviet Union in the spirit of the commitment made by the G8. All such policies should be part of a complex approach to security in regions of concern.