The Third Way is a political position which tries to transcend right-wing and left-wing politics by advocating a synthesis of some right-wing and left-wing economic policies. Third Way approaches are commonly viewed from within the first- and second-way perspectives as representing a centrist compromise between free market capitalism and democratic socialism. However, proponents of third way philosophies see it as something beyond free market capitalism and democratic socialism. This claim is embodied in the alternative description of the Third Way as the Radical center.
Past invocations of a political 'third way', in this sense, or a 'middle way', have included the Fabian Socialism, Distributism, Technocracy (bureaucratic), Keynesian economics, Italian Fascism under Benito Mussolini , Franklin D. Roosevelt's New Deal, and Harold Macmillan's 1950s One Nation Conservatism.
Third Way policies were enacted in the 1980s in Australia by the Hawke/Keating Labor governments. The most recent prominent examples are the Clinton administrations in the United States as well as 2008 presidential candidate Hillary Clinton, the Labour Party (New Labour) governments of the United Kingdom under Tony Blair and Gordon Brown, the Liberal Party government of Canada under Jean Chrétien and Paul Martin, the Australian Labor Party under Kevin Rudd, the Polder Model in the Netherlands, the Democratic Party - demokraci.pl in Poland and the previous Labour government in New Zealand, led by incoming UNDP Administrator Helen Clark.
The Third Way rejects both laissez-faire and socialist approaches to economic governance, but chiefly stresses technological development, education, and competitive mechanisms to pursue economic progress and governmental objectives. One of its central aims is to protect the modern welfare state through reforms that maintain its economic integrity.
The third way has been criticized by some conservatives and libertarians who advocate laissez-faire capitalism. It has also been heavily criticized by many social democrats and democratic socialists in particular as a betrayal of left-wing values. The third way policies differ considerably between Europe and America; in America the term refers to significantly more right-wing and laissez-faire policies than in Europe.
The term "Third Way" has been used to explain a variety of political policies and ideology in the last few centuries. These ideas were implemented by progressives in the early 20th century. The Third Way philosophy was extended in the 1950s by German ordoliberal economists such as Wilhelm Röpke, resulting in the development of the concept of the social market economy. Most significantly, Harold Macmillan, British Prime Minister from 1957 to 1963, based his philosophy of government on what he entitled in a book, The Middle Way (1938).
The term was later used by politicians in the 1990s who wished to incorporate Margaret Thatcher and Ronald Reagan's projects of economic deregulation, privatization, and globalization into the mainstream centre-left political parties.
In the last decade the Third Way can be defined as:
"something different and distinct from liberal capitalism with its unswerving belief in the merits of the free market and democratic socialism with its demand management and obsession with the state. The Third Way is in favour of growth, entrepreneurship, enterprise and wealth creation but it is also in favour of greater social justice and it sees the state playing a major role in bringing this about. So in the words of... Anthony Giddens of the LSE the Third Way rejects top down socialism as it rejects traditional neo liberalism."
– Report from the BBC, 1999
A leading defender of the spread of Third Way influence in modern democracies has been British sociologist Anthony Giddens. Giddens regularly expounds on Third Way philosophy through contributions to progressive policy think tank Policy Network.
Under the centre-left Australian Labor Party from 1983 to 1996, the Bob Hawke and Paul Keating governments pursued many economic policies associated with economic rationalism, such as floating the Australian Dollar in 1983, reductions in trade tariffs, taxation reforms, changing from centralised wage-fixing to enterprise bargaining, the privatisation of Qantas and Commonwealth Bank, and deregulating the banking system. Keating also proposed a Goods and Services Tax (GST) in 1985, however due to its unpopularity amongst Labor as well as the electorate, was scrapped. The party also desisted from other reforms, such as wholesale labour market deregulation (e.g., WorkChoices), the eventual GST, the privatisation of Telstra and welfare reform including "work for the dole", which John Howard and the Liberal Party of Australia were to initiate after winning office in 1996.
Various ideological beliefs were factionalised under reforms to the ALP under Gough Whitlam, resulting in what is now known as the Socialist Left who tend to favour a more interventionist economic policy and more socially progressive ideals, and Labor Right, the now dominant faction that tends to be more economically liberal and focus to a lesser extent on social issues. The Whitlam government was first to use the term economic rationalism. The Gough Whitlam Labor government from 1972 to 1975 changed from a democratic socialism platform to social democracy, their precursor to the party's "Third Way" policies. Under the Whitlam government, tariffs across the board were cut by 25 percent after 23 years of Labor being in opposition.
Labor Prime Minister Kevin Rudd's first speech to parliament in 1998 stated:
Competitive markets are massive and generally efficient generators of economic wealth. They must therefore have a central place in the management of the economy. But markets sometimes fail, requiring direct government intervention through instruments such as industry policy. There are also areas where the public good dictates that there should be no market at all. We are not afraid of a vision in the Labor Party, but nor are we afraid of doing the hard policy yards necessary to turn that vision into reality. Parties of the Centre Left around the world are wrestling with a similar challenge—the creation of a competitive economy while advancing the overriding imperative of a just society. Some call this the `third way'. The nomenclature is unimportant. What is important is that it is a repudiation of Thatcherism and its Australian derivatives represented opposite. It is in fact a new formulation of the nation's economic and social imperatives.
Rudd is critical of free market economists such as Friedrich Hayek, although Rudd describes himself as "basically a conservative when it comes to questions of public financial management", pointing to his slashing of public service jobs as a Queensland governmental advisor.
In Canada following the election of Jean Chrétien and the Liberal Party of Canada in 1993 the new government became focused on debt and deficit reduction, leading to a fiscally conservative agenda cutting billions of dollars from provincial transfer payments and other areas of government funding. The Liberals managed to eliminate a C$42 billion deficit and pay down 36 billion dollars in debt. However, these steep funding cuts led to cuts to some social programs such as Katimavik, reduced resources for the Canadian military, and charges by the provinces and municipalities of federal downloading, typified by a significant increase in wait times for medical services (a provincial responsibility).
Unlike previous Liberal governments in the late 20th century, the Chrétien government pursued corporate tax cuts and the expansion of "free trade", leading to the party's support of the North American Free Trade Agreement (NAFTA). As of 2007 the Liberal Party of Canada still advocates a social liberal agenda based on balanced budgets, support for globalization and fiscal "moderation".
Canada's largest leftwing party, the social-democratic New Democratic Party (NDP) has also experimented with the so-called "Third Way" at various times. During the government of Roy Romanow in the province of Saskatchewan from 1991–2003, the Saskatchewan New Democratic Party broke with its socialist past and followed a much more conservative economic agenda with the goal of reducing the province's debt. This was characterized by a program of hospital closures, program cuts and privatization. Romanow would later claim to be a "disciple" of the "Third Way" ideology of Tony Blair (even though he had been in power for five and a half years before Blair's first election win). Romanow would also quip that he was a supporter of Blair's Third Way concept before it even existed.
In 1938 Harold Macmillan wrote a book entitled The Middle Way, advocating a compromise between capitalism and socialism, which was a precursor to the contemporary notion of the Third Way. Former Prime Minister Tony Blair is cited as a Third Way politician. According to a former member of Blair's staff, Labour and Blair learnt from, and owes a debt to, the Bob Hawke's government in Australia in the 1980s on how to govern as a 'third way' party. Blair is a particular follower of the ideas of Anthony Giddens, as is current UK Prime Minister Gordon Brown.
Third Way policies introduced by New Labour include a more active approach to welfare and skills policy, for example through the New Deal, and the introduction of quasi-markets in public services, with the creation of Independent sector treatment centres and Foundation hospitals in the NHS. Foundation Trusts are considered mutual structures akin to co-operatives, where local people, patients and staff can become members and governors and hold the Trust to account. Labour has created Academy Schools which are state-funded schools that are sponsored by a private company, faith group or charity, have more autonomy and independence than traditional state schools and the freedom to influence the curriculum to an extent. Public private partnerships and private finance initiatives have been used in the construction and maintenance of infrastructure and the delivery of public services.
In the United States, Third Way adherents reject fiscal conservatism, and advocate some replacement of welfare with workfare, and sometimes have a stronger preference for market solutions to traditional problems (as in pollution markets), while rejecting pure laissez-faire economics and other libertarian positions. The Third Way style of governing was firmly adopted and partly redefined during the Administration of President Bill Clinton.
After Tony Blair came to power in the UK, Clinton, Blair and other leading Third Way adherents organized conferences to promote the Third Way philosophy in 1997 at Chequers in England. The Democratic Leadership Council are adherents of Third Way politics.
Other leaders who have adopted elements of the Third Way style of governance include Leonel Fernández of the Dominican Republic, Fernando Henrique Cardoso of Brazil, Marianne Jelved of Denmark, François Bayrou of France, Gerhard Schröder of Germany, Ferenc Gyurcsány of Hungary, Wim Kok of the Netherlands, Jose Socrates of Portugal and Mir Zafarullah Khan Jamali of Pakistan, whose book's preface was written by Anthony Giddens.
Advocates of Laissez-faire capitalism are staunch opponents of a mixed economy, even in the weaker form of the "third way." In 1990, after the fall of his country's communist government, Czechoslovakia's finance minister, Václav Klaus, declared, "We want a market economy without any adjectives. Any compromises with that will only fuzzy up the problems we have. To pursue a so-called Third Way is foolish. We had our experience with this in the 1960s when we looked for a socialism with a human face. It did not work, and we must be explicit that we are not aiming for a more efficient version of a system that has failed. The market is indivisible; it cannot be an instrument in the hands of central planners."
Third way is sometimes described as an idea of former social-democrats which replaces socialism with capitalism and a minimum of socialism, and a strategy to bring the social-democratic parties back to power where they have lost elections. For example, Slavoj Zizek argues that the notion of the Third Way emerged as the only alternative to the victorious global capitalism and its notion of liberal democracy when the Second Way crumbled. Critics argue that third way politicians are in favour of ideas and policies that ultimately serve the interests of corporate power and the wealthy at the expense of the working class and the poor. Some also classify the Third Way as neosocialism or "neoliberalism with a social touch". In many western nations where social democratic or "socialist" parties have adopted centrist or third way policies or have been seen by some as doing so, many new leftwing parties have been able to attract voters who still adhere to the values of traditional left. These include The Left Party of Germany (formerly the Party of Democratic Socialism), the Left Party of Sweden, the Socialist Party of Ireland and Sinn Fein, The Respect Party of the United Kingdom, the Scottish Socialist Party, the Citizen and Republican Movement and the Communist Party of France, the Green Party in the United States and the United Left of Spain to name a few. The Labour Party of Norway followed the third way during prime minister Jens Stoltenberg's first government (2000-2001) leading to a record low in the 2001 election with 24.3% of the popular votes. They were forced back to classical social-democratic way after winning the election of 2005 in a Red-Green Coalition with the Socialist Left party and Center Party (2005-present).
Charles Clarke, a former UK home secretary and the first senior "Blairite" to attack UK Prime Minister Brown openly and in print, stated "We should discard the techniques of 'triangulation' and 'dividing lines' with the Conservatives, which lead to the not entirely unjustified charge that we simply follow proposals from the Conservatives or the right-wing media, to minimise differences and remove lines of attack against us."