Reason to be suspicious

Many on the left are suspicious of the third way as providing semantic cover for a shift to the right, and after reading Anthony Giddens' latest article in the New Statesman, I can't blame them one bit. In an article headlined The left must open up more clear water between itself and its opponents, Giddens compares the current situation of social democratic or left parties in Europe with the triumphalism of the Blair / Schroeder joint statement. Where once social democrats held power in thirteen states of the European Union, they are now reduced to nine. According to Giddens, this is due to too little "revisionism". Social democratic parties have failed to move to the right far enough or fast enough. The German Social Democratic Party is in trouble because its members have rejected the revolutionary neo-liberal "reforms" laid out in Schroeder's joint statement (which is a very familiar recipe to New Zealanders: tax cuts for the rich, flexible labour markets, and a move to a low-wage, low skill, service economy); in Denmark and the Netherlands, the left lost power because they "failed to anticipate and respond to a wave of [anti-immigration] right-wing populism". Giddens' "solution" is for left-wing parties to adopt wholesale neo-liberal economic policies, and on other fronts to

...generate left-of-centre solutions to "rightist" problems - such as those to do with crime or immigration.

In practice, this means outflanking right-wingers on the right, by being even more vicious and reactionary. And so we see the paradigm third way government, Tony Blair's New Labour, demonising asylum seekers and eroding civil and human rights in an effort to win the bidding war for the redneck vote. If there's "clear water" being opened here, it's on the other side of the right-wing boat.

Then there's Giddens' attitude towards dissent. Internal division must be suppressed in order to achieve electoral victory. "Reforms" must be rammed regardless of objections from party rank and file; delays simply make the "backlash" greater. There's more than a whiff of the Douglas blitzkrieg here, which is surprising from someone who claims that democracy must be democratised.

Looking at this program, there is every reason to be suspicious. Giddens' third way isn't a third way at all - it's a wholesale appropriation of the policies of the extreme right, and a sacrifice of core left-wing values for electoral advantage. While it's necessary for left-wing parties to gain power to actually achieve anything, applying Giddens' recipe means forgoing any chance of achieving anything worthwhile. As with the war on terror, if you have to sacrifice everything that would make winning valuable in order to achieve victory, then you really have to wonder what the point is.

But what's truly tragic is that the total compromise Giddens advocates isn't even necessary. Take Britain, for example: it's argued that 18 years of Thatcherism has created an ideological hegemony and destroyed any support for anything closer to "traditional" social democratic policies. Which sounds reasonable, until you realise that in the most recent British election, turnout dropped by 20% as traditional Labour supporters stayed home rather than vote for Blair. Factor in those who held their noses, and it's clear that traditional social democracy (or at least a far "lefter" compromise) still has a large constituency - but urged on by people like Giddens, Blair has simply abandoned them.

Speaking of the Third Way...

Over the weekend Helen Clark attended the Progressive Governance Summit in Budapest. The Progressive Governance Network is a loose affiliation of "third way" and social democratic governments founded by Bill Clinton and Tony Blair as an alternative to the more traditional Socialist International. It gets together every year to network, talk shop, and issue a joint communique. This year's communique reflected the summit's broadening membership - leaders from South Africa, Ethopia, Chile and South Korea attended as well as the usual Europeans - and thus had a heavy focus on development aid and building an "open and fair-rules based global economic and trade system" (which isn't necessarily a bad thing - it all hinges on what the rules actually are). The "peace and security" section also took a wider view, including HIV/AIDS and environmental degradation as threats to global peace, rather than just terrorism and WMD. However, it does seem that you can't invite the British to a meeting without their trying to ram an American agenda through; if they were really concerned about WMD, they'd start by getting rid of their own.

Interestingly, two key terms missing from the communique were equality and human rights. Sure, there was talk of "empowerment" and the need to "increase opportunity and social mobility", even of "social justice", but this is all equality of opportunity stuff. The old egalitarian ideal of striving to improve equality of outcome seems to be entirely absent. As for human rights, they don't even get a look in. I guess this is what happens when you have to share a meeting with a "progressive" regime which "continues to deny its citizens' basic human rights and to repress the unarmed opposition"...

First thoughts on the Third Way

I've been reading a lot about the Third Way recently. For those of you who aren't familiar with the term, the Third Way is the name for the sort of nominally (but maybe not really) left-wing policies pursued in the UK or here. It represents an attempt to reconcile social democracy (the first way) with neo-liberalism (the second) in order to produce a more centrist ideology which remains true to social democratic values while being relevant to a world in which class is dead and markets are triumphant.

At first glance, this doesn't sound too bad. After all, markets are a tool, just like government; does it matter so much which tools we use in pursuit of our goals? Unfortunately, the theory of the Third Way - as espoused by Anthony Giddens in his book The Third Way: The Renewal of Social Democracy - goes a little further than that. He lays out a list of "Third Way values":

• Equality
• Protection of the vulnerable
• Freedom as autonomy
• No rights without responsibilities
• No authority without democracy
• Cosmopolitan pluralism
• Philosophic conservatism

...except that they don't realy mean what they seem to mean. "Protection of the vulnerable" turns out to mean "tough on crime", "no rights without responsibilities" means workfare, and "freedom as autonomy" is not about personal liberty but about obligations to the community. As for equality, it is first recast as a neutered equality of opportunity with a slight mention of redistribution, and then (in his later book The Third Way and its Critics) weakened still further: having noted that "equality of opportunity typically creates higher rather than lower inequalities of outcome", Giddens goes on to say that social democrats should accept this outcome; his comments on redistribution later in the same section are little different from those seen from neo-liberals.

And in terms of concrete policy specifications, a joint pamphlet by Tony Blair and Gerhard Schroder The Third Way / Die Neue Mitte advocates the usual neo-liberal recipe of price stability, tax cuts, shrinking government and tough welfare policies.

So looking at the theory, the Third Way seems to be nothing more than neo-liberalism cloaked in Orwellian newspeak.

What about the practice? Here we run into another problem: the Third Way is a broad path (so broad that one critic has compared it to a carpark), and there are many different variants. Blair's version seems to be little more than Thatcher in drag; while he has made important moves on child poverty, the rest of his program seems distressingly familiar to those who voted against neo-liberalism in 1997 (which is why they stayed away in droves at the last British election). In other words, his Third Way is just an attempt to disguise a continuation of neo-liberal policies from the left. But in New Zealand, it seems that the opposite is the case - our Third Way is far lefter than Blair's, and the label seems more an attempt to hide a (gradual) return to social democracy from the local right!

While the Clark government has left the underlying neo-liberal foundations mostly intact, it has not abandoned its commitment to equality of outcome. Neither has it abandoned low-income workers in favour of flexible labour markets, or government provision of core services in favour of the market. And so we've seen the renationalisation of ACC, the Employment Relations Act, and, in Working for Families, the first serious expansion of the welfare state in over twenty years. I guess the strategy of subterfuge works both ways.

As for how we have this seemingly ridiculous situation of an ideological platform which is objectionable in theory but (at least sometimes) acceptable in practice, I think the answer lies in its origins. The Third Way was conceived and propagated as an electoral strategy, a grab-bag of disparate positions chosen to appeal to the supporters of neo-liberalism, by disillusioned social democrats who seem to have taken Francis Fukuyama's "end of history" far too seriously. They didn't believe social democratic values could be defended any more, and so sacrificed them. However, as the Clark government - and the poor reaction to Blair - shows, that isn't really the case. And it shows the way forward for the Third Way: not by abandoning social democratic values such as liberty and equality, but by re-confirming them. Buried under the Third Way's hype is something that can be defended: an attempt to update social democracy for an era where class isn't so relevant, and where the old tools seem less effective. But it cannot be defended if that "update" involves sacrificing the core values which made social democracy worth pursuing in the first place.

Structures

What's the best way to describe the present political economy of New Zealand?

In broad terms, I think the answer is "a social democratic superstructure on neo-liberal foundations". Up until 1984, we were a broadly social democratic nation, commited to full employment and a welfare state. That changed with the election of the Fourth Labour Government in 1984. The "reforms" implemented by that government and its successor form the foundations of our modern economy: an open, deregulated and globalised market; macroeconomic policies aimed at price stability rather than full employment; and a reduced role for government in the economy.

Despite being elected to provide a change of direction, the Fifth Labour Government (meaning both the Labour-Alliance coalition of 1999 and the minority government we've had since 2002) has largely left these foundations intact. It has tinkered - some additional regulations here, a reversal of an ideological nationlisation there - but it has not made any significant changes. It has remained commited to an open economy, pursued a free trade agenda, and continued to pursue price stability (though it has tweaked the Reserve Bank's Policy Targets Agreement a little). Perhaps the biggest changes have been to the role of government, with the revival of industrial policy through the Ministry of Economic Development, the (opportunistic) acquisition of Air New Zealand and the railway track, and the establishment of KiwiBank. But while the present government wants to play a larger role in the economy, it is still fundamentally commited to market provision and the SOE model.

Rather than attacking the foundations, Labour's policies have focused on ameliorating the worst effects of the neo-liberal economy. What people absolutely hated about the "reforms" was that they shafted the poor for the benefit of the rich. Tax reform (most notably the introduction of GST) benefited the wealthy while shifting the burden of taxation onto the less well-off; the pursuit of disinflation caused mass unemployment; the Employment Contracts Act drove wages down, while cuts to welfare benefits forced beneficiaries to increasingly rely on foodbanks. As Brian Easton put it, equity was largely abandoned as a goal of public policy.

With Labour, it is clear that equity is a consideration again. One of their first acts in power was to hike the top tax-rate to increase revenue and redistribution. Another was to raise the minimum wage - and not just once, but repeatedly, by $2/hour over the course of their term. The gradual reuniversalisation of primary health care through PHOs and the redistribution of the "working for families" package are further examples of this - Labour is trying to ease the inequality and suffering caused by the market.

The other significant change in this area has been the repeal of the Employment Contracts Act - except that "repeal" is really the wrong word. The replacement Employment Relations Act retains the underlying liberal paradigm of individual-centred bargaining and relationships governed by contract law; it simply crufts greater support for unions and collective contracts onto the top of it. It is in a sense Labour's economic policies in a microcosm: retain the foundations while trying to mitigate the worst effects.

Is this limiting of social democracy to the economic superstructure a betrayal of Labour's principles? I don't think so. According to Steve Maharey, the goals haven't changed at all:

Our goal is still the egalitarian project that has motivated all social democratic parties: the full development of every individual however disadvantaged they are by birth or circumstances

Instead what has changed is how those goals are achieved: Labour is now far more willing to work with the market. This is really what they've done all along - the First Labour Government made a similar compromise by eschewing state ownership of the means of production in favour of working within (and mitigating the worst effects of) the existing economic structure. Partly that was a matter of pragmatic electoral politics (they would never have been elected otherwise), but there's also an acknowledgement that we don't necessarily need to rebuild the foundations to create a just society. Michael Joseph Savage and his successors built a just society on top of the market in the 30's and 40's. If they get another term, Clark, Cullen and Maharey may manage to rebuild it for the 21st century.