April 5, 2000

April 5, 2000 | Lecture on Political Thought

The Third Way: New Philosophy or Politics as Usual

In April 1992, the Conservative Party, led by John Major, won its fourth consecutive general election victory. Talk was that Labour would never rule again. After all, if it couldn't beat the "gray" Mr. Major after a long period of economic difficulty, who could it beat? But if a week is a long time in politics, as Harold Wilson once famously remarked, then five years is surely an eon. Labour spent those five years modernizing.

Clause 4, the commitment to state ownership of the means of production, was dropped from the Labour Party's constitution and links with the trade union movement were weakened. They got "tough on crime and tough on the causes of crime." The word "socialism" was dropped. It does not appear once in the Labour Party's manifesto. First, John Smith and then Tony Blair pulled the party aggressively to the right.

While the Conservatives spent those same five years doing some good, such as privatizing the railway system, which is now improving rapidly, mostly they slipped on banana skins. Despite the fact that the economy grew every single month, despite the fact that continental Europe wilted as the UK boomed, the 1992 Clinton mantra of "It's the economy, stupid," never clicked. Racked by scandal after scandal (some real, some totally fabricated), dogged by the press, tired after 18 years in power, the Tories were limping. "New" Labour was suddenly "no danger" to middle England.

I have four goals in this talk: (1) I will describe what people were thinking immediately before the general election on May 1, 1997; (2) I will look at what they did on that day; (3) I will review what Labour has done since then; and (4) I will look to the future.

In the days leading up to the general election, MORI, the leading British public-opinion polling company, asked a representative sample of Brits some 20-plus questions about their views on critical public policy issues. About half the questions concerned economic freedom and half concerned personal freedom. Following the work of Maddox and Lillie at the Cato Institute, the results were plotted on a two-dimensional axis. (See Chart 1.)

Of those Brits who went to the polls, 40 percent were Conservative, 22 percent were libertarian, 20 percent were socialist, and 18 percent were authoritarian. If you look just at the vertical axis which measures economic freedom, you will see that 62 percent (that is the 40 percent plus the 22 percent) responded to more than half of the questions in a free-market manner. And on the horizontal axis, 58 percent, or 40 percent plus 18 percent, were socially conservative.

You would have thought the Tories were batting on a pretty good wicket. So what happened? Table 1 summarizes data on the last 15 British general elections since World War II. On the face of it, it was a glorious victory for Mr. Blair, comparable only to 1906 and 1945. With a majority of 177, which is 33 more than Mrs. Thatcher's post-Falklands high of 144, Labour looked set for a decade or two.

I will make six observations. First, turnout at 71.2 percent was a record post-war low. That might seem strange to you, but the British are used to turnouts in the high 70s, even into the low- and mid-80s. Second, the Labour proportion of all votes cast was a mere 43 percent. If you look down to where you see 43 percent, and if you look back to the left along that line you can see that they regularly lost General Elections with much higher proportions.

Third, only 30.8 percent of all eligible voters turned out for Mr. Blair. More people smoke than voted for Mr. Blair! Yet we have this vision of a despised minority of smokers who, one-by-one, are being hunted down. And on the other hand, there is this other image of an incredibly popular Prime Minister. Apart from the out-of-the-ordinary elections of 1974, this figure of 30.8 percent is the lowest proportion of active support for any winning side in a British general election. Now, if you look at the number of votes cast, the gray, faceless, boring, undynamic Mr. Major got 14.1 million votes in 1992; and the brilliant, laughing, dynamic, hip, modern Mr. Blair got 13.5 million votes in 1997. So he got 600,000 votes less, despite the fact that the electorate had grown by 600,000.

Fourth, you will note that the Liberal Democrat vote continued to crumble. In 1983, they were getting 25 percent of the votes; by 1987, it was 22 percent; by 1992, it was 17 percent. By 1997, it was 16 percent. Now the number of their seats doubled from 20 to 46 because, for the first time in British history, we saw tactical voting on a large scale. For example, one national newspaper featured a two-page spread on election day, in which it told Labour people these are the 50 seats where you must vote Liberal, and it told Liberal people these are the 50 seats where you must vote Labour.

Fifth, other voters (for the fourth parties) had crept up over the decades, from 1.02 percent to 4.05 percent. That doubled in the last general election to nearly 10 percent as the Referendum Party and the UK Independence Party fought for nearly every seat and took quite a significant number of votes away from the Tories. They did better in Tory seats than in Labour seats. They clearly knocked off some Tories.

Finally, there was a bandwagon effect, evidenced by the fact that where Labour did very well, the Liberal Democrats did very badly and vice versa. The voters who turned out had a huge propensity to turn to whoever seemed best placed to do in the Tories. That lost them at least three dozen seats.

So, overall, one could argue that it was a fairly modest performance by Labour. Three in ten did not bother to vote--a record high. Four in ten turned out and voted against the winner--another record high. And the three in every ten votes for Mr. Blair was a record low for the winning side.

As opposed to simply a small majority victory, I would argue that the real cause of the landslide was Tory disarray, the low turnout, tactical voting, strong fourth party performance, and the winner's bonus of the first-past-the-post system. The redistricting was also a major plus for Labour.

So, what has New Labour done over the past two and a half years? First, it has ridden very, very high in the polls, higher than Churchill or Thatcher. Mr. Blair has the highest ratings ever recorded. Every time Mr. Hague claws his way back toward being able to use his long-range artillery, another banana skin sends him hurtling back five or ten points.

The Blair mantra has been "We are not socialists; that's Old Labour. We are not `Thatcherite'; that's uncaring. We are New Labour; that's the Third Way."

Now, trying to define what that means is very hard. Some wags have observed that the best definition of the Third Way is whatever Mr. Blair actually does. So if you want a directly elected mayor for London, if you want to stop teenage pregnancies, if you want to continue privatizing the railways, then obviously you must be Third Way. That is very obvious, isn't it?

They will tell you what they are not, but when they try to tell you what they are, they end up in all kinds of trouble. Vaclav Klaus says "it is not well defined," and Heritage's friend John O'Sullivan says "it is vague and uncertain." Aren't they being polite?

In the early days of New Labour, they used to say "you know it when you see it." So, for example, when Chancellor Gordon Brown made the Bank of England independent, it was held up as an archetype of Third Way policy. It was a "third way" between socialist nationalization and outright privatization. A year after getting elected, the prime minister decided that he had better figure out what this Third Way was all about. He had had earlier brushes with communitarianism and with Stake-Holding, but they both had been like a casual date. This Third Way stuff was looking like it was going to be a serious, long-term relationship, a marriage, even. So, Mr. Blair ordered a "think-in" at No. 10. Many distinguished people attended, including one former member of the Mont Pelerin Society.

Now it would be easy for me to make them look foolish and silly. I could easily quote the words of one attendee who said: "We have ended an era of endings and begun an era of beginnings."

I could quote to you Professor Giddens, the distinguished director of my alma mater, the London School of Economics, who summed up the "wonk-a-thon" with "this seminar shows that there is a new cultural sensibility emerging based on the planks of neo-liberalism and postmodernism and the start of global cosmopolitanism." But I won't go that route. Forget they ever said anything so trite or banal.

Instead, I have done my very best to try to sort out in easy chart form what I call the "Third Way-New Labour world view." (See Table 2.) In the first column, I have listed eight major areas of the political economy. In the second column, I have summarized what New Labour thinks the Old Left is all about. In the third column, I have summarized what New Labour thinks the New Right is all about. In the fourth column, I have summarized what New Labour thinks it's all about.

I have tried to be fair. An element of parody is perhaps a little inevitable in such an exercise. But perhaps parody cuts to the truth faster than smugness. If Third Way architect Anthony Giddens were here today and had just a couple of minutes to address all of you, what would he say? First, he would repudiate both traditional social democracy and neo-liberalism. He would say that both have failed and that we need a new philosophy that combines social stability and economic dynamism.

Second, he would agree with the Right that big government and planning do not work and he would agree with the Left that the market is a credo of selfishness. The Third Way is about, he would say, new forms of collective action, a reformed state, partnerships, civic action, and public values.

Third, he would stress education, or as Mr. Blair says "education, education, education." To which Mr. Major is rumored to have remarked: "Yes, but in a different order."

Fourth, he would highlight the importance of the Third Way in repositioning the Labour Party away from high taxes, excessive trade, union power, and big bureaucracies.

In practice, the Blair Government has been a curious mix of interfering authoritarianism and pro-enterprise liberalism. In the same day that one minister will talk of cutting away at red tape and of the need for industry to regulate itself rather than to turn to government, another minister will stand up in Parliament to call for new government regulation of, say, the utilities or the City. While the IEA's big three achievements of monetarism, trade union reform, and privatization are all safe, you see a strange patchwork. You see policies more radical than the Tories ever had. You see Tory mainstream policies and you see policies that taste a little of Old Labour.

Let me give you a few examples. First, the policies, which are more radical than what the Tories were doing, would include the extension of prison privatization; zero-tolerance policing; replacing student grants with student loans; a register of public assets for sale; on-going privatization; central bank independence; education action zones, in which private sector partnerships help failing school districts; the introduction of road pricing; and the contracting out of the management of public schools. Tory mainstream policies that are encouraged and would continue include getting tough on welfare abuse, getting tough on failing schools, favoring welfare-to-work schemes, naming and shaming failing parts of the public sector, and putting the DNA of all offenders on file.

Can you imagine a Tory Home Secretary trying to put the DNA of all offenders on file? There would be riots in the streets. New Labour proposes it, and nobody so much as blinks.

When I talk of a taste of Old Labour, that includes the introduction, for the first time, of a national minimum wage; the abolition of the assisted places scheme, which finances gifted but poor students who attend good grade schools; signing on to the EU social charter; Labour's grotesque regulatory impulse, whether it is beef, eggs, passive smoking, unpasteurized milk, or the speed at which cars may be driven in television commercials; and certain areas of health, education, and welfare, where Tory policies of diversity, choice, and individualism have been replaced by uniformity, state control, and bureaucracy. (Where one might classify a policy permitting gay sex at 16 years old or granting persons the right to roam on private land or restricting the right to trial by jury, I'm not quite sure.)

Above all, it has been the golden economy bequeathed by the Tories and kept intact partly through central banking independence that has allowed massive constitutional changes to be set in motion.

Let me list a dozen of them: (1) the Scottish Parliament; (2) the Welsh Assembly; (3) possible assemblies for the regions of England; (4) an English Parliament; (5) directly elected big-city mayors; (6) cabinet-style councils for the local governments; (7) the introduction of proportional representation; (8) the abolition of all but a handful of hereditary peers in our Upper House; (9) power sharing in Ulster; (10) an Economic and Monetary Union; (11) a Freedom of Information Act; and (12) the integration of the European Convention on Human Rights into UK law.

Any three or four of these would have been quite a constitutional mouthful, but a dozen major changes to the constitution in such a short period is, I suggest, indigestible.

How is the Third Way sitting with the British electorate? Parts of it resonate well, such as the concern for the environment and the stress put on the work ethic, two good conservative issues for you there. On other issues, the Third Way advocates and the public are poles apart. In particular, the Third Way's rejection of welfare dependency, and its embrace of Europe in general and a single currency in particular does not sit well with Joe Public.

Of all the issues facing the UK, Europe is, of course, by far the biggest. All else dwarfs in comparison. It is 1776 and all that in spades. Europe lost it for the Tories in 1997 and it is the only issue which could lose it for New Labour in 2001 or 2002.

Twenty-five years ago, the Tories were pro-Europe, and Labour was anti-Europe. The reason was simple. Twenty-five years ago everybody thought that Europe meant the Europe of the Treaty of Rome. The Treaty of Rome is a wonderful free market document. It is all about free movement of goods, labor and capital. So it is natural for the two parties to line up in that way--the Tories in favor, and Labour against.

However, Europe has become the Europe of Brussels; not the Europe of Rome. It has become the Europe of regulation and interference and top-down meddling, so the parties have moved. Now, officially, both are for the European Union. Hague talks of being "in Europe, not run by Europe," and Blair revels in the leadership he feels he is bringing to the issue. He talks about the only way of reforming it is to get in there and be a major player in the middle of it.

All the while, some 80 percent of the public is deeply suspicious. Some 75 percent of Tory MPs are deeply skeptical and there are very, very deep divisions within the Labour Party.

Let me conclude on the European front with a word on Monetary Union. As many of us predicted, the euro has fallen consistently since its launch a year ago. The strict Maastricht criteria were totally fudged. Take just the requirement that debt not exceed 60 percent of GDP. In Belgium it is 132 percent, and not scheduled to hit 60 percent until 2031, and in Italy it is 131 percent, and is scheduled never to hit 60 percent mark. So much for strict criteria.

So what of Mr. Blair himself? He is very much a "short-termist." His goal since day one in power has been re-election. He is not so much into U-turns as into S-turns, slithering hither and thither. He is, in the view of many, "too clever by half," and that is, by the way, pejorative.

He will hold a referendum on some issue of principle; upon winning, he will publish the bill. When people complain about some point in the bill, he smiles and says "but it is the will of the people."

He is good at short-term tactics, but not good at thinking through second- and third-stage effects and ramifications and he has taken control of the whole of the government's media Whitehall machine. His goal is early entry into the Monetary Union. He says he wants a firm but fair economy. Old Labour wanted an equality of outcomes; whereas New Labour, he would say, wants equality of opportunities (another, very Tory motion). He wants proportional representation to change the rules and to ensure that the center rises and that neither the Right nor the Left ever rules again.

He has his problems. Will he be able to control the Labour Left long term? Will the Nationalists in Wales and Scotland usurp Labour in those two countries? How deep is corruption in the predominantly Labour-run big cities? How much will the obvious deterioration of the National Health Service, which, of course, is the "finest in the world," impact him when he has pledged to cut waiting lists, and they go up instead? Will scandals close to him have any effect? How long will Parliament be so pliant?

He is a great ducker and diver, a great weaver and wriggler, a great one to hide behind a slogan. He is driven by focus groups, opinion polls, and tabloid newspaper editorials. He is a great lover of spin, of being on message and having his team stick to the daily message. He is so populist it is said that he would re-introduce the death penalty for minors if there were votes in it.

Let me conclude by looking into the future. The challenge for the Tory Party in Parliament is to transform itself from an undisciplined rabble into a proper opposition. Labour hated opposition and was never very good at it. So far the Tories are proving no better, and that is not good. Second, the Tories need to rebuild their membership, which has a very high average age. Third, they need to rebuild their finances. Fourth, they need to figure out how to tackle an opponent who has thrown away its old clothes and stolen half of yours. And the half it didn't steal were those that were going out of fashion anyway.

Fifth, it needs to get back the millions who stayed home on May 1, 1997, and those who went to other parties. That nearly 10 million people actually voted Tory on May 1, 1997, is an incredible base for them to build on when you think of the five years of scandal and horror that preceded that date.

The Kansan CEO at MORI, Britain's leading opinion poll company, Bob Worcester, explains it thus: 30 percent will always vote Tory, 30 percent will always vote Labour, a good 20 percent will always vote "other," that is, the Liberals and the Nationalists. The real fight is over the remaining 20 percent.

As far as the opportunities for the Tories, I think there are many. There is surely something wrong when a prime minister in a Westminster system starts to act as if he were President and has President Clinton as his role model.

There is surely something wrong when you start to think about policy a year into government rather than in opposition. There is something wrong when your spin doctors and press officers outrank your senior cabinet colleagues. There is surely more than a hint of false arrogance in his constant references to the hand of history sitting on his shoulder. There is surely a problem, when the centerpiece of your first administration, namely radical welfare reform, does not so much go up in smoke as disappear without a trace, leaving you rather like President Nixon with no China to visit.

But, I always come back to Europe. It is never the number one issue of the day with the electorate. That is always crime or education or health. But the issue of Europe unifies the electorate more than any other issue. As I said earlier, some 80 percent of the electorate are deeply, deeply suspicious about this European adventure. It also splits the two parties more than any other issue. Mr. Hague's inability to tackle this is basically driven by the fact that of his 166 MPs, it is estimated that some 40 would probably defect if he took a tougher stance on Europe.

In conclusion, if you want to figure out Mr. Blair and what he might do when faced with a particular situation, just ask yourself one simple question: What would President Franklin D. Roosevelt do if Bill Clinton were his chief of staff? Answer that and you will get Mr. Blair right about 90 percent of the time.

----John Blundell is the General Director of the Institute of Economic Affairs in London. He is the chairman of the executive committee of the Board of Atlas Economic Research Foundation (USA), a board member of the Institute for Humane Studies at George Mason University, and a board member of the Institute for Economic Studies in Paris, France.

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