Embryo from two seeds of thought

May 22, 1998

FOR TONY BLAIR, whose political instincts are inclusive and unsectarian, it is risky to attempt the inherently divisive project of designing an ideology under the rubric of "the third way" between classical social democracy and laissez-faire free marketry.

But he is right that pragmatism without some set of overarching principles is rudderless, and right, too, that those principles need to offer grounds for optimism. From an initially shapeless exchange of personal views, some things about the third way are taking shape.

Mr Blair and the third way intellectuals need to make two decisions simultaneously about what the third way is for. First, is it to be an ideology or a model of political economy? If it is to be an ideology, it must appeal to some clear segments of the values in the population and not others, provide a point around which social movements can mobilise and interest groups coalesce, and be robust, however the cultures of the British people shift over the next 20 years.

If it is to be a model of political economy, it must provide an internally coherent and economically viable account of how capital is to be regulated - in competition law, corporate governance, corporate and shareholder taxation and monetary policy - and how labour is to be regulated - in wages, trade union power, mobility and hire-and-fire rules.

To date, the embryonic third way shows more promise as an ideology appealing to a range of political cultures. But, despite the efforts of Anthony Giddens, it has too little of the romantic to inspire and mobilise. As a model of political economy, it has yet to offer principles about how far capital and labour will be regulated, rather than arbitrary judgements about what mixes might be politically tolerable in the short run.

The second decision is how far the project is genuinely to be one of the radical centre, based on meritocracy, or how far it is to be a modernised one of the centre-left, rooted in clear if constrained egalitarianism.

Third-way intellectuals make no bones but that they want a modernised egalitarianism. Among the politicians, George Brown, Robin Cook and John Prescott seem to agree. Mr Blair himself seems less willing to close the door to the centrists. Charles Leadbeater's answer, which appeals to Mr Blair, is to stress the redistribution of knowledge in the hope that this will yield greater equality of opportunity in a meritocratic economy. In short, egalitarian means for meritocratic ends.

Does this meet the viability tests either for an ideology or for a model of political economy? Egalitarianism based on the Leadbeater model is economically viable, but is it culturally viable?

The main beneficiaries of labour market protection as opposed to careers open to the talented are now in the white-collar service industries such as law, broking, financial services.

Certainly egalitarianism based only on knowledge is not likely to inspire and mobilise the typical clientele of most social movements.

The key to developing these ideas into something more viable both as an ideology and a model of political economy is to develop the economic policy implications for regulation on the understanding that even open, transnational markets are rooted in trust, social norms, rituals, forms of cooperation, social capital and social networks.

But the romantic Blairite intellectuals will then have to swallow the less comfortable truth that there are several distinct kinds of "social capital", and that, in an internationally open economy, more of one kind may mean less of another.

In a recession in an open knowledge-based economy, there will be conflicting pressures on third way ideas between economic viability and cultural viability.

In that sense, no third or 33rd way can represent a simple move "beyond left and right". It will be a bold bet that a still fragile coalition between egalitarians and meritocracy can survive under pressure.

Perri-6 is director of policy and research at the independent, cross-party think-tank, Demos.

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