The third way / by Raymond Plant. - [Electronic ed.] - London, 1998. - 15 Bl. = 48 Kb, Text . - (Working papers / Friedrich-Ebert-Stiftung, London Office ; 5)
Electronic ed.: Bonn: FES Library, 1998

© Friedrich-Ebert-Stiftung


Raymond Plant is the Master of St Catherine's College, Oxford, and sits in the House of Lords as Lord Plant of Highfield.

This is an abrigded version of a paper given by Lord Plant at the Friedrich-Ebert-Stiftung/European Policy Forum seminar on "The Third Way" in London, July 20, 1998

The views and opinions expressed in publications of the Friedrich-Ebert-Stiftung London Office do not necessarily represent the views of the Foundation but are those of the authors

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The Context

Ever since Tony Blair assumed the leadership of the Labour Party, there has been talk about his 'project' and since he became Prime Minister this talk has become crystallised into argument about the possibility of a third way in politics. The Blair project or the third way has provoked a good deal of comment and the Prime Minister himself has gone out of his way to emphasise the importance of the third way to his government. He has been involved in both academic and political discussion about it in the UK, Europe and the USA. At the same time, the idea is elusive and the aim of this paper is to contribute towards a constructive, but not uncritical, analysis of third way ideas. The concern with these issues is not just a kind of optional extra, rather there are forces deep in our culture and in the world economy which could be taken to mean that traditional political options and the values and assumptions on which they rest have now become exhausted, contradictory or inappropriate and that a new direction in politics is necessary.

One of the basic issues at stake in this debate is what are the first and second ways if the task is to find a third way, and how does or would a putative third way relate to these alternatives? I think that it would be fair to say that many of those who have been most involved in talking about the project have seen it in terms of a third way either beyond or between free market, limited government economic liberalism on the one hand, and social democracy, committed to state intervention, social justice and greater equality of outcome on the other. Those committed to the third way take the view that both of these alternatives are in fact exhausted and that a new direction is necessary.

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The Third Way

The neo-liberals mount a strong case for markets and a powerful critique of government and bureaucracy together with a root and branch rejection of the idea of social justice which social democratic governments are meant to secure. The social democrats, on the other hand, are more trusting of government and its capacities and are more alive to the moral limits of markets and the impact of markets on the rest of the fabric of society. Hence, it is obvious that a central theme of the third way has to be about the role and limits of both markets and government. Before embarking on that discussion, however, I want to draw attention to how some theorists who have contributed to the third way debate have conceived the defects of both neo-liberalism and social democracy, since it is in part a recognition of these defects that has led to the demand for a third way.

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The Third Way and Neo-Liberalism

Third way politics involves some commitment to the neo-liberal agenda in relation to markets. It rejects planning, it is very wary of state intervention. It does believe in a stable fiscal and monetary environment. The commitment to bold public expenditure within conservative spending places for two years; the decision to go for a comprehensive spending review to plan public expenditure for three years; the decision to give independence over interest rates to the Bank of England; the fiscal stability pact; these are all signs of the requirement not only to give the market a stable framework, but also to make that framework relatively immune from political pressures. What is perhaps more interesting for the politics of the third way, though, is to look more precisely at the view of the relationship between government and the market in relation to issues about social policy, social justice, the welfare state and social inclusion.

One important issue is about the relationship that third way thinkers believe exists between the market and the wider society in which a market is embedded. Third way leaning critics of neo-liberalism have pointed out that such economic liberalism is silent on the question of the kind of moral support the markets need to operate effectively. The neo-liberal view of values is subjective, individualistic, choice-centred, and its conception of reason is instrumental (instrumental, that is, to the goal of utility maximisation). The more of social life and institutions that is made over to the market which embodies these individualistic assumptions, the more difficult it will be to sustain the social and moral relationships on which markets depend. Markets do not exist in a social vacuum, nor are they impersonal forces; they are rather social constructions and they presuppose all sorts of attitudes and relationships relating to contract-keeping, promise-keeping, trust, respect for the nomocratic structures governing the market - in short, some sense of an appropriate level of civic virtue to underpin capitalism. This is not remotely a new idea. It is to be found in Hegel, it is to be found in Durkheim in his stricture that 'not everything in the contract is contractual' - that is to say, that contract-keeping depends upon a set of background conditions of trust etc; it is to be found in thinkers as diverse as Schumpeter and Habermas, but it is overlooked by neo-liberals.

There are two issues here. The first is that market rationality can of itself undermine the moral assumptions and attitudes, which are part of an inherited moral tradition on which the market rests. But a subjectivist view of value and an instrumental view of reason may well erode this kind of shared moral order without which the market will not be able to operate. Neo-liberals assume that it will be possible to reconstruct these values in terms of both moral subjectivism and instrumental rationality, and ingenious attempts have been made to do this, usually by the deployment of game theoretic models. There are, however, clear limits to whether this is in fact possible and, if it is not possible, then neo-liberalism needs what it cannot provide; namely, some sense of common value, some orientation to the public good, all of which makes very little sense on a neo-liberal basis.

Take, for example, monopoly. For the neo-liberal, monopoly is a very bad thing, and yet each individual producer in the market has every reason to seek a monopoly in his product on the basis of instrumental reasoning and a subjective theory of value. It could, of course, be pointed out to him that the pursuit of monopoly on his part will damage the market order of which his trading is a part but, if he is convinced that he can be a free rider on everyone else not seeking monopoly, then, according to neo-liberal views of reasoning, he would have every reason to do so. Of course, monopoly can be prevented by law, but law itself has to draw from people's moral outlooks; so, without some sense of civic virtue directed towards the market itself, the market may suffer from behaviour which in terms of individual market rationality is perfectly sensible.

It would be wrong to say that some of the most radical neo-liberals have not had glimpses of the issue here. Hayek, for example, in Law Legislation and Liberty, Volume 2, having demonstrated to his own satisfaction that social justice is an illusory ideal, then goes on to say that, without some conception of morality in relation to markets, people may not feel loyalty to this impersonal, anonymous order (what he calls the Great Society). He goes on to speculate that the legitimacy of the market order may depend on false moral beliefs which may have to be sustained even though they are false, because the market and the conceptions of morality and rationality which go with the market cannot sustain the authority of the free market order. So the first problem is whether the market itself erodes precisely the moral values and attitudes which it needs to sustain itself.

The second aspect of the problem is that, on a neo-liberal view, there is little in terms of social practices and social institutions which cannot be brought within the purview of markets. That is to say, they do not have a sense of the moral limits to markets. In so far, markets are extended to more and more areas of our life then the central elements of market rationality go with it: utility maximisation, instrumental rationality, morality as subjective preference, contract as the paradigm of human relations. We can find more and more areas of life being pushed into this marketised pattern in a way that undermines other forms of value and relationship. Examples of this trend would be the introduction of market- based ideas in marriage and the family, in bureaucracies and professions in a way that undermines the idea of service, in advocating trade in body parts and human tissues.

This extension of markets to fields which have been the site of other sorts of values, usually of a tradition-based sort, in turn has the effect of eroding the broader value framework of the community and reducing what is a complex value system, drawing upon different motives in different contexts and reducing this complexity to rational utility maximisation across the board, with little sense for the complexity of human life and motivation. Society is reduced to a position in which there are no obligations to others, unless they are self assumed and are set in contracts or quasi contracts. The only obligations that we have as citizens are to mutual non-interference. In the view of third way thinking commentators, this is not a sufficient basis of a common life. In this sense, thinkers of this sort make a kind of communitarian critique of neo-liberalism.

Indeed, 'community' is not a word that looms very large in the lexicon of neo-liberalism. For Hayek, for example, community is an atavistic, backward-looking, anachronistic and primitive value more suited to pre-modern tribal orders. He compares this prejudicially with his own anonymous 'Great Society': the free market and limited government. In the view of third way critics, the combination of a kind of formulaic neo-liberalism with residual conservatism in the Conservative Party proved to be a fatal combination for it. The Conservative government's neo-liberal agenda, which was extended to more and more areas of life, had the effect not only of marketising and commodifying goods, whatever the appropriateness of that, but through this process led to the gradual erosion of precisely the traditional values which Conservatism did wish to sustain. In the end, because it had not addressed the stresses and tensions between its traditional emphasis on community and tradition along with its own impetus to continue extending markets, the government lacked intellectual coherence.

It is, however, one thing for third way thinkers to recognise the need to sustain the community and the social values within which markets are embedded, a need which has been recognised at least since the time of Hegel (1770-1831); it is quite another to produce both a theoretical framework and a set of policies which will allow the market to flourish, as it must in an intensely competitive global economy, while at the same time sustaining the fabric of social life, which does mean keeping the market in check along with the motivations and patterns of human relationship that go along with the market.

Some third way thinkers have looked to the Far East as examples of ways in which free markets, strong communities and robust values can co-exist. This may be a mistake, because their market systems are not yet fully developed. When they are, the social and geographical mobility required by markets may well precisely erode those existing communities: both geographical communities and communities of belief and other social networks of care, for example, based on those communities. If this happens, then these economies will find it just as difficult to combine the market with community and social values as we in the West have done.

Much the same arguments that we have been reviewing apply to the neo-liberal account of freedom which was, after all, a central theme of the Thatcher and Major governments. As we saw, the neo-liberals adopt a severely negative view of liberty: liberty is the absence of intentional coercion, whether that coercion be that of other individuals or the government. But, on this definition of freedom, there is no link between freedom and some conception of human flourishing other than seeing the sheer fact of choice as central to such flourishing. However, without some link between freedom, human flourishing and a series both of needs, resources, opportunities, virtues and obligations that go with freedom, it is difficult to explain both why we would want to be free and why we think our own society is more free than some other.

The neo-liberals hold a de-moralised view of freedom, and again there is the opportunity for a communitarian critique of this neo-liberal approach to liberty. But, again, if value is wholly subjective and if reason is purely instrumental, there is no way of making these links between freedom and other goods, and we are left with the attenuated view that it is the sheer act of choice that is important to human beings and not the sort of choices people make. This kind of existential, antinomian view of fits very badly within a Conservative Party which has wanted to sustain the importance of the maintenance of certain kinds of traditional values and attitudes. Again, however, this is a challenge to the third way: to point out the links between freedom, morality and responsibility is some way from articulating these relationships in a coherent way.

A parallel point about the moral failure of neo-liberalism from a third way perspective comes through the critique of the market as the instrument for social inclusion and integration. The neo-liberal does not accept any collective responsibility for market outcomes, whatever the degree of inequality and social exclusion, because those outcomes are unintended and arise out of free exchange. In the view of third way thinkers, the market cannot be the full mechanism for social inclusion. The trickle down effect and a minimal safety net, plus procedural equality of opportunity is not enough to produce a sense of belonging in society. More active steps have to be taken to secure social integration and overcome the alienation that markets can produce despite its indispensable nature. Because of this rejection of collective responsibility for market outcomes and because of the critique of government and bureaucracy, the neo-liberal lacks the moral and political resources (except via individually self chosen charitable giving) to undertake a proper programme to secure greater social integration. On a third way view, the government has a responsibility for social solidarity and integration but, given its nomocratic view of politics, this is hardly a duty which neo-liberals could possibly credit to government.

So, from a third way perspective, neo-liberalism has many defects. It was right to stress the indispensability of the market, but its failure is essentially a moral one: not to have the moral and intellectual resources to think coherently about how the market relates to the wider society and about how the sinews of community can be preserved in the context of both the market and the state. This is an immense challenge for third way thinkers, since it has been a motif of pro-market thinkers that markets actually mean an emancipation from community and a sense of the freedom of the individual from the pressure of social morality. In seeking to reverse that assumption, third way thinkers have certainly set themselves a major task. In aspiration at least, however, we can see that, if there is a third way, then it is quite different from neo-liberalism.

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The Third Way and Social Democracy

The emphasis upon community and social obligation is also used by third way thinkers against the type of social democracy that I have described in this paper. This applies particularly to social democratic ideas about social and welfare rights. Those social democrats who have taken this line have seen social rights as a form of social integration and cohesion following naturally the sense of belonging to a society and a political community that comes from civil and political rights. On this view, civil, political and social rights define the terms of membership and inclusion in a modern state. For the third way thinker, however, this is a mistake. Instead of social rights creating a robust sense of common citizenship, access as of right to state benefits on an unconditional basis has created privatism, lack of discipline, dependency, and a lack of involvement with the educational and social aspects of the labour market. Receiving a Giro through the post as part of welfare rights does not, in third way views, enhance a sense of citizenship. Like freedom, rights have to be linked to responsibilities and common obligations. Dutiless rights breed alienation, not inclusion.

So there is undoubtedly a strong communitarian streak in third way critiques of both neo-liberalism and social democracy. It is, however, the same streak which leads to an endorsement of at least one theme in social democracy which is wholly opposed to neo-liberal views: namely, the third way commitment to social justice, that marginalisation, poverty and exclusion are injustices which government should seek to rectify. Because such action involves public expenditure, it has to be rooted in some kind of political morality and this is where the detailed arguments of the social democrats rejection of the neo-liberals lack of concern with social justice come into play.

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Community, Co-operation and Justice

In emphasising his commitment to what in a loose sense might be seen as communitarianism, Tony Blair has described his position as social-ism, thus emphasising the commitment to strengthening communities as a centrally important background to markets, and Peter Kellner at the Downing Street seminar on The Third Way called it mutualism. I want for a moment to explore the links between these ideas and social justice which would, as I have said, give third way thought a more social democratic perspective. Mutualism or social-ism is rooted in the commonsensical idea, which presumably no one in his right mind would deny, that we can achieve more cooperatively than we can achieve as individuals. If I had to meet all my own needs as an isolated individual, my whole life would be attenuated. We can do far more, achieve far more, flourish far more as part of society which can be seen as a scheme of mutual cooperation.

As it stands, however, this is either very bland or very challenging. The first challenge is the one posed by John Rawls in A Theory of Justice. If we see society in a mutualist way, as a scheme of social cooperation, should we not ask the following question: Are the terms of cooperation fair to those involved? Are the benefits and the burdens of cooperation fairly shared? Even if it crossed the mind of a neo-liberal to pose the question about the terms of social cooperation, hostility to the idea of social justice would mean that the issue of fairness would not arise. However, I believe that third way proponents are keen on the idea of social justice which can then be asked about the terms of mutual cooperation. Given this commitment, then a number of things follow.

First of all, the emphasis on society as mutualism is no longer bland. It does raise questions about who is contributing to the cooperation and who is not and why not? Do the benefits and burdens at all correlate with contribution? Who holds the power in the cooperative scheme and how do they use it? All of these are recognisably social democratic questions which invoking mutualism or social-ism does not side step, unless they are invoked in such a bland way as to be useless. It also, however, raises questions about equality and exclusion, and I now want to move on to these, focussing particularly upon equality of opportunity and the reform of the welfare state. I think that it would probably be true to say that third way thinkers reject some of the key assumptions of the social democratic approach to the welfare state and, in particular, the Croslandite view that public expenditure on welfare will make for greater social equality. Irrespective of the virtues or otherwise of greater social equality, this kind of expenditure has not been very effective in fulfilling these egalitarian aims.

Equally important, though, is the empirical claim that, in the context of international competitive pressures, the fiscal costs of the welfare state are not supportable and that, in the light of that, the role for the welfare state assigned to it by social democrats is not now supportable. This view is coupled with the reasonable assumption that Croslandite views of public expenditure were adopted during a period when it looked as if his diagnosis of the domestication of capitalism was plausible. Both neo-liberalism and globalisation have made his assumptions about the fundamentally changed nature of capitalism look very optimistic and, in this context, the welfare state has to be rethought, albeit in the context of social-ism, mutualism and a concern with social integration - the latter a theme which precisely animated Croslandite egalitarianism with its emphasis on the relative position of the poor.

This rethinking typically takes a number of directions. Specifically in relation to benefits, however, there is the view that the welfare state has to be reformed around the work ethic. Work is seen as a paradigm case of the reciprocity and mutuality that third way thinkers are looking for and, as such, it is relatively unproblematic in that it fits in with a common framework of values, and the choice to work or not work is regarded as one which is not really problematic and thus escapes the subjectivity of value view of the neo-liberals.

Taxpayers will not be prepared to pay for unconditional benefits at a level that will lift people out of poverty. So, given this fact, if we are really concerned about inclusion and integration, it is necessary to get those who can (including single parents and the disabled) into work, because this is the best route out of poverty. Uprating benefits, the typical social democratic response, is ruled out because of taxpayer resistance when there is no reciprocation or imposition of an obligation on the recipient, and because the effects of taxation for unproductive benefits will have an effect upon competitiveness in the global market.

These arguments are used by defenders of the third way to challenge the social democratic assumption that the welfare state can be an instrument of greater social equality, improving the relative position of the poor in an extra-market way. On the contrary, it is argued, work for the able-bodied is the only feasible route out of poverty. Windfall taxes on the utilities will pay for the investment in these schemes, including subsidies for employers to take on the young and the long term unemployed. Not only is this quite a different view from social democracy, at least in its mid-century UK form, it also implies a role for the state, for bureaucracy and for the purposes of taxation which could not be justified by neo-liberal ideas. In this sense, welfare reform is a genuine alternative to both the first and second ways.

Nevertheless, welfare reform is also connected to equality of opportunity which was one of the concerns of social democracy. Defenders of the third way reject equality of outcome, as did most social democrats, but they are keen on equality of opportunity. Spending on education and benefits, it is argued, should be used to enhance employability skills which will equip both school leavers and others to face a labour market which has changed out of all recognition since the prime of mid-century social democracy. It is argued that global markets and technological change require greater economic adaptability and flexible labour markets. The idea of jobs for life or a career path will, for the vast majority, disappear. Individuals will have to take on a range of different jobs during a lifetime. The government cannot guarantee job security and the sense of middle class insecurity which plagued the last government, and which of course has afflicted people in working class occupations for most of modern history, cannot be cured by some kind of interventionist policy by the government. If an individual is to have any sense of security, it is going to have to come through that person's own skills, the adaptability of those skills and the willingness to take on learning new skills.

So investment in employability skills and lifelong learning is not only a requirement for a dynamic economy, investing in human capital which is much less volatile and moveable than finance capital, but it is also a commitment to equality of opportunity. So education reforms and welfare reforms are to be geared to this overall project of enhancing skills. In a sense it could be called supply side citizenship. On these assumptions, in a global market there cannot be a rich and growing form of end state or status citizenship; that is to say, a bundle of goods which are due to a citizen as a right outside the market. Rather, supply side citizenship stresses that citizenship is an achievement, not a status, it is available through participating in the labour market and reaping the rewards that accrue from that, and investment in skills is part of equal opportunity as a right of citizenship in this new economic context.

Although the details of this policy are rather different from Croslandite social democracy, nevertheless it has more in common with social democracy than with neo-liberalism: its emphasis on a central role for the state, its acceptance of government responsibility in this area, its commitment at least to a positive sense of equality opportunity. However, this emphasis on combatting social exclusion by welfare reform and a work-oriented strategy leaves untouched what can be called the critical issue at stake between the neo-liberal and the social democrat. The social democrat wants to pursue a policy that will maintain the absolute position of the better off while improving the relative position of the worst off; the neo-liberal wants to do exactly the reverse, improve the absolute position of the worst off while being prepared for the relative gap between rich and poor to grow.

Where does the third way stand on this? The answer, I believe, is that it is agnostic. Increasing employability skills and equipping people for the market will give the worst off a stake in the only pathway out of poverty. However, it looks as though the government wishes to leave the reward structure untouched and seems disinclined, for example, to raise higher rates of tax. In these circumstances, the question of whether the position of the poorest groups equipped with marketable skills will improve relative to the rich will be, so far as I can see, a matter for the market to determine. Either these skills will allow the poorest groups to improve their position in the market, or they will not. The social democrat, however, wants to see such a policy pursued as a direct aim of government, not as something to be left to the market. The important point is that, for third way thinkers, the emphasis on combatting social exclusion, which is central to third way politics, is not at all the same thing as the social democratic aspiration of improving the relative position of the poor (or, to put it another way, diminishing inequality); nor is it, though, just a form of neo-liberalism, because the role of government and taxation in investing in these skills goes way beyond the appropriate role for the state in neo-liberal terms.

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Deliberation, Democracy and Community

I want now to turn to constitutional reform and connect that with some of the third way themes I have discussed. Unlike the neo-liberal and the social democrat, third way politics invokes quite a strong sense of community, of common life, of common obligation. These are concepts not at all at home in the individualistic cultures of neo-liberalism and social democracy. At the same time, however, they cannot just be invoked by ministers or policy wonks. If we are to see, for example, the politics of the welfare state in terms of reciprocity and penalising those who do not reciprocate (eg. by withdrawing benefit), then we have to be pretty sure of the moral ground on which we stand. Equally, when the government asserts, as it sometimes does, that it has to challenge vested interests in the public interest, and thus challenge both public and private sector institutions, it has to have a sense of moral authority. It is possible to see some benefits from constitutional reform in these contexts.

First of all, if ideas about responsibility for choice are to be stressed, there is no reason why this should not apply in the political sphere too, and the devolution of power will enable communities, regions and nations in the UK both to make and to take responsibility for their own destinies. In this sense, communitarianism, in so far as it is a central theme in third way politics, applies to politics as well as in the field of social policy.

Secondly, if we talk about duties and obligations and wish to resist the dutiless individualism of neo-liberalism and social democracy, then there has to be some sense of the moral authoritativeness of such a social morality. This has to be a matter of dialogue in a diverse society, it cannot be imposed from one single authoritative source, eg. Christianity. In this sense, changes to the electoral system in devolved bodies, and possibly in Westminster, will perhaps facilitate a more deliberative kind of democracy, together with other forms of political consultation including the derided 'focus groups', which will allow discussions of the values on which common practices and institutions are based to be conducted more adequately. The neo-liberal, of course, celebrates individualism and diversity and has a deep distrust of political processes. The only way for the neo-liberal an individual's values count is in the market place. If, however, we can recognise that there are urgent matters of social morality to be addressed, then it may be that through dialogue in deliberative bodies it will be more possible to address these questions. We are, of course, talking about achieving a degree of value consensus, not truth, and that this consensus will guide public policy in seeking to restore some of the kind of moral infrastructure without which society cannot be efficient or humane.

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In this final section I want to raise some rather skeletal queries about the third way. They are skeletal only in the sense that the politics of the third way are still in the process of formation and therefore it is rather premature for a full scale critique.

It seems true to say that the third way does not have its own theory about the economy and how it works which would, so to speak, incorporate its own themes about community and responsibility into an understanding of the economy in the narrow sense. This is not to say that there are not more cooperative and communitarian theories of the market but, so far as I understand it, third way thinkers are not following that path. They are more concerned with the setting of the economy and the extent to which the market undermines communities; with the inputs into the economy - with employability skills and so forth; and with social inclusion. This leads to an immediate issue.

If one of the criticisms of the Thatcher/Major governments is that they did not have a way of reconciling their defence of the market with its corroding individualism with the defence of more traditional values, why should we believe that there will be a third way which can both endorse the market (within which, in a global context, competition is likely to intensify) and seek to rebuild a sense of community and common life? If market understandings corroded the Conservatives' defence of traditional values, then why will the third way be different?

One way, of course, would be for third way politics to accept a politics of complexity of different spheres of human life, in some of which the market dominates and others from which it is excluded, so that in the non-marketable spheres non-market values should dominate. This seems to me to be much the best third way solution to this dilemma, and a role for the state would be to try to maintain the boundaries between spheres, eg. keeping markets out of health care. Such a view would fit third way politics quite well. It recognises the importance of non-market values, albeit outside the market and not in it. It strengthens a sense of common life, because there would be a recognition of things belonging to an appropriate sphere which would have to be based on a negotiated common judgement. It would also allow for the idea that human nature is complex and that we cannot just be reduced to consumers in a market.

However, things are not quite so simple as this. If the government takes a strict view of value for money in its policy delivery systems then, by allowing cost to determine judgement and not allowing this to be counterbalanced by any other factors of moral concern, it could easily render such an approach set out above redundant. Let me take a specific example: the privatisation of prisons. In opposition, Jack Straw was totally opposed to private prisons on moral grounds, and those moral grounds were very powerful and were to do with the inappropriateness of markets and profits in the sphere of incarceration. As Home Secretary he has, however, sanctioned more private prisons and has justified this on grounds of cost, private prisons costing up to 15% less to run. My point is not to convict the Home Secretary of inconsistency, only to show how difficult it is to keep the market to what just over a year ago he regarded as its proper place. It is one thing to argue that there must be a framework of social morality around the market, so that the market's individualism and subjectivism does not erode all sense of common values; it is quite another to be able to maintain some kind of barrier, if overriding all other considerations is the question of cost.

I now want to turn to welfare reform where ideas seem to be most clearly worked out. Issues here are of great complexity, but I just want to identify a few.

First of all, it is argued that welfare reform must focus on work and that for the able-bodied a life on benefit is not acceptable, because it will lead to social pathology, poverty and social exclusion. If welfare is being organised around an obligation to work, what if the work is not there? This could either be because of recession or because technological change means the shedding of jobs more quickly than reskilling can keep up with (assuming that there are jobs for reskilled people). At the moment, jobs are being subsidised by the windfall tax, but this runs out in three years and there is a question as to whether the incentive for employers is strong enough to create enough jobs anyway. If the state sees work as an obligation, can it rely on the market to produce jobs? And, if it fails, should there not be a role for the state as an employer of last resort? Unless it is then the state is willing the end (namely, work as a basic obligation) without willing the means (namely, jobs). We are not in these circumstances yet but, if the job situation deteriorates, we shall be faced with choices of this sort. For the state to become the employer of last resort would be extremely expensive but, if the government itself is insisting on the discharge of the obligation and delegitimising the alternative (a life on benefit), then it is not clear that there is a morally justified alternative.

Indeed, the existing programme is pretty expensive in that there are input costs (employability skilling together with lifelong learning) and output costs (for example, many long term unemployed who get back to work do so in the public or state funded jobs in the voluntary sector). These costs have to be met by government. At the moment they are being met by the windfall tax, but what about when that runs out? It is a third way criticism of social democracy that it was 'tax and spend', and that it found it impossible electorally to persuade people to pay extra taxes to support socially desirable goals. Unless, however, some other way has been found to finance the New Deal (which surely cannot be seen as just a transitory or interim programme and, if it is, that seems wildly optimistic), then there will be a question about the long term costs of social inclusion which will have to be answered. Third way defenders may well argue - indeed, they do argue - that tax payers will pay for social programmes which involve investment in human capital and require reciprocity as the New Deal does, whereas they would not pay for unconditional increases in benefits without reciprocity as in social democracy. This may be true and it may be a way around the social democratic dilemma, but the issue is still there since, except for the utilities, the New Deal is a kind of free good to tax payers.

The other point worth making about welfare reform, since it exercises people a good deal, is why work should be the only form of reciprocity recognised. Why, for example, should not caring, or looking after children, or volunteering be recognised as a form of reciprocity in exchange for benefit? Part of the answer here I think depends on the fact of how far we can take the moral consensus about obligation to extend. Work is, in a sense, obvious: we know when people are doing it or not doing it, it has tangible monetary value. The same cannot be said for other forms of reciprocity, and I imagine that the government would not care to test too extensively the idea that these other things could be taken as forms of reciprocity and obligation in which people pay back their dues to society.

Given that welfare reform, particularly the New Deal, does not involve a contraction of government (indeed, on the contrary, it seems to imply a very large role for government in terms of its responsibility for social exclusion), the defenders of the third way have to confront the neo-liberal critique of bureaucracy. I do not think that this has been squared up to directly in terms of a critique of the public choice approach to the explanation of bureaucratic behaviour. Nevertheless, I think that there is some recognition, at least implicitly, of the neo-liberal critique and the failure of social democracy to deal with it. The government seems prepared to constrain bureaucratic and professional behaviour in some ways: citizens' charters, league tables, naming and shaming, performance indicators, pressure from competition within the public sector (eg. private pensions), educational action zones. It is also forming partnerships, particularly with the voluntary sector, for the New Deal (although neo-liberals regard state funding for the voluntary sector as a form of corporatism). Given, though, that the concern with social exclusion is an extension of the role of government, it would be useful to have a view from third way theorists about the general philosophical approach they take towards bureaucracy.

Finally, I want to raise the question of the position of those who will not be able to take part in the government's new world of greater opportunity and obligation. So long as citizenship is defined in these terms, where work becomes a kind of badge or passport to citizenship, what about those who cannot work (the disabled being the most obvious group)? Unless there is a recognition that, for some groups, benefits without reciprocity is a perfectly acceptable status then, in seeking a reform of the welfare state focussed on work, the government could be developing a mechanism for overcoming one form of social exclusion only to create another those who cannot be part of an achievement-oriented view of citizenship.

Overall, then, there is a case for saying that there is a distinguishable third way which is definitely, in my view, radically different from neo-liberalism, except for the now unexceptional commitment to the central and indispensable role for the market and a way which also is rather different from social democracy. It does share some social democratic concerns but not others, particularly to do with inequality and relative positions. The third way is only in process of formation. I hope that this has been a constructive contribution to a debate which will continue, I am sure, for the remainder of this parliament.

© Friedrich Ebert Stiftung | technical support | net edition fes-library | September 1998