How the Third Way Turned its Back on Democracy

The Third Way which conquered the centre-left during the 1990s brought with it a hostility to democratic politics – the public would have to adapt to the demands of market, not the other way around.

The problem of democratic representation has always turned on the question of the ‘have-nots’ — that is, not only those without wealth and property, but also those marginalised on the basis of race, ethnicity, gender, origin, religion, and education. Even in a world of fully-fledged democratic rights, the democratic game tends to break in favour of the ‘haves’. They enjoy an easy affinity with political elites who are not so different from them, and they experience democratic politics as a hospitable and responsive place. When in doubt, they can back-channel, mobilise proxies and networks, and exchange cultural influence and economic power for political voice, cloaked in the comfort that what’s in their interest is in everyone’s interest. None of this means the powerful always get their way. But it means they operate on the assumption that their way is likely to prevail.

Before democratisation, which in both Europe and the United States did not reach its full expression until the turn of the twentieth century, those without power were politically excluded by fiat. Even when some ‘have-nots’ overcame formal exclusion, they had to further overcome efforts, both brazen and subtle, to impede the exercise of their political rights; if they managed to bridge the distance between rights-in-name and rights-in-fact, they still had to muster meaningful representation in a game that was not built for them. The achievement of both rights and representation for the powerless is difficult, rare and fragile — not least because formal rights, once achieved, can be used as a pretence for rendering representation practically meaningless. In this case, democracy becomes form without substance.

Three kinds of institutions were crucial drivers of the fitful, contested, imperfect construction of democratic rights and representation of the powerless between the 1850s and the 1920s: socialist and social democratic culture, mass political parties, and labour movements. Where the three converged, the result was a unique historical organisation — the labour-allied mass party of the socialist and social democratic left.

One does not have to romanticise social democratic parties or gloss over their failures to recognise that they, or something like them, are necessary for democracy. Indeed, there was once a well-established twentieth-century pattern in which tough economic times favoured the fortunes of the social democratic left. The assumption that social democratic parties were forces of protection from the vagaries of markets, and understood as such by electorates, was once so taken-for-granted that an electoral left turn came to be understood by social scientists as a law of modern democracy.

But in the 1990s—the era of the ‘Third Way’—this law began to falter, and now appears to be in catastrophic collapse. The 2008 Financial Crisis did not convincingly reinvigorate the electoral fortunes of the social democratic centre-left; it accelerated voters’ rush into the embrace of radical far-right parties, many of which took shape in the third-way era. (The UK Independence Party was founded in 1993, moving in a more xenophobic direction in 2006 under Nigel Farage; in Sweden, where the social democratic party embraced so-called Third Road politics in the 1980s, the far-right Sweden Democrats emerged in 1988.)

The fates of parties, per se, are not necessarily important; but the fate of representative democracy itself is. Historically speaking, social democratic parties occupy the space in democratic systems that has the potential to make the difference between mere rights and actual representation. But simply occupying that space isn’t enough — it matters how these parties work, the agendas and policies they promote, and how and for whom (or what) they speak.

Indeed, language is the coin of the political realm. And so it is noteworthy that, in the interview published by Phenomenal World, former Prime Minister of Spain Felipe González describes politics as akin to ‘an iceberg, with democracy on the surface and democratic forces operating underneath.’ Coming from a social democratic politician, González’s remarks can be read as a comment on the fragility of the representation of the ‘have-nots’ — that it is never fully achieved. From the vantage point of the present, his remarks also suggest that there may have been something about Third Wayism that ultimately eviscerated centre-left parties’ capacity to represent. Indeed, despite claims to the contrary, it now appears clear that Third Wayism’s particular variety of representation was not what centre-left constituencies had in mind.

To think about this, we have to remind ourselves that parties represent more than just constituents; they also make truth claims about how the world works. Claims about the economic world are especially critical for the representation of poor and working people. Accordingly, centre-left parties always concerned themselves with the production and recruitment of economic experts. Before the 1920s, these experts were largely in-house and journalism-centred, but the tumultuous interwar years ushered in two significant changes: on the one hand, rebellious, younger-generation ranks of still-developing economics professions embraced more pro-labour, pro-deficit-spending ways of thinking; and on the other hand, socialist, labour, and social democratic parties increasingly became viable parties of government, growing their ranks and connections to university-educated elites in the process. The result was the forging of a critical tie between centre-left parties and increasingly ‘Keynesian’ economics professionals.

This tie was expressed in and sustained by a dominant professional ethic among mainstream economists that prioritised strategically sensitive policy advice — that is, a commitment to adapting economic analysis to the social democratic imperative of responding to constituencies including, critically, organised labour. With one foot in the academy and the other in centre-left parties, economist theoreticians of the 1960s developed a unique understanding of their political function: to ground economic advice in a sensitivity to democratic demands.

But ties to economics professions meant that centre-left parties’ understanding of the economic world was very sensitive to mainstream economists’ understanding. And so, as economics professions internationalised, became increasingly integrated into the growing world of transnational financial and monetary institutions, and embraced a vision of the world rooted in untethered markets, the economic truth claims—and thus the representative capacity—of centre-left politics were transformed for reasons that had little, if anything, to do with electoral ‘demand’.

This transformation helps to explain a hallmark of Third Way centre-leftism: a shift from the representation of people to the representation of markets, understood not as a means to human ends, but rather as territorially, politically, and socially untethered forces governed by natural laws. We find hints of this way of seeing things in third-way preoccupations with the irresistible forward march of globalisation and ‘modernisation’. In continental Europe, third-wayers sometimes conflated market demands with the exigencies of European integration — which, having originated as a pacification project aiming to construct a ‘community of law’, became increasingly about market-making (trade liberalisation, free movement of workers, labour market reform, monetary integration) from the mid-1980s onward.

No matter the euphemism, the basic logic was the same: democratic constituencies would have to adapt to the demands of markets, not vice versa. Yet socialist and social democratic parties’ embrace of market imperatives entailed an intractable dilemma, because the interests of markets tend not to coincide with the interests of the powerless.

Efforts to rhetorically navigate this irreconcilability was, inevitably, another hallmark of Third Wayism, fuelling the production of memorable but elusive catchphrases. Third Wayism, in the words of Tony Blair and Gerhard Schroeder, stood for ‘[f]airness and social justice, liberty and equality of opportunity, solidarity and responsibility’ while accepting ‘[m]odernisation’ of a specific sort: ‘The essential function of markets must be complemented and improved by political action, not hampered by it.’ Still, Third Wayers insisted there was a line they wouldn’t cross: ‘We support a market economy, not a market society.’ Interestingly, González uses this very phrasing, even now: ‘This is what I believe in: a market economy and not a market society. Because human beings are not merchandise, and for that reason we need regulations and constraints.’ The difficulty, of course, is that in a worldview in which markets can only be helped and never hindered, the line between market economy and market society becomes impossible to uncover — much less put to work as a practical principle of government.

Despite the particular trajectory of the Spanish Socialist Workers’ Party (PSOE)—unlike other social democratic parties, it skipped over the intermediate, Keynesian phase found elsewhere, and its commitments in the 1980s centred on the construction (not ‘reform’) of social welfare institutions—González’ comments echo the constitutive ambiguities of Third Wayism.

Traces can also be found in the interview with Italian Prime Minister Giuliano Amato. He is clear from the outset that his politics are explicitly class politics — a theme that’s missing from González’s political self-description. He notes: ‘The political culture when I entered the Socialist Party was one which stressed the protection and expansion of social rights.’ But present in Amato’s remarks, also, are questions Third Wayers never really answered: where do we draw the line between a market economy and a market society? Who should draw this line, according to what principles, in the context of a meaningfully representative democracy? When Amato recounts that ‘little by little, we’ve reduced public expenditure beyond the point which enabled the continuation of social rights, to the point where it has deteriorated them,’ he highlights the enduring consequences of Third Wayism’s failure to address those questions.

Amato insists that Third Wayers, at the time, could not have known what was coming. In his words: ‘At the time, we could not understand the consequences of what we were doing. We could not see the moment in which the loss became greater than the benefits. And the people who lost from these developments went elsewhere.’

But if democratic politics are to survive, the question we need to answer is what made the writing on the wall so difficult to see. Doing so requires that we reject the notion that parties and politicians simply react to the world as it is. The reasons for the rise of market-centric Third Wayism were as much internal to parties as they were external. To be sure, the period since the 1960s saw large-scale transformations in the structure of the global economy, including the decline of domestic manufacturing in the West and the rise of multinationals and global finance. But these were not inexorable market processes; they were enabled by deregulatory and liberalising policies that Third Wayism, on the basis of a belief in markets, embraced — and, in so doing, helped to make their belief a reality.

Can we chalk the Third Way turn up to ‘ideology’, then? This, too, is overly simplistic. When we peer inside centre-left networks, we see that beliefs are never pure principle; they are inextricable from the complexities of factional intrigue, power-seeking and contestation over the meaning and interpretation of events. Third Wayism was not born as spontaneous consensus, but rather through a series of factional victories—American New Democrats over New Deal liberals; Third Road Swedish and (later) New Middle German Social Democrats over traditionalist foes; New Labour ‘modernisers’ over the ‘old’ Labour Left.

Our collection of interviews helps to grasp the making of Third Wayism and its consequences by shedding light on these processes. They press us to reflect on the present and future of democratic representation, as the space once occupied by socialist and social democratic parties has been vacated in the name of markets — leaving the ‘have-nots’ with little democratic terrain on which to stand. Finally, they speak to the necessity of building parties that are capable of formulating economic truth in a way that expresses, rather than suppresses, the needs, experiences, and demands of the people they claim to represent.

Market Economy, Market Society: Interviews and Essays on the Decline of Social Democracy is a new book published by Phenomenal World. Download and read the book here.

About the Author

Stephanie Mudge is Associate Professor of Sociology at the University of California, Davis. She is the author of Leftism Reinvented: Western Parties from Socialism to Neoliberalism (2018, Harvard University Press).