The emergence of the Third Way: From Douglas to Clark (via Clinton & Co)

In part three, after the new right revolution of the 1980s, social democratic parties such as Labour were searching their souls. Then came new ideas and new 'third way' leaders such as Bill Clinton and Tony Blair, with answers to the identity crisis

First way – the state, Keynesian demand management, the working class as the base of support. Second way – free-market, reduce the scope of the state and cut taxes, relative indifference to social justice. Third Way – well that's the question.

Back in the early 90s, in the shadow of the Douglas revolution and the Richardson welfare cuts, the phrase "neither left nor right – but different" was occasionally heard among Labour members of parliament.

Unfortunately, no one really knew what the phrase meant. A bit like ‘Brexit means Brexit’ – it sounds good until you try to put it into action.

No wonder there was a lack of clarity. Through the middle of the 20th century, Labour had been a social democratic party surefootedly pursuing the expansion of the welfare state, a protected economy and full employment.

But by the 1970s the combined impact of new social movements, a restive business community and a backdrop of change across all areas of society made it clear different approaches to policy and politics were needed.

After a delay caused by the determination of National Party Prime Minister Robert Muldoon to ‘leave New Zealand as good as he found it’, in 1984 the 4th Labour Government embarked on a Roger Douglas inspired programme of economic and public sector reform that broke with the social democratic tradition in favour of a deregulated economy and a marketized public sector. The age of neoliberalism had arrived.

Division within the Labour Party was obvious. As the market became central to policy, some Labour MPs tried to keep the flame of social democracy alive by pursuing more traditional policies in areas like housing, education and health care.

Members of new social movements who had joined Labour over previous decades advanced policies relevant to the environment, feminism, the Treaty of Waitangi, sexuality, peace and human rights.

During Labour’s first term these divisions were held in check by overwhelming voter support for the Government. But when the sharemarket crashed in 1987, wiping out the wealth of many New Zealanders, and the negative impact of reform began to be felt, Labour’s standing in opinion polls collapsed and internal dissent grew.   

I was a rookie candidate for the seat of Palmerston North in 1990 and experienced first-hand just how angry voters were with Labour. I scrapped home by the slimmest of margins (349), largely because the National candidate gave every indication of not wanting to win.

At the time of the 1990 election, Labour had 57 Members of Parliament. After the election only 29 were left. I recall Labour leader Mike Moore at our first post-election caucus meeting asking us (jokingly) to spread out around the room before the media were invited in so we would look more numerous. It was a desperate time. No one was sure what or who Labour stood for.  Left, right – or different?

In the early 1990s, the answer was not easily arrived at.  The Labour ranks included people who represented every possible point of view. An attempt to build a consensus was made through what was called the Labour Listens programme. This involved MPs travelling the country to engage with Party members. A report was produced but was overtaken by work on a book-length manifesto for the 1993 election entitled “Jobs, Growth, Health”.  The manifesto contained an enormous range of policies but did not identify the kind of ‘big idea’ that might have resolved the left/right/different question.  

With the benefit of hindsight, it is easy to see that the ideas Moore was promoting as Labour leader had a lot in common with what would be known as Third Way thinking. Moore was a voracious reader and wrote numerous books – particularly on how to run a value-added economy in a globalising world.

But, as he once lamented, perhaps it was wrong to be right too early. The various groupings within Labour were still trying to absorb the lessons of the 1980s and the loss of the 1990 election. They had yet to agree on what would replace the kind of reforms that defined Labour in the 1980s – or indeed if they would be replaced.

What helped move things forward was the inflow of ideas from progressive centre-left parties around the world.  

If Labour Party members had spoken one of the many European or Scandinavian languages, they would have noticed that many centre-left parties had begun to talk about and implement policies that reflected their determination to respond to New Times. Most European leaders in the early 1990s – people like Germany’s Gerhard Schroeder, France’s Lionel Jospin – promoted policies that closely aligned with what would become the Third Way.  Scandinavian countries even more so.

But it took the English-speaking New Democrats of President Bill Clinton, elected in 1992, to make mono-lingual politicians like me aware that something was in the air.

The New Democrats talked of the global economy, the shrinking working class, the emergence of information technology and new service industries. They argued that the usual suspicion centre-left parties had of the market and entrepreneurialism had to be dropped. They still saw the state as key to progress, but they wanted it reformed to be more efficient and responsive (1).

Words like choice, competition, market incentives, responsibility, opportunity, community, a ‘hand up rather than a hand-out’, free-trade, tax credits, tough on crime and the centrality of work populated New Democrat speeches.

At times, Clinton talked of a third way.  

Then came Tony Blair’s New Labour Party in Britain. Blair and his party were influenced by what they saw in the United States. They were frequent visitors while in Opposition and there were many exchanges between policy analysts, academics and commentators. Anthony Giddens was one of the academics involved.

In 1995, Giddens published Beyond Left and Right - The Future of Radical Politics where he explained the major developments making it imperative that social democratic parties change their ideology and policies.

He argued that social democracy had to rediscover how to be radical. Perhaps it could draw not only on the aspirations of its traditional working-class base but also on the many social movements it had come to represent.

Social democrats had to adjust their thinking to match an uncertain and risky world where it was no longer possible for governments to control everything through the state.

Globalisation, the breakdown of old traditions and the demand for greater personal autonomy were major trends that had altered the context of politics.

Giddens offered a six-point framework for a reconstituted radical politics. In summary they covered:

-       Building a cosmopolitan world;

-       Encouraging individual autonomy along with a sense of personal responsibility.

-       Promoting ‘life politics’ or the debate about how we are to live our lives – individually and collectively;

-       Ensuring individuals and communities have the means they need to make things happen for themselves;

-       Democratising democracy;

-       Rethinking the welfare state;

-       Confronting the role of violence in human affairs.

And who was to advance this kind of programme? Giddens made it clear that in a cosmopolitan world, social democrats should not try to do everything themselves as they did in the past.  Words like devolution, regions, and subsidiarity signalled the importance of giving other social forces the opportunity to participate in building a better future.  

Much of this advice was expressed in typically impenetrable Giddens jargon (I have tried to make his ideas a little more accessible here) so it was no wonder the audience for what he had to say was confined to a small audience. But he had laid the foundations for the more accessible work that appeared three years later (2). 

He was not the only one exploring these ideas. In Britain for example, in the wake of the New Times debate, enormous energy was being poured into such think tanks as The Institute for Public Policy Research (IPPR) and Demos. Perhaps most influential was the report by the Commission for Social Justice that set out a detailed programme for social policy that directly influenced much of what New Labour did when it was elected in 1997.

These were heady times. Social democratic parties were winning elections and setting the policy agenda. Clinton and Blair were sponsoring fora around the world where likeminded governments could explore what to do next.  There were different views on specifics but widespread agreement on the big picture.

In 1999, the New Zealand Labour Party led by Helen Clark was able to form a government with the support of the Alliance. It too said it saw value in a Third Way (albeit it a little half-heartedly). It began to become different.

In the next few blogs we will look more closely at the political programme Giddens set out and what happened in practice.


  1. Reinventing Government by David Osborne and Ted Gaebler was particularly influential.

  2. For a more comprehensive look into what he had to say, the sequence of books by Anthony Giddens that underpins and defines the Third Way include: Consequences of Modernity (1990), Modernity and Self-Identity (1991), The Transformation of Intimacy (1992), Beyond Left and Right (1994) and The Third Way: The Renewal of Social Democracy (1998). The Third Way and Its Critics (2000) and Over to You Mr Brown (2007).