The So-Called Third Way
By Robert Higgs
This article appeared in the Spring 2000 issue of The Independent Review

In the wake of the socialist collapse, Anthony Giddens, esteemed British sociologist and intellectual guru of Tony Blair, believes he has forged a new manifesto for left. In reality, Giddens’s Third Way is an ill-disguised Second Way, a sugar-coated despotism for who think that slaves can be coaxed into loving their masters.


Anthony Giddens has seen the future that doesn’t work, and he recommends it.

Giddens, a distinguished sociologist and director of the London School of Economics and Political Science, is described nowadays as Tony Blair’s guru or favorite intellectual. In The Third Way: The Renewal of Social Democracy (Cambridge, Eng.: Polity Press, 1998), he offers a recipe for “social democratic renewal.” In so doing, he exemplifies the desperate efforts of leftish intellectuals throughout the Western world during the past decade to vindicate far-reaching interventionism, to “reinvent” the imperious managerial state and defend it against its Thatcherite, Reaganite, and libertarian enemies.

Get the Golden Eggs; Redistribute Them

The post-World War II interventionist state ultimately provoked strong political challenge because it could not deliver the goods. By the 1970s the economies of the interventionist states were floundering. Runaway regulation, high taxes, monetary inflation and, in some countries, inefficient government-owned industry were sapping economic dynamism. At the same time, the notion that centrally planned economies could outperform market-oriented economies--the “convergence hypothesis” widely accepted in the West during the 1950s and 1960s--no longer seemed compelling, despite the reluctance of many authorities, from Paul Samuelson to the Central Intelligence Agency, to abandon it. No matter how much the intellectuals might abhor the capitalist goose, they finally had to admit that no other kind could lay golden eggs at the same high rate. As large elements of the public arrived at the same conclusion, the political success of Thatcher, Reagan, and a number of lesser promarket politicos in the West ensued. Ultimately, even the Communists in China and the Soviet bloc gave up on central planning and moved, ever so clumsily, in search of the miracle of the market.

“No one,” Giddens recognizes, “any longer has any alternatives to capitalism--the arguments that remain concern how far, and in what ways, capitalism should be governed and regulated” (pp. 43-44). He never seems to doubt, though, that however much the social democrats might govern and regulate the market economy, it will remain “capitalism,” and the goose will go on laying the golden eggs without pause.

At the very beginning of his tract, Giddens expresses the characteristic melancholy and sense of loss with which the Old Leftists have reluctantly accepted the market:

Socialism and communism have passed away, yet they remain to haunt us. We cannot just put aside the values and ideals that drove them, for some remain intrinsic to the good life that it is the point of social and economic development to create. The challenge is to make these values count where the economic programme of socialism has become discredited. (pp. 1-2)

Central among those revered values, it would appear, is envy. Throughout his discussion (for example, pp. 40-42, 78, 100, 106, 108, 147) Giddens repeatedly denounces the evil of inequality and endorses the continuation of the government’s redistribution of income and wealth (pp. 100-103), which he views as an essential means of arresting the “widespread disaffection and conflict” that would spring from “large-scale inequality” (p. 42). He uses the term “social justice” without placing it in quotation marks (for instance, pp. 41, 45, 65), as if it signified something coherent. Despite a reference to Friedrich Hayek as “the leading advocate of free markets” and a thinker whose ideas “became a force to be reckoned with” (p. 5), Giddens seems unaware of Hayek’s demolition of the concept of social justice (F. A. Hayek, Law, Legislation and Liberty, vol. 2, The Mirage of Social Justice [Chicago: University of Chicago Press, 1976]).

“We Have to Manage”

If socialism “as a system of economic management” is indisputably kaput (p. 3), why not just rely on free markets? Giddens rejects that option because neoliberalism (his name for Thatcherism/Reaganism, which he views as the only live alternative to the Third Way) “creates new risks and uncertainties which it asks citizens simply to ignore” and it “neglects the social basis of markets themselves” (p. 15). “Free trade,” Giddens admits, “can be an engine of economic development, but given the socially and culturally destructive power of markets, its wider consequences need always to be scrutinized” (p. 65). For commentators endowed with the Third Way mentality, it is never acceptable simply to allow citizens to adapt their economic and social affairs to suit themselves. As Tony Blair has declared, “We have to manage that change to produce social solidarity and prosperity” (p. 1). The conceit may be fatal, but it’s obviously not dead. (My allusion is to F. A. Hayek, The Fatal Conceit: The Errors of Socialism, ed. W. W. Bartley III [Chicago: University of Chicago Press, 1988].) In a most anti-Hayekian declaration, Giddens asserts that “civil society is not, as some fondly imagine, a source of spontaneous order and harmony” (p. 85). Why, what if unanimous agreement failed to arise spontaneously at the local level? “Government must adjudicate” (p. 85).

Giddens affirms, correctly, that “the nation-state is not disappearing, and the scope of government, taken overall, expands rather than diminishes as globalization proceeds” (p. 32). Indeed, for those intent on presiding over a New World Order, globalization presents not so much an obstacle as an opportunity, as government must now become “more wide-ranging” (p. 32). “Globalizing processes have transferred powers away from nations and into depoliticized global space” and--sure enough--“this new space needs regulation” (p. 141). “We can’t leave such [global] problems to the erratic swirl of global markets and relatively powerless international bodies” (p. 153).

For Giddens, the agenda of contemporary government remains vast. He writes that “government exists to”

  • provide means for the representation of diverse interests;
  • offer a forum for reconciling the competing claims of these interests;
  • create and protect an open public sphere, in which unconstrained debate about policy issues can be carried on;
  • provide a diversity of public goods, including forms of collective security and welfare;
  • regulate markets in the public interest and foster market competition where monopoly threatens;
  • foster social peace through control of the means of violence and through the provision of policing;
  • promote the active development of human capital through its core role in the education system;
  • sustain an effective system of law;
  • have a directly economic role, as a prime employer, in macro- and microeconomic intervention, plus the provision of infrastructure;
  • more controversially, have a civilizing aim--government reflects widely held norms and values, but can also help shape them, in the education system and elsewhere;
  • foster regional and transnational alliances and pursue global goals. (pp. 47-48)

Giddens aptly remarks that “the list is so formidable that to suppose that the state and government have become irrelevant makes no sense” (p. 48). Certainly that would be so if one were to agree that the listed actions fit within the scope of proper government activity.

Only Government Can Do the Job

In Giddens’s eyes, one has no choice: “Markets cannot replace government in any of these areas,” he declares, “but neither can social movements or other kinds of non-governmental organization” (p. 48). The claim is so wildly out of touch with actuality, not to speak of potentiality, that one scarcely knows where to begin a rebuttal. Can only government provide education? Then what are all the private schools and home-schooling parents doing? Can only government provide public goods? Then what are all the private producers of, for example, scientific knowledge doing?

But one chokes hardest on the notion that only government can foster social peace; the idea is nearly the opposite of the truth. Aside from the scores of millions killed in wars among governments in the past century alone, some 169 million persons were killed by their own governments between 1900 and 1987 (R. J. Rummel, Death by Government [New Brunswick, N.J.: Transaction Publishers, 1994], p. 4), and since 1987 the toll has continued to mount. In the wake of this almost inconceivable carnage comes Anthony Giddens to assure us that only government can foster social peace and have a civilizing aim. Considering the laudatory blurbs printed on the dust jacket of Giddens’s book, I cannot help recalling these lines of Robinson Jeffers:

Political men pour from the barrel
New lies on the old,
And are praised for kindly wisdom.
     (from Cassandra [1948], with apologies for my rearrangement of lines and capitalization)

If only government can foster social peace and promote civilization, may God have mercy on our souls. Giddens remarks that “far right parties and movements would be dangerous if they did become anything more than minority concerns” (p. 52). Obviously, the socialists of various stripes--Bolsheviks, Nazis, New Dealers, Labourites, and all the rest--who have ruled the world during the past century have done a dandy job of keeping us safe and civilized. Giddens shudders to contemplate radical devolution: “a world of a thousand city-states, which some have predicted, would be unstable and dangerous” (p. 129). Compared to what? Is it conceivable that a world of piddling principalities could produce anything even remotely approaching the death and destruction wrought by the megastates of the twentieth century?

Among the many areas in which Giddens feels the need for government to provide essential protection, the environment ranks high. In this area, reliance on “market fundamentalism” would be a “highly dangerous strategy” (p. 55). Therefore, we must hasten toward “engaging with the ideas of sustainable development and ecological modernization” (pp. 55-56). On the concept of sustainable development, Giddens could profit from reading the recent essay by Jacqueline R. Kasun, “Doomsday Every Day: Sustainable Economics, Sustainable Tyranny” (Independent Review 4 [Summer 1999]: 91-106). Although “the notion of sustainable development doesn’t admit of precision” and has been defined in at least forty different ways, Giddens nevertheless recommends it as “a guiding principle” (p. 56).

A New Mixed Economy?

“While government intervention is necessary to promote sound environmental principles” (p. 57), it should be sought by means of “a partnership in which governments, businesses, moderate environmentalists, and scientists cooperate in the restructuring of the capitalist political economy along more environmentally defensible lines” (p.57, quoting John Dryzek, The Politics of the Earth). Such fascistic arrangements, which Giddens recommends in other policy areas as well (pp. 69, 79, 88, 100, 126), usually give rise to the kind of “partnership” entered into by Little Red Riding Hood’s grandmother and the wolf. But maybe Giddens already knows that they do, and he isn’t worried. After all, in his view, “There are no permanent boundaries between government and civil society” (pp. 79-80). I would be remiss, however, to leave the impression that he is totally wild-eyed with regard to environmental policy. He does observe that “there is presumably a limit to the number of scares that can or should be publicly promoted” (p. 62). Perhaps some clever mainstream economist can specify a formal model from which to derive the optimal number of times that the government should cry wolf.

“Third way politics,” Giddens affirms, “advocates a new mixed economy” (p. 99, emphasis in original). In the “old” mixed economies, markets were subordinated to the state. “The new mixed economy looks instead for a synergy between public and private sectors, utilizing the dynamism of markets but with the public interest in mind” (pp. 99-100). We have here a distinction without a difference. Rock ‘n’ roll aficionados, recalling the Who’s song “Won’t Get Fooled Again,” might translate Giddens’s pitch: “Meet the new boss, same as the old boss.” Giddens recognizes that the welfare state has run into a few problems, such as the sacrifice of liberty, but “third way politics sees these problems not as a signal to dismantle the welfare state, but as part of the reason to reconstruct it” (p. 113). In short, if hitting your thumb with a hammer has not proved satisfying, you should change hammers.

The age-old dream of politicians is to starve and pluck the goose while making off with an ever larger gathering of golden eggs. As for the fluff about government’s promoting the public interest, Giddens needs to take a course in public choice, or at least to review Adam Smith’s Wealth of Nations. Governments are good at many things--for example, the surveillance of unoffending citizens at home and the bombing of hapless men, women, and children abroad--but promoting the public interest is not one of those things.

In certain respects, Giddens’s modestly revamped interventionist state would be an even greater nuisance than its predecessor, because the new model not only retains all the old coercive presumptuousness but links it to a politically correct insistence on butting into the most personal realms of life. “The overall aim of third way politics,” writes Giddens, “should be to help citizens pilot their way through the major revolutions of our time: globalization, transformation in personal life and our relationship to nature” (p. 64, emphasis in original). “Welfare institutions must be concerned with fostering psychological as well as economic benefits. . . . counseling, for example, might sometimes be more helpful than direct economic support” (p. 117). Naturally, this approach promises to head off further degeneration of people’s “self-esteem” (p.120). Heaven help us. If people need a priest, they should get a priest.

Notwithstanding Anthony Giddens’s best efforts to put an appealing spin on the Third Way, it remains what it has always been, a ill-disguised Second Way, a species of sugar-coated despotism that recommends itself to those who fancy that slaves can be jived into loving their masters. There can be no third way. Either our rulers remove their spurs from our ribs, or they don’t.

Robert Higgs is a Senior Fellow in Political Economy at the Independent Institute and Editor at Large of the Institute’s quarterly journal The Independent Review. He received his Ph.D. in economics from Johns Hopkins University, and he has taught at the University of Washington, Lafayette College, Seattle University, the University of Economics, Prague, and George Mason University.
Other Independent Review articles by Robert Higgs
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