Speech by Senator the Hon Amanda Vanstone

The Third Way

Location: Centre for Applied Economic Research, Coogee Bay Hotel, Sydney

The Third Way is a catchy title with very uncertain content.

PJ O’Rourke perhaps summed it up best: “A sort of clarion call to whatever.’

Amitai Etzioni has described the Third way as ‘fuzzy at the edges, not fully etched’.

It has been likened to the Loch Ness Monster of contemporary public policy: ‘everyone has heard of it, there are occasional sightings, but no one is sure that the beast really exists’.

The Economist in an article on the Third Way, appropriately titled ‘Goldilocks politics’ likened the search for the meaning of the Third Way to ‘wrestling an inflatable man. If you get a grip on one limb all of the air rushes to another.’

There is actually nothing new about the idea of a third way.

Pope Pius XII called for a Third Way between socialism and capitalism at the end of the nineteenth century.

In the 1960s Harold McMillan spoke of post war Britain’s mixed economy as a ‘Middle Way’.

Buddha found the ‘middle way’ well before Tony Blair.

In a world where political communication is too often driven by poll-tested sound bites, which in themselves can be, if you’ll forgive the irony, deeply shallow, the idea of a Third Way has some attractions.

Third Way terminology is used to conjure up an appearance of newness.

Its very lack of definition allows the listener to insert into the blanks whatever it is that they think has been missing from the political agenda.

In other words the voters bait their own hooks.

Bill Clinton kicked off recent use of the term in his 1992 State of the Union address:

‘My fellow Americans we have found a Third Way. We have the smallest Government in 35 years, but a more progressive one.’

The ‘New Democrat’ sounds a lot like an ‘old Republican’.

Tony Blair was quick to spot what the Third Way could do for him. He jumped on board and poured out more.

‘The Third Way is social democracy renewed’.

‘It is a Third Way for Britain because it represents a third phase of post-war history – following the settlements of 1945 and 1979.’

The third amigo in this Third Way quest was Gerhard Schroeder, who came to power in Germany in September 1998.

Schroeder called his Social Democrats the ‘new middle’.

He explicitly staked the claim to the middle.

Since then, there have been new sightings of the Third Way all over the globe.

It’s this very replication of the Third Way, like bacteria in a Petrie dish, that causes its meaning to be so unclear.

Each country where it has materialised has had its own history, with different political questions to which the Third Way miraculously is the answer.

Hillary Clinton has apparently gone as far as to claim it can: ‘marry conservatism and liberalism, capitalism and statism, and tie together the faults of man and the word of God, the end of communism and the beginning of the third millennium.’

Tom Bentley, the Director of Demos, has asked: ‘Is the Third Way an abstract philosophy, an approach to political leadership and management, or a distinctive set of policies?’

In my view it is none of the above.

The plain fact is that left of centre parties recognise that a clarion call to Socialism or Communism no longer rallies the believers. Even most of the former believers have given up on that idea. It’s a loser.

The Economist article on Goldilocks politics has identified what has happened:

‘Having demonised those Tory governments while opposing them Labour is understandably reluctant to admit that it is following the path it marked out. So a big part of the business of the Third Way consists of making up a story about what the Tories stand for which makes their Labour replacements look clearly different.’

As Michael Novak has observed: ‘Social democrats seldom have to say they were wrong; confident in good intentions, they simply pivot in a new direction’.

Lacking anything resembling a coherent ideology, they steal classic liberal policies and attach new labels developed by the very best of focus group testing to conceal connections with existing centre parties.

Beware of policies cut off from those roots, their ideological base, are rarely successfully transplanted.

As British journalist Clive Crook observed, ‘Conservatives have won the battle of ideas, and then lost the elections to converts whose rhetoric is effective it fools not only voters but very often the converts as well.’

I am an admirer of a number of the Blair Government policies. That’s because they are not based on Labor or Old Labor ideology – they are New Labor or Third Way which means they are re-packaged liberal – conservative policies.

The fact is Blair left most of the Thatcherite reforms untouched.

Thatcherism may have run out of steam, but its achievements were not dismantled.

Privatisations were not undone, taxation levels and welfare payments were not radically changed and market solutions are still sought to social problems.

The Third Way is Maggie with a makeover and a few fresh ideas phrased in poll tested sound bites.

Or, as one Left critic put it, ‘Thatcher without the handbag’.

I read with disbelief a report that the Blair Government planned to introduce performance based pay for teachers linked to the results their students achieved.

My disbelief was not based on a reluctance to accept such a move. I have always believed that good teachers should be paid more.

Why should the good, the not so good and the hopeless all be paid the same?

The disbelief was fired by my recall of the uproar from the Left in Australia caused by the introduction of testing of basic skills in primary schools by the Howard Government.

This is common sense. It is pragmatism. Why was it not welcomed as the Third Way?

It seems to some that the merits of a policy depend on the Social Democrat credentials of its proponents.

It is as if the prior rights to the word socialism gave ownership to the words society and social.

Liberal social policies, which are based on a recognition of the primacy of the individual, which see choice as a better motivator than compulsion, and which see the community rather than the government as the natural builder and owner of social capital were the victors of the twentieth century ideological war.

Third Way pragmatism, which steals liberal policies and separates them from their principled origins, will not last.

Tom Bentley from Demos has also identified this as a key weakness of New Labor and identified it as “the inability to root its policies and pronouncements deeply in a surrounding context”.

Lurking in the heart of all the Third Way advocates is an urge to extend the reach of government, if for no other reason than to try to win elections through the use of the powers of the state.

Having no credible ideology to fall back on, they take classic liberal policies and dress them up in some new packaging called the Third Way. Liberal politics has never been pure ideology it has always been tempered by pragmatism.

For example we have always understood that effective social policy must be built on a strong economic foundation.

In 1996 we inherited accumulated federal government debt of $96 billion.

Ignoring this debt would have meant higher inflation and higher interest rates, resulting in lower living standards for all Australians.

It would mean spending something like $4 billion on interest rather than on things the community wants.

By July next year we will have repaid $58 billion of that debt.

We’ve not only reduced debt, we’ve now had our fifth successive budget surplus.

We have the lowest interest rates in 30 years. Australians are, on average, paying $300 less a month on mortgages than they were in March 1996.

This reduction is far in excess of any relief the Government could have provided through either the taxation or social security systems.

We’ve always understood that people benefit from sound economic policies.

Labor pretends that the close proximity or overlap between its terms in office and recessions or economic difficulty is a recurring accident we can simply overlook.

Rather like a cat can ignore a dog in the veterinarian’s waiting room.

Put them back in power and the dog will revert to type bad economic times will return.

Labor will do as they always do, go into debt so as to spend more to keep itself in power.

Every day Australians pay the interest bill for this indulgence.

Low income Australians suffer most in recessions.

Hopeful home owners postpone their dreams with high interest rates.

And business cuts down to skeleton staff.

It’s not pragmatic to allow this to happen, it’s pernicious.

A strong economy and healthy budget surpluses create the capacity to respond to social needs.

One of the first priorities of the Howard Government has been the needs of Australian families.

The level of support that we are now able to give to Australian families would not have been possible without a strong and growing economy and a healthy budget.

Increases in support via Family Tax Benefit and Child Care Benefit recognise the financial stresses of raising families and provide a substantially level of support than would have been available without the dividend from a healthy economy.

Low income families with children have had real increases in disposable income of 15% to 20% between 1995 and 2001.

The social dividend from a stronger economy has funded new approaches to strengthening the fabric of Australian society.

Last year the Government committed $240 million to funding the Stronger Families and Community Strategy.

This will be used to trial innovative approaches to building social capital in communities and strengthening families as the basic unit of society.

The principles which inspire the strategy are classic liberal principles.

Working together in partnerships, for example, means that community groups and businesses seek to work together, encouraged by government but not dependent on government.

We want them to look for local solutions to local problems rather than seek to impose once size fits all solutions.

We encourage prevention and early Intervention because we recognise that in all things individual choice is the basis of sustainable results.

The social dividend from two terms of sound economic management will also fund Australians Working Together

This will invest $1.7 billion over four years to revolutionise the Australian welfare system.

Australians Working Together is based on the premise that the best help people can receive is help to get a job.

Jobs give more than just money. They give self esteem and an active lifestyle.

In conclusion, what we are seeing is the response of the Left to the failure of left-wing ideology where it has been put into practice.

The victory however hasn’t been one of unbridled capitalism over communism or of the completely free market over centrally planned economies.

The victory has been the triumph of liberal democracy with its focus on the individual over communism, socialism and any other system which does not acknowledge the primacy of the individual.

The focus on liberalism is the individual.

Labor, shackled to the trade unions, will never ever have that focus.

The message is clear. Liberal / conservative policies are being stolen wholesale from the rich warehouse of liberal ideology and repackaged as the Third Way. Beware, stolen policies are like stolen goods. The warranty / guarantee will not be fulfilled.

With the discrediting, even destruction, of the ideological base of the Left, they have turned their envious eyes to the middle ground.

Third Way protagonists like to pronounce their commitment to “what works”. It enables them to be able to ignore their discredited ideology and go for what really does work. That is policies grounded in liberalism. Liberal ideology, tempered with pragmatism and focused on the individual.

As Clive Crook says “New Left parties have discovered exactly what voters want: market friendly economics without guilt, compassion for the unfortunate without higher taxes” and that means, as he says, “conservative policies with Third Way ribbons”.

There is a real risk for Labor politicians in this rush to dump their rejected, discarded socialist leanings. How can they pilfer other politicians’ policies and possibly pretend that they are true believers?