Talk of the third way lends itself to banality and caricature because it invariably begins with a description of what it is not. It rejects the doctrines of Marxist socialism, and of the New Right. It believes in markets, but not too much; in regulation, but not too much. It supports success, but is sympathetic to failure. It emphasises equality of opportunity, but not equality of outcome.
There is nothing wrong with these sentiments; few would disagree with them. But by that very token they offer no guidance in the policy dilemmas of our age. Avoiding extremes is wise counsel when we look at health, education or welfare, but once we have avoided the extremes, there are many options left. Is the third way simply an eclectic compromise which offers to drop any unpalatable bits from the familiar ideologies of right and left? If there is a third way, this is not where we will find it.
The two most widely canvassed compromise positions might be labelled benign socialism and benign Thatcherism. The former is to the right of the traditional left, the latter to the left of the less traditional right. If we want labels that convey their intellectual content, the former is modernised social democracy, the latter redistributive market liberalism.
Benign socialists' embrace of the market is reluctant and provisional. Their instincts remain dirigiste. For them, the project of centralised economic planning and control in eastern Europe and Africa was not fundamentally misconceived, it was simply overdone: too centralised; and based on political authority that was insufficiently democratic. It was not administered by people as sensible and reasonable as us.
This remains the position of most of the British Labour party-although not of its leadership. For New Labour there is more consolation to be found in benign Thatcherism or in redistributive market liberalism. The latter accepts wholeheartedly, welcomes even, the priority of market forces, but combines it with a social conscience. The economic role of the state is confined to redistribution through the tax and benefit system, supplemented, perhaps, by modest regulatory tinkering to make markets work better. This doctrine has never had any wide following (except in New Zealand, which has now been run on these principles for a decade). Its main advocates are economists such as James Meade and Samuel Brittan. The title of Brittan's book, Capitalism with a Human Face, exactly summarises the doctrine, which is an influential one, described in David Marquand's analysis of Blair's first year (Prospect, May): "A meritocratic society is one in which the state takes action to raise the level of the talents-particularly the talents of the disadvantaged-which the market proceeds to reward. First, the state levels the playing field. Only then does the game commence."
But neither benign socialism nor benign Thatcherism has much to say about the key political issues of the day: health, education and welfare. For the benign socialist, both health and education need more money and more political control. At best, this increased political control is translated into more extensive interference in schools and hospitals by bureaucrats from the departments of health and education. At worst, it restores the ability of local politicians to use the governance of schools and hospitals as opportunities for political posturing. All benign socialists agree that the real answer is more money-except that there isn't any, or not much.
For benign Thatcherites, the ideal is wholesale privatisation, marketisation and contractualisation. If access to health and education services is a concern, the answer is vouchers. The jingle of the cash register substitutes for prayers and morning assembly; the Hippocratic oath is overtaken by the contract between doctor and patient. All these ideas are intellectually intriguing-and have as much political appeal as Benjamin Netanyahu on the West Bank or Ian Paisley on the Falls Road.
On welfare, too, neither benign socialists nor benign Thatcherites have much to offer. Benign socialists hope for a world in which the numbers of the sick, unemployed and elderly are small enough to be generously provided for within realistic limits of public expenditure. Redistributive market liberals have a technocratic approach to the reform of social security. They favour schemes such as citizen's income, social dividend and negative income tax.
Unfortunately, no one has ever come up with a variant of these proposals in which the numbers add up. This apparently technical problem derives from a fundamental moral and political flaw. The citizen's right to a decent standard of living independent of his or her conduct or circumstances implies a corresponding duty on others to pay the taxes needed to support this right. Assertion of the right is not accompanied by acceptance of the duty.
These policy failures reflect the underlying weaknesses of the two ideologies. Benign socialists have no convincing answer to the devastating critique of economic planning provided by the east European experience. The rudderlessness of Lionel Jospin's government demonstrates how little substantive content there is to benign socialism. Whatever the third way is, the French know they have not found it.
Benign Thatcherism is wrecked on the fundamental incompatibility of its private and public values. You cannot extol selfishness in business behaviour and expect that the beneficiaries of that process will pay up cheerfully-or at all-to fund generous redistribution of income and wealth. Nor can you easily sustain the commitment of teachers to their students when their actions are defined by contract; or rely on the dedication of doctors and nurses in the operating theatre when those who manage them need the motivation of share options and long-term incentive plans.
compromise is not an ideology. The attempt to give substance to compromise as ideology, by favouring moderate versions of the parent ideologies of Marxism and libertarianism, fails. The origins show through: the flaws of the parent are compounded by the compromise. The search for the third way begins, not by seeking for something in between the first and second ways, but from a rejection of the whole notion that the choice of political action is a choice between roads to an ultimate destination.
For the modern third wayer, it is not just that socialist and New Right ideals, and their more moderated versions, are flawed: any utopian project is necessarily flawed. There are no models of economic, social and political organisation which are universal, valid outside the particular history and culture which have given rise to them. There is no ideal to which we seek to converge; we cannot judge political action by how far it takes us towards this ideal. Francis Fukuyama's announcement of the "end of history" -because the values of late 20th century American intellectuals are valid for all time-is as absurd as the historical determinism of Marx which would culminate in the inevitable dictatorship of the proletariat.
The "big idea" is that there is no big idea. But in its implications that turns out to be a "big idea." John Gray exaggerates only slightly when he sees in it the end of the Enlightenment project which has motivated our politics and economics for two centuries.
If political action is not to be assessed by progress towards an ideal, what is it measured by? The best term I can find is "fit," or perhaps appropriateness. Metaphors from evolutionary biology are overdone, but as soon as we understand that social and economic development is an evolutionary process, and not the imposition of a grand design, it is impossible to avoid using them. Success in evolutionary terms is measured by how well an organism fits with its environment; evolutionary improvement is about establishing a better adaptation to that environment.
In saying these things, we use terms such as success and improvement in very modest ways, as we might talk of a successful picnic or an improved washing powder. When we talk of the good society, we use good in the sense which we employ when we talk of a good knife. The mountain people of Ladakh enjoy a good society, in this sense, if the anthropologists who observe it are to be believed. Good for them, of course: not appropriate for us.
As this example illustrates, fit is deeply subjective: things fit if people think they do. But as the example also illustrates, there may be objective indicators. Certainly there is no room for the view that even if people are apparently satisfied with their lot and their institutions, they ought not to be-the inspiration of political agitation of all perspectives for centuries.
This relativism applies not only to politics, but to economics. In the post-socialist era, we begin to understand that there are different models of market economies. American individualist capitalism is different from Italian networking or Japanese corporatism. Each of these models acquires validity from the social context in which it operates and the products which it makes. Historically, one has developed with and from the other. We can trace the evolution of these models to the different histories and cultures of these three societies. In turn, these different models yield different forms of competitive advantage: Americans write most of the world's software, Italians lead in the manufacture of fashionable clothing and Japan produces automobiles of unrivalled reliability. While we can certainly learn from each other, wholesale transplantation always fails-as in Russia.
Shared values matter, then, not just in morality and in politics, but also in economics and business. And shared values are held in communities, which is why the concept of community plays a key role in discussion of the third way. Both the New Right and the old socialists agreed that power had to be polarised between the individual and the state; they disagreed only on what the division of responsibility between them should be. Both were uncomfortable with the dominant institution of modern business life: the large corporation. For the left, this represented an agglomeration of unaccountable power which needed to be brought under political control. For the right, it had either to be eliminated by reductionism-General Electric is "really" just the individuals who own its shares-or it is "really" just an extension of the personality of Jack Welch, its CEO.
All these miss the main point of General Electric, or any other corporation which continues to be successful. General Electric is an organisation with personality, vitality and values of its own; these values would be stifled by state ownership, have nothing to do with stockholders, existed before Jack Welch and will continue after him. When we talk of communities, we need to understand that the important communities in modern life are not troupes of Morris dancers or associations of residents. Marks & Spencer and the City of London, hospitals and universities, groups of accountants and franchisees are today's communities-organisations which function effectively only by virtue of the shared values within these communities, reinforced by acceptance outside of the relevance and appropriateness of these values. Fit is the key concept of corporate strategy: the successful firm is one whose characteristics are well- adapted to the environment in which it trades.
While this adaptation is the product of evolution, it is not entirely a matter of chance. In contrast to biological evolution, it is not simply the environment which selects the organism: the organism may select the environment; and it may also consciously adapt both itself to the environment and the environment to itself. The search for fit is not simply a Panglossian assertion that what is must be for the best: fit must be actively sought.
If the job of the business leader is to lead that search, that is true of the political leader, too. The job of the politician is to look at those things which do not fit; to broker conflicts; to observe and ameliorate tension between society and environment. When John Major talked of a society at ease with itself, he understood this need, although he had no idea how to fulfil it. A skilled politician such as Tony Blair does it instinctively. Franklin Roosevelt, perhaps the greatest politician of this century, did it on a heroic scale. The intellectual's first contribution is to say that political pragmatism is intellectually respectable.
But the role of the modern policy analyst goes beyond that. It is to help to understand why things don't fit; to spot the origins of conflict and suggest general solutions. Misfits-inadequacies in evolution and adaptation-fall into three broad categories.
First, there are direct conflicts between incompatible or incommensurable values: Northern Ireland is one example. On issues such as these, it is obvious that not only does ideology not help; it gets in the way. No principles beyond those of basic decency and integrity are involved: the agreement is in this sense unprincipled, and properly so. The objective is simply to find a formulation to which all parties can agree.
Similar considerations apply to social issues such as abortion or fox hunting. These are matters on which there is no widely shared social consensus and on which reasonable people can hold differing views. On issues such as these, the job of the politician is to identify and steer through some compromise. If this seems obvious, contrast the consensual approach to these questions in most European countries with how they are handled in the US, where arguments are translated into conflicts of rights. On abortion, the right to choose confronts the right to life; on gun control, the right to bear arms conflicts with the right of public safety. Presenting the issue in this way threatens to tear US society apart.
Second, misfit occurs because institutions have become dysfunctional: the environment has changed and structures have not adapted. This is the argument in favour of constitutional reform, or of reforming the tax and benefit system; it justifies the stress on modernisation. But we must be careful. In economic policy, as in much else, the 1960s were the modern age: the white heat of Harold Wilson's technological revolution, George Brown's national plan, the Industrial Reorganisation Corporation. The translation of Robert McNamara from the Ford Motor Company to the Pentagon and then to the World Bank exemplified the application of analytic rationalism across the spectrum of economic and political life, from automobile production to the Vietnam war to third world development. Yet Toyota, the Vietcong and African poverty had the last laugh.
The third way is not so much modern as post-modern. The case for modernisation is not that we can construct some hypothetical structure which might perform better, but that there is ready evidence of misfit: a contrast between expectations and outcomes. The evidence that institutions are inappropriate is that they are the subject of reiterated and often incoherent complaints from all sides, justified in the case of relations between central and local government, or the interaction between tax and benefits; but less evident in the case of other antiquated institutions such as the House of Lords.
Third, misfit occurs because of the remains of ideologies and the clash between ideology and dominant values. From the left, we have unwanted and inefficient centralised control-the historical politicisation not only of our education system but of how we generated electricity. From the right, we have the attempt to force mechanisms of social sympathy and risk-sharing into a framework of rights and contracts.
if we go back to today's central political issues-welfare, health and education-what might a third way politician have to say? These are issues in which policies and institutions appear to be at odds with the widely held values and expectations. They are central political issues because there is a gap between what our institutions deliver and what we want them to deliver. In none of these areas is the misfit of my first kind-a clash between incompatible or incommensurable values. On the contrary, there seems widespread agreement about what we want from our health service, our education system and (less so but still substantially) our welfare state. Political argument is not about objectives, but about means.
While there is an element of adaptive failure in health, education and welfare-in particular, the ossification of systems of public sector management which are ill-equipped to cope with rapid change or serious external pressure-the principal origins of misfit lie elsewhere. They come from the imposition of both left and right ideologies on value systems with which they are largely incompatible. The problems are the relics of big ideas in areas where no big ideas are required, or at least not these ones.
In health and welfare, the central values are inclusiveness and the socialisation of risk. Inclusiveness implies the opportunity to share in the community's central institutions-voting, employment, raising children, Coronation Street and the FA Cup Final. The socialisation of risk involves accepting that a variety of individual misfortunes are, at least in part, communal as well as individual problems. It is not an accident that the key institutions of our health and welfare systems-the NHS and the national insurance system-date from the period immediately after the second world war, when the values of inclusiveness and risk socialisation were held with particular force.
The NHS epitomises inclusiveness and risk socialisation to such a degree that its intellectual critics are frequently converted when they come into contact with it. This also explains the NHS's extraordinary popularity-which is quite independent of its effectiveness as a means of delivering medical treatment. Americans, who come from a culture which values technical efficiency more highly, are bewildered by our public pride in the NHS. Critics rightly note the NHS's focus on the treatment of illness rather than on the promotion of health. But care, not quality adjusted life years, is the NHS's central value. If the NHS is a national illness service rather than a national health service, it is because that is what we want it to be.
In truth, there is not much wrong with the NHS, except that it does not meet the requirements of modern rationalist ideologies. It suffers from a problem inescapable in any health system: the difficulty, in any but the most uncaring of societies, of refusing (on any grounds) treatment which might yield some benefit even if the probability is low and the benefit small. It is also poorly managed-a legacy of the excessive centralisation and political control which has been endemic in all nationalised industries.
The gap between expectation and achievement in our welfare system is wide. The imposition of ideology has undermined its legitimacy. This has come about in Europe in a curious way. The rights-based political discourse we have imported from the US has influenced not only the right but the left, who have recast traditional arguments based on solidarity and risk-sharing in terms of welfare rights. But there has never been an accepted basis for these welfare rights: we help the sick and unemployed because we want to help them, not because they have a right to our help. The proclamation of such rights has not only raised the costs of social security; it has also changed its nature, and eroded the social solidarity on which the welfare system was based.
Welfare-to-work recognises this: it represents the largest ideological shift by New Labour and most clearly epitomises the third way. It redirects welfare towards inclusion and risk-sharing. It acknowledges a commitment to sharing an element of misfortune such as redundancy or disability. And to inclusion: unemployment policy is about putting people back to work, not compensating them for the absence of work. In a tolerant society, inclusion is optional: but those who choose not to be included have no particular claim on the rest of us. Rights play no part in any of this. What our welfare system offers is the product of our current values.
No policy area epitomises the consequences of the clash of ideology and values more clearly than education. Subjected to political control and increasingly nationalised, Britain's education system displays the familiar characteristics of failed systems of centralised planning: the capture of ostensibly democratic mechanisms of accountability by interested groups; the periodic implementation of sweeping but unsuccessful schemes of radical reform; the proliferation of tools of measurement and control, reinforced, when they fail to achieve their desired effect, by yet more tools of the same kind; the gradual alienation of operating units from a centre which they view with increasing contempt; the consequential fall in morale and performance. For the student of Stalinist economic policies, only the Common Agricultural Policy provides a better test bed than British education (especially higher education).
But education, more than any other commodity, is about shared values in communities, and is undermined by the polarisation of authority between individuals and the state. That is why neither marketisation nor central political control work: the most successful education institutions are rarely found within such contexts. Around the world, the most successful educational institutions are, almost invariably, strongly embedded in communities: usually geographical communities where good schools, technical colleges and metropolitan universities draw on and reinforce civic pride. At the elite level, the communities which support and manage education have no geographical focus, but extend nationally or internationally through the involvement of alumni. This is true of the leading American universities, the French grandes ?coles and the top English public schools.
Educational reform requires the creation, or recreation, of these communities. This cannot be done quickly or easily; and, given where we are, it may not be possible at all. Just as the implementation of grand designs is not always possible, successful evolution is not always achievable.
Is not this version of the third way a profoundly conservative doctrine? There is certainly a sense in which it is: perhaps Burke is the true intellectual progenitor of the New Labour project. Yet this apparent confusion as to where doctrines are to be located in the political spectrum simply reflects the third way truism that the traditional categories of left and right do not describe politics today.
One of the striking features of western politics today is that the two principal parties in the main democracies have more in common with each other than with their counterparts elsewhere. Blair and Hague, Jospin and Chirac, Schr?der and Kohl-what separates each pair is far less significant than the divisions in the Socialist International, and it is barely worth convening a meeting of the European parties of the right. But given that modern politics is not about the promulgation of universal big ideas, but about adaptation within specific social, cultural and historic contexts, this is what we might expect.
Nor should we be surprised to find that, today, conservative policies-pledges to the defence of established institutions-are as likely to be found on the left as on the right. Because today's big ideas tend to be on the right, those who wish to maintain the status quo in the NHS or the SNCF naturally look in the opposite direction. The true measure of the irrelevance of left and right taxonomies is that moving to the right of established left positions-benign socialism-takes you to a very different position from the one reached by moving to the left of established right positions-benign Thatcherism. It is because there is no longer a unidimensional array of political issues that the third way is not to be found in the middle of it.
