The Third Way: More Than 150 Years of Social Democratic Pragmatism

In recapturing the history and the present developments of the Social Democratic movement in Europe and the Antipodes (Australia and Aotearoa/New Zealand), one finds interesting, and perhaps astonishing similarities between the policy platforms—and, thus, the programmatic values and ideas—and the actual policies of the very first days of the Social Democratic movement and today's claims of pursuing a newly-invented "Third Way."

The recently far and wide discussed policy agenda of the "Third Way" was not—as generally conceived—devised in Britain, not by Tony Blair, nor by Tony Giddens. As a matter of fact, the British Third Way was imported and copied from Australia, which in highly troubled times of European Social Democracy saw a remarkable rise of the Australian Labour Party (under the Bob Hawke and Paul Keating Governments, from 1983 to 1996) that, from a today's perspective, truly initiated a renaissance of Social Democracy as a whole.

But, was the recent, the last, period of Social Democratic history really an invention of something completely new? The concept of "the Third Way" and "the Middle Way" is easily traceable back to the 1930s in Sweden, where Marquis Childs wrote his famous book "Sweden: The Middle Way". At that time, the middle way proposed a route in between pure capitalism and pure socialism. Today it is merely the middle road between expenditure-oriented welfare statism on the one side and neoliberalism on the other; but the idea of a Third Way is very much the same. That is, what we deal here today is basically "old wine in new bottles."

The Swedish Middle Way, or Third Way, came forward at a time when the Swedish Social Democrats for the first time participated in government. Together with the agrarian-based Liberal Party—forging a long-lasting inter-party agreement, the "Kohandeln" (cow trade)—then established Sweden's first comprehensive welfare state system; based, however, on (left-wing) Liberal social policy principles (such as universalism of coverage, flat-rate benefits, and eligibility based on social rights/citizenship). The Swedish Third Way of the 1930s meant the construction of a new form of capitalism, one in which the adverse effects of capitalism are addressed by the remedy of a comprehensive welfare state system. In other words, the Swedish Social Democrats put up a people's home to protect them from the rough winds of capitalism and market rule (the Swedish welfare state is referred to as the "folkshemmet," i.e. "people's home").

As regards the United Kingdom, John Maynard Keynes and Sir William Beveridge were both Liberals, not Social Democrats; and both invented a different Third Way on their own. Keynes invented a new macroeconomic policy mechanism, based on the framework under which welfare state spending in the widest sense (for public employment, investment in infrastructure, and welfare spending in general) was being justified, as it was to prevent recession and to promote economic growth. During the heydays of World War Two, Beveridge thought of a way to build a new United Kingdom, one that would rise from the ruins of that disastrous war, one that would serve as a model for other countries-freeing its citizens from the problems of poverty, social exclusion and welfare dependency by means of flat-rate universal social insurance and the National Health Service system.

But after only five shiny years of promising welfare state development in the UK, the policy wheel turned to the right, with the accession of the Conservative Party to power. The majoritarian election system applied in the UK made it then unlikely, and in fact impossible, to give rise to a glorious epoch of the welfare state. Both Keynes and Beveridge provided postwar Social Democracy with a basic framework (also known as they "the postwar settlement"), which was put into effect by Social Democrats in e.g. Sweden, the United Kingdom, Germany, and Australia alike.

So, was it then in the 1930s, in Sweden, where it all began? To be sure, in Europe of the 1930s there was not only the Swedish model of Social Democracy, which stunned the world of that time. Vienna, which had been one of the world's largest cities at the preceding turn of the century, and which was for decades a mighty stronghold of social democracy in Europe (in terms of social democratic theory and politics), was also good for a showdown in Social Democratic pragmatism under the reign of capitalism.

Theoretically, Social Democracy was—ever since the 1870s—a very socialist-minded movement; both Social Democratic parties and labor movements were sticking to Marxism (and in the case of Austria, the special breed of Austro-Marxism) as the theoretical home base, which served to unite and mobilize its members.

But, in policymaking, Social Democracy stood not for Marxism, not at all; it stood for a pragmatic mix of policies—such as large-scale public housing, free universal education and family allowances (to profit also the middle and upper classes), equal treatment of employees and workingmen/-women, the extension of suffrage to women (for long a Conservative-dominated voting segment) and social security benefits to farmers (a hard-core Conservative clientele), wage restrictions for the sake of economic development, and the gradual extension of the welfare state to encompass all of the population.

In more or less close cooperation with Christian Democratic parties in Continental Europe, Social Democracy installed comprehensive wage arbitration systems, applied extensive industrial policies; it nationalized and privatized key industrial conglomerates. In Continental Europe, this form of capitalism come to be known as "Social Market Economy"—that is, an effective Third Way between socialism and (pure) capitalism.

The notion of a Third Way in between socialism/fascism on the one hand and laissez-faire capitalism on the other was also put forward by the Catholic Church beginning from the 1850s in Germany (and later then in Austria, Italy and the Vatican). The Bishop of Mainz, Wilhelm Emmanuel Freiherr von Ketteler, published books and gave exhaustive lectures at national conventions of the Catholic Church all over Germany with the aim of organizing society along a new Third Way, a truly Christian Democratic one, based on the principle of solidarity and the principle of subsidiarity.

Nonetheless, Social Democracy in Germany of the 1860s also put forward very "moderate"—that is, bourgeois- and middle-class based-policy agendas, especially in southern parts of what today is known as Germany. The Southern Social Democrats indeed cooperated and formed coalitions with bourgeois parties (such as the Catholic Center Party). Social Democracy, subsequently, won over votes from traditional Liberal Party voters by the millions (the Liberal Party being a middle class-based party). It needs to note, most working-class members were not allowed to vote in Imperial Germany until the 1890s.

When then was the actual birth-hour of the Third Way? Was it the time when Ferdinand Lassalle founded the first Social Democratic Party in Germany in 1863, the General German Workers' Association, the ADAV (the "Allgemeine Deutsche Arbeiterverband"). A number of historic studies, however, suggest that the birth-hour of the historical Third Way was in 1848 at the heart of the bourgeois revolutions that swept like a storm through all of Europe.

At first sight, the surge of newly-formed political organizations during the year 1848 and the following months seems to have been rather short-lived, but in Germany, due to the later mobilization of the working class when compared to England and France, labor organizers moved quickly (unrestrained by any severe setbacks) to set up numerous special "fraternal societies" and "educational societies," and later on again labor unions, which, in general, preceded the formation of Social Democratic parties (in all of Europe). The proven continuance of working class mobilization between the formation of the ADAV in 1863 and the 1848 Revolutions indicates that the real roots of the Third Way date back to those earlier days. To be clear, the 1848 Revolutions were revolutions geared by both the working and the middle classes, both proclaimed a programmatic change of capitalism under strict authoritarian rule, to empower the masses of the people, and to close the gap to the few, the rich, the capitalists who sided with the aristocrats.

The year 1848 was, in point of fact, the starting point of political social democracy—and that of the long history of the Third Way—with the formation of the world's first Social Democratic Party, the "Partie Democrate-Socialiste" in Paris the same year, which was in effect a coalition of bourgeois and working class factions.

In the light of historical facts, of which only fragments, a truly limited account, of Social Democratic history could be touched here (due to the given scope of this article), it is noted that a "new" Third Way (which, interestingly, was referred to in Australia as "the Only Way") constitutes not a break with the history of social democracy.

The Third Way, in fact, has always been at the heart of Social Democracy, expressed in the political need to form coalitions with bourgeois parties, the necessity to address white-collar Social Democratic voters, and even the need to win over capitalists to walk the only way, the right way, the Third Way (between socialism and laissez-faire capitalism).

Looking closer, of course, specific forms of the Third Way over different times and countries may vary, either tending to lean a bit to the left or the right from each other, but it always embodied the big, historical Third Way.

Today's Third Way, as it is discussed in e.g. Europe and Australia, is the logical outcome of overspending during the time of applied (and certainly falsely-interpreted) Keynesianism—to be sure Keynesianism was also, and still is, heavily applied by Conservative Parties, and Christian Democratic Parties alike, but with different spending priorities.

by Christian Aspalter (The University of Hong Kong)

Suggested Reading

Aspalter, Christian (2001), Importance of Christian Democratic and Social Democratic Movements in Welfare Politics, Nova Science: New York.