August 24, 2004


The Return of the Third Way (Katy Harwood Delay, August 24, 2004,

A group of Democrats are working to revive the
"third way" fashion from the 1990s. Led by Evan Bayh in the Senate, the
group The Third Way seeks a shift away from the left-liberal-labor dogma
toward "market-oriented" economic policies.

According to its inventor Tony Blair, speaking with Clinton and other heads
of state at a 1998 NYU School of Law banquet, "[the Third Way] leaves
behind, if you like, the old left that was about big government or
state-controlled tax-and-spend, and [here he gets a little vague] it is not
the politics of laissez-faire, either . . . it is essentially a belief that
we can construct a different type of politics for the 21st century based on
the values of what I would call progressive politics, but rigorously, in a
really disciplined way, applying those in an entirely fresh perspective for
the problems that we face today."

This admittedly lacks specificity, but I think we can safely say that the
Third Way is an attempt at compromise between capitalism and socialism, a
new-age effort to reestablish free-market roots while preserving and
grafting onto them the aforewilting progressive leaf system. Just as I
thought. [...]

[D]on't let them fool you. Third-Way economics is merely another political
trial balloon. The politicians are still simply trying to twist fattened,
round socialism into a lean, square, free-market hole, mainly to solicit our
vote. The problem extends beyond the Labour-Democrat nexus to encompass the
Tory-Republican nexus as well. Here we find Third-Way governance combined
with free-market rhetoric.

The core problem is the one Mises identified. Every form of intervention
generates an imbalance that seems to call forth a next step toward markets
or toward further intervention. The choice determines whether the social
system will be pushed toward the economics of prosperity or that of poverty.
The Third Way, in short, attempts to combine policies that are internally
contradictory. To attempt a pivot between laissez-faire and socialism is to
be caught in precisely the imbalance that afflicts the US and Europe today.

The problem with this analysis is that the population is rather evenly divided between those who favor freedom and those who favor security. It's entirely possible, maybe even likely, that Compassionate Conservatism/Third Way/New Democratism can't successfully strike a balance between the social safety net that the majority demands and the free market mechanisms that are the only way to pay for it in the long run. But if so then the future is probably pretty bleak. As examples throughout Europe amply demonstrate, people won't stop demanding welfare just because it's driving their nation into the ground.

Followers of Mises seem to have the utopian belief that they can somehow do away with that powerful demand for security--despite the fact that it is as old as Man--or that some imaginary system exists whereby freedom can be vindicated despite the political controls that would be necessary to stop the majority from voting itself a welfare regime. Their argument is with reality.

Posted by Orrin Judd at August 24, 2004 10:31 AM


The solution to what I believe is really not a problem, i.e. the so-called tension between liberty and 'security", (liberty being easily defined while security is an open ended desire without any universally desired solution) was foreseen by the framers in our system of federalism. A return to federalism will provide answers as numerous as states.

Posted by: Tom C, Stamford,Ct. at August 24, 2004 10:53 AM

In the end,in order to be a viable political party in the United States, the Democrates must abandon socialism (a/k/a liberalism, progresiveism, multiculturalism, postmoderism, etc.). The real poles of tension in American politics were defined by the Founders. They are Hamiltonian vs. Jefersonian.

Which one will be taken up by which party is not yet clear, but my guess is that if the Republicans come out on top they will perforce be Hamiltonian as it will allow them to rationalize spending money and incurring debt, whcich is something the party in power always likes to do.

The natural response is for the Democrats to become Jefersonian and to absorb the libertarian thinkers. This means they are going to have to learn to love Murray Rothbard:-) It will be fun to watch, but it is the only way out for them.

Posted by: Robert Schwartz at August 24, 2004 11:02 AM

The way out is fairly simple in theory:

a) The middle class and the rich fund their own retirement and medical accounts.
b) A minimum social safety net funded by taxes on the rich
c) Teaching of financial literacy in the school systems so the basics of investment, risk, and diversification is known

It'll probably never happen.

Posted by: Chris Durnell at August 24, 2004 11:19 AM

Bush's "Compassionate Conservatism" is a Third Way vision. His expansion of Medicare/Medicaid seals the fate of any attempt to dismantle the safety net. All this talk of an "Ownership Society" is just a smokescreen to rationalize big government conservatism.

A democracy will inevitably develop into a welfare state. It is a function of human nature. People will inevitably require that politicians buy their votes with pensions, job protection and special benefits.

Posted by: Robert Duquette at August 24, 2004 11:33 AM

Here is a depressing look at how even those from the most barbaric regimes can quickly become attached to the "security" they offer.

Posted by: Peter B at August 24, 2004 11:33 AM


No, the Anti-federalists were right--even our system leads to a centralized state.

Posted by: oj at August 24, 2004 12:11 PM


The only part of Medicare reform that matters in the long run is HSAs

Posted by: oj at August 24, 2004 12:12 PM

Sadly, I think OJ's vision of Bush's program of an "Ownership Society" is probably the best we're going to get.

Posted by: Annoying Old Guy at August 24, 2004 12:19 PM


Then it's time to do away with the electoral college. Why continue the fraud?

Posted by: Tom C, Stamford,Ct. at August 24, 2004 3:20 PM


The measures they took have slowed the tendency--why speed it?

Posted by: oj at August 24, 2004 4:12 PM