The Third Way from a German Point of View

Thomas Meyer

I. A New Political Philosophy

Since its very inception the beauty of the Third Way discourse has derived its surprising glamour from four distinct yet interrelated sources. First, till now it always was seen as a winner philosophy due to its close ties to the electoral successes of Clinton and Blair; secondly, after neo-liberalism has run into increasing difficulties all over the world the Third Way approach seems to be able to cope with the new challenges of globalization in a humane manner; thirdly, it consists of a magic mix of most general ideas that are open to various interpretations implementable everywhere in the world and also of some quite precise policies that are proof of its practical power; and fourthly, it has re-established fruitful interactions between the political and the academic discourse. All this contributes to the unique welcome the Third Way discourse has received by centre -left milieus in all parts of the world.

In Europe the discussion about the Third Ways, or more general a timely Social Democratic programme renovation, in the first couple of years has been marked by tremendous disputes, differences and even a certain degree of alienation between the proponents of different national approaches. However, as the conference of the Socialist International in Paris 1999 has shown, once the process of serious dialogue between representatives of the differing positions is underway it turns out that beyond spectacular discords in language and symbols there are substantial similarities both in the core philosophy and at the policy level. For obvious reasons the term Third Way itself is disputed. In the perception of many on the continent it is to closely related with Clinton and Blair and some more neo - liberal particularities of their specific approaches. In the history of some European countries, such as Spain, the term has been related to extreme right wing movements, in others, like Germany, it is of no appeal in the electoral arena, and in all it s more or less a brand - name for the peculiar Anglo- Saxon approach to the modernization of Social Democracy in an era of globalization. Thus, in order to remove a main source of misunderstanding an unnecessary dispute it seems to be more sustainable to term the new Social Democratic discourse as Modern Social Democracy. By way of this the further dialogue can more successfully focus on matters of substance without denying those participants the right to stick to the term Third Way who for their own particular reasons wish to do so.

The dialogue between proponents of the European Social Democracies during the last few years has created a considerable amount of consensus both in their basic political philosophy and regarding the guidelines for new policies appropriate to implement them. This does by no means come as a surprise taken into account that all the respective countries are facing the same new challenges of globalization and rapid internal change. The ground on which they stand is very much the same, and so are the basic values in accordance with which they are aiming to cope with the new challenges. Relevant differences remain, however: national differences in the actual social and economic situation itself; differences in the weight of ideologies and traditions in each of the Social Democratic parties; differences in the political cultures of each country, in their political systems and in the composition of the respective political arenas in which they have to compete with other parties.

Notwithstanding all remaining differences the similar problem constellations and dominant similarities in the interpretation of basic values such as justice make for a substantial convergence in the approach of modern Social Democracy. The new issues under discussion are the same everywhere, an so are the basic ways of responding to them. The new approach is focussing on six related dimensions:

1. New Economy. Here the question is : what is really different , and what will be the political responsibility of governments in a globalized knowledge economy for growth and employment - largely without the Keynesian recipes of the golden age of Social Democracy.

2.New Welfare. How can the welfare state contribute to growth, development and activity of the individuals and self-responsibility instead of cultivating passivity. But also how can it guarantee minimum standards for a decent life for everybody that are sustainable in the long run .

3.New Governance. What is the proper role of government in a highly complex, decentralized and utterly dynamic modern society? What is the appropriate division of responsibility between state, society and the individual, between individual rights and duties in today’s society of the individual?

4.New Politics. How can Social Democratic parties prompt very different social milieus- such as traditional blue collar workers, modern wired workers, new middle classes in the service sectors, and new IT- entrepreneurs - to support their political projects and form an electoral majority? What are the relevant strategies to reach all of them? Which policies must be offered, what ways of communication are necessary?

5. Modern Social Justice. Required is a realistic and appealing concept of social justice that matches with the complex modern challenges. Which inequalities are productive and desirable for the whole of society? Which are to be tackled by new policies? In which ways has such a complex concept of justice to be communicated in the individualized and highly diverse society of today.

6. Transnational Regulation. Last not least the most controversial issue: what are the prospects for transnational regulation of the finance markets, for the control of transnational concentration of economic power, for social and ecological responsibility and framework-setting .

The constraints with regard to which the new challenges have to be met are the same in all countries:

• The devaluation of the Keynesian macro – economic coordination that erstwhile had been the favourite tool of social democratic economc policies, due to economic globalization
• The increasing stress on all the welfare system budgets due to high rates of long term unemployment and new social developments;
• The growing diversification of the different parts of the old and new working classes;
• The emergence of new rivals on the left in the electoral arena (Green Parties)

At present time the emerging basic consensus of modern social democracy seems to run along the following lines of new policy packages .

II. The New Economy

Economic globalization, or rather transnationalization is increasingly undermining the long- standing key-tool of social-democratic economic policies: the Keynesian macro-economic co-ordination. The socialization of the means of production and central planning , the erstwhile social-democratic macro- economic favourites in the period before Keynesianism, are completely ruled out as alternatives for modern economic regulation. However, European Social Democracy stands firm to its traditional conviction regarding the primacy of political responsibility over markets. Thus, new ways and instruments of exercising regulative political influence on the economy in an era of globalization are in need.

The economy is undergoing deep changes. The Knowledge Economy is transforming capitalism in many respects: more speedy changes in all dimensions; accelerated obsolescence of goods, services, knowledge and professional skills; a more important role for small and medium size enterprises; the requirement for higher levels of job qualification and permanent re-qualification.

New social risks occur and traditional risks worsen, such as : the fast devaluation of job skills; unemployment; poverty; and , consequently, social exclusion. Beyond all differences in detail and accent the new approach of European Social Democracy is marked by a package of interrelated policies, all of which represent pragmatic strategy-mixes:

• Economic progress, growth and full employment remain matters of political responsibility;
• Socialization of the means of production and state planning remain ruled out as entirely inadequate in an globalized economy;
• Priority for anti-inflation policies; and subsequently the recognition of the autonomy of the Federal Reserve Banks and a policy of strict budget discipline;
• A new approach of co - operation between government and business to achieve the welfare objectives;
• A new mix of supply- and demand - side economic policies implying: favourable (i.e. lower) taxes; priority of research and development to pamper technological innovation; public investment in human capital (job qualification and re-qualification); ecologically sustainable growth (in Germany e.g.: ecological tax reform);limited increase in the flexibilization of labour markets; public job programs for special target groups (young people, long term unemployed); and in some countries( like France) reduction of working hours and tripartite systems of cooperation for job creation and growth (Germany and the Netherlands).

In sum, in its economic policies the New Social Democracy is pursuing a multi -pronged pragmatic approach. Country- wise there are differences in stressing the single parts of the mix, there is, however, also a broad consensus concerning the overall composition of the mix.

III. Welfare State Innovation

In all social democratic parties it is widely acknowledged that the comprehensive European Welfare State has high credentials and merits to its favour. Nonetheless, since more than a decade it is suffering increasingly from four interrelated weaknesses:

• Its costs are unbearably high;
• Its efficiency in tackling the old and new social risks is decreasing;
• To a problematic extent it nourishes a culture of passivity, dependence and benefit fraud;
• In its financial and institutional structures it is partly out of tune with some of the most recent changes of the European societies (e.g. the accelerated ageing of the society).

There is a variety of causes of these welfare state dilemmas which differ from area to area. In the pension system the main cause is the reversal of the demographic pyramid of the society with more and more non-working retired people and less and less working younger people. The contributions of the working part of the society to the pension insurance systems, thus, are substantially increasing and/or the benefits of the pensioner respectively decreasing. In the health insurance systems the main cause of the crises lies in the speedily rising overall costs due to elevated standards in medicine and medical technology that make treatment more and more costly. In the unemployment insurance and welfare (income support) systems the key cause of the financial dilemma lies in the emergence of a double lock of smaller budgets on one hand and higher costs for benefits on the other, both due to the lasting high rates of unemployment. There is, thus, an urgent need for structural changes in order to render the welfare state financially sustainable.

The overall balance of the welfare state is marked by unchanged high expectations in the society regarding its performance without a corresponding readiness to pay for the increasingly high costs. In some sectors there is also a lack of self - responsibility and self-directed problem – solving activities.

Again, in the Western Social Democratic parties there is no dividing dispute about the most basic issues: first, that there is a need for structural change, and secondly, that social security, the guarantee of a decent life and social inclusion for all individuals must be protected.

The reforms that are already implemented or envisaged are all aiming at a new type of welfare state which is more activating; more stern vis-a-vis fraud; more co - productive between state and society in delivering security and support and more subsidiary in its way of functioning.

The new approach contains amongst other the following measures:

• Individuals and families must be made aware that they are responsible for themselves in the first recourse;
• The state is clamping down more effectively on benefit fraud;
• The welfare state in the first instance is a social investment state that provides the needy with new opportunities to help themselves ( job training, new qualifications, support for self-help groups);
• In return for all subsidies that are given, the individual is strictly obliged to look for and accept available job offers (welfare to work), otherwise they will have to suffer benefit cuts or the loss of subsidies;
• An education system that offers life long opportunities for re -qualification is considered to be the most appropriate social policy in the new knowledge economy (policy of second chances).
• Strengthening self - help activities, civil and social responsibility by way of encouraging and organizing a welfare society consisting of social self-help initiatives;.
• Public social insurance systems are slightly reduced in their benefit levels; and at the same time supplemented by enterprise - and private insurance systems. The level of a decent life will be guaranteed, the desired individual living standard must be protected through additional private initiatives.
• Social self-help organizations are encouraged and supported.

Looking at the different Social Democratic parties in Europe it is, however, obvious that beyond this common ground there is also an area of remarkable differences regarding the envisaged levels of social security and the role of civil society agents.

IV. New governance

With the exception of the still comparatively statist French Socialist Party, European Social Democracy is aiming at a new political division of labour and responsibility between government and society. Society will have more political responsibilities, government will change from simply creating political results by implementing programs to new roles and modes of acting.

The ensuing concept of new governance rest on two different pillars:

The first pillar is a functional one, responding to the obvious limits to government’s ability to steer and regulate complex societies by way of simply giving directives from the top. New forms of co-operation between government and civil society actors need to be exercised: government will have to act much more often as a partner to actors from the civil society, as moderator, catalyst, or facilitator.

The related objectives of social security, justice, participation, environmental protection and the like are still seen as political obligations, but the ways of government’s acting in order to achieve them need to undergo substantial transformation toward more co-production, forming alliances, and striking contracts between government and society, towards support of societal actors instead of government acting as the monopolist of welfare related political action. The Dutch Polder Modell, the Alliance for Jobs in Germany and the new approach of communitarianism are examples of this dimension of change.

The second pillar being a socio-cultural (or a moral) one. It rests in the dimension particularly advocated by communitarianism: how to rebalance individual and civic obligations and rights. Government must follow more strictly the principle of subsidiarity. Only when individual and civic efforts to tackle social and political problems fail constantly, public institutions must first step in by supporting the individual or social initiatives, and only in such cases where it is indispensable grant help through direct government action like the payment of benefits.

This is not meant to simply privatize public responsibility. It is aiming at creating new patterns of communitarian action in the society itself and new forms of interaction between society and government institutions. New Governance, thus, is mainly about more self- responsibility and participation of citizens (i.e. civic empowerment); required is a revival of the spirit of republicanism.

V. New politics

The two starting points for the concept of new politics are the almost complete disappearance of the traditional working class and the salience of mass media communication as a prerequisite for electoral success. New politics, thus, is about new social and political alliances for majority building and new strategies of efefctive public communication. The main points of the new strategy are:

• The ‘traditional working’ class has evaporated ( ca.16% on Germany);
• The New Economy has produced new patterns of social stratification, new mentalities, different perceived interests, values, modes of communication and aspirations;
• There is a need of forming new social and political alliances not along the old dividing lines of classes, but with regard to new social groups and values;
• In all European societies the traditional class structure of the classical capitalist society has been replaced by 10 to 12 socio-cultural milieus that differ from each other in terms of values, life styles, and socio-cultural orientations of its individual members. None of theses milieus tends to support social-democratic electoral aspirations automatically.
• Instead of relying on more or less automatic support by related milieus, social democratic parties must form temporary alliances on the basis of overlapping interests through permanent communication with changing focuses.

These new alliances in order to be successful in the electoral arena need to comprise: (1) the rest of the old working class; (2) the new working classes („wired workers", social and cultural workers); (3) the new bourgeoisie (small and medium size entrepreneurs in the knowledge economy); and (4) liberal professionals. Some of them will join such an alliance for social justice, economic innovation and democratic participation because they hope to gain from more justice directly, some will join because they know that inclusion is better for a healthy development of their society as a whole, and others because they know that integration is one of the conditions for social cohesion and stability.

VI. Modern Justice and Social Security

Today, a strategy that advocates a view according to which justice means simply more and more equality would neither be feasible, nor be in tune with the demand for economic growth, nor be successful in the electoral arena. Consequently, European Social Democracy is reconsidering its understanding of social justice. This re-orientation is marked by the following considerations:

• Required is a more differentiated down to earth concept of justice which matters in day to day policies;
• The rejection of the neo - liberal equation which identifies market results with justice;

In the German discussion there is a certain consensus that justice should be understood as a regulative principle comprising five basic dimensions:

• The Dimension of basic needs and rights; this is a dimension of equality: basic equalities in social security, access to education, human and political rights;
• The Dimension of equal freedom; this dimenion combines requirements of equality and of inequality: equal opportunities for all but a broad scope for the unequal use of these opportunities;
• The Dimension of participation: again, it combines inequality and equality: equal opportunities for inclusion and participation , the use of which must be left to the individual’ discretion;
• The Dimension of production; this is a dimension of just inequalities: those inequalities that are conducive to increments in the overall wealth production are justified because they benefit the whole society including the worst off (John Rawls’ criterion) ;
• The dimension of just obligations; everybody is responsible to contribute to the welfare of the society as a whole and his fellow citizens according to his abilities. this refers to the is

Justice is considered by main stream Social Democrats not mainly as moral category but as a necessary condition for social cohesion and the motivation to participate and perform.

One of the disputed issues in European Social Democracy is about the precise meaning of justice and the level of social security. Is, as Blair and his circle seem to propose, social inclusion the modern successor of social justice; are the supply of equal educational opportunities plus an existence- level guarantee of social security the present-day substitute for social justice( a thin concept of justice) ? Or should Social Democracy still be faithful to a thick concept of justice comprising the full equality of life chances and the guarantee of a decent social living standard for all citizens?

VII. Transnational Regulation

A second disputed issue amongst European Social Democrats is about the nature of economic globalization and the scope for political action which it entails. Blair seems to maintain that economic globalization is a fact of life which has to be taken for granted. The only apppropriate strategy for coping with its consequences is the adaptation of the national economies and societies to its compulsions, to foster and strengthen national positions in the global competition.

Contrarily, Schröder, Jospin and other European leaders are calling for new patterns of transnational (global) political co - operation to regain the capacity of political regulation at the global level. From their point of view what is needed now for a successful social democratic answer to the new challenges of economic globalization is building new institutions for effective transnational political regulation of finance markets and ecological and social frameworks setting. The European Union is one crucial arena for transnational political action of this sort, in its turn it has to be made use of as a tool for a genuine globalization of political responsibility.

An open discsussion of the issue, however, has not yet started. Obviously, the two competing approaches are not mutually exclusive. There is hope that a realistic and value based blend of the two will emerge.

VIII. Cultural Diversity and Democracy

As all the European societies have become more and more culturally diverse, new social and political problems arise out of this new reality. Some of them are of a real nature like the problems of economic, political , social, and cultural integration (as different from assimilation), and how to manage the co- existence between building a common political culture of democracy and allowing for different cultural identities and life styles within the framework set by it. Some of the new problems related to cultural diversity are, however, of a more fabricated nature created by right wing populists and fundamentalist representatives of minority groups. They wish to instrumentalize cultural differences for purposes of social and political power building.

Against such strategies of identity politics Social Democracy in Europe acts as an unequivocal advocate of cultural tolerance and social integration on the basis of a shared political culture of democracy. Social democracy everywhere it is defending the democratic ground under the changed conditions by working for a realistic combination of building the basis for political integration and acknowledging cultural differences .

IX. Some Disputed Issues

Beyond this broadly extended common ground of modern Social democracy in Europe there are also disputed issues of substance.

First: Is government only a partner of business and society or still the key and supreme actor with an overall responsibility?

Secondly: Is the rationale of the welfare state mainly to bring people back to the market or should it still create a basic network of social security, independent of success and merits of the individual?

Thirdly: Should Social Democracy pursue rather a thin or a thick concept of social justice? A thin concept in the sense some sort of inclusion of everybody is enough ,or a thick concept as equality in the life chances for everybody?

Fourthly: Are markets considered more as a part of the resolution of our problems or still rather as part of the problems that have to be tackled?

However, these differences are not absolute but mainly relating to variances of accent within a shared basic consensus. This consensus rests on couple of clear cut approaches which also mark the difference between neo- liberalism and Modern Social Democracy. One is the primacy of democracy over the markets. The second is a political concept of social justice as different from a position that accepts the market as the supreme value of political action.

X. Conclusions

To sum up three conclusions can be drawn in order to mark the characteristics of the new European Social Democracy:

First: The new Social Democracy in Europe is neither a system, nor a patent

remedy for all the new social and economic diseases, nor a ready made model that could be exported to every other place in the world. It is, however,a pragmatic approach shaped to suite the concrete conditions of the individual countries that are all under the influence of economic globalization. The answer to the new challenges lies in different packages of policy mixes depending upon both

varying political and welfare cultures and different problem constellations. The unifying factor is a common value based political philosophy aiming at a balance of freedom, justice, social security, tolerance, and economic prosperity.

Secondly: There are already some visible successes in the dimensions of welfare protection, social justice, the expansion of democracy , job creation and economic growth. There are, however, also some visible deficits: the Two Thirds Society with its exclusion of many is still prevailing, the successes in fighting unemployment is still limited, slight cuts in the welfare system had to be accepted everywhere in Europe.

Thirdly: What is most badly missing thus far is a comprehensive strategy for an effective transnational co-operation that can cope with economic globalization through setting and enforcing world-wide social, financial and ecological standards for its responsible regulation. The first step in this direction is an action-oriented dialogue of all those who share the basic values and the overall objectives of Social Democracy.