The Third Way/Die Neue Mitte: A Manifesto
Blair, Tony & Schroeder, Gerhard
This manifesto, issued by the prime ministers of Britain and Germany, seemed to us to warrant critical attention, which we asked Joanne Barkan, one of our editors, to provide. EDS. SOCIAL...
...The willingness and ability of enterprises— especially small and medium-sized enterprises— to invest should be enhanced, as intended by the Social Democratic government in Germany through the reform of the taxes on businesses and as shown by New Labour's reform of capital gains and business taxes in Britain...
...The dislocating effects of change will be greater the longer they are resisted, but it is no good pretending that they can be wished away...
...The trademark of this approach is the New Center in Germany and the Third Way in the United Kingdom...
...We will start on this now...
...clearly justified—such as action to combat crime and destruction of the environment as well as the promotion of common goals in social and employment policy...
...Change inevitably destroys some jobs, but it creates others...
...We should make it easy for individuals to set up businesses and for new companies to grow by lightening administrative burdens, exempting small businesses from onerous regulations and widening access to finance...
...We need to retorm post-school education and raise its quality, at the same time modernizing education and training programs so as to promote adaptability and employability in later life...
...ublic expenditure as a proportion of national income has more or less reached the limits of acceptability...
...But though the language and the institutions may differ, the motivation is everywhere the same...
...We intend to work together to ensure that growing high-tech firms enjoy the same access to the capital markets as their U.S...
...However, deficit spending cannot be used to overcome structural weaknesses in the economy that are a barrier to faster growth and higher employment...
...To achieve higher growth and more jobs in today's world, economies must be adaptable: flexible markets are a modern social democratic aim...
...Our economies suffer from a considerable discrepancy between the number of job vacancies that need to be filled (for example in the field of information and communication technology) and the number of suitably qualified applicants...
...ireletes some Okay"( e of 9.1).4‘trky 04.4.401fte Cceriolnly more *an 41.11t5AS in Same Etkropc fiver ohs . 4wie...
...poYncy sec4-ion so.C...
...The left's supply-side agenda will hasten structural change...
...A New Supply-Side Agenda for the Left The task facing Europe is to meet the challenge of the global economy while maintaining social cohesion in the face of real and perceived uncertainty...
...In the past: • The promotion of social justice was some times confused with the imposition of equall, ity of outcome3The resu t was a n eglec importance of rewarding effort and responsibility, and the association of social democracy with conformity and mediocrity rather than the celebration of creativity, diversity, and excellence...
...DISSENT / Spring 2000 • The ability of national governments to finetune the economy in order to secure growth and jobs has been exaggerated...
...The burdens on them must be lightened...
...regent war*,ers downs\ zed...
...ioac Minty 6%A:tick...
...We invite all social democrats in Europe not to let this historic opportunity for renewal pass by...
...We do not advocate a single European model, still less the transformation of the European Union into a superstate...
...We will establish a network of experts, farsighted thinkers, political fora, and discussion meetings...
...For our societies, the imperatives of social justice are more than the distribution of cash transfers...
...A policy to make cities worth living in fosters community spirit, creates new jobs, and makes residential areas safer...
...People who have never had experience of work or who have been out of work for long periods lose the skills necessary to compete in the labor market...
...Modern social democrats want to transform the safety net of entitlements into a springboard to personal responsibility...
...r\e4 - is ktils where kAlt Ihird V107 wanks 4o te-ke...
...Voters who in their daily lives have to display initiative and adaptability in the face of economic and social change expect the same from their governments and their politicians...
...Here lies the biggest potential for new growth and jobs in the knowled e-based society of the future...
...Social de.nlocracy...
...We face the same challengesIto promote employment and prosper <Thf ity, to offer every individual the opportunity to fulfill their unique potential, to combat social exclusion and poverty, to reconcile material progress with environmental sustainability and our responsibility to future generations, to tackle common problems that threaten the cohesion of society such as crime and drugs, and to make Europe a more effective force for good in the world...
...However, there can be lags between job losses in one sector and the creation of new jobs elsewhere...
...To make these values relevant to today's world requires realistic and forward-looking policies capable of meeting the challenges of the twenty-first century...
...But at the same time Europe urgently needs reform—more efficient and transparent institutions, reform of outdated policies, and decisive action against waste and fraud...
...This 541ance is 50 lener Sounds lt he...
...e re uction o non-wage a i or costs t roug structural reform of social security systems and a more employment-friendly tax and contribution structure that looks to the future/ is therefore of particular importance.• The aim of social democratic policy is to overcome the apparent contradiction between demand- and supply-side policies in favor of a fruitful combination of micro-economic flexibility and macro-economic stability...
...This must now be a top social democratic riorit • Standards at all levels of schooling and for) all abilities of pupils must be raised.0 Where there are problems of literacy and numeracy these must be addressed, otherwise we condemn unskilled individuals to lives of low pay, insecurity, and unemployment...
...claim wi4-11 wh...
...In Germany, the political sector is supporting this endeavor with an immediate action program for jobs and training that will enable 100,000 young people to find a new job or training place or to obtain qualifications] In Britain the Welfare to kir Work program has already enabled 95,000 young eople to find work...
...Modern social democrats solve problems where they can best be solved...
...People in many different walife e looking for the opportunity to become entrepreneurs long-standing as well as newly selfemploye people, lawyers, computer experts, medical doctors, craftsmen, business consultants, people active in culture and sport...
...is, a ove a , means re n mg a spirit of community and solidarity, strengthening partnership and dialogue between all groups in society, and developing a new consensus for change and reform...
...They must be encouraged to take risks...
...cittirAeve, 'Ichern This Viate mod accepts Avo easily and...
...A welfare system that puts limits on an individual's ability to find a job must be reformed...
...Within the public sector(bureaucracY\at all levels must be reduced, performance targets and objectives formulated, the quality of public services rigorously monitored, and bad performance rooted out...
...I. Learning from Experience Although both parties can be proud of our historic achievements, today we must develop realistic and feasible answers to new challenges confronting our societies and economies...
...Overall, the taxation of hard work and enterprise should be reducecliThe burden of taxa('tion should be re-balanced, for examle toward environmental "baisciGermany, t e United Kingdom, and other European countries governed by social democrats will lead the way in this regard...
...Increased indebtedness represents an unfair burden on future generations...
...The importance of individual and business enterprise to the creation of wealth has been undervalued...
...We must: "7 We must explore the scope to lower t en of non-wage labor costs by environmental taxes.r • Introduce targeted programs for th–e–ro.r7-'• term unemployed and other disadvantaged ? groups to give them the opportunity to reintegrate into the labor market on the principle of rights and responsibilities going together...
...mentality an a new entrepreneurial spirit at all levels of society...
...We want all groups in society to share our joint commitment to the new directions set out in this Declaration...
...Having ters7—ne joh for life is a thing of the past...
...The links between business and the science base should be strengthened to ensure more entrepreneurial "spin-offs" from research and the promotion of "clusters" of new high-tech industries...
...he top priority must e investment ---Lin human and social capital.f If high employment is to be achieved and sustained, employees must react to shifting demands...
...Apo Lamptetely the oy.ssv.pwri-ions 04- cimservo4ive Nclea.105ue.s...
...And borrowing to finance higher government investment, in strict accordance withfthe Golden Rulejcan play a key role in strengthening the supply side of the economy...
...The rapid advance of the information age, especially the huge potential of electronic commerce, promises to change radically the way we shop, the way we learn, the way we communicate and the way we relax...
...Constraints on "tax and spend" force radical modernization of the public sector and reform of public services to achieve better value for money...
...It offers millions of our people the chance to find new jobs, learn new skills, pursue new careers, set up and expand new businesses—in summary, to realize their hopes of a better future...
...The taxation of companies should be simplified and corporation tax rates cut, as they have been by New Labour in the United Kingdom and are planned by the federal government in Germany...
...This is the priority for us...
...But, as a general principle, power should be devolved to the lowest possible level...
...We support modern tra...
...This requires enhanced cooperation, not uniformity...
...The EU should build on the achievements of the single market to strengthen an economic framework conducive to productivity growth...
...0-C the ricaVAiv, Europe &thee While subsilarn4;a,1 ely.o.Vtiy QC oppor+n.M-ty is *he" bes# csoo..I cr- Sac...
...Our national economies and global economic relationships have undergone profound change...
...Speed- e.Ciecleortly, +tete money Improves cornce.Aiktveness erApioy molt, coNck t tV t ns si-ando.rds 52...
...Wvncltr rni n e. (-C-u.-kure) v-A-tAmat , 1Tfle rea.,1 c^ue sii(ryas an...
...For instanceJorporate tax cuts raise profitability and strengthen the incentives to inHigher investment expands economic activity and increases productive potential...
...V. Political Benchmarking in Europe The challenge is the definition and implementation of a new social democratic politics in Europe...
...mlevctnce...
...But it will also make that change easier to live with and manage...
...Successful welfare-to-work programs raise incomes for those previously out of work as well as improve the supply of labor available to employers...
...In much of Europe unemployment is far too high—and a high proportion of it is structural...
...Our aim is to modernize the welfare state, not dismantle it: to embark on new ways of expressing solidarity and responsibility to others without basing the motivation for economic activity on pure, undiluted self-interest...
...Good...
...Modernization is about adapting to conditions that have objectively changed, andFt reacting to polls...
...ar re tank wranoi'neaded...
...We want to see real partnership at work, with employees having the opportunity of sharing the rewards of success with em lo ers...
...These individuals must have scope to develop economic initiative and create new business ideas...
...The aim of this declaration is to give impetus to modernization...
...Flexible markets must be combined with a newly defined role for an active state...
...public Schools Cve evtryme, he0.14-h care t public k-rans - e+c . are nece.s - sat)/ -hp crea-ke soc1.4 jv.skice, siortccd ty soc . derv...
...Macro-economic policy still has a vital purpose: to set the conditions for stable growth and avoid boom and bust...
...We should make it easier for small businesses in particular to take on new staff: that means lowering the burden of regulation and non-wage labor costs...
...To address this challenge, Europe's social democrats must together formulate and implement a new supp e agen a for the left...
...Social democrats need to find ways of combating the ever more pressing problems of crime, social disintegration, and drug abuse...
...1Ve face an increasing challenge in reconciling environmental responsibility towards future generations with material progress for society t large...
...New technologies radically change the nature of work and internationalize the organization of production...
...barn...
...In today's world most policy decisions have an impact on both supply- and demand-side conditions...
...low...
...We will thereby deepen and continually further develop the concept of the New Center and the Third Way...
...Services cannot be kept in stock: customers use them as and when they are needed—at many different times of day, outside what people think of as normal working hours...
...We consider safety on the street to be a civil right...
...Social dernocr-o..-kic...
...Modern social democrats recognize that supply-side policies have a central and complementary role to play...
...ocial democrats must 7 be able to speak to t ose peop e. Fairness and social justice, liberty and equality of opportunity, solidarity and res onsibility to others-4these values are timeless...
...We must learn from each other and measure our own performance against best practice and experience in other countries...
...We are proEurope and pro-reform in Europe...
...Support enterprise an setting up one's own business as a viable route out of unemployment...
...We propose to do this in three ways: • First, there will be a series of ministerial meetings, supported by frequent contacts among their close staff...
...This also requires a modern approach to government: • he state should not row, but steer: not so much control, as challengej Solutions to probems must be joined up...
...A tax policy to promote sustainable growth In the past social democrats became identified with high taxes, especially on business...
...Our objective is the widening of 62• DISSENT / Spring 2000 equality of opportunity, regardless of race, age, or disability, to fight social exclusion and ensure equality between men and women...
...A streamlined and modernized tax and benefits system is a significant component of the left's active supply-side labor market policy...
...This c4...truly 6.17...
...In a world of ever more rapid globalization and scientific changes we need to create the conditions in which existing businesses can prosper and adapt, and new businesses can be set up and grow...
...We want all young people to have the opportunity to ain entry into the world of work by means o qualified vocational training...
...Rising employment and expan ing jo opportunities are the best guarantee of a cohesive society,/ The past two decades of neoliberal laissezfaire are over...
...That means education must not be a "oneoff" opportunity:flifetime access to educations training and lifelong utilization of their opportunities represent the most important security available in the modern world ereore, governments have a responsibility to put in place a framework that enables individuals to enhance their qualifications and to fulfill their potential...
...Above all, money spent on servicing high public sector debt is not available to be spent on other priorities, including increased investment in education, training, or the transport infrastructure...
...With this appeal, we invite other European social democratic governments who share our modernizing aims to join us in this enterprise...
...Such decisions contain considerable risks for those who dare to make such a step...
...Adaptability and flexibility are at an increasing premium in the knowledge-based service economy of the future Our economies are in transition—from industrial production to the knowledge-based service economy of the future...
...We are presenting our ideas as an outline, not a finalized program...
...New conditions and new realities call for a re-evaluation of old ideas and the development of new concepts...
...Ivan 1 -Cesio . Good...
...It helps create a virtuous circle of growth, increasing the resources available for public spending on social purposes...
...Prolonged unemployment also damages individual life chances in other ways and makes it more difficult for individuals to participate fully in society...
...We should ensure that training plays a sig6o n DISSENT /Spring 2000 nificant role in our active labor market policies for the unem loyed and workless households...
...With one hand they de-skill and make some businesses obsolete, with another they create new business and vocational opportunities...
...That requires: • a competent and well-trained workforce eager and ready to take on new responsibilities • a social security system that opens up new opportunities and encourages initiative, creativity, and readiness to take on new challenges • a positive climate for entrepreneurial independence and initiative...
...main ?rot: . wls are a. chronic shortar off- .00d..:)013s and sluggish fob creozhcm...
...Poverty remains a central concern, especially among families with children.Feneed spe-) 54 n DISSENT / Spring 2000 cific measures for those who are most threatened by mar inalization and social exclusion...
...56 n DISSENT /Spring 2000 Product market competition and open trade are essential to stimulate productivity and growth...
...We need to become more flexible, not less...
...The diversity of our ideas is our greatest asset for the future...
...a unions protecting individuals against arb b itrary e avior, and working in co-operation with employers)to manage change and create long-term prosperity...
...Adapting to change is never easy and the speed of change appears faster than ever before, not least under the impact of new technologies...
...k-inese...
...They will hold back the potential of innovation to generate new growth and more jobs...
...Their markets and their ambitions must not be hindered by borders...
...IVJAn Active Labor Market Policy for the Left ) The state must become an active agent for employment, not merely the passive recipient of the casualties of economic failure...
...In Europe—under the umbrella of a European employment pact—we will strive to pursue an ongoing dialogue with the social partners that supports, not hinders, necessary economic change...
...and how no si...
...But social democrats must recognize that getting the macro-economics right is not sufficient to stimulate higher growth and more jobs.thanges in interest rates) Dtrk Vncti's Ao be done supply of labor IS A-Go csreo..t...
...j eg, Social nity systems need to adapt to changes in life expectancy, family structures, and the role of women...
...But social democrats have to recognize that the basic requirements for economic success have changed...
...We do not rule out government deficits—during a cyclical downturn it makes sense to let the automatic stabilizers work...
...We will not support measures leading to a higher tax burden and jeopardizing competitiveness and jobs in the EU...
...Together with loco employers, tra e unions, and others, we must ensure that sufficient education and training opportunities are available to meet the requirements of the local labor market...
...socAtiies ce‘teci-exi, . nd_ 3‘).4virt• rIA0Y42...
...The tax and benefits systems need to make sure it is in people's interests to work...
...Modern social democrats should be champions of small- and medium-sized enterprise The development of prosperous small- and medium-sized businesses has to be a top priority for modern social democrats...
...Product, capital, and labor markets must all, ,be flexiblejwe must not combine rigidity in one part of the economic system with openness and dynamism in the rest...
...Rigidity and over-regulation hamper our success in the knowledge-based service economy of the future...
...We will seek discussion with political leaders in other European countries who wish to take forward with us modernizing ideas for social democracy in their respective national contexts...
...To make the European economy more dynamic, we also need to make it more flexible...
...Our countries have different traditions in dealings between state, industry, trade unions, and social groues, but we share a conviction tha raditional conflicts at the workplace must e overcome...
...At the EU level, tax policy should support tough action to combat unfair competition and fight tax evasion...
...It offers Europe a chance to catch up with the United States...
...Let the politics of the Third Way and the Neue Mitte be Europe's new hope...
...j e need to strengthen our policies by benchmarking our experiences in Britain and Germany, and also with like-minded counterparts in Europe and the rest of the world...
...For that reason a framework that allows market forces to work properly is essential to economic success and a pre-condition of a more successful employment polic •jThe EU should continue to act as a resolute force for liberalization of world trade...
...People will support further steps towards integration where there is real value-added and they can be 64 n DISSENT / Spring 2000 as cut +his *sera -I-hawka work" helpfu,.1 for ihose econoth‘eS whose...
...1rh42.4*1-qc...
...rivals...
...But providing people with the skills and abilities to enter the workforce is not enough...
...Social democracy will never sacrifice them...
...The politics of the New Center and the Third Way is already a reality in many city councils, in reformed national policies, in European cooperation and in new international initiatives...
...58 n DISSENT / Spring 2000 or tax policy will not lead to increased investment and employment unless the supply side of the economy is adaptable enough to respond...
...All social policy instruments must improve life chances, encourage self-help, and promote personal responsibility) With this aim in mind, he health care system an t e system or ensuring financial security in old age are being thoroughly modernized in Germany by adapting both to the changes in life expectancy and changing lifelong patterns of employment, without sacrificing the principle of solidarity.jThe same thinking applies to the introduction of stakeholder pensions and the reform of disability benefits in Britain...
...Small businesses must become easier to set up and better able to sur-2 vive • e want a society which celebrates success- 1 ul entrepreneurs just as it does artists and, footballers-f—and which values creativity in all spheres of life...
...04 todh Is need ea...
...We need to take the lead in shaping a society with equal rights for women) and men...
...The public sector must actually serve the citizen: we do not hesitate to promote the concepts of efficiency, compel tition, and_ _I_ jiah performance...
...Sound public finance should be a badge of pride for social democrats) In the past, social democrats have all too often been associated with the view that the best way to promote employment and growth is to increase government borrowing in order to finance higher government spending...
...Hence we must focus our efforts on easing localized problems of transition...
...New Programs for Changed Realities Ideas of what is "left-wing" should never become an ideological straitjacket...
...Social democrats must accommodate the growing demands for flexibi it and at the same time maintain minimum social standards, help families to cope with change, and open up fresh opportunities for those who are unable to keep pace...
...III...
...The real test for society is Why to%-e.4-end,-41a,i *hese...
...Demand and supply-side policies go together— they are not alternatives In the past social democrats often gave the impression that the objectives of growth and low unemployment would be achieved by successful demand management alone...
...Work was burdened with ever higher costs...
...Let us together build(s'ocial democrac 's success for the new century...
...SOCIAL DEMOCRATS are in government in almost all the countries of the EuLropean Union.S Social democracy has found new acceptance—but only because, while retaining its traditional values, it has begun in a credible way to renew its ideas and modernize its programs...
...In environmental protection, the most modern technologies consume fewer resources, open up new markets, and create new "obs...
...n-k-e.r ?re+ -kklis mean Vno+ the go vernrank sVtou.kd e li rti...
...j • Modern economic policy aims to increase the after-tax income of workers and at the same time decrease the costs of labor to the employer...
...Such an approach now points in the wrong direction...
...Crime is a vital political issue for modern social democrats...
...Similarly, we need=a1-7T".- 3 y our politics within a new economic framework, modernized for today, where government does all it can to support enterprise but never believes it is a substitute for enterprise.iThe essential function of markets must be complemented and improved by political action, not hampered by e support a market economy, not a mar-) ket society./ We share a common destiny within the European Union...
...Europe's capital markets should be opened up so that growing firms and entrepreneurs can have ready access to finance...
...The politics of the New Center and Third Way is about addressing the concerns of people who live and cope with societies undergoing rapid change—both winners and losers...
...Immediately upon taking office, the new Social Democratic government in Germany gathered the top representatives of the politisuol cal sector, the business community, and the unions around the table to forge an Alliance for Jobs, Training and Competitiveness...
...In its place, however, there must not be a renaissance of 1970s-style reliance on deficit spendinglind heavy-handed state intervention...
...Some problems can now only be tackled at the European level: others, such as the recent financial crises, require increased international cooperation...
...The means of achieving social justice became identified with ever higher levels of public spending regardless of what they achieved or the impact of the taxes required to fund it on competitiveness, employment, and living stan‘ dardsj Decent puBlic—sei'vices are a vital concern for social democrats, but social conscience cannot be measured by the level of public expenditure...
...J People rightly demand ig -quality public services and solidarity for all who need help— but also fairness toward those who pay for it...
...It could have unwelcome redistributive effects...
...two can ips nea.+Iy or o rnpiti_oy se parozi-ed...
...DISSENT / Spring 2000 6 5...
...Our societies expect us to knit together our diverse experiences in a new coherent program...
...The most important task of modernization is tofinvest in human capital: to make the individual and businesses fit for the knowledge-based economy of the future...
...An active government, in a newly conceived role, has a key role to play in economic development Modern social democrats are not laissezfaire neoliberals...
...Companies must have room for maneuver to take advantage of improved economic conditions and seize new opportunities: they must not be gagged by rules and regulations...
...To ensure work pays and to improve the fairness of the tax system, the tax burden borne by working families and workers should be alleviated, as begun in Germany (through the Tax Relief Act) and by the introduction of lower starting rates of income tax and the working families tax credit in Britain...
...Assess all benefit recipients, including people DISSENT / Spring 2000 63 of working age in the receipt of disability benefits, for their potential to earn, and reform state employment services to assist those caable of work to find appro riate work...
...This requires adherence to our values but also a willingness to change our old approaches and traditional policy instruments...
...To this end the German and British governments have decided to embed their existing arrangements for exchanging views on policy development in a broader approach...
...Social democrats must seize the opportunity of this radical economic change...
...Government has a particular role in providing incentives for individuals to save in order to meet the costs of lifelong learning—and in widening access through the promotion of distance learning...
...Modern social democrats recognize that in the right circumstances, tax reform and tax cuts can play a critical part in meeting their wider social objectives...
...Other social democrats choose other terms that suit their own national cultures...
...Adjustment will be the easier, the more la, 1,..,bor and product markets are working properly...
...Whatever the longer-term benefits for economies and living standards, particular industries and communities can experience the costs before the gains...
...Vhe tax and benefits system can replenish low incomes from employment and at the same time save on support payments for the unemployed...
...We must marry environmental respon/sibility with a modern market-based approach...
...riNktc.A...
...In this newly emerging world people want politicians who approach issues without ideological preconceptions and who, applying their values and principles, search for practical solutions to their problems through honest, well-constructed, and pragmatic policies...
...Does 'tine aerAcutiside hove no posiAive...
...It is important to ensure that the composition of public expenditure is being directed at activities most beneficial to growth and fostering necessary structural change...
...mo em an e icient pu is in rastructure, including a strong scientific base is also an essential feature of a job-generating economy...
...art-time work and Tow-paid work are better than no work because they ease the transition from unemployment to .orbs New policies to oirer u- nemployed people jobs and training are a social democratic priority— but we also expect everyone to take up the opportunity offered...
...A -Iry end +he...
...What- problem have we solved...
...It has also found new acceptance because it stands not only for social 'ustice but also for economic dynamism and the unleashing of creativity and innovation...
...The (weaknesses of markets have been overstated and their strengths underestimated...
...The main elements of this approach are as follows: A robust and competitive market framework 1C4 w‘Ille Imo relying on 1002"siYie-deAcit spending ,socica demo - crais should also avoid dernoni2_Ins a kxseCv-1 4-aol deaMns wi%.k econovnic downtorts...
...From the standpoint of a su of the left, it is essentia that igh levels ogovernment borrowing decrease and not increase...
...ths - Part-ties are \oVutx,i...
...We must support those people by managing these risks...
...Periods of unemployment in an economy without jobs for life must become an opportunity to attain qualifications and fosteryersonal development...
...Social democrats also must not tolerate excessive levels of public sector debt...
...Barriers to employment in relatively low productivity sectors need to be lowered if employees displaced by the productivity gains that are an inherent feature of structural change are to find jobs elsewherelThe labor market needs a low-wage sector in order to make low-skill jobs) available...
...For the new politics to succeed promote a go-a ea...
...4V1e...
...Most people have long since abandoned the worldview represented by the ( dogmas of left and right...
...note any obsku.cles *hat ph one inct4si-ry-From +G .N low-vvo,e jobs etsevAere .Why does ihts n ti-se.4F lead 4o anythinck better...
Vol. 47 • April 2000 • No. 2
