Whither The Third Way?

I just come across one article among of so many eulogy to parting UK Prime Minister, Tony Blair. I found it interesting since it discussed the so called third way after him (instead of the usual Iraw problem).

In Blair words,” A false opposition was set up between rights and responsibilities, between compassion and ambition, between the public and private sectors, between an enterprise economy and the attack on poverty and exclusion."

The ninety witness social democrat like Bill Clinton in US, Schoeder in Germany and Blair in UK rised to pinnacle of executive power with the third way as their mantra. As Dionne from Washington Post put it, “beyond" -- a big word at the time -- both the "old left" and the "new right." Surprisingly, London and Washington were replacing Stockholm and Paris as epicenters of the democratic left. The word "socialism" was out, but "community" was in. "Collectivism" was replaced by the smoother word, "solidarity."

So what is the Third Way? Anthony Gidden defined it as:

“...a centrist philosophy of governance that embraces a mix of market and interventionist philosophies. The Third Way rejects both top-down redistribution and laissez-faire approaches to economic governance, but chiefly stresses technological development, education, and competitive mechanisms to pursue economic progress and governmental objectives.”

There are many arguments that national government is loosing policy power due to globalisation (ie: the famous trilemma in monetary economics). But what could stop government to put higher proportion of budget to education, health, R&D and infrastructure (instead subsidizing a national champion company/industry) while maintaining rule of law where market could function (when it can)?

The role of government is more effective on the factor market and institutional referee instead of an active player. Of course the billion dollar question is what is the exact proper mix between market and interventionist policy? What is the yardstick?

Maybe it will be clearer on The Fourth Way…