For Labour, the future simply isn’t what it used to be. Last week’s election results have left the party even further from power than it was at the December 2019 general election. There is little indication that its leadership can identify a way forward. Worse still, the reaction to its first electoral defeat has been to reach for the familiar nostrums of the New Labour years. Peter Mandelson has been brought in to advise Keir Starmer’s inner circle, and all indications are that a reprise of the third-way strategy is being touted to fill the current strategic vacuum.
In moments of defeat, there is a tendency to look back at what has worked in the past and assume it could be repeated again in the future. The third-way approach of New Labour under Tony Blair and Gordon Brown was a political and economic strategy that brought remarkable electoral success over 20 years ago. It rested on a strategy of “triangulation” – the deliberate distancing of centre-left parties from their leftwing base and politics, and the creation of a new centrist synthesis of left and right that sought to transcend both categories. But far from representing the immutable truths of some enduring strategic playbook, the third way was peculiar to a particular moment in history, and it is fundamentally ill-suited to the world of the 2020s.
Economically, this approach cannot be rerun because it depended on a very particular context – the “long boom” of the 1990s and early 2000s. The high growth of this period was the product of a unique set of circumstances, including the fall of the Berlin Wall and the entry of the former Communist bloc into global markets at the same time as market reforms in China, creating a “great doubling” of the global workforce. This glut of cheap labour, alongside the liberalisation of trade and financial flows, the great wave of privatisation that fuelled the expansion of capital markets, and the rapid onset of financialisation and bidding up of asset values, gave rise to a synthetic boom.
The third way was made possible in the context of this global economic boom that allowed policymakers to skim the surplus of economic growth to fund increases in social spending without fundamentally changing the distribution of wealth and power. But the approach was complicit with increased inequality, disinvestment, offshoring, deskilling, and the hollowing out of the industrial base. The great financial crisis of 2008, which definitively ended the long boom of the 1990s, exposed the inherent fragility of this economic model. Its social consequences are now written deeply into the regional economic inequalities that have become such an entrenched feature of British life.
The economics of the current moment could hardly be more different or less propitious for a reprise of this strategy. Since the financial crisis, the global economy has been on life support; quantitative easing and asset-price inflation for the rich have been coupled with austerity for the poor. The decade that followed the crisis was marked by the slowest and most unequal economic recovery in living memory. By the close of 2019, just before the pandemic took hold, the global economy had slowed to its most sluggish pace since the crash.
Covid-19 has greatly increased these economic problems. As this public health emergency passes, we face a challenge of restarting – in some sectors, even rebuilding – a severely stressed economy, with inequalities of wealth, power and control greatly amplified. These are not conditions under which government can again just hope to “skim the surplus” of an extended boom.
The original third way was developed in parallel on both sides of the Atlantic, and Blair was a careful student of Bill Clinton’s emphasis on fiscal discipline, at a time when governments lived in fear of the “vigilantes” of the bond market. Today the economic and political environment is utterly different. Given the clear need for state-led investment to tackle risks such as the climate crisis and future pandemics, Joe Biden’s new administration has thrown off such self-imposed constraints, and is making good on his promise that “we’re not just going to tinker around the edges”.
While Biden is a veteran of the third-way politics of the 1990s, he has shifted his economic position in response to the demands of the moment, working constructively with the left of his party rather than marginalising it. His administration is charting a course of economic stimulus and large-scale public investment aimed at providing an ambitious response to overlapping crises. If the Democrats are showing that they are not stuck in the past, there is no reason why the Labour party should be either.
Just as the third way is economically unsuited to the present moment, so too it is unrepeatable in political terms. The strategy involved cashing in credibility with a large part of the left’s electoral constituency, a cheque that cannot be spent more than once. Political credit takes a long time to build and exists in finite supply. The idea that the left (and with it, the traditional heartlands of leftwing parties in industrial and post-industrial working-class communities) can be taken for granted because, to use Mandelson’s words from 1999, they have “nowhere else to go”, has been decisively disproven by the steady loss over decades of Labour’s former electoral strongholds in the so-called “red wall”.
If Labour wants to rebuild a successful electoral coalition encompassing both the young metropolitan precariat and voters in the party’s former northern strongholds, it has to offer something concrete and valuable in economic terms. The party can no longer rely on generational support built upon the interests of working people in unionised, industrial jobs that have now largely disappeared. Its loss of support in post-industrial areas did not begin with the 2019 election, but has been accelerating over a much longer period. Despite the surge of support in the 2017 election, Labour has failed to regain most of the 91 seats lost in 2010, the first election following the financial crisis, including those in places such as Corby and Cleethorpes.
As the political faultlines of this decade take shape, Labour needs to articulate a compelling vision for British society and the economy in the years ahead. Hollow flag-waving is a poor substitute. The party needs a real strategy of investment and economic transformation that offers more than the Conservatives’ empty rhetoric of “levelling up”. It needs a vision that is attuned to the deep social and economic crises we face – not least of which are regional disparities, racial injustice, intergenerational inequality and climate change.
If Labour is to take anything from the Blair era, it should be a readiness to adapt to changing economic circumstances and a capacity to learn from what has worked politically in countries facing similar challenges. Those are lessons worth reflecting on, long after the substantive content of third way politics has been consigned to history.
Joe Guinan is vice-president of The Democracy Collaborative, a US thinktank. Martin O’Neill teaches political philosophy at the University of York. They are co-authors of The Case for Community Wealth Building (Polity, 2019).
