The New Zealand Labour Party – 103 years old, one of the oldest political parties in the world – is unique among its social democratic equivalents. During its long history it has been a ‘first way’ a ‘second way and a ‘third way’ party.
Formed in 1916, Labour had the objective of ‘the socialisation of the means of production, distribution and exchange’. More socialist than social democratic, Labour had muted its radical tendencies somewhat by the time it won Government in 1935. It settled for the ‘first way’ of the welfare state, Keynesian style demand management and a mutually beneficial accommodation between workers and employers.
This approach became the preferred framework for political parties, left and right, through until 1984 when the 4th Labour Government of David Lange stormed to power amidst economic collapse and social division.
To the surprise of most, Labour departed from its social democratic past to adopt ‘second way’ policies made up of the primacy of markets, reduced scope of the state, less taxes and relative indifference to social justice (a Treasury official reputedly said that it would be necessary to write off a generation while the economy was restored to profitability). These were the policies of neoliberalism and the new right. So profound was the change that they went by the name of the main proponent, Rogernomics for Finance Minister Roger Douglas.
Douglas argued that there was no alternative to the policies he introduced – floating the New Zealand dollar, reductions in trade tariffs, taxation reform including a Goods and Services Tax (GST), the privatisation of government services and deregulating the banking system - given the financial disaster the Labour Government inherited from the Muldoon National Party administrations of the 70s and early 80s.
The abrupt change in direction – from first to second way – did not go without controversy within the Labour Party. The social cost of deregulation was considerable and led to major policy conflicts. Prime Minister David Lange sought to mitigate the impact of the new direction by establishing a Royal Commission on Social Policy, but he resigned before anything could be implemented.
Labour lost the 1990 election, after six tumultuous years, to the National Party who, never ones for originality, continued the shift to the right.
It did not go well. Labour came within a whisker of winning again in 1993. The same year, an angry electorate imposed a Mixed Member Proportional electoral system on politicians. At the 1996 election, Labour came close to forming a coalition with the New Zealand First Party who eventually decided to assist National back into power (the deciding factor was the role given to Winston Peters). A fraught three years of unstable Government followed until in 1999, Labour, with the assistance of the Alliance Party, won and ushered in the ‘third way’.
By the time Labour was elected, third way governments were in place throughout the democratic world. But it is fair to say that New Zealand, at least initially, was more third way than most. While continuing with the market reforms of the 80s/90s, Labour routinely intervened in the economy. It also pursued a vigorous social policy agenda and promoted the role of the community. It is, arguably, the focus on civil society/community that is the most distinctive feature of third way thinking.
First way – state. Second way – market. Third way – civil society/community.
The Prime Minister, Helen Clark, had shown interest in third way thinking while in Opposition. In Government she become a leading voice through her attendance at the British Prime Minister Tony Blair/US President Bill Clinton inspired international meetings of third way political leaders. Clark’s Chief of Staff, Heather Simpson, was one of the Sherpas who organised meeting agendas.
Within the Labour Party there were mixed feelings about Clark’s support for the third way. I had been writing about New Times and third way ideas for many years and regularly included references to the third way in speeches. Key figures like Finance Minister Michael Cullen never used the phrase third way, but his speeches consistently used concepts that were essentially third way in origin. Others either had no interest in what they saw as “theory” or were indifferent.
To the left of Labour, there was considerable scepticism about the third way. Commentators like Jane Kelsey, a law Professor from Auckland University, spoke for many when she criticised Labour for adopting foreign ideas that limited how radical Labour was prepared to be.
Enthusiasm for using the phrase third way can be seen to drop off sharply in Labour’s second term. This is not surprising. The political tide had turned against third way governments. Clinton was gone. Blair’s star had waned following his support for the invasion of Iraq. Many of the third way European parties had been replaced by centre-right alternatives. New Zealand Labour continued to use the same policy mix, but it did so without reference to a third way.
How do we assess this ideological history of the Labour Party? Does it represent three distinct stages and suggest that the Party was prepared to make clean breaks with its past in pursuit of power?
This may seem to be the case in the minds of some – but even a superficial analysis of what actually happened arrives at a different conclusion.
There is an air of pragmatism that has characterised Labour since it became serious about winning Government (as opposed to favouring extra-parliamentary activity) in the 1930s.
Where the Labour Party of the late 19th and early 20th century wanted to ‘smash capitalism’, the Party that was elected in 1938 had made an uneasy peace with the market. The welfare state regulated markets and achieved significant social policy progress. The first Labour Government was undoubtedly idealistic, but it was also pragmatic.
In subsequent years and decades, Labour continued to pragmatically advance its first way agenda. In doing so it often anticipated what are third way ideas. In the 1950s it wanted to ‘Prepare for a New Society’ and it continued to champion the theme of positive progressive change through the middle of the century.
As a socialist Party, Labour wanted equality of outcomes. But as a social democratic party it pursued equality of opportunity long before Giddens or any other third way exponent made this a central concern.
Education was a key platform for Labour as expressed so eloquently by Peter Fraser (although he may have been channelling Education Secretary Clarence Beeby) when he said: “The Government’s objective broadly expressed is that every person, whatever his level of academic ability, be he rich or poor, whether he live in the country, has a right, as a citizen, to a free education of the kind for which he is best suited and to the fullest extent of his powers”. If that sounds third way, Fraser went on to emphasise that the state would ensure this vision would be a practical reality as any first way government would. He managed to straddle first and third way positions at the same time.
The Kirk Government of the early 1970s did a great deal to break New Zealand’s exclusive ties to Britain in favour of internationalisation. It also vigorously championed new causes like opposition to nuclear testing in the Pacific.
The family has long been at the centre of Labour policy. This is a conservative idea - although the understanding of what constitutes a family has changed dramatically – but through first, second and third ways the family has always been a focus as the Working for Families package of the Clark Government demonstrates.
In key areas like housing Labour has repeatedly shown itself prepared to work closely with the private sector in public/private partnerships.
During the massive economic and public sector reforms of the 80s, Labour (at least some of its key members like Clark and Cullen) still defended the welfare state while making progress on the ascendant identity issues around women, Maori and sexuality.
What these examples show is that there was never a clean break from one policy framework to another. While distinct features might characterise the actions of specific governments, elements of different ’ways’ can be found at all times.
For some commentators this history suggests a failure by Labour to get its ideological act together. Perhaps they were more coherent in the socialist phase around the turn of the last century, but it is pertinent to acknowledge they did not make it into Government until they were prepared to accept the need for compromise.
It could be argued, that this element of compromise was more evident during Labour’s third way phase than during the first or second. The Government of Michael Joseph Savage may have compromised but there is not doubting that it was the role of the state that was at the centre of their programme.
The 4th Labour Government may have been divided over the role of the market and the state, but they will always be remembered for placing their faith in the market during a period of economic and public sector reform.
What helped these Governments to advance a programme of reform that had a distinct direction were the circumstances in which they governed. In the 30s, Labour was dealing with the depression and the Second world War. In the 1980s, economic collapse made it imperative that Labour act decisively.
The 5th Labour Government did not inherit a crisis (although there were many problems). It came to power after some twenty years of massive upheaval and followed on from an exhausted National Party. New Zealanders wanted a Government that could offer stability and security. While many within the Labour Party and caucus would have like to advance a more radical programme, that would have meant ignoring clear instructions from the electorate to ‘settle down’.
The 5th Labour Government did just that. Using the third way programme it brought together first and second way ideas while bringing the community more into the mix. Reforms in health, housing, welfare, regional development and education rested heavily on the role of the community.
Policy programmes based on the mantra of ‘By Maori for Maori’, ‘By Pasifika for Pasifika’ broke with the tradition of the state delivering policy on behalf of these communities.
While this approach might have frustrated radicals within Labour and annoyed those to the left of Labour, it was very successful. Labour accomplished a great deal during its three terms in Government. Its loss to National in 2008 came more as a consequence of electoral fatigue, some disquiet with policies related to identity issues (like prostitution) and resistance to individual policies that had earned a ‘nanny state’ label (like energy saving lightbulbs) than any great dissatisfaction with the Government. It is worth noting that all the policies that caused concern are now taken for granted proving, as former Prime Minister Mike Moore once said, that it can be wrong to be right to early.
It helped also that the National opposition was led by someone who seemed to suggest he would not substantially change the direction of the country. Little did John Key know that he would have to deal with a global financial recession, an earthquake and a mining disaster. But then it is a rule of government that what occupies the time of Ministers is largely unknown at the time of their election.
As we will discuss in later blogs, Labour leaders made it clear that it wanted nothing to do with third way politics once it was back in opposition after the 2008 defeat.
While this is understandable, it begs the question – what next? If that question was important in 2008, it has become more urgent in subsequent years as the world has faced the challenges of ‘new times’ and witnessed the rise of left and right populists. What might be seen as the progressive, moderate, professional style of third way governments is beginning to look quite attractive as populist parties attempt to drag the electorate to one extreme or another (1).
And this is where we might usefully conclude this blog. If the essence of the third way is to draw on the state, the market and the community to build a policy framework, it is the community that provides the distinctive feature. But the community did not come to define the 5th Labour Government because their nine years in power did not coincide with the kind of crises that drove the 1st and 4th Labour Governments. If the pressure for reform had been greater, perhaps, the drive to focus on the community would have been greater.
That pressure exists today. Across the democratic world, politicians are struggling to find the mix of policies that will address the issues they must confront while gaining the support of the electorate. The failure of the centre has opened the door to politics based on the ‘people’ vs the elite (the left) or the ‘people’ vs the elite and migrants (the right). We see this kind of politics being played out in Britain as the country prepares for a December election in the shadow of Brexit.
New Zealand has not yet had to contend with the kind of divisive politics seen in most other democracies – although in a global world, we have discovered that no one is immune. The ingredients for division exist. What will prevent these ingredients being exploited will be the success of progressive politicians who seek to govern the country as opposed to representing their ‘base’.
What I have been seeking to do in these blogs is to encourage a fresh look at what Giddens had to say about a third way. Not because he was right on every issue, but because he was trying to articulate a centre-left platform relevant to new times (he preferred the term modernity). By engaging with Giddens, it might be possible to identify the next step forward. It is urgent that we do so. The future is banging on the door and the wrong people are answering.
Next: The failure of the centre and the rise of the populist agenda.
1. A book readers sympathetic to the kind of argument being made in these blogs might find of interest is: Richard Carr (2019) March of the Moderates: Bill Clinton, Tony Blair and the Rebirth of Progressive Politics. I.B Tauris, London