00148-Why Has the French Socialist Party Shunned the Rhetoric of the Third Way

8/14/2019 00148-Why Has the French Socialist Party Shunned the Rhetoric of the Third Way

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Why Has the French Socialist PartyShunned the Rhetoric of the Third Way?

An Explanatory Model Extended to

Britain, Germany, and Italy

David Leifert

The Lauder Institute, University of Pennsylvania

A THESIS

Presented to the Faculties of the University of Pennsylvania in Partial

Fulfillment of the Requirements for the Degree of Master of Arts

April 2006

Thesis Supervisor: Dr. Julia Lynch

Reginald Jones Thesis Prize Nominee


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Table of Contents

1. European Social Democracy and the French Exception: Introductory Analysis 4

1.1. The Evolution of European Social Democracy 4

1.2. The French Exception 5

1.3. Introduction of the Empirical Question: Why the French Exception? 6

2. The Third Way Analysis of a Political Phenomenon 8

2.1. Reactions to the Emergence of the Third Way 8

2.2. Description of the Third Way The Schrder/Blair Manifesto 9

2.3. Critics of the Third Way and Alternative Interpretations 11

3. Explanatory Model for Socialist Party Adoption of the Third Way 14

3.1. Explanatory 5-Factor Model 14

3.2. Categorization of Policy Factors 16

3.3. Categorization of Political Factors 20

4. Application to the French Case A Missed Opportunity for Change 24

4.1. Assessment of the French Goodness of Fit 25

4.2. Assessment of the French Mediating Factors 29

5. Application to the British Case: Blairs New Labour 33

5.1. Assessment of the British Goodness of Fit 34

5.2. Assessment of the British Mediating Factors 38

6. Application to the German Case Schrders Neue Mitte 41

6.1. Assessment of the German Goodness of Fit 41

6.2. Assessment of the German Mediating Factors 44

7. Application to the Italian Case DAlemas Progressive Initiatives 47

7.1. Assessment of the Italian Goodness of Fit 47

7.2. Assessment of the Italian Mediating Factors 51

8. Conclusion 54

Bibliography


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1. European Social Democracy and the French Exception: Introductory Analysis1.1. The Evolution of European Social Democracy

The political landscape of Western Europe following the end of the Second World War

was characterized by a generalized rise to power of Social Democratic parties and the

emergence of extensive welfare states. By the early 1960s, social democracy had

established itself as the major political force in most West European countries. The social

democratic experiment lasted for two decades, before the political situation was

transformed by the advent of market liberalization and a return of neo-liberalism in the

1980s (Zijderveld 1999, page 3). The drastic changes in the political and economic

landscape driven by conservative doctrines such as Thatcherism and Reaganomics

(Sproule 2005) dealt a major blow to socialists. Whether motivated by electoral

desperation, an authentic shift in government ideology, or both, many social democratic

parties began to reposition themselves towards the political center in the last two decades

of the 20th Century, and endorse a modernized and progressive social democracy

(Teixeira 2000). This phenomenon, dubbed the Third Way movement, was strongly

championed by the social democratic parties of Great Britain and the United States,

namely the New Labour party and the New Democrats. The Third Way was

epitomized during the historic forum entitled "The Third Way: Progressive Governance

for the 21st Century," hosted at the White House in April 1999. The leadership of the

global Third Way movement present at the meeting included United States President Bill

Clinton, British Prime Minister Tony Blair, Netherlands Prime Minister Wim Kok,

German Chancellor Gerhard Schrder, and Italian Prime Minister Massimo D'Alema

(From 1999).


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1.2. The French Exception

Among the four G-7 European countries, the only nation missing was France. Indeed, of

all the socialist and social democratic parties in Western Europe, the Parti Socialiste

Franais appears to be the most strongly committed to a traditional statist policy (Merkel

2001, page 68). The antagonism of the Parti Socialiste Franais (PSF) is fittingly

exemplified by a press account of the social democratic summit hosted by Gerhard

Schrder in June 2000 organized to symbolize the advance of the Third Way. The press

account stated that the gathering was stamped with the handwriting, so to speak, of

French Prime Minister Lionel Jospin, rather than that of Tony Blair. The state was to be

accorded a greater role in relation to the economy (Schwartz 2000).

After five years of cohabitation between conservative President Jacques Chirac and

socialist Prime Minister Lionel Jospin, the 2002 presidential election, which was

expected to be dominated by these two national leaders, bitterly surprised the Prime

Minister and the PSF. The left vote was split among various faction candidates and the

PSF failed to advance to the final round of the elections, placing third behind an ever

stronger extreme-right Front National. The defeat was largely attributed to three

phenomena: record-breaking voter abstention, a fragmented presidential vote due to both

an overstretched coalition of the left and the unusual sequence of elections, and the actual

success of satellite parties from both the left and the right of the political spectrum.

Although a better result emanated from the legislatives, the struggling PSF was once

more confronted with a dilemma worthy of French existentialism: either adopt the legacy

of Mitterrand that the party is won from the left (Bell 2003, page 47) and reinforce


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socialist and statist ideologies, or follow the path paved by sister parties that embraced

the centrist approach to government of the Third Way.

A similar dilemma was faced by large socialist parties of Europe as they struggled with

the choice between left-wing ideology and the principles of the Third Way. Three

successful breaks with the old left following long and powerful conservative

governments occurred in Great Britain, Germany, and Italy. While former German

Chancellor Gerhard Schrder defeated 14-year incumbent conservative Helmut Kohl,

Tony Blair succeeded 18-year conservative incumbents Margaret Thatcher and John

Major, and Romano Prodi of the Democratic Party of the Left (PDS) inherited an Italian

political landscape characterized by over 40 years of Christian Democratic government.

At the upcoming 2007 presidential elections, conservative Jacques Chirac will have

accumulated 12 years of power and, given two consecutive defeats of a weak coalition of

the left, it is arguable that the time may have come for the PSF to follow the footsteps of

its sister parties in the three nations mentioned above. Although this paper will focus on

the 2002 elections, its findings are applicable to the elections of 2007 and beyond.

1.3. Introduction of the Empirical Question: Why the French Exception?

This paper analyzes the reasons why the PSF has not embraced the rhetoric of the Third

Way as of the 2002 presidential elections despite a major political crisis in 1993, and the

factors that would eventually bring it to do so. The term Third Way has been used to

identify a variety of center-left parties, sometimes even including the PSF as one distant

variant that will be further explored in a later section. To avoid fallacious argumentation,


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this paper bases its analysis on the Third Way manifesto co-authored by Britains Tony

Blair and Germanys Gerhard Schrder, which is referred to in the following pages as the

Schrder/Blair manifesto. An analysis of Third Way politics is presented and an

explanatory model is proposed to evaluate the susceptibility of the PSF to a shift in

political direction and adoption of the Third Way rhetoric.

The methodology focuses on a 5-factor model, which is applied to the case of France and

extended to the cases of Britain, Germany, and Italy to gauge its robustness. The periods

chosen for the comparison show the paths taken by the socialist parties of these three

countries immediately preceding general elections that followed significant political

events, as was the case for the PSF in 2002. The 5-factor model argues that a political

crisis of the incumbent right-wing party or of the socialist party of opposition is required

to set in motion the adoption of the Third Way by the socialist party. Once a crisis takes

place, the model proposes an explanation of the degree of adoption of Third Way

rhetoric. It does so by assessing the nature and performance of three policy factors

comprising the building blocks of the Third Way the welfare system, the government

machinery, and the economic system as well as two important political factors

represented by party system type and the potential of party leaders to become successful

champions for change. The composition of each of these factors, and their combined

make-up, will prove to bear great influence on the political choice of socialist parties.


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2. The Third Way Analysis of a Political Phenomenon2.1. Reactions to the Emergence of the Third Way

The Third Way is a term that is filled with meanings and at the same time charged with

having none in the context being analyzed. Among the meanings associated with the

Third Way are the description of a Cold War-era alternative to siding with either the

United States or the Soviet Union and of an alternative to capitalism and socialism in the

form of fascism (Giddens 2000, page 1). The Third Way of relevance to this paper,

however, is the term resurrected by Tony Blair and also referred to as the Radical

Center, which embodies an economic and political ideal positioned between democratic

socialism and laissez-faire capitalism. The Third Way phenomenon has drawn criticism

from politicians on both the left and the right. Oskar Lafontaine, former German finance

minister under Gerhard Schrder, openly condemned the Chancellors manifesto written

in partnership with Tony Blair by declaring that the Third Way is the wrong way Der

dritte Weg ist ein Holzweg (Lafontaine 1999). Lafontaine presented his resignation in

1999 due to irreconcilable differences with the Chancellors political stance. The

magazineDer Spiegel characterized his resignation as another victory of capitalism over

the planned economy, and lobbyists and business associations celebrated his departure

(Hogrefe 1999). Criticism also abounded from right-wing public figures, which portray

the Third Way as either a mishmash of already familiar ideas and policies, or as lacking

any distinguishable content at all (Giddens 2000, page 7).


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2.2. Description of the Third Way The Schrder/Blair Manifesto

What are the characteristics of the Third Way, and how do they differ from the traditional

socio-economic rhetoric of the traditional left? According to the joint manifesto written

by Gerhard Schrder and Tony Blair in 1999, the Third Way proposes a clear break with

the old left and goes as far as abandoning the dogmas of left and right (Blair and

Schrder 1999). Before describing the progressive policies of the Third Way, the

manifesto identifies the main policy areas explicitly rejected by the new movement. The

main policies rebuffed by the Third Way are based on the premise that the government is

all-knowledgeable and should be all-powerful in ensuring the well-being of its flock, the

people. The main policies developed by the traditional left to support this ideology are

the imposition of social equality, incentives for large government spending,

comprehensive administrative and economic intervention, and the undisputable

prevalence of individuals rights over responsibilities. These are identified as policies the

Third Way wishes to disassociate itself from.

The alternative policies proposed by the Schrder/Blair manifesto are based on a

government that is granted the responsibility to not row, but steer (Blair and Schroeder

1999) the economy, with power decentralized towards the local level and freedom of

activity for individual business and enterprise. In addition to decentralization and limited

central economic planning, a modern and efficient public sector is paramount to

restraining overbearing bureaucracies that suffer from internal politicization and

overprotective labor laws. The focus is no longer on the size of government expenditure

but rather on the effectiveness of its initiatives. The proposed platform further decreases


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the role of government by significantly overhauling the welfare state. Instead of a blindly

egalitarian policy, the state is to promote investment in human capital and reward effort

as a means to address poverty and unemployment. Although a social floor should be

provided to all, it should not act as a replacement for productive employment, but rather

as support for reinsertion into the workforce. Education and training become central to

the effort of providing equality of opportunity, and a sense of responsibility and

community spirit is expected from the population. Mutual obligation is encouraged at the

levels of the family, the neighborhood, and the society. The Schrder/Blair manifesto

proposes the championing of a go-ahead mentality, whereby solidarity replaces a

portion of state provisioning and firms negotiate with workers and unions with the benefit

of the whole in mind.

Additional areas addressed by the manifesto, which are related to the main points

described above, are an elaboration of labor market policy with greater flexibility,

promotion of environmental responsibility, the introduction of supply-side economics as

a complement to demand-side economics in order to succeed in the face of globalization,

and a stance on the role of the European Union in national government. The manifesto

states that the Union itself, however, is not to develop into a homogeneous super state but

rather into a facilitator of socio-economic development. It is also noteworthy that the

underlying aspects of the "social market" promoted by the Third Way can also be found

in article I-3 of the Treaty establishing a Constitution for Europe. It states that the Union

shall work forsustainable developmentbased on balanced economic growth and price


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stability, a highly competitive social market economy, aiming at full employment and

social progress.

2.3. Critics of the Third Way and Alternative Interpretations

The Third Way platform described above comprises a general set of political concepts

that has been embraced by different socialist parties to varying degrees. In order to better

understand the concept of the Third Way and design a robust explanatory model for its

adoption, it is imperative to consider the analytical literature that sheds a critical light on

this topic. Much of this literature focuses on the ambiguity of Third Way proposals and

inherent conflicts of interest between policy characteristics.

The critics argue that although a broad framework can be presented, there are

differences of opinion concerning the interpretation of the core values associated with

Third Way thinking and how the state should seek to advance them (White 1998).

Stuart White identifies two main lines of division amongst subscribers to the Third Way

framework. One line of division is between leftists and centrists over the

commitment to real opportunity, where discrepancy of interpretation exists on the

meaning of commitment and real opportunity. Centrists interpret this concept in

meritocratic terms, while leftists interpret it in a more egalitarian light. This discrepancy

impacts the role and methodology of income redistribution. The second line of division

is between liberals and communitarians over the commitment to civic

responsibility. Liberals limit the power of the state to impose legal welfarism, while

communitarians welcome state-led definition and enforcement of good behavior. The


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result of these lines of division is the identification of four types of Third Way

government: leftist liberal, leftist communitarian, centrist liberal and centrist

communitarian. White concludes that such ambiguity can play to the advantage of party

candidates as they reach out to different constituencies (White 1998).

Wolfgang Merkel characterizes the Third Way in a similar manner to Stuart White.

Different types of Third Way governments are also identified, although not along the

same lines of division as presented above. Merkel identifies four types of Third Way

government based on existing European parties (Merkel 2001). The first type is the

market-oriented way of the British New Labour party. It has ample room for

maneuvering given the weakness of interest groups, the absence of coalition constraints,

and the inheritance of a strong-fisted and hierarchical administrative culture established

by outgoing conservatives. The British New Labor party is considered to have the most

radical implementation of Third Way policies. The second type is the market- and

consensus-oriented way of the Dutch polder model, whereby the Partij van der Arbeid

comes closest to the results obtained by New Labour. It does so, however, through

negotiations with political parties and social partners instead of the majoritarian strategic

implementation of New Labour. The third type is the reformed welfare state way of

Sweden, where social democrats have encouraged an open market economy and the use

of supply-side economics. The country has also experienced cut backs on income

redistribution efforts while maintaining the highest level of labor market policy

expenditure of all OECD countries, reaching 2.1% of GDP in 1997 (OECD Database).

Despite a decrease in the reach of its universalistic welfare state, it is still the most


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comprehensive in the Western world. The fourth type is the statist way of the French

PSF, which promotes the state much more than its sister parties dofor

macroeconomic, industry, employment, and social policy (Merkel 2001). Additional

analysis of the PSF platform is provided in a later section.

Unlike Merkel, this paper does not consider the PSF to be a type of Third Way party due

to the partys outright rejection of the concept. As recently as 2005, Lionel Jospin

declared that social-liberalism is unconceivable since socialism is not a liberalism, not

even a social one (Reuters 2005). The explanatory model of socialist party adoption of

the Third Way that follows takes the Schrder/Blair manifesto as its benchmark and

develops a methodology to explain why a socialist party adopts or rejects it. The results

will not yield a binary prediction since the determinant factors of each country will differ,

but will rather provide an assessment of the suitability of each party for the adoption of

the Third Way rhetoric.


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3. Explanatory Model for Socialist Party Adoption of the Third Way3.1. Explanatory 5-Factor Model

Although the Third Way is not the only alternative to an old left rhetoric, it has

certainly taken central stage as the consensus alternative due to its adoption, to a greater

or lesser degree, in various European countries. The explanatory model presented in this

section is tailored specifically to the Third Way but could be calibrated to reflect different

policy factors pertinent to other political rhetoric. The model stipulates that a trigger in

the form of a political crisis from the perspective of the incumbent conservative party, the

socialist party, or both, must exist in order to provoke a shift in political rhetoric. The

trigger itself, however, is not sufficient, as the actual shift will depend on the nature and

success of existing policy and political factors of the model. Accordingly, the model is

based on a 5-factor model that combines three major policy factors proposed by the Third

Way ideology with two decisive political factors. The characteristics of each factor will

impact the direction and strength of the political process set in motion by the triggering

crisis and will significantly influence the success or failure of the process. The three

policy factors that characterize the Third Way ideology as presented in the previous

section are the nature of the welfare state, the degree of state-led economic planning, and

the balance of administrative power between the state and civic society. The two

political factors are party system type and the strength of socialist leadership within the

party and/or the political coalition landscape of the left.

The 5-factor explanatory model draws on the mechanics of the Three-Step approach to

Europeanization proposed by Cowles and Caporoso (Cowles and Caporoso 2001). In


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their approach to analyzing Europeanization, the authors predict the degree of

Europeanization of member countries domestic structures based on two criteria:

Goodness of Fit between existing structures and those proposed by the European Union

and Mediating Factors in the form of facilitating institutions and empowerment of

relevant actors. The Three-Step Model to Europeanization is presented below for

illustrative purposes:

Figure 1: A Three-Step Approach to Europeanization and Structural Change

The 5-factor model proposed herein is constructed based on a similar framework.

Domestic Structural Change is replaced by the adoption of the Third Way rhetoric,

Goodness of Fit is evaluated based on the national characteristics of the three main

policy factors of the Third Way, and Mediating Factors are composed of the political

factors of the model. The resulting model is illustrated by the picture below.

Figure 2: A Three-Step Approach to the Adoption of the Third Way

Europeanization

Process

Goodness of Fit

with domestic

structures =

adaptational

pressures

Mediating

Institutions

Actors Practices

Domestic

Structural

Change

Trigger

- Incumbent Party

Crisis

- Socialist Party

Crisis

Goodness of Fit

1) Welfare State

2) Centralization

3) Economic

Planning

Mediating Factors

1) Party System

Type

2) Leadership

Strength

Rhetorical Shift

1) Full

2) Partial

Triggers Political Factors OutcomePolicy Factors


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The approach above is iterative. As a party adopts a more centrist platform on the broad

policy areas representing Goodness of Fit with the Third Way, the three preceding

processes may be affected by a dampening or reinforcement of the trigger crisis. This, in

turn, may strengthen or weaken Goodness of Fit and possibly change Mediating

Factors as shifts along the left/center spectrum will translate into greater or lower

perceived leadership strength, fragmentation, or both. Every major political decision will

therefore affect this iterative model and push a political platform towards the center or

away from it to different degrees. This push will depend on the Third Ways impact on

characteristics of Goodness of Fit and Mediating Factors. The stronger the mix of 5-

factors, the more likely a party is to adopt the rhetoric of the Third Way. A strong policy

factor occurs either if a factor is successful and consistent with the Third Way, or if it is

unsuccessful and inconsistent with it. As the application of the model will show,

different countries have experienced different degrees of adoption. The application to the

case of the PSF, which rejects the rhetoric of the Third Way, is complemented by the

application of the model to the socialist parties of three major European countries

immediately preceding pivotal elections of national or regional scope. Parallels are

drawn between the countries, and the results are used to evaluate the model. Before

application of the model, further clarification is provided on the categorization of policy

and political factors.

3.2. Categorization of Policy Factors

The model is comprised of three policy factors, namely the welfare state, the economic

system, and the government machinery. The welfare state refers to the nature of the


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social policy regime prevalent in a given country. The models categorization of the

welfare state is based on Esping-Andersens differentiation between three types of social

policy regime. The liberal welfare state is similar to Titmuss residualist regime

(Zidjerveld 1999, page 12) and relies on needs-tested assistance, modest universal

transfers, and modest social insurance (Esping-Andersen 1993, page 26). The

conservative welfare state is shaped by a strong corporatist and statist legacywhere

social rights [are] attached to class and statusin a non-universalistic exclusionary way,

[and where] interference only occurs when the family is not capable of serving the needs

of its members (Zijderveld 1999, page 102). Finally, the social democratic welfare

state is closest to Titmuss institutionalist regime (page 12) and promotes an equality of

the highest standards, not an equality of minimal needs, [where] all strata are

incorporated under one universal social insurance system, yet benefits are graduated

according to accustomed earnings (Esping-Andersen 1993, page 26). The social policy

regime of real opportunity proposed by the Third Way differs from the three types of

welfare state identified by Esping-Andersen. According to the Schrder/Blair manifesto,

the Third Way proposes a regime of equal opportunity that is comprehensive but places

responsibility on recipients to make the most out of the assistance that is largely based on

training and insertion. It is less comprehensive than the social democratic regime, more

extensive than the liberal regime, and less exclusionist than the conservative regime,

hence respectively addressing the problems of excessive taxation, insufficient assistance,

and exclusion. The model does not argue that one type of system is more adaptable to the

Third Way than another: equally strong opposition to change could be expected from

taxpayers in a liberal regime, recipients in a social democratic regime, and the beneficiary


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strata in a conservative regime. Instead, the model argues that the less successfully

established a regime type is, the more susceptible the socialist party will be to the

adoption of the Third Way.

The second policy factor is the degree of state-led economic planning within the realm of

capitalist societies. The 5-factor model categorizes state-led economic policy based on

the classification of economic planning into three types: liberalism, statism, and

corporatism (Katzenstein 1985, page 20). Liberalism relies on macroeconomic policies

and international market competition molded by free enterprise and private ownership. It

further stipulates infrequent state intervention through targeted protectionist measures.

Statism, on the other hand, relies on the ability of the state to plan the course of its

economy. Although statist economies are not isolated, the nature of international

competition is dictated by the state through targeted industrial protectionism, significant

domestic intervention in the form of shielded internal competition or collusion, or

outright ownership of the means of production. While liberal and statist economic

systems are options for those large industrial states whose power is sufficient to [control

parts of] the international environment [or of] their own societies (Katzenstein 1985,

page 23), smaller open economies cannot afford such systems. Economic corporatism

addresses this issue by providing a system where nations accept the changes imposed by

international markets but apply a variety of economic and social policies that prevent the

costs of change from resulting in political eruptions (Katzenstein, 1985, 24). Different

types of corporatism depend on internal negotiations in devising reactionary policies and

can be categorized across two axes: market-driven versus statist-driven policy drivers and


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democratic versus non-democratic decision-making. The Third Way stipulates that the

state should steer, but not row, an economy where the essential function of markets

must be complemented and improved by political action, not [replaced or] hampered by

[government] (Blaire and Schrder 1999). The model argues that the closer an

economic system is to a successful liberal or liberally bent corporatist system, the more

susceptible the socialist party will be to the adoption of the Third Way.

The third policy factor is the extent to which a strong civil society provides a balancing

weight against state preponderance. According to Alexis de Tocqueville, spheres of

organized power outside the state are essential not only to liberty but also to prosperity

(Levy 1999, page 9). The 5-factor model bases its categorization of state preponderance

on the classification proposed by Jonah Levy, who differentiates between dirigisme,

associational liberalism, and neo-liberalism (Levy 1999, page 58). The dirigiste state

centralizes decision-making for social, economic, and administrative policies at both the

national and regional levels. This type of state engenders a strong center-periphery

cleavage and significantly weakens the civil society. Neo-liberalism promotes a

minimalist state and blames flabby institutions such as bloated welfare states,

overzealous regulators, almighty trade unions, and clubby financial establishments

(Levy 1999, page 59) for obstructing the proper functioning of the economy.

Associational liberalism is a compromise between the preponderant dirigiste state and the

minimalist neo-liberal state. This alternative form of government follows the

Tocquevillean political philosophy and encourages intermediary institutions to perform

coordinating functions and provide public goods that are essential to economic


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dynamism (Levy 1999, page 59). In practice, this translates into a delegation of

decision-making and execution to trade unions, employer associations, financial

institutions, and local government authorities. The Third Way promotes both

decentralization and streamlining of government functions. The model argues that the

closer an economic system is to successful associational liberalism, and to a lesser degree

neo-liberalism, the more susceptible the socialist party will be to the adoption of the

Third Way.

The three policy factors described above social, economic, and administrative provide

a simplified but sweeping basis for assessing the overall Goodness of Fit of a country

to the proposed policies of the Third Way. The relevance of each policy should not be

assessed on a stand-alone basis, but rather based on the impact it has on other policies as

well as on the political factors described in the following section.

3.3. Categorization of Political Factors

The model is comprised of two political factors: party system type and leadership of the

socialist party. The model bases its categorization of party systems on the typology

developed by Giovanni Sartori, in which he differentiates between seven classes of party

system. Sartoris typology identifies differences in fragmentation based on the number of

parties, their relative strength, and the ideological nature of party dispersion (Mair 1999,

page 327). Sartori identifies three major types of party systems that are further split into

more granular variants. The single party system is split into the one-party system

(monopoly), the hegemonic party system (satellite parties permitted), and the


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predominant-party system (continued absolute electoral majority). The two-party system

is one of exclusionist competition between two parties and is not split further. Finally,

the multiparty system is split into moderate pluralism (low fragmentation or high non-

ideological segmentation), polarized pluralism (high ideological fragmentation), and

atomization (atomized pre-consolidation stage). The 5-factor model simplifies this

typology by recombining the single party system variants and excluding the atomized

party system, since they are of limited relevance to the Western world. Because the

Third Way disassociates itself from the dogmas of left and right (Blair and Schrder

1999), the model argues that the less polarized a dual or multiparty system is along the

socio-economic axis, the more susceptible the socialist party will be to the adoption of

the Third Way. In addition, a two-party system would pose less coalition constraints to

the adoption of the Third Way than a pluralist party system would.

The political economy of a nation can be defined by the party system type and the policy

factors previously described. When the political economy is favorable to the adoption of

the Third Way, it still needs to be complemented by strong party leadership and coalition

control for actual rhetoric change to occur. The study of political leadership includes, at

the one extreme, great man theoriesfocused upon the role of the individual, and, at

the other, theories emphasizing the structural, institutionalized aspect of leadership [that]

minimize the role played by both individuals and the office or positions they hold

(Gaffney 1996, page 11). While the first set of theories focuses on the impact of political

leadership upon the political environment, the second set focuses on the reverse

relationship. When a coalition exists, assessment of leadership strength should measure


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not only control over the party, but also the degree of consent from, and submission of,

other parties. The 5-factor model takes this concept into account and categorizes political

leadership along two axes: (1) strong party leadership versus weak party leadership and

(2) coalition consent versus coalition dissent. The model argues that the stronger the

party leadership of Third Way advocates and the higher the level of coalition consent,

then the more susceptible the socialist party will be to the adoption of the Third Way. In

addition, leadership and control should be assessed in both absolute and relative terms,

since a clash between very strong leaders of opposite ideology or a moderately strong

leader facing weak opposition would not be expected to be as successful as strong

leadership and coalition control in the face of weak opposition.

The 5-factor model presents a framework for assessment of the susceptibility of socialist

parties to adopt the Third Way ideology in the context of a political crisis given the

existing set of policy and political factors. An additional characteristic of the nations

under study that is implicit in the 5-factors but deserves explicit mention is the degree of

success of each policy and a general desire for change. The evolution and success of

each policy is just as important as the existing policy type. In practice, the model argues

that the less successful a policy that discourages the Third Way, and alternatively the

more successful a policy that endorses the adoption of the Third Way, the brighter the

prospects for adoption. We begin the application of the 5-factor model with the French

case to answer the original empirical question proposed at the outset of this document:

Why has the French Socialist Party shunned the rhetoric of the Third Way? We provide

an analysis of the French situation preceding the 2002 elections, which followed a 5-year


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cohabitation between Jospins left coalition (gauche plurielle) with the conservative right

of incumbent president Jacques Chirac. The explanatory powers of the 5-factor model

are then validated with an application to the cases of the German SPD under Gerhard

Schrder and the British New Labour under Tony Blair shortly before their joint

authoring of the Schrder/Blair manifesto of 1999, as well as to the emergence of the

Third Way rhetoric in Italy after forty years of conservatism.


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4. Application to the French Case A Missed Opportunity for ChangeThe elections of 2002 marked a low point in French democracy, with voter abstention of

30% and a second-round run-off between parties of the right that did not reflect the

original preference of the French electorate, as evidenced by the contrast between the

smashing second-round victory of Jacques Chirac with 82% of the vote and his relatively

weak accumulation of barely 19% of the vote in the first round (Sofres 2002). The

disconnection with voter preference is further illustrated by the fact that almost 45% of

the votes in the first round went to the dispersed presidential candidates of the left,

including the greens. During his time as government leader, Lionel Jospin used his

authority to bring the left back to power, but not to revise the partys doctrine or to

modernize its appeal on a centrist or realist line (Bell 2003, page 2). We use the 5-

factor model to assess the Goodness of Fit and Mediating Factors in France

preceding the 2002 elections. The trigger that set in motion the process that could have

led the PSF to adopt a partial or full version of the Third Way was the near obliteration of

the party in the 1993 elections, in which the PSF amassed only 11% of the vote and won

53 of 577 National Assembly seats. The immediate response of the PSF was to name

Michel Rocard, a moderate socialist with centrist views, as leader of the party. The

policy and political factors that molded the trajectory of the PSF following the 1993

trigger are analyzed in the following sections.


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4.1. Assessment of the French Goodness of Fit

The welfare system in France, as in the majority of continental Europe, was

predominantly conservative. The result of the conservative welfare state had been the

significant exclusion of certain strata of society, particularly the younger working

population and the long-term unemployed. From 1991 to 2002, the unemployment level

of the active population aged between 15 and 24 had hovered around 20%, with a peak of

25% in 1994, the year following the 1993 political trigger. The youth unemployment

level contrasted with a level of 10% for the active population aged between 25 and 50

(LABORSTA database). In response to this appalling situation, the French government

initiated a transformation of its welfare system from an exclusionist corporatist system to

a system of social insertion. In 1998, ten years after the introduction of theRevenu

Minimum dInsertion (RMI) (minimal insertion income), the government launched a new

law dubbed LOLE (Loi dorientation sur la lutte contre les exclusions), consisting of an

ambitious set of policies aimed at combating exclusion (Gilbert and Parent 2004, page

94). Although the system of insertion is a step closer to the Third Way social system of

equal opportunity, it does not reach the level of real opportunity stipulated by the Third

Way. While real opportunity is tied to the custom of deservingness of dependent citizens,

insertion is tied to the custom of solidarity towards the excluded (Gilbert and Parent

2004, page 94). The state of social welfare in France in the years preceding the 2002

elections distinguished itself from the OECD averages with a paradoxical contrast

whereby it provided more generous social benefits through higher out-of-work benefits

(68% versus 40% net replacement rates), higher social spending (29% of GDP versus

21%), and low relative poverty (7% versus 10% below poverty threshold), but suffered


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from lower social success as measured by a high unemployment rate (10% versus 7%),

lower subjective well-being (65% versus 70% life satisfaction), and higher social

isolation (8.1% versus 6.7% feel isolated) (OECD database). In sum, the welfare system

in France during the decade from the 1993 crisis to the 2002 election experienced a very

slight move towards the policies of the Third Way, but fell short of the success of the

average OECD countries. It can therefore be characterized as a positive factor for the

adoption of the Third Way, since it is an unsuccessful, non-Third Way policy.

The second and third policy factors, economic and administrative policy, further

characterize the French Goodness of Fit. Statism has long been a defining

characteristic of France and is reflected in both the role of state-planning in the economy

and a domination of the state over civil society. French statism, already well-established

during the Third Republic, was further reinforced after the liberation from Nazi Germany

by a leadership that extended state control over key sectors of the economy and

established several institutions designed to reinforce the economic will and capacities of

the state (Hall 1986, page 139). Since that time, the government has had to yield to

increased pressures from different interest groups and ease the traditional stance that the

state should remain independent from the pressure of social groups in order to guard the

social interest (Hall 1986, page 176).

In regards to state-led planning of the economy, the average level of economic and

administrative regulation in France was above the average of OECD countries,

particularly in comparison to large advanced economies. According to the OECD


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working paper Product Market Regulations in OECD Countries: 1998-2003, and

excluding the newly accepted or aspiring members of the EU for a remaining total of 25

countries, the French government exerted high regulation and control in both inward- and

outward-oriented policies (Nicoletti et al. 2005). Inward-oriented policies are assessed

based on the level of state control (e.g. scope and size of the public enterprise sector,

control of business enterprises, price controls, and command & control regulation) and

barriers to entrepreneurship (e.g., regulatory and administrative opacity, burdens on

startups, and barriers to competition). France had the fifth-highest level of state control

with particularly high ratings in public ownership regulation and barriers to

entrepreneurship. Outward-oriented policies were assessed based on barriers to trade and

investment (explicit and regulatory), and France ranked relatively badly, with the seventh

highest rating in 1998. As the numbers show, France still exerted strong state-led

economic planning relative to other OECD countries and was classified by the working

paper as a relatively restrictive country, even though the general level of state control

and regulation had decreased in all countries with that classification (Nicoletti et al. 2005,

page 19).

In addition to strong state-led economic planning, French statism also permeated the

administrative sphere. Despite an attempt to decentralize in the early 1980s promoted by

the newly elected socialist administration under Francois Mitterrand and epitomized by

the Deffere Decentralization Laws, the central government still played a large role in the

administration of France. The goals of decentralization were noteconomicbut

administrative and financial in character (Meny 1985, page 188). The objective of the


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socialist decentralization effort was to change France from a system of local

administration to one of local government, where local decision-making, as opposed to

simple execution of central directives, would provide the necessary autonomy for

responsiveness to local needs (Baguenard 2002, page 121). The difficulties encountered

were manifold, and the decentralization effort resulted in a civil society without social

capital (Levy 1999, page 166). The socialist laws emancipated regions by introducing

democratic regional elections and provincial authorities. These authorities were

bestowed with new responsibilities paired with allocation of resources, while general

local autonomy was increased by the lifting of numerous restrictions on local action. The

economic achievements of decentralization were less impressive, however, particularly as

excessive decentralization resulted in a plethora of small localities that were unable to

function independently and therefore did not gain de facto autonomy from the central

government. By 2000, the number of communes in France had grown to 36, 779,

compared to 16,068 in Germany, translating into 1,500 inhabitants per commune versus

5,000, respectively (Baguenard 2002, page 81). In his statist two-step model, Levy

attributes the failure of France to effectively move away from its dirigiste model to a low

degree of societal coordination. As a result, the state was compelled to intervene to

alleviate social dislocation, notably in the labor markets, and to rescue failed attempts at

economic progress (Levy 1999, page 284). The prevalence of the central state is further

illustrated by the high level of central versus periphery public sector employment. In

1997, the central state accounted for 52% of total public sector employment, which in

turn accounted for 22% of total employment (LABORSTA database).


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The policy factors described above portray France as a nation trying to move away from

a heavily conservative welfare state, a system of state-led economic planning, and a

centralized dirigiste government. While the direction of policy change has clearly been

away from the heavy hand of the state, France is still significantly more rigid than other

OECD countries. Because of the positive direction of change and pressures from

globalization and sister socialist parties in Europe and abroad, strongly positive political

factors should lead the PSF to fully or partially adopt the Third Way. The following

section analyzes the Mediating Factors, namely, party system type and leadership

strength that would lead the Third Way to win over, or lose, the PSF.

4.2. Assessment of the French Mediating Factors

The party system type of France has had a long history of polarized pluralism since the

end of the Second World War that is still in existence today. After the liberation, the

political landscape of France was characterized by a clear left-right cleavage fragmented

at first but increasingly consolidated on each side of the political spectrum. The

rationalization of the French party system resulted from increased incentives for coalition

politics as a result of the enhanced prestige of the presidency established by de Gaulle in

the 1960s, the bipolarizing pressures of the direct presidential election after 1962, and the

strengthening of the executive government mandated by the constitution of the Fifth

Republic (Evans 2003, page 12). Following this reform of the party system, three

significant developments shaped the political landscape at the turn of the millennium: the

emergence of a series of minor but relevant parties including the greens and the extreme-

right Front National, the change in strategic dynamics within party factions and within


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coalition members (exemplified by the decline of the communist PCF and the emergence

of the PSF as the main party of the left), and patterns of growing electoral instability in

the form of electoral volatility resulting in six consecutive changes of government since

1978 and disaffection towards traditional politics as demonstrated in higher abstention

rates. The fractioning of the electoral vote is clearly illustrated by the fact that while the

quadrille bipolaire, composed of the PCF and the PS on the left versus the UDF and RPR

on the right, obtained an evenly divided vote exceeding 90% in 1978, this domination

floundered in 1997 and 2002 when these parties obtained around 67% (Evans 2003, page

14). While the 1997 legislatives consecrated the PSF as the governing party, the victory

was largely due to the lack of coordination in the right. The results of the 2002

presidential elections supported the hypothesis presented by Grunberg and Schweisguth

in 1997 that the French political space was no longer simply one-dimensional with Left-

Right polarization but had developed into a two-dimensional space with three poles: the

Left, the Right, and the Far Right. In an updated publication, the authors analyzed the

logic of considering the candidates labeled as extreme left as a fourth pole but hastily

rejected it due to the relative proximity of their ideals to those of the moderate left

(Grunberg and Schweisguth 2003, page 342). In whatever way the French electorate was

partitioned, one thing is clear it was fragmented, polarized, and built on weak

coalitions.

Based on the potentially positive policy factors but clearly negative party system type

described above, party control and coalition leadership would be expected to play a

decisive role in swaying the PSF into, or away from, the camp of the Third Way. In the


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early 1990s the French left was at a major juncture in its political history. As previously

stated, the disastrous 1993 elections dealt a crushing blow to the PSF. Evidently,

although Francois Mitterrand was very successful in promoting himself, he left his party

in dire straits. In distress, however, lies opportunity for change. The PSF was faced with

a dilemma: given the low votes for the left across the board, either consolidate its

leadership on a leftist platform and break with the stigma of a deceivingly centrist

Mitterrand government, or establish itself as a centrist party and target the moderate left

and moderate right electorates with the international support of strong Third Way

proponents including Tony Blair, Gerhard Schrder, and Bill Clinton. The most likely

contender to PSF leadership for the promotion of the Third Way was Michel Rocard, who

had been chosen as Prime Minister by Mitterrand in 1988 in a move which intended to

facilitate the centrist entry into government (Bell 2000, page 179). Rocard, a

modernizer, became head of the PSF after the 1993 defeat and led the centrist faction

of the PSF in the clash of ideals against the left-leaning faction led by J.P. Chevnement,

who eventually left the party in 1994 (Bell 2003, page 55). The Rocardian ideology and

the departure of Chevnement and his followers pointed to a possible move towards the

center (Evans 2003, page 174). However, just as Rocard found little support for his pro-

market speech at the 1977 congress of Nantes, even from his closest followers, his main

supporters once again decided for internal reasons not to make their voice too forceful

(Bell 2003, page 54). Unable to sidestep the left-right ideological cleavage, Rocard

resigned after his Big Bang coalition approach resulted in the worst-ever defeat of the

socialist party in the 1994 European Parliament election (Stevens 2003, page 207). Lionel

Jospin took the leadership of the left coalition with a more pro-left platform and, despite


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losing the 1995 elections, was able to win the legislative elections of 1997. Although

Jospins government actions followed some Rocardian policies, including privatizations,

a decreased role for the state, and social insurance reform, his rhetoric was measured to

avoid alienation of coalition partners (he used, for example, the term private

participation instead of privatization) (Bell 2003, page 47). In fact, leftist rhetoric was

followed by leftist action, most notably with the unlikely implementation of the 35-hour

week, but also the Aubry Law, which aimed to create 700,000 state-sponsored jobs for

the youth (Sferza 2002).

The policy factors described above would have allowed the Third Way rhetoric to

discernibly challenge the status quo. However, economic performance was positive in

the mid-nineties and the center-right was not likely to be easily won over by a fledgling

centrist PSF. Furthermore, the political factors were strongly unfavorable to the adoption

of the Third Way rhetoric, since the leftist faction of the PSF and its leftist coalition

partners were too strong for Michel Rocard, the lead PSF proponent of the Third Way.

The 5-factor model is applied below to three other major socialist parties at conjectural

crossroads, each with its own characteristics and faced with the very different economic,

social, and political landscapes of Britain, Germany, and Italy. The explanatory power of

the model will be tested as it fits the actual rhetoric chosen by these parties.


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5. Application to the British Case: Blairs New LabourWe begin application of the model to socialist parties of other major European countries

with Britain. The British New Labour Party emerged in 1997 as the benchmark for

European socialist parties considering embracing the rhetoric of the Third Way. The

Third Way of the New Labour Party represents today the most radical embodiment of the

concept. Some even argue that New Labour amounts to consolidation of Thatcherism

and that Blair is little more than the son of Margaret (Schmidtke 2002). Application

of the model to the British case investigates the policy and political factors that led the

New Labour Party to adopt the rhetoric of the Third Way as its unconditional political

platform for the 1997 general elections. The triggering crisis was a simultaneous political

crisis of both the incumbent party and the socialist party. After almost two decades of

Conservative government the Labour Party began to seriously reconsider its most basic

social and economic electoral platforms in order to avoid continued obliteration from the

political scene. By the mid-nineties, the conservatives were the ones experiencing a

political crisis. Internal strife over EU issues and the crash of the pound from the

European Exchange Rate Mechanism crushed confidence in the Conservatives long

track of economic successes. In addition, the weaker leadership of John Major, in

comparison to Thatcher, provided a great opportunity for Labour to ride on the

ideological and electoral momentum gained in 1992 and win over the middle class.

In order to take advantage of the situation, the Labour Party had to decide whether or not

to adopt a new electoral platform. This decision depended on the policy and political

factors existing in Britain in the mid 1990s. One option was to develop a customized


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version of the new election platform that democratic leader Bill Clinton proposed as he

won the presidency of the United States in 1992. Clinton faced a very similar situation to

that of Tony Blair, including a long-reigning incumbent Republican government and the

imminent threats of globalization, and adopted a more liberal rhetoric that encouraged

real opportunity, market liberalization, and a small government the main tenets of the

Third Way. According to our model, adoption of a similar rhetoric by the Labour Party

would depend on the policy and political factors in Britain that preceded the 1997

elections, which are discussed in the sections below.

5.1. Assessment of the British Goodness of Fit

In the period leading to the 1997 general election, the British welfare state, unlike that of

France, was based on a combination of minimum universal rights and means-tested

distribution of resources. The system was residualist in that it delivered meager

benefits, on the basis of need, as a last resort for those who are unable to support

themselves through paid work (Levy 1999). The predecessor of the British welfare state

is the set of laws called the Poor Laws, which provided assistance to the very poor and

were amended repeatedly until 1941, when the destructions of war incited a more

equitable treatment of the people. The 1942 Beveridge Report triggered an attempt to

shift towards a universal welfare state that gave security from the cradle to the grave

(Field 1999). Actual implementation of a universal welfare state, however, resulted in

fixed-level benefits below those recommended by Beveridge, which were insufficient to

many and led to the introduction of a means-tested system. Although not comprehensive,

the welfare state did pose a major burden to the government and the economy,


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representing 23% of GDP in 1979 when Margaret Thatcher came to power (Wilding

1997). Interestingly, the expected dismantling of the welfare state by a state-minimizing

liberal government did not occur during the first two terms of the Thatcher

administration, as the percentage of GDP it represented remained unchanged until 1988.

Between 1987 and 1990, however, government took a major offensive against the

bureaucratic structures of welfare provision (Le Grand 1993). Both central and local

authorities saw significant cut-backs in their social services budget, and the system was

replaced by a more pluralist system of provision dominated by quasi or internal markets

[which] radically changed the face of the NHS, Education, Social Care, Local Authority

Housing and the role of the local authority more generally (Wilding 1997). The

Conservative government redirected welfare responsibility both by putting great stress on

the family as the cradle of civic virtue and by privatizing social services operations.

The British economy, one of the most liberal in the world, highly contrasted with that of

dirigiste France. Indeed, the New Right ideologuesrejected indicative planning,

public ownership, incomes policy, exchange controls, and sectoral intervention (Wilks

1997). Britain, whose economy was significantly liberalized by the Thatcher government

following the New Right ideology, was characterized in the OECD study on Product

Market Regulation as a relatively liberal country (Nicoletti et al. 2005, page 19). The

study ranked Britain as having the lowest level of control in outward-oriented policies

and levels well below average in regards to control and regulation in inward-oriented

policies. In the realm of outward-oriented policies, represented by barriers to trade and

investment, Britain ranked highest in all sub-domains, followed closely by its neighbor,


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Ireland. Although it did not achieve such absolute ranking in inward-oriented policies, it

did rank higher than every other European country in both barriers to entrepreneurship,

where it is only outpaced by Canada, and state control, where it ranks 5th. Although

Britain experienced a roller-coaster economic performance under the Conservatives, with

two major recessions in 1983 and 1992 separated by a major boom, as well as a mature

recovery leading to the 1997 elections (Wilks 1997), the legacy of the Thatcher and

Major governments was the establishment of a clearly liberal overall economic policy.

In regards to the government machinery, Britain had adopted an interesting mix of public

and private provision of public services, where public provision was shared by local and

central government. Britain had a long tradition of democratic local self-government in

which there was no regional tier of government imposed between central government and

local authorities. From 1950 to 1994, the number of local authorities in Britain decreased

drastically as a result of the Local Government Act of 1992, which replaced the two-tier

system of local government in certain areas with a single-tier system (OECD, 1997).

Government in Britain was administered in England through a series of central

departments and subsidiary organizations and through national departments in the

remaining countries. Two legislations of the Thatcher government significantly altered

the make-up of government, with the creation of Executive Agencies in the 1980s that

acted as policy implementation bodies and the merger of four central departments into

Government Offices for the Regions (GOs) in 1994, with the purpose of fostering

efficiency without increasing the power or cost of central government. In addition to

altering the operations of local government through the encouragement of voluntary


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tendering and compulsory for some services the Conservative government increased

the number of special-purpose agencies, the Quangos, which often operated at the local

level and were not subject to local democratic control. In 1992, Quangos spent about

46.65 billion of public money (OECD 1997), or 17% of public expenditures (CIA

World Fact Book 1992), while local government accounted for 25% of the budget

(OECD 1997). The uniqueness of the British administrative organization, which did not

incorporate a regional level interfacing the central and local levels, was well-reflected in

the make-up of public sector employment figures. If regional government is considered

local rather than central, Britains central government 47% of public sector employment

was well above the OECD average, and only slightly below Frances 52% mark. This

paper considers regional governments as central, bringing Britains central government

employment to much lower levels than that of its counterparts whose regional

governments represented a significant portion of public sector employment. Despite the

reliance of social services on private contractors, private sector employment from 1985 to

1997 was in line with that of other OECD countries at about 80% of total employment.

The policy factors presented above characterize Britain as a country with a relatively

unsuccessful liberal welfare state, a successful liberal market economy, and a

decentralized government where both central and local governments inherited many of

the powers normally held in other countries by regional governments. Rhetoric adoption

of the Third Way could therefore be coherently developed to offer an alternative to the

welfare state and bank on recent mishaps of the British economy.


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5.2. Assessment of the British Mediating Factors

The political scene in Britain since the late nineteenth century had been dominated by

alternating periods of two-party and three-party systems. The Liberal and Conservative

parties battled virtually unchallenged until the First World War. Following the war, the

1922 general elections were characterized by the dramatic rise of the Labour party, which

captured 30% of the vote despite having become politically relevant less than two

decades earlier. The period from 1922 to 1929 experienced a three-party system, with the

tightest race taking place in 1923, when the Conservatives won 38% of the vote versus

30% for the Liberals and 31% for Labour. Between 1931 and 1970 the Liberals never

amassed more than 11% and played only a limited role in the duel between Labour and

the Conservatives (Boothroyd). This situation has changed since the 1974 elections,

when the Liberals won 20% of the votes and essentially allowed the Conservatives to stay

in power for 18 years, from the 1979 elections to the 1997 elections. Party coalitions,

although a decisive factor in some election years, played a subdued role in the general

political history of Britain. The 1918 coalition government served as training ground for

future election coalitions. The elections of 1931 marked the most significant coalition

formation in Britains electoral history as Conservatives joined forces with their long-

time opponents, the Liberals, and other minor parties, to defeat the rising Labour party

and its coalition with the Independent and Irish Labour parties (which the conservatives

would have achieved on their own anyway, with 55% of the votes). Between 1935 and

1966, only the Conservatives continued their coalition with other minor parties that

aggregated from a high of 5.5% of the vote in 1935 to a low of 0.6% before the coalition


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was dismantled. In recent electoral history, the Liberals and the Social Democrats joined

forces in 1983, with 26% of the vote placing them less than 1% behind Labour. The two

parties ultimately merged for the 1992 elections and became the Liberal Democrats,

amassing 19% of the vote. Interestingly, following Tony Blair's election as leader of the

Labour Party in 1994, the Liberal Democrats controversially pursued a policy of

cooperation with Labour, which eventually failed over proportional representation issues

and other key Liberal Democrat demands.

The rhetoric of the Labour Party had already moved towards the center during the 1992

elections as Kinnock, leading Labour into his second campaign, was by then at the head

of a disciplined and well marshaled party, with changed policies and little remaining from

the Foot era (BBC 1992). Following the 1992 elections, Labour underwent several

changes, with the replacement of Neil Kinnock by John Smith as leader, who was himself

replaced by shadow home secretary Tony Blair after succumbing to a heart attack. A

public school, Oxford-educated barrister, Blair was no son of the left or the Labour

movement, although he was a onetime supporter of the Campaign for Nuclear

Disarmament (BBC 1997). His tenure as shadow home secretary gave him no direct

experience of government since he entered Parliament in the Thatcher years, but support

of his powerful colleague Gordon Brown helped him win the contest for party leadership

against John Prescott and Margaret Beckett. Blair oversaw dramatic changes that

epitomized him as a powerful and commanding leader. Under his leadership, the

modernization of the party stepped into a much higher gear than under Kinnock. Of

particular relevance were the partys eradication of the commitment to nationalization as


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set out in Clause IV of the party constitution and the adoption of its new name, New

Labour, which Blair came to personify during the election campaign. In contrast to

Conservative opponent John Major, Tony Blair showed true party leadership, as he

himself stated: I lead my party, he follows his (BBC 1997). Besides strong party

leadership, the lack of coalition constraints gave Tony Blair great power to adopt the

rhetoric of the Third Way.

Given the policy and political factors described above, namely, successful economic and

administrative policies in line with the Third Way, unsuccessful social policy misaligned

with the Third Way, a political system characterized by a three-party system free of

coalition constraints, and a strong leadership committed to the Third Way, the 5-factor

model would support adoption of the Third Way rhetoric. New Labour did chose indeed

to base its 1997 election campaign on the rhetoric of the Third Way, pushing its platform

further to the center than had been proposed in 1992. This strategy, running on the back

of a mild crisis in the Conservative party with a weak leadership and economic setbacks,

rewarded New Labour with a landslide victory, stealing 16% of the votes from the

Conservatives but only 2% from the Liberal Democrats. The latter became a new force to

be reckoned with, particularly given their center-left rhetoric relatively similar to that of

the Labour Party and their adopted stance against the war in Iraq.


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6. Application to the German Case Schrders Neue MitteApplication of the 5-factor model to Germany focuses on the period preceding the 1998

elections that consecrated SPD Gerhard Schrder as Chancellor of Germany. Schrders

electoral platform went counter to the traditional socialist platform that heavily promoted

a strong welfare state and socialist economic policies. This change in rhetoric was

triggered by a similar phenomenon as that of Britains described above. Just as Tony

Blair banked on the lethargy created by the long reign of Thatcher and her cronies, so did

Gerhard Schrder rely on 16 years of right-wing reign under Kohl and a burning desire of

the German people for something new following the disappointing impact of

unification on the German economy as a whole. Instead of following the traditional

socialist platform, Schrder aligned himself with concepts of the British Third Way, but

at the same time proposing a milder version of it due to Germanys different social,

economic, and political landscape, as analyzed below.

6.1. Assessment of the German Goodness of Fit

The German welfare state, similar to that of France, was based on Bismarckian

traditions, supported by family values, work position and social entitlements (Zeitlin

and Tubek 2003, page 107). Germany prided itself on its Wohlfahrtstaatstatusand

provided a comprehensive set of social benefits in the forms of social security, social

welfare, and other social programs. Contribution rates to the social security system

increased from 26.5% of gross wage in 1970 to 42.2% in 1998. In the late 1990s it

accounted for approximately 22% of GDP, placing it ahead of France (Siebert 2005, page

128-134). Besides social insurance, social welfare, or Sozialhilfe, represented an


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increasing portion of government expenditure, as it grew from approximately 15% of

expenditures in 1970 to over 25% in 1998 (Siebert 2005, page 134). OECD social

indicators pointed to successful social results across the board in comparison to OEDC

averages, except for the rate of unemployment (9.3% versus 7%) and the old age strain

reinforced by low fertility rates. Germany had indeed a large welfare system with high

net salary replacement rates (67% versus 40%), low income inequality, high social and

health care spending (33% of GDP versus 26% and 10.9% of GDP versus 8.4%,

respectively), and healthier levels of subjective well-being and isolation, particularly in

comparison to France. Finally, youth unemployment hovered around 10% in Germany

versus 20% in France, reflecting lower exclusionist effects.

In comparison to France, the German social market economy imposed fewer constraints

on free enterprise and open markets. The OECD study on Product Market Regulation

categorized Germany as a middle of the road country (Nicoletti et al. 2005, page 22).

According to the study, the German government exerted above-average state control and

regulation in inward-oriented policies but significantly below-average control in outward-

oriented policies. In regards to inward-oriented policies, Germany had the 10th and 9th

highest levels of public ownership and involvement in business operations, respectively,

placing it slightly above the average OECD country in terms of state control. In terms of

barriers to entry, Germany fared slightly better. Although it had a similar ranking as state

control for administrative burdens on startups and regulatory and administrative

opacity, the ranking was much better regarding barriers to competition, where it had

the 3rd

lowest level of constraint, bringing the aggregate barriers to entry category


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closer to, although slightly above, the OECD mean. In regard to outward-oriented

policies, Germany fared very well. This category is based on the degree of barriers to

trade and investment, and Germany ranked 20th in 1998.

The level ofdirigisme in Germany was low in comparison to France, particularly due to

its federalist form of government. Federalism is rooted in German history, where for

centuries people lived in a number of independent municipalities. Although unification

occurred in 1871, the regional states continued to be relatively independent (Siebert 2005,

page 278). Despite the traumatic transformation of the previously centrally planned

economy of eastern Germany into a market economy, by 1998 the reunified Germany

was running an enlarged federal system where administrative and financial responsibility

was largely bestowed on the states. Besides strong decentralization, Germany relied on a

system of governance that combined market forces with non-market mechanisms that

were controlled by different levels of government as well as social groups, including

trade unions, employers associations, and workers councils (Siebert 2005, page 325).

Levy characterizes the German model of government as one of high social coordination

and a tendency for a market economy opposed to statism (Levy 1999, page 285). In

terms of public sector employment, the central government accounted for only 15% of

the total public sector in 1997 (less than a third of the French percentage), which in turn

accounted for 18% of total employment in Germany.

The main policy factors countering the Third Way were the comprehensive welfare state

and a relatively constrained internal market. Differentiation from the existing right-wing


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government could therefore be based on these points, should the socialist party decide to

adopt the rhetoric of the Third Way.

6.2. Assessment of the German Mediating Factors

The recent party system type in Germany can be qualified as a moderate pluralism. After

the First World War, a democratic republic replaced the monarchy. However, the

strength and mutual antipathy of the Communist and National Socialist parties, reflecting

an extremely polarized party system, precluded the formation of strong majority

governments. The virtual obliteration of both Nazi and Communist ideological parties

after the Second World War and the collapse of the Soviet Union resulted in a party

system of moderate pluralism. German politics became dominated by the reformist

Social Democratic Party (SPD) on the left and the two-party conservative alliance of the

Christian-Democratic Union (CDU) and its Bavarian ally, the Christian Social Union

(CSU). The SPD formally abandoned Marxism in 1957, and the CDU-CSU replaced the

old collaboration parties of the right. Between 1949 and 1998, the SPD held office only

between 1969 and 1982, while the remaining periods were under CDU-CSU leadership

(Carr). The 1994 Bundestag election results, immediately preceding the 1998 elections,

were 41.5% for the CDU-CSU and 36.4% for the SPD, with the remaining votes closely

split between the minority parties, including the liberal Free Democratic Party (6.9%), the

environmentalist Green Party (7.3%), and the left-wing Party of Democratic Socialism

(4.4%). Interestingly, the coalition of the right had obtained 54%, 55%, and 57% in

1983, 1987, 1990 respectively, but only around 50% in 1994 (CDU/CSU, FDP) as the

Greens and PDS gathered more power and set the stage for a potential coalition of

opposition in 1998. This repartition of votes characterized the German party type as a


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was the main focus of the chancellor. This corroborates the explanatory results of the

model, which pointed to a rhetoric based on reduction of the welfare state and of

unemployment through a real opportunity approach to workforce reinsertion. Indeed,

proposal of both the Hartz 4 program and decreased unemployment through internal labor

market reform comprised the heart of the new socialist platform. The shift towards the

center, however, did not occur without opposition. In March of 1999, the head of the

SPD and finance minister, Oskar Lafontaine, presented his resignation in response to

divergence with the ideologies of the newly elected Chancellor. In opposition to the

business wing of the SPD, Lafontaine advocated a program of state measures to counter

the negative social effects of globalization and an unrestrained market[and] advocated

increasing incomes in order to increase domestic demand so flying in the face of the

dominant supply-side orientated policies ( Schwarz 1999). Schrder handled the notable

Lafontaine with authority and further reinforced his leadership of the party and internal

support of the policies of the Third Way.


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7. Application to the Italian Case DAlemas Progressive InitiativesThe last application of the 5-factor model in this paper is to the main Italian socialist

party of the mid 1990s, the Partito della Sinistra (PDS). The case of Italy provides a

clearly different economic, social, and political landscape than that of the previously

analyzed countries, as further described in the following sections. As in France, the

Communist party, Partito ComunistadItalia (PCI), drew a very large percentage of

votes during the countrys First Republic, with a peak above 34% in 1976 that gradually

decreased thereafter (Schmidtke 2002) but never amassed enough votes to come to

power. The fall of worldwide Communism and the general consent for the EMU

objective in the early 1990s, however, allowed for the waning of a First Republic that

condemned the left, and the PCI in particular, to eternal opposition. The trigger for a

potential adoption of the Third Way by the PDS in 1996 was the build-up of legitimacy

since spinning off from the PCI in 1991, the dismantling of the Christian Democratic

Party, and the major blow to the center-right government by the departure of the Northern

League from the Forza Italia alliance of the North. We now analyze the policy and

political factors of 1996 Italy in order to predict whether the PDS would have been likely

to embrace the rhetoric of the Third Way.

7.1. Assessment of the Italian Goodness of Fit

The Italian welfare state belongs to the Christian Democratic welfare system, which is

characterized by the polarization of social benefits where privileged insiders enjoy

disproportionate protection at the expense of the mass of citizens, who receive little or no

coverage. The case of Italy, however, represents an extreme version of this system


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whose problems are aggravated by large state administration and the operation of

patronage politics (Levy 1999). During the Christian Democratic hegemony throughout

the First Republic until the 1980s, partisan politics took central stage through corruption,

inflated benefits, and conscious oversight of tax evasion by the critical political

constituency. As the supremacy of the Christian Democrats (DC) faded, the government

in the 1980s was led by a five-party coalition, thepentapartito, whose members instead

of eradicating corruption and partisan politics became part of it. As a result, by the early

1990s Italy found itself in dire straits with a budget deficit and public debt reaching 10%

and 100% of GDP, respectively (Levy 1999), as well as a welfare state increasingly

polarized. One example reflecting the level of fiscal burden and polarization is that of the

pension system, which provided a basic pension in manufacturing of 89% of average net

earnings of current workers, [while] the minimum social pension for those who did not

accrue was 19% of average earnings, barely one half of the European Union level (Levy

1999). It was only in 1992, with the advent of application to the EMU, that a mani pulite

investigation destabilized the parties of thepentapartito, most notably the Christian

Democrats and the Socialist Party of Italy (PSI), and permitted three governments of

technicians, led by Amato, Ciampi, and Dini between 1992 and 1996, to redress the

spiraling budgetary and social crisis. Progress was made in the period leading to the

1996 elections, and the operations of the technicians was supported by a PDS eager to

establish its governing credentials (Levy 1999).

On the economic planning front, Italy placed amongst the most interventionist OECD

countries. Despite a high savings rate, funds were directed to government debt rather


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than to commercial banks that could help spur the postwar boom. The equity markets

were v

00148-Why Has the French Socialist Party Shunned the Rhetoric of the Third Way

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