A third way for Labor [pg. 16]

Why not redistributive policies combined with a laissez-faire economy, and welfare financed by a small government?

By GAL ALON
January 2, 2006 21:24

With the surprising victory of Amir Peretz as leader of the Labor Party the prospect of "Third Way" ideology bursting onto the Israeli political scene has become real. After years of ideological stagnation, it has recaptured the minds and hearts of many local social democrats. Nonetheless, some 50 days after Labor's reshuffle, the tone is too similar to that of the Old Left: Enlarge the budget, play with the deficit, raise taxes and maintain a large, inefficient bureaucracy. It is still too early for firm conclusions, but the general direction becomes more and more apparent. Even though there is a long debate around the uniqueness of the Third Way as a separate ideology, one cannot ignore its underpinning. It stands for the integration of what some might consider inherently contradictory vectors: a social agenda with market principles, redistributive policies combined with a laissez-faire economy, and welfare financed by a small government. "Socialism is dead," declared sociologist Anthony Giddens, and with it the old Keynesian dream of full employment and large government. The discourse of the Third Way refers instead to inclusion as the route for equality, to responsibilities as a prerequisite for rights, to social investment as the generator of "responsible risk takers," and to globalization as an inevitable process that must not be hampered. THESE ARE not empty slogans. In Britain, they have been incorporated into specific policies by Tony Blair and Gordon Brown since 1997; relatively generous tax credits were introduced and a National Minimum Wage was set up - all in order to "make work pay." Job centers were built with "personal advisers" to convince "customers" they would be better off at work than on benefits; and "New Deals" were arranged to push people into the labor market by making idleness less rewarding. Special attention was given to child poverty, which Blair pledged to abolish within a generation using mainly the redistributive tax credits scheme. However, a symbolic shift occurred years earlier, with the burial of Clause IV in the Labor Manifesto which committed the party to preserve "common ownership of the means of production." One can challenge the coherency of Third Way policies but not their outcome. Income inequality as well as child poverty are declining in Britain; unemployment is still less than 5%; and private welfare providers financed and monitored by the government are far from failures. The British experience shows that governments do not have to control markets in order to achieve fairer distribution of income; that economic incentives can be more effective than higher customs in protecting local production; that inclusive policies can bring better cohesion than revolutionary legislation. If the right tools are being used, redistribution and prosperity become much more feasible. BUT IS this the discourse of the Israeli Labor Party? It seems that even after stretching the flexible terminology of the Third Way it would be difficult to identify its remnants among Labor's frontline candidates. Days after the "social takeover" declarations were made against the privatization of Bank Leumi and Israel Electric Corporation. Later, there were statements from Labor politicians in favor of reversing the recent reforms enabling pension funds to play a greater role in the markets. One of the potential leaders of the Labor Party, Sheli Yehimovich, said we should "change the economic system entirely and impose restrictions on imports." Then there were calls for increasing the National Minimum Wage by approximately 20% to $1,000 a month. There is no argument about the urgent need to "make work pay" by eradicating the unfairness of both working and remaining poor. Nevertheless, the Israeli economy cannot become hostage to an election catchphrase. The leaders of Labor are well aware that small firms can't afford to pay an increased minimum wage. A similar end can be achieved by the introduction of tax credits. Whereas both methods will make work pay, the former was born out of the need for a slogan. Such rhetoric, especially if not backed up by a serious study, deters voters rather than attracting them. IN HIS recent "Peace Index," Prof. Ephraim Yaar showed that support for the Labor Party tends to decline as poverty rises. My own research into "the poverty of democracy," shows that the poor are often less politically informed. These observations do not mean Labor should give up on the poor vote. They do suggest paying special attention to those voters who constitute Labor's major base of support. Uncalculated and radical pledges will fail to attract them and empty rhetoric will only frighten them, as it has already done. If the Israeli Labor Party intends to fulfill its potential, it must reassess its approach. Instead of vowing to return to Old Left tools of import restrictions, salary rises and public ownership, it must promote new Left policies such as Prof. Yuli Tamir's proposal to make high education free at the point of use. The Jewish state was founded on the principles of welfare and equality. Nevertheless, as the poor electorate is probably more interested in security, the only way forward is with a moderate Third Way ideology. The writer is a Ph.D candidate in the Social Policy Department at the London School of Economics, and a research fellow in the Institute for Policy and Strategy at the Interdisciplinary Center, Herzliya.


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