Clinton and Blair : The Economics of the Third Way

The former United States President Bill Clinton and Prime Minister of the United Kingdom Tony Blair have described their approach to government as a 'Third Way' that is neither of the Right nor Left but new and different. Clinton and Blair have claimed that their Third Way is a social democratic response to the demands posed by globalization, composed of increased public investment on the one hand and 'sound' public finance on the other. Current interpretations of Clinton and Blair's Third Way are brief and limited to the philosophical and political. The purpose of this paper is to analyse the Third Way as an economic policy programme. Its analysis finds that conflict between public investment and 'sound' public finance emerged and was resolved in favour of the latter, locating Clinton and Blair's Third Way within standard neoclassical theory. Their Third Way is thus, contrary to Clinton and Blair's claims, neither 'new' nor social democratic