The theoretical notion of the 'Third Way' was definitively formulated by Anthony Giddens (1998, 1999). The 'way' was no longer to follow the wide avenue between capitalism and communism, but was rather to take a considerably narrowed path between the radical neoliberalism of the 1980s and the old statist-corporatism of post-War social democracy (ibid: 18). From the outset, Giddens and New Labour's new think tanks can be seen as distinct from their own past and from some contemporary social democratic parties on the continent: they no longer view the globalisation of financial markets, the Europeanisation of goods markets and the associated national race for competitiveness simply as an inconvenient constraint on social democratic government policy.

Instead, they see it much more as desirable, serving as a modernising whip on entrenched economic and social structures. Further, globalisation relieves the government of a considerable burden of legitimacy for reforms as far-reaching as they are necessary, particularly where they are directed at strong established interests. However, as a consequence of the globalised money and capital markets, the Third Way theorists see the scope for national monetary and fiscal policies, as well as for macroeconomic employment and structural intervention, as being much narrower than was the case during the 'golden era' of social democracy (1945-1973). The realistic acceptance that globalisation is both a constraint and a resource has considerable implications for social democratic politics. The dispassionate view of the new social democratic realists has frequently led to them being given the label of 'neoliberalism'. It therefore needs to be asked here, to what extent the Third Way can be differentiated from neoliberalism, so as to then distinguish it from the traditional corporatist-statism of post-War social democracy.

Giddens and New Labour share with neoliberalism an aversion to state macroeconomic intervention in the markets. They accept the conservative fiscal policy of budgetary consolidation, oppose increases in welfare expenditure and support the independence of the European Central Bank. Nonetheless, there are differences and these are frequently underplayed by the critics of the Third Way. Giddens criticises, for example, that neoliberalism does not assume responsibility for the political and social consequences of market outcomes (ibid.: 23f.). He argues that the trickle down effect of a prosperous capitalist economy is by itself insufficient to give the lower classes a fair share in social prosperity. Aside from this, the radical individualistic-utilitarian ethic of rational market behaviour is not capable of generating those moral foundations, upon which the markets also rest - contract-keeping, trust, promise-keeping, respect for the legal rules of the markets, taxation laws; that is, a set of civil virtues and a level of community orientation necessary for the efficient functioning of market economies. Moreover, human capital can be most economically effective only when it is sufficiently embedded in social capital (Putnam 1993; Szreter 1998). From this perspective Giddens' and New Labour's 'discovery' of communitarianism seems more astute than if it were to be seen purely as an alibi for the dismantling of the welfare state. Finally, a minimalist social security net of the kind characteristic of neoliberal concepts, is considered to be inadequate to guarantee Giddens' social inclusion within society (1999: 132f.).

Even this cursory summary of critiques of neoliberalism elucidates the distinction between radical market fundamentalism and the neoliberal vision of the minimal state on the one hand and the concepts of the Third Way on the other. Labeling it as neoliberal does not make analytical sense and can be seen as having a strategic function in day-to-day political polemic.

Nonetheless, just as clear as the demarcation from neoliberalism is the distancing of the Third Way from from traditional continental social democracy. Third Way theorists especially criticise three key stances relating principally to the differing understanding of the structure and function of the welfare state:

- what is argued as the illusion that an increase in social expenditure will automatically lead to a reduction in socio-economic inequality;

- the passive nature of welfare entitlements in the traditional welfare state. Instead of leading to more socially-oriented and individually-responsible citizenship, it leads to privatism, dependency, a loss of discipline and a lack of motivation to adapt oneself to the new educational challenges of the changing labour market (Giddens 1999; Plant 1998: 6).

- the traditional welfare state, rooted primarily in the logic of the classical industrial modernity, has proved too inflexible in the face of post-industrial problems. In part it protects the wrong kinds of social groups, while rarely incorporating new kinds of social risks into its insurance and safety net. Furthermore, welfare payments no longer meet the realistic individual needs and social challenges of the heterogeneous society at the end of the 20th century.

New Labour does share with traditional social democracy the commitment to social justice. However, it is no longer defined as egalitarian in the sense of being an ex-post remedy for market inequalities. Rather, it is conceived of much more as the a priori prevention of social marginalisation, poverty and social exclusion. To meet this common social democratic commitment to social justice, however, New Labour proposes to follow a path that deviates from social democratic traditions.² I want to briefly elucidate this path with the following four key concepts upon which Giddens bases the defining elements of his Third Way (Giddens 1999: 119 ff.): inclusion, exclusion, employment and welfare to work.

Giddens both modifies and specifies central programmatic topoi, which had long since degenerated into inconsequential images of identity cherished by those guarding the social democratic traditions. This is the case firstly for the term equality. 'The new politics', he writes, 'defines equality as inclusion and inequality as exclusion' (1999: 120). For him inclusion means the formal attribution and actual realisation of the political rights and civil duties that every member of society possesses and should fulfil. However, the actual realisation of these formal rights and responsibilities depends to a large extent on citizens' equality of opportunity. In a working society access to education, training and to work is the definitive form of equality of opportunity. Welfare payments cannot replace this access and must above all not be allowed to complicate it. Equal opportunities, education and training are thus fundamental to the Third Way project. Giddens emphasises that they would be crucial even if they were not as important as they are for opening up labour market opportunities (ibid.: 121). That is, he views equality of opportunity, to be achieved principally through education and training, not just as a labour market tool, but also in general as an emancipatory instrument for opportunities in life.

Giddens (1999: 121) distinguishes between two forms of exclusion in modern society that should be prevented in contemporary developed societies: voluntary self-exclusion at the top end of society and the mostly involuntary exclusion at the bottom end. At the top end Giddens talks of a silent 'revolt of the elites' (ibid.). According to his diagnosis, society's rich have increasingly retreated from public institutions: they evade tax liability to an increasing degree and refuse to contribute to the public education and health systems.³ The involuntary exclusion at the bottom end arises out of long-term exclusion from the labour market, and through the uncoupling of growing prosperity and participation in cultural opportunities. In its place both social stigmatisation and the concentration of excluded citizens living in residential ghettos increase. The lack of inclusion, and the exclusion of a noticeable part of society in welfare state societies that was de facto tolerated and fought unsuccessfully and with ineffectual policies, is one of Giddens' sharpest and most striking criticisms of the traditional European continental welfare states and the once celebrated 'Model of Rhineland capitalism'.

To prevent this double exclusion, and to facilitate social inclusion, New Labour attaches paramount importance to access to work. Work, and not compensatory welfare payments, is seen as the only way out of poverty and social marginalisation that promises to be successful. However, access to work should not be secured primarily by way of classical state-financed employment programmes or through demand driven deficit spending at the macro-economic level. Instead, it should be facilitated at the micro-economic (i.e. individual) level by increasing the employability of every individual. This means on the one hand increasing individuals' duties, but on the other hand demands that the state actively create the opportunities that strengthen the necessary individual responsibility. The cornerstones of this strategy are public and individual investment in further education, life-long learning and the establishment of as much equality of opportunity as possible. The traditional, passive-compensatory welfare state hinders the responsibility of citizens to subject themselves to this learning process. Moreover, embedded long-term unemployment leads to many cases of exclusion that are unintended, yet are 'facilitated' by the welfare state.

The welfare state must be restructured into a social investment state in order to increase the responsibility on individuals to reintegrate into the labour market and acquire the necessary qualifications. Here Blair's campaign slogan 'education, education, education' is linked to the 'welfare to work' principle. It signals the paradigm shift from the goal of ex-post distribution via the tax system and welfare payments to the ex-ante goal of equality of opportunity in the labour market. Social policy is no longer to be geared towards solving the social problems of the market economy through passive monetary compensation. Instead, the goal is much more to integrate people into society through educational programmes, retraining and temporary subsidising of jobs. Active educational and labour policy should prevent socio-political damage and not just passively support people retrospectively. This was also always the maxim of Swedish social democracy, though it was embedded for decades in a universalistic welfare state.⁴ New Labour, however, does not want to follow this latter option at all. It argues that the welfare state should be targeted much more to the really needy. It should no longer stretch to include the entire middle class or artificially erect barriers to entry into the workforce or retraining through the provision of overgenerous benefits. The concept of the Third Way ios no longer based on a political culture of solidarity, work and social morals. Instead, it assumes individual rational utility-maximising actors.

New Labour has abandoned the classical social democratic 'model' of a generous universalist welfare state. Theorists and practitioners of the Third Way do, however, want to prevent the 'Americanisation' of British society. Social exclusion, societal anomy, rising crime and the emergence of a large underclass are to be prevented in order to enable British people to integrate and again become 'one nation' (Blair). Raymond Plant, a Labour Member in the House of Lords, aptly calls the welfare state concept: 'supply side citizenship' (1998: 9). In this context supply side citizenship means that the state establishes the framework within which citizens should then realise fair opportunities through individual responsibility. It becomes clear that from such a perspective citizenship is less a conferred right and much more a goal with related duties for which one must constantly strive. It can only be attained through participation in the workforce and the onus is thus on the active state to establish the basic conditions necessary to access the labour market. Each individual is then obliged to responsibly utilise these opportunities. This could be labelled a revamped social democratic 'social contract'. However, the contracting partner and the end result of the contract is no longer the benevolent-paternal welfare state. Rather, it is a state more strongly rooted in liberal (equality of opportunity) and communitarian (protection of the community from the negative effects of individualisation) principles. In terms of legitimising power, the meritocratic principle of the market in Giddens' concept of the Third Way has gained ground on the insufficiently fostered notion of solidarity. Although Giddens, Plant and others leave no doubt here about the active role of the state, they seem fully prepared to accept greater income inequality as a market and policy outcome. Their acceptance ends only at the point where this leads to voluntary and involuntary exclusion in the higher and lower strata of society.