The Centre-Ground's Shift to the Left

Whether a Democrat or a Republican is inaugurated in January 2009, the centre of political gravity in the US is well to the left of where it was a decade ago. President George W. Bush's own contribution to the shift has been negligible. It is the result of long-term, tectonic shifts in political and economic ideology that are affecting all developed countries.

In hindsight, despite the re-election of a conservative president, 2004 was the hinge between eras. The definitions of right, left and centre changed dramatically between 1932 and 2004, which can be broken into two periods.

In the first, 1932-1968, the left/right spectrum in the US and similar democracies was defined by the appeal of various forms of statism on the left and the political weakness of classical liberalism or libertarianism on the right. Democratic socialism was never influential in the US, but its place was taken by economic populism, symbolised in the 1930s by demagogues such as Huey Long.

During the New Deal era of 1932-1968, the only politically relevant conservatives were moderates such as Dwight Eisenhower and Richard Nixon, who accepted the welfare state but fretted about its costs. Laissez-faire economics was considered to have died out in the Depression. New Deal welfare-state liberalism occupied the centre, flanked by economic populism to the left and moderate economic conservatism to the right. A similar spectrum was found in Britain and west European democracies, where democratic socialism replaced economic populism as the statist alternative to the "third way" of the welfare state.

Between 1968 and 2004, the political spectrum shifted to the right with respect to economic (but not social) issues. Long before the collapse of the Soviet bloc, socialism was discredited as a viable economic alternative. Parties of the left in the western world abandoned programmes of nationalising the economy for welfare-state liberalism. The disappearance of radical socialist or populist alternatives turned the former "third way" or "centre", welfare-state liberalism into "the left".

During the same period, Milton Friedman and other neoclassical economists led a powerful intellectual revival of laissez-faire economics. They blamed the "stagflation" of the 1970s on welfare-state policies and prescribed free markets as the panacea for society's problems. Outflanked on the right, the moderate position of Eisenhower, Nixon, and Tory "wets" in Britain suddenly became "the centre". Thus the post-1960s spectrum: welfare-state liberalism on the left and libertarianism on the right, with the centre occupied by what formerly had been moderate economic conservatism.

It was during this period, in the 1980s and 1990s, that many of the parties of the left, trying to move towards the centre, adopted moderate economic conservatism, now called neoliberalism. "Clintonomics" resembled Rockefeller Republicanism more than New Deal liberalism. President Bill Clinton and Tony Blair, then the UK prime minister, collaborated on a project they called "the third way" -- a term that had once been used for the welfare-state liberalism that was now redefined as the extreme left position.

That era has come to an end. The two great trends now are the collapse of libertarianism as a political force and the rise of economic populism.

Libertarians succeeded in promoting deregulation and the liberalisation of trade and finance. But, partly as a result of their success, the popular anxiety caused by globalisation doomed far more radical libertarian reforms.

Even as libertarianism was losing its political lustre, economic populism came to life in US politics for the first time since the 1930s. Unlike the reactionary populism of Patrick Buchanan in the 1980s and 1990s, the middle-class populism represented by CNN's Lou Dobbs cannot be dismissed as marginal. The decline of libertarianism and the revival of populism are already reshaping politics in the US and similar societies.

What formerly was the left -- welfare-state liberalism -- is once again the centre. To its left (in economic, not social, terms) is protectionist populism; to its right, neoliberalism.

This comes as a disorienting shock to Clinton-Blair third-way neoliberals. Having positioned themselves as the reasonable mean between the welfare-state left and the economic libertarian right, they have awakened to find that they are now the extreme right. The clever ones are inching their way, ever more carefully, towards today's new centre.

You can hear the change in what prominent would-be centrists are saying. In the 1990s, when neoliberalism was the centre, the line was: we must slash middle-class entitlements in order to be more competitive in the global free market. Now the line is: in order to save free-market globalism from populists preying on middle-class economic anxieties, we must expand the middle-class welfare state.

The winners -- at least for now -- are welfare state liberals such as old-fashioned New Dealers in the US and their equivalents in other countries. The position of the original "third way" of 1932-68 always made sense. Middle-class social insurance programmes, by guaranteeing economic security, reduce the appeal of populism, socialism and other kinds of radical statism, and make possible broad political support for open and competitive national and global markets. You will hear much more of this line as politicians rush to occupy the new centre in the years ahead.