The term Third Way refers to various political positions which try to reconcile right-wing and left-wing politics by advocating a varying synthesis of right-wing economic and left-wing social policies. The Third Way was created as a serious re-evaluation of political policies within various centre-left progressive movements in response to international doubt regarding the economic viability of the state; economic interventionist policies that had previously been popularized by Keynesianism and contrasted with the corresponding rise of popularity for neoliberalism and the New Right. The Third Way is promoted by some social democratic and social liberal movements.
Major Third Way social democratic proponent Tony Blair claimed that the socialism he advocated was different from traditional conceptions of socialism, and referred to it as "social-ism" that involves politics that recognized individuals as socially interdependent, and advocated social justice, social cohesion, equal worth of each citizen, and equal opportunity. Third Way social democratic theorist Anthony Giddens has said that the Third Way rejects the traditional conception of socialism, and instead accepts the conception of socialism as conceived of by Anthony Crosland as an ethical doctrine that views social democratic governments as having achieved a viable ethical socialism by removing the unjust elements of capitalism by providing social welfare and other policies, and that contemporary socialism has outgrown the Marxian claim for the need of the abolition of capitalism. Blair in 2009 publicly declared support for a "new capitalism".
It supports the pursuit of greater egalitarianism in society through action to increase the distribution of skills, capacities, and productive endowments, while rejecting income redistribution as the means to achieve this. It emphasizes commitment to: balanced budgets, providing equal opportunity combined with an emphasis on personal responsibility, decentralization of government power to the lowest level possible, encouragement of public-private partnerships, improving labour supply, investment in human development, protection of social capital, and protection of the environment.
The Third Way has been criticized by some conservatives and libertarians who advocate laissez-faire capitalism. It has also been heavily criticized by many social democrats, democratic socialists and communists in particular as a betrayal of left-wing values. Specific definitions of Third Way policies may differ between Europe and America.
The term "Third Way" has been used to explain a variety of political courses and ideologies in the last few centuries. These ideas were implemented by progressives in the early 20th century. The term "Third Way" was picked up again in the 1950s by German ordoliberal economists such as Wilhelm Röpke, resulting in the development of the concept of the social market economy. Later Röpke distanced himself from the term and located the social market economy as "first way" in the sense of an advancement of the free market economy. Most significantly, Harold Macmillan, British Prime Minister from 1957 to 1963, based his philosophy of government on what he entitled in a book, The Middle Way (1938).
The Third Way has been defined as:
...Something different and distinct from liberal capitalism with its unswerving belief in the merits of the free market and democratic socialism with its demand management and obsession with the state. The Third Way is in favour of growth, entrepreneurship, enterprise and wealth creation but it is also in favour of greater social justice and it sees the state playing a major role in bringing this about. So in the words of... Anthony Giddens of the LSE the Third Way rejects top down socialism as it rejects traditional neo liberalism.—Report from the BBC, 1999, 
A variant of the Third Way exists which approaches the centre from a social democratic perspective. It has been advocated by its proponents as an alternative to both capitalism and what it regards as the traditional forms of socialism, including Marxist socialism and state socialism, that Third Way social democrats reject. It advocates ethical socialism, reformism, gradualism - that includes advocating the humanization of capitalism, a mixed economy, political pluralism, and liberal democracy.
It has been advocated by proponents as a "competition socialism" - an ideology in between traditional socialism and capitalism. A chief social democratic proponent of Third Way, Anthony Giddens, has publicly supported a modernized form of socialism within the social democracy movement but claims that "traditional socialist" ideology referring to state socialism that involves economic management and planning are flawed and states as a theory of the managed economy, socialism barely exists any longer'.
Under the nominally centre-left Australian Labor Party from 1983 to 1996, the Bob Hawke and Paul Keating governments pursued many economic policies associated with economic rationalism, such as floating the Australian Dollar in 1983, reductions in trade tariffs, taxation reforms, changing from centralised wage-fixing to enterprise bargaining, heavy restrictions on union activities including on strike action and pattern bargaining, the privatisation of government run services and enterprises such as Qantas and the Commonwealth Bank, and wholesale deregulation of the banking system. Keating also proposed a Goods and Services Tax (GST) in 1985, however this was scrapped due to its unpopularity amongst both Labor and electorate. The party also desisted from other reforms, such as wholesale labour market deregulation (e.g., WorkChoices), the eventual GST, the privatisation of Telstra and welfare reform including "work for the dole", which John Howard and the Liberal Party of Australia were to initiate after winning office in 1996.
Various ideological beliefs were factionalised under reforms to the ALP under Gough Whitlam, resulting in what is now known as the Socialist Left who tend to favour a more interventionist economic policy, more authoritative top-down controls and some socially progressive ideals, and Labor Right, the now dominant faction that is pro-business, more economically liberal and focuses to a lesser extent on social issues. The Whitlam government was first to use the term economic rationalism. The Gough Whitlam Labor government from 1972 to 1975 changed from a democratic socialism platform to social democracy, their precursor to the party's "Third Way" policies. Under the Whitlam government, tariffs across the board were cut by 25 percent after 23 years of Labor being in opposition.
Former Labor Prime Minister Kevin Rudd's first speech to parliament in 1998 stated:
Competitive markets are massive and generally efficient generators of economic wealth. They must therefore have a central place in the management of the economy. But markets sometimes fail, requiring direct government intervention through instruments such as industry policy. There are also areas where the public good dictates that there should be no market at all. We are not afraid of a vision in the Labor Party, but nor are we afraid of doing the hard policy yards necessary to turn that vision into reality. Parties of the Centre Left around the world are wrestling with a similar challenge—the creation of a competitive economy while advancing the overriding imperative of a just society. Some call this the `third way'. The nomenclature is unimportant. What is important is that it is a repudiation of Thatcherism and its Australian derivatives represented opposite. It is in fact a new formulation of the nation's economic and social imperatives.
Rudd was critical of free market economists such as Friedrich Hayek, although Rudd described himself as 'basically a conservative when it comes to questions of public financial management', pointing to his slashing of public service jobs as a Queensland governmental advisor.
Former Prime Minister Tony Blair is cited as a Third Way politician. According to a former member of Blair's staff, Labour and Blair learnt from, and owes a debt to, the Bob Hawke's government in Australia in the 1980s on how to govern as a "third way" party. Blair wrote in a Fabian pamphlet in 1994 of the existence of two prominent variants of socialism: one is based on a Marxist economic determinist and collectivist tradition, and the other is an "ethical socialism" based on values of 'social justice, the equal worth of each citizen, equality of opportunity, community'. Blair is a particular follower of the ideas of Giddens, as was his successor Gordon Brown.
In 1998, Blair, then Labour leader and Prime Minister of the United Kingdom, described the relation between social democracy and Third Way as the following:
The Third Way stands for a modernized social democracy, passionate in its commitment to social justice and the goals of the centre-left…But it is a third way because it moves decisively beyond an Old Left preoccupied by state control, high taxation and producer interests; and a New Right treating public investment, and often the very notions of ‘society’ and collective endeavour, as evils to be undone.—Tony Blair, 1998., 
In the United States, "Third Way" adherents embrace fiscal conservatism to a greater extent than traditional social liberals, and advocate some replacement of welfare with workfare, and sometimes have a stronger preference for market solutions to traditional problems (as in pollution markets), while rejecting pure laissez-faire economics and other libertarian positions. The Third Way style of governing was firmly adopted and partly redefined during the administration of President Bill Clinton. With respect to U.S. presidents, the term "Third Way" was introduced by political scientist Stephen Skowronek. "Third Way" presidents 'undermine the opposition by borrowing policies from it in an effort to seize the middle and with it to achieve political dominance. Think of Nixon’s economic policies, which were a continuation of Johnson's "Great Society"; Clinton’s welfare reform and support of capital punishment; and Obama’s pragmatic centrism, reflected in his embrace, albeit very recent, of entitlements reform.'
Clinton, Blair and other leading Third Way adherents organized conferences to promote the Third Way philosophy in 1997 at Chequers in England. The Third Way think tank and the Democratic Leadership Council are adherents of Third Way politics.
Other leaders who have adopted elements of the Third Way style of governance include Gerhard Schröder of Germany, Fernando Henrique Cardoso of Brazil, Wim Kok of the Netherlands, and José Sócrates of Portugal.
Advocates of free market capitalism are staunch opponents of a mixed economy, even in the weaker form of the Third Way. In 1990, after the dismantling of his country's communist government, Czechoslovakia's finance minister, Václav Klaus, declared, "We want a market economy without any adjectives. Any compromises with that will only fuzzy up the problems we have. To pursue a so-called 'third way' is foolish. We had our experience with this in the 1960s when we looked for a socialism with a human face. It did not work, and we must be explicit that we are not aiming for a more efficient version of a system that has failed. The market is indivisible; it cannot be an instrument in the hands of central planners."
Left-wing opponents of the Third Way argue that it represents social democrats who responded to the New Right by accepting capitalism. The Third Way most commonly uses market mechanics and private ownership of the means of production; and in that sense it is fundamentally capitalistic. In addition to opponents who have noticed this, other reviews have claimed that Third Way social democrats adjusted to the political climate since the 1980s that favoured capitalism by recognizing that outspoken opposition to capitalism in these circumstances was politically nonviable, and that accepting capitalism as the current powers that be and seeking to administer it to challenge laissez-faire capitalists was a more pressing immediate concern.
Charles Clarke, a former UK Home Secretary and the first senior "Blairite" to attack Prime Minister Gordon Brown openly and in print, stated "We should discard the techniques of 'triangulation' and 'dividing lines' with the Conservatives, which lead to the not entirely unjustified charge that we simply follow proposals from the Conservatives or the right-wing media, to minimise differences and remove lines of attack against us."
William K. Black said that "Third Way is this group that pretends sometimes to be center-left but is actually completely a creation of Wall Street--it's run by Wall Street for Wall Street with this false flag operation as if it were a center-left group. It's nothing of the sort."
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