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To a Third Way Consensus

The century just ended was rough on simplistic ideologies, both of left and right. Socialism had its day in court, and was found wanting. The Great Communist experiment is virtually over (save for a few holdouts, such as Cuba and North Korea). The ideology of the right, as represented by the Washington Consensus of neo-liberal, market fundamentalism, wasn’t much more successful, even if its failures often go unacknowledged.

The last half-century has shown that while development is possible, it is not inevitable. Countries most successful at it – those of East Asia – followed policies markedly different from the Washington Consensus. Before the financial crisis of 1997, East Asia experienced three decades not only of unprecedented growth, but also of unprecedented reductions in poverty.

Out of these successes arose a new view: a “Third Way” between socialism and market fundamentalism. Ironically, America, long a zealous advocate of market fundamentalism, developed according to its own “Third Way.” US industry grew behind tariff walls. From the first telegraph line between Washington and Baltimore, constructed by the Federal government in 1842, to the modern internet, from agricultural extension services in the 19th century to military related research in the 20th and 21st, new industries were promoted through a quiet, market-oriented, industrial policy.

There is, of course, no single “Third Way” applicable to all countries and situations, but a multiplicity adapted to each country’s social, political, and economic circumstances. Nonetheless, these “third ways” share much: