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The Third Way is a term used to describe a hybrid form of economic government, combining some elements of a free-market economy with some elements of a command economy. The Third Way is essentially a centrist philosophy, finding a middle ground between capitalism and socialism. Many proponents of the Third Way view it as a step forward from both market liberalism and democratic socialism, taking the best elements from both to create a completely unique system.
Since the 1980s, the Third Way has been implemented widely in Western countries to a larger extent than in the past. Socialized systems have been introduced or expanded in many countries, while at the same time, free-market policies have been pursued to further open markets. Generally, the Third Way receives widespread support from the public, as it aims to protect many of the economic ideals represented by unfettered capitalism, while still offering security nets for those who fall on hard times.
Many of the most fervent advocates of both socialism and capitalism dislike the Third Way, however, seeing it as a failure to adhere to either system. Strong supporters of democratic socialism tend to find its free-market policies unacceptable, and often see it as using certain socialized systems to continue pacifying the populace without instituting the truly necessary sweeping changes to reform the system. At the same time, strong free-market proponents find the socialized systems included in the Third Way to be undermining of a broader laissez-faire capitalism.
Near the end of the 19th century, Pope Pius XI issued a call for a Third Way to find a common ground between the conflicting socialist and capitalist systems of the era. Following the Second International, the fight between capitalism and socialism appeared to be nearing a sort of boiling point, and the Third Way offered a way to defuse that situation. In the early-20th century, a number of governments began to implement Third Way programs, including both the progressive movements of countries like the United States under Roosevelt, and the Fascist governments of countries like Spain and Italy.
Following World War II, capitalism was the ascendant philosophy, and although the Third Way remained a viable economic movement, it had much less steam than it had in the past. This remained true until center-left governments began springing up throughout Europe, a process that was exacerbated by the fall of the Berlin Wall. As socialist ideologies began to take hold in traditional capitalist bastions, the strong free-market philosophies seen in leaders the likes of Ronald Reagan and Margaret Thatcher needed a way to move forward. The Third Way offered a compromise that could bring center-left members of government on board, while still pushing through an agenda of privatization, globalization, and deregulation.
The basic premise of the Third Way is one of having one’s cake and eating it too. The idea is that a government can continue to push forward with neo-liberal ideals, growing the economy, increasing the creation of wealth, moving previously public holdings into the private sector, but at the same time it can provide ample protections for its citizens, such that the needs of social justice are still met.