I am grateful to Tristan Stubbs for his interesting comments. He raises a number of important issues that bear further discussion.

Clearly we do not disagree on the importance of achieving democratic institutions and liberal political structures in the developing world. Let me focus, then, on the points where we do seem to diverge. Tristan says:

"Few would argue that the NHS is suffering, but to claim that this is the result of a lack of funding is patently untrue. Over the last nine years the Labour government has almost trebled pre-1997 investment, bringing funding in line with European levels. What is more, it has overseen the biggest ever redistribution of wealth to the poorest, lifted a quarter of children out of poverty, and introduced a minimum wage. And while proposed market reforms of public services may be worrying, they are by no means axiomatic for proponents of the Third Way."

This is all true. But now much of the government’s increased investment in the NHS is now being reversed as it applies sharp cuts to hospitals and medical services in order to deal with large deficits in the health budget. Cut backs in funding and increases in user fees throughout the network of public services, particularly in transportation, municipal functions, and higher education, are causing a major deterioration in both the quality and accessibility of these services. Moreover, the large gap between the wealthiest and poorest percentiles of the population has continued to grow rapidly. The trend towards the concentration of the country’s wealth in an ever decreasing proportion of the population remains unabated under the Labour government.

Stubbs goes on to state:

"I mentioned France’s troubles earlier; German unemployment, though improving, is running at eight per cent. Even the most successful social democratic party in the world, Sweden’s SSDP, risks defeat by a centre-right coalition after being blamed for rising joblessness and burgeoning social inequality. The reason for these countries’ difficulties? Their celebration of entrenched industrial interests precludes flexibility, a valuable currency in the globalised economy."

Implicit in this remark are the classical assumptions that powerful labour unions, strong protections for workers rights, and a comprehensive social welfare state invariably produce economic stagnation and high unemployment, while tax cuts for business, liberalization of the job market, accompanied by reduction in public expenditure on social services will generate high growth and low unemployment. These assumptions have been driving the steady erosion of the welfare state and labour rights in large parts of the western world for the past thirty years.

If one compares the economic performance over the past ten years of countries that have applied radical liberalizing economic measures, like the UK and the United States, with a range of western economies that have retained social democratic policies, it becomes clear that the classical assumptions do not, in general, hold.

Consider the productivity, growth, and unemployment indicators for the following countries, with roughly comparable per capita GDP, averaged over the ten year period of 1995-2004 (the statistics are compiled from OECD profiles of each country, which are available at www.oecd.org).

          Annual Increase in        Annual Growth        Unemployment
          Labour Productivity       in Real GDP
Denmark           1.64percent           2.13percent           5.23percent
France            2.13                  2.33                 10.13
Germany           1.8                   1.46                  8.38
Norway            2.34                  3.01                  4.05
Sweden            2.38                  2.85                  7.06
UK                2.11                  2.87                  6.03
USA               2.32                  2.75                  5.06

While France and Germany do indeed exhibit sluggish growth and productivity with relatively high unemployment, Norway, Sweden, and Denmark, all of whom have more generous redistributive welfare states and labour protection than either of these countries, display relatively robust results. In fact, Norway outperforms the UK and the United States on all three indicators.

The OECD uses the Ginni Coefficient as an index to measure inequality of household disposable income on a scale of 0 to 100, with 0 representing full equality among households and 100 maximal inequality among them. The measures of inequality for the six countries listed above from the mid-1980s through to 2000 (the latest date for which the OECD lists comparative figures for this index) are as follows.

               mid-1980s             mid-1990s                2000
Denmark           22.8                  21.3                  22.5
France            27.6                  27.8                  27.3
Germany           ....                  28.3                  27.7
Norway            23.4                  25.6                  26.1
Sweden            19.9                  21.1                  24.3
UK                28.6                  31.2                  32.6
USA               33.8                  36.1                  35.7

As expected, the Scandinavian social democracies consistently show the lowest degree of inequality, Britain and the United States the highest, with France and Germany in an intermediate position. While the Scandinavian countries have been remarkably successful in sustaining reasonable growth, productivity, and low unemployment within the framework of a strong welfare state, they have also clearly suffered from the increasing pressure that globalized markets have exerted on wages and social spending over the past decades, and this is reflected in the progressive rise of their inequality indices. As Stubbs suggests, this trend has become more acute in recent years.

Three primary responses to globalization have emerged. The neo-liberal approach celebrates it as both a positive and an inevitable phenomenon which requires us to embrace an unfettered free market. The constraints of the welfare state and the redistributive tax system required to support it are regarded as counterproductive obstacles to this process which must be dismantled as quickly and thoroughly as possible. The neo-liberals make no pretence of addressing the enormous social cost and labour instability produced by globalization, either in the West or in the developing world. They see the market as delivering the optimal solutions to these problems, despite compelling evidence to the contrary.

The anti-globalization movement regards globalization as a purely destructive force that serves the interests of a small corporate elite and visits devastation on the wage earning classes of the West, as well as the poor of the developing world. The supporters of this movement seek to halt its progress and return to an essentially localist economic system in which trade and markets are severely restricted. They ignore the fact that such economies would completely stifle growth. They would not be capable of generating the wealth needed either to alleviate poverty in the third world or to sustain the high standard of living that anti-globalizers demand for themselves in the West.

The advocates of the Third Way (as it is described in Anthony Giddens (1998), The Third Way, Polity Press, London, and implemented in the policies of New Labour) treat globalized markets as unavoidable and seek to cushion their social effects. They hope to do this through ameliorative measures like extensive job re-training programs, incentives for business to invest in deprived areas, and joint public-private provision of social services intended to reduce the burden of public spending in a way that avoids the collapse of these services. Third Way theorists do not provide substantive solutions to the profoundly disruptive effects of globalization in the West, nor do they address the problem of using the new wealth that it produces for social benefit in the developing world. They are essentially reluctant neo-liberals with a sense of social guilt.

I have been attempting to formulate a fourth approach on which the potential social benefits of globalization are realized by finding methods for transposing the constraints and redistributive mechanisms of classical social democracy from a national market, where they are increasingly ineffective, onto the emerging integrated global market. Such an approach recognizes the importance of this market for generating prosperity while seeking to harness its power in order to distribute its wealth to the largest possible number of people.

Shalom Lappin is Professor of Computational Linguistics in the Department of Philosophy, King’s College, London

I did, in fact, acknowledge Lappin's political explanation for the rise of Islamism — that it derived from the same groups' failure to deliver democracy. Nonetheless, I highlighted his materialist account for Islamism since I understood it to be emblematic of his broader approach. I considered it to be conceptually linked to his argument that democracy would take root in developing countries after a change in their material wealth. Returning to the original quote, however, I recognise that Lappin's conviction is that democratisation will accompany a rise in living standards, rather than result from this rise. Hence, the process of collective bargaining "will lead to the gradual convergence in living standards in the developing world and the West. It will also contribute to the democratization of the former'. I apologise for misinterpreting Lappin's argument in this way.

Yet my main point remains the same. I suggested that the reform of democratic and legal structures must take primary importance if economic development is to be truly sustainable. Although, as Lappin notes, "labour rights are human rights", human rights should always precede labour rights. Few citizens of developing countries are employed in industry, and an even smaller number are union members. What is key, therefore, is to protect the majority — those employed in subsistence agriculture, or in the black economy — from arbitrary taxation and expropriation by venal kleptocracies. This could well be possible with the kind of free trade agreements that Lappin proposes, which will oblige signatories to work towards strengthening democratic institutions.

2. I am grateful to Shalom Lappin for clarifying the centrality of trade unions to his scheme, and I find the example he gives of the Solidarity movement in Poland convincing. I believe, as I just mentioned, in the usefulness of free trade agreements in promoting democracy. But I don't have as much faith as Lappin in organised labour. When unions such as Solidarity fight oppression, their aims dovetail with those of the wider population. The right to vote, to assemble, to collective bargaining — all of these are noble causes of the labour movement which, as Lappin notes, have benefits for all. This is one of the reasons that free trade agreements should insist that states protect the right to organise trade unions.

However, once democratic market economies have been established, the aims of organised labour and those of the wider working class tend to diverge. Too often the narrow interests of traditional elites are traded for the equally narrow interests of union members. State protection of the French industrial and agricultural sectors has contributed to chronic unemployment in immigrant areas of the banlieues and exacerbated Third-World poverty.

And while we can promote human rights through free trade agreements, the same can't be said of social democracy. To insist that governments adopt a social democratic model is at best optimistic and at worst a call for the kind of doctrinal orthodoxy of which Lappin accuses me. We can endorse measures such as the European Working Time Directive to EU member states, but to do so on a wider scale, while desirable, may well prove impracticable. Indeed, even within the EU there is much discomfort over labour regulation. In countries such as Poland, memories of communism have influenced voters to elect parties with populist neoliberal platforms.

The social democratic response should therefore be to demonstrate the inadequacies of neoliberalism, and to argue for the desirability of full employment ahead of a minimal state (this shouldn't be too difficult — Poland's neoliberal model has created unemployment levels as high as twenty per cent). It was in pursuit of this goal that social democrats learned to accommodate themselves to liberalised markets — this was no "resigned embrace".

3. In his rejoinder, Lappin asks how the Third Way differs from traditional neoliberalism. Its emphasis on full employment is the first answer. The second lies in its advocacy of a welfare safety net for those cast aside by the globalised economy.

According to Lappin, the NHS is suffering from massive underinvestment, a result of the iniquitous neoliberal ideas that have informed British governments since the 1980s. Few would argue that the NHS is suffering, but to claim that this is the result of a lack of funding is patently untrue. Over the last nine years the Labour government has almost trebled pre-1997 investment, bringing funding in line with European levels. What is more, it has overseen the biggest ever redistribution of wealth to the poorest, lifted a quarter of children out of poverty, and introduced a minimum wage. And while proposed market reforms of public services may be worrying, they are by no means axiomatic for proponents of the Third Way.

Lappin's deconstruction of the Third Way highlights the acute social gap between the richest and poorest citizens of the United States. Yet a comparison between the British and American social models is somewhat specious. Though they share an attachment to liberalisation, in relative terms their welfare states are incomparable. A better contrast might be made with European economies. I mentioned France's troubles earlier; German unemployment, though improving, is running at eight per cent. Even the most successful social democratic party in the world, Sweden's SSDP, risks defeat by a centre-right coalition after being blamed for rising joblessness and burgeoning social inequality. The reason for these countries' difficulties? Their celebration of entrenched industrial interests precludes flexibility, a valuable currency in the globalised economy.

4. Both Shalom Lappin and I wish to adapt social democracy to the interconnected world, but have differing views as to how to achieve this. If we are to realise a progressive agenda for future global development, we must protect a culture of debate on the Left. This is why, in my response to Lappin's article, I called for a discussion of the Third Way rather than an ex ante dismissal.

I assume that when Lappin refers to the "tone" of my response he means to imply that it was overly polemical. The piece was adapted from a review of the Euston Manifesto launch that I produced for the Henry Jackson Society website. The text of Lappin's speech at that event was the same as "Towards a Renewal of Social Democracy". Although the political aims of the Manifesto — a commitment to liberal democracy, pluralism and tolerance — were restated by every speaker, the only mention we had of an economic programme was Lappin's. I found it odd that a spokesman for a project with the potential for support not only from the left, but from the broader political spectrum, should dismiss some of Euston's most instinctive colleagues (me included) as neoliberals. To be branded as such is as exasperating — and as imprecise — as it is for Eustonians to be labelled neoconservatives.

I therefore welcome the Social Democratic Futures project. After all, to paraphrase Shalom Lappin, free debate should come naturally to those who consider themselves "democrats and political liberals".

Tristan Stubbs is the Henry Jackson Society’s Environment / Economy Section Director

Setting aside the tone of Tristan Stubbs’ remarks let me respond to what I take to be his main points.

1. Stubbs seriously misinterprets my account of the rise of radical Islamism. The fact that I identify this movement as, in part, conditioned by the failure of secular nationalism to deliver democracy or prosperity in post colonial third world countries certainly does not entail that I regard poverty as the major cause of Islamism, nor is my proposed description of this phenomenon “materialist” in any obvious sense. It is unclear to me on what basis Stubbs arrives at these thoroughly unmotivated inferences. I was simply suggesting that radical Islamism has been filling the political void left by the collapse of secular revolutionary nationalist ideologies thoughout the third world. This claim seems to be uncontroversial in that it amounts to little more than a straightforward description of the facts.

2. Stubbs asks how free trade unions can be established in third world countries that are ruled by repressive regimes which do not respect the rights of organized labour. This is a reasonable question. I suggested a partial answer in proposing that global free trade agreements be used as instruments for promoting democratic institutions, as well as social investment in the developing world. The obvious precedent here is the demand for democratization and respect for human rights that defines a necessary condition for entry into the European Union. It is also worth recalling that when union activists struggling against an undemocratic government enjoy widespread popular endorsement within their own country and receive strong support from abroad, they can, in some cases, effectively challenge their government. This is how Solidarity established itself both as a free labour union and the main engine of democratization within Communist Poland in the 1980s.

3. Stubbs claims that I have mistakenly identified Third Way politics with the neo-liberalism of the Thatcher era. Instead, he suggests, it aims to achieve prosperity by promoting entrepreneurial energy and freeing business from regulation in order to generate investment. This view is, from what I can see, indistinguishable from a vintage neo-liberal approach. It is unclear how it differs from the model proposed by conservative devotees of liberalized markets, low corporate taxation, and reduced business regulation. On this approach, a rise in living standards will invariably accompany the economic growth that is generated by reducing the burden of taxation and regulation on business activity. The problem with this theory is that it stands in marked contrast with the observed facts. The social gap between the richest and poorest segments of the population in Britain has grown considerably under recent Labour as well as the preceding Conservative governments. The wages of large sections of the labour force have grown very slowly or remained static in real terms. The quality of social services like the NHS and higher education, as well as the public transportation system are suffering from massive underinvestment. This pattern Is even more acute in the United States. In the Third World, rapid development through economic liberalization and investment has indeed led to the emergence of an expanding middle class and a reduction of poverty in countries like China and, to a lesser extent, India. However, large sections of the populations in these countries have been left out of the new economy and are sinking even deeper into poverty and dispossession. It should be clear that I am not calling for the destruction of the market, but for its deployment in a manner that maximizes social benefit across the population at large, as well as economic development.

4. Finally, Stubbs suggests my criticisms of Third Way politics and my proposals for a robust renewal of social democracy in internationalist terms will alienate people who might otherwise sign up to the Euston Manifesto’s project. This is, at best, a puzzling assertion. I am presenting a personal view in the context of an open discussion on how best to renew social democractic policies in a global economy. Other contributors to the forum have taken alternative positions, some of them closely aligned to New Labour. Stubbs’ comments here appear to exclude free discussion and to seek political orthodoxy in terms of Third Way policies. If this is the case, then these comments are entirely incompatible with the diversity of opinion and free debate that we wish to encourage on these issues. If such debate prevents some people from joining the Euston Manifesto Group, then one wonders in what sense they could possibly be democrats and political liberals.

Shalom Lappin is Professor of Computational Linguistics in the Department of Philosophy, King’s College, London