Prepare ye the way of the Blair

Tony Blair tells two stories of last weekend's "Third Way" summit in Washington. One (hard to believe, but there it is) has him unsure of which way to go in the large building where the meeting was held. He asked a janitor: "In which room is the Third Way meeting?" The janitor, according to Blair, replied: "There ain't no third way, sir, there ain't but one way, and it's straight ahead." The second story concerns Massimo D'Alema, prime minister of Italy and a former communist. He enthusiastically told Democratic senators and congressmen at the meeting that their party's ideas were very like the socialist ideas of the European left. At which use of the dreaded, vote-killing "s" word, the Democratic representatives blanched and changed the subject.

Both stories are unconsciously self-serving. For Blair, the Third Way is the way that leads straight ahead; and it is indeed a way that combines the pro-business liberalism of US new Democrats with the diluted socialism of the modernising European left. He is in the vanguard of all that. For the moment at least, the Third Way project - even as it is thoroughly reviled by academics and commentators in Britain for being empty of content - is extraordinarily successful. It started as a British-American ideological venture; now European and other leaders are turning to it for inspiration, because they think it may have something that helps them to understand a shifting, shrinking world.

So, at the Washington meeting (held under the shadow of Nato's 50th-anniversary celebrations), what had begun as a transatlantic dialogue between two policy-wonking leaders, Blair and Bill Clinton, included Wim Kok of the Netherlands, D'Alema of Italy and, the largest acquisition of all, Gerhard Schroder, chancellor of Germany.

Blair and Schroder are emerging as ideological soulmates. As soon as the Kosovan war allows, they will jointly launch a document called The Way Forward for Social Democracy and they will commend it to fellow centre-leftists in Europe and beyond.

This will be a bigger deal for Schroder than for Blair. The resignation of Oskar Lafontaine, his left-wing finance minister, has left him free to move into a centrist position. He has long thought this the right place to be, but it is still much more contentious in the German SPD, where many (perhaps most) members distrust Schroder, than in the British Labour Party, where the left has found no way of grappling with the Blair juggernaut. The Way Forward document talks of flexibility, adaptation to world competition and encouragement to entrepreneurship in a way familiar to those accustomed to new Labour rhetoric. It is new to an SPD discourse which still has traces of the class struggle. Yet Schroder wants the document's last section, which deals with the merits of a "flexible" labour market, to be made even stronger.

Moderate socialists, you may say, have always accepted the market, but the Third Way does so in a quite different way. "The left," says Laura Pennacchi, a minister in the Italian "Olive Tree" coalition, "has historically accepted the market only as a matter of necessity and has been reluctant to make a distinction between the dynamism of market machinery and the pathological implications of its operation - blanketing the former with its negative verdict on the latter." In Italy, D'Alema has continued the efforts of his predecessor Romano Prodi to grapple with an overloaded and over-manned state and with a welfare system that pays such generous pensions that, within a decade, they will account for an insupportable 20 per cent of the budget.

The Third Way is also winning on the right. What was the recent, controversial speech by Peter Lilley, the deputy Conservative leader - advocating decent public provision of health and education - but an attempt to trail a Tory version of Blair's winning formula? Even more substantially, the only major party of the European right that is in power - in Spain - is also attracted by Blairite ideas. Blair and Jose MarIa Aznar, the Spanish premier, issued a joint policy statement on labour market flexibility last month - the first time parties of the left and right have done such a thing. The substance is no different from the Blair/Schroder document. Old Spanish customs (as some of our restrictive union practices were rudely called) are to be replaced by new British flexibilities.

The Labour left is marginalised and now, as a result of the Balkan war, quite bitterly split. So Blair need fear nothing from that quarter for some time. It is a different matter in Europe. Lionel Jospin, the French prime minister, asked to explain the differences between his position and the Third Way, said: "Since society cannot be reduced to an exchange of goods, the market cannot be its sole motive force. So we are not 'liberals of the left', we are socialists. And to be socialist is to affirm . . . that there is a primacy of the political over the economic." He also claimed he did not know what the Third Way was - but that if it were "something inserted between social democracy and liberalism", then he wasn't interested. In so far as it can be labelled, that is exactly what it is. But it is not at all clear whether this is simply the response of a man constrained because he happens to be in coalition with communists, or if there is a point of principle somewhere. Blair would also say that the political should take primacy over the economic; and, in a recent discussion, the chief of his policy unit, David Miliband, said that if Blair had thought of Jospin's phrase - "we are for the market economy, not the market society" - he would have used it.

Above all, the Third Way is seen as a policy framework for dealing with globalisation. In a speech in Chicago just before the Nato summit, one of the most revealing he has made, Blair said that globalisation had not only transformed our economies and working practices, it was also a political and security phenomenon. "We live in a world," he said, "where isolationism has ceased to have a reason to exist." National interest was giving way to "the beginnings of an international community". He proposed a vast agenda of reform of international bodies and called for a set of criteria "under which we should get actively involved in other people's conflicts" - an initiative he described as "the most pressing foreign policy problem we face".

Here, then, the Third Way approach seems to have an analytic power: Blair contrasts the "old" world, in which nation states deemed themselves inviolable, with a "new" world, in which that inviolability could and should be breached where a concern for human rights warrants it. He seeks a third way between pure self-interest and pure moral purpose - and wants to enlist the world powers in a search for it.

It is a common observation now that the institutions of our world, domestic and international, are no longer capable of the tasks set them. The IMF, the World Bank and the World Trade Organisation face challenges that are too large for their resources or mandates. The UN Security Council reflects the cold war, and is often paralysed. Nato is another cold war leftover. The European Union, while it accrues more power, is increasingly criticised for its lack of democracy. National parliaments find power slipping from them, but no other centre can offer to protect citizens' rights or demand that people take heed of their responsibilities. Everywhere the old is being superseded but the new is unable to act.

This is felt to be the state of the world by more and more people. That is what gives impetus to Third Way politics. The name is wrong, the programme vague, the use often opportunist; but it is becoming more and more popular, because it seeks to answer the large questions.