Hutton and ‘Stakeholders’

Hutton and the art of the possible

“Trust is the cement of non-competitive market bargains. It is the means of solving the commitment problem – of making people behave apparently against their immediate self-interest bat in their true long-term interest…trust is dependent upon parties to a deal caring about their reputation as moral beings and monitoring their own conduct with integrity” (The State We’re In p252)

Very often when people in public life introduce questions of morality into the arid world of economics it is to lecture the poor and disadvantaged on the need to “accept their obligations”. Or to not complain about their lot. Meanwhile the affluent show increasing reluctance to accept their obligations.

By contrast the impression one gets from reading and listening to Will Hutton, the Assistant Editor of the Guardian who is interviewed in this issue, is of a fundamentally decent man. His optimism, energy and willingness to take the Right on are invigorating at a time when the Labour Party has been engaging in retrenchment and adaptation to Thatcherism.

For too long the Left has been made up of people for whom “socialism” is a pick and mix combination of sectional interests and bigotries. The success of Hutton’s book, The State We ‘re In has a lot to do with its elegant and coherent world view. This, along with the fact that it is written by a journalist rather than an academic, makes it comprehensible to a very wide audience.

Another reason for Hutton’s success is, unfortunately, a lack of competition. Hutton describes himself as being one contributor to a tide of ideas which are influencing New Labour and well beyond. But there are few others. And Thatcherism has bitten deep. If further proof were needed, Mandelson’s book, reviewed in this issue, provides it. Blair and Mandelson both say that there is no going back to the post-war consensus – the most economically successful period in Britain’s history. John Gray, the New Right theorist, turned Blairite, says social democracy is dead. Insofar as breaking that consensus was Thatcher’s primary aim she has succeeded beyond her wildest dreams in the late 70s.

The focus of the interview was a discussion of New Labour’s attitude to stakeholding. It is clear, however, that Hutton’s concerns range much wider than this. To create a truly enduring change in society it is necessary to build a consensus across the political spectrum. He is behaving in an extremely political way. New Labour are not.  Building a consensus does not mean being all things to all men. It does not mean peddling the fantasy that there are not opposing interests in society which must be reconciled (if there were not why would anyone bother with politics?). New Labour, bizarrely, seem to be intent on narrowing their base of support, despite all sorts of simplistic talk first about appealing to Middle England and now to the whole Nation. The Mandelson book was an exercise in humiliating socialists in the Labour Party. New Labour could not hide their delight at Scargill’s departure. (This magazine was critical of Scargill at the time of the Strike, unlike the Kinnockites, but recognise that he represents something which a party of the Left ought to be able to incorporate. Or at least regret its passing.)

When the Labour Party made an issue of unemployment they used to focus on the total number of people out of work. (They attacked the Tories bitterly in the early 70s for presiding over levels of joblessness which today would look like full employment.) Clearly it is important for the Left to continue arguing that multi-million unemployment is both unacceptable and unnecessary. When the society was half as wealthy as it is now it was capable of providing full employment. But whatever else you can say about unemployment at least it is a stable lifestyle. Landlords often compete for DSS tenants knowing that Housing Benefit provides a steady income in the way that the labour market no longer can for large swathes of the population. One of the most important things Hutton has done is to focus attention on the economically and socially damaging effects of job insecurity.  He has described eloquently how different sources of insecurity – financial market and labour market – feed off each other.

This is a subject which is addressed by New Labour regularly. But there is an important difference in approach. For Hutton insecurity is not the mechanism for motivating people (as it is for the Right). It is corrosive of the social relationships which arc vital for all but the most mercenary of businesses to thrive.

New Labour has an ambivalent attitude towards job insecurity. Sometimes it sounds like an alibi behind which they can shelter. “But in a global economy, the old ways won’t do”, lectured Blair in Singapore. At other times this helplessness is not even something to be regretted: “stakeholders in a modem economy will today, more frequently than ever before, be self-employed or in small businesses. We should encourage this”. (Singapore) while Mandelson says “the opportunities being created in new kinds of consumerism, work and lifestyle are very exciting.” [p7] and later he breathlessly insists that “every European company must raise quality, lower costs.. . change in almost every respect – to regain a competitive edge.” [p 171] Not even Schumpeter could be more delighted by the creative destruction of capitalism.

Such enthusiasm for frantic change in response to market forces betrays a surprising innocence about how business actually works which is odd considering Mandelson’s lectures: “too many British companies are not up to the standards of the best”. (Businessmen probably find this sort of pep talk pretty irritating coming from a millionaire businessman like Heseltine but it must be considerably worse from a man whose brief experience of the world of work was as a t.v. producer.) Neither Mandelson’s book nor Blair’s speeches show any awareness of the fact that, as J .K. Galbraith pointed out nearly 30 years ago in The New Industrial State, most large businesses arc driven by bureaucratic as much as market relationships. The Mandelson/Blair conception is straight out of the Right’s caricature. They ought to talk more to the businessmen they meet rather than simply kow-towing to them.

Hutton is the most exciting thing around. But he should be put into perspective. Like Keynes, who is clearly a great influence, he has identified grave and systemic problems in capitalism in this country and his appeals are for measures which would strengthen not weaken that capitalism. (Nevertheless he has been attacked with ferocity in the right-wing press which seems to have a very twisted view of its own interests.) In effect Hutton is only saying what is obvious to practically everyone in Continental politics – left, right and centre, lie is explaining to a British audience what does not need to be explained elsewhere in Europe. I suspect many people in Germany would have difficulty seeing the point of his book. Of course markets are embedded in and determined by social institutions! Of course spot market prices cannot be the theology which guides their every move!

Hutton was sympathetic to the criticisms which we had of New Labour’s vision of stakeholding but lie, and others, argue that a greater patience must be shown. Twenty years ago many people now close to B lair believed that it was not their job to help save capitalism. 11 wasn’t worth saving. New Labour is now a pro- European party, allegedly. We are in a truly sad state if it is “impossibilism” to suggest that New Labour should be defending a European conception of capitalism vigorously and consistently, rather than a Thatcherite one. Or even to appreciate the difference. There is much evidence that at a senior level this difference is not appreciated. Some of this is provided later in the issue. For the moment consider whether a right wing German capitalist would be capable of saying: “Never must the power of the collective exercised through the state be allowed to transgress the rights of the individual”, [my emphasis] or “This is not to delude ourselves that wealth is somehow created by governments or society. Wealth comes from personal effort and entrepreneurial flair”. [p7]

When it comes to making spending commitments New Labour is politically astute – it remains vague, it leaves its options open. When asked about the legislative implications of stakeholding Blair did not say: “we’ll think about it”, or “wait until the election,” or “we’ll try ‘changing the culture’ first by ‘persuasion’ then we’ll consider legislation”.  He said, there will be no changes in the law. So did Alastair Darling. Hutton is perfectly right when he argues that for all their bluster the Right are on the run. If all they’ve got to offer is more Thatcherism then all they can expect is more social damage. In which case is it impossibilism to imagine that New Labour should show a bit more bottle?

The stance which this magazine has taken on Blairism has been harsh. The review of Mandelson’s book is harsh as well. We make no apology for that. One person’s harshness is another person’s clarity. This is not sectarianism and nor is it because Blairism is rightwing.

We have argued before that New Labour cannot be judged in terms of a developing political or intellectual tradition. They are in a situation comparable to the Fabians in the 1890s. They are starting something completely new. History has no lessons for them beyond indicating roads they will not go down. (“New Labour dumps the ideological baggage of the past to offer new solutions” – Mandelson [p 21]).

Hutton appeals to models of existing and successful societies – Japan and Germany. New Labour do not, beyond flirting with using an authoritarian city-state as having lessons for a mature mixed post-industrial economy.

New Labour do not see themselves as moving rightwards along the political spectrum – within the intellectual framework that politics has been conducted in since at least the French Revolution. They argue that they are neither left nor right. “New Labour is a new type of politics” (Mandelson p 17). It is beyond left and right.

They have rejected class as a framework within which to think about politics. They appeal to all classes. One Nation. New Britain. This is why when attempting to discuss the practical impact of Blairism in the society Mandelson had to resort to describing Ben, Eileen, Peter, Laura, Tracy, Bill, Phil, Jane and Chris who are the creations of marketing men. When the world is one of atomised individuals all we have connecting us is our place in the pecking order based on our prowess as consumers.

They are against all vested interests. (Sometimes though Mandelson implies that he thinks that vested interests don’t exist.) Politics has never been conducted in this way before anywhere in the world, ever. It is a daunting task before them.

But they tire confident of success. In fact both Mandelson and Blair, talk not merely of winning an election but of being in power for a generation.

Since the Industrial Revolution began the relentless expansion of the market into more and more areas of life has resulted in a huge increase in wealth but also great social dislocation. Libraries arc stuffed full of books on this subject. But New Labour argues that it wants both greater competition, a more thorough adaptation to the demands of the market, people furiously re-educating themselves throughout their whole lives and much greater social cohesion. There are few details as yet but they seem to have found the Holy Grail.

The New Labour project is not something which it is possible to be relaxed about. A society exhausted by the upheaval of the Thatcher revolution will not be permitted to have a rest. This is hardly surprising given the admiration which Blair and Mandelson have for Thatcher. A list of some of the things that Mandelson plans to change is printed on page 15. It includes the political system, the Civil Service, the Criminal Justice system, the welfare state, employment relationships and parent-child relationships. This seem like a lot of change to hike on for an administration with almost no governmental experience. The project is all the more vulnerable because they have abandoned the organisational ballast which they once had – the trade union movement (which is a vested interest.) Mandelson plans to change all these things without having what Hutton has described as “a political economy of capitalism”. In other words unlike Thatcher he does not have a theory about what is going on (even one that is wrong). That explains why his book is such a contradictory jumble as Mike Craig makes clear.

If New Labour arc right – if they have found the Holy Grail, politics as we know it will be changed forever. But until a more convincing explanation emerges this magazine would lose its integrity if it did not continue to comment skeptically on New Labour’s proposals. Since it doesn’t have much money its integrity is one of the few things it has got going for it. Other parts of the media who are not expressing skepticism about the Blair project because they want the Tories out will assist in getting Blair elected but they will do the cause of the centre-left no good in the long-run.

[Sadly, Hutton let himself be talked out of his correct understanding.  He has done little since his first impressive impact.]


This article appeared in April 1996, in Issue 53 of Labour and Trade Union Review, now Labour Affairs.  You can find more from the era at and