Why British companies are so limited

Jobs & Fairness: the logic and fairness of employee ownership by Robert Oakeshott (Michael Russell Publishing, £35)

Is Britain a nation converted to capitalism? We read the burgeoning business pages with more interest than the news sections. We admire the fortunes made by dot.com millionaires. Our political leaders appear to build upon the neo-liberal revolution of the Thatcher years.

Is Britain a nation converted to capitalism? We read the burgeoning business pages with more interest than the news sections. We admire the fortunes made by dot.com millionaires. Our political leaders appear to build upon the neo-liberal revolution of the Thatcher years.

Yet fewer and fewer of us have a direct stake in the show. In 1969, just under half the UK's marketable wealth - ie stocks and shares - was owned by individuals. Today, three-quarters of UK plc is owned by three financial blocs: pension funds, insurance companies and overseas investors (who are the biggest owners of British equities). By contrast, in the US only 6.2 per cent of equities are held overseas, with nearly half of America Corp. being owned by households.

Britain may be a capitalist nation but the British people are not, it seems, a nation of capitalists. This may explain the relatively poor performance of UK plc. For 30 years, Britain has floated around 18th place in the world table of income per head. If Britain were a member of Euroland, we would lie tenth out of eleven in GDP per capita, with only Spain below. It does not seem to matter whether Britain is governed along corporatist lines under Wilson, under the smash-the-unions philosophy of Thatcher, or the boom-and-bust style of Major: we never move out of our low ranking.

We read columns comparing the weak euro to the virile pound, but no one asks why Britain is so much poorer than the European countries which have foregone the pleasure of roller-coaster currencies. America is set up as a model economy yet no one asks why there are so many capitalists in the US, and so few in Britain.

One reason is that America manages to be a net importer of capital whilst Britain is the world's biggest exporter of capital. The US has cleverly organised a reverse Marshall Plan for itself. Europe, led by Britain, sends its capital there.

Capital is attracted across the Atlantic because there is a real market in forms of ownership in America. The new entrepreneurs who have dynamised the US economy have opted for partnership, rather than employer-employee, status. The mechanism to achieve this varies, but is always located in the idea of employee ownership.

Around 10,000 US companies are employee-owned, covering nine million workers. They range from dot.com start-ups to the world's fourth biggest airline, United Airlines, where employees own more than half the stock.

Robert Oakeshott is Britain's leading expert on employee ownership. He has spent his life examining the different forms it can take. Detailed studies in this book range from the Mondragon scheme in the Basque country to employee takeovers of steel firms in rural Pennsylvania.

There are a handful of such firms in the UK. John Lewis is a prime example of a British employee-owned enterprise. If John Lewis were quoted, it would be one of the FTSE 100's star retail performers. But its enduring success lies in its unique form of partnership, with each employee enjoying a real financial return on their personal investment in serving customers and keeping prices down.

Oakeshott's book is not a dry list of companies. He combines narrative with philosophy, and draws on Locke, Burke, Thomas Hardy, Isaiah Berlin and Adam Smith to argue that there is a rich British tradition of seeing ownership in larger, more generous and rewarding, terms.

We have tried everything else to make our country grow and prosper. But, for the last quarter of the 20th century, it has remained an also-ran in the world economy. If we want to become a proper capitalist nation in a world that has opted for market economies, it seems the only rational decision is to create many more capitalists in Britain. Setting up fiscal and legal frameworks to encourage capital to invest in the UK, by letting employees become their own owners, is the best way forward.

The reviewer is Labour MP for Rotherham