Five years ago now, Gordon Brown set out the principles of what he called the New Economics. Drawing heavily on the thinking of Robert Reich, President Clinton's first Labor Secretary, the then shadow chancellor argued that nations could only "add value" by the skill, ingenuity and enterprise of their workforces. Mr Reich's premise was that the large companies which dominate capitalism are footloose and unpatriotic: they owe no loyalty to a country, and will pursue the maximisation of profit regardless of national boundaries. A company could be headquartered in Detroit or London, carry out all its manufacturing in Korea or Vietnam, do its accounting in India and hold its accounts in the Cayman Islands. The only way in such a global economy for the government of one nation to develop a competitive advantage and retain the benefits for its people is to improve their skills, because workers are less mobile than capital and corporations. This was a new style of thinking for the centre-left, and for New Labour it provided the intellectual rationale for the abandonment of Bennite "socialism in one country" a decade earlier. But it was highly simplistic, and in key respects - as the BT/MCI debacle shows - simply wrong.
The fact that MCI has been swooped upon by a rival American company, WorldCom, is suggestive of the chauvinism of American finance. It turns out that the free market is not as blind to borders as Mr Reich thought. The idea that a huge American telephone company should be taken over by a foreign one - never mind that BT speaks English - did not appeal to Wall Street. The New York markets preferred one of their own, the fast- talking Bernard Ebbers, whose WorldCom may be a quarter the size of BT, but which was more or less created as a corporate vehicle by the Manhattan investment banks.
Strategically, Mr Ebbers is pursuing the same vision as BT's Sir Iain Vallance, one of Tony Blair's favourite business leaders. Mr Ebbers says he wants MCI in order to build a global player in a world telecoms market which will be dominated by a small number of mega-corporations. That was Sir Iain's cunning plan, too, but it seems that international finance - that is, predominantly American finance - is prepared to gear up the cash for it if the global player wears an American shirt.
Messrs Brown and Blair cannot complain too loudly, however, because they never really believed in the full version of Robert Reich's analysis. In practice, a strong streak of British nationalism has run through their relations with business. They did not like it when Rover was sold to BMW, and although they have embraced the slogans of Conservative orthodoxy in the matter of "not picking winners" they have promoted the global ambitions of both BT and British Airways. The similarities between the two cases are instructive: telecoms and airlines are two industries which are still emerging from state control and national regulation, and which have been strongly influenced by the rebirth of the "big is beautiful" doctrine in business.
In the case of BT, it was Labour, not the Tories, which accepted the argument that less competition at home was a price worth paying for a "global player" wearing a British shirt. Mr Blair referred again, in his big speech this week, to his deal with BT to get every school on to the information superhighway. For him, it seems, BT is our General Motors, and there is an identity of interests between company and corporation. That may smack of Fifties corporatism, but there is as much truth in it as in the Reich model. BT is a British company, with a British workforce and a physical network in this country which may be part of a global network, but which anchors it here.
The question then is: what is good for BT? There were sufficient doubts about the MCI merger to suggest that it was in the interest of BT shareholders and customers to call it off. Mr Blair's mistake lay not in his support for BT, but in backing a strategy for the company which was over-ambitious, reflecting Sir Iain's lust for a leading role on the world stage. It is not surprising that Mr Blair felt an affinity with him, but politicians should stay on the right side of the line between picking winners and backing proven success.