City & Business: The knowledge-based economy - Mandelson meets the American way

TWENTY-FIVE years ago I worked for an American magazine called Psychology Today. Its commercial premise - that psychologists had scientific principles for making people happy and fulfilled - was absurd if not fraudulent. But it was the end of the Sixties. People were partial to that sort of nonsense. The magazine was based in Del Mar, California, home of the Jimmy Durante racetrack. I worked in swimming trunks and T-shirt so I could go surfing after editorial meetings on the beach. To my surprise over my three years there, I also learned a fair amount about American business and the relationship of US business culture to the UK.

The head of the magazine's book division was a dashing Englishman named Richard Holme. Richard hosted fund-raising parties for leftwing causes supported by the Hollywood crowd. The party at which Jane Fonda - then known as Hanoi Jane - was guest of honour featured police helicopters hovering intrusively over the eucalyptus trees. Observing Richard - now the redoubtably mainstream Liberal Democrat peer Lord Holme - I saw how the English could play off American business culture without really comprehending it.

My editor, meanwhile, was a self-styled Kentucky hillbilly, former Rhodes scholar, and protege of Time magazine's founder Henry Luce named T George Harris. It was through George - who was so interested in the work being done at Harvard Business School he later became the editor of the Harvard Business School Review - that I first met business-oriented academics like Harvard's Professor Michael Porter. In the Seventies, these guys were focused on the "human potential movement" - using far-out psychological techniques to expand the mind and everything else - and how it could be applied to business. Much of this was guff, the verbal equivalent of bell-bottoms. But it was partly a version of Ralph Waldo Emerson's New England transcendentalism: "God is in each of us, so the potential of each of us is limitless."

I spent hours listening to the spoutings of these professors, straining to separate the guff from the insights, until it dawned on me I was missing the point. The point was that business school profs like Porter are Mammon's preachers. They test the commercial zeitgeist, then package the results in secular versions of tub-thumping fundamentalist sermons. Up and down the land they go - as consultants and speakers - spreading the gospel, cementing the consensus on how to make money.

The "human potential movement" as part of the general culture has gone the way of the "counter-culture". But it lives on in unexpected places like America's General Electric, the most influential company in the world. Its chief executive Jack Welch preaches "boundarylessness" - GE shorthand for the belief that the potential of the company's workers, and thus the company itself, is limitless.

CONSEQUENTLY, when on Thursday Peter Mandelson, the Secretary of State for Trade and Industry, told me he had met Porter earlier in the day and had been impressed, I was intrigued. That evening I went to London's Queen Elizabeth II hall to hear Porter speak. The event was entitled the "Michael E Porter Lecture" and sponsored by the CBI and Merck Sharp & Dohme.

Porter's hair was thinner. His whippet-like prowling in front of his audience was more mannered. But the secular fire and brimstone were still there. Biz-speak flowed like sacramental wine: "I want to communicate tonight in a way that encourages participation. I want to engage at a very personal level."

But those in the audience dismissing Porter as an intellectual version of the caricature American tourists in Bermuda shorts (the ones wandering round Windsor Castle wondering why they built it so close to Heathrow Airport) would be missing the point. Mandelson does not take the Harvard B-School prof at face value. He is promoting him for another, more complex reason - globalisation. Much of the much ballyhooed "globalisation of the markets" boils down to the spread of American corporate culture worldwide. CEOs in Helsinki and Taipei as well as New York and LA now hero worship GE's Jack Welch. Business schools round the world, not just at Harvard, teach "benchmarking" and "best practice".

Globalisation has allowed Porter to spread his wings internationally. Today he advises companies and countries how to compete with GE and the US. Porter sees no conflict here. He believes everyone can raise his business game and in so doing make the world a better place. He may not wear Bermuda shorts. But he is an American innocent.

Mandelson, Prince of Darkness, is anything but innocent. So it's here his promotion of the American prof gets interesting. Mandelson believes Porter's message on "the innovative society". Porter preaches that, as a result of globalisation and new technology, companies and countries not only can tap into their limitless potential, they must do so in order to survive. Capital and cheap, disciplined labour doesn't matter as much anymore, goeth the lesson. What determines economic success now is what employees and countries know that competitors do not know. Crucial, goeth the lesson, is how the UK organises its collective knowledge and brings it to bear commercially.

IN PUSHING the Competitiveness White Paper out on Wednesday, however, Mandelson will not only spread the prof's new gospel. He will link it to the Government's Third Way. I wish him well. America's corporate culture and its Asian variants needs a dose of social justice. American corporate culture is totalitarian. If you don't sing with the congregation, you're a non-person. GE's Jack Welch is a brilliant businessman. But he is also Melville's Ahab, the terrifying, monomaniacal captain in pursuit of Moby Dick.

There must be a way to merge American corporate culture with Britain's love of freedom and individuality in a way that helps UK Plc beat Americans at their own game. UK Plc should be able to earn at least as good a return on its investments as America Inc, enjoy it more while doing so, and be less cruel to those sidelined from the game.

New Labour launched a prototype of its Competitiveness White Paper last year. It was called Cool Britannia. The Government's notion was that Britain really is authentically cool. The country's creative communities made it so. New Labour's idea was to export this coolness in the form of cultural products - films, music, theatre, design. Cool Britannia was slated. I have yet to fully understand why. There are plenty of purists about - people who saw Cool Britannia as a crass exercise in marketing destined to kill off the very creativity that was being put up for sale. But the same purists make a fetish out of Hollywood's B-movies. These are a triumph of the unholy relationship between art and commerce. Why can't Britain strike its own compromise? One explanation was offered to me by my colleague Hamish McRae. He told me: "The British are immature about money." Maybe it's time people grew up.

The debate over the Competitiveness White Paper will no doubt revolve around policy issues. Should companies be allowed to write off R&D spending, and if so how much? Should capital gains taxes be cut in half to encourage risk-taking, and if not, how else might the country overcome its notorious aversion to risk?

Still, like it or not, the heart of the debate over the White Paper must be cultural. Secular preachers like Porter succeed in America because the American people are unified behind the idea that its corporations are the engine of the nation's prosperity.

There is no such consensus here. Instead, there are deep divisions - over the country's relationship to the European continent, over class. Mandelson can talk until he is blue in the face about the knowledge-driven society. What he is really saying is: "Let's come together over New Labour's policies for raising our standard of living - and leave the divisions over Europe and class behind us." It will be easy - and in a party political sense right - to slate him. But let us at least count the cost of doing so before we begin howling.