Until Tony Blair's speech in Singapore last Monday, most people probably thought that a stakeholder economy was one in which everyone holds a lottery ticket. Not any more. The Labour leader caused quite a stir with his promise to create an economy "run for the many, not for the few... in which opportunity is available to all, advancement is through merit, and from which no group or class is set apart or excluded".
Mr Blair explained to David Frost yesterday that he intends the term "stakeholder" economy to be an umbrella concept, under which a multitude of more specific policy initiatives will comfortably sit. Not only will it offer a basic litmus test for new policy ideas as they arise, but it is also intended to persuade the electorate that Labour has a "big idea" to set in competition with the more brazenly laissez faire approach of the Conservatives. Note that the term stakeholder applies to the economy in Mr Blair's lexicon, to emphasise its toughness, while the term "one nation" is applied to the vaguer concept of society.
The Conservatives quickly recognised the danger of allowing the stakeholder concept a free run. But, as has been their recent habit, they were initially in two minds about how best to attack it. Michael Portillo was first out of the blocks, telling the nation that Mr Blair was simply mimicking the Thatcherite creed 16 years too late. Soon after, Michael Heseltine took an entirely different tack, claiming that this idea was Old Labour reincarnated, with powers being restored to the trade unions and other pressure groups. The fact that Mr Blair's speech had contained not one single word about the unions, or any other form of pressure group, was a disadvantage for the Heseltine interpretation, but this has nevertheless become the accepted Tory line. This will probably not worry Mr Blair too much - he is awfully hard to paint convincingly in Old Labour colours. Perhaps more troubling from his point of view is that the word "stakeholder" is something of a term of art which has acquired a specific meaning for certain people on the left, and their interpretation of its meaning may not be music to Mr Blair's ears.
One interpretation of the term is that championed by Will Hutton of the Guardian. He sees in it a new view - at least for the Anglo-Saxon economies - of the structure of the firm. In the US and the UK, the rights of the owners of the firm, the shareholders, are not only seen as sacrosanct, but company directors are required by law to protect them. This gives shareholders a primacy over other groups, such as employees, customers, or indeed the local community from which the firm derives its support services. Flowing from all this, it is claimed by the left, is the short- termism bred by Anglo-Saxon stockmarkets and the takeover culture. It is quite possible to imagine free market economies in which private firms do not operate in this way. In fact, Germany is one such example - a genuinely free market economy, but paradoxically one which requires directors on supervisory boards to represent all the interest groups that come together in a firm, not just the shareholders. The absence of any significant influence from the outside capital markets is said to have encouraged a long-term approach to investment decisions, employment practices, and customer relations. Many in the Labour Party want to see the next government take legislative action designed to import the German system of corporate governance into the UK.
So far, Gordon Brown has been very cautious about making specific commitments in this area, and yesterday Tony Blair went out of his way to rule out any change in corporate legislation. This caution is amply justified. For one thing, the two industrial economies that are built most conspicuously on the stakeholder concept of corporate control, Germany and Japan, are probably the two countries facing the most severe economic difficulties at the moment. This is mainly because both economies are plagued by overvalued currencies, which have nothing to do with the stakeholder system - but it is difficult to make a convincing political case for copying either of them just now. More important, any attempt by the Labour Party to change the statutory rights of shareholders, or to sanction the appearance of workers on company boards, would instantly play into the hands of Michael Heseltine, and justify his remarks about restoring power to the unions. Whatever the merits of the case, which are dubious anyway, it is not worth taking this considerable electoral risk - the avoidance of egregious error is probably all that is now needed to ensure a Labour election win.
There may, however, be some aspects of corporate reform which are safe ground for New Labour. It is important to distinguish sharply between measures which would trespass on the ownership rights of shareholders, which would be political death, and measures which encourage the representatives of shareholders, whether company managers or investing institutions, to display more long-termist behaviour. Mr Blair may have had this latter category in mind when he said that companies should no longer be bought and sold like commodities - a reference to Labour's plans to introduce a "public interest" criterion into the takeover code. Restricting hostile takeovers, and encouraging long-term shareholding through the tax system, are likely to be politically acceptable ways to encourage a stakeholder mentality in industry.
This leaves us with a further problematic interpretation of the stakeholder concept - that related to the welfare state. No sooner had Mr Blair sat down in the Far East than maverick Labour MP Frank Field was claiming the speech heralded a root and branch reform of pensions and benefits. It is certainly true that the present welfare system does not protect workers from summary restriction of pension and unemployment insurance "rights" which they believed the state had bestowed. While it is unthinkable in a free society for the state to rescind individual property rights - indeed they are so deeply-rooted that they have often re-emerged in eastern Europe after 50 years of communism - the same is not true of the communal pension and benefit rights bestowed under a democratic welfare state.
One way of remedying this problem is to require individuals to build up their own "provident accounts" on the Singapore model of forced savings. These can be used for unemployment insurance, education, pensions and even housing. Since they are individually assigned accounts, and fully funded by supporting investments, they cannot be lightly cancelled by the state, and would certainly be compatible with a stakeholder economy. But would a generation which is already heavily taxed to pay for the unfunded pensions of its parents now vote for a second dose of forced savings to pay for their own pensions as well? It seems rather doubtful, to put it mildly. This may be another area where New Labour needs to proceed cautiously as it puts meat on the bones of the stakeholder idea.
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