Over-arching concepts, like the stakeholder economy, have their value both in determining the ground upon which political debate takes place and broadening the basis of support for the party which successfully employs them. There is considerable electoral virtue in a concept open to disparate interpretations and satisfying a variety of political tastes. Harold Wilson’s ‘big idea’ of a New Britain forged in the ‘white heat of the technological revolution’ proved effective in these respects. It was not only sufficiently nebulous to be embraced by the technocratic Right and the pro-planning, public-ownership-supporting Left, but also, in capturing something of the spirit of the 1960s, it served to rally a significant swathe of the aspirant middle and working classes to the cause of Labour. Similarly the ‘stakeholder economy’, since Tony Blair’s Singapore speech, has shown its worth as a portmanteau term which can hold a rich diversity of ideological baggage.
Yet, whatever the flexibility and consequent electoral attractiveness which
In fact, rather than welcome the interpretative creativity of such writers, the leader and his spin-doctors backed away from the choppy waters of specifics to the electorally safer waters of the general. For example, in a post-Singapore interview with David Frost, Blair stressed that ‘the stakeholder economy’ was, essentially, ‘a unifying theme or slogan’; ‘an umbrella concept, under which a multitude of more specific policy initiatives will comfortably sit’.footnote3 But what are those initiatives to be? What is their substance and coherence? What economic policies are Labour likely to marshall under the banner of the stakeholder idea? Here it is better to ponder neither the imaginative attempts of those who have sought to give it radical content nor the sound-bites of the leader and his pr entourage who, for the moment, seek to ensure that the ineffable remains so. Rather, it is more useful to consider the economic literature which the Party has produced in recent years, to try to distil from it the substance of what New Labour is likely to offer—whatever preor post-election label they may use. If the truth of Labour’s stakeholder economy is out there, then this literature is surely where it may be found.
In reviewing that literature, what becomes immediately apparent is that, since the late 1980s, the Labour Party has advanced a supply-side socialism which aims to increase the flow, enhance the quality and improve the use of factor inputs; the primary objective being to increase productive efficiency, reduce unit costs and, crucially, enhance Britain’s international competitiveness. A unilateralist Keynesianism, it was believed, could no longer deliver in terms of full employment or sustained economic growth and could not, therefore, furnish a basis for the social-democratic project; the failure of the expansionary strategy pursued by the French Socialists in the 1980s under Mitterrand made that all too clear. This did not obviate the need for macroeconomic management but it did mean that such management would achieve its objectives only on the basis of two preconditions. First, there must be a substantial improvement in Britain’s international competitiveness and a rejuvenation of her industrial base to curb the increasing inflow of high-value manufactured imports. Second, macroeconomic management policies had to be coordinated at either a European or a g7 level. Specifically, as it was put in the Labour Party’s Rebuilding the Economy, ‘The only way in which recovery can be sustained without inflation accelerating is if an internationally coordinated expansion of demand is combined with supply-side policies to boost investment in industry skills and infrastructure’. There was a need, in effect, for ‘an interaction between supply-side policies and [internationally coordinated] demand management’.footnote4
It is, then, upon the rejuvenation of the supply-side, and the honing of Britain’s competitive edge that the overriding emphasis has been placed in the Party literature of the last decade.footnote5 As one pamphlet put it, while demand management might have its part to play, ‘the best way to cut unemployment and create jobs that last is to modernize our economy and build competitive industries that can succeed all round the world.’ ‘Export-led growth [was] the only guarantee of sustainable growth.’ It was necessary to face the fact that, as the 1992 Manifesto phrased it, ‘Britain [was] in a race for economic survival and success. Faced with intense competition, companies and countries can succeed only by constantly improving their performance’ and that meant more ‘cost-effective production, continuous product and process innovation, the flexibility of a highly skilled workforce and the ability to translate the achievements of modern science into commercially viable projects.’ Only thus could the objective of ‘a prosperous manufacturing sector producing high profits for investment’ be secured and ‘more industrial companies [restored] to the front rank of innovation, productivity and profit’; things which were regarded by Labour as fundamental prerequisites for permanent, well-remunerated employment and thence for a sustained rise in living standards.footnote6
To this end, a number of things became important. To begin with, and fundamentally, the level of investment in the British economy had to be raised and its nature altered. Thus it was recognized that in the early 1990s Britain was investing less of its gdp in manufacturing than all but two of the twenty-four oecd nations. Further, it apparent that while for most oecd countries r&d investment (total and industrial) was higher in the 1980s than the 1970s, for Britain the opposite was the case. There was also the problem of short-termism with respect to the investment which did take place; with emphasis placed by investors on quick gains, rather than the long-term expansion and underlying strength of companies.
To remedy this state of affairs Labour, in the late 1980s and early 1990s, proposed a number of measures, some fiscal and some institutional. As regards raising the level of investment, the Party advocated a substantial improvement in tax allowances for investment in new technology, innovation, product design and product development. On the institutional side, it identified the need for regional investment banks; financial intermediaries with local knowledge of investment opportunities which would, among other things, serve as an antidote to the concentration of financial expertise and decision-making in London. In addition, to facilitate investment in smaller businesses, it proposed the creation of a Business Development Bank.