With the end of the military and ideological confrontation of the Cold War, people have come to notice that state vs. market is not the only important dimension along which national economic systems differ: it was not central planning that differentiated the capitalist systems of Germany and Japan from those of Britain and America. But from the beginning of the ‘types of capitalism’ debates of the 1990s, there was one implicit question: as open national economies merge into a single world economic system, how far will the global diffusion of the Anglo-Saxon form of capitalism go? Will there still be room for rather different forms of capitalism to survive in countries like Japan and Germany?footnote¹

We tend now to forget that Anglo-Saxon capitalism has not always assumed its current thorough-going, neo-liberal form. A quarter of a century ago, most people in Britain accepted ‘mixed economy’ as a reasonable characterization of the world they lived in, and as on the whole a sensible set of arrangements: it was not only a question of a mixture of public ownership (in coal and steel as well as in utilities) and private industry. ‘Mixed economy’ also acknowledged that people worked for a mixture of motives, some more for personal profit, some more for public service. It seemed much in keeping with the spirit of the mid 1970s for the Social Science Research Council,footnote² as it then was, to set up a panel to produce a report on the Social Responsibility of Industry, and for the report to assume that those who managed corporations should also have mixed motives, mixed objectives, not just that of profit maximization. They should acknowledge that they had obligations not only to their shareholders, but also to those who would later become known as their stakeholders. There was a flurry of interest—another approach to dethroning the bottom line—in the idea of reworking the national accounts to produce a calculation of Net National Welfare whereby policing, pollution control and prisons would count as disvalues and carry a negative sign, not a positive one as in the calculation of GDP.footnote³

One other personal memory symbolizes the assumptions of the time—Richard Titmuss, arguing in the LSE Academic Board that university teachers should not be paid supplementary fees for acting as examiners. They were paid a decent salary to do a job, and had a duty to do all that the job required. He lost the argument. The consensus was that people do, indeed, work for a mixture of motives; that for academics—as for others in the public service—duty, public spirit, a sense of responsibility to students and to the discipline, together with the enthusiasm generated by intellectual curiosity and the competition for renown, ought to be the overwhelmingly dominant motivators. But a little extra cash can also help to carry one through the more boring parts of the job.

The shift in that pragmatic consensus over the last twenty years has been remarkable. From the notion of a little bit of extra cash as a useful, marginal incentive, to the belief that cash, and the fear of being deprived of it, are the only reliable means of stopping people (in the economists’ jargon) from shirking—becoming lazy time-servers. Both the main British parties now share the belief that only competition for private profits can bring a reliable train service, cheap electricity, safe nuclear fuel or ‘efficient’ prisons. Performance-related pay has been enforced throughout the public service. The academic marketplace grows ever more like an auction for prize bulls. And in industry, there is ever heavier reliance on stock-options, rather than a fixed salary, as the form of executive remuneration.

The popularity of stock-options for directors and senior executives has a double significance. Not only does it reflect the dominant view about why people work rather than shirk, it also serves to align the private interest of the manager agent with that of his shareholder principal, and so reinforces the shift to shareholder-sovereignty in business philosophies that has been going on over the last twenty years. The talk about the social responsibility of corporations—so-called stakeholder theories, popular in business schools twenty years ago—has all but disappeared from such institutions. And the economists have proffered their legitimating blessings. I recall George Akerlof devoting an LSE public lecture to explaining—indeed, proving with algebra—that if what you wanted was to do good, you would get more good done the Rockefeller way, by single-minded maximization and donating your superior profits to charity, than by diluting your profit drive in order to be nice to your employees or suppliers. There is no need for such exhortations today, for that has become the dominating consensus: maximizing shareholder-value is exactly what management should be about. While every consulting firm has its own definition of shareholder-value, and its own pet formula for calculating it, almost everyone agrees that it is the dominant, touchstone objective. Treating your employees, your customers or your suppliers decently is fine, provided it can be shown—and only if it can be shown—to count on the bottom line, to increase earnings or raise the share-price.

Anglo-Saxon capitalism itself, then, is an evolving set of institutions, not a constant; and it has evolved into something rather different today from what it was twenty years ago.footnote⁴ As for the source of these changes, it has become fashionable, in the last five years, to attribute almost everything that happens to the processes of globalization. It is true that globalization had something to do with it. The growth of international trade and investment made it administratively almost impossible to maintain foreign-exchange controls, and this not only greatly narrowed the scope for nation-state economic policy-making, but also had other reverberating consequences—among them, the growing dominance of American financial institutions in world financial markets. It was mostly Frenchmen who were advising Elf Aquitaine and Total in their takeover battle, and Germans advising Mannesmann, but they were doing so as employees of American investment banks, working to American methods and criteria. To organizational dominance is added American cultural hegemony, nowhere more apparent than in the economics profession, as the hot topics—principal-agent theory, for instance—of Chicago and Berkeley become the hot topics of Milan, Osaka or Madrid. At the political level, too, it is manifest in the way that institutional practices spread from the United States to Britain, Europe and Japan—whether it be the liberalization of stockbroking fees or the introduction of working families’ tax credit.

But these aspects of globalization are far from the whole story. It was not because Englishmen were going abroad for their mortgages in droves that control over building society interest rates was abolished in Britain in the 1980s—with the result that, as we have recently seen, raising interest rates across the board (and thereby increasing the financing and exporting problems of manufacturers) came to be the only way of cooling off the housing market. That bit of deregulation happened because the Thatcher government had a strong belief in the sovereign virtues of competition. Demutualization of building societies and the unlocking of shareholder-value naturally followed. And so with many of the other changes that have contributed to making the stock-market ever more central to the British economy, and shareholder-value the central concern of management. They have precious little to do with the constraints of globalization and a lot to do with shifts in ideology, and with the expression of ideology in economic policies. The growth of private savings, with the cutback in basic pensions and the withering away of SERPS, had to do with the Thatcher government’s belief that the welfare state was a vicious breeder of dependency. The movement of private savings from fixed-interest vehicles to equity (encouraged by tax concessions—the Personal Equity Plans, now revamped as Individual Savings Accounts) had to do with that government’s faith in the stock-market as the most efficient means of allocating capital and improving national competitiveness. Similarly, globalization had little effect on the shift of corporate pensions from defined-benefit to what are euphemistically called ‘defined-contribution’ (i.e., undefined-benefit) forms, and the increased investment of pension funds in equities. Behind all these ideological shifts, of course, there lay structural power-shifts, too. The decline of trade unions was one element of this, as it was of the whole process of reinforcing the sovereignty of shareholders at other stakeholders’ expense.