The State to Come

Citation

Payne, J. (1998), "The State to Come", International Journal of Manpower, Vol. 19 No. 3, pp. 200-202. https://doi.org/10.1108/ijm.1998.19.3.200.3

Timed to coincide with the 1997 UK general election, Will Hutton’s follow‐up to the pathbreaking The State We’re In, is likely to be widely read. In particular, it will appeal to anyone interested in the formation of a radical social democratic project at the end of the millennium. Readers familiar with Hutton’s earlier work should not expect any great surprises here however. Hutton seeks, primarily, to respond to criticism, misrepresentation, even “bastardization” of the arguments set out previously while adding more flesh to old stakeholder bones. Thus, he reiterates that stakeholding never meant transplanting the German social model to UK soil or reinventing failed UK neo‐corporatism.

Chapter 1 challenges what Hutton sees as Tory myths about the alleged Thatcherite economic miracle. What emerges is a more realistic picture of a UK capitalism suffering long‐term relative economic decline caused by sustained under‐investment. From the womb of Thatcherite free‐market ideology, we are told, sprung a socially fragmented, unequal and ghettoised society inimical to efficiency and long‐term economic renewal and held together by an increasingly authoritarian state prepared to trespass on the liberties of the free‐born Englishman. Chapter 2 then goes back to basics and engages with neo‐classical economics, the essential theoretical underpinning of the New Right, interrogating the self‐regulating properties of free markets.

Chapter 3 treads familiar ground outlining the weakness of UK shareholder capitalism. Attention is drawn once again to the UK’s dysfunctional financial system that undermines long‐term investment by founding it on a low trust, low commitment ownership base. Hutton also paints a familiar picture of UK industry hamstrung by a banking sector that offers only short‐term high‐risk loans thereby causing substantial under‐borrowing. Hutton outlines a set of practical stakeholder reforms, some old, some new, involving taxation, the position of banks in insolvency proceedings and the establishment of a Council of Institutional Investors, that together could facilitate long‐term business planning and restructuring by encouraging trust and commitment between shareholders and the firms in which they invest. There is an insistence on the need for active state intervention to tackle unemployment, a comprehensive welfare state and education system to guarantee social inclusion. Hutton persuasively puts the case for wholesale constitutional and electoral reform insisting on the inseparability of stakeholder politics and economics: a modernized, inclusive and democratic state as the only sure foundation of an inclusive and reinvigorated UK capitalism.

The most interesting section of the book is where Hutton challenges advocates of globalization. His concern is to respond primarily to the Conservative Right who argue that the global economy and competition compels the nation state to bow to transnational capital and deregulate the internal labour market in order to suck in job‐creating foreign investment. Hutton contends that the power of the multinational company to dictate terms to the nation state is exaggerated, that the relationship is better conceived as a symbiosis with the global firm also dependent on state patronage. He accepts, also, that the era of “Keynesianism in one country” is over. The old‐fashioned Keynesian economic boost of low interest rates and increased government borrowing to sustain full employment is no longer an option (if it ever was) sucking in imports from abroad and courting the ferocity of world capital markets that leads ultimately to currency crisis and policy reversal. But, even here, the constraints are exaggerated and there remains considerable leeway for the nation state to “initiate partnerships, regulate activity, cut deals, fix tax rates and spending levels”(p. 60).

In a subtle twist of the argument in chapter 4, Hutton raises the stakes again. Here, he argues that by buying into Europe and the single currency UK enlarges its choices and scope to initiate stakeholder reforms creating a united front in support of a European social model he clearly favours. But more than that it breaks open the iron cage at the level of the nation state, within which Keynesianism has been bound since the 1970s, and opens up a path to a new Euro‐Keynesianism. He suggests that the “euro”, backed by a trade surplus and an economy with below optimum output levels, would be a hard currency and the precursor of a millennial boom, no less, that could ease the financial pressures to attack existing structures of state welfare as well as expand the power and autonomy of the nation state vis‐à‐vis both the multinational firm and world capital markets. Moreover, a second long boom in post‐war capitalism would permit the “euro” to breathe new life into pan‐European institutions capable of using Keynesian principles to manage the whole of Europe as single economy with a stimulatory bias.

But there are problems. First, Hutton’s stakeholder society may not be a transplantation of German capitalism to domestic soil, as Hutton insists, but he himself is keen to draw the similarities such that the latter remains a parallel form at least. Consequently, the strains exhibited by German capitalism will continue to undermine faith in his vision. Moreover, in so far as Hutton contends that the present crisis is not intrinsic to the model itself but derives from extraneous factors such as German unification and an over‐valued mark, the treatment is far too cursory to be convincing and remains little more than an assertion. This is precisely one of those key areas where Hutton needed to beef up stakeholderism. Second, the same can be said of Hutton’s over‐optimistic economic assessment of the impact of the single currency. Hutton himself acknowledges that this is a leap of faith and that there is a danger that Europe locks itself into a an inflexible financial straitjacket that merely perpetuates excessive deflation ‐ the nightmare scenario he wishes to avoid. Third, to his credit, Hutton is aware of the obstacles that such a radical project to reform UK capitalism would encounter from vested interests including the City, the Treasury, foreign UK‐based multinationals, world capital markets, and a domestic capitalist class steeped in free market anti‐statist liberalism. He calls on the reforming government in specific instances to hold its nerve and impose sanctions on those who subvert policy initiatives. His infectious “optimism of the will” is a riposte to the pervasive “pessimism of the intellect”, the no‐choices can‐do‐nothing school. But if there are constraints to a radical stakeholder programme it is the sum total of such constraints and the whole nexus of vested interests in the UK today that appears so threatening; a fact that New Labour seems to have grasped more effectively than Hutton. Hutton’s belief that Labour’s electoral programme will include important triggers, such as regional and national devolution, that can have powerful multiplier effects and act as shunts in a stakeholder direction, may again reflect Hutton’s own species of optimism. A more realistic assessment is that the UK under a cautious Blair will just carry on muddling through employing the rhetoric of the stakeholder society where it suits but divesting it of the genuinely radical content which its author intended it to have.