Capital & Class

http://cnc.sagepub.com/ Stakeholder Economy? From utility privatisation to New Labour

Julie Froud, Colin Haslam, Sukhdev Johal, Jean Shaoul and Karel Williams Capital & Class 1996 20: 119 DOI: 10.1177/030981689606000106 The online version of this article can be found at: http://cnc.sagepub.com/content/20/3/119

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119

POLEMIC
Julie Froud, Colin Haslam, Sukhdev Johal, Jean Shaoul and Karel Williams

Stakeholder Economy?
From utility privatisation to New Labour
The economics of the centre and centre left today should be Tony Blair, Speech to the Singapore Business geared to the creation of a Stakeholder Economy which involves all Community, 1996b: 3 our people, not a privileged few or even a better off 30 or 40 or 50 per cent. If we fail in that, we waste talent, squeeze potential wealth creating ability and deny the basis of trust upon which a cohesive society One Nation (sic) is built. If people feel they have no stake in society, they feel little responsibility towards it and little or no incentive to work for its success . The creation of an economy where we are inventing and producing goods and services of quality needs the engagement of the whole country (in) a Stakeholder Economy in which opportunity is available to all, advancement through merit and from which no group or class is set apart or excluded. Will Hutton, The State Society is dividing up before our eyes, opening up new social Were in, 1995: 106 ssures in the working population. The rst 30 per cent are the disadvantaged (because) some 28 per cent of the adult working population are either unemployed or economically inactive . The second 30 per cent are made up of the marginalised and insecure (because) people in this category work at jobs that are insecure, poorly protected and carry few benets . The last category is that of the privilegedthe just over 40 per cent whose market power has increased since 1979 . The fact that more than half the people in Britain who are eligible to work are living either on poverty incomes or in conditions of permanent stress and insecurity has had dreadful effects on the wider society.

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Capital & Class #60

Introduction All politics is dened by the tension between is and ought which provides the motive for action. If we consider the recent centre left discussion of the stakeholder economy, the tension is nicely epitomised by the contrasting quotes from the two public gures, Tony Blair and Will Hutton, whose speeches and journalism have done most to popularise the concept. The promoters of the stakeholder concept aim for a future of economic success which includes everybody as stakeholder, while they dene our present social failure as the exclusion of too many through the labour market. The gap between the visionary future of universal inclusion and the painful present of real exclusion can be presented as an index of noble aspiration. But in our view it is more accurately an index of ineffectuality because there is not and cannot be a plan for getting from exclusion to inclusion when the vision rests on a political fantasy about general benefits for all stakeholders and their economic analysis does not confront the structural reality of redistributive conflict between stakeholders. In this article we make these points through case study of a rather different tension or gap in centre right politics between the ex ante 1980s promises about the benets of utility privatization and the ex post 1990s reality of redistributive conict. The utility case is relevant to Blair and Hutton in two ways. First, at the visionary level, the rights 1980s privatization project is framed through a political rhetoric that recurs in the centre left 1990s discussion of stakeholding which envisages general benefits for all stakeholders in a win win scenario. Second, at the level of practical analysis, utility privatization illustrates redistributive conict where the gains of one stakeholder are at the expense of another. Thus, the privatization case can provide the basis for a critique of stakeholding because it brings out the extent to which this is the left appropriating the rhetorical forms of the right and evading structural realities in a way which frustrates a credible centre left politics. The case itself is discussed in two sections whose organisation is relatively straightforward. The rst section analyses the White and Green Papers on privatization and shows how unrealistic ex ante expectations of benets for all stakeholders were sustained by a rhetoric of emancipation. Specically, this section analyses how stakeholders were dened as beneciaries against a background of assumptions and assertions about efficiency gains through the transforming power of management. The second section uses company report and accounts for individual companies and utility plcs to analyse ex-post outcomes. It identifies the linkages between labour, product and capital markets which establish competing claims and structural limits; utilities which operated in limited product markets could only meet the extra claims of new shareholder stakeholders through the capital market by redistribution at the expense of existing employee and supplier stakeholders. The third and nal section draws out the implications of the case for a New Labour politics which shares the illusions of the right. The utilities case may not be representative but is instructive: stakeholder conflict is inevitable wherever revenue and output are not growing, while further redistribution at the expense of the workforce will only intensify a general deterioration in the composition of employment.

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The rhetoric of emancipation: stakeholder benets, management and efficiency gains

Thus, the question who will benet was raised explicitly in the case of electricity and water where the White Papers formally recognised the trinity of customers, employees and the national economy:
a modern, competitive (electricity) industry will be created, widely owned by the public, and more responsive to the needs of customers and employers There are real benets in prospect for the customer, employee and the economy (Cm 322, 1988: 16). the government believes that the privatization of the water authorities will benet their customers and employees, and indeed, the nation as a whole (Cmnd 9734, 1986: 1)

EACH UTILITY PRIVATIZATION was prepared and justied in Green and White Papers: these include White Papers on telecomms in 1982 (Cmnd 8610), buses in 1984 (Cmnd 9300), water in 1986 (Cmnd 9734) and electricity in 1988 (Cm 322). They were all short, flimsy documents which are now largely forgotten or discredited documents. But, these texts are worth rereading because these right wing White Papers of the 1980s all use the same rhetoric to dene a eld of the visible which recurs in 1990s centre left discussion of stakeholding: in both cases the stakeholder is dened as a beneciary (not a claimant) in a discourse whose strong assumptions about efficiency through management sustain a rhetoric of emancipation and suppress real problems about reconciling the claims of different stakeholders. It may be useful to begin by proposing our own simple accounting denition of a stakeholder as one who makes some claim on the distribution of the sales revenue which is provided by purchasers; if the identity of the purchaser is mutable because the purchaser can be an individual consumer, a private rm or the state, the list of corporate stakeholders is fixed and definite because it will include suppliers and workforce as well as, in the case of a for prot PLC, rentier shareholders. From this common sense point of view, privatization involves the extension of an existing form of ownership which adds extra claims on the individual firms income by a new class of stakeholder, the private shareholder. But all of this was suppressed by semiotics in White and Green papers on privatization which excluded outside shareholders from the list of stakeholders and focused more generally on benets rather than claims.

Curiously, the list of stakeholder/beneficiaries excluded outside shareholders who were beyond the eld of the visible. The White Papers did include obligatory general references to the benefits of wider share ownership and made specic claims about the benets of employee shareholding. In the case of water, the argument was that shareholding would give employees a stake in the business and enhance their effort and contribution as much as their reward:
Employees will benefit from employee shareholdings, closer identification with their businesses, greater job satisfaction, better motivation and the prospect of the rewards that enterprise has brought to those that work for other industries that have been privatized (Cmnd 9734, 1986: 2).

But, when shareholder claims were otherwise invisible, it was perhaps not surprising that there was no serious discussion of the

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possibility of stakeholder conflict over the distribution of limited income. The prospect of such conict was further displaced by the strong imagery which represented privatization as the emancipation of utility management from government interference: after privatization, management would respond creatively to the discipline and incentives of product market competition which would encourage the utilities to identify and meet consumer needs. The assertion was that, under public ownership, there had been constant interference with the management of the public utilities. In electricity, for example:
the Government of the day has wide ranging powers to interfere in the running of the industry. The government appoints the members of all the boards that run the industry. All capital expenditure plans have to be approved by the Government which also determines the industrys total borrowing limit. While attempts have been made to set a clear framework in which these controls have been exercised, the management of the industry does not have the freedom to manage in the same way as in the private sector (Cm 322, 1988: 5, Cmnd 9734, 1986: 1 on water; and Hansard, 7 May 1985, c.645 on gas).

Capital & Class #60

From this point of view, the privatization programme was generally represented as a rebalancing of interests against the producer and towards the consumer; in electricity, for example, greater competition will create downward pressure on costs and prices, and ensure that the customer, not the producer or distributor comes rst (Cm 322, 1988: 16). The preoccupation with control mechanisms was reflected in the White Paper proposals for de-regulation and re-regulation which would introduce or mimic the effects of product market competition. In buses, the introduction of competition via deregulation was just the ticket; when the dead hand of restrictive regulation had been removed, local monopolists would not be able to charge their inefficiency and substantially higher costs to the consumer (Cmnd 9300, 1984: 59). Elsewhere, because privatization involved the creation of privately owned regional or national monopolies, a discriminating reregulation would be necessary; in electricity, for example, regulation should be designed to promote competition, oversee prices, and protect the customers interests in areas where natural monopoly remain. The explicit logic of this position was regulation via price control which simulated the effects of competition; in electricity the regulatory system will be designed to provide each company in the industry with incentives to operate more efficiently and to ensure that the benets are shared with consumers (Cm 322, 1988: 13). The rationality of a privatization project which would make the world more like economic theory was determined within this system of rhetorical identifications without much by way of empirical corroboration. All of the White Papers asserted or assumed substantial inefficiency, but only one of them (on buses) made any attempt to measure the extent of inefficiency and thereby demonstrate ex ante that meaningful savings could be

It was then claimed that private ownership could emancipate and create incentives for management if government interference was replaced by the private sector mechanism of control by consumers through the product market. In telecomms, for example:
we want industrial and commercial decisions to be determined by the market and not by the state. We believe that consumer choice and the disciplines of the market lead to more stable prices, improved efficiency and a higher quality of service (Cmnd 8610, 1982: 1; see also Cmnd 9734: 1 on water; and Hansard, 7 May 1985, c.637 on gas).

Stakeholder Economy?
realised. The results here were inconclusive in an apples and pears way: public sector bus companies had 30-40% higher costs than private operators but they also provided a different set of services. The empirics of buses only complicated matters because they raised the awkward point that the industrys internal costs were mainly labour; in this case, surely efficiency savings could only be achieved at the expense of wages and employment? In the White Papers on buses and telecomms, this possibility was closed off immediately with the bland assertion that in both cases there was a

123
latent demand for more and better services which the privatized companies could protably meet; in buses it was even envisaged that the long twenty year decline in number of passengers would be reversed so that more people would travel (Cmnd 9300, 1984, para. 1.5). In electricity, privatization was positively represented as wider career opportunities for employees (Cm 322, 1988: 15). The rhetorical implication was that all activities were essentially the same, in that they were equally open to a win-win process of transformation from which no stakeholder would lose.

Structural Realities: redistribution from suppliers and workers to consumers and shareholders
purchases and labour cost have been deducted from sales revenue and paid to outside suppliers and the internal workforce. Different activities generate variable amounts of cash because they have different purchase/sales ratios and different labour shares of value added which is simply sales minus purchases. From this point of view, the important point is that the utilities were suitable cases for privatization, in a way that welfare services were not, because the utilities generated a cash surplus from which shareholder claims could be met. Public sector activities like tertiary education and hospitals have been run to breakeven so that they are weakly cash generative: labours share of value added runs around 85 per cent so that wages effectively absorb everything left over after the purchases have been paid for. By way of contrast, as Table 1 shows, water and telecomms were highly cash generative because they uniquely combined a low purchase/sales ratio of around 30 per cent with a low labour share of value added below 50 per cent; the result was more than 25p cash per of sales. The rest of the high

I F THE UTILITIES CASE is intellectually interesting because the White Papers construct a rhetoric about the benefits of stakeholding, the case is also practically important because post-privatization experience provides a uniquely simplified case of competing claims, conflict and redistribution. The simplication arises from product market and labour process characteristics: the utilities generally operate in non cyclical product markets where they sell commodities produced by technologies which are relatively slow to change. Under these conditions, the case highlights the linkages between capital, product and labour market. As the claims of shareholders are added, they can only be met by redistribution from other stakeholders. In understanding the structural realities about competing claims, we can begin by analysing the specics of different activities in a general accounting framework which emphasises cash generation and its determinants (Williams et al. 1994, 1995). At the level of the company or the sector, cash is a surplus which remains as a residual after

124 Table 1. Differences in cash generation

Activity Purchases to Sales ratio

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Labours share Cash per of of Value Added Sales Revenue

High cash generation Middling cash generation Low cash generation No cash generation

Water BT Gas Buses Electricity generation Electricity distribution Tertiary education Hospital trusts

25% 33% 70% 25% 75% 80% 20% 25%

30% 60% 50% 65100% 35% 50% 85% 85%

greater than 25p per 1525p per less than 15p per

Source: Report and Accounts. In privatized utilities for rst year after privatization.

prole energy utilities were in the middling or low categories because they all suffered from a purchase/sales ratio which was 66 per cent or higher; the result was more modest percolation of cash at a rate between 5 and 25p in the pound. Wherever the basic precondition of cash surplus was satised, privatization could go ahead with the new shareholders claims accommodated by adjusting the amount of issued capital in line with the activitys capacity to generate cash from current operations. Society paid the price because, as assets were transferred from public to private ownership, the selling price was effectively determined by their operating capacity to generate surplus cash from which shares could be serviced. What the assets had cost historically, or would cost to replace, was irrelevant and public assets were often sold off at a fraction of historic or current replacement cost. If the public lost and the new shareholder owners gained at point of sale, further stakeholder conict could have been anticipated. In the longer term, the claims of the capital market would be a problem because the British stock market expects increases in dividend distribution to shareholders.

However, the utilities generally operated in mature commodity markets where demand was non cyclical and stable but very slow growing: in typical cases, such as gas and electricity, the physical volume of sales has increased by no more than 10-15 per cent over the last decade. In cases like telecomms, where BT has maintained its share of a growing market, an increased volume of business brings few benefits because the regulator restrains prices. Table 2 summarizes the complex evidence on trends in real sales revenue and value added (revenue minus purchases) in the different utilities. The power utilities (British Gas, PowerGen, National Power and the RECs) combine increases in value added with weak or negative real sales growth: in gas and electricity supply, the strategy was to reduce the purchase/sales ratio and stretch value added by squeezing suppliers prices, passing misery down the supply chain and incidentally putting the miners out of a job. Only two utilities, water and BT, show a positive increase in real sales. In the case of water this is no benefit to the water companies because it reflects the influence of the K factor which was set to allow the industry to finance investment in clean up:

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125

Table 2. Growth in real sales and value added since privatization in various utilities
Real sales Post-privatization Average Total % annual % change growth Real value added Post-privatization Average Total % annual % change growth

Years

British Gas BT 10 Water Companies Buses National Power/Power Gen 12 Regional Electricity Cos.

198694 198495 199092 198993 199094 199094

-13.5 23.3 28.9 -4.0 -12.0 5.7

Note:

-1.4 1.9 7.2 -0.8 -3.0 1.4

19.0 14.7 n/a n/a 27.0 26.2

1.9 1.2 n/a n/a 6.8 6.6

Source: Annual Report and Accounts, various years.

Buses includes GRT, Stagecoach and Badgerline.

in water, the increase in sales revenue goes largely into the pockets of contractors and equipment suppliers who are upgrading the infrastructure. In the case of telecomms, where demand was growing strongly, all the increase is in the first 3 years after 1984 before the regulator insisted on price cuts which spoilt cost recovery. When all these qualifications have been entered, the overall conclusion is simple: since 1987, all of the utilities have flat or declining real sales. The contradiction between the claims of the capital market and the limits of the product market could only be met by redistribution to shareholders from other classes of stakeholder. In this case, the work of utility management is not to delight consumers through product market innovation but to satisfy shareholders on the capital market through cost reduction which strips out labour and purchase costs; and, wherever labour costs must be reduced, management becomes the mechanical relay between the capital market and the dole queue. To understand how this redistribution played in different sectors, we must turn to activity specifics and the variability in labour and purchase costs, as well as the balance of power between purchasers and suppliers: it is

the larger cost categories which are most likely to be targeted for reduction, just as it is the weaker claimants who will be squeezed. We can illustrate these points by presenting some company cases which show different patterns of redistribution from employees and suppliers to shareholders and consumers. British Gas, like the Regional Electricity Companies, has a high purchase/sales ratio because it distributes and retails somebody elses product; after privatization all these companies had purchase to sales ratios of 70 per cent or more. British Gas was particularly unfortunate because it was under more acute pressure from its regulator to reduce prices so that real sales cost per Kwh declined by 23 per cent between 1986 and 1994. Relief was provided by squeezing suppliers even harder. As Table 3 shows, real purchase cost per KwH fell by 35 per cent so that suppliers not only met the regulators requirement for lower prices but also generated a surplus for distribution to shareholders. Table 3 shows that this surplus was levered up by sacking some 30,000 workers, one third of the workforce, so that dividends could increase almost four fold. Table 3 also shows that two thirds of the employment loss could have been avoided if the sum distributed as dividends

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Table 3. Redistribution at British Gas British Gas: Real Sales Cost and Real Purchase Trends
Real Sales Cost per KW/h (Pence) Real Purchase Cost per KW/h (Pence)

1986 1991 1994 Total 19861994

2.06 1.78 1.62 -23.0%

1.46 1.07 0.95 -35.0%

British Gas: Dividends and Employment

Dividends million Employment

1987 1991 1994 Total 19871994

166 437 631

89,700 79,400 59,400 30,300 +21,000

Employment increase if dividends were not paid

Source: Annual Report and Accounts, various years.

had been applied to pay wages at the average wage of 1994. British Telecomm is another company under pressure from its regulator. Over the period 1984 to 1995, real sales price per unit has fallen sharply because volumes of inland calls increased by 69 per cent but real total sales increased by only 12 per cent. Unlike the energy distributors and electricity generators, BT has a relatively low purchase to sales ratio of 37 per cent, so that the leverage obtained by squeezing suppliers is limited and any substantial cost reduction will have to be nanced by reducing numbers employed or the wages paid: most utilities in this position have chosen the low conflict option of targeting numbers employed through voluntary redundancy packages which pay off those with pension entitlements while distributing the benefits partly in the form of real wage increases for those who remained. Table 4 shows what happened at

BT whose suppliers did not escape because, as the table shows, purchase cost has declined roughly in line with real sales cost per call. But the modest share of purchases in value added means that the larger part of the reduction in cost per call, and the quadrupling of dividend payouts to more than 1 billion has been financed by a reduction in employment of some 42 per cent or nearly 100,000 on the original base of 235,000. Again, employment loss would have been much smaller if the sum distributed as dividends had been applied to pay wages at prevailing rates. If every utility tells a different story, in most of these stories stakeholder redistribution to shareholders from employees by sacking is a recurrent theme. In social accounting terms, this represents a redistribution of the value added fund from labour to capital because labours share falls as capitals rises in a process whose

Stakeholder Economy? Table 4. Redistribution at British Telecomm British Telecomm Index of Real Sales Cost and Real Purchase Trends
Real Sales Cost per Call Index

127

Real Purchase Cost per Call Index

1984 1990 1995 Total 19841995

100.0 85.0 64.0 -36.0%

100.0 86.0 70.0 -30.0%

British Telecomm: Dividends and Employment

Dividends million Employment

1984 1990 1995 Total 19841995

234 663 1108

235,200 245,700 137,500 97,700 +39,200

Employment increase if dividends were not paid

Source: Annual Report and Accounts, various years.

arithmetical logic is self evident. The utilities mostly show 10-15 per cent declines in labours share of value added; and, in these cases, half or more of the decline in labours share is generally taken out by a rise in dividends share of value added. The reductions in labours share have been generally obtained not by busting rates but by sacking workers so that the cash saved on wages can be distributed to shareholders. Under stock market pressure, the utilities have discovered redundancy, a peculiarly British form of investment which always pays back inside three years: the enhanced pension contributions or the lump sum pay off represent the up front cost equal in most cases to less than two or three years wages after which the savings from reduced labour expense are permanent. Table 5 summarises the redistributive changes from workers to shareholders in various utilities since the first year of

privatization and then adds the individual results together to produce a summary for Utilities PLC. To dramatise the point about capitals gains at labours expense, the table calculates how much more employment could have been sustained in the aggregate by Utilities PLC if the cash that was paid out as dividends had been retained and applied to sustain employment; using an average wage, as before in the individual companies, we calculate the number of employee equivalents which the dividend represents. In BT and National Power retention of dividend cash would not have maintained pre-privatization employment but in British Gas retention would have allowed employment maintenance while in the RECs and Water Companies the retention of dividend cash would have funded an increase in employment. As the Utilities PLC total indicates, in the aggregate the symmetry of redistribution is near perfect. Utilities PLC

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Table 5. Dividends versus employment in privatized utilities since rst year of operation
Dividends Employment paid t costs ( mill.) ( mill.) Numbers employed (000s) Numbers employed without dividends (000s) Numbers employed year after privatization (000s)

British Gas (1994) BT (1995) 10 Water Companies (1993) National Power/ Power Gen (1995) 12 Regional Electricity Companies (1994) TOTAL

631.0 1108.0 478.0 300.0 515.1 3032.0

1804.0 3882.0 1152.0 320.8 1513.6 8672.0

67.3 137.5 39.6 9.6 69.0 323.0

90.8 176.7 56.0 18.6 92.5 434.6

91.9 235.3 40.6 23.3 81.8 472.9

Source: Annual Report and Accounts, various years.

has sacked more than 30 per cent of its workforce, or some 150,000 workers, since privatization; 92 per cent or almost all of these lost jobs could have been sustained if the cash distributed as dividends had been applied instead to paying wages at the average rate prevailing inside the companies. The recent grumbling public protests about perks and proteering by the privatized utilities registers the gap between the ex ante rhetoric of emancipatory triumph and the ex post reality of redistribution. But, if politicians are reluctant to eschew the rhetoric of emancipation, social scientists who evaluate privatization have been equally reluctant to abandon the categories and concepts of the official pro privatization White Papers. Much of the evaluative literature has done little more than add an extra tincture of economics to the original preoccupations, so that the redistributive problem has never been adequately analysed. Economics influenced evaluation (like the regulatory regimes)

privileges some stakeholder interests rather than others, by focusing on benefits for consumers through lower prices while neglecting or ignoring the producer interest. It also adds orthodox measurements which do not clarify the issues, especially efficiency/ productivity measures expressed in terms of output per unit of input. Crucially, economic efficiency measures fail to distinguish between (a) sweating increases in productivity, obtained negatively by sackings, which make fewer labourers do the work so that some other stakeholder can benet and (b) transformational increases which result from product or process innovation which usually expands the market and thereby creates a basis for all stakeholders to derive a benet. Perhaps measures of the rate of exploitation would be more useful and, in their absence, what we can do in the next section is take up some of the issues around sweating and redistribution in the next section which turns to Blairs political economy.

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129

Policy implications for New Labour

The broad notion of a unied society with a strong sense of purpose and direction is really a matter of common sense. Working as a team is an effective way of working or playing a sport, or running an organisation. My point is that a successful country mst be run the same way. That cannot work unless everyone feels part of the team, trusts it and has a stake in its success and future.

Tony Blair, Speech to the Singapore Business Community, 1996b: 4-5.

Our strategy delivers real value for shareholders and customers with significant cost reductions and dramatic improvements in productivity. The groups operating efficiency continued to improve with a reduction of 18,500 people employed in the year, compared with a reduction of 14,700 in the previous year. Staff costs were reduced by 4.2 per cent as a result of savings from these reductions which more than offset pay increases.

Ed Wallis, Chief Executive, PowerGen 1995 Report: 5

British Telecomm 1995 Report: 12

THE QUOTES FROM TONY BLAIR and recent utility plc reports bring out the contrast between New Labours political vision of a successful country and the structurally determined realities of the business policy which builds successful companies. While New Labours leader dreams of a fantasy football team of all the talents, the utility managers are playing a different game where they get the winning result by dropping players. In this third and final section, we explore the mythological ramifications and policy implications of this contradiction. As a necessary preliminary, we begin by establishing the broader context around post privatization developments in the utilities. In terms of outcomes, the loss of utility employment since privatization contributes to a much broader and larger scale deterioration in the composition of

employment. Table 6 summarises the main trends since 1979 within a workforce whose overall size remains around 25 million. The most notable development is the large scale substitution of service for manufacturing employment. Since 1977, the number employed in manufacturing has been more or less halved, as 3.5 million manufacturing jobs have been lost while 3.2 million jobs have been gained in the service sector. This shift represents a deterioration in the composition of employment because, as the Employment Gazette demonstrates, earnings in services are generally 25 per cent lower than in manufacturing. As Table 6 also shows, the primary shift from manufacturing to service employment is associated with two other corollary shifts as the workforce is increasingly feminised and casualised. An overall loss of around 1.5 million male jobs is

130 Table 6. UK composition of employment 197795

Shift 1
Manufacturing Services Male

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Shift 2
Female

Shift 3
Full-time Part-time

1977 1995 loss/gain

7.2 3.8 -3.4

12.7 15.9 +3.2

11.1 9.5 -1.6

8.8 10.2 +1.4

16.4 13.9 -2.5

3.5 5.8 +2.3

Earnings in services are 25% lower than in manufacturing

Full-time females (manual Increase in number of part+ non-manual) in indus- time jobs offsets 92% of the trial and commercial loss in full-time jobs companies earn 68% of male earnings

Source: Labour Market Trends, various years; Department of Employment Gazette, 1992.

balanced by a similar gain in female jobs, while an overall loss of around 2.5 million full time jobs is balanced by a similar gain in part time jobs. These corollary developments intensify the deterioration in the composition of employment because part time and female jobs pay less. For example, if we consider all women (manual and non manual) in full time employment, their male counterparts in industrial and commercial companies earn nearly 50 per cent more. These overlapping shifts have undermined the basis of the post war settlement in two respects. First, they have removed the traditional factory work source of relatively well paid semi-skilled male employment so that an increasing number of men are marginalised or excluded from the workforce.

Second, and more broadly, an increasing number of both male and female manual workers who retain jobs are trapped in forms of employment where there is no realistic prospect of rising real incomes. Table 7 illustrates the gender specific aspect of the problem by comparing changes in the activity profiles of male and female workers. Total employment for males has declined by some 2 million since 1979, while female employment has increased. Increasing numbers of older males have been displaced into economic inactivity while their younger counterparts face unemployment or are forced into forms of self employment which they would not otherwise choose. The number of economically inactive men has increased by nearly 2 million since 1979; while the number

Table 7. UK trends in economic activity 197995

Employment * male female Self-employment * male female Unemployment * male female Econ/inactive * male female

1979 1995 loss/gain

13.3 11.3 -2.0

9.1 10.3 +1.2

1.4 2.5 +1.1

0.3 0.8 +0.5

0.8 1.6 +0.8

0.7 0.8 +0.1

4.2 6.0 +1.8

11.3 10.7 0.6

* Note: All totals in millions Source: Labour Market Trends.

Stakeholder Economy? Table 8. Average gross weekly earnings (excluding overtime) in 1995 prices
Manual employment Non-manual employment

131

Male full-time manufing female part-time services male full-time manufing female full-time services

1979 1995 gain %

293 313 +7.1

92 93 +1.4

352 449 +27.7

199 290 +45.9

Source: New Earnings Survey.

of economically inactive women has actually declined over that period. The increase in self employment and in unemployment since 1979 accounts for a further 2 million male workers; while the number of women in these categories has increased by not much more than half a million. If women have done better than men in claiming jobs, the trend of female manual earnings in the rapidly expanding part time service sector is as discouraging as that of full time male manufacturing workers who are caught in a declining sector. As Table 8 shows, real wages for both groups have stagnated for nearly twenty years because the bargaining position of male factory workers has been undermined by deindustrialization, which brings an oversupply that remains the normal condition for part time women service workers despite the expansion in their form of employment. Some workers have done very much better because Table 8 also shows that non manuals, male and female, have over the same period enjoyed substantial real wage increases in the same activities. Specically, non manual male manufacturing workers have a 28 per cent rise in real earnings; while non manual females in services have a 46 per cent rise. If the broader trends are depressing, the fact remains that the privatized utilities made only a small contribution to these adverse trends. Since privatization, they have sacked no more than 100,000 workers in total while those workers who remain have generally

been rewarded by rising real wages. Furthermore, if we consider mechanisms and drivers (not outcomes) the privatized utilities are a special case. Only in privatized utilities do we see the addition of extra capital market claims at the point of privatization followed subsequently by a substantial 10-15 per cent rise in capitals share of value added at the expense of labour. In other sectors, the prots crisis of the 1970s when labours share was unusually high was followed by a renormalization which took the form of a much smaller once-and-for-all-gain by capital. And it is, equally, impossible or unfair to blame all the adverse trends in the composition of employment on the capital market and its requirement for distributed prot. The decline of manufacturing reects long term uncompetitiveness in the product market vis--vis European competitors plus the effects of low wage competition from Asia, critically from Japan and then, since the mid 1980s, from the Asian Tigers. The spread of part-time employment (and low grade selfemployment) also reflects the thrust of government policies designed to improve labour market exibility. At least part of the problem has been created by government policies which were represented as the solution. While New Labour is eager to abuse the conservative government for its role in creating a divided society, an incoming Labour government would be ill prepared to

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resist the multiplicity of forces which make for exclusion in our society: with Blair as prime minister, what we must expect is a larger scale replay of the tragedy of the utilities. To establish these points, we must consider the social vision in Blairs (1996b) speech to the Singapore business community and read that speech in the economic context of Blairs (1996a) speech to the Keidanren delivered in Tokyo a couple of days previously. The two speeches were clearly intended to be complementary and, if the rst Tokyo speech attracted less attention, that is unfortunate because it is in many ways intellectually more interesting than its Singapore twin which contained the soundbites about stakeholding. The political content of stakeholding is obviously and immediately different from Tory privatization rhetoric of the 1980s which had a very different concept of the role of government which interfered for the right as it now enables for the left. The 1980s White Papers relied on a value laden opposition between government interference with management and product market incentivises for management. This opposition provided the principle of Tory decision and action on 1980s privatization as government pursued emancipation through management and enterprise freed from bureaucratic intervention (Hansard, 7 May 1985, c.637). This content is not, of course, carried over directly into centre left discussion of the stakeholder economy which presents government as enabling. Beyond that, the Blair Singapore speech has very little content in the traditional what is to be done sense because it avoids policy proposals. The centre left of the 90s does however recapitulate the form of the rights 80s political rhetoric about emancipation without losers, and does so both by rejecting any identification of stakeholders as claimants and, more positively, by emphasising the

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benefits of management. Thus, in the Singapore speech which formally announced stakeholding as the big idea, we have a definition of stakeholding as inclusion, trust and partnership which can in some unspecied way be asserted against the claims of the capital market at the level of the individual company:
We cannot by legislation guarantee that a company will behave in a way conducive to trust and long term commitment, but it is surely time to assess how we shift the emphasis in corporate ethosfrom the company being a mere vehicle for the capital marketto be traded, bought and sold as a commodity, towards the vision of the company as a community or partnership where each employee has a stake, and where a companys responsibilities are more clearly dened (Blair, 1996b: 4).

This vision will appear less than mystical for those who, like Blair, believe in the transforming power of management to deliver more for less. This is a theme that emerges very clearly in his treatment of specic policy issues like welfare or education:
Last week in the UK, (the) Vice Chancellor at Exeter University, gave one of the most powerful and persuasive speeches about education that I have ever heard. He argued that there was room for a 30 per cent improvement in the education system within existing budgets not least by building the system so as to include people rather than exclude them and by developing genuine leadership at all levels of the system (Blair, 1996b: 3-4)

The resulting vision is of inclusion through management, in shared opportunities which transcend the old left preoccupation with redistribution:

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educational excellence throughout the population (Blair, 1996a: 6). There is much of interest in this economic analysis not least because Blair in Tokyo presents a highly selective bowdlerized reinscription of Reichs ideas. The Tokyo speech omits the structural pessimism and radicalism which figure prominently in Reichs book. Blairs speech echoes neither Reichs fatalism about the destructive impact of low wage Asian competition on American blue collar employment nor Reichs radicalism about the possibility of a redistribution of income from the fortunate fth. If Blair presents a soft focus version of Reichs analysis, what is even more interesting from our point of view is that, his Tokyo speech buys into national economic policies which are intended to accommodate the requirements of the new global order but which are most likely to aggravate stakeholder conict across a broad front within the national economy. At the same time, the Tokyo speech fails to identify upcoming areas of stakeholder conflict and to propose practical policies which could be adopted by government to palliate stakeholder conict. The new global order is used by Blair to justify an updated version of the policies of monetary and fiscal rectitude which have always attracted the Labour right from Snowden to Healey: according to Blair, macro economic policy must be kept tight, disciplined and geared to stability (Blair, 1996a: 4) and an incoming Labour government would adopt low tax rates which need to be internationally as well as nationally competitive (Blair, 1996a: 5). These policies are likely to aggravate stakeholder conflict because macro restraint will, other things being equal, restrain the economy wide output growth which makes it easier to accommodate conicting stakeholder claims. Low tax rates will constrain public expenditure and intensify the revenue side pressures

One Nation politics is not some expression of sentiment, or even of justiable concern for the less well off. It is an active politics, the bringing of a country together, a sharing of the possibility of power, wealth and opportunity. The old means of achieving that on the left was through redistribution in the tax and benet regime (Blair, 1996b: 2).

The paradox is that the stakeholding vision encourages New Labour speech writers to abandon the old politics of redistribution in favour of a rhetoric of inclusion just as structural realities compel capitalist managers to promote redistribution with exclusionary consequences which Labour laments. In Blairs case, the paradoxes and contradictions of this position are intensified by his economic world view and New Labours commitment to specific policies which accommodate globalisation in a way which will make stakeholder conict worse. Blairs economic position, as developed in the Tokyo speech, is hardly original: those who read the speech will immediately recognise its appropriation of problem denitions and solutions from Robert Reichs The Work of Nations (1991). As Secretary of State for Labour, Reich appears on giant screens at New Labour rallies and, as author, he supplies New Labour with an economic world view. Thus, Blairs Tokyo speech announces that the driving force of economic change today is globalisation (Blair, 1996a: 2) which has created a new world order where capital and technology are mobile (and) people are our key resource (Blair, 1996a: 6). The Keidanren is then reassured about New Labours economic philosophy which is to accept globalisation and work with it, especially by upgrading education and training, because the challenge for any country seeking to make its economic way in the 21st century is to spread

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on employment intensive public services. These macro economic sins of commission are combined with sector specific errors of omission because there is, for example, no reection on the experience of the utilities or on the forms of regulation which national government could adopt in these areas so as to rebalance stakeholder interests. Even more culpably, there is no consideration of the upcoming conicts in health and education where stakeholder conflict is likely to be aggravated by resource accounting or the general adoption of plc type accounting frameworks which add new claims that are potentially highly disruptive: revenue constrained organisations like hospital trusts cannot provide for depreciation, make interest payments and maybe pay dividends on public dividend capital without sackings and/or wage cuts. Stakeholder conflict in these public services is likely to have much greater social impact because the employment base in public services is so large. The utilities never employed more than 500,000 whereas health and education each employ 1.5 million and together employ 3 million, a total which is more or less equal to the remaining workforce in British manufacturing.

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Conservative propagandists seized on Blairs Singapore speech because they hoped to persuade the electorate that stakeholding is New Labours code for a return to the bad old days of the 1970s. For instance, Brian Mawhinney claimed it was, a deal under which Labours old friends in the Trade Union Movement get back all the power and privileges they had abused in the 70s (Times, 17 January 1996: 1). This wrap was nonsense because the balance of power in the labour market plus the institutional framework have changed so that it is impossible to put the clock back. It would have been fairer to say that, through utopian stakeholding, New Labour has turned away from any form of social democratic politics. A realistic social democratic politics would be built on a recognition of conict and the need for decisions about whether and how to promote or enforce the claims of worker stakeholders in a society where those claims are being denied. That is what Blairs stakeholding rhetoric avoids and, if you doubt that, we would suggest one test in the next general election campaign which New Labour hopes to win: ask your local Labour candidate whether and how an incoming Labour government would safeguard the employment base in public services like health and education?

______________________________ References
Blair, T. (1996a) Speech to the Keidanren, Tokyo, 5 January 1996. __________ (1996b) Speech to the Singapore Business Community, 8 January 1996. Cmnd 8610 (1982) The future of telecommunications in Britain, Department of Industry, HMSO, London. Cmnd 9300 (1984) Buses, Department of Transport, HMSO, London. Cmnd 9734 (1986) Privatisation of the Water Authorities in England and Wales, Department of the Environment, HMSO, London. Cm 322 (1988) Privatising electricity: the governments proposals for the privatisation of the electricity supply industry in England and Wales, Dept .of Energy, HMSO, London. Hutton, W. (1995) The State Were In, Jonathan Cape, London. Reich, R. (1991) The Work of Nations, Simon & Schuster, New York. Williams, K., C. Haslam, S. Johal and J. Williams (1994) Cars: Analysis, History, Cases, Berghahn Books, Oxford. Williams, K., C. Haslam, S. Johal, J. Williams and R. Willis (1995) The Crisis of Cost Recovery and the Waste of the Industrialised Nations, Competition and Change: The Journal of Global Political Economy, Vol.1, No.1, May.