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DOI: 10.1177/030981689606000106 1996 20: 119Capital & Class

Julie Froud, Colin Haslam, Sukhdev Johal, Jean Shaoul and Karel WilliamsStakeholder Economy? From utility privatisation to New Labour

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119

POLEMIC Julie Froud, Colin Haslam, Sukhdev Johal,

Jean Shaoul and Karel Williams

Stakeholder Economy?From utility privatisation to New Labou

The economics of the centre and centre left today should be

geared to the creation of a Stakeholder Economy which involves all

our people, not a privileged few or even a better off 30 or 40 or 50 percent. If we fail in that, we waste talent, squeeze potential wealthcreating ability and deny the basis of trust upon which a cohesivesociety One Nation (sic) is built. If people feel they have no stake insociety, they feel little responsibility towards it and little or noincentive 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 StakeholderEconomy in which opportunity is available to all, advancementthrough merit and from which no group or class is set apart orexcluded.

Society is dividing up before our eyes, opening up new socialssures in the working population. The rst 30 per cent are thedisadvantaged (because) some 28 per cent of the adult workingpopulation are either unemployed or economically inactive . Thesecond 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 thatof the privilegedthe just over 40 per cent whose market power hasincreased since 1979 . The fact that more than half the people inBritain who are eligible to work are living either on poverty incomesor in conditions of permanent stress and insecurity has had dreadfuleffects on the wider society.

Tony Blair, Speech to theSingapore Business

Community, 1996b: 3

Will Hutton, The StateWere in, 1995: 106


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All politics is dened by the tension betweenis and ought which provides the motive foraction. If we consider the recent centre leftdiscussion of the stakeholder economy, thetension is nicely epitomised by thecontrasting quotes from the two publicgures, Tony Blair and Will Hutton, whosespeeches and journalism have done most topopularise the concept. The promoters of the stakeholder concept aim for a future of

economic success which includes every-body as stakeholder, while they dene ourpresent social failure as the exclusion of toomany through the labour market. The gapbetween the visionary future of universalinclusion and the painful present of realexclusion can be presented as an index of noble aspiration. But in our view it is moreaccurately an index of ineffectuality becausethere is not and cannot be a plan for gettingfrom exclusion to inclusion when the visionrests on a political fantasy about generalbenefits for all stakeholders and theireconomic analysis does not confront thestructural reality of redistributive conflictbetween stakeholders.

In this article we make these pointsthrough case study of a rather differenttension or gap in centre right politicsbetween the ex ante 1980s promises aboutthe benets of utility privatization and theex post 1990s reality of redistributiveconict. The utility case is relevant to Blairand Hutton in two ways. First, at thevisionary level, the rights 1980s privatiza-tion project is framed through a politicalrhetoric that recurs in the centre left 1990sdiscussion of stakeholding which envisagesgeneral benefits for all stakeholders in a

win win scenario. Second, at the level of practical analysis, utility privatizationillustrates redistributive conict where the

gains of one stakeholder are at the expenseof another. Thus, the privatization case canprovide the basis for a critique of stake-holding because it brings out the extent towhich this is the left appropriating therhetorical forms of the right and evadingstructural realities in a way which frustratesa credible centre left politics.

The case itself is discussed in twosections whose organisation is relatively

straightforward. The rst section analysesthe White and Green Papers on privatiza-tion and shows how unrealistic ex anteexpectations of benets for all stakeholderswere sustained by a rhetoric of emancipa-tion. Specically, this section analyses howstakeholders were dened as beneciariesagainst a background of assumptions andassertions about efficiency gains throughthe transforming power of management.The second section uses company reportand accounts for individual companies andutility plcs to analyse ex-post outcomes. Itidentifies the linkages between labour,product and capital markets whichestablish competing claims and structurallimits; utilities which operated in limitedproduct markets could only meet the extraclaims of new shareholder stakeholdersthrough the capital market by redistribu-tion at the expense of existing employeeand supplier stakeholders. The third andnal section draws out the implications of the case for a New Labour politics whichshares the illusions of the right. The utilitiescase may not be representative but isinstructive: stakeholder conflict is inevit-able wherever revenue and output are notgrowing, while further redistribution at the

expense of the workforce will only intensify a general deterioration in the compositionof employment.

120 Capital & Class #60

Introduction


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EACH UTILITY PRIVATIZATIONwas prepared

and justied in Green and White Papers: theseinclude White Papers on telecomms in 1982(Cmnd 8610), buses in 1984 (Cmnd 9300),water in 1986 (Cmnd 9734) and electricity in1988 (Cm 322). They were all short, flimsy documents which are now largely forgotten ordiscredited documents. But, these texts areworth rereading because these right wingWhite Papers of the 1980s all use the same

rhetoric to dene a eld of the visible whichrecurs in 1990s centre left discussion of stakeholding: in both cases the stakeholder isdened as a beneciary (not a claimant) in adiscourse whose strong assumptions aboutefficiency through management sustain arhetoric of emancipation and suppress realproblems about reconciling the claims of different stakeholders.

It may be useful to begin by proposing ourown simple accounting denition of a stake-holder as one who makes some claim on thedistribution of the sales revenue which isprovided by purchasers; if the identity of thepurchaser is mutable because the purchasercan be an individual consumer, a private rmor the state, the list of corporate stakeholdersis fixed and definite because it will include

suppliers and workforce as well as, in the caseof a for prot PLC, rentier shareholders. Fromthis common sense point of view, privatiza-tion involves the extension of an existing formof ownership which adds extra claims on theindividual firms income by a new class of stakeholder, the private shareholder. But all of this was suppressed by semiotics in Whiteand Green papers on privatization which

excluded outside shareholders from the list of stakeholders and focused more generally onbenets rather than claims.

Thus, the question who will benet was

raised explicitly in the case of electricity andwater where the White Papers formally recognised the trinity of customers, employeesand the national economy:

a modern, competitive (electricity) industry will be created, widely owned by the public,and more responsive to the needs of cus-tomers and employers There are real

benets in prospect for the customer, em-ployee and the economy (Cm 322, 1988: 16).

the government believes that the privatiza-tion of the water authorities will benet theircustomers and employees, and indeed, thenation as a whole (Cmnd 9734, 1986: 1)

Curiously, the list of stakeholder/bene-ficiaries excluded outside shareholders whowere beyond the eld of the visible. The WhitePapers did include obligatory generalreferences to the benefits of wider shareownership and made specic claims about thebenets of employee shareholding. In the caseof water, the argument was that shareholdingwould give employees a stake in the businessand enhance their effort and contribution asmuch as their reward:

Employees will benefit from employeeshareholdings, closer identification withtheir businesses, greater job satisfaction,better motivation and the prospect of therewards that enterprise has brought to thosethat work for other industries that have beenprivatized (Cmnd 9734, 1986: 2).

But, when shareholder claims were other-wise invisible, it was perhaps not surprisingthat there was no serious discussion of the

Stakeholder Economy? 121

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


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possibility of stakeholder conflict over thedistribution of limited income. The prospectof such conict was further displaced by thestrong imagery which represented privatiza-tion as the emancipation of utility manage-ment from government interference: afterprivatization, management would respondcreatively to the discipline and incentives of product market competition which wouldencourage the utilities to identify and meetconsumer needs.

The assertion was that, under publicownership, there had been constant inter-ference with the management of the public

utilities. In electricity, for example:the Government of the day has wide rangingpowers to interfere in the running of theindustry. The government appoints themembers of all the boards that run the indus-try. All capital expenditure plans have to beapproved by the Government which alsodetermines the industrys total borrowinglimit. While attempts have been made to set aclear framework in which these controls havebeen exercised, the management of the indus-try does not have the freedom to manage inthe same way as in the private sector (Cm322, 1988: 5, Cmnd 9734, 1986: 1 on water;and Hansard, 7 May 1985, c.645 on gas).

It was then claimed that private ownershipcould emancipate and create incentives for

management if government interference wasreplaced by the private sector mechanism of control by consumers through the productmarket. In telecomms, for example:

we want industrial and commercial decisionsto be determined by the market and not by the state. We believe that consumer choiceand the disciplines of the market lead tomore 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).

From this point of view, the privatizationprogramme was generally represented as arebalancing of interests against the producerand towards the consumer; in electricity, forexample, greater competition will createdownward pressure on costs and prices, andensure that the customer, not the producer ordistributor comes rst (Cm 322, 1988: 16).

The preoccupation with control mechan-isms was reflected in the White Paperproposals for de-regulation and re-regulationwhich would introduce or mimic the effects of product market competition. In buses, theintroduction 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 chargetheir inefficiency and substantially highercosts to the consumer (Cmnd 9300, 1984: 59).Elsewhere, because privatization involved thecreation of privately owned regional ornational monopolies, a discriminating re-regulation would be necessary; in electricity,

for example, regulation should be designed topromote competition, oversee prices, andprotect the customers interests in areaswhere natural monopoly remain. The explicitlogic of this position was regulation via pricecontrol which simulated the effects of competition; in electricity the regulatory system will be designed to provide eachcompany in the industry with incentives tooperate more efficiently and to ensure that thebenets are shared with consumers (Cm 322,1988: 13).

The rationality of a privatization projectwhich would make the world more likeeconomic theory was determined within thissystem of rhetorical identifications withoutmuch by way of empirical corroboration. All of the White Papers asserted or assumedsubstantial inefficiency, but only one of them

(on buses) made any attempt to measure theextent of inefficiency and thereby demonstrateex ante that meaningful savings could be



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prole energy utilities were in the middlingor low categories because they all sufferedfrom a purchase/sales ratio which was 66 percent or higher; the result was more modestpercolation of cash at a rate between 5 and25p in the pound.

Wherever the basic precondition of cash

surplus was satised, privatization could goahead with the new shareholders claimsaccommodated by adjusting the amount of issued capital in line with the activityscapacity to generate cash from currentoperations. Society paid the price because, asassets were transferred from public to privateownership, the selling price was effectively determined by their operating capacity togenerate surplus cash from which sharescould be serviced. What the assets had costhistorically, or would cost to replace, wasirrelevant and public assets were often soldoff at a fraction of historic or currentreplacement cost. If the public lost and thenew shareholder owners gained at point of sale, further stakeholder conict could havebeen anticipated.

In the longer term, the claims of the

capital market would be a problem becausethe British stock market expects increases individend distribution to shareholders.

However, the utilities generally operated inmature commodity markets where demandwas non cyclical and stable but very slowgrowing: in typical cases, such as gas andelectricity, the physical volume of sales hasincreased by no more than 10-15 per centover the last decade. In cases like telecomms,

where BT has maintained its share of agrowing market, an increased volume of business brings few benefits because theregulator restrains prices.Table 2summar-izes the complex evidence on trends in realsales revenue and value added (revenueminus purchases) in the different utilities.The power utilities (British Gas, PowerGen,National Power and the RECs) combineincreases in value added with weak ornegative real sales growth: in gas andelectricity supply, the strategy was to reducethe purchase/sales ratio and stretch valueadded by squeezing suppliers prices,passing misery down the supply chain andincidentally putting the miners out of a job.Only two utilities, water and BT, show apositive 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 theindustry to finance investment in clean up:


Cash per of Sales Revenue

greater than25p per

1525p per

less than15p per

Labours shareof Value Added

30%60%

50%65100%

35%50%

85%85%

Purchases toSales ratio

25%33%

70%25%

75%80%

20%25%

Activity

WaterBT

GasBuses

Electricity generationElectricity distribution

Tertiary educationHospital trusts

High cashgeneration

Middling cashgeneration

Low cashgeneration

No cash gener-ation

Table 1. Differences in cash generation

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


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British GasBT10 Water CompaniesBusesNational Power/Power Gen12 Regional Electricity Cos.

Real sales Real value addedPost-privatization Post-privatization

Average

annual %growth-1.41.97.2

-0.8-3.01.4

in water, the increase in sales revenue goeslargely into the pockets of contractors andequipment suppliers who are upgrading theinfrastructure. In the case of telecomms,where demand was growing strongly, all theincrease is in the first 3 years after 1984before the regulator insisted on price cuts

which spoilt cost recovery. When all thesequalifications have been entered, the overallconclusion is simple: since 1987, all of theutilities have flat or declining real sales.

The contradiction between the claims of the capital market and the limits of theproduct market could only be met by redistribution to shareholders from otherclasses of stakeholder. In this case, the workof utility management is not to delightconsumers through product market innova-tion but to satisfy shareholders on the capitalmarket through cost reduction which stripsout labour and purchase costs; and, whereverlabour costs must be reduced, managementbecomes the mechanical relay between thecapital market and the dole queue. Tounderstand how this redistribution played indifferent sectors, we must turn to activity

specifics and the variability in labour andpurchase costs, as well as the balance of power between purchasers and suppliers: it is

the larger cost categories which are mostlikely to be targeted for reduction, just as it isthe weaker claimants who will be squeezed.We can illustrate these points by presentingsome company cases which show differentpatterns of redistribution from employeesand suppliers to shareholders and consumers.

British Gas, like the Regional Electricity Companies, has a high purchase/sales ratiobecause it distributes and retails somebody elses product; after privatization all thesecompanies had purchase to sales ratios of 70per cent or more. British Gas was particularly unfortunate because it was under more acutepressure from its regulator to reduce pricesso that real sales cost per Kwh declined by 23per cent between 1986 and 1994. Relief wasprovided by squeezing suppliers even harder.AsTable 3shows, real purchase cost per KwHfell by 35 per cent so that suppliers not only met the regulators requirement for lowerprices but also generated a surplus fordistribution to shareholders.Table 3showsthat this surplus was levered up by sackingsome 30,000 workers, one third of the work-force, so that dividends could increase almost

four fold.Table 3also shows that two thirdsof the employment loss could have beenavoided if the sum distributed as dividends


Total %change

19.014.7n/an/a27.026.2

Average

annual %growth1.91.2n/an/a6.86.6

Total %change

-13.523.328.9-4.0

-12.05.7

Years

198694198495199092198993199094199094

Table 2. Growth in real sales and value added since privatization in various utilities

Source: Annual Report and Accounts,various years. Note: Buses includes GRT, Stagecoach and Badgerline.


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Dividends million Employment

1987 166 89,7001991 437 79,4001994 631 59,400

Total 19871994 30,300

Employment increase if dividends were not paid +21,000

had been applied to pay wages at the averagewage of 1994.British Telecomm is another company

under pressure from its regulator. Over theperiod 1984 to 1995, real sales price per unithas fallen sharply because volumes of inlandcalls increased by 69 per cent but real totalsales increased by only 12 per cent. Unlikethe energy distributors and electricity generators, BT has a relatively low purchaseto sales ratio of 37 per cent, so that theleverage obtained by squeezing suppliers islimited and any substantial cost reductionwill have to be nanced by reducing numbersemployed or the wages paid: most utilities inthis position have chosen the low conflictoption of targeting numbers employedthrough voluntary redundancy packageswhich pay off those with pension entitlements

while distributing the benefits partly in theform of real wage increases for those whoremained. Table 4shows what happened at

BT whose suppliers did not escape because,as the table shows, purchase cost hasdeclined roughly in line with real sales costper call. But the modest share of purchases invalue added means that the larger part of thereduction in cost per call, and thequadrupling of dividend payouts to morethan 1 billion has been financed by areduction in employment of some 42 per centor nearly 100,000 on the original base of 235,000. Again, employment loss would havebeen much smaller if the sum distributed asdividends had been applied to pay wages atprevailing rates.

If every utility tells a different story, inmost of these stories stakeholder re-distribution to shareholders from employeesby sacking is a recurrent theme. In socialaccounting terms, this represents a

redistribution of the value added fund fromlabour to capital because labours share fallsas capitals rises in a process whose


Real Sales Cost per KW/h (Pence) Real Purchase Cost per KW/h (Pence)

1986 2.06 1.461991 1.78 1.071994 1.62 0.95

Total 19861994 -23.0% -35.0%

Table 3. Redistribution at British Gas

British Gas: Real Sales Cost and Real Purchase Trends

Source: Annual Report and Accounts,various years.

British Gas: Dividends and Employment


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arithmetical logic is self evident. The utilitiesmostly show 10-15 per cent declines inlabours share of value added; and, in thesecases, half or more of the decline in laboursshare is generally taken out by a rise individends share of value added. Thereductions in labours share have beengenerally obtained not by busting rates but by sacking workers so that the cash saved onwages can be distributed to shareholders.Under stock market pressure, the utilitieshave discovered redundancy, a peculiarly British form of investment which always paysback inside three years: the enhanced pensioncontributions or the lump sum pay off represent the up front cost equal in mostcases to less than two or three years wagesafter which the savings from reduced labourexpense are permanent.

Table 5 summarises the redistributivechanges from workers to shareholders invarious utilities since the first year of

privatization and then adds the individualresults together to produce a summary forUtilities PLC. To dramatise the point aboutcapitals gains at labours expense, the tablecalculates how much more employmentcould have been sustained in the aggregate by Utilities PLC if the cash that was paid out asdividends had been retained and applied tosustain employment; using an average wage,as before in the individual companies, wecalculate the number of employee equivalentswhich the dividend represents. In BT andNational Power retention of dividend cashwould not have maintained pre-privatizationemployment but in British Gas retentionwould have allowed employmentmaintenance while in the RECs and WaterCompanies the retention of dividend cashwould have funded an increase in

employment. As the Utilities PLC totalindicates, in the aggregate the symmetry of redistribution is near perfect. Utilities PLC


Dividends million Employment

1984 234 235,2001990 663 245,7001995 1108 137,500

Total 19841995 97,700

Employment increase if dividends were not paid +39,200

Real Sales Cost per Call Index Real Purchase Cost per Call Index

1984 100.0 100.01990 85.0 86.01995 64.0 70.0

Total 19841995 -36.0% -30.0%

Table 4. Redistribution at British Telecomm

British Telecomm Index of Real Sales Cost and Real Purchase Trends


British Telecomm: Dividends and Employment


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Dividends Employment Numbers Numbers Numberspaid t costs employed employed employed

without year afterdividends privatization

( mill.) ( mill.) (000s) (000s) (000s)

British Gas (1994) 631.0 1804.0 67.3 90.8 91.9

BT (1995) 1108.0 3882.0 137.5 176.7 235.3

10 Water Companies(1993) 478.0 1152.0 39.6 56.0 40.6

National Power/

Power Gen (1995)300.0 320.8 9.6 18.6 23.3

12 Regional Electricity Companies (1994) 515.1 1513.6 69.0 92.5 81.8

TOTAL 3032.0 8672.0 323.0 434.6 472.9

has sacked more than 30 per cent of its

workforce, or some 150,000 workers, sinceprivatization; 92 per cent or almost all of these lost jobs could have been sustained if the cash distributed as dividends had beenapplied instead to paying wages at theaverage rate prevailing inside the companies.

The recent grumbling public protestsabout perks and proteering by the privatizedutilities registers the gap between the ex anterhetoric of emancipatory triumph and the expost reality of redistribution. But, if politic-ians are reluctant to eschew the rhetoric of emancipation, social scientists who evaluateprivatization have been equally reluctant toabandon the categories and concepts of theofficial pro privatization White Papers. Muchof the evaluative literature has done littlemore than add an extra tincture of economicsto the original preoccupations, so that the

redistributive problem has never beenadequately analysed. Economics influencedevaluation (like the regulatory regimes)

privileges some stakeholder interests rather

than others, by focusing on benefits forconsumers through lower prices whileneglecting or ignoring the producer interest.It also adds orthodox measurements which donot clarify the issues, especially efficiency/productivity measures expressed in terms of output per unit of input. Crucially, economicefficiency measures fail to distinguishbetween (a) sweating increases in product-ivity, obtained negatively by sackings, whichmake fewer labourers do the work so thatsome other stakeholder can benet and (b)transformational increases which result fromproduct or process innovation which usually expands the market and thereby creates abasis for all stakeholders to derive a benet.Perhaps measures of the rate of exploitationwould be more useful and, in their absence,what we can do in the next section is take up

some of the issues around sweating andredistribution in the next section which turnsto Blairs political economy.


Table 5. Dividends versus employment in privatized utilities since rst year of operation



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3 Policy implications for New Labour

THE QUOTES FROMTONY BLAIR and recentutility plc reports bring out the contrastbetween New Labours political vision of asuccessful country and the structurally determined realities of the business policy which builds successful companies. WhileNew Labours leader dreams of a fantasy football team of all the talents, the utility managers are playing a different game wherethey get the winning result by droppingplayers. In this third and final section, weexplore the mythological ramifications andpolicy implications of this contradiction. As anecessary preliminary, we begin by estab-lishing the broader context around postprivatization developments in the utilities.

In terms of outcomes, the loss of utility

employment since privatization contributesto a much broader and larger scaledeterioration in the composition of

employment. Table 6 summarises the maintrends since 1979 within a workforce whoseoverall size remains around 25 million. Themost notable development is the large scalesubstitution of service for manufacturingemployment. Since 1977, the numberemployed in manufacturing has been more orless halved, as 3.5 million manufacturing jobshave been lost while 3.2 million jobs havebeen gained in the service sector. This shiftrepresents a deterioration in the compositionof employment because, as the EmploymentGazette demonstrates, earnings in servicesare generally 25 per cent lower than inmanufacturing. AsTable 6 also shows, theprimary shift from manufacturing to serviceemployment is associated with two other

corollary shifts as the workforce isincreasingly feminised and casualised. Anoverall loss of around 1.5 million male jobs is

The broad notion of a unied society with astrong sense of purpose and direction is really a

matter of common sense. Working as a team is aneffective way of working or playing a sport, orrunning an organisation. My point is that asuccessful country mst be run the same way. Thatcannot work unless everyone feels part of the team,trusts it and has a stake in its success and future.

Our strategy delivers real value for share-

holders and customers with significant costreductions and dramatic improvements inproductivity.

The groups operating efficiency continued toimprove with a reduction of 18,500 people employedin the year, compared with a reduction of 14,700 inthe previous year. Staff costs were reduced by 4.2 percent as a result of savings from these reductionswhich more than offset pay increases.

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

Ed Wallis, Chief Executive,PowerGen 1995 Report: 5

British Telecomm 1995 Report: 12


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balanced by a similar gain in female jobs,while an overall loss of around 2.5 million fulltime jobs is balanced by a similar gain in parttime jobs. These corollary developmentsintensify the deterioration in the compositionof employment because part time and female jobs pay less. For example, if we consider allwomen (manual and non manual) in fulltime employment, their male counterparts inindustrial and commercial companies earnnearly 50 per cent more.

These overlapping shifts have under-mined the basis of the post war settlement intwo respects. First, they have removed thetraditional factory work source of relatively well paid semi-skilled male employment sothat an increasing number of men are

marginalised or excluded from the workforce.

Second, and more broadly, an increasingnumber of both male and female manualworkers who retain jobs are trapped in formsof employment where there is no realisticprospect of rising real incomes.

Table 7 illustrates the gender specificaspect of the problem by comparing changesin the activity profiles of male and femaleworkers. Total employment for males hasdeclined by some 2 million since 1979, whilefemale employment has increased. Increasingnumbers of older males have been displacedinto economic inactivity while their youngercounterparts face unemployment or areforced into forms of self employment whichthey would not otherwise choose. The numberof economically inactive men has increased by

nearly 2 million since 1979; while the number


Shift 1 Shift 2 Shift 3Manufacturing Services Male Female Full-time Part-time

1977 7.2 12.7 11.1 8.8 16.4 3.51995 3.8 15.9 9.5 10.2 13.9 5.8loss/gain -3.4 +3.2 -1.6 +1.4 -2.5 +2.3

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

male female male female male female male female1979 13.3 9.1 1.4 0.3 0.8 0.7 4.2 11.31995 11.3 10.3 2.5 0.8 1.6 0.8 6.0 10.7

loss/gain -2.0 +1.2 +1.1 +0.5 +0.8 +0.1 +1.8 0.6

Table 6. UK composition of employment 197795

Table 7. UK trends in economic activity 197995

Earnings in services are25% lower than in manu-facturing

Full-time females (manual+ non-manual) in indus-trial and commercialcompanies earn 68% of male earnings

Increase in number of part-time jobs offsets 92% of theloss in full-time jobs

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

*Note: All totals in millionsSource: Labour Market Trends.


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of economically inactive women has actually declined over that period. The increase in self employment and in unemployment since1979 accounts for a further 2 million maleworkers; while the number of women in thesecategories has increased by not much morethan half a million. If women have done betterthan men in claiming jobs, the trend of femalemanual earnings in the rapidly expandingpart time service sector is as discouraging asthat of full time male manufacturing workerswho are caught in a declining sector. As

Table 8shows, real wages for both groupshave stagnated for nearly twenty yearsbecause the bargaining position of malefactory workers has been undermined by de-industrialization, which brings an oversupply that remains the normal condition for parttime women service workers despite theexpansion in their form of employment. Someworkers have done very much better becauseTable 8also shows that non manuals, maleand female, have over the same periodenjoyed substantial real wage increases in thesame activities. Specically, non manual malemanufacturing workers have a 28 per cent risein real earnings; while non manual females inservices have a 46 per cent rise.

If the broader trends are depressing, thefact remains that the privatized utilities madeonly a small contribution to these adverse

trends. Since privatization, they have sackedno more than 100,000 workers in total whilethose workers who remain have generally

been rewarded by rising real wages.Furthermore, if we consider mechanisms anddrivers (not outcomes) the privatized utilitiesare a special case. Only in privatized utilitiesdo we see the addition of extra capital marketclaims at the point of privatization followedsubsequently by a substantial 10-15 per centrise in capitals share of value added at theexpense of labour. In other sectors, theprots crisis of the 1970s when labours sharewas unusually high was followed by arenormalization which took the form of a

much smaller once-and-for-all-gain by capital. And it is, equally, impossible orunfair to blame all the adverse trends in thecomposition of employment on the capitalmarket and its requirement for distributedprot. The decline of manufacturing reectslong term uncompetitiveness in the productmarket vis--visEuropean competitors plusthe effects of low wage competition from Asia,critically from Japan and then, since the mid1980s, from the Asian Tigers. The spread of part-time employment (and low grade self-employment) also reflects the thrust of government policies designed to improvelabour market exibility. At least part of theproblem has been created by governmentpolicies which were represented as thesolution.

While New Labour is eager to abuse the

conservative government for its role increating a divided society, an incomingLabour government would be ill prepared to


Manual employment Non-manual employment

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

1979 293 92 352 1991995 313 93 449 290

gain % +7.1 +1.4 +27.7 +45.9

Table 8. Average gross weekly earnings (excluding overtime) in 1995 prices

Source: New Earnings Survey.


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resist the multiplicity of forces which makefor exclusion in our society: with Blair asprime minister, what we must expect is alarger scale replay of the tragedy of theutilities. To establish these points, we mustconsider the social vision in Blairs (1996b)speech to the Singapore business community and read that speech in the economic contextof Blairs (1996a) speech to the Keidanrendelivered in Tokyo a couple of dayspreviously. The two speeches were clearly intended to be complementary and, if the rstTokyo speech attracted less attention, that isunfortunate because it is in many ways

intellectually more interesting than itsSingapore twin which contained the sound-bites about stakeholding.

The political content of stakeholding isobviously and immediately different fromTory privatization rhetoric of the 1980s whichhad a very different concept of the role of government which interfered for the right asit now enables for the left. The 1980s White

Papers relied on a value laden oppositionbetween government interference withmanagement and product market incentivisesfor management. This opposition providedthe principle of Tory decision and action on1980s privatization as government pursuedemancipation through management andenterprise freed from bureaucraticintervention (Hansard, 7 May 1985, c.637).This content is not, of course, carried overdirectly into centre left discussion of thestakeholder economy which presents govern-ment as enabling. Beyond that, the BlairSingapore speech has very little content in thetraditional what is to be done sense becauseit avoids policy proposals.

The centre left of the 90s does howeverrecapitulate the form of the rights 80spolitical rhetoric about emancipation without

losers, and does so both by rejecting any identification of stakeholders as claimantsand, more positively, by emphasising the

benefits of management. Thus, in theSingapore speech which formally announcedstakeholding as the big idea, we have adefinition of stakeholding as inclusion,trust and partnership which can in someunspecied way be asserted against the claimsof the capital market at the level of theindividual company:

We cannot by legislation guarantee that acompany will behave in a way conducive totrust and long term commitment, but it issurely time to assess how we shift theemphasis in corporate ethosfrom the

company being a mere vehicle for the capitalmarketto be traded, bought and sold as acommodity, towards the vision of thecompany as a community or partnershipwhere each employee has a stake, and wherea companys responsibilities are moreclearly dened (Blair, 1996b: 4).

This vision will appear less than mystical

for those who, like Blair, believe in thetransforming power of management to delivermore for less. This is a theme that emergesvery clearly in his treatment of specic policy issues like welfare or education:

Last week in the UK, (the) Vice Chancellorat Exeter University, gave one of the mostpowerful and persuasive speeches abouteducation that I have ever heard. He arguedthat there was room for a 30 per centimprovement in the education systemwithin existing budgets not least by buildingthe system so as to include people ratherthan exclude them and by developinggenuine leadership at all levels of the system(Blair, 1996b: 3-4)

The resulting vision is of inclusion

through management, in shared opportun-ities which transcend the old left pre-occupation with redistribution:



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One Nation politics is not some expressionof sentiment, or even of justiable concernfor the less well off. It is an active politics,the bringing of a country together, a sharingof the possibility of power, wealth andopportunity. The old means of achievingthat on the left was through redistribution inthe tax and benet regime (Blair, 1996b: 2).

The paradox is that the stakeholdingvision encourages New Labour speech writersto abandon the old politics of redistribution infavour of a rhetoric of inclusion just as

structural realities compel capitalist managersto promote redistribution with exclusionary consequences which Labour laments. InBlairs case, the paradoxes and contradictionsof this position are intensified by hiseconomic world view and New Labourscommitment to specific policies whichaccommodate globalisation in a way whichwill make stakeholder conict worse.

Blairs economic position, as developed inthe Tokyo speech, is hardly original: thosewho read the speech will immediately recognise its appropriation of problemdenitions and solutions from Robert ReichsThe Work of Nations(1991). As Secretary of State for Labour, Reich appears on giantscreens at New Labour rallies and, as author,he supplies New Labour with an economicworld view. Thus, Blairs Tokyo speechannounces that the driving force of economic change today is globalisation(Blair, 1996a: 2) which has created a newworld order where capital and technology are mobile (and) people are our key resource (Blair, 1996a: 6). The Keidanren isthen reassured about New Labours economicphilosophy which is to accept globalisationand work with it, especially by upgrading

education and training, because thechallenge for any country seeking to make itseconomic way in the 21st century is to spread

educational excellence throughout thepopulation (Blair, 1996a: 6). There is muchof interest in this economic analysis not leastbecause Blair in Tokyo presents a highly selective bowdlerized reinscription of Reichsideas. The Tokyo speech omits the structuralpessimism and radicalism which figureprominently in Reichs book. Blairs speechechoes neither Reichs fatalism about thedestructive impact of low wage Asiancompetition on American blue collaremployment nor Reichs radicalism about thepossibility of a redistribution of income fromthe fortunate fth.

If Blair presents a soft focus version of Reichs analysis, what is even moreinteresting from our point of view is that, hisTokyo speech buys into national economicpolicies which are intended to accommodatethe requirements of the new global order butwhich are most likely to aggravate stake-holder conict across a broad front within thenational economy. At the same time, the

Tokyo speech fails to identify upcoming areasof stakeholder conflict and to proposepractical 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 havealways attracted the Labour right fromSnowden to Healey: according to Blair,macro economic policy must be kept tight,disciplined and geared to stability (Blair,1996a: 4) and an incoming Labour govern-ment would adopt low tax rates which needto be internationally as well as nationally competitive (Blair, 1996a: 5). These policiesare likely to aggravate stakeholder conflictbecause macro restraint will, other thingsbeing equal, restrain the economy wideoutput growth which makes it easier to

accommodate conicting stakeholder claims.Low tax rates will constrain public expendi-ture and intensify the revenue side pressures



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on employment intensive public services.These macro economic sins of commissionare combined with sector specific errors of omission because there is, for example, noreection on the experience of the utilities oron the forms of regulation which nationalgovernment could adopt in these areas so asto rebalance stakeholder interests. Even moreculpably, there is no consideration of theupcoming conicts in health and educationwhere stakeholder conflict is likely to beaggravated by resource accounting or thegeneral adoption of plc type accountingframeworks which add new claims that are

potentially highly disruptive: revenueconstrained organisations like hospital trustscannot provide for depreciation, makeinterest payments and maybe pay dividendson public dividend capital without sackingsand/or wage cuts. Stakeholder conflict inthese public services is likely to have muchgreater social impact because theemployment base in public services is so

large. The utilities never employed morethan 500,000 whereas health and educationeach employ 1.5 million and together employ 3 million, a total which is more or less equalto the remaining workforce in Britishmanufacturing.

Conservative propagandists seized onBlairs Singapore speech because they hopedto persuade the electorate that stakeholdingis New Labours code for a return to the badold days of the 1970s. For instance, BrianMawhinney claimed it was, a deal under whichLabours old friends in the Trade Union Move-ment get back all the power and privileges they had abused in the 70s (Times, 17 January 1996: 1). This wrap was nonsense because thebalance of power in the labour market plus theinstitutional framework have changed so that itis impossible to put the clock back. It wouldhave been fairer to say that, through utopian

stakeholding, New Labour has turned away from any form of social democratic politics. Arealistic social democratic politics would bebuilt on a recognition of conict and the needfor decisions about whether and how topromote or enforce the claims of workerstakeholders in a society where those claims arebeing denied. That is what Blairs stakeholdingrhetoric avoids and, if you doubt that, we would

suggest one test in the next general electioncampaign which New Labour hopes to win: askyour local Labour candidate whether and howan incoming Labour government wouldsafeguard the employment base in publicservices like health and education?


Blair, T. (1996a)Speech to the Keidanren, Tokyo,

5 January 1996.__________ (1996b) Speech to the SingaporeBusiness Community,8 January 1996.

Cmnd 8610 (1982)The future of telecommunica-tions in Britain,Department of Industry,HMSO, London.

Cmnd 9300 (1984)Buses,Department of Trans-port, HMSO, London.

Cmnd 9734 (1986)Privatisation of the Water Authorities in England and Wales,Depart-

ment of the Environment, HMSO, London.Cm 322 (1988)Privatising electricity: the govern-

ments 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,JonathanCape, 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 andR. 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.

______________________________References

Capital & Class 1996 Froud 119 34

Documents

Transcript of Capital & Class 1996 Froud 119 34