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The smoking ruins of financial capitalism have brought forth any number of books that could bear the subtitle: “How the collapse of Lehman Brothers proved me right”. From Marxist millenarianism to Austrian-school austerity, there is nothing like a global recession for reviving ideas that went out of fashion in an age of plenty.
Will Hutton’s contribution to this genre deserves closer attention than most, however — first because of its impressive lineage. Twenty years ago, his polemic The State We’re In captured perfectly the seedy decay into which Britain had sunk. It was a surprise hit, momentarily catapulting its author into the company of other great critics of laissez faire capitalism such as JK Galbraith and even Keynes. Hutton described a country corroded by worship of the free market, with an economy undermined by fraud and speculation, educational standards slipping fast and every institution from the press to the royal family sinking in public esteem.
Moreover, he seemed to have picked his moment to perfection, with New Labour poised to win an unassailable majority in parliament. The year 1997 was to be a new 1945, when Britain would remake both state and economy and undo the meaner bargain struck by Margaret Thatcher.
It would not come to pass, and one way of reading Hutton’s How Good We Can Be is as an examination of why the country was not remade and the high cost of this failure. The clearest reason is that matters did not deteriorate as he expected. While Hutton at times appears to see signs of Britain’s ongoing decline everywhere, comparing his new book with The State We’re In instead reminds us that there are few straight lines in history.
The Britain that Hutton described in 1995 was indeed a squalid and even cruel place. The gains from the Thatcher revolution had been bought at a high cost: two draining recessions; persistent long-term unemployment; a creaking National Health Service; pensioner and child poverty at near-record levels; and the political class viewed with disdain. Twenty years later, the same author looks around and often sees nothing but solid vindication of his earlier warnings.
But his concession that “for all the egregious mistakes made on its behalf, the country is not a wasteland” comes closer to the truth. From 1993 the UK embarked on a record period of expansion, racing past those continental economies that were the model for Hutton’s “stakeholder capitalism”. Germany stole Britain’s mantle of “the sick man of Europe”. The state pumped cash into public services. Poverty fell and the NHS soared in the public estimation. In many other ways, Britain appeared to become a happier, kinder place, more tolerant of diversity and a magnet for young workers from all over Europe.
Watching this unfold, Labour was happy to strike a bargain with unreformed capitalism — a bargain that paid off handsomely for the state in the short term. The government only toyed with Hutton’s stakeholder variety, which would have demanded strenuous efforts to make business put workers, customers and the environment on an equal footing with shareholders. The apparent defeat of Hutton’s 1995 thesis is best summarised by the headline of the Economist’s dismissive reappraisal 10 years on, “The state of denial we’re in”.
The interesting question is whether the financial crisis and its aftermath show this to have been a diversion: Anglo Saxon turbocharged capitalism on borrowed time. Does Hutton get the last laugh?
How Good We Can Be certainly gives a sense of a calamity foretold. Whatever Hutton thought in 1995 were inexcusable levels of executive pay, credit and inequality are decisively trumped in 2015. Anyone who was appalled by the City’s short-termism in the 1990s would be at a loss to describe modern finance, with its alphabet soup of complex instruments and trades measured in milliseconds. The picture is one of a free-market system run amok, obsessed with immediate profit, failing to invest for the long term and heedless of the consequences.
Hutton’s work is a reminder that the free-market economy has delivered a very different outcome from promised. What I find less convincing in How Good We Can Be are his remedies, which, given his goal of “ending the mercenary society”, can look strangely small. As in previous works, Hutton’s focus is firmly on ownership and governance. But against the macroeconomic sweep of the financial crisis, demanding that companies “declare their business purpose on incorporation” feels like a rather dilute response. Requiring directors to outline their virtuous intentions through yet another layer of narrative reporting will not magically elicit greater results. Nor can a British Stewardship code, no matter how fiercely written, really address the role of the callous investor at the heart of global finance.
It is a relief, then, when Hutton returns to form with a gloomy look at the present-day crises — constitutional, political and fiscal — set to define Britain. The next five years might see the loss of Scotland, the UK flouncing out of Europe and a Conservative government stripping funds away from public services even as it cuts corporate taxes to a record low.
The irony is that Hutton’s vision of a reformed capitalism, far from being the answer to these challenges, looks ill-suited to the new climate. Making UK plc more sensitive to its stakeholders would fall to some junior minister — a diversionary nice-to-have, rather like the Conservatives’ Big Society — while bigger beasts wrestled with the NHS, the deficit and a disintegrating United Kingdom. If this year looks bad, the book Hutton has brewing for 2020 could well be bleaker still.
How Good We Can Be: Ending the Mercenary Society and Building a Great Country, by Will Hutton, Little, Brown, RRP£16.99, 304 pages
Giles Wilkes is an FT leader writer
Will Hutton will be speaking at the FT Weekend Oxford Literary festival on Saturday March 21 (oxfordliteraryfestival.com)
Photograph: Writer Pictures