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The idea of stakeholding is that the individual can have a stake - or make an investment - in all aspects of society, whether it is financial or not. Its history can be traced back to the 1930s. However, it is the idea to win the election for Labour. By "stakeholder society" Mr Blair accepts most of the Tories' economic reforms, and means only that Labour will try harder to help the poor, the unemployed and the disadvantaged. He has avoided suggesting that he wants to reform the basic workings of the economy. He wants to keep the merits of private ownership, but reshape them. For example in Britain public corporations are mainly for creating revenues for their shareholders, whereas in many other countries (Japan) the corporations often do more than that, they offer cultural incentives and get involved in urban policies in order to benefit their owners socially as well as monetarily. According to Anthony F. Buono and Lawrence T. Nichols a corporate stakeholder is "any identifiable group or individual who can affect or is affected by organisational performance in terms of its products, policies, and work processes.'' This means individuals need to commit themselves in order to have a stake in society, so actually being idle should not mean being a stakeholder.
Other main view is to make investment more long-term and provide sources of cheaper capital, so the stakeholders could more frequently be self-employed or small businesses. They may work alone or in small units, but they are part of the larger economic picture. To make this possible a central bank should be reformed with local branches to accept savings, interest rate should be kept lower and high-street banks should be discouraged to make short-term loans.
The word "stakeholder" has been introduced to business vocabulary instead of shareholder or stockholder. The main difference is that later is market orientated and companies are only obliged to provide short-term profit for their shareholders. Stakeholding also includes social inclusion, membership, trust, co-operation, long-termism, equality of opportunity, participation, active citizenship, rights and obligations. Although it might be more expensive in the short term, in the long-term everybody will benefit from the greater well-being of the whole society (i.e. by lower social security taxes).
Or as Tony Blair put it in Singapore (January 7 1996):
""We need a country in which we acknowledge an obligation collectively to ensure each citizen gets a stake in it. One Nation politics is not some expression of sentiment, or even of justifiable 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....If people feel they have no stake in society, they feel little responsibility towards it, and little inclination to work for its success. ....
Government should to tackle long term and structural unemployment, the development of an underclass of people cut off from society, poverty, the black economy, crime and family instability. Most western economies suffer from it. It is wrong, and unnecessary and, incidentally very costly.
Unlike Mr Blair, another leader of Labour Party stakeholder policy, Mr Hutton, objects to the government's anti-inflation policies. He favours a "Keynesian" fiscal boost to promote full employment and regards fundamental changes in the financing and management of firms as crucial to the creation of a stakeholder society. He wants the state to encourage investors to act like committed long-term owners; to expand the supply of cheap, long-term debt; to make firms lower the returns they expect from investing; and to make employers more loyal to their workers.
Since 1979 financial and employment systems have been deregulated. There is less state intervention and markets forces are allowed to work more freely (i.e. reform of the NHS). Taxes have also been reformed to reward enterprise (lower to rates) and benefit idleness (better targeting). The idea behind being that those at the top do well and their efforts will improve the lot.
This system has had bad consequences on the equality of pay. They can be best represented by a Lorenz curve showing the amount that lowest 10% earn compared to highest:
Indirect institute of fiscal studies has indeed discovered that lower 10% pay 20% of their income to indirect tax, whereas top 10% only pay 8%, so by moving to higher levels of indirect taxation, conservatives have made the tax system much more regressive.
Employment regulations are also scaled back. Trade unions are not recognised anymore, that has made jobs unsecured and less paid. In attempt to make labour markets more flexible, firms have started to employ more labour part-time and with less binding contracts, so the job-security falls again.
Financial institutions have started to demand more returns, short-time that has put even greater pressure on companies, the source of extra profit often coming from abandoning long-term projects, cutting wages and sacking people.
England has been made more open to foreign trade, by loosing the tariffs etc. This has however very bad effects on domestic industries as the goods are produced in low-wage countries with lower health and security standards and British firms have to compete with these imports.
Lower marginal tax rates have so far shown that their income effects exceeds substitution, producing backward-sloping supply curves for top-management. As they have now more money for leisure they will work less and the effects of decreased tax rates has not been an increase in top-management.
But the exports from lower-wage countries mainly mean they can produce more efficiently and this gives Britain an incentive to improve, mostly by adopting more capital intensive production methods. If Britain would impose trade barriers the situation in lower-wage countries would become even worse. More capital intensive production methods have an effect on employment, but the empirical evidence has shown, that only for unskilled manual workers. The employment of skilled labour has increased steadily. This, together with the possibility for everyone to earn very high wages, provides a great disincentive to remain idle, so more people participate and have a stake in society. Previous safety nets just made more people dependant and ignorant of the society and work.
Yes, inequality is bad if there are barriers to become rich (like in medieval times), but conservatives have tried to remove them. The workings of capital society mean that it becomes more effective when it is more unequal. And however effective the redistribution system would be to make wealth distribution more equal, it would decrease the liberty. There needs to be a fear and greed in the system to make it tick. It is true that the number of people owning shares has risen sharply, thanks to the government's policy of allocating a large slice of privatisation shares to individuals, rather than selling them only to big financial institutions. About 3m people owned shares in 1979; 11m did so in 1991, although many individuals have made just short term investments.
Mr Blair says that the Conservatives have spent their time in power "tearing apart the fabric of the nation". Tory policies have favoured the lucky few. The less fortunate, those least able to take care of themselves, have paid the price. Public services have been starved of resources; the welfare state has come under withering attack. The Tories stand for ruthless individualism; man's better instincts, his need for community and for social cohesion, have been denied or denigrated. Slavish regard for market forces has replaced industrial policy. The rights of workers have been trampled. Britain's manufacturing industries have shrivelled. Privatisation was a fraud on taxpayers and consumers. The rich have prospered: the poor, the hopeless, the insecure and the unemployed have multiplied. Britain, says Labour, has become a coarser and crueller place. The Tories have diminished the country economically and morally.
But the conservatives argue that the best way of giving people a stake in society, they argue, is by spreading ownership of property. This was a key aspect of the Thatcherite programme, the Tory view of stake-holding in an economy.
John Major has said to Labour stakeholder view: "It is entrenched and steeped in the traditions of the left, of socialism, of corporatism."
Brian Mawhinney (Conservative Party Chairman): "Its essence is corporatism. Welcome back all the old friends - the trade unions, the vested interest groups, the Labour-dominated local authorities"
Labours New Clause Four means the stake-holder will be trade unions, pressure groups and local authorities. The plans have to be financed by increasing taxation etc.
So the question in the essay becomes more like do we need the stakeholder society? and haven't we already got a satisfactory version of it under the Tory government? By measuring efficiency of firms it has greatly increased despite the short-terminism in the City. Socialist community ideas have also been tried unsuccessfully in the former USSR with the definite evidence that not everybody wants to take part of being involved in a society or if they do, then only for their personal benefit. It is also true that the taxation system has become unfair to poor and brings in less revenue and have not had a remarkable effect on top-managers incentives.
So the stakeholder society would have a place in England. It will help to make the system more favourable to poor (and "idle"), so there should be no reason why it can't start doing that from he present situation. However when giving stake to wider range of people the stake has to be taken away from the ones that own it now, mostly because of their own work. Where it is definitely unwise to have a dictatorship with all the power belonging to a group, the empirical evidence from communism has shown that it might not be a good idea to let the people who don't want to lead the society do so and punish the people who want to control a bigger stake of it.