Financial Strategy, Second Edition

CASE STUDY 13

The State of Denial We're In

The Economist

TEN YEARS ON, WILL HUTTON IS STANDING BY HIS BESTSELLING CRITIQUE OF BRITISH CAPITALISM

“Did I get it wrong?” It takes a brave pundit to ask that question. So Will Hutton deserves credit for challenging himself and readers of his column in The Observer newspaper on January 9th to re-examine his bestselling critique of British capitalism, and try to decide whether it has stood the test of time. Much has changed, in Britain and elsewhere, since The State We're In was published in January 1995 – and much of the change has been different from what Mr Hutton expected. Yet after (no doubt) many long hours of soul-searching, Mr Hutton has found that he is as convinced as ever of his “core analysis”.

In essence, this analysis was that the increasingly market-oriented British model of capitalism was in trouble. It needed to be reformed in ways that, taking the best bits from the alternative models of capitalism, would reduce the power of short-termist shareholders and strengthen that of other “stakeholders” in companies, including workers and the state.

In 1995, British voters were preparing to bring to an end nearly two decades of Conservative Party rule. Their faith in the party's economic competence had been shattered by a deep recession, a series of corporate scandals and Britain's forced exit from Europe's exchange-rate mechanism, a forerunner of the euro. Mr Hutton's book caught the mood perfectly, especially among educated ...