The New Statesman Essay - Don't let the right hijack enterprise

The minimal state isn't good for business. To get started, even Microsoft needed help from big compa

Each age has its defining vocabulary. Science and technology in the 1960s. The fight against inflation in the 1970s. Rolling back the state in the 1980s. In the late 1990s and early 2000s, we have our own special buzzwords. Enterprise and entrepreneurship - part of the new lexicon that extends across political boundaries. We all believe in enterprise now.

Nor is belief in entrepreneurship the preserve of the profit- making private sector. We want a more enterprising public sector. We hail social entrepreneurs. What we lionise is the visionary individuals who, by taking risks, can transform an organisation or practice into something creative, agile and innovative. In the private sector, they make millions; they can make the public sector come alive. There ain't nothing to beat enterprise; no change agent as effective as the entrepreneur. Aneurin Bevan may have thought of himself as a socialist; he is better understood as a political entrepreneur.

In many respects, the new attachment to enterprise is unexceptionable and long overdue. Few would gainsay that the world is a more remarkable place courtesy of Bill Gates or Tim Berners-Lee; the achievement in building the internet and linking it to the PC is undoubtedly a revolution in communication analogous to the invention of the telephone or the television. Nor is it surprising that such men are admired. They have achieved something from which we all have benefited, but which almost none of us could ever match.

So far so good. What is more worrying is the simple way enterprise has come to be understood. It is seen as a kind of behavioural attribute that individuals are more or less capable of acquiring as long as they have some predisposition to be enterprising that can be helped to flower if the incentives are right. Enterprise has become like beauty or brains: an asset every individual wants. What is different is that it is seen as springing from individual effort best taken when taxes and regulatory burdens are low. There may be a culture of enterprise; but it is individuals who take the risks. It has become part and parcel of a Darwinian view of the world where what matters is competition and survival of the fittest. Since it is the most enterprising who win, we had better make sure that the incentives for the enterprising are as great as possible.

In this respect, our attachment to enterprise is part of the collapse of ideology and the elision of the differences between left and right in a new compact that recognises that there is no alternative to capitalism. If we look to enterprise to solve our economic and social ills, necessarily there is less focus on the inbuilt incapacities of markets, structural malfunction and power imbalances as the source of problems. Individual enterprise will do what left of centre radicals failed to achieve. It will turn round depressed cities and regions; it will relieve weakening companies from being supported by the state; it is the cultural change the unemployed need to adopt to become employed.

There is a truth in the diagnosis. The left has been too ready to think in terms of structures, class and political action as the solutions to societal malaise. But the new preoccupation is incomplete. Enterprise may be the necessary precondition for economic and social success, but by itself it is insufficient even in a capitalist world - especially if the locus of enterprise is seen as the individual. In any case, the motivation for enterprise is much more complex than the urge to become individually rich. It is as much a social phenomenon as any other, and the circumstances for its creation and success are socially embedded. Structures, power and the distribution of income still matter. Nor is it the only value system around which we can and should build a just economic and social order. Enterprise is good, certainly; but this does not mean that it alone is the salve of all ills.

The naive view about enterprise is neatly summed up by our comic-book-strip notion of venture capitalists - the risk-taking financiers who oil the wheels of enterprise by backing start-up companies in new technologies and industries and so spearhead the enterprising economy. The usual conception is of entrepreneurs having a light bulb go off in their head with a sudden idea about a new company or technology. They work up the scheme as a business plan which they then hawk round the venture capitalists until one sees the merits and backs it by taking an equity stake. The company is launched, and one in ten goes on to be the next or Microsoft. The founder and venture capitalist alike make a fortune and society has an organisation that it did not possess before. It is win/win all round - and if other companies fail, then that is the price of capitalist endeavour. The venture capitalist makes enough profit on the companies that succeed to more than compensate for the failures.

This is the kind of story that accompanies most accounts of the rise of the new economy and dotcommery. Silicon valley, the quintessential expression of enterprise, is seen as the creation of risk-taking, high-tech, open-necked young bucks and risk-taking venture capitalists. The individualistic anarchy of the internet only underlines the cultural truth about enterprise. At its heart are individuals - and perish the government that obstructs this process through taxation, regulation or any intervention. California is where hi-tech Darwinism is given its most complete expression. The result: enterprise.

It is a vast oversimplification, but very useful ideologically. To become enterprising, we have to concede that the universe turns on right-of-centre principles. Taxation should be low. There should be no limits on what the successful can earn. We must build an equity culture, because that better supports risk and enterprise. Regulation should be minimal. The state must keep out. New Statesmen readers know the litany.

But even in California, this traduces reality. The contestants in this Darwinian hi-tech fight to the finish are highly educated - products of one of the best financed university systems in the world. The net itself is the product of the Pentagon constructing a networked communications system so that the destruction of any individual defence centre in the US would not hurt the viability of the whole. Microsoft's upper echelons are staffed largely by recruits from IBM. Bill Gates and his senior team were never individual inventors doing the rounds of venture capitalists with an idea in their heads; rather, they shamelessly piggy-backed off the intellectual capital built up by big companies and big government which have been central to the success of US hi-tech.

As for the venture capitalists, the flow of funds they invest in young high tech start-ups is almost entirely tax-sheltered. As hi-tech companies have reached valuations that make the Dutch tulip mania of the 1630s look tame, they have made fortunes that even Midas would have envied. "Risky" investment is not difficult in these circumstances. The irrationality and extraordinary short-termism of the US stock market, chased even higher by speculative day traders, has meant that some of the most dubious business propositions ever entertained have been valued at billions of dollars - as long as they had the magical patina of hi-tech and the internet around them. But over the past few weeks, there has been a painful rediscovery that losses are losses, even if they are made by hi-tech companies - and hi-tech companies have gone out of fashion. Enterprise is returning to earth with a vengeance.

As for motivation, the early net entrepreneurs were inspired by a combination of anti-establishment enthusiasm and belief that in cyberspace they were building a new means to communicate that would transform the world. Low taxes had little to do with it. Indeed, Tim Berners-Lee set out to invent the World Wide Web not to make a fortune but as the creation of a public good. It was as the net boom took off and the new companies floated themselves on the stock market at crazier and crazier prices that the preoccupation with becoming a billionaire entered the equation. But this has polluted the entire industry. The business plans are increasingly far-fetched; and investors, mad to make a killing, have been ripped off. Enterprise became nothing more than a speculative bubble.

None of this is to deny the original achievement of some of the early companies or the potency of the new informational capitalism. But what it underlines is the need to be more sophisticated about what we regard as enterprise. Nobody is going to challenge the notion that to be enterprising, in the sense of thinking innovatively or daring to do something different, is an excellent and desirable quality. It is the attempt to turn that generally good mind-frame, as useful for a poet as a businessmen, into an ideological statement about how economy and society should be run that becomes contentious. Quite simply, it is not true. The enterprising society emerges as much from a complex interaction of public institutions, innovation by big companies, high-quality education and an altruistic desire to make the world a better place as it does from a willingness to tolerate great inequality and minimal regulation of the labour and product markets.

Once this rubicon is crossed, a rather different policy mix emerges, as does a more balanced approach to business. For married to the new love affair with enterprise is the newly uncritical approach to business. It has become a new syllogism. To be enterprising is to be pro-business, and to be pro-business is to identify the business interest as the public interest. And it is this that must be challenged.

We should start the syllogism from the other direction, but in doing so recapture enterprise from its new custodians on the right. We should begin with a balanced conception of the public interest, in which notions of justice, compassion and the common good can sit side by side with the need for business dynamism; indeed, the enterprising pursuit of the public interest demands just such an accommodation. Thus we might be enterprising in regulating the mushrooming number of utilities that can dig up the road at times and places of their choosing, causing traffic chaos. We might be enterprising in regulating the labour market so that employees can strike a better balance between the demands of home and work life. The Civil Service can be told to relax; it does not need to couch its future in terms of business plans. We may want the NHS to be enterprising, for example; but that is a rather different requirement than wanting it to be run as a cost-minimising enterprise.

It is a distinction that is vital. The quality of enterprise is too important for it to be hijacked by the right, so that to want to be enterprising involves signing up for a very particular pro-business agenda that even the best businesses recognise as being only part of the story. We can champion the entrepreneur and enterprise while recognising that enterprise is socially produced and that successful business, at least if it is to serve the goal of contributing to a better society, needs the balm of enterprising regulation. Enterprise is too good a word to be lost to the common good.

The writer is chief executive of the Industrial Society

This article first appeared in the 10 April 2000 issue of the New Statesman, The long war against democracy