Great Will of China

Hutton's recommendations for stakeholder capitalism were largely ignored by the incoming Labour administration. But if he was ever bitter he seems to have got over it.

"The Blair government has been a lot more successful than the grumpy old men consensus in the media that colours the national debate," says Hutton. "It's complex, but the past 10 years have not been bad for Britain. It's been, for many people, 10 very good years. It's become a multicultural, more tolerant and savvy society."

Hutton's handling of the complex Chinese economic puzzle is refreshingly straightforward. China, as we all vaguely know, will be very important very soon. The economics of the 21st century will belong to China, much as the 19th came under British influence and the 20th closed under US dominance. He details the fantasy that is communist doctrine, the endemic corruption of the state and the unsustainability of China's exponential growth. Within a decade it will be the world's second largest economy. The country is the single most important financier of the enormous US trade deficit. It competes for oil, water and military muscle. But though it looks like an unstoppable engine, it is not a market economy that we would recognise and it is on the verge of collapse.

Sitting in his office at the Work Foundation, the left-of-centre think tank he now heads, Hutton insists that "collapse" is too strong a word; convulsion might be better. "The question is, how will they make the transition from what they've got to where they need to be without very substantial convulsions?" says Hutton. "In the best case the Communist Party see the light and build plural institutions, which will mean losing monopoly control of the state. The next generation of leaders enact this or fight like tigers to resist it. If so we will see civil war in China or they may rally the country in a foreign adventure."

Hutton's 1990s prescription for a stakeholder British society envisaged a framework in which companies had obligations towards their employees and the wider community as well as their owners. His new book provides a similar analysis for China's problems. If the Chinese state is to survive it must relax its control of society, develop institutions outside the Communist Party and become accountable to its people.

To a cynical and worn-down left-of-centre readership, who have seen the results of Western democracy being exported to Iraq at the end of a gun barrel, the idea that West is best may appear risible. Hutton argues, however, that the US has undermined and retreated from the very values that it needs a peaceful China to adopt. "The paradox is that it might be right to say that the Middle East needs this Enlightenment infrastructure but you cannot impose it - certainly not by driving a coach and horses through the Enlightenment principles that underpin international law."

These values, says Hutton, oil the wheels of market society. Foremost is pluralism - creating private and public institutions that are alternatives to monopoly control. Then there is the development of individual capabilities by eradicating huge social inequalities. Finally, successful economies rein in the excesses of capitalism with systems of justification and accountability.

When they work, the other values that flow from this Enlightenment trinity - the independent rule of law, democratic participation, a free press, the protection of the vulnerable - are, says Hutton, the genius of the Western way of life. The point of The State We're In was that Britain didn't have to do capitalism Thatcher's way; by grounding capitalism in social democratic institutions, it was possible to make a profit while having some regard for how these profits were made.

There is no hiding his disappointment that this framework for a more caring, consensual society has not been built by Blair. Then there is the war. "The Enlightenment values I talk about are indivisible and suspending those values internationally for the war in Iraq and allowing the British private sector to cock a snook at a large part of my Enlightenment agenda has been a large part of the failure of the Blair-Brown years."

These failures do not entirely obscure his judgement of the Blair project. "Our lives have got better, we've got better clothes on our backs, our kids are being better-educated, there are reduced waiting times in local hospitals," says Hutton. "But if you pick up the Telegraph or Daily Mail the Blair government is a bunch of untrustworthy shysters. What they've actually done has not been great but in part it is substantially better than is acknowledged."

NEW Labour may have pretty much left the private sector alone, but Hutton believes Blair does not get enough credit for attempting to reform the public sector. Although he is an optimist - "Tiggerish" is how he describes his sunny outlook - Hutton has to admit there is little chance of Gordon Brown making advances on social cohesion. A prime minister Brown, Hutton fears, will have to spend too much time attending to the centre ground to have regard for a centre-left agenda. The Blair-Brown double act, which the media portray as a fatal flaw at the heart of the project, was in fact the very construct that allowed a left-of-centre agenda to be delivered.

"Here's the irony of New Labour. What people don't get is that New Labour as a construct requires two people at the top. That structural tension, with one to pitch to the centre ground and the other to be the custodian of a centre-left agenda, is embedded in the way that New Labour builds its coalition and runs its politics and sustains its parliamentary majority."

In a conservative country like Britain, PM Brown, Hutton thinks, will not be able to repeat the trick on his own. "Months away from becoming the head honcho, realisation is dawning with Brown that he is going to have to do the same stuff as Blair. He is going to have to cuddle up to Rupert Murdoch like Blair did, hence the wretched licence fee deal for the BBC which the Murdoch press celebrated hugely."

Brown will have to do much more than hobble a great public institution with a reduced licence fee to secure the centre ground. We will see more of a pro-business agenda, says Hutton, continued Euroscepticism and much more to secure New Labour's centrist electoral position.

"The big question is, who is going to fill the vacuum on the left of centre? No-one, actually. Brown needs to think about how he's going to create that same kind of political tension in New Labour that he and Blair had."

Hutton probably guffawed last week when the controlling Brown promised to build a Cabinet of "all the talents". He has a warning for the putative PM. "If it's just going to be Gordon running things from the centre with a couple of special advisers and everyone else being ciphers of the Brown project then it will become an increasingly bare centrist New Labour cupboard. If there is no-one for the left to look up to there will be more disaffection from the party faithful and electoral defeat looms."

BUT it would be a mistake to simply accept the settlement that Blair delivered. The left, it seems, has to be antagonised even more. "The one thing Blair doesn't get credit for is the pluralism part of my Enlightenment trinity and his attempts to construct a network of plural institutions in the public sector, plural foundation hospitals, plural city academies, plural skills councils," says Hutton. "Brown should protect that part of what Blair did, drive on with lowering inequalities, which means taking a hard look at top people's pay and being much more aggressive in putting in place a proactive welfare state."

While he's about it he could breathe new life into the accountability process which episodes like the abandonment of the fraud investigation in BAE did so much to undermine. There are signs that Brown is thinking in these terms although his instincts are to concentrate power and portray himself as the guardian of the left-wing inheritance.

Ten years on from the New Labour dawn and after two years of hard labour on the Chinese political system, Hutton concludes that the West has to live more by its own standards. He seems ambivalent about the prospect of a Brown premiership, and about China's future. "I think Asia is beginning to have a version of the European Enlightenment," he says. "You can see it in India, and I don't think China is going to stand aside from that general trend in central Asia.

"I am in the long run a real optimist but I don't think China will emerge from the other side of this smoothly until we in the West practise what we preach and understand and value our own Enlightenment institutions. Otherwise we lose them."

Will Hutton's The Writing On The Wall: China And The West In The 21st Century is published by Little, Brown, £20