I WANT Britain to be one of the really dynamic economies of the 21st century. It is sobering to think that just over a century ago, we were top of the league of prosperous nations, thirteenth in 1979, and today eighteenth. Yet our people, by their intelligence, grit and creativity are still a people unrivalled anywhere in the world. We must develop their ability and so make ourselves world leaders again.

The key words are investment, quality and trust. In a speech in Japan last week I set out our belief in the need to invest in people and capacity to build a strong economy. I referred to our proposals on industry, for public/private partnership, infrastructure, technology, science, small businesses and, above all, education and skills.

The reason for investment is to create a long-term strength. The better our capacity, the more up-to-date our plant and technology, the higher grade our skills, the stronger the product will be. When very-low-labour-cost countries can outbid us at the lower end of the market we must be moving up continually to higher value-added products. That comes through quality. We will not sell our goods and services by being the cheapest, important though cost is. We will sell them by being the best.

The easy way to competitiveness has been seen as devaluation. Since 1979 the pound has virtually halved in relation to the deutschmark. But it is not competitiveness that lasts unless it is backed up by an improvement in quality. In an age of customised design, articulate and careful consumers, it is through high-value-added products of quality that we will score. The best British companies know this and are doing it. But to build lasting prosperity it is not enough merely for individual companies to be engaged. The creation of an economy where we are inventing and producing goods and services of quality needs the engagement of the whole country.

It must become a matter of national purpose and national pride. We need to build a relationship of trust not just within a firm but within a society. By trust, I mean the recognition of a mutual purpose for which we work together and in which we all benefit. It is a Stakeholder Economy in which opportunity is available to all, advancement is through merit, and from which no group or class is set apart or excluded. This is the economic justification for social cohesion, for a fair and strong society, a traditional commitment of left-of-centre politics but one with relevance today, if it is applied anew to the modern world.

We know the pace and effect of new global markets and technological change. Jobs can be rendered obsolete, even whole industries. The world of work has been transformed. There is a revolution happening in media, communications and information. There is a real risk that in this era of change, some prosper but many are left behind, their ambitions laid waste.

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. The old means of achieving that on the left was through redistribution in the tax and benefit regime. But in a global economy, the old ways won't do. Of course, a fair tax system is right. But really a life on benefit - dependent on the State - is not what most people want. They want independence, dignity, self-improvement, a chance to earn and get on. The problems of low pay and unemployment must be tackled at source.

The economics of the centre and centre-left today should be geared to the creation of the Stakeholder Economy which involves all our people, not a privileged few, or even a better-off 30% or 40% or 50%. If we fail in that, we waste talent, squander potential wealth-creating ability and deny the basis of trust upon which a cohesive society, One Nation, is built. If people feel they have no stake in a society, they feel little responsibility towards it and little inclination to work for its success.

The implications of creating a Stakeholder Economy are profound. They mean a commitment by Government to tackle long-term and structural unemployment. The development of an underclass of people, cut off from society's mainstream, living often in poverty, the black economy, crime and family instability is a moral and economic evil. Most Western economies suffer from it. It is wrong, and unnecessary and, incidentally, very costly.

Reform of the Welfare State must be one of the fundamental objectives of an incoming Labour Government. Our Welfare State, begun by Lloyd George and Churchill, then a Liberal, and carried through by the 1945 Labour Government, is one of our proudest creations. But it suffers today from two important weaknesses; it does not alleviate poverty effectively; and it does not properly assist the growth of independence, the move from benefit to work. Too many people go on to benefit to stay there. The result is that it neither meets sufficiently its founding principle; nor is it cost effective.

For Singapore, the Central Provident Fund has worked well. But I stress that though, of course, our social security spokesman, Chris Smith, is here today and will examine carefully the CPF system, we cannot transplant one system in one country to another country with a different system born in very different circumstances. But where there are lessons to be learned we will learn them and it is surely right, for example, to look at a better balance between savings, investment and security in the modern world.

The Stakeholder Economy has a Stakeholder Welfare system. By that I meant that the system will only flourish in its aims of promoting security and opportunity across the life-cycle if it holds the commitment of the whole population, rich and poor. This requires that everyone has a stake. The alternative is a residual system just for the poor. After the Second World War, the route to this sort of commitment was seen simply as universal cash benefits, most obviously child benefit and pensions. But today's demands and changed lifestyles require a more active conception of welfare based on services as well as cash, childcare as well as child benefit, training as well as unemployment benefit.

Secondly, our education system must be guaranteed to serve all our people, not an elite. Britain has extraordinary talent in science, research and innovation, though occasionally we do not develop it in the way we should. But we need the commitment to excellence at the top to permeate all the way down.

This is not just about spending money. Last week in the UK, Sir Geoffrey Holland, the former permanent secretary at the Department of Education, now vice-chancellor at Exeter University, gave one of the most powerful and persuasive speeches about education that I have ever heard. He argued that there was room for a 30% improvement in the education system within existing budgets, not least by building the system so as to include people rather than exclude them, and by developing genuine leadership at all levels of the system.

Thirdly, we must ensure the new technologies, with their almost limitless potential, are harnessed and dispersed among all our people. Knowledge and technology can combine today as never before to educate, liberate and expand horizons. A class divide in technology in the information age would be a disaster and it must be avoided.

Fourthly, we must build the right relationship of trust between business and Government. For far too long, relations have been dogged by the fear of business that Government wants to take it over and Government's fear that business, left to its own devices, will not be socially responsible. In reality, in a modern economy, we need neither old-style dirigisme nor rampant laissez faire. There are key objectives on which business and Government can agree and work together to achieve. This ``enabling'' role of Government is crucial to long-term stability and growth.

The same relationship of trust and partnership applies with a firm. Successful companies invest, treat their employees fairly, value them as a resource not just of production but of creative innovation. The debate about corporate governance in Britain is still in its infancy and has largely been focused on headline issues like directors' pay and perks.

We cannot by legislation guarantee that a company will behave in a way conducive to trust and long-term commitment. But it is surely time to assess how we shift the emphasis in corporate ethos from the company being a mere vehicle for the capital market - to be traded, bought and sold as a commodity - towards a vision of the company as a community or partnership in which each employee has a stake, and where a company's responsibilities are more clearly delineated.

Finally, stakeholders in a modern economy will today, more frequently than ever before, be self-employed or small businesses. We should encourage this, diversify the range of help and advice for those wanting to start out on their own, and again use the huge potential of the developing technology to allow them to do so successfully. They may work alone or in small units but they are part of the larger economic picture.

This brings me back to the Asian Tigers. One feature of them, discerned for example by Dr Fukuyama, (an economist of the right who is nonetheless concerned at the selfish individualism of parts of Western society) is their high level of social cohesion. This may be based on value systems either different or inappropriate for Western economies. But the broad notion of a unified society with a strong sense of purpose and direction can be achieved in different ways for different cultures and nations. And it is really a matter of common sense. Working as a team is an effective way of working, or playing a sport, or running an organisation. My point is that a successful country must be run the same way. That cannot work unless everyone feels part of the team, trusts it, and has a stake in its success and future.

This is where a new economics of the centre and left-of-centre must go; an open economy working with the grain of global change, disciplined in macreoconomic and fiscal policy yet distinguished from the laissez faire passive approach of the right by a willingness to act to prepare the country for this change, and a commitment to ensure that its benefits are fairly distributed and all our citizens are part of one nation and get the chance to succeed. That is the real way to combine efficiency and equity in a modern age.

There is a

real risk that

in this era of

change, some

prosper but

many are left

behind, their

ambitions

laid waste