Tony Blair remarked that his project to transform Labour would be over when the party had learnt to love Peter Mandelson. Lord Mandelson has proved it. He has become indispensable to Gordon Brown’s Government and revered within the Labour Party by the uncomplicated expedient of burying the principles of new Labour.
Lord Mandelson’s latest revisionist venture concerns the £10.5 billion takeover bid by Kraft Foods, the US manufacturer, for Cadbury. He has urged shareholders to be “genuinely critical” of takeover bids, and said that investors who pursue a short-term interest could find themselves working against Britain’s business interests.
The Business Secretary knows the power of insinuation. The City will understand his words as a signal that the Government opposes Kraft’s bid. In an earlier political incarnation, Lord Mandelson would have seen the issue as no business of government. He would have been right.
Mr Blair forced Labour to recognise the limits of government. “The importance of individual and business enterprise to the creation of wealth has been undervalued,” wrote Mr Blair with Gerhard Schr?der, the German Chancellor, in 1999. There is nothing wrong in stressing a company’s long-term interests; but it takes hubris and heedlessness of history to imagine that government uniquely understands what these are.
Lord Mandelson had previously acknowledged the strength of feeling generated by the bid for Cadbury while emphasising that he had no statutory power to intervene. That was the right position. His implication that there is a national interest in who owns the company goes much farther.
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If the concept of a “national champion” in industry means anything, it is that a company should aim for market share regardless of profitability. That strategy does not work. The interventionist industrial policies of governments of both parties in the 1970s were a costly failure. They protected failing companies in declining industries.
Incompetent bankers have tarnished the reputation of capitalism recently. But when Cr?dit Lyonnais, the French bank, was state-owned in the 1980s and 1990s it expanded its loan book at disastrously uneconomic terms. French taxpayers paid a heavy price for such profligacy. And in a global financial market, it was not even French corporate customers who benefited from the low cost of borrowing that the bank offered.
Lord Mandelson understands how markets work and why wealth creation matters. Yet in his second return to government he has considered the conflict between party tribalism and economic judgment, and chosen badly.
He has embraced a prime minister who he plainly does not believe is the best candidate that Labour could offer. He has built up an unwieldy department whose main strength is the platform it provides for an unusually eloquent politician. He has blurred the distinction between old Labour’s economic failures and new Labour’s belated recognition of them. His verbal intervention in the bid for Cadbury confuses popular affection for Fruit & Nut with the value of the company that manfactures it. All that approach will accomplish is to depress the company’s long-term value. Lord Mandelson has stopped serving the new Labour project he once built; in his intervention on the Kraft-Cadbury bid, the Business Secretary is not doing much for British business either.