The key elements of the Labour Party’s economic policies in the election were: we will cut public expenditure, but not as quickly or as nastily as the Conservatives;  we believe in a market economy, but not very strongly.   These propositions do not constitute a persuasive narrative, and they did not persuade.

The European left has been in intellectual disarray since the collapse of socialism. The threadbare content of Labour’s economic thinking, revealed in the last few weeks, is paralleled by similar weaknesses in France’s Partie (not very) Socialiste and Germany’s SPD.  Only the extreme parties of the left in Greece, and now in Spain, appear to be gaining electoral ground – by promising things that they cannot deliver. Tony Blair (and Bill Clinton) saw the need for fresh economic thinking in the 1990s, but their Third Way collapsed into vacuity.

So here is one idea to start Labour’s rethinking of economic policy  (more will follow).   The profit-making corporation is, and should and will remain, the central institution of the modern economy.  But that does not mean that the function of a profit-making corporation is to make a profit.  The function of a corporation is to produce goods and services to meet economic and social needs, to create satisfying and rewarding employment, to earn returns for its shareholders and other investors, and to make a positive contribution to the social and physical environment in which it operates. That is the role that corporations play in our society.

Tony Blair flirted with the idea that the role of the corporation was a central issue when he embraced ‘stakeholding’ before his election in 1997, but the debate died as a result of monopolisation of economic policy by Blair’s Chancellor of the Exchequer and the opposition of business people who thought ‘stakeholding’ meant trades unionists on company boards. But it may be an idea whose time has come again.

The commonly raised objection that an organisation cannot have more than one objective can be dismissed quickly.  The job of the professional manager is to balance sometimes complementary, sometimes conflicting, claims.  Just as the statesman must balance competing pressures and interests, and as every household must manage the sometimes incompatible demands and needs of different family members.

        The good school imparts factual information while stimulating critical thinking. The good smartphone finds an appropriate compromise between portability and battery life.  We recognise good schools and smartphones when we see them, and we know a good company in the same way.

The good corporation – like the good smartphone or the good school – can be identified by what it achieves .  It pays its workers a living wage; it does not engage in artificial and aggressive tax avoidance.  It develops the skill and capabilities of those who work for it and does not bewilder its customers with complex tariff structures.  It earns profits, reinvests some, and pays a growing dividend to its shareholders. Its executives spend more time walking around offices and shop floors than sitting in the meeting rooms of investment banks.  The good corporation contributes its expertise to the formation of policies that affect its activities, but does not engage in lobbying activities on a scale that corrupts political decision-making.

The political and social legitimacy of the market economy, and of the corporations through which it functions,   is not something that can simply be asserted – as it has been in the rhetoric that has dominated economic policy for the last three decades. Its legitimacy has to be earned by the behaviour of the major economic institutions.  That social contract has too often been broken in recent years.  And drawing attention to that breach, and the measures needed to regain trust is an agenda which is not hostile but friendly to the long-term interests of the business community.