Finance: People power still favours the few

Yesterday was the 170th anniversary of the birth of Karl Marx. Now that Communism is no longer perceived as a threat, it is the bearded revolutionary who is once again "cool". Apparently, Das Kapital is very much the book to be seen with these days.

Karl Marx would undoubtedly be fascinated by the news that his old nemesis, capitalism, is on the wane. Capital investments are being replaced by people as the key differential in business. "Peoplism" is replacing capitalism. What remains to be seen is whether Peoplism will be any kinder to the under-privileged than capitalism.

The importance of uniquely gifted individuals to companies has been well documented. The latest indicator is the private sector salary increases announced by the Government on 22 April, which are running at twice the rate of public sector rises. The figures for the finance, legal and property sectors are three times higher. It seems that employers free of treasury restraints are only too pleased to invest in people.

It is not only the service sector that is committed to retaining star employees. State-of-the-art technology is no longer enough to ensure the success of even the most traditional "heavy" industry.

"Objectives are achieved by people, not systems, procedures or pieces of machinery," said one manufacturer in response to a recent research report, while another commented: "Although we are currently investing in a new production facility, the "edge" comes from people."

It is the right person, not a system or technology, who is currently being sought to turn round struggling companies such as Laura Ashley and WH Smith. Any individual able to convince the board that they are that person could command their own price, regardless of their country of origin.

While France fears for a brain drain of its top business-school students to the City of London, all merchant banks know they could lose millions overnight if another company poached their top analytical team. Fund managers such as Nicola Horlick have become stars in their own right. How many people can remember both the name of the company she left, and the one she is working for now?

In the past, the advantage of being part of a large workforce with little differentiation between members was that it gave rise to a powerful trades union movement. This protected the weak and guarded against some of the worst excesses of capitalism in a battle against a common foe.

Now, with the realisation that we are all individuals with more control over our future, those who are able to progress within the new scheme of things will inevitably question why they have to support those who are not doing well for themselves. Loyalties will not be bound up with class or trade, but with individual market value.

This is a huge step back from the safety nets built up to underpin the triumph of capitalism over the last 200 years. In the past, many big companies with a paternal spirit, such as the Quaker chocolate companies, made a virtue of looking after their workers almost from cradle to grave, providing schools, workers' cottages, chapels and summer camps.

And if your employer wasn't quite so generous, or you were out of work, the good old welfare state would always be there. Formerly, the Government had greater leeway to raise taxes and introduce protective measures. Economies were confined to countries or, at most, regions, and the state found it possible to sustain systems of support for those who fell by the wayside.

UK workers are now truly beginning to compete directly against those in the Third World. With 51 of the world's top 100 economies being multinational companies rather than countries, traditional notions of patriotism fly out of the window. The reality is that these companies would rather pay dividends than taxes - and, often, they have the economic power to ensure that this is what they do.

Market globalisation is driving Peoplism inexorably towards increasing inequality. Equality of opportunity does not mean equality in a more general sense - and it never has. Instead we face the prospect of a fragmenting society, with a glowing future for successful world citizens contrasting more and more starkly with the diminishing quality of life for the unskilled.

The effects of Peoplism can be seen at their most extreme in Russia, where the ideas of Karl Marx were once adopted so enthusiastically. There, society has moved from Communism to Peoplism without the intervening period of capitalism. Wealth and opportunity have come to the select few, while, for the many, life is harder than ever. Maybe a more accurate label for the ethos that is displacing capitalism would be "Some Peoplism".

The writer is chairman of the recruitment specialist Reed Personnel Services, and Professor of Innovation and Enterprise at Royal Holloway, University of London.