STUDIES IN POWER : A MARKET FORCE

.STANLEY Kalms leans forward at his desk, looking wary and belligerent. The chairman of Dixons is 64 next Tuesday but still gives the impression that he is balanced on the balls of his feet, and ready to jab at your solar plexus. And then there is that look of his, a look that flickers between concentration, boredom and contempt. It is a gaze that could microwave a potato.

The chairman of Dixons is known in the retailing industry as a remorseless operator, driving his competitors into submission and his senior staff to linger over the appointments pages of the Financial Times. When they come to this chintzy office in a Mayfair mews, they know what they are going to say and tend to say it without straying from the point. Even then, they may be brutally cut down to size, straightened out, peremptorily returned to focus on the Dixons ethos of service and value. Stanley Kalms is an old-style autocrat and he has very definite views which extend well beyond the sales of compact disc players and television sets to the realms of public policy, and this is what makes him interesting. For it goes without saying that he has a lot of power - power that comes not only from running one of the most successful chains of stores in Europe but also from his influence on Conservative policy makers; and, beyond that, power that comes from his presence on that most unconservative of Tory instruments, a quango - and a quango which, should the Tories return to power, will give Kalms access both to an enormous budget and to even more enormous influence.

Kalms is a free marketeer who five years on from Mrs Thatcher's departure is showing signs of - well, how shall I put it? - signs of cautious revision. For behind the obsidian stare I think it is possible to detect a churning conscience that is trying to reconcile the tenets of Thatcherism with the obvious flaws in our society. To be honest, I could not always work out where he stood. He seems to have compassion and understanding in some areas, but to be capable of sweeping disdain in others. Several times I found myself taken aback by the harshness of his views; those moments, for instance, when he said: "Teenage pregnancies are rape, lust or incest"; or "Unless an institution has within it the seeds of its own destruction, it is unhealthy."

After a little while in his company, he began to remind me of one of those tough Victorian magnates, the men who tempered their commercial drive with a sense of public duty galvanised somewhat after the fact by religious faith. These were people who believed that charity was a personal act: you put your money where your mouth was and saw the project through, whether it was building a library, a school or a drainage system. The idea that the state could do all these things through a system that was centrally funded by tax revenue was inimical to them. Kalms springs from this tradition, most notably in his unyielding belief in personal responsibility and his dislike of those who avoid it.

He identified his key characteristics as the following: "I am very detailed and single- minded; very determined; very conscientious..." He paused for the only time in our interview: "Then you would have to add another ingredient - a natural aggression." He omitted to say that he is very hard-working, and has always put in 12 hours a day, sometimes every day of the week.

He is a Jew, not deeply religious, but deeply interested in his religion. He says that everything he is today can be traced to his childhood in north London. "In a Jewish middle-class background, we don't need to search too far for our attitudes and frameworks. It's all based on Jewish teaching, and if you are not particularly religious they surround you with a fairly big fence so you tend to grow up with a whole set of family values; educational values, behavioural patterns and a keen desire to be acceptable." I asked whether there was any looming figure in his early life, a rabbi, teacher or business mentor. "No," he said, "I don't think so. No. When I was starting to move into the commercial world at 16, it was still the family and only the family." A glint of irritation entered his eyes, as if all this were irrelevant.

He left grammar school in Finchley having displayed little promise, except in the playground, where this tough little kid learnt how to come out best in any swap or deal that was going. The war was on, and the teaching staff had been reduced to an apathetic crew, none of whom spotted Kalms's aggressive abilities. When young Stanley left, the headmaster expressed surprise that he had managed to scrape his matriculation - something that still annoys him and may explain the drive that suddenly came into play when he entered the family business in north London. His father's photographic shop had puttered through the war with little commercial success. When peace came, it had a reputation for reliability, but suffered from lack of supply and had only a tiny stock of films and cameras. Within the first week of Stanley's employment, he had more than doubled sales, from pounds 40 to pounds 100. He made it a priority to find supplies; soon there were five shops, then 16, and by 1962, at the age of 30, he floated the business and became a millionaire. But although now married and independently rich, he was far from happy. The only thing that satisfied him was business, and so began the extraordinary expansion of Dixons. Today the company records annual sales of nearly pounds 2bn from nearly 1,000 shops.

Kalms is clear about what has contributed to his success and where he has failed; if anything, he tends to dwell on the latter: "I shot up to running a big business, and there have been times when I haven't quite absorbed all the responsibilities. I just hadn't grown up fast enough to deal with new situations. You make bad decisions and you don't control the situation as well as you might. Then you come out of it, you've learned the lesson, and you're a better person for it." (The mistakes include an experiment in retailing pharmaceuticals and an unsuccessful pounds 1.8bn assault on Kingfisher, which countered with its own doomed bid for Dixons.)

This habit of self-review can be endearing, but it makes people believe that what is good for them is good for society. To liberals, this approach seems to be nothing more than a mixture of moral arrogance and crude empiricism, but, whatever its failings, it does provide an immensely workable world view. At the beginning of the Eighties, Kalms found that his own conclusions about society very much chimed with Mrs Thatcher's. He saw in her someone who had started out as he had - in a small family business. And many of the values that he had learnt from his Jewish father, she had taken from the Methodism of Alderman Alfred Roberts. In her biography Lady Thatcher wrote of her parents: "They lived on a knife edge and feared that if some accident hit them, or if they relaxed their standards of thrift and diligence, they might be plunged into debt and poverty." This must have been utterly familiar to Kalms.

So too was her emphasis on personal responsibility, which was one of the most important drives behind her anti-institutional administration. That too clicked with Kalms. I asked him whether there had been a regrettable side to this revolution, and it was then that I got the harsh reply about institutions and their health.

"Unless an institution has within it the seeds of its own destruction," he said, "it is unhealthy. If an institution is just solidly established, then it becomes bureaucratised and less democratic. Where we've got good contra forces within the institution, I'm comfortable; but when they are solid, defensive and self-perpetuating, then I'm very nervous about them. What is frightening is when they go into their monolithic phase, when they are growing and growing and you think: where's my point of entry? The structure of Brussels is contrary to everything I believe in - remote, bureaucratic, self-perpetuating, monolithic. The quicker it implodes the better." This is pure, unequivocal, punchy Kalms.

One imagines him to have been a strong father to his three sons, Richard, Stephen and Paul; not overbearing, but very definite in his views - which is perhaps why none of them now works with him in Dixons. He once wanted them to do so, but both generations agree that it is better if they don't. He is married to Pamela, who works for Barnet Health Authority, and with whom he has led a blameless and unflamboyant life for 41 years. He is closely connected to many Jewish organisations; has a holiday home near his sister in Israel; takes rabbinical advice; and gives to many Jewish charities. He has also sponsored a chair in Business Ethics and Social Responsibility at the London Bus-iness School, which strikes a number of enemies as rather piquant, to say the least; during the Kingfisher bid a private investigator working on behalf of Dixons was discovered to be compiling dossiers on key personnel at Kingfisher. Kalms knew nothing of it and was deeply embarrassed by the revelations, but the mud stuck and added to Dixons reputation for being a slightly thuggish outfit.

Be that as it may, it's true that, towards the end of the Eighties, Kalms had become interested in social problems and had begun talking about the "nasty infection" which had taken root in British society. Although Tony Blair was, as shadow Home Secretary, saying many of the same things, Kalms could not, or at any rate did not, publicly bring himself to blame his heroine and the hyper-reductive solutions of the times. A few months ago, however, he abandoned his discretion and was quoted as saying "I don't think Margaret Thatcher gave enough thought to the consequences of adapting to the market system. The system works, but it is crude. It is a bit like saying the operation is a success, but the patient is going to die. We have to find a better way of helping people to make adjustments."

In his terms, this is a very big step, and it is a key to the man that he has expressed any doubts. No other prominent businessmen have admitted the failings of Thatcherism; they would say perhaps that Kalms has been too susceptible to the merging analyses from left and right of what is wrong with British society. Still, he is essentially a free market- eer and cannot quite forsake his faith in the market economy.

Indeed, it is as a standard-bearer for this that he occupies the positions he holds in public life, and it is these that make him important in British society. It is surprising that he has not by now picked up a knighthood, for he seems to fulfil all the requirements and is an occasional adviser to John Major. He also is a member of the Centre For Policy Studies and chairman of a hospital trust - King's College in Camberwell, south London. But his biggest interest outside work is the Dixons City Technology College in Bradford, one of 18 similar colleges set up to teach children about commerce and industry. Dixons supported the school with pounds 2m, and Kalms has given his own money to help another school specialise in science and computers. He is messianic in his enthusiasm.

"The experiment [at Bradford] worked. The results are phenomenal - nothing less describes it. It's multi-cultural, and there are mixed abilities. There's no absenteeism, no truancy - I said from day one when I opened it that the only success would be if we had a seamless process from school into industry. I have seen the quality of the kids coming out of that school and I know that they will find work immediately. We are not educationalists, but we add value. The school is a preparation for a life of work."

He brings such views to bear as a member of the Funding Agency for Schools, a quango set up, as the name suggests, to dispense funds to the grant maintained schools, and he believes passionately in bringing the market economy to the education system, giving headmasters and governors independence from the local education authorities: "The local authorities have often failed their schools and the grant maintained system means that there is a focus on each school's performance." Should the Tories win the next election and fulfil their aim of making all schools grant maintained, the FAS, and Kalms with it, will be immensely important.

In each interview for this series, I have asked the subject what he or she felt was the most destructive force in our society. Stanley Kalms said that he believed it to be the lack of consensus politics in Britain: "One government does one thing and then the next comes in and reverses all its decisions." This, of course, is standard stuff from those who, in the Wilson years, might have called for a "businessman's government". It was also similar in tone to a conversation I had had the night before with a group of Conservatives who used this line to argue against any political confrontation; what had been done in the past 16 years, they said, was mostly right. I began to say this, but Kalms is not easy to stop in full flow about the grant maintained system: "We've got it, it works, it's established. How can a society grow when it's in such internal conflict on basic issues like education and health? As soon as Blair gets in, the trusts will be broken up and all the things we're doing to give an esprit de corps in our hospitals will be lost. These are very destructive forces."

He believes that the Health Service is working as best it can: "Essentially, within the NHS there have to be accepted disciplines... I don't like using the word 'rationing', but there is a finite resource and infinite demand and you have to reconcile the two. The whole world faces the problem, but politicians get nervous about the subject. We are not dealing with just health problems, there are the social problems. For instance, we have special midwives who are dealing with teenage pregnancies. The system picks up problems and deals with them humanely but nobody deals with the root problem."

What was the root problem? "Well, it's how do we have teenage pregnancies in the first place? I mean, teenage pregnancies are rape, lust or incest - one of the three."

This was the 19th-century moralist talking. I goggled and was about to protest. He must have seen my expression, because he said: "It's all about broader judgements. There's nothing wrong with a certain amount of sexual freedom - I mean that has to be accepted, but there have to be other judgements. If it's just free love and to hell with the consequences, yes, I regret that. It's the ethical aspect that is important. Teaching people what to do with their lives; how to behave; what responsibilities they've got. That's what's missing. They're not taught broader values at school or at home if they come from poorer families."

I wondered how he got on with the staff of Dixons stores, whether he found he was out of touch with the young men and women who came to work for him. "They're keen to get on, which is nice, because the contrast is so appalling with other people of the same age - young men who have missed out and are loitering around and who come to an interview wearing sneakers and earrings. You can see society is absolutely polarised between those who jumped on the wagon and those who are left by the wayside. I think as you get older you learn to understand that you can't read young people's level of total competence. You can only judge them as they are - but I don't think you can forecast when you see a young man how high he will climb. I like to see the young people coming in... but, to me, they all seem to be cut off the same block of wood."

I asked what sort of responsibilities he felt he had to his large workforce: "If I brought you a device," I said, "which could replace 20 of your staff in each of your thousand stores, would you buy the device or worry more about the implications for your people in Dixons?"

He paused, and then looked foxily over the top of his glasses: "Firstly, you have got to be the best - it's a jungle out there, it's a market economy, and you've got to provide the best service. If you are human and a boss with an ethical approach, you have to find a solution. I would have to find a way round discarding people by slow evolution. I mean, there's no way that I can suddenly get rid of the guy who's hooked his star to my wagon, there's no way you can get rid of them even when they're past their sell-by date. You find answers: retrain them, re-motivate them, help them. But the real answer is that you can't ignore the market economy. That's your greater responsibility; the greater good is to be the most efficient in the market. That secures the income of the majority."

At the top of Dixons, it is a different story. Kalms does not worry so much about those who have made it up the greasy pole because they can look after themselves. "Personal relationships come into it, but they all know they're in a performance-orientated environment and face the cold rigours of business. When change comes, you have to do it in a civilised way." By "change", he means firing someone.

The thing I found most interesting about Kalms is his belief in cycles of growth and decay. He said at one stage: "My argument is that the market itself must be inefficient. It's inefficiency that drives capitalism - it's the fact that people have ideas, develop them and take risks. Some succeed, some fail, but the failures allow more people in." This is the same thought that informed his hostility to institutions, for he is suspicious of anyone or anything that is not subject to, in his phrase, "the cold rigours of business". His is a flawed Utopia in which some people must be happier, better rewarded and more successful than others for the whole thing to work. However civilised a society, these elements of failure and chaos cannot be excluded. "Capitalism," he declares, "has lots of warts, but you mustn't clip its wings and prevent it functioning as a wealth-creating structure."

There is a man at the London Business School who is currently recommending that, after four years in the job, chief executives should put themselves up for election in their company; if they win, they should be allowed to stay another four years, but no more. Kalms is having none of that: "This is one of the most dangerous thoughts they have ever had," he said. "I mean, it will be the death of the free market entrepreneur."

Stanley Kalms has been at the top of Dixons for nearly 50 years and is exactly a year from retirement age, but he plainly doesn't consider this an option. Having built up the company and acquired the influence and self-determination that goes with a billion-pound business, it will be some while before he leaves. Besides, Dixons gives him a position and without it he would, for example, be invited to Number 10 far less often. To put it baldly, he would be less powerful. Did be enjoy his power?

"When you have got power you have to be responsible - power demands a massive amount of self-discipline. The moment you become arbitary, you're nothing - you're just there because you're there. That's the difference between power and authority."

Not much enjoyment there, but he is not a man who smiles easily, and apart from the brisk goodbye at the end of the interview, I cannot remember him smiling or laughing once. This is not because he disliked being interviewed - on the contrary, I think he enjoyed talking. It is just that he is an exceptionally earnest man. People speak of a lighter side and say that when you get to know Stanley you find a warm individual - a loyal and steadfast man, which I can believe. But one should never lose sight of the sudden swooping harshness of his views and never, never lose sight of the bully within. !