The dismissive mockery with which Michael Portillo and Ken Livingstone greeted Tony Blair's Singapore call for a stakeholder economy is more revealing than the applause it evoked in other quarters. Not for the first or the last time, the New Right and the Old Left are at one. Neither understands what Blair is saying, but both sense that he spells death to the old politics in which both are mired. Both are afraid of him; and both clothe their fears in world-weary superciliousness.

For the New Right and Old Left are prisoners of a mind-set which has dominated the political discourse of the greater part of this century, and which has only just begun to fade. That mind-set was both child and parent of the great ideological contest bet ween socialism and capitalism which began in the closing decades of the nineteenth century, and which lasted until the closing decades of this. The view of the world which it engendered was manichaean: light against darkness, good against evil, progress a gainst reaction. And for manichaeans, the notion that reality consists of different shades of grey is at once inconceivable and terrifying.

But the manichaean ascendancy has ended with the end of the cold war. On the economic plane, though only on the economic plane, the contest between socialism and capitalism has produced a conclusive victory for capitalism. The socialist ethic of solidarit y and fellowship is as compelling as ever. In some ways, it is even more compelling now than it was 100 years ago, for it alone offers an answer to the deadly cocktail of 1960s social individualism and 1980s economic individualism which threatens to drown us all.

The economics of socialism, on the other hand, have been fatally discredited. The primordial socialist assumption that central planning and public ownership were, by definition, more efficient than market co-ordination and private ownership - an assumptio n held as fervently by respectable British Fabians as by ruthless Russian Bolsheviks - has turned out to be the reverse of the truth. If productive power is the test of a social system, then the capitalist market economy is the most successful social syst em ever known.

But this is only the beginning of the story. The neo-liberal triumphalists of the early-1990s, who confused the economic victory of capitalism with the end of history, were premature. What we have in fact entered is a new historical chapter, enormously ri cher and more confusing than the last, in which the terrible simplicities of the last 100 years no longer have meaning.

The question is no longer whether capitalism should be replaced by socialism, or the market by the state. It is what kind of capitalism we should embrace, where the boundaries of the market-place should lie, how and by whom markets should be regulated, an d in whose interests. Behind these questions loom more fundamental ones. Granted that capitalism has won the economic battle, and granted too that the socialist ethic is even more sorely needed than it used to be, what form of capitalism is most congruent with that ethic? Granted that the production of most goods and services should be governed by market criteria, what kind of market economy is most likely to sustain a vibrant public domain, strong enough to nurture the community values which make a healt hy civil society possible, and governed by the principles of citizenship and solidarity?

For now that we have emerged, eyes blinking, into the post-cold war daylight, we can see that capitalist market economies are not all of a piece. No doubt, they all spring from the same fundamental propensity to 'truck, barter and exchange', which Adam Sm ith thought intrinsic to human nature. But, like all the great universalist simplifiers, from Plato to Marx to Hayek, Smith obscured as much as he illuminated. Sexual desire is also intrinsic to human nature. So is the fear of death. Yet different societi es regulate sexual behaviour, and cope with death, in widely differing ways.

So it is with the market. Markets are social constructs, embedded in societies, shaped by societies and sustained by societies. The unregulated free market which has been the holy grail of British government for fifteen years is a chimera. All markets are regulated - if not by the state, then by custom, convention and the institutions of civil society. Because of this, the rational market actor, that ghostly phantom which has obsessed economists for around a century, is also a chimera. What is rational in one society may be irrational in another. That, in turn, means that market economies do not all behave in the same way or produce the same outcomes. Some are more productive, more environmentally friendly and more socially cohesive than others.

In nailing his colours to the stakeholder mast, Tony Blair has shown that he is at home in this complex and challenging new world of variety and nuance. Albeit only tentatively and in embryo, he is proposing a politics for grown-ups in place of the infant ilism of the Portillos and the Livingstones. Above all, he is opening the door to a left-of-centre project for government, more radical than anything attempted in this country in modern times.

For whatever else the notion of a stakeholder economy may or may not imply, it must imply a profound break with the assumptions and practices which have been central to Britain's shareholder capitalism for nearly 300 years. At the heart of the stakeholder concept lies the simple proposition that Property must discharge obligations to the wider community as well as to its owners: that the decisions of a capitalist firm must reflect the interests of its employees, its suppliers and the localities in which i t operates as well as those of its shareholders.

That proposition runs against the grain of a conception of property rights which has been fundamental to British capitalism since its dawn in the seventeenth and eighteenth centuries. The British version of the capitalist market economy was born out of a revolt against conditional property in the name of absolute property, against the medieval principles of the just price and noblesse oblige in the name of the unfettered right of the property owner to do what he would with his own. Though the rights of pr operty were, in practice, curtailed in the next 300 years, sometimes thanks to enlightened property owners themselves, the attitudes and assumptions formed during that revolt have never been abandoned. They permeated the institutions and operational codes of the state; they shaped the legal system and company law; they underpinned the mainstream tradition in economics. They still do.

One reason why they have never been seriously challenged is that they have influenced the mentality of the left as much as that of the right. For the best part of eighty years, socialists and anti-socialists alike have repeated the same Gertrude Steinian mantra: property is property is property. Anti-socialists have done so because they have feared that any dilution of property rights would begin the slippery slope to socialist expropriation. Socialists have done so because they have been so eager to repl ace capitalism altogether that the idea of swapping one model of capitalism for another has seemed to them irrelevant or treacherous or both.

One result is that the British trade-union movement has been more anxious to screw the highest possible wages out of hostile employers than to share managerial power and the responsibilities that go with it. Another is that the occasional Labour governmen ts which have flitted across the British political scene have left the fundamentals of British capitalism virtually unchanged. The British mixed economy, inaugurated by the post-war Labour Government, was a mix of British capitalism with the British state . It was less a new model than the familiar old model with a slightly different chassis.

Now Tony Blair has signalled a break with this tradition. If the signal is followed by action, it will be the best thing to have happened to the British left in my adult lifetime. But the proviso is crucial. It is easy to say you want a stakeholder econom y. It is much more difficult to face down the massive nexus of vested interests - international as well as domestic - which stands in the way.

Moving towards a stakeholder form of capitalism would imply, at the very least, radical changes in company law, radical changes in the financial system, radical changes in industrial relations and radical changes in the relationship between central and lo cal government. The role and status of a company would have to be redefined, so that managers had a duty to stakeholders as well as to shareholders. The insistent pressures of the stock market would have to be blunted. Capital would have to accept organis ed labour as a social partner, and organised labour would have to accept the obligations of partnership. Central government would have to free local government from the financial leading strings of Whitehall, so that local stakeholders could jointly deter mine how best to develop their local economies.

Even this is only the beginning. Stakeholder capitalisms are more competitive in the global market-place, and more popular with the world's currency markets, than shareholder ones. The short-termism, asset-sweating, under-investment and disdain for human capital endemic in Anglo-American shareholder capitalism may be good for property owners in the short term, but they are sure sources of relative economic decline and currency depreciation in the long term. Unfortunately, it does not follow that the world 's financial markets will look with favour on a switch from the shareholder to the stakeholder model in the early stages, before the new policies have had time to work. Without measures to de-couple the domestic economy from increasingly feverish global c apital markets, no such switch can be made. And the only realistic measure in sight is early entry into a European Monetary Union - with all that that implies for the sacred British tradition of absolute Westminster sovereignty.

That leads on to the most radical implication of all. The absolute ownership of the shareholder mirrors the absolute sovereignty of the Crown-in-Parliament, and the absolutist conception of political power that flows from it. Stakeholder economics demand stakeholder politics. And stakeholder politics must be a politics of power-sharing, negotiation and mutual education - a politics that requires the transformation of the British constitution and the reconstruction of the British state. Tony Blair has gone too far to turn back. His only choice is to charge on. When battle starts - as start it will, he will need all the help he can get.