This sentiment may derive from a streak of Puritanism in me, but I have always believed that progress comes at a price. You never have it entirely your own way. If life gets better, it gets harder. We have more material wealth today, more freedom, more opportunity to travel, communicate, work and fulfil our ambitions, but the choices are tougher, our responsibilities greater, the forces that shift and sway our lives, more ferocious and far-reaching.
This has profound implications for people; and for politics and Government. Change is opening up new horizons; but there is fear of what may lie within them. Technology and global financial markets are transforming our economies, our workplaces, our industrial structure. Economic change is uprooting communities and families from established patterns of life. The way we live, as well as the way we work, our culture, our shared morality, everything is under pressure from the intensity and pace of change. What's more, there's much of the change we like as well as worry about. It can be exhilarating. But it is certainly unsettling.
Ask any parent what's the hardest thing and they'll tell you: knowing what you should really get uptight about; and what you simply have to shrug off as part of the modern world the kids of today live in. Get it wrong and we all end up sounding like our fathers.
The result of all this change, economic and social, is that the instinct of the people towards Government is subtly altering. The opening of the 21st century has seen a move away from a very narrow, perhaps selfish, individualism towards ideas of belonging, of community, of a self-interest that is mutual. "Set me free - get off my back" is probably and understandably still the feeling of business towards Government in respect of business itself; but for the wider society, the feeling is more "give me a helping hand". People want us to manage change with them. Not resist it - that would suffocate opportunity; but not laissez-faire either, not just letting it happen, regardless. They look for economic security, for them and their families. They look for social stability, some fixed points, some rules.
Don't misunderstand me. None of this means a desire for Big Government. In fact, the opposite is true: Government itself will be expected to change dramatically, as I shall say in a moment. Heavy-handed state intervention, the battle between capitalism and socialism in anything like the terms my grandfather's generation would have understood it, is dead and buried. But the idea of values, of collective purpose and therefore of community or collective action - of bonds of connection - is not. It is being renewed.
Moreover, the nature of our world and its challenges mean that nations themselves increasingly need to co-operate more. The challenges to virtually all of us today are common. Of course they are different in scale. Of course, nations are a product of their own individual history.
But even as between developing and developed nations, it is the similarities in the economic and social issues that often mean more than the differences. And as for within the developed world, the challenges are virtually identical. One reason I am so keen to foster debate between the US and Europe is that we can hugely exaggerate the gulf between us in intellectual and political terms. In fact, the priorities are largely the same. It just suits our political cultures to ignore it.
Politics is going global. All of us are seeking to make sense of, and manage, change.
But the effect in the role of Government is profound. The key to the management of change is reform. The pace of reform has to match the pace of change. Societies that are open, flexible, able easily to distinguish between fundamental values, which they must keep and policies, which they must adapt, will prosper. Those that move too slowly or are in hock to vested interests or what I have called elsewhere forces of conservatism, reacting negatively to change, will fall behind.
So, Government has a role. But the role is to lead reform, to equip the country and its people for change. And what is more, it must articulate the case for reform by allying it to a purpose for the reform, to a vision of the future; to the values that underpin it. In this way, political direction and leadership can exert their own beneficial modernising force.
The vision, is of a society where we liberate the potential of all, as workers and as citizens. What is the agenda of reform to get us there?
The most obvious is the challenge of the so-called "new economy".
In thinking about the potential impact of the new economy, it is interesting to start by recalling the sad experience of the 1970s. A decade or more of economic failure was driven by one simple phenomenon - a quintupling in the price of oil, which at the time was by far the most important commodity in the world system.
Higher inflation, rising interest rates, deteriorating government budget deficits, declining productivity growth, and rising unemployment - all of these disasters stemmed directly from the shock in the oil market.
Twenty years on from the oil shock of the 70s, most economists would agree that oil is no longer the most important commodity in the world economy. Now, that commodity is information.
In quick succession - starting from the mainframe, passing through the PC and now reaching mobile telephony and the internet - new digital products have exploded on to the scene. As a result, the price of acquiring and processing information has been declining by about 30 per cent per annum for much of the past decade.
And this favourable "information shock" - rather like a reverse oil shock - has had profound effects throughout the global economy.
In the United States, these effects have become so important that they have led to an improvement in the performance of the entire macro economy. The digital sectors of the US economy still only amount to about 8 per cent of GDP, but they have accounted for about 35 per cent of the growth rate in recent years. And the drop in computer prices has shaved almost one per cent off the inflation rate each year.
The disciples of the new economy in the United States often make dramatic - some would say exaggerated - claims about its impact.
Nevertheless, both the Federal Reserve and the IMF appear to believe that there has been a significant increase in the underlying growth of productive potential in the latter half of the 1990s.
- A more stable economy.
- The possibility that much lower unemployment can co-exist with low and stable inflation.
- And higher productivity growth.
All of these improvements have characterised the United States economy in recent years.
So far, not all of these advantages from the new economy have crossed the Atlantic. There is relatively little evidence that either productivity growth or inflation in continental Europe has yet been affected by the digital revolution, despite the fact that Europe actually leads America in some crucial new sectors, including wireless telephony.
It is quite possible that the next major development of the web - m-commerce, or access to the internet on mobile handsets - will take off in Europe before it does in the United States. Furthermore, Europe is now rapidly playing catch-up with America, with growth rates in general internet usage actually exceeding the rates in the United States.
The coming explosion in B2B (business-to-business) e-commerce could occur just as rapidly in Europe as in the United States. And I have seen estimates which suggest that the growth of B2B-commerce will have an even more dramatic effect on prices and employment than anything we have seen from the web in the past five years.
Where does Britain fit into this picture? Sometimes, we tend to take it for granted that our cultural and linguistic links with America will automatically give us an advantage in the development of the new economy.
Around three-quarters of all the websites on the net use English as their main language.
Furthermore, the penetration of the internet among British households has occurred more quickly than in most continental European economies. UK e-commerce transactions in 1999 were already worth around ??3 billion, and we think they could grow tenfold to around four per cent of UK GDP by 2002.
The UK has the advantage of a liberalised and competitive telecommunications market, a good track record for early deployment of new technologies, and major strengths in broadcasting and content industries.
As in America, Britain has seen a prolonged and stable economic expansion - and we seem also to be experiencing a significant drop in structural unemployment as labour market reforms take effect.
We in Britain would be very foolish to rest on our laurels in any of these respects. In some aspects of business and consumer e-commerce, especially in its application in the small business sector, we lag behind Canada, Australia and Scandinavia - and both Germany and France are trying to catch us fast.
We have set ourselves a demanding target - we wish to become the best environment in the world for e-commerce by 2002.
We intend to ensure that the cost of internet access will be competitive. And we intend e-commerce transactions to play a more dominant role in the activities of UK individuals, businesses and government than anywhere else in the world in three years time.
The public policy questions raised by the growth of the new economy in the next few years may turn out to be much more profound than many have yet realised.
After all, the social and political structure of the Western world has always been moulded by economic change - from the agrarian system of the 18th century, to the industrial revolution of the 19th century, and factory mechanisation in the first half of the 20th century.
More recently, we have seen sharp growth in services, and this has now taken a new twist with the rapid spread of digitisation. Some economists believe that these changes will have profound social effects, including on the growth of cities, the optimal size of businesses, the structure of families, the need for transportation, and the like.
I do not pretend to know how all of this will work out, but several key lessons for policymakers already seem clear.
- First, the growth of the new economy will not diminish the absolute requirement for fiscal and monetary policy to be oriented towards discipline, stability and transparency. We certainly have no intention of relaxing our efforts in any of these directions in Britain in the years ahead.
It is troubling that some economists believe that the new economy in the United States may be increasing the likelihood of economic instability, by fuelling a boom in stockmarket prices which could later turn into a bust.
Previous periods of strong technological advance - whether the growth of the railway system in the mid 19th century, or the expansion of radio in the 1920s - have often been associated with excessive gains in stockmarket prices.
And equally often, the re-entry phase after these periods of excess has been very painful.
We must remain mindful of these lessons from history.
The best way of ensuring that these painful episodes are not repeated is to watch our inflation targets like a hawk, and to ensure that our fiscal targets are set with the utmost rigour and discipline. I can assure you that we have every intention of maintaining these disciplines in the United Kingdom, which is why we gave the Bank of England independence and introduced an entirely new framework for fiscal policy.
- Second, the arrival of the new economy may involve a period of accelerated change in industrial structure. Indeed, this is always a side effect of rapid technical change.
Rather than Government trying to pick winners or back particular industries or businesses, Government should have a role that is enabling: supporting small businesses; encouraging technological advance; investing in science; above all, promoting competition and removing the barriers to business growth.
- Third, our welfare systems and labour markets will require fundamental reform. In Britain, this has taken the shape of major changes in: unemployment benefit; disability; the treatment of single parents and pensions. We have been careful to preserve flexibility in our labour markets and re-shape the Employment Service around an active strategy for work.
Most of all, in an economy dominated by information and knowledge, education is king. Not just in school or university but throughout life. This idea is now a truism. But its implications in terms of reform are still not properly addressed. Investment is critical. But our entire system of educating and developing the potential of people needs radical change. In Britain, we have extended nursery education, reoriented our primary school system around numeracy and literacy, are now opening up our comprehensive system at the secondary stage, to far greater diversity, choice and a relentless drive on standards. Teachers' contracts are being reformed to link pay to performance. Education authorities that fail can be contracted out to the private sector. Each stage of the system through to the teachers training colleges themselves are being opened up to rigorous inspection, with results published.
We have already reformed student finance for our universities. We are expanding student numbers. But there is much, much more to do.
Every pupil denied decent education is a national resource squandered.
This year, we are trying to raise educational attainment amongst adults. A whole network of adult learning centres are being established, incentives provided to upgrade skills and a new University for Industry established through the use of internet technology.
Yet if this sounds ambitious, my continual worry is that it is not ambitious enough.
And whilst on the subject of education what makes sense for the industrialised world is imperative for the developing world. 150 million children of primary school age in developing countries do not go to school and over 900 million adults, two thirds of whom are women, are illiterate. That is why I attach such importance to the Jomtien target of universal primary education by 2015. Our aid budget now reflects this priority, with over ??800m being focussed on educational priorities. It is part of a comprehensive strategy linking education, debt relief, trade, economic development and good governance.
So there is a big agenda here for reforming Government.
For the EU, at Lisbon in March, we will reach a decision point on economic reform. Does Europe continue with the old social model, that has an attitude to social legislation and welfare often rooted in the 60s and 70s or does it recognise that the new economy demands a re-direction of European economic policy for the future? I would like to see Lisbon mark a definitive turning point towards the reform agenda, retaining the values of the European social model but changing their application radically for the modern world.
On the Euro, Britain has set out our position clearly. In principle, in favour. In practice, the economics, given our economic cycle, must be right. The timetable, predicated on the economic conditions, remains as we have set it out repeatedly.
But, leaving aside the UK position for a moment, the Euro should be a spur for reform. Costs will become transparent; inefficiencies less masked; competition stimulated.
The alternative - protectionism - will not work; and is, in any event, highly undesirable.
The question for Europe is clear: can it take on the attitudes and interests of the past and move decisively to gain a lead in the new economy and industries of the future? We will work to see that it does. If it does, it will make a big difference to re-building confidence that Europe can move forward again; and it will make a big difference to British attitudes to Europe.
Let me return to the purpose of reform.
At the heart of the public policy towards the new economy is the idea that helping people in the new economy is not about protection but empowerment. An economy based on knowledge is one where people are the greatest national resource. The old left idea of equality in the sense of uniform outcomes or income is replaced by the notion of equal worth. Each person has value; has potential; our common task is to develop it.
The result is not just a change in economic policy - from regulation to education, for example; but a change in social policy. Indeed the two become linked. So reforming our welfare and labour markets, promoting educational excellence for all, throughout life, become major policies of social emancipation. The bane of all modern developed nations is social exclusion - a group of people, set aside from society's mainstream, alienated, unmotivated, often existing in a murky sub-culture of crime and drugs. They need to be offered a deal, not some more benefit. Our largest single Government programme is the New Deal for the unemployed. It has halved youth unemployment. The benefit rules are tough. But the jobs and skills are real. The new Working Families Tax Credit and lower starting rate of tax is making work pay.
The next step is to get the new I.T. to the poor as well as the comfortable.
We have to expand the winners circle, open up opportunity. That needs active Government, reforming Government, but underneath this process is a change in the essential social contract.
The economic challenge has a corresponding social challenge. Society is changing. Multi-cultural. Multi-racial. Women work. Many families are under strain. Inner cities have ghettoes of deprivation where life is often hopeless, though they are cheek by jowl with areas of great prosperity.
Ask our citizens what their chief social priority is and many would answer: crime: if they are a parent, crime linked to drugs. This is not the place to explore the new society in detail. Let me just make this point. On all three social questions, they are ultimately about creating a new sense of citizenship based on rights and duties going together. People want a society free from prejudice but not free from order, rules and values. They want a judgement on our conduct towards each other that is fair; but they want a judgement.
That is why the 60's agenda that tended to be liberal on sex, race, sexuality, welfare and crime has given way to a new agenda that is liberal on lifestyle and race but hard on crime and at least firm on welfare. It is no longer just conservatives who talk of zero tolerance of crime. But again, criminal justice systems, policing, the treatment of children, supporting families in a way that corresponds to the lives real people lead, are all way out of date with how today's citizens want their society governed. Reform, here, too is vital; and some of it depends on value judgements that politicians are uncomfortable making.
What applies at home within a nation; applies abroad between nations. Just as citizens within a country reach out for the strength of the community to help them confront the challenge of economic and social insecurity, so nations are coming together to promote trade and prosperity, peace and international order.
Global financial architecture, world trade, environmental pollution, third world development, the prevention of nuclear proliferation, the resolution of conflicts - it is again a commonplace that these require us, as nations, to work together ever more closely.
Yet again, we need far-reaching reforms. The institutions of world governance are often cumbersome, usually fashioned decades ago, in a different era, and immensely difficult as instruments of action. Governments react at a number of different levels to international issues. There are regional alliances that work permanently which they are part of, like the EU. Governments take care with those.
Then there are crises of an international nature which Governments focus upon and manage; like Kosovo or the 1998 financial crisis. Here activity is intense; Government energy and purpose is directed.
Then there are problems which could become crises and our Governments deal with, but often find it harder to focus intensively upon; or issues which are undoubtedly serious but where our public opinion does not readily accept our national interest is either immediately or very directly engaged; like the Congo; or like the WTO; or Kyoto.
It is this last category that concerns me. Each individual national Government doesn't have the space or time to focus or not in a way that is enough to resolve the problem. Here we are dependent on working with our international institutions. If they fail, no politician pays an immediate price; but the world could pay a heavy one at a later date.
We need, therefore, to ask fundamental questions of reform about our systems of world governance: such as the IMF and the World Bank; the UN; NATO; the WTO. What do we need them to do? How do we reform them to do it? What are the rules and principles that we want to determine how we act as an international community?
Nations, it is said, act out of self interest. Anything else is delusion. This is true but recognising we are part of an international community is in our self interest.
Since this is an economic forum, let me just develop this briefly in respect of international economic issues.
There is no point in pretending that the events in Seattle were not a setback for the cause of global free trade.
But what should our mature conclusion be, now that we have had time to reflect on what happened?
Our conclusion should not be that open markets and free trade are wrong. The worst thing we could do for developing countries would be to shelve the trade liberalisation agenda and sit back while trade barriers were re-erected around the globe.
The right conclusion is that we have an enormous job to do to convince the sincere and well-motivated opponents of the WTO agenda that the WTO can be, indeed is, a friend of development, and that far from impoverishing the world's poorer countries, trade liberalisation is the only sure route to the kind of economic growth needed to bring their prosperity closer to that of the major developed economies.
Furthermore, free trade is not inconsistent with rising standards of environmental protection.
But these arguments must be put persuasively and carefully. And we must engage directly with the concerns of those who are not yet persuaded. There is no point in thinking that if we ignore dissent, if we dismiss sincerely-held alternative views, that they will just go away. History teaches us that just does not happen.
Like Pascal Lamy, I believe we can and should try to launch the new trade round this year. We cannot afford another Seattle, but nor can we afford to postpone the massive gains that a successful new trade round would deliver.
To kick start the process, we need the early establishment of an Eminent Persons Group to provide advice on how to improve the WTO's working methods. We need more transparency and more effective processes for building consensus. This need not take long. I see no reason why such a group could not provide early conclusions by the summer.
And to help re-build momentum, I hope that the US, Japan and other developed countries will join the EU in immediately offering the Least Developed Countries duty free and quota free access for nearly all goods.
We face a similar challenge in relation to financial markets.
I imagine that most people in this hall would regard it as axiomatic that open money and capital markets are the best means of ensuring that investment flows to the most attractive opportunities, and that that is how economic development is best promoted.
But to many people in South East Asia and elsewhere, who lived through the financial crises of 1997 and 1998, those arguments do not seem so firmly based.
They point to the huge swings in capital flows they experienced, as footloose money moved into and out of their markets. They point to dramatic exchange rate movements, well out of line with any change in economic fundamentals. They argue that their markets were destabilised by huge institutions seeking short-term profits at their expense.
Once again, we must ensure first that we analyse these episodes properly and carefully. And second we must draw the right conclusions from that analysis.
Serious analysis shows that in many of the worst affected countries there were major underlying problems in their financial sectors. In some cases, the banking system was effectively bankrupt. And there was no effective regulation, certainly not regulation which matched international best practice.
In these countries, it is clear that opening up their financial markets, particularly borrowing in foreign currency, without paying attention to the need to maintain a healthy domestic financial system was a dangerous course to take.
Once again, that should not lead us to conclude that open capital markets are not an appropriate objective for the longer term. I believe they are.
But if we are to make progress in that direction, we need to address the reasonable concerns of countries who believe that their markets have been damaged.
This is not just a technical issue. Though it is true that we need a better understanding of the dynamics of world capital markets, and the interaction between them.
It is also an important political issue. Developing countries should feel confident that their concerns are assessed and addressed, and that they are properly involved in the work of the international financial institutions.
That was one reason why we now have the G20, and why Gordon Brown last year proposed the creation of the Financial Stability Forum, with membership beyond the G7, to look at these important financial market issues. The aim is to strengthen our ability to spot problems before they go critical - a financial early warning system, if you like. But also to undertake careful analysis of problems as they emerge, and produce solutions to them which carry the support not just of policy makers and financial institutions in New York or London, but of those in Hong Kong and Singapore too.
My case is that the forces of change are pervasive and fundamental; that they require nations to adapt and reform with equal rapidity; and that though the role of Government may be new, its ways of working radically different, it has a role and our citizens know it and want the role performed.
Here is my final point. Reform is painful. Its effects are often long-term. The pressures on politicians with a 24 hours a day news media are short-term.
The news agenda is relentlessly driven by scandal and controversy, sometimes serious, often not, policy or debate coming a poor second. The art of political leadership is changing. We have to find ways of communicating with people more profoundly and of sharing responsibility with our citizens more directly. And the Government machine itself cannot dictate reform to others unless it is showing willingness to reform itself.
Let me summarise. Alongside the advance of global markets and technologies we are seeing a new search for community, locally, nationally and globally that is a response to change and insecurity, but also reflects the best of our nature and our enduring values. With it is coming a new political agenda - one that is founded on mutual responsibility - both within nations and across the world.
We have the chance in this century to achieve an open world, an open economy, and an open global society with unprecedented opportunities for people and business. But we will succeed only if that open society and economy is underpinned by a strong ethos of mutual responsibility - by social inclusion within nations, and by a common commitment internationally to help those affected by genocide, debt, environment.
I call it a Third Way. It provides a new alternative in politics - on the centre and centre-left, but on new terms. Supporting wealth creation. Tackling vested interests. Using market mechanisms. But always staying true to clear values - social justice, democracy, cooperation.
I believe that from Europe to North America, Brazil to New Zealand, two great strands of progressive thought are coming together. The liberal commitment to individual freedom in market economy, and the social democratic commitment to social justice through the action of government, are being combined.
We know that our success will depend on whether we can change as fast as the environment around us. And we know that we will be judged on whether we deliver practical results for our citizens.
I am, despite it all, a political optimist. For there is one other big change. There is the possibility of a new political consensus around much of what I've talked about: in terms of values and in terms of policy debate.
The 20th century was a brutal lesson in the need for tolerance, understanding and commonsense about human nature. The 21st century will not be a battle around ideology. But it will be a struggle for progress. Guided not by dogmatic ideology but by pragmatic ideals, it can be achieved.