Former business secretary distances himself from remark that was seen as maxim for Labour's embrace of free markets
Lord Mandelson has admitted he is no longer "intensely relaxed about people getting filthy rich as long as they pay their taxes", given rising inequality and stagnating middle-class incomes brought about by the damaging downsides of globalisation.
Almost a decade and a half after making the remarks, which were seen as characterising the Labour government's embrace of free markets and the City, Mandelson said he was "much more concerned" about inequality than when he made first made his comments to a US industrialist in California in 1998.
Describing his previous remarks as "spontaneous and unthoughtful", Mandelson who has held a number of government posts during his long political career but was most recently business secretary in Gordon Brown's government, said he would not repeat them today.
Speaking on BBC Radio 4's Today programme after the publication in Davos on Wednesday of a thinktank report on the future of globalisation, Mandelson said: "I don't think I would say that now. Why? Because amongst other things we've seen that globalisation has not generated the rising incomes for all."
In an about-turn from one of the staunchest defenders of free trade and globalisation on the left, the former European trade commissioner also made the argument for greater government control and economic intervention and said he believed the UK needed to develop a "modern industrial policy".
Governments, he said, needed to help far more with "pump-priming" the economy, adding: "We have got to do far more in our country and the government has got to help the private sector to do this, to innovate and specialise in the production of high-value-added goods."
Mandelson said that in his initial embrace of globalisation he had taken for granted it would generate rising incomes for all but that instead the middle class were facing stagnating incomes and unacceptable levels of inequality within countries.
In a foreword to the report, titled The Third Wave of Globalisation and published by the Institute for Public and Policy Research, Mandelson writes: "People simply do not want to live in a world that puts abstract economic efficiency or "liquidity" in financial markets above their personal sense of economic security for themselves and their families. It is hard to argue that they are wrong."
Speaking about Ed Miliband's political predicaments, Mandelson said the right wing had been good at handling rhetoric of austerity and deficit reduction but warned the centre-left against reverting to old arguments and "business and bank bashing".
"It's not going to get them anywhere at all," he said.