Public consent for selling off British business is Pfizzling out, but it still doesn’t matter
Joe Wright, 7 May 2014
The debate over Pfizer’s bid for the UK drugs giant AstraZeneca continues to rumble on this week. At a price of £63 billion plus, this takeover would be the largest ever of a British company, but one of its least popular. Interventions about the dangers it could hold for British jobs and industry have already come from the Labour leader, successfully demanding an independent review after a £50-a-share bid was rejected by Astra, and from Boris Johnson calling for greater commitments from Pfizer to protect R&D in this country. This morning, George Osborne responded that he will not ‘take lectures’ from the party that ‘has done nothing to protect Britain’s national economic interest’ and allowed the US firm Kraft to buy the iconic British company, Cadbury.
Normally for the parties, this would be a classic battle of ideology. But as shown by the responses from senior Tory figures, laissez faire economics is becoming an increasingly harder sell in post-financial crash Britain; words like ‘big business’, especially of the American kind, and ‘mergers’ leave a bad taste in the mouth.
Pfizer have offered reassurances that their control of AstraZeneca would not endanger British jobs. They have committed to keeping 20 per cent of the new combined company’s R&D workforce in the UK, to continue AstraZeneca’s plans to build a new research site in Cambridge, and to ‘retain “substantial commercial manufacturing facilities” at Macclesfield and protect jobs for five years unless “circumstances significantly change”’.
These commitments will do little to alleviate concerns. The government has already been embarrassed once by ‘gentlemen’s agreements’ this year and now the Swedish finance minister has stepped in to warn of Pfizer’s track record on keeping promises. The company bought the Swedish Pharmacia in 2003 but has since scaled down its operations despite making similar commitments on Swedish jobs. It has so far declined to comment on this merger or its subsequent actions.
In any case, it is not clear the government could stop the merger if they wished, even if internal concerns and public pressure were to mount. The Enterprise Act allows the government to intervene only in bids concerning defence or media companies. The shadow business secretary, Chuka Umunna, has called for the protection of national interests in research & development to be added to the Bill. But, as Chris Blackhurst points out in The Independent, this case would still fall under EU jurisdiction. As it stands, the EU can only block a merger on the grounds that it would stifle competition in the sector, which it is unlikely Pfizer is doing in this case. Vince Cable has hinted there would be grounds to intervene on the basis of tax avoidance if it is true Pfizer’s primary motivation for the merger is to use the UK as a tax haven.
Of course, this debate is all for nothing unless Pfizer can rise to the demands of AstraZeneca’s shareholders. The company has little to offer them in the way of better management: they have no new drugs in the pipeline and suffered a 15 per cent drop in the last quarter’s earnings. Unless it is willing to pay a huge price, it is unlikely shareholders will accept. AstraZeneca’s board also remains unwilling. It is doubtful Pfizer would wish to attempt a hostile takeover given the row a friendly bid has already created. But large mergers have tended to prove impervious to public opinion, such as with Cadbury, and if the price turns out to be right…
EU law is frequently bent to favour national economic interests, Germany and France are particularly enthusiastic users of state aid which breaches EU law. What happens to France and Germany? Well, fines are sometimes levied but then ignored by the French and German governments.
The reality of any supranational law is that it is not really law at all because there is no over arching supranational power to enforce the law on those who break it.
Britain should simply refuse to allow the takeover and the grounds of national interest and ignore any penalties which are imposed by the European Court of Justice.
Economic history suggests that the most effective general strategy to promote economic development in a country is to allow competition within the domestic market (where it does not create serious social discord) whilst regulating international trade through protectionist measures sufficient to maintain the general capacity of a country to point where it can maintain itself in an emergency such as war or blockade and be sovereign in most circumstances.This would require the judicious use of embargoes, tariffs and quotas to ensure that all the vital industries remain as a presence in Britain.
A few industries should be in principle wholly supplied from the British market. These are defence equipment and the various energy sources. The reasons for defence equipment provision being domestic are simple: any foreign supplier can cease to supply goods for political reasons or simply be unable to produce the goods when wanted at all or in sufficient quantities.
Energy supplies should be domestic because if they fail the whole of society is brought to a halt. Self-sufficiency in energy in any advanced country could be achieved in the medium term by nuclear power supplemented perhaps by new sources of energy such as wave and current power and bio-fuels.
A country should also build up a stockpile of essential materials such as metals and the minerals used in the chemical industry. Five years national supply should be a minimum.
A country should be able to feed its population from its own production at a pinch. In Britain this is possible with modern crop yields and animal husbandry. Crop yields are considerably greater than they were even in WW2 and the opportunities for increasing the volume of animal products have multiplied greatly over the past 60 years, for example, in the massive development of poultry farming since 1945.
75% of the market in every other vital industry should be reserved for the domestic market. What is a “vital industry”? Try these for starters: metal (especially steel), chemical, biotech, computers, robotics, motor vehicles, shipping, aerospace, clothing, building, machine tools.
I would also reserve to domestic production at least 25% of the market for goods that are useful but not vital to provide a base for an expanded home production in times of emergency. Trade in wholeheartedly nonessential goods – Christmas trees, pogo sticks and suchlike – could be “free”.
I am not arguing for autarky. What I am advocating are trading circumstances which allow a nation to defend its national interests, particularly in time of war or international crisis. The measures I propose would produce self-sufficiency in food where necessary, the maintenance of the ability to manufacture a complete range industrial goods and most importantly the maintenance of an arms industry which can produce a full range of weapons necessary for the defence of the country.
Such a system would provide the security the state requires and permit very substantial international trade even in essential goods.
Obviously such a regime could not be followed in its entirety by most states. However, all could exist within those parts of it suited to their circumstances, for example, Britain could manage the entire regime, many third world countries could be self-sufficient in food.
Read more at http://livinginamadhouse.wordpress.com/2012/04/20/free-markets-and-free-trade-elite-propaganda/