Andrew Fisher on the reaction to Pfizer's attempts to take over AstraZeneca
Ministers are panicking. A US pharmaceutical giant is attempting to take over a UK pharmaceutical giant. Both Pfizer (US) and AstraZeneca (UK) are part of the Big 6 Pharma companies.
Surely this is a case of the free market in action though? Why are the free market advocates of Cameron's Tories and orange book Liberals getting wound up by this perfectly normal corporate activity?
It is made all the more odd since part of the reason for Pfizer's offer is to take advantage of the UK's tax haven status, as our corporation tax rate of 21% (falling to 20% next year) is far lower than the US rate of 35%. This is exactly what Osborne wanted when he set out his strategy at the 2012 Budget, a lower UK corporation tax rate was "an advertisement for investment and jobs in Britain". (Richard Murphy sets out a brilliant critique of tax competition in relation to the Pfizer deal here).
The problem for Osborne and the government is that there are fears this takeover would mean less investment or jobs in Britain. So Business Secretary Vince Cable has been trying to gain commitments from Pfizer to continue investment in UK research facilities and the maintenance of UK jobs.
Today, Labour leader Ed Miliband has entered the fray with a letter to David Cameron, in which he says "we also all recognise that too often in recent years major takeovers have failed to deliver the promised benefits".
Miliband is referring to the previous experience of US food giant Kraft taking over UK food giant CadburySchweppes. At the time of takeover in 2010, Kraft promised to keep a Bristol factory open. But just a week after the deal went through, Kraft backtracked and said it would close the plant. That's the free market though, right?
Miliband advocates "a stronger public interest test" for corporate takeovers in his letter. This may be less surprising coming from Miliband since state intervention in the market, for the public interest, as become the key theme of his leadership, including the print media post-Leveson, in the energy markets, and most recently with regard to home rentals (while continuing to tease over the railways).
But why are the free market enthusiasts, who have scorned Miliband's above interjections (at least initially), been spooked by Pfizer? Well because this is the point at which nationalism and neoliberalism clash. By nationalism, I mean the laudable democratic and electoral concerns about what is in the interests of UK's people - our jobs, industries and living standards. But I also mean the nationalistic pompous concern that the UK should be seen to be a world leader in some industries, an international player, which allows UK politicians to bask in the reflected corporate glory - and the concerns that Johnny Foreigner might take over a well known British brand.
BBC reports that: "Pfizer told Mr Cameron it would go ahead with Astra's planned research and development (R&D) base in Cambridge, and retain its Macclesfield manufacturing facilities. Pfizer also pledged that if the deal went ahead, 20% of the combined company's R&D workforce would be based in the UK".
But the BBC also adds that: "The US firm said its commitments would be valid for five years, unless circumstances changed significantly" (my emphasis). In light of the Kraft takeover, I'm sure I won't be the only one concerned that Pfizer's words might melt in the mouth like Cadbury's chocolate.
This concern also afflicted the Thatcher government when they privatised BP. As I document in my new book, The Failed Experiment ... and how to build an economy that works:
"when BP was fully privatised in the late 1980s, significant consternation was caused when the emir of Kuwait bought a significant shareholding in the company. BP was not just another privatisation. Oil made the economy go around and the Thatcher government did not want a Middle Eastern government to have sway over the UK in such a crucial area. The free market ideology of the Thatcher government butted up against the nationalism of her party. The Prime Minister, Chancellor and Foreign Secretary all met to devise a way to keep privatised BP in the hands of “one of us”, as Thatcher might have said – and so a UK buyer was found. The government recognised the need for strategic control of a national asset, even as it was selling it off. This highlights a great contradiction"But the national credentials of AstraZeneca are not really that strong - only one-eighth of their workforce is UK based (though a not insignificant 6,700 are UK jobs). And the secret of the pharmaceutical industry has been to generate huge profits by patenting state or state-funded or state-subsidised research and selling it back to public healthcare systems at a lavish profit.
In any sane economy, the pharmaceutical industry would be publicly owned - and neither would the patents that price sometimes vital medicines out of the reach of the poorest in the world and cause rationing in public healthcare systems. The pharmaceutical industry is both too important to fail and too important to be left in the hands of unaccountable profit-maximising corporate interests.
To any politician dedicated to the public interest this would be obvious. But today's politicians are either captured by corporate interests or too impotent to act. For the latter there's always Viagra, produced by Pfizer ... although I'm not convinced there is a drug on the market to stiffen resolve.