AstraZeneca: UK establishment to rob pensioners?
There's a gang, comprising the Labour leadership and assorted other protectionists, which is placing the forces of the political market before Britain’s long-term national interest
A loud, swaggering gang based in inner London is offering protection to rich yet possibly incompetent executives and it is doing so at the expense, in part, of pensioners, widows and orphans. Where is the outrage?
The gang, comprising the Labour leadership and assorted other protectionists, are placing the forces of the political market before Britain’s long-term national interest.
I have no opinion as to whether AstraZeneca shareholders should sell to Pfizer. But it is clear that the just and efficient way forward is for the shareholders to decide if they should cash out or not. The politicians are acting ultra vires and need to butt out.
This episode serves to remind us how populist, interventionist politicians beggared Britain before the Thatcher renaissance. Let’s review the many ways the soap-box jockeys have called this one incorrectly.
AstraZeneca is not “British owned”. It belongs to its shareholders, including presumably pension funds and insurance companies who have a moral as well as legal duty to do right by their ultimate beneficiaries.
Anyway, only a quarter of AstraZeneca shares are British owned. Almost half are owned by US investors. Some five sixths of its staff are based overseas. Its CEO, Pascal Soriot is French, the Chairman is a Swede, and its sales are global.
There is nothing wrong with any of that. It has a presence in the UK because it is in its interests to have that presence. If the British staff are excellent the majority would keep their jobs under an ownership change. As Sir Richard Sykes, former head of GSK said, ‘ownership is irrelevant’ provided that there is strong encouragement to do the drug discovery and development here.
If some jobs are cut to reduce duplication, ultimately that means cheaper medicines. Those made redundant would seek work elsewhere or start their own firms. They are not hapless. Schumpeter called this process “creative destruction” – a harsh-sounding phrase, but the fundamental truth behind that phrase is what drives capitalism forward and raises our living standards.
A heretical question: is big pharma, or even R&D, on their exact current scale, really “strategic”? In the seventies it was often sagely noted that Britain couldn’t survive without the capacity to produce twenty million tonnes of steel, and to prosper we had to mine a hundred million tonnes of coal.
Yet those industries withered in the face of cheap imports, and new (better-paying) industries arose that were never envisaged by politicians: IT, mobiles, genetic engineering, and a huge Japanese car plant amid what was once a great coalfield.
It is not clear why the UK’s long-term interest should be in R&D to precisely the same degree that it is today: finance, production, logistics, and marketing all make a contribution to the value chain – perhaps they should grow (or decline) relative to R&D: who is to say? At what point do we put our economy into deep freeze?
AstraZeneca and other pharma companies might well prosper in the UK, I suspect some of them will – they will have every opportunity to do so if taxes are low and students well educated – but it is not for the state to protect them or rig the market at the expense of a particular firm's shareholders. If Ed Miliband thinks AstraZeneca is a great British company then by all means let him buy some of its shares with his own money.
There is a profound question of property rights and liberty here. If Miliband was told that in future he could only sell his house to people who already lived in Primrose Hill (support the locals!), that the new owners had to retain Ed’s cleaner (jobs!), and that the curtain colour must never change (heritage!), then Ed and Mrs M. would feel pretty aggrieved.
They had saved hard and spent time and money on (ahem) tax planning to own their home, and then along comes some clever clogs who says the house is not fully theirs to dispose of. Where’s the fairness in that?
There is also the question of investment and jobs in Britain in the long term. People from Britain and worldwide put money into British firms because they know they can get the money out again. Protectionism and xenophobia do not “save jobs” – they drive away investment, retard specialisation and comparative advantage, and they create international friction where there could be cooperation (trade).
During the European election campaign left-wing commentators have spoken against supposed attempts to restrict the free movement of labour: but they have gone AWOL on the free movement of capital. Indeed, it is questionable whether Miliband’s proposed intervention is allowed under EU law.
It is certainly discouraged under British law: Labour brought in the 2002 Enterprise Act in part to get politicians out of the take-over process. Remember that when politicians cite past “broken promises” on the part of Pfizer and others.
This is not a story of asset stripping. Pfizer wants to invest in AstraZeneca because AstraZeneca has assets to develop and also Pfizer wants to invest in the UK as HM Government steadily builds a low-tax, high growth economy. Indeed, KPMG and PwC have both recently reported strong interest among foreign companies in headquartering in the UK. Hitachi Rail and Starbucks are among the HQs coming to Britain, bringing with them jobs, rent, and tax receipts.
Earlier this month Fiat-Chrysler announced that it was to move its global HQ to London as the UK is a relative tax haven. Good news, you might think: Yet perhaps in the confused world of Ed Miliband we should rue that “Another great British office block has fallen prey to Johnny Foreigner”.
If we are an open economy with low taxes we will prosper. If we close up or if we leave investors prey to the ill-educated forces of the political market place we will stagnate economically and culturally.
Side with the shareholders’ right to choose.
Andrew Gibson is an occasional contributor to The Commentator
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