There could be no clearer case than Pfizer to show just how predatory and rotten is the international finance capitalist system. It will kill what is left of our productive industry and starve us in its prison until we break free...
The wolf has gone away, for the time being. US pharmaceutical giant Pfizer, the largest drug company in the world, has abandoned its bid for AstraZeneca, and under Britain’s takeover rules won’t be able to make a new bid for at least six months. But the saga has shown just how fragile the country’s productive base is, how little the government can do about it – and how little the government wants to be able to do anything about it.
British scientists discuss one of AstraZeneca’s research compounds, AZD9291, a potential lung cancer treatment.
Photo: Marco Betti/AstraZeneca plc
Unions in the industry welcomed the news that Pfizer’s “final” bid of £55 billion had failed. Unite and GMB, mindful of the catastrophe that unfolded after Kraft took over Cadbury and gutted that old-established British company in 2010, have been campaigning to stop the takeover. At stake are thousands of jobs – AstraZeneca employs 6,700 workers here – and the country’s industrial base (see Box, right).
AstraZeneca is a crucial part of what is left of Britain’s research and industrial base. On its own the company accounts for around 9 per cent of Britain’s entire spending on research and development (R&D) – a figure which reflects not just the costs of pharmaceutical development but also how little many other companies spend on innovation.
For its part, AstraZeneca has been no angel. In March 2010 it closed down its Charnwood research centre near Loughborough, destroying 1,200 jobs. It followed that in 2013 with the announcement that it is to close Alderley Park research centre, making hundreds redundant and moving the rest to Cambridge, where it plans to set up a global cancer research facility.
But it is a British-based company that sees its future in Britain. It was formed in 1999 out of a merger of Astra, an 86-year-old Swedish company, and Zeneca, itself created in 1993 when ICI hived off its pharmaceuticals (and other) businesses.
AstraZeneca still has major facilities in Sweden, employing 5,900 people there, many at its Mölndal research centre outside Gothenburg. It also has a big site at Gaithersburg, Maryland, US, with around 3,000 workers.
Pfizer hadn’t even bothered to give “guarantees” about employment or R&D outside Britain. So US and Swedish workers will share the delight of those in Britain that Pfizer has failed to have its way.
Swedish trade unions are still smarting from Pfizer’s takeover of Pharmacia more than 10 years ago. “It is enough to look at what happened after Pfizer bought Pharmacia in 2003; the Swedish operations are dramatically scaled down, and today only a fraction is left,” said unions Unionen, Akademikerföreningen and IF Metall in a statement.
Corporate lawyers, accountants and PR firms will be distraught. Their slice of the pie, according to City experts, would have been around £350 million, perhaps more. Tough.
Handcuffed by the EU?
Anyone who thinks that when it comes to the crunch it makes any difference whether we have a Labour or Conservative government should just look at what they say and what they do.
Prime Minister Gordon Brown in 2010: “We are determined that the levels of investment that take place in Cadbury in the United Kingdom are maintained and we are determined that, at a time when people are worried about their jobs, that jobs in Cadbury can be secure.”
Prime Minister David Cameron in 2014: “The government quite rightly should be neutral in this. What we should do though is always be engaged with both companies – as we have been – to try and make sure that whatever the outcome, British science, British jobs, British manufacturing, that they get a proper and deserved attention.”
Peter Mandelson, business secretary at the time of the Kraft takeover of Cadbury, at least had the grace to acknowledge that he was powerless to prevent the takeover. One reason he was so impotent then and Cameron is now is the Enterprise Act of 2002, brought in under a Labour government, which enshrined in UK law EU definitions of when governments can intervene in mergers.
Those definitions in British law are precise. They refer to mergers involving national security and defence, media plurality and (following an amendment after the 2008 crash) banking stability. The notion of “public interest” touted recently by Labour business spokesman Chuka Umunna in relation to AstraZeneca is in fact specifically restricted to media ownership.
To put it another way, the EU’s rules are not designed to permit Britain to defend its industrial and research base. Politicians don’t like to mention this, because it shows how impotent they are and how much the EU rules our lives.
The other reason they are impotent is, quite simply, choice: they believe the free market is the best of all possible worlds, and government intervention the worst.
That’s why Labour and Coalition governments have consistently implemented EU directives and regulations about competition and merger into British law in ways that ensure we cannot defend our industrial base (unlike France where, to a very limited extent, the law allows a certain degree of protection).
So when politicians say their hands are tied, they are right. But they crafted the handcuffs and put them on themselves.
Among other things, the takeover bid highlighted the fragile existence of workers in pharmaceuticals, an industry awash with cash in search of profit-generating investment. Pfizer, for example, is holding $49 billion in cash, and needs to find a home for it.
It may seem a paradox, but the only way of finding a home for that amount of money involves destroying value on a giant scale. Capitalism’s way forward is to spend vast amounts of cash buying a competitor company, then to strip the assets and dump a large part of the workforce. Merger and acquisition is its essential mode of operation and the cancer in our economy – it really has no interest in R&D.
If all of this sounds crazy, well, it is. Pfizer in particular has a track record of shelling out a fortune buying companies, hollowing them out, and finding itself back where it started: full of cash but devoid of promising new products to fuel the next generation of profits. Because the company has so much capital it must choose M&A not R&D.
Packaging blister strips of stomach drug Nexium at AstraZeneca’s Macclesfield facility.
Photo: AstraZeneca plc
Since 2000 Pfizer has bought large and innovative pharmaceutical companies, most notably Warner-Lambert for $90 billion, Pharmacia for $60 billion and Wyeth for $68 billion. As David Barnes, former chief executive of AstraZeneca told the BBC on 6 May, that spending spree didn’t lead to more research. On the contrary: the combined R&D spend of the merged companies is $3 billion less than before the acquisitions, according to official EU figures.
To put that in context, Pfizer’s R&D spend in 2013 was $5.7 billion – so it has effectively reduced its combined R&D activities by a third or more. The result is that while Pfizer is the largest drug company in the world, and probably the richest, it is only the fifth-largest spender on R&D.
Call that investment?
Among the laws any sensible country would possess would be one banning the use of the word “investment” to cover asset stripping. One reason Pfizer was so keen to buy AstraZeneca was because its corporation tax in Britain is just 10 per cent, against 35 per cent in the US. Buying AstraZeneca would have allowed Pfizer to domicile itself in Britain and save between $1 billion and $2 billion a year in tax. That’s not investment, it’s tax avoidance.
The government says its low company taxation is great because it encourages investment. It does nothing of the kind: it encourages takeovers and dismemberment, and does nothing to safeguard jobs or Britain’s future.
However much politicians tell us our existence as a class depends on making capitalists rich, Karl Marx was bang on the nail back in 1849 when he wrote: “Even the most favourable situation for the working class, the most rapid possible growth of capital...does not remove the antagonism between his interests and the interests of the bourgeoisie, the interests of the capitalist.” (Wage Labour and Capital, 1849.)
At the end of 2011, according to analysts Compustat, US firms were holding cash assets of $5 trillion – to put that into context, it’s double Britain’s total annual Gross Domestic Product.
With that amount of money sloshing around the global economy, no worker is safe. And when the last acquisition and merger goes through the international financiers will absolutely have to have a war, a quite big one, to invest in. ■