IT’S amazing how fashions change. Just a few years ago, prior to the financial crisis, Big Pharma was demonised. It could do nothing right, and was blamed for many of the world’s ills. At the very same time, banks were lionised and lauded as the new saviours of the economy, with Alex Salmond, the leader of the SNP, writing to RBS’s Fred Goodwin to express his support for his disastrously ill-conceived takeover of ABN Amro, and Gordon Brown handing him a (now revoked) knighthood.
Attitudes are fickle in politics. Other industries that have taken it in turn to be demonised have been supermarkets – during the good years, their focus on cheap prices was sneered at by prosperous elites – coffee shop chains and oil companies. Today, the banks are hated and Big Pharma is supposedly our best new hope to build a high value added economy.
The absurdity of it all can be seen by the shockingly asymmetric reactions to two jobs stories. The possibility that Pfizer could cut some jobs at AstraZeneca’s UK operations if it were to buy the firm has captured Westminster's imagination, with outraged neo-protectionist politicians pledging to do something about this (though few noticed when AstraZeneca announced its own big cuts two months ago, and even though politicians shouldn’t meddle). The loss of any job in pharma is now seen as a threat to the national interest, regardless of the actual viability of the roles. All job cuts are traumatic, difficult decisions, but that is a nonsensical position to hold for anybody who knows anything about how market economies work.
Yet Barclays’ latest round of job cuts is being treated in a very different way. Some, no doubt, are rejoicing in private, which is sickening; the banking industry remains hated, partly because of a deeply simplistic yet widely held interpretation of the causes of the crisis, and partly because of a misunderstanding about the stabilising function of variable compensation in industries with highly volatile revenues.
No politician is calling on Barclays to be banned from cutting these jobs for reasons of national interest (and quite rightly: such decisions should be left to firms). Nobody is decrying the slow decline of Britain’s last remaining investment bank. And yet the scale of Barclays’ job cuts and the hit to the City, still Britain’s most important economic powerhouse, is far more significant than whatever may or may not happen were Pfizer to buy AstraZeneca. The higher capital and liquidity requirements that are now rightly required have made large chunks of Barclays’ investment banking operations unviable; its management is having to give up on Bob Diamond’s great dream of building a British rival to Goldman Sachs or JP Morgan. It’s sad, significant, will affect the livelihoods of thousands of Londoners and will cut HMRC’s tax receipts – yet it is a necessary commercial decision.
But the chancellor’s statement shows that he doesn’t understand the situation. “Barclays is seeking to build a bank that is focused on its customers”, he said, as if that had anything to do with its decision to slash unprofitable elements of its investment bank (a unit that has always been extremely clientfocused). Osborne continued: “Any job loss is regrettable, but we do want banks that are supporting the British economy and I think Barclays can be part of that.”
So there you have it: if you are a Barclays investment banker, dear reader, you apparently don’t support the British economy; and only by deglobalising, being more UK-focused and more reliant on retail banking can Barclays start to contribute. Sigh.
The problem, once again, is that the coalition as well as Labour believe that they can pick winners – both winning industries (finance, bad; pharma, good) and winning firms (AstraZeneca, good, Pfizer, bad).
The simple reality is that they cannot and should not do either