The coalition's ambitions to promote the UK's £60bn pharmaceutical sector as a high-growth industry have suffered a blow after drug output dropped by a quarter during the lifetime of the government despite an expanding market at home.
The is significant: the pharmaceuticals industry is supposedly one of the UK's success stories and was a plank on which the rebalancing of the economy was to be built. And it is not happening.
But this is the consequence of the UK's 'finance curse'. Just as an over developed extractive industries sector tends to, first of all, squeeze out all other significant activity in an economy and then reduce its growth potential the same is true of the finance sector, and we are very clearly seeing that happen in the UK economy now. Finance is squeezing out all other economic activity from the UK, and we are all paying the price for that.
There is much more on the finance curse here.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
Ooh, I can answer that one!
What happens when there’s only finance left is modelled by analogy to all the other extractive industries: when the value’s been mined out, they move on.
Taking the money with them.
Leaving a ghost town, where the smart ones sold up before the mugs got the news and ended up trapped, paying for houses and businesses that’ll never be worth what they paid.
Leaving tailing ponds and spoil heaps of toxic waste, slowly collapsing and poisoning the groundwater.
And the money’s *gone* – the locals will never have the resources to remediate the toxic legacy.
In fairness, pharmaceuticals is suffering a particularly bankerish strain of the Finance Curse: it isn’t being squeezed out, it’s become more bank-like.
That is to say, more of a rent-seeking activity than a productive enterprise: purchasing, preserving and extending patents, marketing and M&A have all crowded out research and development.
I recommend a quick read of Nick Lowe’s ‘In the Pipeline’ blog: part of it is fairly technical news of new research tools and the success or failure of promising compounds; some of it is hair-raising stories if “Things I won’t work with”; and part of it is story after story of layoffs and research site closures – a couple of thousand research jobs gone, here and there, every month.
The latest theme is how company X, Y or Z is abandoning or selling off or spinning-out an entire field of drug development: the FT has probably picked up on AstraZeneca’s plans to spin out it’s entire anti-infectives division. That is to say: the old ICI pharma is moving out of antibiotics – all antibiotics, patent portfolio, research and production – and they are spinning it out as an ‘stand alone’ unit beccause there are no buyers, at any price, among the giants (or even the medium-sized) pharmaceutical companies.
Think that one over: AZ and their peers in the pharmaceutical industry see no value in developing antibiotics.
Adds a rather bitter flavour to “And it is not happening”, doesn’t it?
Will Hutton predicted this in “The State We’re In” 20 years ago
This is why the banks should have been broken up and massive restrictions placed on them soon after the 2008!
Almost seven years later, nothing of any significance has happened at all to reform the banking sector, and this is largely why we are in the mess we are now.
The financial industry is far, far too powerful. Time it was reigned in.
I think the person who talks of this with the biggest insight at the moment is Yanis Varoufakis in his ‘erratic Marxist’ speech he made which you have had on this blog Richard (thank you kindly).
Varoufakis points out that the importance of wage labour for example, and seems stress that the link between capital and labour (via jobs and decently paid ones at that) is the real value creation point for properly functioning economies.
This is because this is the real ‘trickle down’ theory – as profits from activity are absorbed by the workforce to become the disposable income this drives other market actors to produce goods and services and to innovate to meet those needs, desires etc.
The inherent danger in modern capitalism is where capital seeks to create value with other capital/debt or tries to dispense with labour altogether rather than create value through labour. Not only will this be increasingly unacceptable to the world’s citizens (causing political destabilisation ), it may also strangle innovation and the creation of value as pure capital seeks to free itself from risk in order to maximise growth. Money at last will be an end in itself – sod anything that can be usefully done with it.
This is why we need to go back to the drawing board and realise that capitalism works best when we all get a fair share of the capital it generates. The time of capitalism dominated by rent seeking must surely be coming to an end and if not, we need to take steps to hasten it.
What should happen is what has been suggested already, a wasteland. However, since the vultures and the bookies have the money they will ensure they hve a foot in whatever happens. They are already reducung most industrial/service industries to a few giants by funding mergers. The recent Covidian/Medtronic one at 40bn is a good example, telecoms is another.
The result, pressure to reduce headcount, move to low cost bases and, of course, smoke-filled rooms to discuss price fixing.