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Anglo Disease: policy vs shareholders (or: builders vs looters)

by Jerome a Paris Sun Aug 3rd, 2008 at 07:01:59 AM EST

The Anglo Disease is a label invented to describe the economic consequences of the domination of the financial sphere over the rest of the economy, and over all political discourse. It has been explored in various texts which are listed here.

A beautiful demonstration of the Anglo Disease in today's Torygraph:

Having rejected the £12bn offer from the French, our nuclear industry has been left in crisis, judging by some reactions to the news.

Nonsense. It's much worse than that. It's our energy industry as a whole that's in crisis, or about to face one. But the British Energy shareholders are to be congratulated for refusing to sell key assets too cheaply.

In other words: the country is in a crisis, but shareholders were right to be selfish instead of letting a transaction which might have been a part of the solution happen. Or stated differently: let's make sure by our discourse and actions that no public policy is possible, and when it fails, claim that it's government incompetence again and that the only solution is in private hands, ie that more selfishness is needed.

Or: Après moi, le déluge


It's not even a focus on the short term because the long term consequences are ignored: they are not:

Senior management among our biggest energy companies are predicting "brown outs" in five or six years time when the lights will go out for a period each week because we simply won't be generating enough power to go round. It's not just the economy that's looking more like the 1970s, we'll be enjoying at least a four-day week before you know it.

It's a completely, transparently, cynical claim that what happens in the long term is not a reason enough to change behaviour in the short term if it can brign about a quick buck.

Actually, it's even worse than that:

However, that's no reason to rush into panic measures now. Back in March, when British Energy started this process, I wrote that, with the right investment and strategy, our nuclear energy industry could become a much more valuable asset, one central to the future of the UK. This was because of the fundamental agreement among the energy industry, Government, consumers and the more enlightened environmental lobby that nuclear had to be expanded.

With this consensus in mind, it's hardly surprising that the shareholders who own British Energy want to extract the most value they can from what is obviously a key strategic asset.

This is about taking opportunity of a future crisis to hold the government to ransom because you hold an asset which some thing might be a solution to the problem. This is hostage taking, pure and simple.

But it is profoundly mistaken for one reason: these are not assets that are sitting around and that anybody can develop. Besides the cheap digs at non "enlightened environmentalists", nuclear will not be "central to the future" of the UK. It might play a positive role if, and only if, it is run properly, something that this country has demonstrably not been able to manage. Therefore, the issue is not even about selling at the best price, it is exclusively about selling to a capable entity at the best price. And oops, that suddenly brings the number of buyers down. Not having had any energy policy, the UK has no energy industry either, and thus has to convince others to come and do the job for it.

With all the countries that suddenly want to go nuclear these days, the capacity of EDF or Areva is stretched and they can be picky about where they invest. British Energy, beyond offering available sites for the next generation of power plants, is mostly going to be a source of headaches - it can be seen as a very expensive real estate deal.

It's not quite clear how BE is more of a "strategic asset" for EDF than it is for the UK.

That is, shareholders except the Government, which owns 35pc of the company and has appeared keenest to sell. Why? Because having dithered for years over nuclear, the Government is now in a rush "to do something". Its track record (remember Gordon Brown's record on selling our gold reserves) suggests it was always going to be too quick to hand over some or all of our stake in British Energy to new partners, such as EdF, who offer to solve the company's funding issues in an apparent quick-fix solution.

Well, after decades of the dominant discourse being " there is no need for any energy policy" "let the markets make the technological choices and may the best solution prevail", and the subsequent rush to build more gas-fired plants, the predictable result today, as gas runs out, is a massive shortage of fuel and no clear idea on how to fill the gap.

But yeah, let's blame government (as opposed to governments run under that particular ideology of not doing their job) and call EDF a vulture pouncing on our weaknesses (given the overall content of that article, that's particularly rich).

France's foresight in developing nuclear power means its energy giants are in pole position to negotiate a brilliant deal - for their shareholders.

France's forsight came from having a government willing to think about energy, and to actually run an energy policy, using pretty specific tools to do so: powerful energy companies, State-owned, and run as monopolies, able to make technological choices and actually implement them on a meaningful scale over long enough periods.

And one important distinction: this was not done for the shareholders, but for the whole population of the country. Maybe it's a distinction that needs to be underlined again and again. Now that EDF has been privatised (thanks to the French partly caving in to the dominant ideology), it is indeed its shareholders that benefit; thankfully that still mostly means the French government.

For a company committed to expanding in nuclear, EdF badly needs a position in the UK market which, come what may, will see a significant expansion in nuclear in the coming decades.

British Energy with its existing land and infrastructure, remains the most convenient way of gaining access to that significant opportunity and EdF needs to recognise that in its offer. If it refuses to do that, there are numerous other options to develop our nuclear infrastructure.

The UK will not "come what may" see a significant expansion of nuclear. That will happen only if there is the right kind of regulation, sites are available, and willing and able investors step in (or, the UK government takes over, but that's probably not what the Torygraph editorialist has in mind). That's more than a few significant provisos.

In that context, EDF does not "badly" need a position in the UK. It sure would like to get a slice of that market, but the "bad need" is on the other shoe. Ownership of BE and its sites is indeed the most convenient route to develop nuclear in the UK - indeed, it is probably the only one, but that is something that has value only for a very small number of players, most of which already dropped out for various reasons in the very recent past: more specifically, EDF is probably the company willing to pay the highest premium for BE, given that it's the company most able to invest on a large scale in nuclear plants, given its existing competence in the field and its financial strength.

EDF did recognise BE's advantages in its offer. The shareholders need to recongnise their weak negotiating position, rather than whine.

And whine they do:

Remember, there is no way a French government would even contemplate allowing a British company to buy similarly important Franco assets, whatever the industry.

Given the fact that we will sell, the French should pay up for the benefits of Anglo Saxon capitalism, even if they won't practice it themselves.

Why on earth should the French government agree to sell strategic industries to private investors, let alone foreign ones? This has been done in the UK for the benefit of (a-national, but presumably English-speaking and investment-bank-hiring) private investors, not that of the general population. This has always been presented as a good thing per se, not just if it was accompanied by similar measures in other countries. It allows looting to take place in the country where it happens, but has no incidence on what happens elsewhere.

But looting is looting, and when there is nothing left to loot, you're stuck with nothing, and those that have something become stronger than you. You'd better be happy that you still have a few things that might tempt others to help you out instead of insulting them for their efforts.

But hey, nobody said the Anglo Disease carriers did not have chutzpah - or the insufferable arrogance of those that have not been proven wrong for the better part of 30 years. No wonder I'm looking for the crahs to happen; it's not schadenfreude, it's the desperate need for these people to be wiped out by reality from dominating the bullypulprit and poisoning public discourse with their ideology while their friends steal and steal and break and break.

Brownout (and Brown out) next year, please. It's the only way, I fear.

Display:
The gem:
the French should pay up for the benefits of Anglo Saxon capitalism, even if they won't practice it themselves.

For sure, the total decrepitude of the British energy industry is one of the great benefits of the Anglo-Saxon model!

By the way, we have already been (and still are) paying dearly to enrich the few ones who benefitted from the Anglo-Saxon capitalism..

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sun Aug 3rd, 2008 at 08:27:11 AM EST
Rich!

By they way...

Now that EDF has been privatised (thanks to the French partly caving in to the dominant ideology), it is indeed its shareholders that benefit; thankfully that still mostly means the French government.

And a certain shareholder named monsieur Guillet... ;)


Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sun Aug 3rd, 2008 at 11:30:16 AM EST
[ Parent ]
Torygraph quote
Remember, there is no way a French government would even contemplate allowing a British company to buy similarly important Franco assets, whatever the industry.

Given the fact that we will sell, the French should pay up for the benefits of Anglo Saxon capitalism, even if they won't practice it themselves.

After all, it's Anglo-Saxon capitalism that destroys the power infrastructure and gives the possibility of hostage profits...

by Metatone (metatone [a|t] gmail (dot) com) on Sun Aug 3rd, 2008 at 10:36:01 AM EST
We'd do well to remember that, when these boys are on top, they will talk tough about how the point of competition is that the smartest survive and the weak must go to the wall so the system remains efficient. But when they're in the shit, they invent a special premium due for "the benefits of Anglo-Saxon capitalism".

Perhaps that could come with a medal. Or a poney.

From a commenter:

British Energy investors right not to rush into a bad deal - Telegraph

The evil state-run EDF delivers the cheapest electricity, complete energy independence for our electricity at least, with an excellent track record in security and reliability.
Pray tell, what are "the benefits of Anglo Saxon capitalism"? Enron? The subprime mortgage crisis? The decrepit rail infrastructure in the UK?
Are you for real?
Posted by Nicolas MONNET
by afew (afew(a in a circle)eurotrib_dot_com) on Sun Aug 3rd, 2008 at 01:23:33 PM EST
Well, this commenter would be a eurotrib reader whose login name begins with "nic". :)

A 'centrist' is someone who's neither on the left, nor on the left.
by nicta (nico@altiva․fr) on Sun Aug 3rd, 2008 at 01:55:27 PM EST
[ Parent ]
Heh! Good comment, nic...!
by afew (afew(a in a circle)eurotrib_dot_com) on Sun Aug 3rd, 2008 at 03:15:05 PM EST
[ Parent ]
One of your best ever, Jerome.  It deserves to make the op ed page of the FT etc.  Please submit.

No wonder I'm looking for the crahs to happen; it's not schadenfreude, it's the desperate need for these people to be wiped out by reality from dominating the bullypulprit and poisoning public discourse with their ideology while their friends steal and steal and break and break.

Unfortunately, I´m not sure it happens this way.  Capitañlism needs periodic crises to soften up the populace for ever more extreme measures - higher prices (to reduce demand - not increase profits - you understand).  When the brown-outs do start you can expect carte blanche for inexperienced "entrepreneurs" to move in and take over the industry.

I was once fortunate enough to lead a really innovative and advanced team in a particular field of technology in a global business.  We had a track record of successfully implementing this technology in subsidiaries - but not yet in head office.  I made a play to have our technology accepted as the global standard to be implemented in head office as well.

A technology "strategist" who had an office next to the relevant main board direct produced a powerpoint presentation promising similar benefits (having seen our solution) with a totally untried (and as yet non-existent) technology.  His "solution" was declared the corporate standard.  

It was never implemnted, but that was not the point.  He got millions of ponds for a ridiculous project with only a tenuous chance of success.  Capitañism is really an old boys club which is about favouring OUR people/shareholders and not THEIRS - especially the French.

Any focus on actually producing something useful is actually rather boring and counter-productive - I was gobsmacked that powerpoint vapourware could be favoured over a proven production solution with actually delivered superior capabilitities.

But I got it wrong.  I should have produced a fancier powerpoint presentation, asked for a lot more money, and gotten an office next to the relevant Director.  I wasn´t in the club.  And neither is EDF.


"It's a mystery to me - the game commences, For the usual fee - plus expenses, Confidential information - it's in my diary..."

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Aug 4th, 2008 at 05:07:21 AM EST
I agree with your pessimism, Frank. But the experience you relate could happen (and is regularly happening) in any big hierarchical organisation, be it a corporation, a state administration, a municipality or a non-profit organisation, a political party or even a trade union. It has to do with the dominant model of power in our societies, not with capitalism.

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Mon Aug 4th, 2008 at 05:57:46 AM EST
[ Parent ]
but this is unlikely to be good LTE material, given that it's a 'fisking' of a Torygraph Op-Ed.

As to 'being part of the club', I don't think it matters much here, as reality asserts itself. The irony is that the shareholders might still be vindicated: for instance, if there are brownouts in the UK, turning into a major political crisis, and the government ends up making expensive promises to ensure immediate investment, power prices would jump and then remain high, giving BE more value for its residual production (and you'll have yet more crowing about how government is incompetent...). On the other hand, a crisis might also force the UK government to sell at any price to whoever will take the damn company off their hands, which might mean a lower price.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Aug 4th, 2008 at 09:43:52 AM EST
[ Parent ]
The article is myopic and deluded, as can be expected from the torygraph, but that still does not justify

  1. additional, multinational, anti-competitive conglomeration,
  2. even if it is French, because
  3. the consumer always loses

a. in individual 'power' vs. a giant,
b. in jobs and
c. in price.

IMBiasedO, there is no Goliath deserving an altar, much less my support.

Our knowledge has surpassed our wisdom. -Charu Saxena.

by metavision on Fri Aug 8th, 2008 at 11:32:55 AM EST


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