The hostile takeover of Cadbury shows we’ve got the state-market balance wrong

The Labour movement column

By Anthony Painter / @anthonypainter

A couple of years ago I was driving up the A38 – the Birmingham road section approaching Longbridge – for the first time in a while. I actually grew up not far from there and went to school just a mile or so from that section of the road. As I approached what used to be the Rover car factory I felt a visceral sense of loss. Where the Rover factory – that was once the second biggest car factory in Europe in the 1970s – had stood, there was now a void. In its place were a few JCB diggers and mounds of rubble.

It was the realisation that a part of the community – the central part of the community – has simply been amputated. And like an amputee sensing a phantom limb, the communities around the factory must continually look at that site and wonder, “what happened? How could it happen?”

I remember the strikes in the 1980s, going around the factory and looking with awe at the robots and the shiny new minis, and the excitement of the Maestro onboard computer (over-excited; it was hardly Kit out of Knight Rider, though it felt like it was at the time). A huge number of working age men in the local community either worked in the factory or in the parts and supplies manufacturers that fed off Rover. Friends would tell me with pride that they had got a job at the factory and, what’s more, it was a job for life. In my snotty way, I would tell them that there was no such thing. Unfortunately, I was right. But I had no notion that the entire thing would disappear.

Sure, most of the people who worked there have gone on to find employment elsewhere. They are often jobs that are much less well remunerated, much less secure, and lack the same sense of pride that came with working at an icon that generations of your family had worked at too. Social mobility was all well and good but this was pride. Pride in your community, pride in your city, pride in your family and pride in yourself. This was not share capital, return on investment, or rate of return – it was about identity; who you were and celebrating your place in the world. If you want to get a sense of Birmingham at that time then read The Rotters Club by Jonathan Coe – that is just how it was.

And now, that community is left with retail parks and promises of high-tech renaissance. That shouldn’t be knocked but it’s not the same thing. A measure of the consternation that local people must feel is the emergence of the BNP. In Northfield, Longbridge and Kings Norton wards, they polled 16.9%, 14.1%, and 10.8% respectively.

At Christmas, we’d sometimes get the train from Longbridge station into Birmingham New Street. One of the stations we’d pass through was Bournville. It was a magical place – I had been convinced that the canal that passed alongside it was made of chocolate. You don’t have to reach for Roald Dahl to remember the excitement when each new Cadbury bar found its way onto the shelves. Kids were proud of their parents who worked in Cadbury, just as kids were proud of their parents who worked at Rover.

OK, so the takeover by Kraft doesn’t spell the end for Cadbury. Who knows, Irene Rosenfeld could remain true to her word and it could mean an expansion of manufacturing output and employment in the UK. I just wouldn’t bet on it. And we have no way to enforce it.

There was no reason for Cadbury to be sold to Kraft. It is a perfectly healthy business. It is embedded in the local community. It has history. More importantly, it carries an ethos – a company is more than a vehicle for ownership. It is the engine of community. It has responsibilities to its workforce and the community in which it operates. Bournville is a model village (OK, apart from the fact it doesn’t contain a pub.) The well-being and health of Cadbury’s workers were central to the ethos of the business. Quakers knew how to be good capitalists.

The shocking thing about this takeover is not that it is happening. It is that it is happening with so few guarantees for the future of the Bournville factory, its brands, its workers, and the local community. This is not because the Government didn’t want concrete assurances – it is clear that Lord Mandelson did his best within the confines of the law. But the power balance between the market and the state has shifted over the last three decades so that not only can we not get assurances that hostile takeovers will be in the public interest, we can no longer even ask the question in any meaningful way.

We should not be in a position where a major hostile takeover can not be required to agree to undertakings that they will act in the public interest and the interest of the communities they will serve. Will Hutton and Phillip Blond put it about right in a piece in the FT last week:

“The competition rules are ill-interpreted and toothless without a public interest test for mergers and buy-outs.”

This position is not a return to a naïve protectionism. It is simply to ensure that wider interests than the current shareholders – some of whom will have become recently shareholders having smelt blood – are protected when a hostile takeover occurs. It is a way of building greater legitimacy in markets. It is a way of embedding markets in society. It is a way of giving neutral market forces a soul and ethos.

Rover and Cadbury are not the same cases at all. Cadbury’s future seems assured in some respect. However, the importance of both companies to their local (and in some ways overlapping) communities is clear. Kraft should agree, legally, to undertakings to protect the public interest because rapid industrial and economic change can devastate an area – just look at those former coal-mining villages. The problem we have as a nation is how do we force them to do so if they refuse to play ball? That is a more profound issue that goes into the balance of power between the state and the market. It has become apparent that we have got that balance wrong. It is time to re-adjust.