Limitations of the market- Conference in Oxford 2001 We can seize the opportunity to relocalise- Speech by Miriam Kennet

Do we really have a free market or are there barriers to trade in the field of technology.?

In my opinion the current arrangements have provided us with technologies which are failing fundamentally to meet our needs. We have complex technology which provides nuclear industry, food industry with lately complex products such as Genetically Modified Foods or crops that are sterile forcing farmers to return to market for more seeds next year, we have a chemical and pharmaceutical industry which produces cloned animals and medicines which are very expensive and there is almost no competition and a few large firms produce and control access to the markets.

The situation in complex technology is surely an oligopolistic one where large companies, often with a greater turnover than many smaller countries control the markets entirely.

In addition, the products produced by these mega concerns do not appear to be providing people with what they need. The nuclear industry is increasingly making people sick who live near product units, pharmaceuticals seem to have side effects which have not been subject to experimental rigour before coming to market and in telecoms the number of players in the market has reduced every year leaving a handful of huge players bullying the others out of the way.

Whatever claims may be made by GATT and the Uraguay Round or now the WTO about Free Trade and the intention to make markets accessible to all, the reality on the ground, is really very different.

How is this playing out? What are the factors which prevent a Free Market allowing access to all , and I would argue equally important intelligent decision making by all players to be guiding its actions and technology choices.

Firstly, much of today's business takes place as "Intra Firm Trade" that is huge multinationals plan investment, research and development in what they think will increase shareholder value. As we saw in the dot .com share hike often this technology advance is spurious but it will attract investors. The important thing is that the larger company can make those decisions safe in the knowledge that they operate internationally so at the moment no government can ban them from proceding with their pet project. No matter how immoral it may seem to a rational person.

Secondly,the bigger players do their home work and ensure that the markets accept their products, They have I would argue found their way round most government regulation.They do this by "creating " the legislation themselves which allows them to procede. They do this by very skilful and deliberate and time consuming playing the lobby system. They spend huge amounts of time creating industry assossiations which them provide an opportunity to create Non Tarrif Entry Barriers to new comers to technology. This can be in the form of an environmental charter or a customer care charter or a Quality Standard. The important thing is to pre-empt legislation that is independent of the industry. Voluntary codes and industry led legislation and regulation ensures that "so called standards" are kept high.. However, as we have seen in the nuclear and Genetically modified foods industry this does not equate to the kind of controls the public believe it is getting.

Genetically modified foods have not been successfully tested, nuclear installations are notorious for their leaking and by passing of proper installation and commissioning testing. The only regulators trained enough to test complex technology are often making that industry their career so the poacher turns gamekeeper for a few years and then either goes native, as in the case of the Environment Agency at Aldermaston where they live on site or simply go back to the day job in that industry.

With much of complex technology effectively self regulated in the things that matter, ie. Risk, how do smaller new comers get kept out?

As a buyer in complex technology, myself, I have a £150 million pound annual spend. I have found that there are several trends which have conspired at the level of the firm to keep out newcomers even more and also to create an certain illogical insanity to our complex technological advancement.

Firstly, most companies worry more about share holder perception than anything else, and that is short term perception, and I mean very short term,Profit and turnover figures, have to be reported monthly in a Multinational.

In order to be sure that Board members don't appear to have made daft decisions, the trend is increasingly to look for experience in suppliers. This means references and in practise what are called "Blue Chip but in reality means "other multinationals".If a supplier has safely delivered a number of projects to other multinationals then it is considered fairly safe to buy from them.If they are a multinational themselves, then it is considered safe to buy from them. Further an increasingly worrying trend is that in addition to firms only choosing bigger companies for technology , they don't even trust their own judgement, I would say in about half the cases I have dealt with they are choosing to employ one of the big five consultancies to make that decision for them.

Not only that but they all have now ,huge technology development departments where they are taking over the work of the multinational. This means further contraction of competition and huge swathes of technology development are now in the hands of these major consultants. As we have seen they themselves got to a stage where they believed in their own infallablity and Andersons went tumbling with Enron.

I have worked on projects where IT Directors chose to use IBM who were clearly not very efficient, rather than risk not having someone else to blame if it went wrong.

Directors really just want to keep their jobs today, and often till the next round of redundancies or someone notices the mess, That means that often they don't care so long as they personally don't get blamed in the uncertain world of complex technology.

The other difficulty in the way of market entry is, that if the main project goes to the big consultancies, then no bidding will take place for the work, as it will all be done in house, "intra firm "and then any technology gaps missing will be filled by regular trading partners with a global permanent umbrella agreement. No need for any new bidding or Contracts. " No one ever got fired for buying IBM" is becoming a serious threat to free market and infant industry trade.

There are inspite what I have said, some grounds for feeling that the age of the dinosaurs as I call them is beginning to come to a close. Firstly in the industry people are less keen now to user consultancies.This is new, since the fall of Enron, in fact in my firm its been banned.It still happens but its less frequent. People are daring to say "the emperors have no clothes" they are not bringing anything to the party.

Secondly, I will tell you about a big piece of work I did for a new telecoms network for Europe worth 20million euros. We always used a huge American mulitinational who no one liked and who were ripping us off for years. I went in and asked if we needed to use them and again everyone said no but we are unable to get the board to listen to reason, they feel safe with AT and T as it was.

I went in and argued that smaller players were better and that bigger is not necessarily cheaper or less risky, In the Telecoms technology market, big firms were going under everyday. In fact the deal would have been through Concert which did go out of business as we negotiated. So we ended up using 12 smaller players in different countries and we saved 11 million euros by that decision.

Time and again we hear that higher environmental standards and ethical statements by companies also save money and indicate durability in the market place and I am busy implementing our companies' first ethical statement. In conclusion then, fear of loosing their jobs in the uncertain market place of complex technology has led to insane and illogical trends and decision making in the past.

I think this trend is starting to unravel, but the arena of regulation, non tarrif barriers such as trade asossiation and voluntary codes and standards need very careful scrutiny as they are acting in the interest of these megafirms and the real decision making has become neither free nor fair nor transparent.

Miriam Kennet August 2002.