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| Peter Diamond and other Nobel winners' solutions stumble in real world The economics Nobel prize winners Peter Diamond, Christopher Pissarides and Dale Mortenson recommend slashing benefits to encourage people back to work – but this creates further problemsWho could question the need to help unemployed workers find jobs, especially when companies complain there are plenty of jobs available and no one to fill them. The latest Nobel prize winners for economics have all examined the way markets fail to work efficiently and how barriers can be overcome or swept away.MIT professor Peter Diamond, Dale Mortenson of Northwestern University and Christopher Pissarides of the London School of Economics were awarded the £1m prize for their work examining why unemployed jobseekers fail to find work when there are jobs going begging.But the message seems to be that capital needs to work harder and workers need to fit in more closely with its ever-changing whims.Pissarides has worked hard informing the European Union on how to free up labour markets with a mix of benefit cuts, tax incentives and a bonfire of restrictive regulations.As his boss at the LSE, John Van Reenen, said: "He has shown how labour market regulations, entry barriers to setting up new service firms, tax and welfare policies affect differences in employment across the world."Pissarides argued for more flexible labour rules to be included in the Lisbon Agenda on job creation and won.Van Reenan said they were based on "the right economic principles but the main barriers to implementing them was lack of political will".These "right economic principles" were ditched because they hurt ordinary voters.There is merit in examining in detail how markets work, but there is a political game here that undermines the labour market protections built into continental rules in order to force workers to take lower-paid work when they lose their job.Cutting benefits, such as housing benefit, is top of the UK coalition government's list of measures to make the difference between out-of-work incomes and in-work incomes wider.Taking the knife to housing benefit fits the Pissarides theory. But all the time it is implemented without tackling property prices and rents it is a recipe for making lots of people miserable.While it might make a labour market model work like a precision engineering tool, everyone knows cutting housing benefit just takes us down a route to US-style ghettos, with poor people chased out of high-rent areas even more than they are now.It is a classic case where we can all agree that people need jobs and housing benefit is too high, but following the path recommended by a clever economist, who says we can have higher employment after lowering benefits, puts us in the position of creating another problem.EconomicsGlobal economyUnemployment and employment statisticsEconomic policyPhillip Inmanguardian.co.uk © Guardian News & Media Limited 2010 | Use of this content is subject to our Terms & Conditions | More Feeds guardian.co.uk |
HSBC walks away from £5bn bank deal in South Africa Pullout leaves Standard Chartered denying interest as shares in Nedbank and majority shareholder Old Mutual slumpStandard Chartered was tonight playing down suggestions that it was interested in bidding for South Africa's Nedbank after HSBC pulled out of talks hours before an exclusive deadline for negotiations expired.The decision by HSBC to withdraw its potential £4.5bn offer for Nedbank – after two months of access to confidential information – hammered shares in the South African bank as well as those of its majority shareholder, Old Mutual, which has been keen to sell its stake.Nedbank slumped 8% while Old Mutual, which has a listing in London, was the biggest faller in the FTSE100. Old Mutual lost nearly 5% amid fears that it would find it difficult to attract interest from bidders prepared to help reduce its 55% stake.HSBC gave no explanation for the decision to end talks on buying up to 70% of Nedbank other than to say the decisions "have not been successfully concluded".The bank declined to comment further but sources tried to play down suggestions that the reshuffle under which chairman Stephen Green and chief executive Mike Geoghegan are both being replaced had influenced the decisions.Analysts concluded that HSBC had been scared off by potentially risky loans held by Nedbank, although there were suggestions that pulling out of talks could be a negotiating tactic to push down the price on a business that would have been crucial to HSBC's expansion plans in the fast-growing South African market.The City of London had regarded Standard Chartered as the only other serious contender for Nedbank but, just days after a £3.3bn cash call to bolster its balance sheet, the bank insisted it was unlikely to step into the fray.Under the terms of the rights issue, the cash must be used to boost Standard Chartered's capital cushion, not to help fund a potential deal. When the rights issue was announced, finance director Richard Meddings told the Guardian that he was not building a "war chest" to fund deals.While shareholders will be relieved that HSBC is not taking on too much risk, or overpaying, by buying Nedbank, the bank will now face questions about how it plans to achieve its goal of expanding in South Africa."HSBC have made a strategic statement saying they are going to get involved in Africa, but I don't know how now," Rob Nagel, senior portfolio manager at Cadiz Asset Management told Reuters.Standard CharteredHSBCSouth AfricaFinancial sectorJill Treanorguardian.co.uk © Guardian News & Media Limited 2010 | Use of this content is subject to our Terms & Conditions | More Feeds guardian.co.uk |
French Protesters Dig In President Sarkozy sent in police to clear blockades of striking refinery workers, in a show of strength that unions said would only fuel their determination to continue rolling strikes against the French leader's plans to raise the retirement age. online.wsj.com |
Kenya in cemetery scandal arrest Kenya's mayor of Nairobi is arrested for questioning in connection with the sale of land for a cemetery in the capital. bbc.co.uk |
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