The General Economics Thread

Britain's Lloyds Banking Group has agreed to pay fines totalling $370 million ( 217 million pounds) to U.S. and British authorities investigating its part in a global interest rate rigging scandal and manipulating fees for a government lending scheme.

The settlement is the seventh joint penalty handed out by U.S. and British regulators in connection with the attempted manipulation of the London interbank offered rate, or Libor, and other similar benchmarks, which are used to price around $450 trillion of financial products worldwide.

Lloyds' settlement follows British rivals Barclays and Royal Bank of Scotland, which agreed to pay fines of $453 million and $612 million respectively in 2012 and 2013.

The penalties comprise a fine of 105 million pounds ($178 million) by Britain's Financial Conduct Authority, $105 million by the U.S. Commodity Futures Trading Commission and an $86 million fine by the U.S. Department of Justice.

The FCA said the total UK fine of 105 million pounds include 70 million pounds for attempting to manipulate fees payable to the Bank of England for the firm's participation in the special liquidity scheme, a taxpayer backed government scheme to support British banks during the financial crisis.

"The firms were a significant beneficiary of financial assistance from the Bank of England through the SLS. Colluding to benefit the firms at the expense, ultimately, of the UK taxpayer was unacceptable," said FCA director of enforcement, Tracey Mc Dermott.

Companies should have the right to discriminate and pay employees as low as they want

ON A sunny day in July, visitors to the new British headquarters of Huawei, a big Chinese telecoms firm, might think they had arrived in California. Last year the company opened an office in a suburban office park near Reading, a large town west of London. Its building looks over manicured grass verges, disguised car parks and spacious access roads. Gardeners drive lawnmowers as employees potter around on bright orange bicycles. Nearby, the M4 motorway hums.

Politicians and urban planners obsess about growth in big cities. Huawei’s gleaming office is a reminder that a sizeable chunk of Britain’s economy is propped up in places such as Reading. The region stretching along the M4 and M3 motorways, as far as Swindon and Winchester (see map), produces 8% of Britain’s economic output—as much as the metropolitan areas of Manchester and Birmingham combined. The computing and telecoms firms clustered in out-of-town business parks pay well; unemployment is rare. Yet even here, London’s economic magnetism can be felt. Rather than pushing out jobs, the capital increasingly sucks them in.

Between 2002 and 2012 output per head in the Thames Valley Berkshire local enterprise partnership area fell from 178% of the national average to 164%—still very good, but a considerable drop. House prices have inflated more slowly than in England as a whole. At the end of last year 14% of office space in the region was empty—more than in many northern cities. Many white-collar jobs appear to have been replaced with worse-paid ones.

Firms used to move to the Thames Valley from London. Increasingly, they arrive from other, less geographically favoured towns. Huawei used to be based in Basingstoke in Hampshire. A host of similar businesses are moving out of older office blocks in towns such as Bracknell and Woking to newer business parks, says Jon Neale of Jones Lang LaSalle, a real-estate firm. Better connections to London, shiny new facilities and a more urban feel are part of the draw. As well as offices, the Green Park complex where Huawei now resides has a regular shuttle bus from Reading station and a nursery school.

Where offices are older and journey times longer, though, jobs are disappearing. In Swindon, a town of 212,000 people some 80 miles from London, about 6,000 jobs were lost in the ten years to 2012, even as the town’s population grew by 16%. Commuter trains heading east are packed in the morning, says Mike Conner, who runs AppsBroker, a tech company. But the ageing offices near the station are empty. The main appeal of Swindon for his firm, he says, is that “it’s the cheapest spot on the M4”, largely thanks to the absence of bigger competitors.

What has caused this change? One reason is that the IT support jobs once common in these places have been moved offshore, says Sandra Jones, of Ramidus, a property consultancy. At the same time high-skilled vacancies are increasingly advertised in central London. A growing cluster of telecoms firms is taking root near Paddington station. Vodafone put its headquarters there in 2009, moving 200 executives from its offices in Newbury, a town in West Berkshire. Nokia followed in 2011, shifting staff from Farnborough.

Executives based in London can more easily meet investors in Canary Wharf or the City, as well as advertising firms, consultants and the like. Adrian Griffiths, a businessman from Swindon, says the town where he is based has everything he needs for his plastic recycling start-up, except for finance: “There are no angel investors here, not one. So two to three days a week I have to go to London.”

And the technology industry is changing. Huawei notwithstanding, much of the energy is in startups, which tend to employ small teams of young, city-dwelling developers rather than large numbers of middle-aged engineers. Creating smartphone apps requires less lab space than developing new silicon chips, and the firms that do it want to be close to their competitors so they can poach staff. That helps to explain why Google is opening its new offices in the capital rather than outside it.

The pull of London is not everywhere irresistible. Cities such as Cambridge and Brighton have thrived in recent years. Their universities—and the accompanying restaurants and nightlife—help them to attract the urbanophile young. In Reading, local officials hope to pull off the same trick. Crossrail, a new railway which opens in 2019, will help commuters get to London, but it will also urbanise the town’s core. New offices and restaurants are already under construction near the station, which is being rebuilt. Some startups are based at the university. And nearby Heathrow airport may expand.

Things will not be so easy for smaller towns such as Bracknell, or for more distant ones such as Swindon. As London’s magnetism grows, they are likely to see more jobs pulled away, just as small towns in the north are struggling to compete with cities such as Manchester and Leeds. Their best hope then will be to become commuter towns for more successful cities, which cannot expand much because they are constrained by green belts. Perhaps those empty offices might become homes.

The historical schools seem to be examples of the various movements to reject classical and neoclassical economic thought, which makes them very important, if not particularly influential today. Those Wikipedia articles offer nothing concrete in the way of statements or predictions, so it's impossible to judge them empirically.

The historical school held that history was the key source of knowledge about human actions and economic matters, since economics was culture-specific, and hence not generalizable over space and time. The school rejected the universal validity of economic theorems. They saw economics as resulting from careful empirical and historical analysis instead of from logic and mathematics. The school also preferred reality, historical, political, and social, as well as economic, to mathematical modelling.