This is the era of entrepreneurship. Even staid universities are being transformed. A recent Kauffman Foundation study revealed that today, over 1,500 U.S. colleges and universities offer some form of entrepreneurship training, whereas only a handful did just 15 years ago. However, as quickly as university entrepreneurial programs proliferate, students’ expectations from them are morphing.
Historically, university entrepreneurial programs have generally started in business schools and met the needs of those students wanting to launch a business, rather than join an existing one. These programs quickly expanded to include engineers and scientists who wanted to commercialize their high-tech gizmos. The entrepreneurial programs delivered on the students’ desires by teaching how to start and build a business. But something is changing on university campuses. There’s a new generation of students with very different views of their futures. They want careers with meaning and they want to study what they are passionate about. They want to learn how to earn a living from those passions.
Unlike the previous generation of students, this generation is not coming to entrepreneurship programs with solid business ideas; these students are coming only with newfound knowledge and interests. This greatly shifts their expectations and needs. While commencing an entrepreneurial-education program with a business-plan course made perfect sense to students coming in with solid business ideas, it makes no sense for this new generation of students with few businesses to launch. These students need to learn the complete entrepreneurial arch that spans from capabilities on one shore to an ongoing business on the other side.
Building from the capability footing of the arch requires first identifying an opportunity that’s actually feasible, given one’s resources and abilities. The next block in the arch is designing a business that exploits that opportunity. A feasibility study then needs to be done to see if this business meets the aspirations of the founders and any investors that may be required. Once a new venture is deemed feasible (or the conditions of that feasibility determined), one then traverses to the right side of the entrepreneurial arch, to the familiar elements more typical in classic entrepreneurial education: creating a business model and business plan, finding the human resources and financial capital needed to start the business, and managing the growth of the new venture.
Creating courses and entrepreneurial skill-building programs on the left-hand side of the entrepreneurial arch was not necessary for the previous generation of students, who came to entrepreneurial programs with exciting new business ideas. It is essential for the current generation. But these pre-business planning entrepreneurial skills—opportunity identification, business design, and business assessment—are largely missing from most entrepreneurship curricula.
We need to teach students how to create differentiated businesses from their differentiated capabilities, building upon their unique knowledge bases and what they came to the university to study. Business is the vehicle for creating and capturing value from your capabilities. The discussion about how to leverage your capabilities to create value for the world should start not with the vehicle, but with your capabilities. That’s what students are passionate about and that’s what they came to the institutions of higher learning to deepen their knowledge about.
Business schools such as the University of Michigan’s Ross School of Business, with the help of successful serial entrepreneurs and alumni, are demonstrating how this can be done across a dynamic university. While expanding the entrepreneurial curriculum satisfies the needs of this generation of students, it also moves entrepreneurial programs significantly beyond “extracurricular” student activities and a few elective courses. Staid institutions of higher learning must manage to sustain these transformations for the good of their graduates and the global economy.
Join the discussion on the Bloomberg Businessweek Business School Forum, visit us on Facebook, and follow @BWbschools on Twitter.
Tim Faley is an adjunct professor of entrepreneurial studies and managing director of the Samuel Zell & Robert H. Lurie Institute for Entrepreneurial Studies at the University of Michigan.
Tuesday, March 27, 2012
Revamping the Entrepreneurship Curriculum
Real Estate Investors See the Green in Golf Courses
Looking for real estate bargains? Consider golf courses. Investors from Donald Trump to luxury homebuilder Toll Brothers (TOL) are wagering there’s money to be made buying them. Stand-alone 18-hole golf properties in the U.S. sold for a median price of $3 million in the first nine months of last year, down from $4.5 million in 2006, according to data from broker Marcus & Millichap Real Estate Investment Services. Prices slumped after lenders including the finance arm of General Electric (GE) stopped providing money for building courses and investors in commercial mortgage-backed securities retreated amid losses on deals made at the height of the property bubble. “Lack of financing is really causing a discount to value, and investors are taking advantage,” says Steven Ekovich of Marcus & Millichap. “Golf courses may never be as cheap as they are today.”
The sport’s popularity soared after Tiger Woods won the 1997 Masters Tournament at Georgia’s Augusta National Golf Club. In 2000, when Woods captured the U.S. Open in Pebble Beach, Calif., by a record 15 strokes, an unprecedented 400 courses were opened. Television ratings typically surge by as much as 50 percent when Woods is in contention to win a tournament, according to Nielsen (NLSN) figures. He hasn’t won a regular season PGA Tour event since September 2009, a span during which his career has been derailed by his admission to extramarital affairs and assorted injuries.
Woods’s fortunes aside, golf took a blow when the recession hit. The total number of rounds played in the U.S. annually has fallen more than 7 percent since 2006, according to research firm Golf Datatech. As a result, about 775 golf courses have closed. While new ones continue to open, the nationwide course count has declined by 355 since 2006, to about 16,000, according to the National Golf Foundation. Terry Vanek, an analyst at Marcus & Millichap, estimates that there are about 185 stand-alone golf courses on the market today—with asking prices of $320,000 to $15 million.
Toll Brothers, the largest U.S. luxury homebuilder, is buying private golf clubs until the residential real estate market improves, according to David Richey, president of Toll Golf, a division of the company. Toll plans to buy three golf properties in cash at “distressed prices” of $3 million to $4 million by the end of this year, Richey says.
Peter Nanula, former chief executive officer of Arnold Palmer Golf Management, started Concert Golf Partners in 2010. He has as much as $50 million to buy golf properties that he intends to revamp and sell within five to seven years. Concert Golf made its first course purchase in July, when it bought Heathrow Country Club’s golf course and racquet club for $4.5 million. The club, in north Orlando, sold for $20 million in 1996, the Orlando Sentinel reported, citing Seminole County court records.
Trump is buying the Doral Golf Resort & Spa in Miami out of bankruptcy for $150 million five years after Morgan Stanley (MS) acquired it as part of the $6.7 billion purchase of CNL Hotels & Resorts. The resort features five courses on 800 acres, including the famed Blue Monster, and about 700 hotel rooms. “They built too many courses during the Tiger boom, and now they’re closing and disappearing,” says Trump. “At some point enough will disappear that golf will be a really good business.”
The bottom line: With financing scarce, the median price for a golf course was $3 million in the first nine months of 2011, down 33 percent from 2006.
Obamacare, Day 2: Regulation or Tyranny?
Any Supreme Court sophisticate worth her briefs will tell you that trying to predict where the justices are going based on oral arguments can lead to trouble. Sure, some members of the court will telegraph their views. Others take the opportunity to play law professor, bat the attorneys around the way a cat toys with a cornered mouse, or just show off.
So with that out of the way, let’s ignore the wisdom of the sages and speculate on what Tuesday morning’s two hours of back-and-forth on health reform portends.
Under the heading of No Big Surprise: The four Democrat-appointed members of the court—Stephen Breyer, Ruth Bader Ginsburg, Sonia Sotomayor, and Elena Kagan—showed no inclination via their questions and comments to strike down the Affordable Care Act based on the argument that Congress exceeded its constitutional authority “to regulate Commerce … among the several States.” These more liberal justices are not necessarily trying to do the president a favor; they simply believe that Congress possesses sweeping power under the Commerce Clause of the U.S. Constitution to shape and constrain the economy. According to this view, the requirement that all Americans buy health insurance or pay a penalty constitutes a legitimate regulation of an industry that accounts for 17 percent of the U.S. economy.
Twenty-six states disagree. They’ve challenged the 2010 law, saying that by forcing individuals to purchase insurance, Congress has gone a big step too far in bossing people around. From this perspective, it doesn’t matter that the act’s goal is to make sure that 32 million uncovered citizens get health coverage, so that everyone else does not, in effect, have to pick up their emergency room fees. The challengers see this as a matter of principle, a bright line Congress may not cross. And some of the more conservative members of the high court certainly seemed tempted this morning to tell Congress and President Barack Obama to back off, based on a report from Bloomberg News.
“The federal government is not supposed to be a government that has all powers,” Justice Antonin Scalia said early in the argument. “It’s supposed to be a government of limited powers.”
Justice Anthony Kennedy added that the insurance mandate tells people that they “must act.” That, Kennedy suggested, “changes the relationship of the government to the individual in a fundamental way.”
Sotomayor countered that the government can require people to buy insurance ahead of time “because you can’t buy it at the moment you need it.”
Wait a second, said Chief Justice John Roberts. “Can the government require you to buy a cell phone” because someone may need to call to report a fire or mugging?
The mandate forces young people, who may need little care, to subsidize medical treatment “that will be received by somebody else,” said Justice Samuel Alito.
Um, yeah, responded Ginsburg. “That’s how insurance works.” Later she added, “People who don’t participate in this market are making it more expensive for those who do.”
Are the five conservatives set to knock down the law? Who knows? Generations of Supreme Court precedent, going back to the New Deal era, would appear to give Congress authority to do almost anything it wants when it comes to overseeing the economy. Justice Clarence Thomas has indicated on a number of occasions that he thinks that precedent is wrong and he wouldn’t mind tossing it. He’s almost certain to vote against Obamacare. His comrades on the right, despite the skepticism they are expressing, may hesitate to undermine so much settled law. (I’ve gone so far as to predict an 8-1 vote upholding the Affordable Care Act, but as everyone who knows me will confirm, I’m usually wrong.)
The most intriguing new prognostication I’ve seen this morning (it arrived before the arguments finished) came from a poll of former Supreme Court clerks and lawyers who have argued before the justices. Sam Stein of the Huffington Post reports that that only 35 percent of these presumably well-informed respondents predicted that the individual mandate will fall. (Stein qualifies: “The findings are far from scientific. Only 66 people participated in the survey—43 former clerks and 23 other attorneys.”)
On Wednesday, the last of three days of argument, the justices will consider what should happen to the rest of the health-reform law if they strike down the insurance requirement. A decision is expected by June or July. As my father-in-law, a very accomplished attorney who has himself argued successfully before the Supreme Court, would say: Only time will tell.
Big Brother Wants Your Facebook Password
If you want to become a state trooper in Virginia, you should probably delete any indelicate information you have on Facebook. During the job interview process, the Virginia State Police requires all applicants to sign into Facebook, Twitter, and any social-networking site to which they regularly post information in front of an administrator.
“You sign a waiver, then there’s a laptop and you go to these sites and your interviewer reviews your information,” says Corinne Geller, spokeswoman for the Virginia State Police. “It’s a virtual character check as much as the rest of the process is a physical background check.” Geller says the practice has been around for only three months and is just one of many ways the state makes sure its law enforcement officials are ethically sound. (Potential troopers also have to submit to a polygraph test).
Virginia is not the only state to do this; other police departments and government entities have similar policies. Until recently, the city of Bozeman, Mont., and the Maryland Division of Correction both asked job applicants to hand over their passwords. Each has discontinued the practice—in Maryland’s case it was after a prison security guard named Robert Collins contacted the American Civil Liberties Union (ACLU) and complained. Now they go for the over-the-shoulder approach that Virginia favors. University of North Carolina at Chapel Hill has a unique method: It requires all student athletes to friend a designated coach or administrative official on Facebook so that he or she can monitor their pages.
According to the ACLU, the number of employers who request access to applicants’ Facebook profiles has risen over the past year. Accessing such private information puts employers in a legal gray area and may potentially open them up to both privacy and discrimination lawsuits.
“This practice is so new that until recently, many people weren’t even aware that this was happening,” says Catherine Crump, staff attorney with the ACLU. Crump says that—while the ACLU has noted Facebook screening in both private and public sector jobs—”when the government is the employer, people have the constitutional right not to be subjected to unreasonable searches.” In other words, if you’re applying for a government job and your potential employer asks you to give up your social-media passwords, they might be violating your Fourth Amendment rights. “People should be entitled to their private lives,” she says.
Facebook calls this profile-access practice “distressing” and has recently amended its Statement of Rights and Responsibility (the legal terms to which you agree every time you access the site) to make it against company policy to share or solicit your account password. “We don’t think employers should be asking prospective employees to provide their passwords because we don’t think it’s the right thing to do,” said Erin Egan, Facebook’s chief privacy officer, in a recent blog post. Egan was unavailable for an interview, but a company spokesperson says that when people apply to work at Facebook, the social-networking site doesn’t look at their private information during the hiring process. Facebook currently has no plans to take legal action against any companies that ask for passwords, but it looks forward to “engaging with policy makers” to protect against the practice in the future.
Having to share a Facebook password is understandably distressing for people seeking jobs, but Crump says it could harm employers, too. When companies scroll through Facebook profiles, they may happen upon information they don’t want to know. “In job interviews, there are certain questions that employers know not to ask,” she says, such as if a person has children. “You’re not allowed to discriminate based on familial status, “but once you start trolling through someone’s life on Facebook, you’re going to stumble on that information,” she says. If the company doesn’t hire that person, it may open itself up to allegations of discrimination.
Bill Peppler, managing partner of the national staffing and recruiting company Kavaliro, says people should assume that their potential employers will look at their Facebook and Twitter pages. Kavaliro works with a number of national and international corporations such as Con Edison (ED), Verizon Wireless, and Starwood (HOT); while the company doesn’t ask for applicants’ passwords, it reviews as much publicly available information as it can find on Facebook.
Peppler tells one story about a person who was rejected for a position because of compromising photos posted to Facebook. “We’re not talking about undergraduate spring-break photos that are 10 years old. We’re talking about copious amounts of alcohol, where in every single picture the person had a cocktail or beer in hand. The company saw that and said, ‘You know, we’re going to move on from this candidate.’”
Surprisingly, this person was not an inexperienced college student or recent grad. “The millennial generation is much more used to it, they can use privacy settings,” he says. Instead, it’s people in their mid-30s or who “have been working for three to five years that seem to be the ones who are slipping up.”
Why Tim Tebow Will Make a Great Politician
When the Denver Broncos inexplicably drafted Tim Tebow in the first round two years ago, I made a bold prediction, immortalized on Twitter, that he’d be out of the league and running for Congress three years hence. I think my assessment of his football skills holds up pretty well, even if my timing was a bit overaggressive: He’s gone from starter to backup, so his career trajectory is clear enough. And I’m more certain than ever of his political skills, especially after yesterday’s 33-minute solo press conference to introduce himself as a New York Jet to the local media.
It’s been clear for some time now that Tebow’s personal attributes make him a blue-chip Republican political prospect: good looks, competitiveness, overt religiosity, and an inclination toward public service. Yesterday’s news conference showed that he also has a soft touch with the media and a gift for gracefully deflecting adversarial questions that are invaluable and increasingly necessary in the world of politics—as Rick “It’s Bulls—” Santorum could probably attest.
In fact, one of the notable things about Tebow’s event is how closely it resembled a political press conference, rather than a boosterish, softball-laden press conference more typical of the sports world—a fact I attribute to the uniquely aggressive New York media corps. The first three questions Tebow fielded were all good examples of this, and his response to each one illustrated the gifts he’d bring to politics.
The first was a “gotcha” question about the discrepancy between his and John Elway’s account of how Tebow had arrived with the Jets: Elway said Tebow had a role in choosing the team; Tebow had suggested otherwise. In response, Tebow put on a big smile, offered a clear explanation—he was consulted only after the initial trade agreement was held up—and snuffed out any embers of controversy by twice thanking the “gracious” Broncos team that had just dumped him.
The second questioner sought to pit Tebow against a teammate, Jets starting quarterback Mark Sanchez, by asking him, “As a competitor, do you want to be the starter? Do you hope to be the starter?” The purpose of this question was to create what football reporters long for—a bona fide “quarterback controversy”—and the questioner tried a clever bit of misdirection by opening with a little preamble testifying to Tebow’s vaunted “personal competitiveness” in hopes of eliciting the response that yes, he’s gunning to be the starting quarterback. Tebow dodged his aggressor as easily as if he were a 150-pound cornerback. “I think everybody that puts on a uniform, you want to go out there, you want to play,” he said. “That’s why you play the game of football, and I’m excited to be a Jet, to go out there, and to help this team any way that I can. Whatever my role is, however I can expand that role, I’m gonna try to do that. Every day in practice, I’m gonna go out and compete and try to get better as a quarterback and help this team any way that I can.” This was very smooth: Tebow said he wanted to “play” rather than “start,” and “expand that role” rather than “supplant that overpaid mediocrity Mark Sanchez,” shutting down the questioner while maintaining a positive, agreeable tone throughout.
The third question was a variation on the second, this time a straightforward attempt to stir up trouble between Tebow and Sanchez by raising the possibility of a controversy. “I really don’t pay too much attention to it,” Tebow replied, and then pivoted to praising the teammate he was meant to trash. “But I think the exciting thing is that me and Mark have a great relationship—we have had a good relationship for the last three years, we’ve been friends, we’ve texted back and forth, we’ve talked already, and we’re gonna have a great relationship and a great working relationship—and I think we’ll have a lot of fun together.”
The questions continued along these lines for another 20 minutes, the media coming at Tebow from every angle, determined to extract something—anything!—that could make the basis for a controversy, especially one that involved Sanchez, who’s less than beloved. Tebow consistently lowered expectations when the media tried to raise them; deflected personal criticism of his lousy passing skills with positive thinking (“I think I’m improving every single day”); and prevented anyone from portraying him as a diva by subordinating his personal desire to play quarterback to the betterment of the team, however it wants to use him. He even dispensed kind words for his tormentors, noting what an honor it was that so many members of the media showed up to hear him speak.
All told, Tebow proved impervious to the most aggressive and adversarial press corp in professional sports and finished the day looking even better than he had when it began. These aren’t just the skills of a talented athlete. They’re qualities that will make Tebow a successful national politician, and—who knows?—maybe one day, a president.
US recovery: are the Fed's hawks and doves fighting over a turkey?
Fed chairman Ben Bernanke is encouraged by economic improvements, but unconvinced over strength of US recovery
Ben Bernanke: Under his chairmanship, the Federal Reserve has tried everything to kick-start the US economy Photograph: Alex Wong/Getty Images
It all started when stock markets around the world tumbled in October 1987. After seeing the Dow Jones index fall by more than 500 points in a single day, the-then chairman of the Federal Reserve cut interest rates to shore up the stock market. It did the trick. Confidence returned, Wall Street rallied and so was born the idea of the "Greenspan put" – when times got tough the Fed could always be relied upon to ride to the rescue.
The Greenspan put was deployed in a more serious crisis in 1998, when the hedge fund Long Term Capital Management went belly-up, a move that ensured that the wild dotcom boom of the late 1990s continued for a further two years. When the internet bubble collapsed under the weight of absurd valuations and falling profitability, Wall Street expected Greenspan to deliver, and once again he did not disappoint.
Interest rates were slashed to 1% and left there for a year, creating the conditions for a housing boom the like of which the United States had never seen. Eventually, the Fed did start to tighten policy, but too little too late.
Greenspan has long retired, but the Fed's policy has not changed. The biggest bubble in history led to the biggest bust in history and the biggest policy response in history. Zero interest rates, electronic money creation, manipulation of the money markets: you name it, the Fed under Greenspan's successor, Ben Bernanke, has tried it.
The strategy appears to be working, after a fashion. Activity in the world's biggest economy is picking up and unemployment has started to come down. Compared with Europe – which is not saying much, admittedly – the US is doing OK. In the financial markets, there is growing confidence that America's recovery is for real, and a lively debate about whether the Fed needs to start to thinking about withdrawing some of the stimulus it has provided. Bond yields – the interest rate paid on government bonds – have been rising in the past few weeks, an indication that financial markets believe stronger growth will force the Fed into taking pre-emptive action against inflation.
There are three schools of thought about the US economy. In the first there are the doves, who believe that policy should be kept ultra-loose for years to come. They are led by Bernanke, who, as a student of the Great Depression and Japan's "lost decade" in the 1990s, is alive to the risk that tightening too quickly and too aggressively can tip countries back into recession. That was what happened in the US in 1937 and on many occasions in Japan during the 1990s and early 2000s. As things stand, Bernanke would be happy to see the Fed's key policy rate remain at virtually zero for the next 2½ years.
The Fed chairman is modestly encouraged by recent developments in the US economy, which has seen jobs created, a floor put under the housing market and a pickup in factory output. But he remains unconvinced about the strength and the durability of this recovery, not least because something similar happened at the end of 2010 and the start of 2011. There remains a lot of slack in the US labour market. In the past five years participation rates have fallen, the number of discouraged workers has increased, and under-employment - those working part-time but want to work full time – stands at 15%.
For the time being, Bernanke commands a majority on the Fed's open market committee that sets policy. But a smaller faction – the hawks – believes the recovery is for real and that the Fed will regret its laid-back approach if inflation lets rip over the next few years. This group says it is worried about repeating Greenspan's mistakes.
A paper being presented to the UK Royal Economic Society annual conference this week argues that this policy error – mirrored elsewhere in the west – caused the global financial crisis, since it resulted in a search for investments that paid higher interest. This, in turn, led banks to soften the requirements for borrowers, the upshot of which was the sub-prime mortgage boom. The study by Manthos Delis and his colleagues at the Cass Business School at City University concludes: "Our results are all the more striking as the present stance of the Federal Reserve is to maintain ultra-low interest rates in an attempt to resurrect the sagging US economy. Central banks should consider the possible adverse effects of their loose monetary policies on bank risk-taking."
The doves and the hawks are also slugging it out over the US budget deficit. Doves want to delay action to repair America's public finances; indeed some, like Paul Krugman, say that Barack Obama's economic and political problems stem from his failure to provide a big enough stimulus. Hawks, like all the Republican candidates for the White House, say that too much government spending is "crowding out" the private sector, thus stifling recovery.
Where a dove like Bernanke would agree with a hawk like Mitt Romney is that the US can return to its former economic glory provided the right policies are used. This rests on a number of assumptions: that America remains a powerful economy, that it is a world leader in a number of sectors, and that it has a history of re-inventing itself, thereby confounding those who write it off. All of that is true. Yet there is a third way of looking at the US economy. Yes, it has bounced back from difficult periods, but the picture over the last few decades is that a bigger and bigger stimulus is required to produce a growth spurt. What's more, the upswings have been weaker than in the 25 years after the second world war, and have been accompanied by larger trade deficits and the relentless hollowing out of manufacturing. In his new book*, Thomas Palley notes that there has been a marked difference in the growth paradigms before and after 1980.
Prior to that date, when the economy grew so did the incomes of the American middle class. Everybody gained from productivity improvements, and in the good times manufacturing employment rose and the trade deficit was negligible. After 1980, the gains from productivity were monopolised by those at the top, manufacturing employment fell even during upswings, while the boom of 2001-07 was the weakest in postwar history. Palley notes that the post-1980 growth paradigm "involved squeezing worker incomes, squeezing household saving rates, raising debt levels, persistent asset price inflation in excess of consumer price inflation, and reliance on ever lower nominal (ie not adjusted for inflation) interest rates".
This is a sobering but accurate conclusion. For a while America's weaknesses were masked by asset price bubbles, cheap imports, financial innovation, and cheap money. But there are limits to how high debt levels can go and how low interest rates can go. The desperate attempts by the Fed to kick-start the economy show that these limits have been reached. In that sense, the debate between the doves and the hawks is irrelevant. A more interesting debate is whether America's growth model is a turkey.
*Thomas Palley: From Financial Crisis to Stagnation, Cambridge University Press
Eurozone fears cause drop in UK takeovers
Debt crisis causes 14% fall in number of takeovers and mergers, but average size of deal rises 41%, report reveals
The drop in the number of takeovers was driven by fears over the future of the eurozone, the report says. Photograph: Oli Scarff/Getty Images
The turmoil sparked by the eurozone debt crisis has caused a 14% fall in the number of takeovers and mergers in the UK, a report has revealed.
The declining number of deals in the first quarter of 2012 compared with the previous three months was driven by fears over the future of the eurozone as Greece threatened default, Ernst & Young's M&A Tracker said.
The same trend was echoed on a global scale, with the number of deals down 24%. However, in the UK a 41% rise in the average size of the deals to $264m (£167m) meant their total value rose 20%, beating the global picture where average transaction values only increased slightly.
Jon Hughes, transaction advisory services leader at Ernst & Young, said: "The market uncertainty of late last year has clearly impacted transaction activity in the first quarter of 2012.
"That said, the small upswing in average deal values could indicate an increase in confidence amongst buyers, who, whilst still cautious about undertaking transactions, are more willing to push through larger deals."
The proportion of deals in the UK financed by cash rose to 91% from 88% previously, driven by an increase in the number of companies sitting on large surpluses. Globally, 55% of deals were financed by cash.
Hughes said: "Globally, the historically low cost of debt and improving equity markets have driven funding towards external sources of finance.
"This reflects an increasing confidence about access to capital markets for transactions.
"In contrast, deals in the UK have been, on the whole, financed by well-rated companies utilising their healthy cash piles to fund 100% cash payment transactions."
Ben Bernanke warns jobs recovery may be 'out of sync' with economic picture
Federal Reserve chairman says number of people working and total hours worked are still significantly below pre-crisis peaks
Ben Bernanke said he was concerned by the number of Americans who have been unemployed for more than six months. Photograph: Alex Wong/Getty Images
Federal Reserve chairman Ben Bernanke has warned that the recovery in the job market remained fragile – but said he believed cyclical, not structural, problems were to blame.
The US economy has added an average 245,000 jobs over the past three months, and the number of people applying for initial unemployment benefits slipped to a four-year low last week.
The recovery has been seen as a major boost to president Barack Obama's re-election campaign. But Bernanke warned there may be trouble ahead.
"We have seen some positive signs on the jobs front recently, including a pick-up in monthly payroll gains and a notable decline in the unemployment rate. That is good news. At the same time, some key questions are unresolved," Bernanke said in a speech to the National Association for Business Economics on Monday.
He said the recent positive jobs numbers seemed "somewhat out of sync" with the overall pace of economic expansion, and that a close look revealed some worrying trends.
The number of people working and total hours worked are still significantly below pre-crisis peaks, said Bernanke. He said he was particularly concerned by the large number of people who have been unemployed for more than six months.
"Notwithstanding these welcome recent signs, the job market remains quite weak relative to historical norms," he said. "After nearly two years of job gains, private payroll employment remains more than 5 million jobs below its previous peak."
The share of people unemployed for more than six months has been higher than 40% since December 2009, he said. "By way of comparison, the share of unemployment that was long term in nature never exceeded 25% or so in the severe 1981-82 recession," said Bernanke.
Even though the unemployment rate has been falling, it was still roughly 3% above its average over the 20 years preceding the recession, he said. "Moreover, a significant portion of the improvement in the labor market has reflected a decline in lay-offs rather than an increase in hiring," said Bernanke.
The Fed chairman said he believed in part that the recent bounce back in the jobs market may have been the "flip side of the fear-driven lay-offs that occurred during the worst part of the recession."
Worried employers sacked too many workers going into the recession and have now started hiring back employees to cope with demand, Bernanke said.
But he said he was not convinced that the high rates of unemployment were caused by structural factors, including the shift of jobs from people to technology and US skill shortages.
While structural changes are important in the long-term, Bernanke said he believs they have played only a "modest" part in the recent increase in long-term unemployment.
If he is wrong, said Bernanke "it will become even more important to take the steps needed to ensure that workers are able to obtain the skills needed to meet the demands of our rapidly changing economy."
Greece's cut-price potato movement shows Greeks chipping in
Greeks are pulling together and forging innovative new social and economic models to help those hit hardest by the debt crisis
Jon Henley finds some Greeks moving beyond anger Link to this video
Spyros Gkelis, a smart and hard-working biology lecturer from Thessaloniki, saw it like this. "If someone shoves you," he said, "you know, like really pushes you, hard, in the street, so it hurts, your first reaction is to lash out. Strike back. But if that doesn't achieve anything, if they keep pushing, and it keeps hurting, you think again. Try something else. Work out some way of dealing with it."
In their fifth year of recession, with 21% of the workforce jobless, salaries slashed, one in 11 people in greater Athens using soup kitchens and half the country's most prescribed medicines now in short supply, that is what more and more Greeks are doing. Faced with a half-broken state, and systems and structures only making things worse, people are doing things differently.
In a clearing on a hillside above the second city, Elisabet Tsitsopoulou found herself buying five 25kg sacks of potatoes, for herself and her neighbours, from the back of a lorry. She paid €0.25 a kilo, against the 60-70 cents she would pay in the shops. The farmer she bought from, Apostolos Kasapis, was equally happy: he got his money straight away, rather than having to wait up to a year – or forever – for a middleman's cheque.
"It benefits everyone," said Christos Kamenides, professor of agricultural marketing at Thessaloniki University, of the producer-to-consumer system he has helped perfect. The potato movement was launched last month and is spreading across Greece, incorporating other staples such as onions, rice, flour, olives and – at the last count – more than 4,000 Easter lambs. Town halls announce a sale; locals say how much they'll buy; farmers show up with it in 25-tonne trucks. Everyone's happy.
With many Greeks now taking home 30% less than before the crisis, but prices of plenty of products still impossibly high, the movement is a clever and, for many, vital way to cut costs that is of practical help to both parties to the transaction. There is anecdotal evidence, too, that supermarket prices are starting to fall, certainly on direct sale days, in response to it.
In several parts of the country, small volunteer shops are setting up, often on the initiative of local councils, selling produce at barely more than cost price – the margin is marked on the pack – in member-only schemes, to avoid tax and legal problems. Kamenides is developing a broader scheme along these lines. His "unified co-operative" will unite producers and consumers and may eventually serve as an economic model for buying and selling essential foodstuffs.
A couple of hours south, in the port of Volos, an alternative economic model is already up and running. More than 800 townsfolk have signed up for a local currency scheme called TEMs. Teachers, doctors, babysitters, a bookkeeper, farmers and smallholders, a decorator, hairdresser, seamstress and a lawyer are among the members. In the past couple of weeks Theodoros Mavridis, a local electrician, has not had to pay a euro for his eggs, tsipourou (the local brandy), fruit, olives, olive oil, jam, soap, and help in filling out his tax return.
Maria Choupis, a founder member, said up to 15 such networks are active. Members transfer units into and out of each others' accounts online. To ensure the currency works hard, these can hold a limit of 1,200 TEMs, and cannot be more than €300 overdrawn. For Bernhardt Koppold, an alternative therapist, the scheme is easier and more direct but also "a way of showing practical solidarity". Choupis agrees it's "as much social as economic". That's a point that recurs frequently. There is, among many Greeks, still intense anger at what they are living through, as well as almost complete disillusionment with politicians, not to say politics. But in Choupis's words, many are "moving beyond anger": instead of lashing out, coming together.
In Volos, a waiter in the taverna by the ferry terminal, told me that "in the years of cheap money and easy credit, we just lost sight of what matters, you know? It's sad that it's taken a crisis to do it, but we're rediscovering our values."
People are helping each other in small, informal ways. Teachers and parents' associations "come together, gather food and discreetly arrange to allocate it to families in the school who are suffering", said Victoria Pakrete, an Athens teacher who herself volunteers in a soup kitchen. Marie Le Du said that in the northern Athens suburb where her mother lives, women from the local Orthodox church "work in pairs. They visit two or three families that are 'their' families, drop in for a coffee and a chat to catch up – and discreetly hand over a parcel of donated food, as part of the visit, to preserve the family's dignity."
Others are more organised. Reveka Papadopoulos, head of Médecins Sans Frontières Greece, said that in the past year she had seen "some really encouraging, exciting things. People are seeing the power of organising themselves, of helping themselves, and each other. It's wonderful to see … it keeps you going."
So in Thessaloniki, the National Theatre of Northern Greece is about to launch a season of plays by Genet, Pinter, Albee and Greek authors under the banner Social Theatreshop.
Theatregoers will pay for their tickets with food, which the theatre's 300 staff – actors, technicians, administrators, all working on the project for free – are distributing among charities and welfare groups in the city.
"We are, everyone knows it, in a very bad situation," said the deputy artistic director, Giannis Rigas. "We thought, we have to do something for people who now have so little money that they are going hungry. But this isn't charity, it's a fair exchange: food for theatre. A couple of tins of soup, or a packet of pasta, for a ticket. And it's also a way to put the theatre back where it belongs, in the community."
Across town, on the redecorated first floor of a battered building owned by a trades union association, more than 80 doctors and dentists volunteer their time at the social medical centre, opened late last year to treat illegal immigrants with no access to free healthcare.
In fact, 70% of the patients seen by the GPs and specialists at the centre until 9pm each night are Greek citizens who can no longer afford health insurance.
"If you're not earning, you no longer have easy access to care," said Sofie Georgiadou, a dentist who volunteers one evening a fortnight. "I never imagined I would one day find myself working somewhere like this, in Greece."
It doesn't, in some instances, take much to change things. In Athens, Xenia Papastavrou, fed up with the quantities of perfectly good bread going to waste in restaurants and bakeries when welfare groups were spending money elsewhere to buy it, has founded a network called Boroume that, via its website, now puts 70 commercial food donors – including Greece's largest bakery chain and 25 Athens hotels – in contact with 400 welfare groups, from elderly people's homes and orphanages to drop-in centres for the homeless and municipal soup kitchens. Similarly Silia Vitoratou, a statistician, joined with friends in December to set up Tutorpool, whose site now puts 500 volunteer tutors in contact with pupils who need their help. It is a fact of Greek life that most schoolchildren, especially those hoping to go to university, will at some stage need after-school tutoring; many parents can no longer afford the private tuition centres that for decades have met that demand.
Tutorpool is helping Vassilis Xanthopoulos, 11, who is dyslexic and has had extra private tuition since he was very young.
"Last year, we had to stop," said Harris, his father. "My business has practically collapsed, and my wife is earning half what she used to. It was €450 a month we no longer had. Vassilis started falling behind almost instantly. Tutorpool really saved us."
Warming as they are, though, such initiatives can't save everyone. Korina Hatzinikolaou is a developmental psychologist at the Athens Institute of Children's Health, which co-ordinates Greece's child healthcare provision.
Her salary has been cut by a third and hasn't been paid since December; she and her two small sons have had to move back in with her mother.
More alarmingly, the institute itself can no longer make ends meet and is threatened with closure; Greece's national neo-natal screening programme, among others the institute runs, is now at risk.
"There are limits to what ordinary people can do," Hatzinakolaou said.
"We can do much, but we cannot run a health system. At some point, a state has to say, 'You know what? This really matters. Let's all do it, together. Let's make it a priority.' But here in Greece, the social state is collapsing. I am really not sure how it will end."
Greece on the breadline
Jon Henley spent a week blogging his way through Greece, hearing the human stories behind the European debt crisis in a country that has been left reeling. Each report in the Greece on the Breadline series was accompanied by hundreds of online comments, as readers shared very similar experiences across the country.
Many called for projects such as the "potato movement" to be extended to other parts of the country, while soppan updated us on the progress of Boroume, the scheme to make better use of leftover food from restaurants. "From what I've seen of their website Boroume has started a Patras branch, and as far as I know local bakeries were already giving away leftovers to illegal immigrants, which as you know is a major problem in our town."
After the report on tutors giving free lessons, MonaLisa4Ever and others shared links to free education resources: "But a system that is deprived of resources (school libraries, computer labs, modern buildings, play spaces, etc) can only depend so much on the creative potential of the teachers ... The system is starved." Readers involved in the projects featured in the series came online to explain more – from vzlalsj, a physician working in a Greek hospital on HIV and malaria levels, to KaterinaK, the leadership coach offering free lessons to the unemployed.
While some were concerned about the effect reports on the crisis might have on the tourism industry, many gave thanks for showing how ordinary Greeks are tackling social problems.
A new solidarity among citizens is a source of support and hope, readers like Nirema said: "What helps maintain my optimism: when I last visited Athens ... the three times I made it to the [non-mainstream] theatre, it was packed. Bookshops in central Athens were also quite busy ... Then I saw the burnt-down neoclassical cinema, and the human remains of the day sleeping on the pavement, and a few angry faces venting their anger on buildings ... Still, the fact that people huddle together in theatres and read books, trying to make sense and hopefully rectify all this, feels [sic] me with hope."
Ben Bernanke's promise to support economic recovery boosts US markets
Federal Reserve chairman warns that US job market remains fragile and says Fed is prepared to step in to help recovery
The Dow Jones closed up 160 points after his comments on Monday and continued to rise early Tuesday. Photograph: Andrew Burton/Getty Images
US stock markets have been boosted after Federal Reserve chairman Ben Bernanke said low interest rates are still needed to support the fragile recovery in the job market.
Despite a decline in home prices and consumer confidence, the US markets continued to hold their rally early on Tuesday as investors cheered a Bernanke speech in which he emphasised the Fed's determination to continue supporting the recovery.
At a a speech to the National Association for Business Economics on Monday, Bernanke warned that the job market remained fragile, despite official reports showing consistent improvement in recent months.
The US economy has added an average 245,000 jobs over the past three months, and the number of people applying for initial unemployment benefits slipped to a four-year low last week.
The recovery has been seen as a major boost to president Barack Obama's re-election campaign. But Bernanke warned there may be trouble ahead, and said the Fed was prepared to step in to help the recovery.
"We have seen some positive signs on the jobs front recently, including a pick-up in monthly payroll gains and a notable decline in the unemployment rate. That is good news. At the same time, some key questions are unresolved," Bernanke said.
"Further significant improvements in the unemployment rate," he said, "will likely require a more rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies."
The Dow Jones industrial average closed up 160 points after his comments on Monday and continued to rise early Tuesday.
The rally continued despite figures that showed US home prices fell in January from a month earlier. The average home price is now back to early 2003 levels, according to Standard & Poor's Case-Shiller home-price index.
A widely watched measure of consumer confidence also fell. The Conference Board index of consumer attitudes fell to 70.2 in March from 71.6 the month before.
Overall, Bernanke painted a somewhat gloomy picture of the recovery in the US jobs market. He said the recent positive jobs numbers seemed "somewhat out of sync" with the overall pace of economic expansion, and that a close look revealed some worrying trends.
The number of people working and total hours worked are still significantly below pre-crisis peaks, said Bernanke. He said he was particularly concerned by the large number of people who have been unemployed for more than six months.
"Notwithstanding these welcome recent signs, the job market remains quite weak relative to historical norms," he said. "After nearly two years of job gains, private payroll employment remains more than 5 million jobs below its previous peak."
What's your take on the US job market? Is the recovery really here or are we headed for another downturn? Whether your unemployed, recently employed or have had a job for a while, we want to hear from you in our latest people's panel.
'Mission impossible' for Spain's PM – another €40bn in cuts
People's party supporters wave flags as Mariano Rajoy arrives at a campaign rally in Seville. Expected election victory in Andalucia on Sunday will be followed by further austerity. Photograph: Marcelo Del Pozo/Reuters
Spain's prime minister, Mariano Rajoy, faces the toughest week of his three months in office as he is forced to announce up to €40bn (£33.45bn) in spending cuts and taxes in a budget on 30 March, the day after a general strike.
As Rajoy's conservative People's party looked set for victory in key regional elections in southern Andalucia on Sunday, other European leaders and the markets were signalling Spain as now being the biggest single threat to the stability of the eurozone.
A win in Andalucia would give Rajoy unprecedented control over troublesome regional governments whose inability to reduce deficits has helped to put Spain centre-stage in the eurozone crisis. Asturias, a much smaller northern region, was also voting.
Rajoy was recently forced to backtrack by fellow EU leaders who refused to accept the deficit target of 5.8% of GDP Spain set unilaterally for this year. They told him to cut to 5.3%.
The EU economic affairs commissioner, Olli Rehn, has blamed attempts by Spain, the eurozone's fourth largest economy and a more potent threat than bailed-out Greece, Portugal or Ireland, to ease up on deficit-cutting for renewed pressure on sovereign debt.
"Because there was a perception Spain was relaxing its fiscal targets for this year, there has already been a market reaction of several dozen basis points on yields of Spanish bonds," he told reporters. "That shows how fragile the situation still is. To return to sustainable growth, it is a necessary condition to ensure sustainability of public finances."
Spanish economists described the deficit target as "mission impossible" for a country sinking back into recession and with 24% unemployment. They have warned of devastating consequences if Rajoy, who has already imposed cuts and tax increases worth €15bn, is obliged to find a further €40bn over nine months.
A vicious spiral of recession, unemployment and falling tax revenues threatens to double the real cost of a superficial annual adjustment of €32bn.
"This is mission impossible," said LSE professor Luis Garicano in a blog posting with Jesús Fernández-Villaverde of the University of Pennsylvania. They estimated the total real adjustment needed this year to cope with falling revenue at between €53bn-€64bn. That is twice the €30bn "Save Italy" plan announced by prime minister Mario Monti in December.
Angel Laborda of the Funcas think tank puts the total adjustment at €55bn euros in a 1.7% recession.
Observers believe Rajoy has delayed revealing the latest dramatic round of cuts and tax increases until after the elections. It is unclear where the axe will fall. His government has signalled that pension payments, unemployment benefits and sales tax are all untouchable – though it has retracted quickly on other pledges. There were rumours of increases in company taxes and electricity tariffs and sweeping cuts in public investment.
A general strike on 29 March will test how the Spanish feel about Rajoy's handling of an economy laden with private debt and fallout after a housing bubble burst.
On Saturday Monti accused Spain of turning the clock back on a eurozone debt crisis that had seemed to be easing. Spanish 10-year bond yields are now higher than their Italian equivalents. "It (Spain) certainly made profound reform of the labour market but it did not pay the same attention to public finances," he told Italian business leaders. "This is causing us big concern because their yields are rising and it wouldn't take much to recreate trends that could spread to us through contagion."
Monti later softened his line, saying he had every confidence in Spain and Rajoy.
Citibank's chief economist, Willem Buiter, told Bloomberg radio that Spain was now the country that most worried him. "It's really moved to the wrong side of the spectrum and is now at greater risk of sovereign restructuring than ever before," he said.
Eurozone crisis live: Merkel says Greek exit would be huge mistake - 27 March
CDU candidate in the Saarland elections Annegret Kramp-Karrenbauer (L) and chancellor Angela Merkel. Photograph: John Macdougall/AFP/Getty Images
5.40pm: Looking ahead to tomorrow, there's plenty of economic data out...
• UK - final reading of GDP for Q4, current account for Q4
• France - detailed GDP for Q4
• Germany - preliminary CPI for March
• Italy - business confidence for March
• euro zone - money supply for February.
In the afternoon, ECB vice president Vitor Constancio will give a speech and there are planned strikes for transport workers in Athens. And with that, it's time to close the blog. Once again, thanks for all the comments, and we'll be back tomorrow.
Live blog - market down
5.17pm: Quick round up of the markets. The French and German indices were dragged down by oil stocks, after French company Total said it might take six months to stop a massive gas leak at a platform in the North Sea. More on that here.
The French CAC finished the day down by almost 1%, while the German Dax was 0.33% lower. The FTSE closed down 0.6%.
The Euro has been up and down against the dollar today but traders said there was little news to drive it in any one particular direction. Daragh Maher, currency strategist at HSBC, said
We finished more or less where we started. Yesterday we had events. Today is more like a consolidation in the market.
5.08pm: As bad as things are in Greece, the sovereign debt crisis has not brought everything to a grinding halt. The Greek Olympic committee is saying that its leg of the 2012 Olympic torch relay will still go ahead despite near empty public coffers. Helena Smith in Athens reports:
International sponsors appear to have come to the rescue of not only the Olympic torch lighting ceremony – a theatrical affair involving 'nymphs' dressed in ancient garb in ancient Olympia – but the torch relay which will see the flame being carried through 40 towns and cities across Greece.
With just over 100 days before the opening of the London games on July 27, Greek organizers confirmed that an array of international conglomerates had agreed to pick up the bill for the 1,800-mile journey the flame will make before it is put on a London-bound plane. The lighting ceremony takes place May 10.
"It's going to be as good a torch relay as any other," said a member of the Hellenic Olympic Committee (HOC), "although, yes, it would have been very difficult without sponsors and private individuals stepping in."
Earlier this week, HOC head Spyros Kapralos, vowed there would be no letting up of the torch relay on Greek soil. "It's going all around the country … to remind all our fellow countrymen of the importance of the torch, the importance of the Olympic Games, that everything started from here."
But, he added, it was "essential" to remind Greeks that they would not be picking up the bill. "The costs will be covered by sponsorships, the participation of local communities and individuals," he said.
OECD calls on eurozone finance ministers to take decisive action
Organisation for Economic Co-operation and Development's secretary general, Angel Gurría, says current level of funding is insufficient to restore market confidence
OECD secretary general Angel Gurria calls for decisive action on the eurozone crisis. Photograph: Francois Lenoir/REUTERS
The struggling eurozone needs the "mother of all firewalls" to provide the breathing space from its debt crisis needed to revive growth, the west's leading economic thinktank said on Tuesday.
In its annual health check on the 17-nation single currency area, the Organisation for Economic Co-operation and Development said decisive action was needed by finance ministers when they meet later this week.
The OECD's secretary general, Angel Gurría, said the current level of funding was insufficient to restore market confidence, still fragile despite the second Greek bailout finalised earlier this month. He called for a €1tn (£835bn) war chest to contain the sovereign debt crisis, noting: "Europe is stalling. It needs to get out of first gear and make growth the number one priority."
The OECD warned that the debt crisis was having a knock-on impact on the UK and that the 27-nation European Union faced a tough future. "Longer-term prospects are for growth to be weaker than over the past twenty years, influenced by population ageing and sluggish productivity gains."
Gurría said important advances had been made by governments in Spain, Portugal, Italy and Greece but the challenges remained daunting.
"Weak financial conditions, fiscal consolidation and economic adjustment are restricting demand in the short term before the long-term benefits on stability and growth are felt," Gurría said. "Decisive action to restore confidence and support demand is needed now."
Greek officials said the country was likely to hold a snap election on 6 Mayas it must implement more austerity cuts in exchange for its €130bn bailout agreed this month. Meanwhile Ireland is to hold a referendum on the EU's new fiscal treaty on 31 May, the government said on Tuesday – which will probably be the only popular vote on plans for stricter budget discipline.
The Paris-based OECD said the eurozone would slow to a virtual standstill this year, noting that there was a risk that austerity programmes and bank deleveraging would hit growth before the benefits of stronger public finances and economic reforms materialised. "High-risk spreads and self-fulfilling expectations could lead to unsustainable debt dynamics. There is a risk of global spillovers from these developments. This calls for both short-term action and long-term reforms."
The survey said economic, fiscal and financial imbalances in the area had led to weak banks, high unemployment and low growth. It urged an ambitious programme of reforms in product and labour markets, tax systems and education to rebalance economies, restore competitiveness, boost growth and bring down stubbornly high levels of unemployment, particularly among the young.