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Dan Balz says former prime minister Blair's policies in Britain (1997-2007) closely followed the policies of moving to centrist positions of U.S. president Clinton, with Blair's election in 1997 following Clinton's wins in 1992 and 1996. Clinton followed the Reagan years and Blair the Thatcher years in government, in modifying the early postwar ideas about the economy. The election of Corbyn by 59.5% of the vote of Labor party members, exceeds the 57% achieved by Blair in 1994. The opposing candidates did very poorly. Yvette Cooper, who most resembled Blair's positions was seen as waffling on issues by not taking clear positions. She lost badly with 4.5% of the vote, showing that something significantly has changed with the the deep recession following the 2008 financial crisis, and the recovery through years of austerity policies under Cameron's Conservative government. Balz's view is that this is likely to bring up the same debate in the Democratic party- Corbyn proposes a national investment bank for large investments in education, health services and infrastructure, and a reversal of Labor policies introducing fees for college education to increase opportunity. Sanders has not proposed a national investment bank, but says he would invest in education ( including reversing the spiralling education costs), health services, infrastructure, and other areas. Hillary Clinton has made the issue of upward mobility for the middle and working class a central issue in her campaign, but lacks the authenticity claimed by Sanders, who has tapped into anti-establishment feeling following the lack of recovery in wages under 7 years of the Democratic party government in the U.S. In this context Jeb Bush has also stated at the 2013 CPAC conference that social and economic mobility is the central issue of our times, only he would approach it by giving business incentives to increase business investment to create jobs and increase wages; and by adopting a tax code that would be also fair to the middle and working class....

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India needs more dams to collect, store and channel water to where it is needed. The rainy season is becoming shorter, with alot of the rain as much as 50% falling in about 15 days. This means some areas are flood prone and the water if not collected in dams would be lost. THe other problem is that a lot of water is wasted without proper maintenance of the existing dams and storage areas. Much of the state governments investment in this is ineffective so water is lost for lack of maintenance. The state irrigation departments are underfunded, overmanned and corrupt and are not upto the task of maintaining the existing irrigation systems. This presents ahuge problem because India is estimated to lose the equivalent of two thirds of the new storage it builds to siltation. Between 1992-2004 India built 200 medium size irrigation projects but the area irrigated by these projects actually shrank by 3.2 million hectares. New dams are not coming on fast enough and India has 200 cubic metres of water per person, compared with 1000 cubic metres in China. Groundwater -with the governments providing free electricity to farmers for pumps- is used widely but this is becoming unsustainable. The WOrld Bank estimates that 15% of India's food production comes from "mining" which is the use of unrenewable groundwater supplies. Many of these wells are drying out. Also free electricity is causing electricity boards to have insufficient funds for expanding supply causing chronic shortages. One quarter of India's electricity is given free or cut rate to farmers. And politicians trying to reform this system are often booted out of office. All this as 400 million Indians have no electricity. The answer is not merely to raise prices in places like Haryana state- where according to aWorld Bank study farmers with electricity spend 25% of their incomes for it and to repair engine pumps- but also for the utilities to improve supply. Farmers also need to learn to use water more efficiently. ...

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The engineering changes in the design of the 787 Boeing Dreamliner provide an experience in humidity levels, altitude levels, turbulence, and roominess that is not dramaically different but enough to provide a noticeably better experience. Nobumi Matsuda, who runs an eye clinic in Japan and is studying the eye health of pilots, says he expected more, that humidity levels were not enough. Boeing used the construction of the body of the jet using super strong plastics instead of aluminium, to create a small increase in humidity levels. The humidity level inside the Dreamlier is 10-15% compared to 4-7% in other airplanes. By pressurizing the cabin to lower altitudes there is a 6% increase in oxygen absorbed at the 6000 feet level at which it is set than the 8000 feet level, according to Boeing. Michael Grepo, a computer systems expert taking the Tokyo to Frankfurt flight on ANA, says he experienced an improvement in breathing, dryness of the nose and contact lens, but it was not a huge difference. Thorsten Hoffmann, a German sales executive says he did not notice till he got off the flight, when he realized that he felt good, had slept better. Othe changes are big overhead bins. The large windows are supposed to reduce motion sickness and provide great views on takeoff and landing. Boeing says "while it can be argued that the passenger comfort improvements are incremetal, the combination of so many improvements in one airplane is revolutionary in our opinion." At the customer level these are proving less revolutinary and more of a subtle type that add up to a noticeable improvement. Boeing now has on its hands a remarkable sales success, with 870 Dreamliners ordered by 59 of the world's airlines. A big factor from the airlines point of view is high fuel prices. The 787 is 20% more fuel efficient than the comparable size Boeing 767....

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The crisis of late 2008 and early 2009 in the global economy saw huge stimulus programs, resposible economic management, and rapid recovery by the end of 2009 in developing countries. China put in place a large stimulus program, and in most developing countries, India, Vietnam, Brazil and other countries efforts were made to strengthen the safety net for the poor and to introduce stimulus for creating jobs. India and Indonesis saw the return of ruling party governments and in Brazil Lula da Silva had favorability ratings above 60%. So contrary to earlier fears in late 2008 their was both asense of political stability and asense of confidence in the developing countries. Capital is flowing into these countries and the IIF says that net private capital inflows to developing countries will double in 2010 to $672 billion. Russia which saw capital outflows of $50 billion in the first 9 months saw $20 billon of capital inflows in the fourth quarter of 2009. Half of the 140 million laborers working in Chinese cities returned home in early 2009, a fifth stayed there and another fifth counld not find work when they returned to the cities. But as the stimulus in China kicked in, and infrastructure development surged, (see link to the rail infrastructure spending) by the middle of 2009 jobless ness among rural migrant workers went down to less than 3%. This shows in the Pew Global Attitudes Project wth more than 40% of respondents in India, China and Indonesia saying that they were satisfied with their lives, in China this was 87%. In France, Japan and Britain the share is below 30%. In America 49% of those in the Pew pollingfelt that America should mind its own business internationally, 30 points higher than in 1964. When asked "Are you better off in free markets?" the respondents share fell in 2009 in Germany by 4 points, in Spain by 10 points. Shares rose in India and China, and stayed flat in Brazil and Turkey, so there is no backlash against free markets in developing countries....

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The shift from non-conventional polluting single cylinder engine contraptions used by poorer Chinese called "Inkfish" to conventional fuel efficient engines will reduce oil consumption in China even as more cars are on the road. This explains the paradox of Chinese vehicle sales being up by 77% year over year in the first quarter of 2010, and still gasoline demand went up by only 3%. Kack Perkowski, founder of Chinese auto-parts manufacturer Asimco Technologies, says the shift from the low tech "inkfish" type vehicles to fuel efficient small cars popular with the Chinese and encouraged by government policies to reduce oil consumption is a big factor in this development. Perkowski says 50 million engines are manufactured in China each year and if you subtract the 13.6 million cars, trucks and buses sold in China last year, another 36 million low tech highly fuel inefficient engines including "inkfish" engines were sold. China's car buyers are very price conscious and prefer smaller cars. Smaller cars are also well suited to the crowded roads in the coastal cities. And the Chinese government wants to keep oil consumption down so it is pushing buyers in the direction of smaller engines with tax breaks. The Chinese governmet is expected to announce subsidies for plug-in hybrids worth about one third of the sticker price. The motives are environmental and energy security related, but also have the intent of enabling China's car manufacturers to gain experience and leadership in newer electric car technologies. Bottom line: some experts including Deutsche Bank's Sankey view China's oil demand growing much slower, at about 2.6% a year over the next 15 years. This would mean oil demand tapering off at 13-14 million barrels of oil per day by 2025, much higher than the 9.1 million bpd in 2010, but growth curbed by fuel efficient engines and increasing fuel efficency of the Chinese vehicle population....

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Spirit Airlines strategy to charge for almost everything from snacks to bags, reservations on the phone and other items for a flight- making it a bare bones flight like that of European budget carrier Ryanair- has proven very successful. Spirit's net profit per plane is now the highest by far in the U.S. airline industry. Spirit leads with $2.06 million profit per plane, followed by Delta at $1.21, United $1.19, JetBlue $0.51, Southwest $0.32, US Airways $0.21, and American at a negative $2.32 million, according to Ascend and FactSet Research. Spirit has stayed away from business fliers, instead pursuing the frugal flyer, other than the seat everything has a price. Boarding passes cost $5, water $3. Spirit started the trend to charge for bags. Southwest has moved away from the no frills arrangement and Spirit is gutsily moving that way. Carryons in the overhead bin run $30-$45. Compared to other airlines which get only 6% of revenues from add on charges, Spirit gets about 50%. Since 1989 Spirit earned $289 million, compared to $1 billion for way larger Southwest. Bill Franke, a former CEO of America West Airlines in 1990's, bought Spirit with the idea of modeling it on Ryanair in Europe, after Spirit could not turn a profit flying Midwest passengers to Florida. He teamed up with CEO Baldanza to run the operation on a hands on basis with only 1% going for advertising, and Franke doing some of the ads in emails. Running flight on a tight schedule means late flights and with tight seating and strict refund policies, Spirit has many complaints. It has the worst on time performance in the industry. Yet it has planes running close to capacity in today's frugal customer environment. Prices are about 30% lower than competitors according to industry analysts. Franke and Baldanza seem to revel in this, sensing that they have struck the right tone for a frugal flier, and outdone cost pioneer Southwest. ...

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Simon Nixon points to two large capital gaps Spain's government faces for Bankia. Spain was not prepared for the events of the last month as it took control of Bankia. The agreement to convert 4.5 billion of preference shares into equity gives it 100% of Bankia parent, Banco Financiero y de Ahorros, and 45% of Bankia. The capital gaps Spain faces for Bankia comes from expected loan losses which it has been slow to deal with. BFA-Bankia's real estate loan losses are estimated at 52 billion euros. Capital provisions for this are only 11%. J.P. Morgan estimates another 4.9 billion euros will be needed under new government rules. But these rules do not reflect all the losses if real estate loans are written off and and other loans are correctly shown as nonperforming, and other corporate loan provisions are increased. When this is done total losses would in reality be about 12% of the 190 billion euro loans at BFA-Bankia or 22.8 billion euros, according to experts. To correctly deal with this would require $15 billion euros, in addition to the 4.9 billion euros, for a total of 19.9 billion euros. The other capital gap comes from BFA's capital carried on books at 12 billion euros, the pre-IPO value. This has been shrinking rapidly to 5.5 billion euros at 2011 end, and is now down to 2.8 billion euros. This could mean another capital gap of 5 billion euros, depending on to whether shareholders are wiped out. Bankia has 350,000 private shareholders and it will be important to maintain depositor confidence. The total is close to 25 billion euros in capital gap for BFA-Bankia that the Spanish government must face up to quickly. It does not stop there because there are other cajas savings banks and other banks that will have to be taken into account- too large a loss would mean losing market confidence and poorer access to financial markets. ...

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China's State Internet Information Office chief Lu Wei, 54, is a Communist Party official who assumed office in 2013. He attends many of the internet conferences and gatherings in China and overseas, loudly explaining China's Communist Party line that "respect for national sovereignty" on the Internet should be adhered to. Mozur and Perlez reveal the vigorous personality of Lu Wei as he argues for this view of the Web at gatherings, in sharp contrast to the way younger generation social media users and business users see the internet. Lu Wei spent his early years as bureau chief of the state owned Xinhua News Agency in southern Guangxi Province. He was promoted to positions as secretary general and vice bureau chief at agency headquarters, and to vice mayor of Beijing in 2011, chief of the city's propaganda department. He came into prominence following an article in the Communist Party journal "Seeking Truth," after pointing out that China needed to manage the way information about the country and the Party is presented using the new information technologies. He also perceived the risks posed by distorted or incorrect information to financial markets, and economic security. This was confirmed the following year with the rapid spread of reports about a high-speed rail crash in Wenzhou, China, and in numerous other incidents following this, as social media reports that could not be confirmed spread quickly in out of control fashion. He now is the director of a new Central Internet Security and Informatization Leading Group, headed by president Xi Jinping, with the task of coming up with a policy for balancing views of openness needed for the economy with government views on internet oversight. This is not only a political matter, as Chinese officials face the challenge of how to get the public to vent views on critical matters such as public anger about pollution, food contamination, contractors and badly constructed housing in a recent earthquake, mismanagement in the railways ministry, and a whole range of issues related to economic development, health and public safety. ...

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New risks are emerging in the shadow banking system as regulators work to make the banks safer. Banks as deposit backed financial firms are different from mutual funds, private equity and other firms that are doing more of the financing for business and home loans in the U.S. financial system. As banks deleverage responding to tighter regulation by increasing capital buffers and reducing assets, it makes the financial system safer, yet creates new risks in the shadow banking system not subject to regulation and not supported by bank deposits the way banks are. A IMF report put out in April 2015 underlines these new risks in the U.S. and European financial system. Mutual funds and exchange-traded funds now rival banks in providing financing to companies with high debt. Total bond holdings worldwide in 2014 were $9.6 trillion, increasing 25% over 2008, and the mutual funds leveraged loans increased 60% to $151 billion in the U.S., 223% in the eurozone to $126 billion, according to the IMF. The IMF points out that these mutual funds and exchange traded funds favor emerging market and corporate junk bonds, and operate in a way where they mimic each others in their investments, creating contagion. With hard to sell securities and the rapid decline in these types of funds in a panic, the effect could be to create contagion across the funds. In the mortgage lending field a similiar process of deleveraging is happening. U.S. banks share of federally guaranteed mortgages from big banks down from 61% in late 2012 to 33% in 2015, other smaller finance companies taking up 51% increasing from 24%, according to an American Enterprise Institute report. Paul Tucker, former deputy governor of the Bank of England, points out the dangers. He says policy makers and regulators are playing catchup with firms in the financial services industry who are constantly looking for gaps in the rules, a game that policymakers and regulators are likely to lose at some point....

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Ostrower and Cameron point out that Dennis Muilenburg, the new CEO of Boeing, is first and foremost a engineer. He comes from a different background than former CEO Jim McNerney. McNerney graduated from Yale University, and followed a path of consulting with McKinsey, work at P&G, moved to General Electric where he worked under Jack Welch for many years, before the position at Boeing. This was a path for many CEO's at the time. As the U.S. returns back to its manufacturing and technological roots and with the manufacturing and technical problems at Boeing and Airbus, Muilenburg brings the right focus to meet future challenges. Muilenburg graduated from Iowa State University with a bachelor's degree in aerospace engineering, a master's degree in aeronautics and astronautics from the University of Washington He joined Boeing as an engineering intern in 1985, and is at Boeing since 1985. Since Dec. 2013 Muilenburg was president and COO, leading Boeing's effort to use automation to cut costs of developing and building commercial jets. Before that job he headed Boeing Defense, Space and Security, where he is credited with improving the operating margin from 9% in 2009 to 10.8% in 2013. He cut costs and closed facilities as the division share of Boeing revenue declined from about 50% in 2009 to about 34% in 2014 following defense spending cuts, but did this while maintaining higher research spending to drive efficiency improvements, say analysts. At Boeing Muilenburg's first 14 years were spent designing jets and military systems, some for contracts such as the advanced fighter jet program which Boeing lost to Lockheed, before moving to Washington D.C. for a new unit selling air traffic management services. He says the move was a period of personal growth for him more than any other period in his career. Muilenburg enjoys cycling, and puts in about 120 miles per week around Chicago...

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Faces in the continuing foreclosure crisis in Spain in 2014 include Xacobo Rodriguez and his mother in Madrid. Foreclosures continued at a high rate in Spain into 2014. The Bank of Spain reports that 38,961 primary residence homes were foreclosed in 2013, a decline of only 1% from 2012. If second residences are included the number of foreclosed house increased by 11% in 2014. This is six years into the housing crisis in Spain with no end in sight. The government has declared a 2 year moratorium on eviction of families that meet hardship criteria- a member of household disabled, expired unemployment benefits, very young children. A Social Housing Fund with 6000 units which provide places to live was created but only a small number of units are given out so far. The social advocacy groups say not enough is being done. The government points out that 90% of houses taken by banks were unoccupied at the time. Bank Association spokesperson says there is an understanding of the depth of the crisis with 6 million people out of work, that action is taken to reduce the stress on homeowners. And point to the data showing only 1% of homes were taken by banks in 2013 of the 6 million home mortages outstanding, with one third of these done with an agreement to have debts erased for the homeowners. Women and immigrants are affected to a larger degree, according to Human Rights Watch. Social housing in Spain is only about 2% of the housing stock making things more difficult, by comparison it is 17% in France, 21% in the UK, 35% in the Netherlands, according to Human Rights Watch. Meanwhile the Spanish government of the Partido Popular under Mr Rajoy, continues a policy of trying to be responsive to the homeowner crisis, and at the same time helping the banking system recover following a $56 billion bailout loan taken by Spain from the European Union. ...

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The system of using performance evaluations for "forced" or "stack" ranking of employees started with Jack Welch at General Electric. Microsoft adopted the system under Ballmer till 2013, when it decided that the need for teamwork was more important and discontinued the practice. Welch used it to get rid of "underperformers" or managers who did not conform to his requirements when he became CEO of General Electric. It was his personal style and way of bringing change to GE. The practice of "forced" ranking increases competition inside the company instead of teamwork, say managers, and leaves a lot to the caprice of individual managers. In December 2013 Ballmer facing criticism from his Board for missing some of the disruptive technologies in the information tech business and falling behind Apple and Google, sought the advice of Alan Mulally of Ford Motor Company. Mulally had to fight entrenched Japanese competitors and pull Ford out of a crisis in which even Ford's logo had been put up as collateral for loans. Meeting for 4 hours on Mercer Island in Seattle Mulally told Ballmer that he focussed on teamwork and simplifying the way Ford did things. Ballmer phased out the "forced" ranking system as one of the last major steps before he leaves Microsoft. In today's environment for tech companies of intense competition worldwide and disruptive technologies without teamwork and employees looking to come up with new and exciting products the future is surely lost. Having the "bottom" 50% of the employees compete for limited positions can be dangerous or suicidal without the dominant position in markets that GE and Microsoft had. It also makes no sense to substitute internal competition and capricious manager behaviours for teamwork. It is the responsibility of managers to do as much as possible to make good hiring decisions, and then motivate and help employees to achieve their best performance with frequent helpful feedback, and to promote teamwork. This is the lesson Ford learned through its crisis and Microsoft is now learning....

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Walmart comes out in favor of requiring employers to provide health insurance to all workers, a central feature of President Obama's effort to provide near universal coverage in the USA. As the country's largest private employer, employing 1.4 million Americans, this change is significant. In a letter to the President, Walmart CEO Mike Duke, joined by Andrew Stern of the Service Employees International Union, and John Podesta of the Center for American Progress, who also signed the letter, say they are for an employer mandate which is fair and broad in its coverage. Walmart had a couple of reasons for doing this. For one Walmart needed to join the negotiations, as the Senate Finance Committee is considering other proposals that are less favorable to Walmart than employer mandate. Already Walmart is covering 52% of its employees, and has improved health benefits in recent years in response to criticism of the company. The industry average is 45%, according to a 2008 Kaiser Foundation study, and some companies do not provide the health benefits that Walmart does, so this helps level the playing field by requiring all large companies to share the burden. Walmart wants to see effective cost controls to keep costs down, and Rahm Emmanuel, the President's chief of staff, assured Walmart that "cost control and employer mandate are heads and tails of the same coin." Under the plans considered by the Senate Finance Committee under Max Baucus, small businesses are exempted from the employer mandate. Republicans have opposed employer mandate. And the U.S. Chamber of Commerce has opposed it saying it would make companies lower wages and cut jobs. Walmart's shift has been gradual. From a company used to providing skimpy benefits, it has evolved as it improved benefits, and two years ago it joined the SEIU union to call for affordable health care for all Americans by 2012. It has Mr Dach as its governmental affairs vice president, and this is significant, as Dach is an advisor to Democratic party politicians....

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U.S., UK and Swiss regulators charged UBS AG with conspiracy to rig the London Interbank Offered Rate or LIBOR. LIBOR is the interest rate at which large banks lend to each other and is determined from daily reports made by 16 banks to the British Banking Association, giving the rate at which the bank borrows from its peer banks. This rate helps determine the rate for trillions of dollars in securities, home and auto loans, swaps and derivatives. A tiny movement in LIBOR can affect trading profits, and it influences perceptions of a bank's health particularly in a crisis such as the 2008 financial crisis. Every day a 16 bank panel reports this rate to British financial authorites. UBS took full responsibilty and pleaded guilty to criminal fraud. UBS settled the charges for $1.5 billion. Barclays PLC, a UK bank, settled charges for LIBOR manipulation in mid 2012 for $450 million, ending in the departure of the bank chairman and CEO. Britain's regulator the Financial Services Authority, FSA, says in its report that rigging the rate was "routine and widespread" at UBS in order to increase trading profits, done with the knowledge of senior managers, and included cash awards or trading opportunities to employees at other banks to participate in manipulating the LIBOR rate. During one period of 18 months UBS paid 15000 British pounds to a firm of outside brokers every 3 months. FSA says LIBOR and versions of it are "at risk of being improperly influenced " between Jan. 2005-2010. What this means is other large settlements with other banks can be expected. Fannie Mae and Freddie Mac may have lost $3 billon from this manipulation of LIBOR, according to an internal report from the inspector general of the Federal housing Finance Agency, which also says Fannie and Freddie should sue the banks responsible. The whole issue of LIBOR came to light after an article was published in the WSJ, April 16, 2012, and a WSJ study on LIBOR using credit default insurance to track LIBOR rates, on May 29, 2012....

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After a long year of uncertainty this is what it comes down to. The new turnaround plan developed by CEO Fritz Henderson and the government's auto task force will leave the government owning more than half of GM. Under this plan GM will get an additional $11.6 billion in loans from Treasury, on top of the $15.4 billion already received. THer government will get half of the ownership of the company in payment for half of these two loans. And GM will use stock instead of cash to pay off half of the $20.4 billion it owes a United Auto Workers fund to cover retiree health care. That transaction will leave 39% of GM in the hands of the UAW. This happens just as another agreement was reached to leave the UAW with 55% ownership of restructured Chrysler, and FIat SpA getting 35%, with the US government and lenders owning the rest. What happens to bondholders? They were told to swap $27 billion of unsecured debt for a 10% company stake. GM and the government give bondholders little choice, if they do not do so GM's Fritz Henderson says GM will file for bankruptcy. In 2011 hourly workers will be less than 40,000. Market share will shrink to 18% in 2014 from 22% in 2008. The number of dealers will drop to 3605 by 2011, down 42% from 2008, and GM will kill the Pontiac brand. Much of the company will have disappeared, showing how market forces are at work in our system in destroying companies, and leaving them as a fragment of what they once were, if management gets complacent and makes a series of errors. Its a big development and shows the savy shown by the government auto task force's leaders in setting up the arrangements. A smaller GM will emerge. But this is an understatement if ever there was one. Here is a company that had close to 200,000 workers in 2000, with hourly workers close to 150,000. See the graph. ...

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A poll done by the International Republican Institute, a nonprofit affiliated with the Republican party, of 3500 people across Pakistan found a couple of important things. The Republican Institute's goal is to promote democracy in the developing world. 1. Popularity of President Zardari at 9% and Nawas Sharif's at 55%. The US resumed contacts with Sharif, and Sharif is seen as able to bring the Islamic moderates to the American side. 2. Economic issues are what concerns Pakistanis most. Refugees are approaching the 1 million number according to the UN High Commissioner for Refugees. 3. 81% said the country was going in the wrong direction, Zardari was never elected and is incompetent and this could be the reason. But military is still unpopular, 77% want democratic rule, possibly with Sharif or some sort of combination of Sharif, lawyers movement, and Islamic moderates in charge. 4. From alow of 9% in January 2008, now 37% are willing to work with the USA against extremism. Could Obama's election and US support of Pakistan's effort to heal itself be apart of this change of heart? 5. 45% support fighting extremists in the tribal areas and the Northwest Frontier Province. And 69% say having the Taliban and Al Quaeda operate in Pakistan is a serious problem. If these poll results accurately reflect shifting feeling in Pakistan, American help to help Pakistan pull itself up by its bootstraps economically and unify the country under a democratic administration of Islamic moderates and people from other areas like the lawyers movement, could work. It also improves the prospects of pulling out of Afghanistan after the situation improves, and setting up an administration that comprises Islamic moderates and tribal representatives that keeps out Al Quaeda, and works to rebuild Afghanistan after seemingly endless years of war. These efforts would require cooperation of Iran, India, Pakistan and the US, and assistance of countries like Turkey, in creating an atmosphere that promotes peaceful development in the entire region. ...

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The decision to replace Gen. McKiernan with Gen. McChrystal and to have Lt. Gen David Rodriguez as his deputy, was made by Defense Secretary Gates and Jt Chiefs chairman Mullen, after thinking about this during the transition to the new Obama administration. The failing war effort in Afghanistan with the Karzai government controlling only pockets of Afghanistan and Kabul and leaving the countryside to the Taliban has alot to do with this. Gates feeling is "we can and must do better." That it took so long, with the Taliban only 50 miles from Islamabad, Pakistan, and the question of Paksitan's nuclear weapons falling into thier hands vexing the adminstration, shows that things slowed down with the transition and the economic crisis. The decision was not adifficult one considering that McKiernan had little to show for his efforts, and the rapidly deteriorating situation by all accounts. McKiernan was a senior officer who spent his entire military career commanding conventional forces, serving in the Balkans and the Iraq war in 2003, and has the wrong midset and background for counterinsurgency warfare. McChrystal has experiences suited to counterinsurgency warfare, having commanded commando teams that took out leading insurgents. He is also director of the Joint chiefs of staff, so known to Mullen for his abilities. Rodriguez commanded the 82nd Airborne Division in eastern Afghanistan, is seen as aleading expert in counterinsurgency warfare. He is also Gates's senior military advisor so known to Gates for his abilities. The new strategy is to go with counterinsurgency warfare to turn this thing around. This puts 2 commanders with this kind of experience in Kabul, and close communication with Gates and Mullen because they worked together before. With additional troops, and shift in resource acquisition at the Pentagon that Gates is trying to secure for this kind of warfare, this creates the kind of combination that could help the US in Afghanistan and Pakistan, and achieve more modest goals. See the links to Gates's and Petraeus's more modest goals....

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Rich calls Obama's speech for all its apparent thoughfulness and logic, a failure in its mission of coming up with a way to tackle Afghanistan and Pakistan. It did not grapple with the real issue and complexity of these places. He says the rigorous analysis failed and what Obama is ending up with is a too clever by half holding action which lacks credibility becuase the Karzai regime lacks credibility, and the American people have serious doubts of the wisdom of increased involvement. Worse it lacks acredible exit strategy for all the emphasis on early withdrawal. Making some calculations with Petraeus's field manual Rich comes up with a force of 586,000 that would be needed for a proper counterinsurgency in Afghnistan for its population of 28.4 million. But America still would have only less than one fourth of this number in the vast mountainous terrain of Afghnistan, especially when the government it is backing has seriously alienated its own people. So isn't it just as possible that McChrystal and Gates have made a serious error, that the surge that worked in Iraq was based on apeculiar topography that is absent here, which means even more troops not awithdrawal is likely a year from now? He points out that, as Fred Kaplan had pointed out in Slate, that the idea that the coaltiion partners are increasing their share of the burden is an illusion, as America's new share of allied troops with the surge will be 70% compared to 50% when the Bush administration left office. But what he finds most disingenuous is the idea that there will be no sacrifices in economic terms for America, that life can just go on like before, even as the cost of the war will shortchange urgent economic priorities at home and even gut alot of the domestic needs. This was missing in the Obama presentation....

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The most important segment with future implications for growth is the young people segment, and here American companies are really weak. Of the "millenials" or people born between 1979 and 1985, those who consider a Ford when shoppng for a small car are only 7%. These are Ford's own numbers according to the Wall Street Journal. Ford and GM are moving their emphasis to small cars. Ford did this at the Los Angeles Auto Show with the new Fiesta arrriving in the market in early 2010, and GM will compete with the Honda Civic with its Chevy Cruze due in August in showrooms. To do this Ford and GM are remodeling their showrooms. To do this 3000 Chevy stores are taking on a new focus on small cars and 26,000 sales people are being retrained by end of 2009. Kurt Mcneil, Chevy's sales chief, says their emphasis is on giving a good response to online customers by having salespeople able to talk fluently about fuel efficiency and compare with Honda and Toyota. For Chevy the showroom remodeling involves having a greeter at the reception desk not a salesperson, this is who one first sees when walking into a dealership. The improvements costing $200,000 to $600,000 per location are being paid by dealers with GM offering financial incentives for the work. The way Ford is approaching it is to use social media like Facebook to a bigger extent. It will send a social media consultant to its largest 800 dealerships or one fourth of all stores to build an online infrastructure to connect to local buyers and offer online updates, videos, and games related to small cars. Ford, GM and Chrysler have only 21% of the small car market, according to Autodata, and Ford has only the aging Focus to offer today. In 10 months of 2009, 19% of 8.65 millon light vehicles sold were small cars up from 14% in 2006, while the percentages for SUV and pickups dropped 53% to 46%. ...

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Roosevelt say experts was a great crisis manager but not great when it comes to policies to create jobs. His achievements were stabilizing the banking system with deposit insurance, government investment in banks, and restrictions on banking practices, creation of the SEC, and fireside chats that steadied the national mood. Unemployment when he took office in 1933 was 25% from 3% in 1929, and industrial production had dropped 40% since 1929. So FDR took office when a lot of the damage had already been done, compared to that Obama takes office earlier in this downturn. And Roosevelt did not fully grasp John Maynard Keynes's advice when he visited the White House in 1934. Keynes complained to Labor Secretary Ms. Perkins that he had thought the President was more literate economically speaking, while the President felt Keynes had a rigmarole of figures he did not understand. Roosevelt said of Keynes: "He must be a mathematician rather than a political economist." It took some time for government spending to take hold. Throughout the 1930's government spending remained around 20% as a share of the economy. Today its 35%. And the average unemployment stayed at stubborn 17% on average for the decade of the 1930's. It was not till the 1940's that things changed. Total government spending as a share of the economy reached 52% in 1942 with the onset of the war, and peaked at 70% in 1944 when the unemployment rate dropped to 1%. One lesson experts say is that its easier to stem unemployment and job losses by action earlier in the downward spiral through vigorous action by government. In retrospect because industrial production fell by 40% during the 1930's experts say Roosevelt was actually timid in his response. U.S. Fed chairman Bernanke is a student of this period and draws a similiar lesson from that period for vigorous action early in the crisis....

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As exports and manufacturing decline, China is continuing to maintain high rates of fixed asset investment with the focus now away from factory construction to infastructure like roads, bridges and rails. The National BUreau of Statistics reported that urban fixed asset investment expanded 26.5% in Jan-Feb 2009, compared to 26.1% growth rate for 2008. Fixed asset investment was 42% of GDP in 2008, according to JP Morgan strategist Jing Ulrich. Now it could go up higher to 45%. China's growth has been off-balance say experts, now it is becoming even more so. As long as factory construction as fixed asset investment a lot of new jobs were being created in the manufacturing sector, now these jobs are not being created. China's small and mid sized companies that generated about half of the 4.42 trillion GDP, like GenTech of Mr Yu profiled in the other linked article in WSJ, and which created 90% of the new jobs, are now contracting. With smaller private consumption, and the efforts to improve the safety net and provide universal medical care inadequate and coming late, domestic demand will not help balance the economy and boost manufacturing. Private consumption is only 35% of GDP in China, a much lower percentage than India. The comparable figures for the US are 71%, UK 64%, Australia, Canada, France, Germany and Japan 57%. The balance is now heavily skewed towards government spending. Investment spending from HongKong and Taiwan, the home bases of industrialists with made for export industries inceased investment by 1% in Jan-Feb of 2009 from the year earlier, compared to 17% growth in all of 2008. And foriegn funded companies have comparable figures of 2% for Jan-Feb 2009 compared to 15% growth in all of 2008. Real estate investment growth also fell to 1% for Jan-Feb 2009 compared to 21% for all of 2008. In short the other pillars of growth in housing, and investments from Hong Kong, Taiwan and the West are declining. ...

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About 41% of Unilever's $53 billion in sales come from developing countries, up from 22% in 1990. In 2006 developing world sales increased by 8%, sales in Europe only 1%, and sales in the USA only 2.4%. This shows the growing significance of developing countries sales to Unilever. With head offices in Rotterdam and London, Unilever was formed from a 1930 merger of a Dutch food company and a British soap company. Unilever has been selling its bar soaps and cooking oils in the Dutch and British Empires, in countries like India, Indonesia, and South Africa since the 1880's. CEO Patrick Cescau is focussed on promoting products in fast growing regions of the world. The management structure is being changed to recruit new and nurture promising managers in countries like India and South Africa. These managers are being trained in western countries to learn new marketing methods, and are being asked to come up with their own new ideas for products from scratch for developing countries with low price points. Its not about adapting existing western products, but dreaming up new ones for low income shoppers. Its introducing a product called Cubitos- miniature bouillion cubes - tailored to low income shoppers in 25 developing markets and their tastes, for as little as 2 cents. The stakes are huge. Its competitors like P&G are doing this in Mexico. Nestle is expanding in Brazil with a new plant dedicated to shoppers making less than $10 a day, and setting up a distribution network to sell to small stores in shantytowns in Latin America. Unilever estimates are that 1.2 billion consumers will buy packaged goods for the first time in 2010, mostly all in the developing world. Detergent sales are soaring in places like India, as shoppers use powders to clean their clothes, moving up from bar soaps. Estimates are that each week 40,000 people in Asia use a washing machine for the first time. ...

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When Manmohan Singh and Wen of India and China said in Beijing that the people of both countries were united in their aspirations for the future this was very real and sincerely stated. Geopolitics is somebody's game who does not know his own country, people and history in these long neglected parts of Asia. Here in India or China in different ways its these aspirations that matter. India is desperately trying now to improve schooling after years of neglect for the country's rural poor, where the quality of government schools is startlingly poor. The figures are dismal. In general only 1 in 10 college age Indians go to college. But its worst at the lower poorer parts of society. Among the poorest 20% of Indian men half are illiterate and only about 2% graduate from high school. For the top 20% of Indian people only 2% are illiterate and 50% are high school graduates. The problems even as the government pans to triple spending in the next 5 years run deep. There is no motivation among school teachers because for years the schools have been neglected and there is no education culture in poor villages, teachers are poorly trained if at all, they are late or absent and there islittle discipline and education ethic. Parents are very poor and do not understand the value of education and want to pull children out of school to earn wages for the family as migrant labor. The parents are illiterate or poorly educated so there is very little help at home. And there is corruption as some of the money to be invested in school buildings, equipment, lunches, teachers, etc is stolen or goes to bribes. There are some dedicated people but they get washed out in the midst of so much apathy, lack of conviction, corruption and lack of motivation among teachers parents and village officials....

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Irish voters rejected the Lisbon treaty 53% to 47%. Ireland joined the EU in 1973 and has gone during this period from the poorest country in the bloc to the second richest in per capita terms after Luxembourg. As the first attemp to get approval of an EU constitution for a closer political union was rejected by French and Dutch voters in 2005, the effort was modified to take out the EU flag and call it a treaty and not a constitution and to go the route of approval by parliaments in each country instead of elections. But Ireland's constitution required a referendum and now Ireland has rejected the treaty. The Irish generally have favored the EU so it will give more thought to those who favor closer political union about how to proceed from here. Opposition to it in Ireland was based on a fear that Irish taxes would have to be raised and make Ireland less attractive for investors, and fear that the EU's global free trade stance meant that cheap food imports would be forced on Ireland and hurt Irish agriculture, but the Lisbon treaty has little to do with taxes and farming. The Lisbon treaty calls for a EU President that is appointed and ceate a Foreign Minister who can speak for the EU and greater powers to legislate in areas like immigration. How will EU supporters proceed from here? One is to go for ratification by the Parliaments of the 26 other countries in the EU without risking a vote. Another is to work on a two speed Europe with core countries like Germany and France and Spain and Portugal and Italy forming a political union and countries like the UK and Netherlands taking a more trade and economic based union approach. Also subject of discussion will be how to get the message of European union across, what is it about, and what are the institutions for, according to one expert at Oxford University....