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Greg Ip, Chief Economics correspondent of the WSJ, says there is a disconnect between falling stock markets in Jan 2016 and the economy. This is true not only for the U.S. economy but for China as well, says Ip. He points to the 6.9% growth rate in China for 2015 as close to the target set by China's government. Reports of economic output and exports show China's economy stabilizing. This contrasts with weakness in the way the government and the central bank have managed financial markets since the summer of 2015, sending confusing signals and hurting investor confidence. One difference as the stock markets decline worldwide- the Fed in the U.S has little room to cut rates and plans to gradually increase rates, the Chinese govenment and planners do not plan stimulus as they look for ways to reduce debt in the economy. This means less support for financial markets and less support for high valuations in the tech and startup sectors, which could provide stability in the long run.

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Issues raised by the huge mismatch between revenues and investment for AI. $400 billion estimated investment by 5 Tech firms in 2025 alone with revenue of about $40 billion and huge uncertainty about when AI will produce returns. Articles seen this week of November 17 in the WSJ and NYT on this issue, podcasts, discussions in other media outlets. Could this lead to a dot com bubble type economic crisis? Could that lead to a recession? Alongside these articles another article in the WSJ on Nov 17 shows the benefits small firms get by using AI, benefits which are on the fringes of their business, not essential but with some experimenting firm owners/managers able to tweak AI information for use in business. Nothing significant which firms will pay much money for. The uncertainty is a major factor. Should geopolitics trump all these concerns? Is the competition with China require this scale of investment, and is China following a more utilitarian approach as reported in a WSJ article this month, of investing in AI in a utilitarian way targeting its use in improving manufacturing, improving infrastructure, and not wildly throwing money at experimental uses that are unlikely to yield much result. In geopolitical sense would the country that not only promoted AI but used it efficiently and cost effectively, used it in ways that promote the overall public good, get the WIN. In short it behooves everyone of us to ask hard questions of AI, to dehype the hype, to look for the public good that comes out of this from it's efficient use. To ask the tough questions when $400 billion generates only $40 billion in 2025 and the $3 trillion planned investment over 5 years is half unfunded, is it going to crowd out energy needs for homes and business, push renewable energy targets back, crowd out essential investments in the crumbling aging infrastructure of the US and Europe, crowd out essential investments in education, healthcare, pharmaceuticals, and manufacturing, that hold better promise for our People. Will it also put retirees at risk when corporate bonds from retirees money fund the unfunded portion of AI? This means making the political dimension not about migration, settling the illegal migration issue that was meant to be settled a long time back, or about cultural issues that have little day to day impact on our lives which are about groceries, childcare, housing that are non ideological. Making the political dimension not about remote countries that one knows little about except when it affects public safety and health as with fentanyl. Capital allocation decisions to the vital needs of America can then be free of politically induced error, so that it can be subjected to the test of how best it serves the public interest and the people of the Nation. ...

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Germany has shown that low tech contact tracing efforts work- no apps needed, a phone, a desktop computer with a centralized database, and most important the human relations skills of the person doing the calls. The  sensitivity to the situation facing each person being called, being able to talk to the person in the language they speak in a multilingual environment such as California, is shown here. A 40 person team operates in San Francisco consisting of public health officials, clinicians, medical students and librarians. They call the contacts of people with coronavirus, arrange tests, and as needed send packages of food and medicines to hotel rooms or homes. Every call is expected to last 15 minutes but all sorts of questions are handled.  English and Spanish are used. Here one of the persons doing the contact tracing says she does not use apps, just an open source software used in the fight against Ebola. Definitely low tech, no waiting, get going is the message to every city in the world. She says apps software such as what Google and Apple are putting out can tell you whether the person went to some place, but cannot tell you more about that person, cannot tell you about problems the person is having being tested, and how they are having difficulty providing for families. One of the big lessons from Germany and efforts such as this one in San Francisco, and in other places such as Paris, Singapore, Taiwan, is that there is a complex nature to contact tracing that cannot be solved by tech. In fact the best thing to do is to get started immediately, with a phone and a database on a computer, as long as you have a person who has the motivation and skills, empathy with people, a lot can be done. Waiting for apps is a dangerous waste of time is shown by the low tech German experience, and the experience in other places. Most important is starting immediately. The example shown here of working with migrant workers in contact tracing shows in the most vulnerable places it is these human relations skills that count, that no tech app can do. It requires detective skills to find out and get people to share their history of movements and contacts for 14 days . In Singapore crowded dormitories house 300,000 of 1.4 million migrant workers. Singapore using an app also but its use is secondary. Apps don't work in many situations but fail in the most critical situations such as these dormitories and other eccentric or atypical situations such as faced by South Korea with religious groups and gay communities, elderly people in Europe, that generate the worst dangers of spread and need to be cluster isolated quickly. Human contact tracing has a history of being an effective method and was used in China and South Korea during the 2003 SARS epidemic. More countries need to adopt the method used in Asia and in Germany, particularly Britain, the U.S., France and India. It is OK that Britain's NHS and India's national government with Aarogya Setu app have put out their own apps which balance privacy concerns with the need to act immediately and cover the entire country, but the hard slog of human contact tracing teams in each district is indispensable. This is why the former Health minister in Britain calls it Britain's national mission to do this. Speed is key- putting together teams across the country in every district from skilled volunteers or government workers, and pulling together the phone and a centralized database on a computer as basic equipment. The fact that this is easily doable and people with human skills needed can always be recruited as they have been in Germany- from public officials in local government who are less busy in lockdowns, medical students, clinicians, volunteers, people from different professions- makes it inexcusable not to learn from others experience and get going. Just Do It. You want to reopen business, professions, offices and public services- Just Do It, it makes this possible. You want to prevent spread of the virus- Just Do It, it makes this possible. You want to limit damage to the economy and get the recovery going- Just Do It, it makes this possible. People of all shades of opinion can agree on this- its the only thing that works, even when there is a lack of enough proper accurate testing. ...

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G-7 nations reach agreement for a global minimum tax of 15% a floor for taxes that the Biden administration finds acceptable. This agreement was reached at a meeting of the Treasury chiefs of the 7 G-7 countries in London on June 5, 2021. The G-7 countries are Canada, France, Germany, Italy, Japan, UK, and US. Next agreement from Russia, China, India and Brazil in the G-20 nations would establish new ground rules for the major economies. The G-20 meeting is in Venice July 9-10. The OECD is steering the international efforts to achieve that goal. For the agreement to be effective a number of small nations that use tax rates of below 15% to attract business have to be part of the new rules. One of these countries is Ireland with a tax rate of 12.5%. For the Biden administration in the US the goal is a significant one as president Biden seeks business to pay its fair share so that long neglected priorities for education, healthcare, infrastructure, post pandemic improvements can be met. France and other nations in the EU face similar needs in the post pandemic environment. By setting a floor the Biden administration is both creating a new cultural concept of fairness in taxation and making it possible to finance the $2 trillion spending programs for these priorities of president Biden. Behind this are important facts that have left the large tech businesses paying little or no tax depriving governments of the very revenues that are needed for infrastructure and services for a modern well run state. The Biden administration seeks to include the tech businesses as well as all businesses in the new tax rules so that a uniform idea of fair taxation applies across the whole economy for the first time in two decades. In this way it makes up for the missed opportunities in the OBC administrations of Obama, Bush, Clinton that have led to loss of faith in the state and institutions in the US. A similar situation prevails in the UK,  France and Germany where previous administrations failed to address this important issue of fair taxation and financing infrastructure and priorities in health, education, and critical needs of the people.   ...

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Priceline surged in a tech boom of two decades ago before coming down. It has regenerated itself through its 2005 acquisition of Amsterdam based portal Booking.com, followed by acquiring booking site Agoda and travel search engine Kayak. This has helped the stock rise in the last decade. Over 90% of its revenue comes from outside the U.S., even though its original model of naming a price for a booking is gone.  Booking.com is making an attempt to penetrate the Chinese travel market with a series of acquisitions starting with online travel agency Ctrip.com. Ctrip.com is established but recent acquisitions are burning cash. There is skepticism about these acquisitions as Chinese company share prices are seen as inflated similar to the stock booms that went bust in the U.S. Booking.com invested heavily in online advertising primarily through Google. Yet though western customers use search engines to find and book travel, in China customers go directly to Ctrip or apps like Meituan to book trips. To get people to book Chinese travel companies offer large discounts, a model that may not be right for Booking.com. The effort is to add to Ctrip customer base the middle to lower income customers from Didi ride sharing app and the Meituan app, through its partnerships with these companies. The experience of other travel sites such as Expedia in the Chinese market is poor, with price wars and Expedia selling its majority stake to Didi Chuxing. Expedia's CEO at the time calls it "the wild, wild east" because of the intense competition. About 130 million Chinese travelled overseas in 2017, up 7%, and spending $115 billion. ...

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China's current account surplus has declined to 2.8% of GDP for 2011 from about 10% in 2007, and will be around 2.3% of GDP in 2012, according to IMF estimates. The U.S. current account deficit is down to 3.1% of GDP from 5.1%. By controlling the exchange rate China was able to keep the competitiveness of its exports, resulting in a five fold increase in exports from 2000 to 2010, according to the IMF. The decline could be temporary say experts, as the the recession in Europe and the U.S. resulted in slowing exports, with its infrastructure buildup sucking in imports of machinery and other goods from the western countries at an accelerated pace with its 2009 stimulus measures. Another reason is that in the last decade China has developed its own high tech and other companies which will now increase exports. IMF forecasts show a pickup in China's trade surplus to 4.25% by 2017. This could be lower if the renminbi is allowed to appreciate. Estimates of appreciation of the renminbi are 8 percent in nominal terms since June 2010 against the dollar. Including inflation, which is higher in China, the renminbi has appreciated by 13% since June 2010. ...

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The US is requesting talks with China at the World Trade Organization with the objective of ending hundreds of millions of dollars of subsidies China gives to increase wind energy production. The wind power grants are being targeted because Chinese producers are required to use domestic parts to be eligible for the grant, which range from $6.7 million to $22.5 million. In the last 5 years foreign companies' share of the Chinese market has dropped from 79% to 13%, according to Goldman Sachs, with China's efforts to promote Chinese manufacturers. The renewable energy market in China is expected to reach $100 billion by 2020. And wind energy is the fastest growing sector. The effort comes after the US Steelworkers union alleged that China was using import substitution subsidies in violation of WTO rules, in a 5800 page petition. Steelworkers union president, Leo Gerard, says this doesn't address most of the billions of dollars of clean-tech subsidies and other support provided by the Chinese government. Gerard says the goal is not litigation but to put an end to these practices that are trade distorting, and act as a barrier to US exports to China....

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Issues of inequality and lack of upward mobility came up in the last presidential election. A Federal Reserve Survey for 2018 shows the financial fragility facing many Americans. One quarter of working individuals say they do not have any retirement savings. About 17% of households say they cannot pay all their monthly bills. About 40% of Americans say they do not have enough cash to cover an unexpected $400 expense, and would have to rely on credit cards balances or loans from family to make the payment. This survey by the Federal Reserve is done each year since 2013, after the financial crisis hit in 2009 it became more important. Still Americans are showing unusual resilience and upbeat spirit. About 75% say they were doing Ok or living comfortably up from 63% in 2013. And two out of three described lovcal economic conditions as "good" or "excellent."  This shows that the financial vulnerability resulting in the loss of jobs in the U.S. both from jobs lost in manufacturing going overseas,  jobs lost through automation or industrial decline in some sectors, and the hit from job loss during the financial crisis and its aftermath years of 2009-2014 is still leaving a lot of families financially vulnerable. Low interest rates and stagnant wages also meant savings growth for ordinary Americans was less than it should be in a healthy economy without booms and busts. This is also the environment in which the U.S. is tackling challenges to its technological leadership in 5G following a decline in sectors such as autos and electronics, with job losses to Japan and South Korea. New trade agreements are focussed on correcting the imbalance, first with Mexico, South Korea, and now with China. Focus is also on fair wages and labour overseas to raise American wages in key sectors. The damage done by a low interest rate to savings of ordinary Americans outside the stock markets is also being seen as a downside in the boom bust cycle, that includes loss of jobs for vulnerable American families. The rise of the tech sectors has diluted the traditional protections of working class Americans with the shifts and realignment of the major parties. ...

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During the presidential debates Donald Trump was asked about his proposal for a 45% tariff on imports from China to the U.S.. Trump's response was "if they don't behave." he would use this as a negotiating tactic against China. Senator Ted Cruz of Texas responded by reminding viewers of the high tariffs under Smoot-Hawley legislation that were one of the factors that created the Great Depression in the 1930's. Economist and former Federal Reserve chairman Bernanke is a student of the Great Depression, and says "it was highly counterproductive, it lengthened and deepened the Great Depression." Economist Peter Petri of Brandeis University in his study cited in this article, says that the tit for tat that starts with such a move could eventually cost the U.S. 1 million jobs. It might fix one problem the one of imbalanced trade with China his figures show, and create another huge problem the loss of markets for U.S. goods all over the world. Overall a 45% tariff would reduce U.S. merchandise imports by $383 billion and reduce U.S. merchandise exports by $658 billion, says Petri. Gordon Hanson, economist at the University of California, San Diego, who has actually shown how trade has affected different counties in the U.S., leaving some dependent on government assistance. Hanson sees this tariff as counterproductive, it makes the U.S. more self-sufficient but hurts U.S. exporters, would significantly hurt the tech boom, and reduce America's standard of living. The problem is that everybody can get into this in a tit for tat. France did this even before the Smoot Harley Act of 1938 was passed in 1930 with 60% increase in tariff on individual items, by higher tariff legislation in 1928. Close allies Canada followed quickly after Smoot Hawley increasing its tariffs, so did Great Britain. Unemployment went up significantly after 1931, worsened by weak banks and lack of support from the Federal Reserve. Trade with Mexico would come to a halt Petri shows, and the result would be more Mexicans trying to cross the border turning a relatively non existent problem of immigration in 2015 -with Mexicans preferring to remain home and net immigration dropping significantly following the 2008 financial crisis and the strict Obama policy of deporting illegal immigrants- into a real one. Trump says its just a threat, but it is likely to lead to a tit for tat response by China, then by U.S. allies, other trading partners. Consider that president Herbert Hoover opposed the Smoot Hawley bill for raising tariffs on industrial goods, and only proposed adifferent legislation reducing tariffs on industrial goods and increasing the tariffs on agricultural goods to give relief to American farmers. Politics intervened as Smoot from Utah and Hawley from Oregon, from mountain and agricultural states with a lack of understanding of how the international trading system works but as heads of two influential commmittes, the Senate Finance Committee and the House Ways and Means Committee, let politics overrride and pushed their legislation through Congress. In 1932 Smoot and Hawley were defeated for reelection, but the damage had been done, and promises of better conditions for workers and farmers never kept. A significant reason for the U.S. standard of living is that it is a leader in the global trading system. Even in 1945 and the years following the end of the war tariffs were higher in Britain and other countries. In return for this leadership the U.S. enjoys the advantages of the dollar being the main global currency, and the advantages of a world leading technological sector that has large global markets. Hanson and Autor have pointed out how imbalanced trade has hurt some counties in the U.S. This is a very real problem for workers in the manufacturing sector, as shown by elections in the midwestern states, Michigan, Ohio, Illinois and other parts of the country. The problem is compounded by the tech sector looking out for itself, the financial sector looking out for itself, and forgetting that we are all in the same boat. And that includes the Chinese who are in the same boat. China is doing a major shift in policy towards a consumer driven economy, and this needs to be accelerated for the benefit of ordinary Chinese. This makes the policy of a 45% tariff by the U.S. doubly unproductive because it hopes to add urgency to the problem of the U.S. trade deficit and manufacturing workers, but takes an approach that risks ending up damaging the global trading system by setting in motion a process that no one controls or can foresee the destination....

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This report in The South China Morning Post in Hong Kong, gives insights into the Chinese position in trade war with the U.S.  China has its own internal groups which support China being able to take a leadership role in world affairs. Xi Jinping made giving China a prominent role in the world a feature of his presidency. China  has this internal audience and its own sense that China's resurgence was won with hard work and cooperation, plus dedication of the Chinese people. In the past Japan and South Korea also used state subsidized industries, and subsidies to gain leadership in key business sectors involving high technology. China would see this state subsidies model as its own model of development. From this standpoint the U.S. demands on subsidies as unfair competition could be seen as changing a key part of its economic model.  Asking China to put everything in writing and show tangible proof of enforcement as the U.S. insisted in talks, was too much for the Chinese side. China said trust us to do this, and lift the tariffs based on our verbal assurances. The U.S. having seen decades of no progress on this point, wanted tangible proof before tariffs were lifted. Added to the demands on subsidies were the demands for no more of what the U.S. calls stealing of U.S. technology through forced transfer of technology by U.S. firms as a condition to operate in Chinese markets. With the U.S. lagging in 5G technology and Huawei ahead the issue resonates on the U.S. side. Add to this Mr. Trump's key voter base includes the former Democratic party supporting workers who have shifted to him because of trade agreements and policies of Clinton and Obama that hurt American workers through seemingly endless closure of manufacturing plants from Chinese competition.   ...

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As the founder's daughter Huawei CFO Meng Wanzhou, is a high profile figure arrested in Canada from U.S. request for extradition in the ongoing U.S. - China tech rivalry.Ren Zhengfei, 74 years old, a former military engineer built Huawei over 3 decades into a leading telecom company.  The CFO was in line to succeed her father as CEO.

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With the aggressive actions taken along the 1600 kilometre border in eastern Ladakh by China's People's Liberation Army, India needs a younger soldier to protect the border at high altitudes in below freezing temperatures. The entire 3500 kilometre border in the high Himalayan regions from east to west need technology driven surveillance with soldiers fit and ready for such duty. Agnipath's goal is to bring down the average age in the army from 32 years to 26 years to better reflect the youthful population in India. A tighter better disciplined force with high tech is needed. Bringing in more and new recruits is intended. Both the 25% of recruits retained after 4 years benefit and the 75% benefit. The 25% will have opportunities to move up the ranks. The 75% who come back out of the military will have the advanced technical training and courses, certification, that would make them attractive to the public and private sector companies in 2026 and beyond when India's economy will be 50% larger than today at growth rates of 10-12%. This is already seen in the way technologically trained military recruits from World War II in the US Army, Navy and Air Force were quickly absorbed at high salaries in the high growth period of America 1950-1970, with incentives like the GI Bill. Modifications that could be discussed- The 25% retained after 4 years. There is no magic number it could be raised to 30 or 40% during these post pandemic years and then lowered to 25% as the economy grows rapidly by 2025, or kept at 30% without changes, a number of options could be open.The financial aspect of the training can be modified where the 25% retained could have these 4 years added to their years for calculating pensions. The 75% are given 1.2 million rupees and even this can be adjusted upwards so that they could start businesses as entrepreneurs or have the time to pursue higher education before taking up for example with free education to enhance their education in areas of interest as was given by the GI bill to Americans in the armed services after World War II in 1946. Ideas from the GI Bill signed by president Franklin Roosvelt in 1944- Adding one year of unemployment payments, low interest loans to start a farm or business, full tution and living expenses for college. In 2008 the Veterans Act in the US continued support for education of servicement by making eduction free at a public college or university.  The Roosevelt GI bill benefited about 7.8 million servicemen in the US armed services. 2.2 million went to college, 7.6 million took training programs. It was an impressive achievement. No scheme is perfect there are budgetary constraints such as how to manage pensions to give the armed services the best possible funding including the training and course capabilities that also need good financing and the higher pensions for armed services. Every political party  government around the world without exception will have to face these budgetary constraints and the goal is to do right by the armed services providing the income and opportunities they deserve. Was a decent effort made with the right goals set? This is how these matters of national interest for India and the Free World that includes South East Asia, Africa and Latin America, should be discussed.    ...

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Emmanuel Macron graduated from Sciences Po University in 2004 with a degree in public affairs. He joins the Finance Ministry as an inspector and then buys himself out of government service contract by 2008 to join a private bank. He arranges an acquisition from Nestle and other business deals during this period. In 2012 he is appointed as deputy secretary general for the president's office after Francois Hollande a socialist is elected to the presidency. In 2014 he is offered the position of Minister of Industry and Digital Affairs in the second Manuel Valls government. He makes some changes to French government but opposes the wealth tax or tax on business, and is generally pro-business, though he acts as a member of the Socialist party.  He uses this period to build momentum for his own run for the presidency as support for Hollande falters having lost support from his working class base with Macron and Valls inspired changes.  Macron finally announces he will run for the presidency forming his own En Marche movement which he finances with his own fund raising. Throughout this period right up to the election in 2017 Macron has not run for public office. When he wins the presidency in that year he lacks the experience needed as the youngest president in French history at the age of 39. Like another young president Obama he handles his public image with the media for his En Marche movement promising to unblock France. This public image and his lack of experience makes him impervious to the social changes going on in France that lead to the yellow vest protests in 2018. This is a period when there are changes in the midwest as workers in Michigan and other midwestern states turn away from Hillary Clinton and Obama.  French workers are in the position of workers in the US with the decline of manufacturing, much of it shifted with the supply chain to China and Japan, and the gap opening between rural and urban tech educated areas. Macron follows Obama's quick rise from Senator to run for president yet lacks experience, and lacks sufficient grasp of the social changes with loss of manufacturing, the wide gaps between rural and urban tech educated people, conditions in the rural and farming areas. Macron survives this period, is reelected in 2022 with the help of socialist Melenchon voters. He says he will govern differently, less distant from average Frenchmen, but his instincts are to push for pension reform. At a time of cost of living crisis, and when the French budget office says the change in pension from 62 to 64 was not critical at the present time when inflation was hitting the public after the pandemic. Macron does this by Article 49 in the way he has done under the Manuel Valls government, by executive action alone. This time he faces a no confidence motion in parliament in March 2023 following some of the largest protests France has seen in years, with two thirds of the French according to FR24 opposing the change in pension law. Women see this as coming at a time when age discrimination hurts their chances of earning a living after 50 years of age.  Age discrimination is widespread in France, in a way it is not in Germany, say reports in the NYT. And with the cost of living crisis acts as a major hurdle for the average French person, if pensions are delayed without addressing these cultural issues in France. The result is that the protests have substance and Macron is seen as not sensitive to this at a time when he lacks a majority in parliament. ...

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Productivity as measured by GDP per hour worked was $44 in Italy in 2009. It has remained the same as in 1999. In the EU-15 (first 15 members of the EU) the GDP per hour worked increased from 47.9 in 1999 to 49.0 in 2009. For the U.S. this GDP in the same period went up from $56.0 to $58.0. This shows the lack of productivity growth in Italy. With the current focus on Italy's slow economic growth efforts are underway to make changes that would increase growth. GDP growth in Italy was 1.3% in 2010, compared to 1.8% for the eurozone, according to Eurostat. Italy's Minister for Public Administration Renato Brunetta says he would like to cut that gap in half. Some of the measures in the recently passed $40 billion spending cuts package, include efforts to help the underdeveloped southern region. This includes cutting red tape for real estate developers, and streamlining accounting for business. Italy's growth comes mainly from exports that make up about one fourth of GDP. But this comes from lower tech sectors such as textiles, chemicals and machinery, where it must compete with China and other countries. In May 2011 industrial output was up by 1.8% in Italy,compared to 7.5% for Germany. Another problem is the large and inefficient public sector and the gap between protected state workers and a younger generation- with one in three Italians 15-24 unemployed....

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This report in the NYT looks at the support for the AfD stalled at about 11% nationwide but closer to twice that in East Germany where years of neglect have led to voters shifting to far right parties. The view is presented that there is a core hard right of 10%. Yet it ignores or prefers to overlook what happened in the east which provides the real clues to what happened, so that future policy could be designed to address social goals in a way that never happened in Germany. This is in line with developments in China where president Xi is addressing social goals after years of tech and infrastructure expansion that neglected rural areas and urban poor. It is in line also with the same action taken to address social goals in US president Biden's $3.5 trillion workers and families plan. Social Democrats under Mr. Scholz and a younger generation represented by the Greens have the same challenges facing them to come up with the plans to correct these problems in Germany and with a plan designed for the neglected eastern part of the country. Helmut Kohl pushed for reunification of Germany. With the collapse of the Berlin Wall the momentum was set for this to happen. Yet looking back over that period since 1990, German chancellors and administrations for three decades from both CDU and SPD have failed to invest and create opportunities in eastern part of Germany. It makes German reunification an empty concept looked at from outside. The previous administrations including Kohl and Merkel relied too much on market capitalism to do what it has been shown not capable of doing- tackling social goals and economic crises, much less  political storms such as creation of GDR following Soviet army entering Berlinin 1945. Much commentary on the issues in east Germany show people there left to themselves after mass migration out of the east to the west leaving older people and pensioners in the east, and a sense of being ignored or forgotten. US president Biden said today in ther UN General Assembly- "Our shared grief is a poignant reminder that our collective future will hinge on our ability to recognize our common humanity and to act together." And he went on to say the next ten years to 2030 "will quite literally determine our futures."  The Social Democrats under Scholz and the Greens under Baerbock and Habeck have to come up with plans and programs that will increase ease of living and opportunities for a thriving eastern part of Germany, after the failures of market capitalism in its unregulated form during the Merkel years and predecessor administrations. ...

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Seen in a larger context, the Biden tax pledge seen from the southern and midwestern and less well off states is not about taxes, it is about federal revenues that build the infrastructure and services in these states that increase the standard of living. This happened in the 1930's and 1940's under FDR and Truman, in the 1950's under Eisenhower, in the 1960's under Kennedy/LBJ. And is happening again under Biden today. Lets not forget that president John F. Kennedy says in his speeches that these regions in America in the 1860's under Lincoln were in development close to what prevailed in the 1960's in India, Ceylon, Chile, Turkey or China. The Biden pledge not to increase taxes on anyone making less than $400,000 is significant because it grasps the situation in America where extraordinary gains in wealth since 1980 have gone only some of it to the top 1-2% in midwestern states and southern states, and most of it to the top 3-5% in coastal states population in the east and west, New York and California, where the finance and tech industry are based. In Michigan and Wisconsin only 2% of households make more than $400,000, in Pennsylvania, Nevada, Arizona and Florida 3%. WSJ shows a map of the US showing this for individual states. The core southern states have 2% of households with incomes over $400,000- including Arkansas, Tennessee, South Carolina, Alabama, Louisiana, Oklahoma, with Mississippi less than 1%. It is only segregation in the late 1960's and culture issues such as abortion that have turned them from Democratic states to Republican states as they were the largest beneficiaries of taxes diverted into investment in these places since FDR/Truman and John Kennedy/LBJ. It was JFK who came up with the phrase "a rising tide lifts all boats" when he opened federally funded projects in Arkansas. Seen objectively the large investments made under Lincoln, FDR/Truman, Kennedy/LBJ from tax revenues are what changed this region from conditions that prevailed in less developed countries that John Kennedy points out in his speeches, true for the midwest, parts of the west, and the southern states alike.  President Kennedy said on Feb. 25, 1963 to the American Bankers Association Symposium on Economic Growth: "Today, many Americans tend to think of developing underdeveloped countries in terms only of faraway nations. But in 1863, even measured by 1963 dollars, our own per capita income--and this should be a source of encouragement to many who are laboring with the problem of underdevelopment in far-off countries--our own per capita income was less than $1 a day, approximately the same as Chile's. Nearly 60 percent of our labor force was engaged in agriculture, the same percentage as is today engaged in the Philippines. An estimated 20 percent of our population was illiterate, the same percentage of the population of Ceylon. Only one-fifth of our 34 million people lived in towns or cities of over 5,000 in population, as is roughly true now of Turkey. In 1863, this Nation had fewer railroad tracks laid than India has today, and its children had a shorter life expectancy than a child born this year in Thailand or Zanzibar."   ...

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After suffering a deep depression Greece's economy is in 2019 24% smaller than in 2007. It may not be till 2033 that Greece recovers to its precrisis level GDP, says Oxford Economics, a consulting firm. With the creditors of Greece maintaining a tight control and requiring high taxes and high budget surpluses of 3.5% of GDP excluding interest payments, there is very little financial leeway to reduce taxes as the newly elected government of Mr. Mitsotakis of the New Democracy party has stated. Greece spent 8 years till 2018 under an austerity regime set by the European Union overseen by the IMF with eurozone authorites in return for a financial bailout loan package. Spending cuts and tax increases of 40% of GDP led to drop in GDP of 25%. Greece had misrepresented its official spending numbers to eurozone authorites in the years leading upto the crisis, leading to a lack of sympathy from ordinary German taxpayers for the country's situation. Unlike Portugal which was able to increase exports and find ways to reduce the austerity regime with sympathy from Germany, Greece lags behind in foreign investment and is 72nd in the ease of doing business ranking of the World Bank.  Unemployment is falling very slowly and is at 18%. Greece has returned to bond markets with 10 year bond yields of 10%. Growth is stuck at 2%. Pension spending takes up most of the budget, with little left for investment, education and other needs. No parties talk about cutting pensions anymore as a grandparents pension supports many families. The high taxes have hurt the private sector with the most productive people emigrating to other countries in northern Europe and to other parts of the world. About 500,000 left from 2010 to 2017, most are college graduates, and 64% have postgraduate degrees, a survey shows. Most of them will never return as it  is difficult to live and plan a life on a Greek salary. During the financial crises affecting Latin American countries such as Mexico, Brazil and Argentina for decades, the expression lost decade became common. Some like Argentina had repeat situations of lost decade before recovering. Even the U.S. suffered badly suffering close to a lost decade with faulty mortgages causing a crisis in 2009. Only Greece has proved that this can happen for nearly three decades. Greece's experience also sullied the euro currency's image, that was further damaged by the austerity policies across the eurozone's financially weaker countries. Lack of transparency and insider groups unable to take up the national interest and pursuing narrow interests left Greece in a bad position with little sympathy from stronger northern European countries such as Netherlands, Sweden, Germany. Today's political crisis for the centre right and centre left parties in Germany and other Northern European countries such as Scandinavia, Netherlands, also stems from this flawed entry of countries such as Greece into the eurozone with poorly managed finances. A combination of Tech creating low wage jobs, erosion of working class, failure of centrist parties free market policies to protect the working class, shift of jobs to low wage countries such as China, had already eroded the situation. The humanitarian response to what was both a economic and war related migration from North Africa  to Europe only worsened the image of these parties with working class people alienating them further. The eurozone countries and the European Union are only gradually recovering from these errors.     ...

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After the Phase 1 trade deal with China led to cancellation of new tariffs on computers, mobile phones and the remaining products imported from China, tariffs are still in place on $370 billion of imports from China. President Trump says China agreed to import $32 billion of agricultural goods, with the figures reaching $50 billion in 2020. The prior high was $26 billion in 2012. This comes as a big relief for the agricultural farm sector which had 24% more bankruptcies in 2019. Farmers are now more likely to vote for president Trump as they did in the last election. In addition China agreed to buy $200 billion more of American goods over the next 2 years. This combined with the USMCA agreement to replace NAFTA, for North American trade, is good news for president Trump and for the U.S. economy for 2% annual growth. The S&P stock index went up by 29% in 2019. The big concession by China is its agreement to agree to penalties if it does not keep up its part of the bargain.  Intellectual property protection remains a challenge and Mr. Trump may have decided to take a tactical success and shore up his base of farmers and small business people before taking up these issues in the future. China for its part may have decided to make a tactical move of its own as it has nothing to lose in importing more farm products from the U.S. in exchange for being able to continue to make the computers, iPhones and tech products it manufactures, just like before. China has not conceded much in terms of its goals set  in "Made in China 2025." Both sides are taking a much needed pause to consolidate their positions, as the fundamental differences remain to be tackled. Huawei and Chinese technology issue remains as before with the U.S. wary of China's technological gains in 5G telecom equipment and keen on building and protecting America's technological advantage in future trade relations. ...

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Zhou Xiaochuan, is head of the People's Bank of China since 2002. For a long time Zhou has tried to convince party leaders in China to make financial sector changes. The new leadership of Jinping-Li Keqiang has now adopted most of the road map and priorities drawn up by Xiaochuan. The first is bank deposit insurance, which would especially protect small depositors and provide a basis for new private banks to compete with large state owned banks, creating competition in the financial sector. By supporting creation of privately owned banks impetus could be given to loans to the private sector to rebalance the economy away from state owned banks and state owned enterprises. This is a key goal in the road map drawn up by the think tank Development Research Center (DRC) which has the backing of premier Li Keqiang. Competition from new private banks would let banks compete to offer higher rates to depositors, another goal. In a September article for the Communist Party Seeking Truth magazine, Zhou pointed out the pressing need for " supporting private capital to set up private banks and guide them to position themselves in serving small and micro companies." These new companies especially in tech and information technology fields can be the new drivers for growth in the future as the burst of infrastructure building generated growth slows down. The one area Zhou faces resistance is his idea of opening up China to foreign capital inflows and outflows. Here critics,including younger economists, say this protected China in the Asian financial markets crisis of 1997, and would protect China in the event it faces outflows of the type that are happening in India in 2013 after the U.S. Fed's plan to withdraw from its quantitative easing. Xiaochuan sees the flow of foreign capital as another way for capital to flow to new private companies and balance away from the state owned enterprises, and for China's savers to be able to obtain more attractive returns. Zhou says his plan would include the option for China to reintroduce capial controls in a crisis. As China's debt to GDP ratio is set on a trajectory to approach the levels reached in Japan before its banking crisis there is greater awareness from party leaders about the need for prudence. Xiaochuan has worked with party leader Jinping's key economic advisor Liu He for years, and has the support of He and Jinping for introducing deposit insurance as a top priority. President Jinping and Premier Li Keqiang see the need for Xiaochuan's experience and foresight "as a talent who can be counted on," as the sense of importance of changing the economic structure has deepened in 2013. Mandatory retirement for Xiaochuan at 65 was set aside to give him a third five year term, and his road map long ignored by former premier Wen Biao, is now at the top of China's agenda. ...

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This review of Acemoglu and Robinson in the MIT News is relevant to the situation faced today. The two professors at MIT and University of Chicago, have provided two books relevant to today's crises, the first "When Nations Fail" in 2012 about the need for inclusive nations, and the second "The Narrow Corridor" about the importance of the role of individual and society in sustaining democracy. Their point in the first book "When Nations Fail" in 2012 coming after the financial crisis caused by banking excesses stated that the nations fail when they are not inclusive.  In practice it is about " the system being rigged" to favor some groups as the Republican party and Mr. Trump say has happened. The banks and lobbyists, pharmaceutical industry and lobbyists, tech industry and lobbyists, leading to a system where individual and society are pushed into a corner. Social theorist and economists fail to look at things in practice such as profit seeking behaviours and unethical behaviour that goes unchecked, which continued after the financial crisis into the election of 2016, with charges of rigged systems.  This week Germany's DW.com oped pages covered New York with the statement that treatment in New York costs $15,000 for coronavirus infection illness yet many New York residents in the worst affected neighborhoods would find a $500 expense difficult to bear. Early closing of schools to control infection rate was resisted by Mayor De Blasio of New York because many parents depended on schools for lunches for their kids. The situation had been allowed to deteriorate to that level.  In their second book the MIT authors are saying that the role of the individual and society are important to check that of the state (for example if it is perceived as being rigged by the influence of lobbying of legislators and politicians as the Republican party and Mr. Trump have maintained). It is only when it is checked and there is some tension is there the possibility of democracy and democratic processes, say the two MIT authors. In the absence of this the states and elites of politicians and business interests supporting the leaders and their common behaviours, become a perpetual state, in effect a one party rule of two parties with similar behaviours and interests in the state. A situation that allowed the outshoring of American manufacturing and European manufacturing to China including critical infrastructure, essential infrastructure over 2 decades even over the protests of Mr. Lighthizer since 2010. As the twin crises evolved in Europe of austerity policies after banking excesses in Europe, and the migration crisis of migrants coming from North Africa and the wars in the Middle East, a similar situation began to develop in Europe as the political elites entrenched in Germany, France, and Spain faced new voices. The tensions that arose were constructive bringing in the role of society and individual that the MIT authors say are so necessary for the narrow corridor of democratic process to function. New parties emerged in France with Macron's La Republique En Marche, Podemos and Ciudadanos in Spain, and in Germany with the SPD and CDU shrinking till the revival of Merkel for her handling of the pandemic. Coming from an intuitive way born from experience in East Germany, Germany's recent president Joachim Gauck, civil rights activist  came up with the same ideas. He is a Lutheran pastor in former East Germany who struggled against the government of the German Democratic Republic (former communist East Germany) for a role for individual and society against the state. We profiled and quoted him in "The Way Forward"  column in Lyrarc.com. Gauck's point was that  having diverse groups in the conversation is important, not excluding others from outside in the conversation is important. Gauck called  debate "the oxygen of democracy,"  that needed to be maintained.  Genuine democratic process is hard to sustain, it happens only when the role of individual and society is given prominence, so that only a narrow corridor exists for democracy, a narrow space in which can be sustained only if the effort is there, the goodwill is there, and the grace of Divine Providence.  It is fragile and it is critical to sustain.   In this sense the sometimes heated debate in the U.S. and Europe, Asia and Latin America about words such as- austerity, community, solidarity, migration, New York Mayor De Blasio's choice between school lunches and infections, about infrastructure, pharmaceutical prices, infrastructure, outshoring, jobs sent overseas, manufacturing locally, made in USA or made in India or made in France, Atmannirbhar Bharat, misallocation of capital starving health and public services, are all relevant and essential for democracy. This includes the discussion to avoid use of the military in protests in American cities in the middle of a pandemic which just crossed the 2 million mark in cases in the U.S., that was taken up by Defense Secretary Esper. In it lies the hope for democracy and many voices. Der Spiegel recent look at the pandemic how it happened in China, closes with the line- you need more than one voice in society. A constant reminder that many voices be heard, counseling patience, but also that wise choices be made with divine providence.           ...

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Founded in 1880, Carl Welcker's company has seen the changing fortunes of manufacturing for over a century, during depression and after the wars. Still the 50% drop in orders for this company, which makes the machines that make 80% of the spark plugs in the world, is like nothing Carl Welcker has experienced. Its a tragedy he says. Its the speed of the manufacturing decline that is causing concern. In Europe where a fifth of GDP comes from manufacturing industrial production is down 12% from ayear ago. In Brazil it is down 15%, in Taiwan 43%. In China exports are down 25%. In the USA, industrial output went down by 11% in February 2009, according to the Federal Reserve. The pattern of this decline recalls the pattern of 1929, as tightening creedit and consumer fear reduces demand for manufactured goods in one country after another, creating a downward spirtal that reduces global trade. And of concern is that trade is declining even faster than manufacturing.German exports are down 20% from ayear ago, Japan's have plunged 46%, and in the USA exports fell at an annualized rate of 23.6% in the fourth quarter of 2008. A company like Schutte in Cologne, Germany, expanded rapidly as globalization opened new markets in Eastern Europe and Asia. Sales more than doubled in 5 years from 58 million euros to 100 million euros. Which suggests that the extraordinarily rapid expansion of the last few years may have its reverse effect heightened in a slowdown, as those additional sales to China and Eastern Europe disappear. For the USA manufacturing accounts for 14% of GDP, for the world 18%, and for China 33%. But this creates a misperception about the importance of American manufacturing exports. First, manufacturing contributed more to GDP growth than any other sector of the US economy, and accounts for two thirds of American exports, says the chief economist for the National Association for Mnaufacturers in Washington. America's share of global manufacturing output, he says, has remained steady at 20 to 23% for the past decade. This covers jet engines, locomotives, pharmaceuticals, and high tech products. For countries like India where manufacturing accounts for 16% of GDP, the last quarter of 2008 saw the first quarterly production decline in over a decade. And industries like handicrafts exports have fallen by 55% to $1.35 billion, and textile makers have cut half a million jobs. ...

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A number of issues came up at the Women20 Summit in Berlin. Annette Niederfranke, Director of the International Labor Organization, brought up the issue of family reconciliation as "one of the toughest challenges for working women worldwide," that in order to meet obligations women tended to work in "non standard forms of employment and in part time work linked to lower wages, lower social security, lower benefits, and fewer training possibilities." Childcare was also an issue that was prominent considering the lack of adequate childcare in many countries including in the European Union. With responsibilities for the elderly, babies, and small children women tend to be in the workforce for shorter periods leading to men taking up many of the higher positions. Angela Merkel pointed out that Gemany tended to take a narrow view of professions available to girls, saying- "So it is very very important that we take a broader view of things while girls are still at school." Merkel also supports a Africa compact that would help women set up small and middle size businesses in poor countries. The "Digital" aspects of this and other efforts for women were a major topic being discussed. One idea that came up was that more cooperation from men was needed to make things happen. This is the third Women20 Summit after ones in Turkey and China, and a sense of momentum was felt by women. ...