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This commentary in the WSJ says it is essential that the U.S. get back manufacturing of all technological goods back to the U.S. or its allies. The dangers of depending on China or other countries not clearly allied with the U.S. is quite clear especially after the pandemic. The U.S. and European supply chains need to be completely remade, restructured, to avoid dependence on China or countries that are not allies. This is what supply chain renewal is about. Yet initiatives alone with hundreds of billions of dollars price tag re not the answer to the problem. What is needed are specific targeted actions such government direct assistance to key sectors to ensure U.S. technological advantages in worldwide competition. Giving a hole range of incentives and direct financial support to industries making everything from electronic and computer components to high tech parts that go to defense and civilian production.   The U.S educational component in this puzzle is university students in all high tech courses which should be kept for U.S. citizens or from key allied nations at American universities. The manufacturing base would mean securing incentives and aid to manufacturing industries, component by component, part by part, to secure American leadership and distinct advantage.  Job losses have to be reversed and industries relocated back to the U.S. And only in cases where it is advantageous to manufacture overseas to relocate in allied countries India, Japan or South Korea. U.S. labor has to be brought into the picture as a key participant in the national interest and given an important role. R& D efforts have to be developed component by component, technological part by part, and technology by technology, so that a systematic plan can be followed to secure American leadership for the rest of this century, is what experts including this one say is required today. ...

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The U.S. Federal Reserve announced on Dec. 13, 2016, that it would increase its benchmark short term interest rate by 0.25 percentage point, to between 0.50% and 0.75%. The increase will also be reflected in business and household borrowing costs. The Fed also announced its intention to make 0.75% percentage point increase in 2017, possibly in 3 quarter percentage point moves. The Fed's forecast is for the fed-funds rate to reach 2.1% at the end of 2018, and 2.9% at the end of 2019. The Fed's policy is based on a sense of strong labor market with unemployment falling, and says it is based on discussion at a 2 day meeting, and "in view of realized and expected labor-market conditions and inflation." This reflects a view that there is now not that much slack in the labor market, that further improvements could trigger higher inflation. Fed forecasts for inflation are for it to increase from 1.5% in 2016 to 1.9% in 2017 and to the target of 2% in 2018. The unemployment rate of 4.6% in 2016 is forecast to go to 4.5% in 2017 and remain at that level till 2019. Economic growth is forecast at a median annual rate of 1.9% in 2016, 2.1% in 2017, only a slight improvement from last forecast in Sept. 2016. Support for chairwoman Yellen's policy decision was unanimous. See the link on views of NYT's Binyamin Applebaum and Neil Irwin on how Fed rate policy and economic growth under the Trump administration is likely to play out, and Ian Talley's report on impact on exports with a stronger dollar in WSJ. These views also are in line with the Fed's forecasts and policy decision as they reflect the concerns of the Fed about inflation, and also reflect the Fed's view that growth will be close to 2% in 2017-2019, and not the 3-4% stated by Trump and Treasury Secretary Mnuchin. Fed rate policies to keep inflation at about 2% tend to counter stimulus spending by the Trump administration and effect of tax cuts. The size of the stimulus and the tax cuts are also likely to be much smaller than stated because of Republican concerns about the deficit in the U.S. Congress, according to these views. The stronger dollar also has the paradoxical effect of making trade gains more difficult while increasing trade friction in tougher bargaining supported by Trump, making the higher growth targets harder to reach.   ...

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Krugman points out that the federal tax rate for the top 1% is 34% in 2013, according to the Congressional Budget Office, because president Obama let the high end Bush tax cuts to expire. It is the number to remember says Krugman- 34. In 2008 the figure was 28.2. Under Hillary Clinton the average tax rate for the top 1% would go up by 3.4 percentage points, according to the Tax Policy Center. Some of this would help pay for the tution plan to provide access to the middle class to public universities. Under populist Trump, Krugman points to the elimination of the inheritance tax and tax rates going down substantially, and no such programs to promote the upward mobility that everyone is talking about, and no way to pay for a big infrastructure building effort for growth and jobs- upward mobility that is the focus of every candidate's election campaign including Sanders, Trump in appealing to older white working class families, Clinton, Ryan, Bush, and others in both parties.   ...

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Mike McNamara, CEO of Flextronics, on the increasing competitiveness of U.S. manufacturing and the return of manufacturing jobs to the U.S.

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Wessel describes the changes in American manufacturing as it goes through some of the same changes that happened in Germany in the years after reunification. With high unemployment German manufacturing companies worked with unions and the government for wage restraint over the last decade, resulting in wages barely keeping up with inflation. The increase in productivity and wage restraint helped Germany become more competitive with factories in Asia and Eastern Europe. Wages are now increasing with larger wage increase negotiated by the unions in Germany, as skilled labor is becoming scarce. In the U.S. Labor Department figures show an increase in output per hour in American manufacturing of 13% in the last 5 years and 21% in the five years before that. Typical of the wage changes in manufacturing- American Axle & Manufacturing plant in Three Rivers, Michigan hires assembly workers at $10 per hour, with older "legacy workers" making $18 per hour. General Electric brought back manufacturing work from Mexico paying workers $13 per hour for new hires, compared to to $21- $23 in prior years. At GM, Ford and Chrysler workers make $16-$19 per hour in base pay compared to older workers with legacy rates of $29-$33. The Bureau of Labor Statistics shows earnings for production workers in manufacturing averaging $19.15 per hour in April, which is where they were in 2000 adjusted for inflation. The impact of this large increase in productivity with new machinery and production methods, and the wage reductions in manufacturing, is a return of offshored jobs. Wages increased in China and Mexico in the last decade. After a 35% decrease in the number of manufacturing jobs in the U.S. from 1998-2010, the number of jobs has increased by 4.3% to 11.9 million in April 2012, according to the Labor Department....

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The coronavirus pandemic and the disaster in nursing homes, the chaotic conditions in the first wave, the lack of staff and poor attention to residents during the pandemic, has exposed the major weakness of nursing home care in western countries. Much of this sector is in the hands of private operators seeking a profit.  The staff is paid low wages and lacks the experience and empathy needed for care of older people. During a virus all these factors turn deadly. With some staff sick the other staff is overburdened. If the sick turn up for work they are likely to risk the safety of other staff and the residents. With the incubation period lack of testing there is no way to know. When deaths occur and the nursing homes are sealed from the outside world the deaths happen with no goodbyes as happened in U.S., Britain and Sweden. This has exposed the scandalous and shocking way in which the elderly are treated in today's environment where ridiculous amounts of money are being spent on other things and the the most basic "one's parents" are neglected and allowed to die in horrific manner in a pandemic. The new trend for home care for the elderly is a welcome trend and long overdue as one of the worst aspects of the system in the west is the treatment of elderly parents in nursing homes run for profit. The new technology tools available for monitoring a elderly person at home, and the help of stores such as Best Buy which are serving elderly at home, is making this more and more a choice for the elderly. Even older patients and ones needing significant care can recover and spend time at home in a better environment, a less costly one, as hospital managers and families have learned in 2020. Some hospitals in the U.S. say they never want to go back. That the drive to get every patient home who can be home is the right one for patients and families and for the government paying for the care so that dollars are well spent in quality of care. Home health care companies are working on providing new services for sicker patients recovering at home. Technology helps do better monitoring. Medicare now pays for digital doctor visits and intense hospital type care at home after coronavirus showed this as vitally needed.  Both the Biden and Trump administrations are firmly focused on this issue. Seema Verma as head of Medicare is clear about the need for a national conversation on how we take care of the elderly, of our parents. And Mr. Biden wants to spend $450 billon to make certain that people who need long term care can get the support they need in the home and the community. This report looks at the home health care companies and how they are improving their services. This and telemedicine are two of the major constructive changes coming out of the pandemic, clearing out some of the worst aspects of the old system of living the older years in the western world.  Nothing speaks more about humanity and a human world than the story here of Savanna Hollar, 90 years old and almost blind. She broke her shoulder in August, Her sons decided not to send her to a the rehab facility she went to after a broken hip 3 years earlier. The sons brought her home to recover in the farmhouse near Yadkinville, N.C., where she has lived since 1951. One of her sons himself 63 years says that at a nursing home she would be lonely, scared and afraid to move. The sons hired two people to help her during the day and a rotating system was used for having people help her. At home Mrs. Hollar could enjoy her gray cat, Buddy, her favorite recliner and tomato sandwiches made with produce from her garden. Really, if we can't do this much what good is the U.S.A.? or Britain? or Sweden? or India? ...

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A statement by German Finance Minister Schauble that Germany would be able to accept inflation of between 2 and 3% showed the new flexibility of the German position after the election of Hollande in France. Schauble said on April 10, 2012, Germany would find inflation "in the corridor between 2 and 3%" acceptable. The ECB's target is 2%. Earlier the Bundesbank in statements to the German parliament indicated that higher inflation rate in Germany was acceptable if the overall eurozone rate remained near target. This would give other eurozone countries an opportunity to improve competitiveness. Schauble also indicated willingness to accept higher wages in Germany because of years of wage concessions by workers in Germany. France's major parties, unions and industry are in agreement on a plan for reducing wages to avoid layoffs. This gives the normal process of adjustments in free markets a chance to function to restore competitiveness and balance. It also addresses the concerns of workers in Germany who would benefit after a decade of wage concessions, and improve consumption in Germany, as demand for Germany's exports adjusts to a slowdown in the global economy....

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Matthew Slaughter of the Tuck School, Dartmouth, says that the principle of comparitive advantage should determine what America exports and imports. Under comparitive advantage each country concentrates its energies on the particular goods and services that it does better than other countries. Free trade operates under the idea of comparitive advantage, but in practice it is quite different than its textbook economic counterpart. It is constantly changing as new countries or industries in different countries try to upset the existing pattern. Under a textbook example Airbus should not exist because Boeing was the most efficient manufacturer upto that time, and new entrants in a industry are nurtured for years with support from the governments of their countries. And in some situations the governments may exclude certain companies or industries from support such as Komatsu and construction equipment in postwar Japan, and Infosys and software outsourcing in India, and still survive and grow. Under comparitive advantage Japan should still be importing construction equipment from Caterpillar in the US, and there would be no serious competition in that industry. This would work to the detriment of the principle of competition in free trade which is just as important to free trade as the idea of comparitive advantage, with new entrants in an industry upsetting the old way of doing things and creating price/quality improvements. Slaughter simply pulls back off the shelf the old idea of comparitive advantage without seriously considering its real life aspects. Without dealing with trade distortion from currency manipulation, from the impact on jobs, without considering the continuing critical role of manufacturing in developed economies to provide the standards of living for a large middle class, and creating the kind of society that people of developed countries aspire to. He mentions GE's Immelt and the President's Council on Jobs, but makes no effort to engage Immelt 's statement in his recent op-ed article in the Washington Post, that the concept of transitioning from a export-oriented economic powerhouse to a services led consumption based economy could be done without loss of jobs, prosperity and prestige, was fundamentally wrong. He has only one line for manufacturing's role in America's economy. This line says knowledge intensive industries such as education and software are just as important as manufacturing, but fails to mention that manufacturing has received less attention in recent decades. In so doing he is discounting his own profession of concern for the high rate of joblessness in the U.S., and the need for a new focus on manufacturing in the U.S. to reverse that trend. By saying that imports are not a sign of failure but can raise standards of living, and leaving it at that, Slaughter does not acknowledge that consumer debt that US consumers have taken on in the process certainly affects future prospects for the US economy. And he makes no mention of the need for rebalancing the world economy, which is exactly how free trade should work ideally. Countries that have high imports export more to rebalance the world trading system, as currency valuations are allowed to adjust makig their exports more attractive. By not taking into account the realities of free trade, and the need for practical measures to rebalance without policy induced distortions by state run economies, Slaughter ignores the idea of free trade that works as it should and for all countries. The irony is that Immelt's own committment to jobs and competitiveness has been questioned in online blogs and most recently by an editorial in the Wall Street Journal on January 26, 2011, titled "The Misallocators." That editorial refers to the outsize role of GE Capital in GE's earnings during the past decade, and the lack of credibility of a focus on competitiveness and jobs that this creates for GE. It mentions the loss of 34,000 GE jobs in the US during the last decade. ...

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Francois Hollande is elected French president. Greek voters vote against the austerity measures by giving a majority of the votes to parties on the far right and far left.

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This WSJ editorial says the recent agreement at the Caterpillar Joliet plant in llinois is not about leverage but about increasing U.S. manufacturing competitiveness. As U.S. competitivness improves and the economy grows wages will increase. It does little service to management, labor and the U.S. economy for above market wage rates to lead to loss of manufacturing competitiveness as happened in the U.S. automobile industry, resulting in closing of plants.

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Laurent Berger, head of the French Confederation of Labor, C.F.D.T., is a moderating force in France as president Macron leads an effort to make a revision to France's labor code. With a large parliamentary majority president Macron is expected to push for a shift to a Scandinavian version of "flexible security," that allows companies and the economy to adjust the work force, introduce retraining and create flexibility so that new jobs can be created. His union is now the largest, after surpassing the militant General Confederation of Labor. Issues in labor changes proposed by president Macron are- direct negotiations between management and employees bypassing unions, and a cap to compensation in unfair dismissal cases. Berger's view is that though the interests of labor and management conflict, there has to be dialogue instead of constant confrontation. He is willing to see some jobs lost if business creates new jobs with improvement in the economy. Macron has summoned labor leaders for marathon talks. ...

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A Tax Policy Center study (joint project of the Brookings Institution and the Urban Insitute) shows $157 billion would be generated in the first year from an increase in taxes on the top 1% of income earners in the U.S., about 1.13 million households earning average $2.1 million, by increasing the federal tax rate from current 33.4% for this group to 40%. This could pay for a program to provide tution free education in America's colleges and universities. Even increasing the federal tax to 40% on the 115,000 households earning over $9.4 million on average, the top 0.1% of American households, would generate $55 billion in the first year, enough to pay for the $47 billion cost of tution free education at all of America's public colleges and universities, according to the Tax Policy Center. Economists including Stiglitz and others, point to significant impact of revenue generated from such a tax when applied to improving educational opportunity for the middle class and lower income groups. Education is a great leveler of income disparities as seen in the U.S. after World War II. During recent decades the highest income groups weren major beneficiaries of tax and economic policy, at the very time the middle class and factory workers were hit hard by global competition which lowered wages and exported jobs. The interest rate policies of the Fed after boom bust cycles also favored large investors in equity markets over smaller income earners with savings account deposits, whose savings experienced little growth under interest rates close to zero. ...

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The lack of economic opportunities for an increasingly urbanized African younger generation is a major challenge. The median age of 19 makes Africa the world's youngest continent. Megacities are growing up in places such as Lagos and Kinshasha as millions leave subsistence farming to go to cities. Unlike Asia and Latin American countries men and women are coming to shantytowns in cities at a time when Africa is much poorer for a similar level of urbanization that Asian and Latin American nations reached decades earlier. In 1993 this WSJ analysis and graphs show the Asian emerging economies and sub Saharan Africa had similar GDP per capita of $2415, by 2019 this was $4000 for Africa and $12,000 for Asian emerging economies. Latin America was at $10,000 in 1993 and in 2019 was at about $15,000. The gap widened considerably between Asia and African countries. Asian emerging economies increased GDP to 5 time from the same starting point as Africa in 1993, Africa doubled GDP over the period of 25 years to 2019. Latin America started from a much higher point and increased GDP by only 50% over 25 years. Asian economies that performed better over this period did better because of stable even entrenched governments such as in Singapore with Le Kuan Yew and in China with stable successive governments under CPC leadership of prime minister Deng. The difference in Asia was a commitment across all classes and groups to development, a sense of development as a way to make up for the years lost under colonialism of foreign powers in the eighteenth and nineteenth centuries. A sense of correcting historical injustice and wrongs. This is a missing ingredient in the processes unfolding in Latin America and Africa in the last 25 years. ...

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Bayer AG CEO Marijn Dekkers talks to the Journal's Geoffrey Rogow about the company's pharmaceuticals business and job retention. Dekkers says profits are reduced by the tight budgets of European governments and the pressure on pricing. He cites the 16% mandatory rebate in Germany on prescriptions. For Bayer diversification through the chemicals business offers a way to handle the ups and downs in the pharmaceuical business with patent expiration. He is not interested in acquisitions because of the high premium involved and the difficulty of recovering this for investors. Bayer like other drug companies has extensive operations in China. Bayer is training salespersons in top and second tier Chinese cities. It has a program to train 10,000 physicians in rural areas of China working with the local government. Dekkers makes an interesting point about jobs and job retention in the U.S. He says a lot of jobs were outsourced in the 1990's and its difficult to bring them back. Germany has done a better job with job retention with "kurzarbeit" and other programs working in partnership with industry. In his view this could have been managed better in the U.S. with active programs such as this in the last two decades....

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Moore points out that there are twice as many people working for the government in the U.S. (22.5 million) than in manufacturing (11.5 million). In 1960, the situation was quite different, there were 15 million workers in manufacturing and 8.7 million working for the government. More workers in the U.S. work for the government than in construction, farming, fishing, forestry, manufacturing, mining and utilites put together. Every state in the U.S. has more people working for the government- except for Indiana and Wisconsin- than people in manufacturing industrial goods. And California has 2.4 million government workers, which is twice the number in manufacturing in that state. New York and Florida have a 3:1 ratio, and New Jersey a 2.5:1 ratio of government workers to workers making industrial goods. Part of the reason for this is the huge increase in productivity and the advances in technology that make it possible to have higher production with fewer workers. This kind of productivity is missing in the government sector. And efforts to improve productivity tend to be blocked by the unions who favor the status quo....

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Inflation in China and rising wages are pushing up costs for American manufacturers. The pressure on China, most recently in Congress, is helping to push up the value of the yuan. This combined trend is making it attractive for some manufacturers to bring factories home to the U.S. A trend in the U.S. towards non-unionized labor and the new trend to a two-tier wage level- with lower wages for entry level workers- and the shedding of legacy health care costs, is creating a more cost competitive labor force in the U.S. This extends from older industries such as furniture and auto components to newer industries and technology. The new factories setup in the U.S. use technologies that require a smaller number of workers, in most cases less than half the number of workers that were employed earlier. This adds another element in cost efficiency, though it means fewer jobs are created with new plants.

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IG Metall, the union representing 3 million workers in metals and engineering industries, negotiated a 4.3% wage increase over 13 months. The union had asked for a 6.5% increase. Unions won wage increases of more than 6% in the public and telecommunications sectors. Workers in chemical, agriculture and hotel industries are pushing for increases of over 6%. The union wage negotiations help set the pattern for wage increases for the 41 million employed workers in Germany. This will help France and other EU countries close the gap with Germany in wages and improve competitiveness.

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Manufacturing in the US is adding jobs for the first time since 1997, according to government data. Job growth in 2010 was 1.2%, or 136,000 jobs. IHS Global Insight expects total manufacturing jobs in the US to increase in 2011 to 12 million. Manufacturing will be a modest contributor to job growth according to economists. Economists projections show a gain of 2.5% or 330,000 manufacturing jobs in 2011. Moody's Analytics estimates job growth of 2% a year through 2015. Government incentives, need to replace aging equipment and rehiring in the automobile industry will help manufacturing. At the same time manufacturers are cautious about hiring and increases in automation reduce the need for workers compared to earlier periods. Overall the loss of about 6 million manufacturing jobs since 1997 will not be made up. Yet the improvement is a positive sign as the US faces high unemployment and companies make investment in new factories overseas to meet growth in emerging markets.

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France's union and business representatives reach agreement on improving competitiveness by providing new flexibility in labor rules. Unions agreed to cooperate with business in ways similiar to the German "kurzarbeit" program where workers work shorter hours but are guaranteed employment when demand is down. Workers on temporary contracts get health care benefits and incentives are given for businesses to take on more permanent employees.

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Proof that this is not an ordinary deep recession like those in the post war period comes in the way foreign trade is reacting in this downturn. Already evidence of this has been seen in the way Germany has been affected because of slowing exports from China to the US. German exports to China have declined as the Chinese export model comes under severe stress. A similiar situation is playing out for Japan. Now new proof of the drop in foreign trade is emerging in Commerce Department figures. Combined exports and imports of the USA dropped 18% in 4 months July to November, to $326 billion from $398 billion. Two thirds of this drop was in imports. So China and Japan's exports to the USA are severely affected. Japan showed a 27% decline in exports in November, according to the Japanese Ministry of Finance, and imports dived 14%. According to calculations by the WSJ, Germany had 11.8% decline in foreign trade in November, and similiar numbers for France and Britain. Chief US Economist at IHS Global Insight, Nigel Gault, says this is going to be the worst global recession since World War II. Combined with what is happening to inventories, (see links) and what is happening in housing, banking, the auto industry, and other industries, the complications of non-transparent packaged financial products clogging the American financial system, the hugely indebted consumer (see links), and the $2.1 trillion and rising cost of the stimulus and bailouts needed by one estimate, suggest that the recovery forecast for 2009-2010 does not take into account all these simultaneously occurring patterns and developments working together. ...