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Government GDP figures show the GDP shrank by 1.8% in the third quarter of 2016 compared to the same period in 2015, the first such contraction in the economy since 2009. Household consumption was down 3.2%. The sharp decline in the value of the lira by 20% in 2016 makes imports costlier, in an economy dependent on consumption spending and tourism for higher GDP growth. Political uncertainty with instability in Turkey following a crackdown on opposition and media also leads to decline in foreign investment and investment by domestic firms.

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A study by the National Employment Law Project shows most of the job creation in the economic recovery to 2014 in the U.S. is replacing the better paying jobs with lower paying jobs in fast food retail and similiar low paying industries.

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Krugman points to the economic muddle that China is getting itself into. He says one way of looking at what is happening now with high inflation is that inflation is the market's way of undoing the currency manipulation that China has engaged in. By following aweak currency policy to protect export interests China has created an artificially high trade surplus. But this is now turning into a lose-lose proposition for both China and the US as market forces push wages and prices up, whittling away at any competitive advantage of China's weak currency policy. He says some estimates he has seen show that Chinese undervaluation could be gone in two or three years. Chinese consumers are asked to accept interest on savings limited to 2.75% and below inflation, with the spread designed to help banks earn their way out of bad loans made during the stimulus lending binge of 2009-2010. What is happening is a massive allocation of capital away from consumers to lending for state owned companies that have created overcapacity in many industries, and use part of this capital to engage in real estate speculation. Krugman says China may be on its way to some kind of crisis with collateral damage to the rest of the world as it is a major importer of commodities from Canada, Brazil, Argentina, Australia, and a major importer of high tech goods from Germany and the USA....

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A new report, "China: 2030," by the World Bank and the Development Research Center (DRC), has major implications for the course of action taken by new Chinese leaders. The limits to China's economic model with the dominant role of state owned companies has been pointed out in the past. It has now reached a point where China must choose to move to a modified model or face the "middle income trap" of countries like Brazil and Mexico, where income levels and growth reaches a certain level and then decelerates suddenly with little warning. The report makes some major recommendations that would modify the current system. It says the state owned companies should be supervised by asset management firms focussed on commercializing these companies, and not supervised by the State-owned Assets Supervision and Administration Commission (SASAC). The asset management firms would restrict the state owned companies on what areas they participate and sell off businesses to make it possible for private companies to compete. Zoellick says- "China needs to restrict the role of the state-owned companies, break up monopolies, diversify ownership and lower entry barriers to private firms." The state owned companies would be required to pay sharply higher dividends to the government which could then be used for social programs. Currently state owned companies invest in land which is sold by local governments for revenue helping fuel the real estate bubble. Significantly, the report had its origins when it was proposed by Mr. Zoellick, head of the World Bank, during a visit to Beijing in Sept 2010. It was supported by Li Keqiang, then vice premier, and now expected to be the new prime minister of China. The World Bank is widely respected by Chinese leaders because of its assistance during the early stages of reform in the 1980's. The DRC reports to China's State Council, a top governmental institution, and the No. 2 person at DRC, Liu He, is a senior advisor to the Politburo Standing Committee. He helped draft the current five year plan and is close to Li and Xi Jinping, the next president of China. The SASAC has opposed these ideas, especially any shift in its personnel selection of management at the state owned companies, which it shares with the Communist party's personnel department. Respected China economists say China faces large risks of a sudden sharp slowdown because the the state owned companies have largely copied foreign technology and have not generated enough technological advances, which will be needed for the next stage of growth. Lower growth rates could worsen problems in China's banking system leading to a crisis. The Conference Board, estimates China's growth at 8% for 2012, slowing to an average annual growth rate of 6.6% from 2013 to 2016. Barry Eichengreen of UC Berkeley, Donghyun Park of the Asian Development Bank, and Kwanho Shin of Korea University, say the annual growth rate will drop by at least 2 percentage points by 2015....

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India is an attractive place for foreign investors with the country moving up 23 places in the ease of doing business rankings of the World Bank. Growth is faster than China since 2015, and GDP is expected to double to $5 trillion by 2030, according to government think tank NITI Aayog. Corporate deal making from foreign investors exceeds that in China. Mergers and acquisitions targeting Indian companies reaching a total of $93.7 billion in 2018, up 52% from last year, according to Dealogic. Overseas purchases were $39.5 billion for India in 2018 compared to $32.8 billion for China. In comparison to China where trade tensions are increasing, India under the Modi government has improved the ease of doing business- implementing a new bankruptcy code, easing foreign direct investment rules, introduced a nationwide goods and services tax to replace a hodge podge of taxes in different states. In the consumer sector Unilever NV made purchase of a malted drink brand Horlicks from GlaxoSmithKline PLC as part of a $3.75 billion deal. Softbank led a $1 billion investment in OYO Hotels. In infrastructure Tata Steel made a $8.3 billion acquisition of steelmaker Bhushan Steel. Reliance Jio's aggressive push in mobile with low prices is leaving the telecom industry ripe for mergers and consolidation- Bharti Infratel acquired Indus Towers for $6.5 billion. Closely held family companies are also selling out their controlling stakes. ...

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Orlik cites a 2011 survey from China's South Western University of Finance and Economics, which surveyed 8000 households and found that 55% of Chinese households had little or no savings for that year. 10% of households control 86% of wealth and 56% of household income. Surveys in 1995 and 2002 showed 10% of households controlled 31% and 41% of wealth. In the U.S. top 10% of households control 74% of the wealth, according to the Federal Reserve figures. What this means, says Orlik, is that before China can shift to consumption based growth the low incomes of the majority of households have to go up, requiring a major policy shift. Under current policies and even with movement in the direction of the DRC/World Bank policy report for China for a gradual shift away from state owned enterprises, there is little prospect for rebalancing the world economy.

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The appointments to key economic positions in the Jinping-Keqiang administration in 2013 reflect continuity and importance given to experience. Zhou Xiaochuan continues as head of the central bank PBOC, to keep an experienced person in the the event of a financial crisis. Lou Jiwei, chairman of the sovereign wealth fund, is now the new finance minister. Xu Shaoshi, minister of land and resources, is the new head of the National Development and Reform Commission, the economic planning agency. Xiao Gang, chairman of the Bank of China, one of four state owned banks, will be the new head of the securities regulator, China Securities Regulatory Commission. Zhang Gaoli, a member of the Political Standing Committee of the Communist party, and Wang Yang, party chief of southern Guangdong province, also join the economic team. Li Keqiang, the new prime minister emphasized the agenda for the next decade telling a press conference: "Talking the talk is not as good as walking the walk. We need to pursue market oriented reforms." This means giving the private sector and consumers a signficant role in the Chinese economy....

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A bill in the U.S. Senate in October 2011, which has bipartisan support, would push for China to correct an unfair trade advantage from keeping the value of the yuan low. The bill requires retaliatory tariffs for countries that have "misaligned" currency. This makes it possible for the U.S. Treasury Department to take action even if it finds no currency manipulation by China. This is a new approach as the U.S. Congress struggles to restore a level playing field in international trade.

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The U.S. Senate voted 63 to 35 passing legislation that forces the U.S. government to seek tariffs and other action against countries with "misaligned" currencies."

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This NYT report on Mohamed Bin Zayed of the United Arab Emirates, who comes from Abu Dhabi one of the 7 emirates in the Gulf Coastal region, is rare and unusual. It provides stories the prince loves to tell that make a point about how he sees the world. Here he tells them to Robert F. Worth, in the only interview Mohamed bin Zayad has ever given to a journalist from US or Europe. It took a year just to get the interview. The title about a Dark Vision is inappropriate as Mohamed Zayad simply reflects what is a British way of looking at things- valuing the Constitution, keeping religion private even its deeply held beliefs and cultural traditions such as Bedouin's practice, and a general tolerance that characterizes British society and similar societies throughout the history of Europe and Asia that were sitting on shipping lanes and practiced trade for a livelihood. It is also important because the other Mohamed, Mohamed Bin Salman of Saudi Arabia is seen as someone influenced by the ideas of Mohamed Bin Zayad of Abu Dhabi. President Biden plans a trip to the region in coming months to continue on building a narrative of development for the region. This provide an insight into the coastal regions that include Gujarat across the Gulf in India, that for centuries traded with the Gulf kingdoms. They have a trading mentality and with it comes a tolerance that is also seen in trading nations such as England. This is what brought Britain to India (and China) says Mohandas Gandhi. Gandhi went so far as to say that if there was trade on the moon you would find a British shopkeeper was first to setup shop there. Zayed has as a minister in his cabinet, a woman who is minister of Tolerance, Sheikha Lubna al Quasimi.  Zayed is unique for three reasons. He has embedded in his views the spirit of tolerance. As Worth puts it in NYT, Zayed has grasped what is true to the spirit of the Gulf region. The country's location on an ancient shipping lane has bred a type of Islam in the Gulf region, that is open to the world and tolerant.  His father Zayed Nahyan's  tendencies to openness and frank demeanor combine with this tolerance to provide a different kind of leadership. His father had the pluralist instincts that combined traditional Bedouin attitudes with a rare liberal mindedness. He died at age 86 in 2004. Zayed bin Nahyan MBZ's father was selected for these very reasons by the British in 1966 to rule the small Gulf kingdom of Abu Dhabi. In 1966, says this NYT report, the country was mostly illiterate, half of all children died during childbirth and one third of the women during childbirth, there was a complete lack of western medicine. Zayed Nahyan's brother was averse to development making the British select Zayed Nahyan at the request of Abu Dhabhi families. These early years shaped Mohamed Bin Zayed's views of how to see the world. Zayed the son loves to tell stories, and this one in the NYT shows how Mohamed bin Zayed the son and Mohamed bin Nahyan the father share a sense of what it means to be human and support all people's aspirations for a better life. This is the narrative in India and the region of 1.8 billion people that extends from India to Indonesia and Vietnam. This was seen at the G7 when leaders of India and Indonesia were invited to meet with the G7 in Munich, Germany and taken as utterly serious participants in the discussions to shape the Free World. To see the difference- UAE has signed agreements to increase trade with India to $100 billion over 5 years and was thanked by prime minister Modi for treatment of 8 million Indian workers in the Gulf region during the pandemic. Saudis are now stabilizing the Turkish and Egyptian economies with aid and providing some of the funding assistance for Siemens to modernize the entire Egyptian rail system with the latest technology over the next 5 years. Projects of this size that have never been undertaken since 1945. Sometime in the 1980's when Zayed was a young military officer having completed training at the Royal British Military Academy at Sandhurst, England, and educated in Scotland, he went to the grasslands of Tanzania. During his visit to Tanzania he went to several villages to see the Masai tribes. When he returned he sat with his father crosslegged on the floor in traditional Bedouin and Asian style and told him about his travels. His father asked Zayed about all the details- the wildlife, the Masai people and their customs, the extent of poverty in the country. After hearing it all his father asked Zayed what he had done for the people he had encountered. In response Zayed shrugged and answered, the people he met were not Muslims. Zayed still recalls his father's reaction, sudden, forceful and indelible from memory. Zayad says his father took a sudden hold of his arm and spoke to him in a harsh tone and stern demeanor- " We are all God's children."     ...

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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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Zombrun describes the effect of low interest rates on savings for the bottom half of households in the U.S., the pressure to invest in stocks without the skills and experience of the better educated part of households in the top 20% of households by wealth and income. This resulted in a negative effect, a depletion of savings compared to an increase under a higher interest rates scenario with less pressure to take risks in a volatile stock market. This is the direct cost of the crises in stock and financial markets of 2000 caused by a internet bubble, and the larger crisis of 2008-2009 caused by the bubble in mortgages and housing. The secondary effects of the mortgage price bubble and faulty mortgage securities was in the millions of homeowners who went into foreclosure in 2009-2013, which further depleted wealth and savings of households in the bottom half lacking the experience and skills to navigate this type of housing market. The failure of the Obama administration to stem the foreclosures with practical steps which would have helped not hurt the banking sector, as suggested by FDIC's Sheila Bair and Harvard economist Martin Feldstein in many WSJ op-eds in 2010-2012, added to the erosion of savings and wealth of the bottom half. Minorities in particular were hit hard. A third effect is of communities across America that are feeling the effects of job migration to emerging markets such as China that has been underway as part of the globalization of the last three decades. A fourth effect in the rising cost of education, particularly since 2000, has reduced the opportunities for struggling working class people to enter the middle class and enjoy the higher incomes in precisely the very period when the divergence of incomes between less educated, less killed people and the more educated and better skilled people was taking place. The last two effects were neutral as part of the overall process of emergence of a globalized economy with a premium on more skills and education, requiring action by the government, universities and business for a concerted effort to mitigate in some places the negative effects and enhance in other places the positive effects. The first two effects were man made crises which required managing in constructive and positive ways for the entire American people, taking risks where necessary such as fears about the financial system if foreclosures did not go through. The risks of a long period of extremely low interest rates for savers and the middle as well as working class were poorly understood by the Fed since 2000. A similiar crisis is being faced in Europe with extremely low interest rates. Janet Yellen was only doing the honest thing by acknowledging how far and how different the situation is now compared to the period of three decades following 1945- a question not just of values cherished in America, also of the need for societies to advance through creation of wealth across all sectors of society or regress, as described by Smith in the Wealth of Nations....

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Joe Parkinson of the WSJ gives a in-depth account of the emergence of Recep Tayyip Erdogan in Turkey's politics, with contributions by Emre Peker, Ayla Albayrak, Yeliz Candemir. Erdogan grew up in a poor neighborhood of Istanbul, and became the head of a local youth branch of the Islamist National Salvation Party in 1976 after an adolescent period steeped in mosque culture and Islamic ideas. In 1994 he is elected Mayor of Istanbul amid voter discontent with corruption and problems with infrastructure and public services. He served for four years making improvements. After reciting a poem publicly that said "the mosques are our barracks, domes our helmets, minarets our bayonets and faithful our soldiers," he is jailed for 4 months by a military backed secular government in 1999. During this period Erdogan, described by friends from his youth as having a unique ability to adapt to difficult situations, makes a transformation. He moves to the centre, coming out in favor of stronger ties to the EU, and works hard to attract support from the secular and nationalist voters to add to his conservative religious base. In 2003 he is elected prime minister as head of the Justice and Development Party. This begins a period of ten years in which Turkey sees remarkable period of economic growth during which Turkey's GNP nearly quadruples from a little over $200 billion in 2002 to $794.5 billion in 2012, according to the IMF. It may be partly coincidence and partly good management of the economy under Erdogan. Turkey's previous banking and currency crises before 2003 created a better understanding and discipline for managing the economy. Emerging markets such as Brazil, India, China, Russia, Indonesia, and other parts of Asia and Latin America were able to achieve high rates of growth during this 10 year period. Competitiveness in Brazil and Turkey has not improved significantly in this period according to experts, and large capital inflows into Turkey partly supported the credit boom in Turkey. And just as growth is slowing significantly in all emerging markets, Turkey under Erdogan faces a new test. Especially now that Erdogan is seen as autocratic in his effort to suppress protests to build an Ottoman era army barracks in Taksim Square, Istanbul. The fears of secularists in Turkey are that this is the Erdogan of the period in 1999, after serving as Mayor of Istanbul. Just as Turks turned away from the overreaching actions of the military, the public sentiment may be shifting beyond the overreaching actions of the religious parties in Turkish politics. The protests in Brazil against the Rouseff administration after the popularity of the Lula administration, show that slowing economic growth and missteps by the elected government can alienate younger voters. The parties still retain a majority but face an uncertain future in which lower economic growth and missteps lead to a search for alternatives. At the same time Turkey's efforts for accession to the EU are beng put on hold as Germany opposes the actions to suppress protests of the Justice Party in Turkey. ...

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Internet penetration is about 30% in India, compared to 50% in China and 87% in the U.S., according to the World Bank. The number of internet users increased from 375 million in Oct. 2015 to 402 million in Dec. 2015, according to Internet and Mobile Asssociation of India. Growth of internet users is increasing with the falling price of smartphones and mobile data usage.

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Marcellus Shale natural gas prices are monthly average of $2.80 per million BTU compared to benchmark U.S. prices for natural gas of $3.61 in Nov. 2013. The low prices of natural gas are leading to closing of more coal powered plants in the Pennsylvania, and W. Virgina, where a glut of natural gas is developing with few pipelines in the region. For the U.S. coal lost market share down to 37% in 2012 from about 50% of the electricity generated in the U.S. Over 100 coal burning generators were closed in the U.S. since 2011 because of lower natural gas prices and the federal government's stricter pollution limits for power plants.

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Caterpillar is asking workers at its Canadian plant to accept a large cut in wages and benefits. Wages and benefits at Caterpillar's rail equipment plant in LaGrange, Illinois, are less than 50% of the costs at the Caterpillar locomotive assembly plant in London, Ontario. According to the U.S. Bureau of Labor Statistics U.S. manufacturing labor costs per unit of output were 13% lower in 2010 than in 2000. This compares with an increase of 2.3% in Germany, increase of 18% in Canada, and increase of 15% in South Korea. Caterpillar is also asking for more flexible work rules at the Canadian plant. The flip side of this is that U.S. workers are earning significantly less in manufacturing, especially considering inflation, and the middle class is shrinking in the U.S. At the same time wages in the U.S. that are more competitive with wages in Mexico and China with flexible work rules and use of automation and technology, is helping to reverse the shrinking of the manufacturing sector in the U.S....

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Northwestern University's Robert Gordon sees growth in the US economy dropping from 1.93 %- that it achieved in the period 1972-2007- to 1.5% from 2007 to 2027. At that rate of growth GDP per capita would increase by 35% in the next twenty years, compared to the 62% increase in the previous period. He says better educated workers would be needed to increase the growth rate. And he discounts the impact of the internet revolution as it has no magic quality, and he describes the present transformation technologically as a mere shift to smaller devices that is not changing productivity. He does not see another technological revolution like the internet boom. The coming retirement of baby boomers increases the number of retired people that wage earners would have to support, and there is no evidence of education levels increasing for the remaining workers. What this means is that it will be more difficult to fix large problems from carbon emission, energy to infrastructure improvement. Gordon arrived at these numbers by combining research on educational attainment, technological change, and workforce demographics for the USA, and running this data through models. Gordon has examined data going back to 1891 for the USA. This shows that the next twenty years will be the slowest growth in the nation's history, since George Washington assumed the Presidency....