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In his second part of the series on Capitalism and Globalization Schieritz says Trump's arguments have backing, and goes back to the studies done by David Autor of MIT on the adverse impact of free trade on communities across the U.S.. Lyrarc has covered this issue since 2006, and the reality is that this issue was brought up long before the Autor study gained prominence. On Nov. 12, 2010 Robert Lighthizer, Deputy Trade Representative under U.S. president Reagan wrote an op-ed in the NYT titled "Throwing Free Trade Overboard," that made a strident and strong case for what Trump says 5 years later, and from no less than a top trade official under Repubican Reagan.Trump comes late to this in 2015 when it was already amply clear what was happening. It is not so much Trump having discerned this, than others who should have paid attention, including Lew and leaders in both parties, and the business community,  who for too long ignored it. Or as Hilsenrath in a recent WSJ report says, simply said we have seen this before with Japan's entry into the American market, not realizing the speed and widespread impact of the changes in trade with China, that are unprecedented in history- evident just from the great speed of urbanization and manufacturing work force growth in China, policy rapidly impacting vulnerable communities across the U.S. The corrective course has to be credible which is why it has to come from a a reawakening among leaders such as May, Merkel and Clinton, who are keen students of change, and capable of designing and executing a corrective course of action, and winning the popular support and patience needed to stay the course which could run for most of the next decade. It would also provide leadership and show the way for societies in Brazil, China, India and other countries facing similar problems.     ...

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Andrew Jacobs provides this exceptional account of the tense atmosphere in Brazil, and the split between supporters of the government and the opposition, in April 2016 with the impeachment effort against president Rousseff.

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Public sentiment shifts sharply against free trade in the March 2016 Michigan primary for the U.S. presidential election, with candidates saying trade agreements do not take into account the interests of American manufacturing workers making large gains. Between 1999 and 2010 public sentiment shifted against trade agreements for all age, education and income groups. A study by Autor, Hanson and Dorn showed loss of 5.6 million jobs in the last decade and large trade deficits, and demonstrated the effect by counties in the U.S. most hurt by trade policies.

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A hard look at the idea of the "Great Moderation" a peiod of stable prosperity that America has enjoyed for 20 or so years with low inflation, stable unemployment and smaller bumps along the road even in recessions such as the one in 1990 and in 2000 which had shorter durations with good rebound. The IMF report on the world economy for September looks at this period of stability and sees a continuation. This report takes a look at the current crises in housing and credit markets and takes a more cautious view wondering if things may be at a turning point where such stable growth cannot be taken as a given. In general the world economy has become more flexible and structural shifts to globalization and the shifts in manufacturing to other parts of the world such as emerging countries have made for a more resilient world economy compared to the economy that faced the oil shocks of the seventies. The three specific causes to which this stable period is attributed are the better handling of monetary policy, the better inventory management with Just in Time and manufacture to order, inventories literally being the shipments that are carried by Fedex or UPS on a particular day, and credit markets securitization of debt packaging it into marketable securities creating a large credit pool so thay companies could have better access to credit. Securtization has suffered because some of the basic rules were broken such as how securities are rated and not because of the basic concept. Have the markets and investors and households taken on more risk in their asset portfolios because of the belief that this period of 'Great Moderation' would simply continue. Its these kinds of behaviour that get tripped up until things get cleared up and return to normal. Is this simply a phase like the prior downturns preceding it that should see a similiar rebound or is it something different. One thing that is noted is that the period of relative prosperity has ocurred as in many countries in Europe and Asia. And the housing markets in many countries in Europe and Asia have also seen rising prices similar to that of the US. Can this turn into a worldwide recessionary situation? Comment made later on April 12, 2008 after the Bear Stearns crisis in March 2008 and the Fed meeting summary describing the downturn as expected to " be protracted and severe", and the emergency measures by the Fed itself made to prevent a possible global financial crisis. In hindsight the 3 reasons for the Great Moderation can be evaluated in this way. The first was the only real one to which researchers attribute about 50% of the Great Moderation, which is the revolution that Just In Time inventories have accomplished for smoothing drops in demand. The second financial innovation proved to be illusory just as mentioned here because it was gamed because the financial houses and other firms were able to get around regulation or the regulations were inadequate and the innovation fell victim to unrestrained greed in the manner mortgage securitization was done. The third wise better monetary policy as mentioned here did not get much credit from researchers and this turns out to be true. Keeping interests rate low was possible because of the disinflationary aspect of globalization specifically manufacturing in China which ended in 2007. Further the success of the US economy made it possible for the US dollar to remain strong and the USA to continue to attract capital for much of this period even while interest rates were low. But its the export of disinflation from China, and no pressures of inflation from globalization through commodities demand for much of this period, that kept inflation low and made it possible for the Fed to keep interest rates low without creating inflationary pressures. Of the three financial innovation and monetary policy may have in them in fact unlike the first Just in Time and information technology, may have in them the seeds of trouble as well as gain if not carefully managed, like fire a good servant but bad master, and this is really what happened in what turns out to be a very human world, greed subverted financial innovation without the necessary appropriate regulation to go with it and the Fed's libertarian instincts and complacency or lack of energetic oversight under a man past eighty years made it lose sight of its need to adjust interest rates to cool off excesses in the market and send appropriate signals to the financial and housing markets. The Economist was slightly ahead of the curve when it makes the observation here that this is likely to be a global housing crisis and a global credit crisis with all the implications of this for global economic growth. ...

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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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Zaragoza a city of 700,000 is the capital of Spain's fastest growing region, and its halfway between Barcelona and Madrid. It has grown rapidly. The arrival of GM here was a big turning point in 1982. The GM plant here can turn out 2000 sub compacts, small minivans and delivery trucks a day, now it is one of 7 GM plants in Europe to suspend production for 2 weeks in October to work off inventories. About 600 of 7000 workers were laid off. Young people here who have never seen anything but good times see this as a big shock. And its a sign of how things across Europe are shaping up. Spain's economy contracted by 0.2% this summer. The European Commission expects the 15 nation eurozone to be flat next year with no growth, but this is an early estimate and may be revised to show a contraction as the economic downturn is just beginning.

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Toyota has passed GM in sales worldwidefor the first quarter 2007. But this is happening against a changing backdrop which is that worldwide sales and markets are shifting to China and India, and GM has the initative in both countries. Its Chinese sales increased by 32% to 876,000 units in 2006 and it plans to inroduce 10 new models or upgrades in the Chinese market in 2007. The other change is that after years of growth Toyota sees a relatively stagnant US market and its strategy is shifting to extracting more profit from each car, by increasing the flexibility of US plants to make more and diverse models, and building plants in low wage areas like the one in Mississippi. Note that the plant in Mississippi is expected to come onstream a year later in 2010 and produce 150,000 not 200,000 Highlander SUV's. Also related to this is the disappointment in Tundra pickup sales which may miss the modest target of 200,000 for 2007. On the manufacturing front Toyota is slowing down product development to ensure that all needed quality checks are performed by engineers. Mr Watanabe, Toyota's CEO, and a manufacturing man himself, has referred to quality checks being skipped or neglected in the rush for sales growth. GM is pursuing cost, efficiency and quality goals of its own and $9 billion in cost savings are planned for this year compared to 2006, another $9 billion is expected to be achieved in 2008. Another factor that is relevant to Toyota's experience in the US market is its fear of being labeled as a foreign company taking away American jobs. Hence the build up of US manufacturing capacity to 1.8 million now to increase to 2.2 million by 2010. And advertising for Toyota continues to foster an image of cars made in America, by American workers for the American buyers. In this new environment leadership in a worldwide market may actually shift back and forth between competitors and new challenges will come up as the Asian market explodes, and profitability and quality will become just as important or more important than sales....

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With higher growth overseas multinational companies are increasingly investing outside their local base country. Germany has strong trade unions and German companies are investing outside Germany, in Eastern Europe and other countries. This is leading to a shift in investment to countries in Eastern Europe, China, India, etc. where there is growth and labor costs are attractive. The multinational companies still do a lot of the advanced research and manufacturing in their home base and say the growth overseas makes them stronger financially to continue to invest at home. The shift may also be due to the trade union factor- an example being the UAW union in the U.S., rigid labor rules, and other distortions from high wages and benefits that cannot be supported in the global economy. This includes distortions such as the Jobs Bank in the Detroit auto industry. Similiar situations exist in Europe where unions are strong and there is not enough of the flexibility needed for companies to grow in the global economy....

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The yuan is up 5.5% since the peg to the dollar ended in 2010, reaching 6.469 to the dollar. But this is not helping the U.S. trade deficit. The U.S. Bureau of Labor Statistics shows the price of imports from China are up 2.8% in May over the same month prior year. And the trade surplus for China in the first four months of 2011 is higher than the same period in 2010. What is happening? The improvements in productivity of Chinese manufacturers and the acceptance of lower margins is reducing the effects on trade balance of a small appreciation of the yuan, so that only a fraction of that appreciation is showing up in higher prices for Chinese goods. Also significant is that the yuan's small appreciation against the dollar is not enough to make up for the dollar's fall against other currencies. The yuan is down 8.3% against the euro and has actually declined 3.7% on a trade weighted basis in the last year.

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China's jobs situation is holding up better than expected with lower levels of economic growth. In 2014 there were 115 job openings for every 100 applicants, according to an official labor survey. Part of the reason is that the services sector is playing a larger role in growth. The services sector contributed 3.8% to growth in 2014, compared to the slower growing manufacturing sector, which contributed 3.0 percentage points. With problems in heavy industry and real estate this is reducing the need for larger stimulus spending. Official figures for GDP growth in 2014 are 7.4%.

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A study by Bank of Japan's Research and Statistics Department in the Feb. 2013 Bank of Japan Review paper titled "About the Real Effective Exchange Rate," shows how Japan maintained international price competitiveness during the period of the strong yen at 80 to the dollar. It found that with deflation the cost inputs of labor, factory equipment and materials in Japan were reduced, even as the price in overseas markets for finished products went up. It found that while the yen went up against the dollar in nominal terms, in price adjusted terms accounting for deflation it has actually fallen. Nomura economist Kiuchi says the Japanese yen had to go to 54 to the dollar before it matched the level of the 1995 priceadjusted high of 79 to the dollar.

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The increasing competitiveness of Mexico compared to China and India as an investment destination in 2013. Foreign companies are investing heavily in Mexico because of investment advantages in labor cost, supply of engineering and management talent, and proximity to the U.S.

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The Australian government forecasts lower GDP growth in 2012- dropping to 3.25% fro 4% earlier. The government plans spending cuts of 11.5 billion Australian dollars over the next 4 years, which will further affect economic growth. The mining and resources sector boom is leading to an overvalued currency which is affecting growth in manufacturing, tourism, and retail sectors. Australia has two economies and this limits economic policy options.