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General Electric has become an example of how not to run a a business. Once  a leader in American business it is now a shadow of its former self, and withered in many of its markets, with a slumping share price. This report in the WSJ shows how the involvement in banking and capital markets was the first error at GE that hit the company's share price hard during the global recession of 2009. Other decisions and a hard driving culture led to more mistakes leading to the current situation. By 2008 GE Capital brought 38% of GE's revenue, for a company that was a leader in infrastructure a huge misstep, and the start of the decline. In terms of company culture and management a more thoughful management style, a willingness of management to have self-criticism and different views represented are better for companies. A hard driving culture can hurt companies over time- here the example Jack Welch CEO, and Jeff Bornstein as CFO are given for this hard driving culture. Renault-Nissan is a recent example of CEO running into issues with the company's culture and profile developed under a larger than life personality. There is a lot to be said in favor of a gentler disposition, a healthy lifestyle, and a thoughtful style, in the management ranks of companies at all levels which produce better results. This serves as a part of Lessons in Management and Culture. ...

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The former Chief Election Commissioner of India, Mr. S.Y Quraishi, looks at the 2019 Nigerian elections. Nigeria has about 47% of the population of West Africa. Muslims and Christians are almost equal in numbers and there are 300 ethnic groups. About 82.3 million voters were registered to vote. Quraishi sees the 41% registered voters to be disproportionate to the total population. In India about 62% of the total population is registered to vote. The Independent National Election Commission (INEC) chairman, Mr. Mahmood Yakubu, says security, fake news, hate  speech, and expenditure control are the top issues. Postponement, delays and chaos at polling stations contributed to a historic low turnout, 35.6% compared to 44% in 2015. Police presence was discreet and needed for the elections. A coalition of 70 civic organizations monitored the elections and contributed to its credibility. In Lagos there were 1.1 million valid votes. India has strong interest in Nigeria's democracy. Over 135 Indian companies have operations in Nigeria, including  State Bank of India, Bharti Airtel, Tata, Bajaj, Birla, Kirloskar, Mahindra. The election commissions of the two countries have met yet there is need for more engagement. About 50,000 Indians live in Nigeria. By continuing the process established by the two earlier elections including a peaceful transition from Mr. Goodfellow to Mr. Buhari, Nigeria is strengthening the democratic process. In continuing the fight against corruption, building infrastructure, the difficult process of modernization and development is taking place even with difficult economic conditions. ...

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About $82 billion in investment is planned for ports modernization to improve shipping and cargo handling capacity by 2030, according to the prime minister. "Maritime India Vision 2030" gives some idea of the vision for India as it develops and modernizes. Shipping and ports infrastructure building is part of the overall vision for new infrastructure for the country.

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Prime minister Abe of Japan and President Jinping of China meet for 25 minutes on the sidelines of the Asia Africa Summit in Indonesia, on April 21, 2015. In a sign of thawing in relations both sides take an active interest in improving relations. This is the 60th anniversary of the Bandung conference in Indonesia, and Japan restated its pledge during the 1955 meeting of Asian and African leaders to not use force in territorial disputes. Abe said he had "deep remorse" for Japan's role in World War II. Xi Jinping's speech covered China's effort to build the "Silk Road" infrastructure projects in Asia and Africa, and said the AIIB bank was seen positively by the international community. Jinping emphasized the joint responsibility of both countries for peaceful development and regional stability. Abe suggested that a communications system for emergencies be established between the two countries and a defense dialogue be setup.

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The European Union’s total defense spending increased by 30% from 2021 to 2024, to 326 billion euro or $341 billion. That is 1.9% of the EU’s GDP it's economic output, according to European Defense Agency. It is still short of 2%.  Britain will ramp up defense spending all the way up to 3% in 2027. Britain is short of defense equipment with transfers to Ukraine and with much of the defense budget going to maintain a nuclear deterrent. This leaves less for other defense needs. This report says most of the procurement for defense equipment goes to countries outside Europe.The Kiel Institute says 80% comes from outside EU. It is not mere shortage of funds it is the severe bottleneck from lack of defense manufacturing industry  that is putting Germany, France and UK in a situation where they are too dependent on the US. It takes years to build this capacity. Russia built it up during 3 years of war by going to a wartime economy and it now produces 4 times the ammunition Europe produces. The US did the same to match and exceed Russian capabilities and capacity, Europe lagged behind with unwillingness of Macron and of Scholz in particular to switch funds from needs in transport, infrastructure to defense. The debt brake Merkel to stop debt based infrastructure investment is what ails Germany. It has had two pernicious effects it created the AfD's surge by lowering economic growth and investment in public needs - housing, transport, public services. It worsened the SPD and CDU performance by not investing in security with no policies to return crime committing refugees to their home countries. A combination of aid and other assistance, diplomacy, secured the cooperation of countries to take them back. A strong display of action on removing refugees committing any offenses would have lessened the number of terrorism incidents. ...

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Obama's 2009 Stimulus package sets aside money to promote new mass transit infrastructure building, but no money is set aside for operating budgets of existing mass transit systems. With prices of diesel fuel doubling in 2008, and revenue from state property sales and fuel taxes down from the economic downturn- on which the mass transit depends for operating budgets- many systems are considering service cuts and fare boosts. Transit agencies are facing huge shortfalls in New York, Washington DC, San Francisco and Chicago. Th Metropolitan Transportation Authority which runs public transportation in New York city and greater New York has a shortfall of $1.2 billion in a $11 billion operating budget. It will be forced to cut fares by 23% and severely cut services, including some lines like the Z line and shorten hours, to meet budget. All this is happening as use of public transportation is surging, and is at the highest level in over 50 years. In 2008 Americans took 10.7 billion trips on the country's 6,500 public transportation systems, according to the American Public Transportation Association's recent report. Some of the systems are old and need renovation. New York's operates 24 hours aday and handles millions of riders. Repairs are needed on its 90 year old signalling mechanisms. The MTA has maxed out the money it can borrowfor repairs, and debt service costs on its loans will reach $2 billion a year. Additional Stimulus needs to set aside money for the modernization of existing mass tranist systems, which would deliver value just as significant as the new mass transit infrastructure building that is planned....

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Brazil's economy is forecast to contract by 2% in 2015, the currency has lost about one third its value and the stock market is down 22% in the last year. This follows the decline in demand for Brazil's commodities exports as China growth slows down. Experts say Brazil is now seeing another boom bust cycle similiar to boom-bust cycles in the past, such as the 1966-73 boom followed by years of hyperinflation and stagnation. Brazil's exports to China declined 17% in the first 7 months of 2015. The crisis is in many ways similiar to crises in other emerging markets dependent on commodities exports. The resources boom leads to overvaluation of the currency, and decline in development of manufacturing away from dependence on commodities exports. Other errors rise from complacency and politics prevalent in such periods. These errors include mismanagement of resources with poor resource allocation decisions such as spending on soccer stadiums in cities in the northeast while basic bus services remained underfinanced in large urban areas, large overspending by the government using state owned bank BNDES to offer rates at below market rates, a credit fueled boom and credit card binge for households, and a reversal of capital flows from the U.S. and Europe with the sharp decline in investment climate. There is a severe loss of confidence in the government of Dilma Rousseff with her approval rating as low as 8%. Corruption scandals at Petrobras show close links between the Workers Party of Rousseff and executives, with about $2 billion in misused funds. Brazil, like other emerging markets such as Russia and India, have taken some lessons from the 1997 financial crisis by setting aside large foreign exchange reserves for a crisis. Brazil's reserves of $397 billion help it cushion the effects with funding of the safety net and support to industries to avoid large layoffs. Other problems not tackled as in Mexico, India, and other emerging markets, are the weak educational system, and poor infrastructure, that create bottlenecks for growth. Brazil could face a lost decade after the debt overhang, decline in foreign investment and commodity export generated revenues. ...

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A ten vote majority for Republicans is expected in the House of Representatives. Two Congressmen Waltz as National Security Adviser and Stefanik as UN Representative are taking new positions, so is Mark Rubio in the Senate. This means defiant Congressmen could put limits on what legislation passes.

Lisa McClain, Republican of Michigan, who may be the new head of the Republican Conference replacing Stefanik says-

DJT “will tolerate disagreement, but he’s not going to tolerate infighting because we have a job to do to fix this country, and we don’t have a lot of time.”  Republicans will try their own bold experimentation, as Biden did in the first two years passing infrastructure and other spending legislation.

In two years the majority in the House may not be there as happens in anti-incumbent sentiment shifting who controls the House of Representatives.

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With the German economy stagnating and the FDP partner Lindner as Finance minister not willing to invest in the German economy or in defense, Chancellor Scholz fires Lindner. One of the problems that the Social Democrats accepted in the coalition with the Greens and FDP is the role given to the FDP which has acted as a brake on German investment in the economy. By comparison US president Biden has invested a trillion dollars in the US over the last 4 years for infrastructure, chips, science, manufacturing.The result is that the US economy is in stronger shape. It comes a bit late for Scholz but it shows the urgency of the issue and the need to tackle it as the coalition has lost popularity by sticking with the FDP and not able to offer Germans the program they were elected to accomplish of growth and investment in housing, childcare and other areas of the economy.

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Michel Barnier is approved by 52% of French people in an Ifop poll, yet 74% think he will not last long. The NFP will call a no confidence motion when its candidate 37 year old Lucie Castets of the Finance Ministry was turned down by Macron. The RN of Marie Le Pen will support Barnier for now and Marie Le Pen says she expects new elections within 1 year. Barnier supports halting migration to France for 4 years, a position RN of Le Pen supports. Denmark with a socialist government has taken similar position. By taking strong action on migration as northern and southern Europe both shift to this policy including Socialist parties, the EU as is happening in the US can address fundamental issues of cost of living action, infrastructure investment and investment in education, healthcare, science and technology competitiveness, renewable energy. Removing the migration issue can put a clear focus on the action needed to address these problems.

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PM Modi says Indian Rail is an important part of the vision for Vikshit Bharat or Developed India 2047 as he opens the new Jammu division of Indian Railways. PM Modi described the infrastructure laid for the Udhampur-Srinagar-Baramulla Rail Link USBRL, the Anji Khad cable-stayed bridge, and the Chenab Rail Bridge in Jammu and Kashmir.

PM Modi says-

“I was watching a video of the new sleeper version of the Vande Bharat train running at the speed of 180 km per hour in trial. It makes me feel good. The introduction of high-speed Vande Bharat trains and the expansion of metro networks demonstrate India’s commitment to world class transport systems,” the PM said.

“This is just the beginning as the time is not far when the first bullet train will run in the country.” 

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Mark Carney's program for Canada is based on 5 Actions-

1. Double the rate of home building to get 500,000 additional homes a year.

2. Ease Cost of living pressures. Reduce the lowest tax bracket rate to 14% from 15%. Scrap the sales tax on buying the first home for homes less than C$ 1 million about $720,000. Make dental care available for low income Canadians adding 4.5 million Canadioans to the national insurance program.

3. Build a national electricity grid east to west, reducing dependence on the US.  Invest in both clean energy and fossil energy.

4. Increase defense spending to 2% of the budget with $18 billion in additional spending over 4 years.

5. Invest $5 billion in ports, rail, and infrastructure to create new trade corridors.

 

 

 

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Ms. Ursula von Der Leyden, who was a strong advocate for women on social issues, is the new defense minister in the Merkel cabinet for 2014. Frank-Walter Steinmeier of the Social Democrats is the new foreign minister, a position he held in the coalition of 2005-2009. SDP leader Sigmar Gabriel- who worked hard to get the approval for a coalition in a vote of the rank and file of the SDP- is the new Economics and Energy minister, with responsibility for shifting Germany away from nuclear power. Wolfgang Schauble continues as Finance minister. The new term for Merkel is likely to focus on domestic issues such as building infrastructure, education, the shift from nuclear energy, and immigration.

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A poll released by Datafolha on June 29, 2013, shows a sharp drop in popularity of Brazil's president Dilma Rousseff from 57% to 30%. In northeastern Brazil, an area where the ruling Workers Party enjoyed strong support, Rousseff's popularity fell sharply from 64% to 40%. Over 80% of respondents in the poll expressed support for the street protests in Brazilian cities over poor infrastructure, transportation and public services, and overspending on soccer stadiums at the expense of basic services. A protest over bus fare increases set off the street protests. Rousseff's response to the protests have come under criticism- the president offered to conduct a referendum for improving the political system, and channel oil royalties to education.

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The Economist makes an important point about the violence, poverty and terrorism in failing states. The failure of civil institutions and civil wars in Africa, have led to complete breakdown. Similiar situations playing out in Afghistan and Pakistan. At the very least says the Economist, "there is evidence that economic growthin countries next to failing states can be badly damaged." Even in South Asia where India has forged ahead with high growth rates, one can say that economic development has not made a significant dent in the poverty, malnutrition and lack of infrastructure across the country. It adds that a weak goverment may lack the wherewithal to identify and contain a pandemic that could spread globally.

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See the piece on GE's Energy Gusher in Ahead of the Tape. As GE's financial services business led to earnings shortfall and 13% drop in its share price on April 11, investors may be overlooking the strong position of GE in energy businesses like turbines, nuclear energy, and in oil and gas. GE's overeseas sales went up by 23% in 2007 driven by 23% gain in its energy centric infrastructure business. Additional note is that GE is in the healthcare business and in green environmental business which should see growth even in a recession. And the financial services business may see further trimming after the earnings shortfall, so that GE is well positioned for the future.

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Italy's finance minister Carlo Padoan, the EU president Jean-Claude Juncker, and Vitor Constancio, vice president of the ECB, express the need for increased public spending and investment to reverse increasingly sluggish economic growth by Septembr 2014. In a letter to Paduan, finance ministers of France and Germany, Sapin and Schauble, express support for a new investment program in 2014-2015.

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Jair Bolsonaro, a former army officer, is expected to win by a large margin in the runoff election in Brazil against Fernando Haddad of the Brazil Workers Party. Crime, corruption including the Car Wash scandal involving the state oil company and politicians, a deep recession with the fall of commodity prices, have led to a shift in Brazil away from the Workers Party. Polls from Datafolha show about 60% of the vote in runoff going to Bolsanaro. About 30% of supporters say they are voting for something new after the deep recession and failure in providing government services with no money in the budget for adequate spending on infrastructure and services, education and health.  Both the centrist PSDB and the Workers Party that came in following the shift to civilian rule from military dictatorship in the mid-80's failed to win a significant part of the vote. The conservative PSL party only had 5 seats in the outgoing 313 seat house showing the deep dissatisfaction with the existing Congress and politicians in Brazil. Crime is a big issue with 64,000 deaths in Brazil in the last year, with failures in government services, including a failure to tackle a yellow fever epidemic over 2 years, are other issues that have led to the change in the mood of the voters in Brazil. ...

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Retail sales in China dropped sharply. Retail sales dropped from double digit increases for most of 2014-2017 to single digits in 2018- sales dropping to 8.1%. Government restrictions to prevent a housing bubble restrained housing sales, and policies to control corporate debt limited growth. Higher inflation for food and housing, have led to asharp pullback in growth of consumer spending.  Trade tensions with the U.S. have hurt consumer sentiment. The feeling that China's growth would stabilize because of its connections to the world economy is fading as consumers see persistent trade tensions with the U.S. including tariffs of upto 60% in tit for tat actions as hurting China's prospects.  The GDP growth is expected to be about 6.5% for 2018 according to government estimates, which experts say is actually much less or even half that as exporters retrench in the face of slack demand in China and lower sales to the U.S.  Rail and other infrastructure projects that were considered unsuitable are now being given approval in efforts to boost the economy. More tax cuts and expanded deficit spending are policies likely to be followed.  At foreign companies no overtime, and job cuts are commonplace especially in the auto industry. ...

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China's Finance Ministry is having a difficult time controlling local governments using local government financing vehicles to invest in more infrastructure, airports roads and subways. One such city is Wuhan which plans six subway lines, three bridges over the Yangste river and a new airport. Much of the money comes from land sales. The Finance Ministry in a 2013 report pointed to the unreliability of land sales for future borrowing as the property market is slowing, and because it is highly unpopular to requisition land for land sales. This matters because the IMF says debt is growing faster in China than when Japan, South Korea and the U.S. fell into deep recessions at different times between the late 1980's and 2009. Local government debt accounts for one fourth of the increase in China's domestic debt since 2008. New rules by China's bond agency in Dec. 2014 prevents investors from using low grade debt to borrow cash. In the past local governments found a way around the central governments effort to curb growth of debt by restructuring the local government vehicles or some other way, as Wuhan has done. Wuhan Urban is the local government financing vehicle for Wuhan and its debt increased by 20% in 2013. Wuhan's mayor, Tang Liangzhi, is pushing construction to the point where he is known as Mr. Dig, Dig. One reason for China's slowing growth below 6-7% is the need to control the growth of debt. Local government debt in China reached 36% of GDP in 2013, double the figure in 2008, and will increase to 52% of GDP in 2019, according to the IMF. And the increase is not proportionally delivering the same results as before. JP Morgan estimates that over 4 units of borrowing are needed in 2015 for every unit of investment, compared to less than 2 units of borrowing for every unit of investment in 2007. PRC Macro Advisors of Hong Kong says half of the borrowing by financing vehicles goes to pay interest on existing debt in 2014. There are 8000 such local government financing vehicles in China today each competing to build infrastructure in its neighborhood, in the case of Wuhan to build a computing back office for financial companies and as transportation hub, even though its uncertain whether this will be realized or not. The problem is that alternative investments as an opportunity cost are being neglected, the hospital not being built as China's population ages with underinvestment in health care, and the private company with better returns that is unable to find financing. A classic example of crowding out of better return investments as a glut of housing and road/bridge/ airport infrastructure gets built. The central government is wary but faced with slowing growth pushes problems down the road, what experts call a Japan syndrome....

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Questions about whether the emerging market countries are looking ahead at a period of lower growth in the next decade. If the slowdown in 2013 is structural then these countries have to to make changes in economic policies that will help them return to higher rates of growth. If the slowdown is cyclical then this is temporary and emerging market countries will return to higher growth rates. Countries such as Brazil, Mexico and India need to improve infrastructure and educational systems, and invest in research and development to generate more growth. Turkey and India depend on foreign capital, which puts limits to growth, creating a need to boost domestic savings and investment for long term growth. Lower rate of about 7% compared to the 9-10% of the last decade in China are because the wave of investment in construction and infrastructure building through huge state investments is now slowing, says Peter Aslund of the Peterson Institute of International Economics. It is a positive prospect for China, according to Kalpana Kochhar, a deputy director of IMF, because of the asset bubbles developing in real estate. It is seen positively by China's new government as it tackles problems created by a rush to industrialization of widespread pollution of the environment, and lack of balanced development without attention paid to healthcare, worker wages and social security. Stephen Schwartz of BBVA bank, says urbanizaton will drive further gains, especially in India, which has lagged behind the gains made in China and is likely to follow the rapid urbanization seen in China. New elections in India in 2014 are likely to lead to more growth oriented government policies. A pause in the U.S. Federal Reserve's policy of withdrawing economic stimulus gives emerging markets, especially India, and opportunity to come up with new economic policies to restore growth....

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Building extensive subway systems in large cities is the next focus for China's infrastructure building effort. China's prime minister, Li Keqiang supports "new urbanization, with people at the center." Building convenient mass transit for cities with subways and light rail is seen as a way to improve living in urban environments. Other related priorities are water supply, garbage disposal and more sidewalks. Subway lines reaching further into the fringes of cities helps push population out further and lead to less overcrowding and pressures on limited space in core areas of cities This also takes pressure off increasing automobile use inside the centre of cities, reduces overall automobile use in urban areas, and frees up money for consumers to spend on products other than automobiles. This fits in with the plan to urbanize China, by taking pressure off property prices, reducing air pollution from automobile use, and improving quality of life. It is also seen as a way to stimulate economic activity in the fringe areas as subways extend further to outlying urban areas. An example is the $300 million three station line to Kunshan, an extension above ground to Shanghai's subway, which is expected to connect with a line to Suzhou. China's cities have spent about 22% of the total debt of $1.76 trillion in 2010 on transportation infrastructure, according to national audit. The subway and light rail effort is taking place in 26 cities with new or expanding lines, according to the Transportation Technology Development and Planning Research Center. Subways charge much less in China compared to New York- 2 yuan or 30 cents compared to $2.50 base fare in New York city, and will need local government and state subsidies. ...

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As many politicians and commentators deride programs by the government in the infrastructure area as " mere spending programs", Robert Frank, an economist at Cornell and NYU offers some much needed clarfication. High savings rates are not bad for the public, savings go into investment int he economy, and higher savings properly channelled can lead to higher productive investments that in turn generate a virtuous cycle of more investments. There is thus no conflict between private savings and economic growth. China's and India's higher savings rate leads to savings going into investments in the economy for higher economic growth. Only in sharp economic downturns does the paradox of thrift operate, here lower consumption leads to lower production and layoffs, and the economy goes into a tailspin as consumers hoard their cash and postpone purchases. There is an element of fear in that kind of downturn. So its aunique animal. With the government stepping in to provide investment, make up for jobs lost, and restoring confidence, the paradox of thrift does not operate. ANd its ok and desirable to have consumers save especially when they are so overstretched as they are today. A real world example is that much of the US credit card debt is at 20% interest rates or more. In just 5 years says Robert Frank each dollar invested in reducing debt would support more than $2.50 of additional consumption, in 10 years more than $6. Savings matter. The wastefulness of spending is not a given. It depends on where the government is spending. If there are productive investments like infrastructure that are waiting to be made, then with some due diligence and care the investments can be very efficient....