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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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Tsai Ing-Wen is elected president of Taiwan by a landslide in the Jan. 2016 election. Tsai, leader of the Democratic Progressive Party (DPP) was elected with 56 percent of the vote, compared to 31 percent for the Koumintang candidate Eric Chu. The DPP won 68 seats out of 113 in Taiwan's parliament. Tsai told a news conference about Taiwan- China relations - "I also want to emphasize that both sides have a responsibility to find mutually acceptable means of interaction that are based on dignity and reciprocity."

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Xi Jinping, president of China says at the Davos Forum that world leaders should "join hands and rise to the challenge" from protectionism coming from the new U.S. administration. He called on world leaders to support the Paris climate accords- "to stick to it instead of walking away from it."

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Andy Street, Mayor of the West Midlands Combined Authority, says when you consider that London gets 7 times the infrastructure spending per person than West Midlands, "its not bloody surprising" that his region is not growing fast. West Midlands covers a large part of central England, including Wolverhampton, Birmingham and Coventry. Even life expectancy is lower by 8 years in Blackpool, and disposable income can be quarter in Camden compared to North London. Labor's Corbyn and Conservative's Thatcher in the British general election are both campaigning for reviving the regions outside London, that have seen investment in people and technology lag substantially behind London. Regional revival is the big issue in this election. Consider that London which accounted for about 15% of economic output in the 1980's now accounts for nearly 25% of economic output of Britain. Berlin is about 4% of Germany's economy, and Paris 10% of France's economy. A word of caution on Brexit is sounded by experts at the University of Birmingham, who say the whole process of Brexit is so complicated that it may detract from the task of reviving this region. Even though the political upheaval had origins in this discontent, was it more about shifting government attention to the gap between London and the rest of the country, and less about a complex process of withdrawal from the European Union. ...

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A 93 year old hero of the French Resistance, Stephane Hessel, publishes a pamphlet called "Indignez-Vous!," released by a small publishing house from the publisher's home. He calls for resisting the "international dictatorship of the financial markets" and "defending the values of modern democracy." He protests France's treatment of illegal immigrants, the influence on the media by the affluent, cuts to the social safety net, French educational reforms. It was first published in October, and now has sold 1.5 million copies, all through word of mouth advertising. It has been translated into Spanish, Italian, Portuguese, and Greek. New editions are planned for Slovenian, Korean, Japanese, Swedish and other languages. In Britain, it was published with the title "Time for Outrage." The pamphlet is about 4000 words and only 14 pages of text. Its timing is good, as the French are debating what to do in their politics with an election approaching and Sarkozy's standing at new lows. The short length and low price are a big plus, at $4 it made a convenient Christmas gift. Britain, Spain, Portugal and Greece are going through austerity cuts. Public sentiment has been aroused by the cuts, and by the overarching influence of financial markets on the economies of these countries. Some of these countries referred derisively as piigs- Portugal, Ireland, Greece, Spain -countries in the financial markets. The economic impact has fallen disproportionately on the young, with high jobless rate for young people from Italy to Spain, and cuts in funding for universities and schools in the UK also fall heavily on young people. A sense that something has gone wrong in the free market system and the western world. Austerity cuts in spending in the U.S. create a similiar feeling and joblessness among young people is also high in the U.S....

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Luigi Zingales of the University of Chicago Booth School of Business, compares the growing cronyism in the U.S. and the lack of social mobility to the situation in Italy where he grew up, and where the economy has stagnated over the last decade with fewer opportunities for the younger generation.

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A recent book "The Spirit Level" has become popular in Britain. It says that countries with greater disparities in income also do worse in a number of social indicators, from higher murder rates to lower life expectancy. It also affects the consensus in society which is a necessary underpinning for sustained economic development and economic growth. Inequality when it affects the middle class and reduces the size of incomes in the middle, or creates stagnation in incomes, poses large risks for society and affects economic growth. In the US the home foreclosure crisis and the lack of bargaining power of wage earners in the middle class has created this problem. This is exacerbated by the banking crisis and bad loans in the banking system. Studies show that slow growth in college graduating rates in the USA after 1970 compared to the period 1900-1970, has increased inequality, especially with today's knowledge economy. Germany is also affected by this problem as wages for workers have remained stagnant with the labor reforms. Interestingly a combination of economic growth and payments to the poor have increased the size of the middle class and its incomes in Brazil. The austerity policies in Britain will affect incomes and income growth in Britain for the middle class. In China the gap is widening quickly between the urban areas and the rural areas. And the policy of residency permits- the hukou system-which limits internal mobility from rural areas to the cities and towns, makes the inequality all the more glaring. The lack of democratic election makes the situation worse in China compared to Brazil, because free elections in Brazil enabled leaders from the working classes such as Luiz Inacio Da Silva and Ms. Rousseff to emerge as heads of government. These leaders pursued policies that would explicitly bring a more shared prosperity in Brazil compared to the leadership in China. In China policies are determined by entrenched interests in its model of development- the state-owned companies and banks and their managers, local and government officials of the Communist party, and businesses with the networks and connections with the Communist party and local governments. This is why the ginni coefficient which measures inequality has dropped significantly in China, putting it in the rank of developing countries with poor records in equality. Inflation in China, India and Africa also affects the poor and lower middle classes to a greater extent. Current trends suggest that rebuilding the middle class in the developed countries and providing fairer distribution in developing countries will be of serious importance in coming years. Especially with the likelihood of more economic crises which tend to adversely affect the middle and lower classes disproportionately....

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Chancellor Merkel meets President Trump in a key summit in March 2017. The two leaders have different styles, one flamboyant the other reserved. Chancellor Merkel tells the German media "it is better to talk with each other than about each other." Trump called Merkel's refugee policy "catastrophic," Merkel has said that the Geneva convention requires countries to do this on humanitarian grounds. On trade German's Economy minister Brigitte Zypries says Germany would file a suit on any hike in import duties at the World Trade Organization, that WTO rules restrict import taxes to 2.5% on autos. Germany's BMW plant in the U.S. exports more autos than GM and Ford put together, and Merkel is likely to emphasize large German investment in the U.S.. The heads of BMW and Siemens and other industry executives are accompanying Merkel to the U.S. as trade will be a key topic.

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Polls show 83% of the German public support increasing the minimum wage to 8.50 euros an hour. About two thirds of the public support increasing income taxes on high wage earners. The Social Democrats talks with the CDU to form a coalition are likely to lead to CDU accepance of the condition for a minimum wage of 8.50 euros an hour, but not to the condition for raising the taxes on high income earners. The SPD sees the higher taxes as a way to pay for new infrastructure. A survey done for TV broadcaster ZDF shows 61% of Germans favoring a SPD-CDU coalition. In the 2013 elections the SPD gained 25.7% of the vote and the CDU-CSU gained 41.5%. The SPD is pushing for flexible retirement age, equal pay for men and women, a tighter financial regulation, and a growth and employment strategy in the EU.

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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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IMF's differences with Greece and Germany on relative weight of tax hikes and cuts to pensions for the Third Bailout Program accepted by Greece in July 2015. The IMF wants to see further cuts in pensions, the Tsipras centre- left government in Greece is committed to protecting pensioners and the poor, and has agreed to tax hikes that do not put a disproportionate burden on the poor and working class. The IMF fears the relative weight on tax hikes for generating a surplus to pay down debt could hurt prospects for economic growth.

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The recent appointment of fast food executive Andrew Puzder as Labor Secretary has caused great concern among union leaders. Puzder supports a $9 minimum wage compared to $15 supported by Democrats. Unions now represent 7% of the labor force, down from a high of 20% during Reagan's time when Reagan appointed a construction company executive as Labor Secretary and cut regulations.  Globalization has thinned the ranks of workers in unions. And the failure of Democratic administrations to stem the shift of factories overseas to China, Mexico and other places, as part of global supply chains focussed on cost, has weakened Democratic support among workers since the period of Bill Clinton. It eroded to the point where Obama won 65% of support among unions and Hillary Clinton won 56% in 2016. Interestingly the Republican Romney gained 33% versus 37% for Trump, showing voters were more inclined to move away from Democrats and only a smaller number willing to support Republicans, but the shift enough to give Republicans a win in 2016 for the presidency. The figures are from a Election Day survey of trade union AFL-CIO, and a larger proportion in midwestern states showed disaffection with policies from Clinton to Obama. In fact Obama spent years promoting another free trade agreement TPP that favored tech more than auto and older industries, just as Bill Clinton had promoted NAFTA, without giving thought to what this was doing to its worker base of support. A similar situation happened with Social Democrats in Germany as a SPD administration moved to the centre and handed Christian Democrats led by Merkel a win in parliamentary elections. As Democrats such as former Labor Secretary Reich, a professor at UC Berkeley who served under Bill Clinton, describe the problems of working class people their is less reflection on the impact of the changes from globalization and how Democrats handled or mishandled it, and more on the politics between the two parties.   ...

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Sharply lower consumer spending is hurting Apple sales in China. Apple cut sales and issued a sales warning in January 2019. This follows Apple's sharp slowdown in India with its uncompetitive pricing.

Retail sales growth in China- which bounced back in previous downturns- dropped to the lowest level in 15 years in November 2018. Auto sales are down with the sharpest drop in 7 years- the first annual drop in sales since 1990. Fears of a housing bubble have led to restrictions on home purchases for speculation which have not been lifted. Income tax reduction has not increased spending. GDP growth for the fourth quarter dropped to 6.4%.

Further signs of a sharp pullback are seen in the drop in consumption tax revenue falling by 61% in October and 71% in November 2018. The consumption tax is placed on cars, gasoline and luxury goods, and is paid by the companies making the products.

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Not a very flattering picture of the chancellor. She has already lost 1.3 million CDU voters to the Greens, and about 260,000 to the far right AfD party. In all about 4.3 million CDU voters have shifted from Merkel's CDU to other parties on the right or the left and to the Greens, between the general elections of 2017 and the European elections in 2019, according to Infratest Dimap. It had 33% of the vote in 2017, now it polls at 27%, down 6 points. The Greens come next at 22%, in recent Politico poll. Merkel's sentiments may have overtaken the reality of how much Germans wanted to integrate war and economic refugees from Africa and Asia. She has since revised her judgement that it was a decision made at the time based on what happened at that time without enough time to prepare for the sudden influx of refugees from Budapest. A new party the Alternative for Germany AfD emerged from the migrant crisis in the eastern part of Germany that had 13% of the votes in 2016, building on discontent from reunification, depopulation of the east, and a sense of drift and neglect. Even a sense that the affluent western part of Germany was more concerned about refugees than its own economically insecure countrymen in the east. After being in power since 2005 Merkel's period shows signs of aging. Her record on investment infrastructure and health, education and child care is also found to be weak. The effort to maintain austerity for so long following the financial crisis of 2008 by profligate banking and bad accounting by member states in the EU including Ireland, Spain and Greece, has hurt parts of the middle and working class stuck with low wages and inequality in the EU and in Germany. The migrant crisis and refugees have split her party and German opinion adding to the problems of the economy in the EU and Germany.  ...

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Thomas Frank describes how things went wrong in America by drawing the contrast between Martha's Vineyard and Decatur, Illinois. In 1946 he says a typical executive's salary was only 2 times that of a worker at a Caterpillar plant in Decatur, Illinois. By 2016 this had changed to where the top executive at Caterpillar was making over 400 times the wage of a typical worker at a Caterpillar plant. Democratic politicians he said had moved away from their working class base towards places like Martha's Vineyard. For Republicans the embrace of tax cutting, the deficit, and cuts in education and healthcare, entitlements, to the exclusion of everything else in a recession environment led to the rise of Trump and the rejection of stands on these issues- including amazingly the embrace of a $5.3 trillion increase in the deficit under the Trump plan estimated by economists and a recession after a temporary boost.  Inserted into this were the culture wars, immigration, with the change to mass deportation as a solution to immigration problems. ...

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There are similarities in the Republican and Democratic party platforms in 2016. One area of agreement is in the reinstatement of Glass Steagall Act. That legislation made in the Depression period to separate commercial banking from investment banking was changed  when president Clinton made changes in a deal with Senators Phil Gramm and Jim Leach in 1999. The too big to fail problems of banks and the problems of investment banks during the 2008 financial crisis are attributed to the lack of Glass Steagall protections for financial stability and safety. The result is that in the post 2016 environment banks can expect a tougher regulatory environment. Another are is in trade where both parties are expected to take tougher positions to protect U.S. interests. The Republican platform calls for "better negotiated trade agreemets that put America first."

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The top 1% of Americans owns more wealth than the 90% at the bottom, according to the Economic Policy Institute. The Economic Mobility Project points out that the U.S. provides less intergenerational mobility than most other industrialized countries. A key factor is less educational investments to give better educational opportunities to the less advantaged. Michael Spence, a nobel prize winning economist, says we have in America gone from one propertied man, one vote; to providing voting rights to all regardless of color or gender or property, and back to where it is now one vote for so many dollars. The financing of political campaigns has made good policy decisions for the financial sector based on merits and wise judgement impossible, as Congress and the White House are beholden to interests that finance political campaigns, says a former head of the Commodity Futures Trading Commission.