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The effort to shift China's economc growth away from the rampant overbuilding in housing and industrial capacity of the past to domestic consumption, and focus on meeting the demand for better medical care, quality of food, education and other quality of life products. China's leaders met at the Central Economic Work Conference in Beijing in Dec. 2015 to work out ways to make this shift so that growth rate of 6.5% and other goals can be met. Plans include reducing industrial overcapacity, dealing with overinvestment and unused inventory in housing, reducing financial risks from high corporate debt to GDP ratio approaching 160% estimated by Standard and Poors Ratings Services. By comparison the U.S. debt to GDP ratio is 70%. A steep rise resulted from the huge China stimulus program of 2008-2009, when the ratio was 98% for China. Experts such as Derek Scissors of the American Enterprise Institute are pessimistic about the prospects of successfully implementing reforms, saying reducing industrial overcapacity was a goal of the new Jinping Li-Keqiang leadership in 2013, but not much progress has been made in 2 years....

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Research from Australian National University shows steadily improving conditions for migrant workers in China. Migrant workers were able to spend more time in cities- an average of 8.9 years. The hukou sysem ensures migrants return to rural areas when they have to raise a family. About 252 million migrant workers work in factories and construction jobs in urban areas. Migrants with children leave them with grandparents back home. Improving the conditions of these workers is important to reduce the wage and income disparities in China and to reduce inequality. About a fifth of the migrant population now has pension and health benefits. Creating a balanced economy with domestic consumer spending making a larger share of GDP also requires improving wages and benefits of migrant workers. Incoming prime minister Li Keqiang says in a statement on a government website: China "must take migrant rural workers and gradually change them into urban residents. This requires that we push forward household registration reform." If done seriously this will create a new kind of China as these migrant workers are integrated into urban society after years of being shunned and ignored by China's educated middle class. Professor Meng's research at Australian National University of migrant workers shows the proportion of migrant workers with unemployment insurance increased from 11% in 2008 to 21% in 2012. The research shows similiar figures for health and pensions. Improving their living standards also make it attractive for more young people from rural areas to migrate to cities increasing urbanization....

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Russian president Medvedev offers his view of the protests in Russia, that Russia is entering a new stage in the development of its political system. Medvedev told his United Russia party: "We are entering a new stage in the development of our political system and we should not close our eyes to that. It has already begun... It began because the old model- which faithfully and truly served our state in recent years, and did'nt serve it badly, and which we all defended- it has exhausted itself." He wanted to see United Russia take a leading role in reform. He warned that "it is categorically inadmissible that the political system be delegitimized." And warned Russians that the consequences of this were disastrous after the last time this happened in 1917. He was also critical of the U.S. government for its criticism of the elections.

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A shift in priorities away from focussing on high growth to lower sustainable growth was announced by China's premier Wen Jiabao at the National People's Congress, China's parliament, in March 2012. This shift will reduce investment in infrastructure, power generation and exports, which will affect the level of imports of commodities from commodity producing nations in the Middle East, Australia, Canada and Brazil. It should increase imports of software, computers, entertainment, tourism and high tech goods from the U.S. and Europe. Chinese leaders have said they would make this kind of shift for some years now but growth has consistently increased more than the target rate, and domestic consumption as a percentage of the economy has actually decreased in the last decade. Now 9-10% growth rates may be a thing of the past and the target of 7.5% set this year may be actually closer to the real figure. The Chinese leaders have belatedly realized the need to make these changes now because slowing markets in Europe -which is seeing declining growth and high unemployment- and in the U.S., make the issue impossible to avoid. Wen told the Congress: "Accelerating the transformation of the pattern of economc development... is both a long term task and our most pressing task at present... Domestically it has become more urgent but also more difficult... to alleviate the problem of unbalanced, uncoordinated and unsustainable development." This is his way of saying that its unavoidable and better to start in earnest now, and at the same time recognizing the resistance to change from the stateowned companies and the other interests who have benefitted from surging growth, and now occupy a central role in the power structure. An opinion article in the People's Daily, China's official newspaper, said: "imperfect reforms are to be preferred to a crisis caused by no reforms." The World Bank's president Zoellick is respected by the Chinese leaders. He also urged them to make changes now. The recent report of the DRC, China's planning research arm, and the World Bank, also laid out the new direction away from a focus on infrastructure to domestic consumption. The fear is sudden deceleration in the absence of policy action. The impact of this will be negative for commodities over time, leading to slower growth in Australia, Brazil, and Canada. It should boost imports from Europe and the U.S. of high tech, consumer, pharmaceutical goods over time....

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As the Obama administration plans a large stimulus spending plan that may approach $1 trillion over several years, considering also the second phase of the $800 billion first phase stimulus, there is a concern that there may be wasteful spending and social costs of borrowing and spending by the government of such proportions. In economics jargon this hinges on whether there is amultiplier effect of spending, higher if its efficiently and well spent with less impact on private consumption and investment, and lower if the opposite were true. The assumption behind amultiplier of 1.0 for an additional bridge or road is that resources like manpower and capital that would be otherwise idle are deployed to produce something useful. An increase in one unit of government purchases increases by one unit the real gross domestic product. The government has effectively created the additional bridge or road without a cut in anybody's consumption or a businesses investment. The other contrasting approaches are to say there is a multiplier of zero, meaning there is a social cost in two ways. One the reduction of consumption and the crowding out of businesses investing in new products and technologies for example, and second in the inefficent use of resources if a government bureaucracy is put to work allocating money and the additional dangers of favoritism and corruption. To say that there is a multipier of 1.5 would mean that the government figures out a way to get private investment through conversion of plants for automotive parts say to make wind turbine blades by giving incentives, tax benefits and grants, spends on a dilapidated road and public transportation infrastructure that may provide benefits in increased growth capacity over future years. The limits of a government bureaucracy and inefficiency of government would in this case be addressed by transparency rules adopted and measures that track progress that are freely available to all citizens say on a website on the internet, and by bringing in fresh management talent from the private sector. There appears to be no generalization that can be applied for one multiplier for all projects. It may be that the multiplier will vary with the project. Some projects like the conversion of a factory making unneeded auto parts to a badly needed wind energy part, to change the dynamics of energy market pricing, to meet energy needs and cut emissions, may end up having a multiplier much above 1.0. A redundant or less needed bridge has a lower multiplier than a bridge rebuilt before it leads to breakdown. And also the complication that too large a movement in one direction say of stimulus spending, might result in a shift of the curve towards a smaller multiplier and diminishing returns, as the resources to track such a large expenditure and the talent to adminster are overextended. The social cost of private investment not making that investment in new technology, new product or improved product has to be figured into all this, both at the conceptual level as all costs and benefits may not be picked up in the analysis, and at the macro level keeping in mind that the animal spirits, as they were once described, may just not be there to absorb the huge outlays which a government can make. These do not come without an opportunity cost and borrowing costs. All this leads one to to conclude that spending has to be carefully evaluated and projects assessed on a case by case basis for costs and benefits. The spending has to be balanced to provide just as many incentives for private investment to invest in new products and technologies. One way the Obama team is attempting to address this is to include a $300 billion tax cut for businesses and individuals. The business tax cuts are aimed at helping small business with losses, and for future investments and making hires and forgoing layoffs. The other part relates to careful evaluation of spending projects and transparency so the people can see if they are effective. See the link to this....

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A Wall Street Journal/NBC poll conducted in September 2010 shows a big change in public opinion in the US towards outsourcing of production and on free trade agreements. Poll respondents were asked "Do you think free-trade agreements have helped or hurt the US?" The response in 1999 was close to 30% for those who said hurt and those saying helped. By 2005 the curves diverged seriously with more people saying that it hurt and fewer saying it helped. In 2010 this swing is sharp with about 50% saying it hurts the US and only about 10% saying it helps. When asked "Do you agree or disagree that outsourcing of production and manufacturing work to foreign countries is a reason the U.S. economy is struggling and more people are not being hired?" the response is overwhelmingly agreeing that this is bad for the U.S. job situation. The answers are the same across party affiliation, in fact higher for Republicans than Democrats 90% to 84%, higher by income level with 93% for those making over $75,000 agreeing and 86% for those making less than 75,000 agreeing, 93% of professionals and managers agree compared to 89% white collar and 83% blue collar agreeing. This shows all segments of society agree that that the manner in which free trade and outsourcing of production is taking place is not helping the U.S., and this time the highly educated segments are leading the way. Bill McInturff, the Republican pollster who helped do the survey points to the big change in the way well educated and upper income people perceive free trade agreements. In 1999 only 24% of this group making over $75,000 said free trade hurt the U.S., now 50% of this group says it hurts the US. This is sure to lead to big changes in U.S. trade and currency issues with China and other countries. ...

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

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Walt Mossberg, who writes the Wall Street Journal's consumer technology review section, watched Steve Jobs up-close over the years since 1997. They met one-on-one for product introductions, long discussions about the industry, and recently after Jobs illness, at his home in Palo Alto. Mossberg describes a long walk to a nearby park after Jobs had undergone a liver transplant. It provided an insight into the man Steve Jobs was. Persistent- he called Mossberg for 4-5 straight weekends during the dark days of 1997-1998 to convey his vision of Apple products or discuss aspects of reviews. Patience and optimism about the future- Jobs always maintained a positive tone and a vision of what could be in the digital revolution, and Apple's role in it in these discussions. There is the opening of the first retail store in the Washington D.C. area, and Jobs patiently handles Mossberg's incredulity about Apple and its inexperience with retail stores. And Jobs saying that he had taken a serious interest in the details- down to the translucency of the glass. There is the meeting with Bill Gates at the fifth All Things Digital Conference, when both made their appearance together for the first time and Jobs hands a cold bottle of water to Gates. By this time Jobs had already come to the conclusion- as he once said after accepting a $150 millon investment from Gates in 1997-1998- that it was no longer true that Microsoft had to lose for Apple to succeed....

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David Gelernter, Yale professor of computer science, says above all things Steve Job was designer-in-chief. At his Stanford commencement address in 2004, Jobs recounts his experience in a calligraphy course at Reed College as one of the singularly important experiences of his life, and something he carried over to the the revolution in portable devices- portable Macs, iPod, IPhone and iPad. The search for and building of elegant, easy to work, fun to use devices. Job was able to grasp the potential of such devices, says Gelertner, from his very first visit to the Xerox research labs in Palo Alto in 1979. In doing this he gives credit for long forgotten pioneers of the personal computer, who were just as important perhaps even more so, Douglas Engelbart and Alan Kay. At Xerox, Kay built on the earlier innovations of Engelbart. Engelbart was first to develop the mouse, onscreen window, and the concept of computers doing more than just computing, such as controlling machinery, doing everyday stuff, and doing things with pictures. Xerox's corporate executives failed to grasp the significance of the developments in their labs. Jobs grasped this rightaway and put all his efforts into developing the Apple Macintosh in 1984 incorporating these ideas. A decade later Gates copied the Mac's eay to use features and created economies of scale, creating the personal computer that we know today. The internet was a parallel development during that decade after the pioneering work of Tim Berners-Lee on the worldwide web. Jobs took the experience one step further and created new devices like the iPhone and the iPad that brought mobility, ease, and refinement to the internet experience....

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A study by Sentier Research from Census data shows people in the U.S. age 55-64 years make 10% less in June 2012 compared to June 2009. Every demographic has suffered income losses in this period. Median household income declined by 4.8% in these three years. Using December 2007 as astarting point shows a decline of 7.2%- $50,964 vs. $54,916. Blacks, those with some education like a high school diploma but no degree, the older Americans, and younger Americans were hit hard. Long term unemployment was the cause of the decline among older Americans. Even college graduates suffered a decline of 5.9% from $88,570 to $83,378.

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Mills and Ottino point out that as in 1912 the U.S. is on the cusp of a revolution induced by new technologies on the horizon. Then it was electrification, automobiles, the telephone and radio. Now it is cloud computing (big data), smart manufacturing and wireless. Ottino is Dean of the McCormick School of Engineering and Applied Sciences at Northwestern University, Illinois. He describes the changes that smart manufacturing and new metal alloys can bring in manufacturing. America's unique advantages- its educational system, its open and youthful culture and better demographics, that position it to realize serious gains through technological change. Similiar advantages exist with educational systems and the spirit of innovation in Europe. On another dimension the huge increases in connectivity, cloud computing, and precise instantaneous language translation have the potential to bring closer the peoples of Asia, Africa, Europe, Latin America and North America, creating a sociological revolution on how people think and act across regional boundaries....

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Automobile parts imports into the U.S. have increased from $89 billion in 2008 to $138 billion in 2014, up from only $31.7 billion in 1990. In a huge shift in wages with increasing global competition wages at an American Axle plant in Michigan at $10 an hour are about what Target stores and Wal-mart pay for retail workers. An new generation of workers in manufacturing are seeing a shift from being in the middle class during their parents generation to lower class, with this downward pressure on wages as parts are manufactured in places such as Mexico and China.

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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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Spain's central bank was lauded for macroprudential supervision before the housing bubble burst. Will China's central bank and financial authorites which have managed the housing bubble upto this point face similiar problems? Can China be the sole exception even as housing bubbles burst with wide repercussions in the U.S., UK and Spain? Nicholas Lardy, of the Peterson Institute of international Economics, says urban housing stock makes up 41% of Chinese household wealth in 2011. The same figure for the U.S. is 26%. Chinese buyers invest in homes because low interest rates on savings accounts cannot keep up with inflation. Real estate investment was 13% of GDP in 2011. Home ownership is a recent development in China, only since 1990, Chinese have never experienced large price declines. Household debt as a percentage of disposable income has increased significantly in recent years, up to 53.6% in 2011 from 31.3% in 2008, according to Lardy.

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Mr. Eike Batista's EBX Group companies were one of the prime beneficiaries of huge government investments in mining, oil and other commodities. The fading of the commodities boom is resulting in large losses for these companies. Street protests in Brazilian cities shows the weakness of the Brazilian economic model that neglected public services in transportation, health care and education and concentrated on infrastructure and mining projects.

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Florida's House of Representatives passed a bill in March that reduces the number of weeks of unemployment benefits from the standard 26 weeks to 20 weeks. A similar law was passed in Michigan recently. Both states have unemployment rates exceeding 10%.

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This Times editorial questions whether Mayor Bloomberg did the right thing in the manner in which he ousted protestors from Zucotti park in the financial district of New York city. Now that the protestors have been forcibly removed from the park, it is the responsibility of the Mayor to keep his promise to let the demonstrators continue their protest against income inequality, says the editorial. The concern is that the end of the protests at Zucotti park could end up quashing the entire protest movement, which serves to draw attention to serious issues in a democracy.