Justin YiFu Linjus writes:  China’s recently finalized 13th five-year plan maps out its economic strategy and ambition for the 2016-2020 period. Among its objectives are a doubling of GDP and average rural and urban household incomes relative to their 2010 levels. These targets would require China’s economy to grow at an average annual rate of at least 6.5% during the next five years. While this pace would be significantly slower than the 9.7% growth the country has averaged since 1979, it is undeniably fast by international standards. And, given that China’s growth has decelerated every quarter since the beginning of 2010, some have questioned whether it is achievable. I believe that it is.

Economic growth results from increases in labor productivity caused by technological advance and industrial upgrading. High-income countries, already on the cutting edge of productivity, must earn their increases through technological and organizational breakthroughs; as a result, their typical growth rate is about 3%. Developing countries, however, could potentially accelerate productivity growth, and thus GDP growth, by borrowing technology from advanced countries.

The question for China, after 36 years of catching up, is how much longer it can continue to benefit from this process. Some scholars believe it has reached its limits.

In the five years after Japan reached that level, its economy grew at an average annual rate of 3.6%. In South Korea, growth fell to 4.8%. In Hong Kong, it slowed to 5.8%. Given that China is projected to cross the same threshold sometime this year, many believe its average annual growth over the next five years will fall well below 7%.

What this analysis fails to take into account is the fact that advanced countries are not sitting by idly; they are growing and making technological breakthroughs. And that creates opportunities for developing countries to continue to learn.

Those who predict a slowdown in China are correct to look at its per capita GDP, which is a reflection of a country’s average labor productivity and thus the level of its technical and industrial advancement. But the best indicator of China’s growth potential is not its per capita GDP relative to some arbitrary threshold; it is the difference in per capita GDP between China and the United States, the world’s most advanced economy. And on this measure, China has plenty of room for expansion.

When Japan crossed the $11,000 threshold in 1972, its per capita GDP was 72% of the US level. When Taiwan crossed it in 1992, its per capita GDP was 48% of America’s. The comparable figure for China today is only about 30%.

In 2008 China’s per capita GDP was 21% of the US level. By examining how other East Asian economies performed when they were at a similar point compared to the US, we can estimate China’s potential for growth.

Japan’s per capita GDP was 21% of America’s in 1951, and in the following 20 years it grew at an average rate of 9.2%. In the two decades after Singapore hit that level in 1967, it grew at an average of 8.6%.

The Chinese economy’s current slowdown is the result of external and cyclical factors, not some natural limit. China has been suffering from the aftereffects of the 2008 financial crisis and plummeting export demand. From 1979 to 2013, annual export growth averaged 16.8%. In 2014, it dropped to 6.1%; in 2015, it dropped further, to -1.8 %.

This external drag is likely to continue, as politics in developed countries impedes efforts to implement the structural reforms – such as reducing wages, lowering social benefits, financial deleveraging, and consolidating budget deficits – needed to revive economic growth. Indeed, like Japan beginning in 1991, much of the developed world risks lost decades.

To achieve its growth targets, China will have to rely on domestic demand, including investment and consumption. Thankfully, it has strong prospects in both areas. Unlike developed countries, which often struggle to find productive investment opportunities, China can pursue improvements in infrastructure, urbanization efforts, environmental management, and high-tech industries. And, unlike many of its developing-country rivals, China has ample fiscal space, household savings, and foreign-exchange reserves for such investments. The investments will generate jobs, household income, and consumption.

Even if external conditions do not improve, achieving 6.5% and above annual growth is well within China’s reach. In that case, the country will continue to be the world’s primary economic engine, contributing about 30% of global growth until at least 2020.

Michael Spence and David Brady write:  How to improve economic performance at a time when political instability is impeding effective policymaking.

Brady shows the correlation between rising political instability and declining economic performance, pointing out that countries with below-average economic performance have experienced the most electoral volatility.

Over the last 15 years increasingly powerful digital technologies enabled the automation and disintermediation of “routine” white- and blue-collar jobs. With advances in robotics, materials, 3D printing, and artificial intelligence, one can reasonably expect the scope of “routine” jobs that can be automated to continue expanding.

The rise of digital technologies also boosted companies’ ability to manage complex multi-source global supply chains efficiently.  The tradable sector as not generated much employment, at least not enough to offset declines in manufacturing. In the United States, for example, net employment generation in the third of the economy that produces tradable goods and services was essentially zero over the last two decades.

The share of national income going to labor, which rose in the early post-war period, began falling in the 1970s. While globalization and digital technologies have produced broad-based benefits, in the form of lower costs for goods and an expanded array of services, they have also fueled job and income polarization, with a declining share of middle-income jobs and a rising share of lower- and higher-income jobs splitting the income distribution. The magnitude of this polarization varies by country, owing to disparate social-security systems and policy responses.

Until 2008, when economic crisis roiled much of the world, the concerns associated with rising inequality were at least partly masked by higher leverage, with government expenditures and wealth effects from rising asset prices supporting household consumption and propping up growth and employment.

In the post-war industrial era, one could reasonably expect to earn a decent living, support a family, and contribute in a visible way to the country’s overall prosperity. Being shunted into the non-tradable service sector, with lower income and less job security, caused many to lose self-esteem, as well as fostering resentment toward the system that brought about the shift.

While technology-driven economic transformation is not new, it has never occurred as rapidly or on as large a scale as it has over the last 35 years, when it has been turbocharged by globalization. With their experiences and fortunes changing fast, many citizens now believe that powerful forces are operating outside the control of existing governance structures, insulated from policy intervention. And, to some extent, they are right.

The result is a widespread loss of confidence in government’s motivations, capabilities, and competence.

As Brady points out, during the more stable period immediately following World War II, growth patterns were largely benign from a distributional perspective, and political parties were largely organized around the interests of labor and capital, with an overlay of common interests created by the Cold War.

This has several economic consequences. One is policy-induced uncertainty, which, by most accounts, amounts to a major impediment to investment. Another is the distinct lack of consensus on an agenda to restore growth, reduce unemployment, reestablish a pattern of inclusiveness, and retain the benefits of global interconnectedness.

These trends may actually be healthy, as they bring concerns about globalization, structural transformation, and governance – which have so far been expressed mainly in the streets – into the political process.

When a developing country gets stuck in a no-growth equilibrium, building a consensus on a forward-looking vision for inclusive growth is always the critical first step toward achieving better economic performance and the policies that support it. .

The man proposed as Myanmar’s new finance and planning minister has a fake degree in finance, it has emerged.

Kyaw Win admitted buying the bogus PhD from a fictitious online university – Brooklyn Park in the US – which sold fake qualifications from Pakistan.

He was caught when the National League for Democracy party, which is forming the new government, made his CV public.

It remains to be seen if Kyaw Win remains on the list of cabinet ministers to take office next week.

A party spokesman said the fake degree did not matter..

A check found the title still on his LinkedIn page, reports the BBC’s Jonah Fisher.

Kyaw Win wrote a number of articles on economics and finance using his fake title.

If the former civil servant is confirmed as minister, he will be responsible for a huge budget and his honesty and accuracy will be vital to the smooth running of Aung San Suu Kyi’s new government in Myanmar, also called Burma.

Brooklyn Park University was among the websites exposed as making tens of millions of dollars in estimated revenue from fake degrees back to Pakistan.

After the terrorist attacks in Paris, citizens returned to work displaying an remarkable degree of fortitude. Investors were equally stoic. France’s CAC-40 index was never down much more than 2%, ending just 0.1% lower for the day. London’s FTSE-100 index slipped by a larger, but still-measured, 1%, while Germany’s DAX index actually inched 0.1% higher.

A sad sign of the times, perhaps. Experienced investors have learned that, unlike the human toll, the financial ramifications of a terrorist attack can be short lived. While travel and tourism related stocks like airlines, booking sites and cruise line operators were effected across global markets.

While a downturn in travel stocks is a common, and typically transitory, reaction to threats and acts of terrorism, a more lasting effect could come from the economic impact of fearful consumers and tighter borders.

European economies and the institutions underpinning the European Union are in fragile condition anyway.  Refugees have put pressure on many countries.

It’s not just France that will suffer. The ability of the Islamic State to strike indiscriminately, and at will, means that consumers across Europe could pull in their horns. Anecdotal evidence suggests that British shoppers remained home over the weekend, unnerved by reports that additional security personnel had been assigned to patrol shopping areas in London’s busy West End and in popular shopping malls.

The damage to Europe’s Schengen zone, which allows freedom of movement amongst 26 European countries, may be longer lasting. A number of nations had already erected temporary border controls in the face of the unprecedented wave of migrants fleeing the Middle East and Africa.

Yet the efficient transfer of goods across national boundaries has been crucial in creating pan-European supply lines. Witness Airbus, which sources components from Spain, Germany and the UK (admittedly, not party to the Schengen agreement) for assembly at hangars in southern France. Gone are the days when manufacturers consistently shipped completed units for sale abroad. Border bottle necks could profoundly affect manufacturing industries across Europe, at a time when industrial production is barely expanding.

But it may be political risk that poses the greatest threat to European economic prosperity. Nationalist parties have been gaining ground across Europe, not least France’s own National Front. Anti-austerity messages resonate with voters keen to register discontent with all policies emanating from EU headquarters in Brussels, economic or otherwise.

These novice political parties have no experience in steering already-traumatised economies to safety. Look no further than Greece for an example of a new political grouping grappling with the implementation of financial reform, to the detriment of its people. The human cost of these terrorist tragedies is incalculable; a measurable economic toll is bound to follow.

Raghuram Rajan. Governor of the Reserve Bank of India, writes: Our world is facing an increasingly dangerous situation. Both advanced and emerging economies need to grow in order to ease domestic political tensions. And yet few are. If governments respond by enacting policies that divert growth from other countries, this “beggar my neighbor” tactic will simply foster instability elsewhere. What we need, therefore, are new rules of the game.

Why is it proving to be so hard to restore pre-Great Recession growth rates? The boom preceding the global financial crisis of 2008 left advanced economies with an overhang of growth-inhibiting debt.  Structural factors like population aging and low productivity growth – which were previously masked by debt-fueled demand – may be hampering the recovery.

Politicians know that structural reforms – to increase competition, foster innovation, and drive institutional change – are the way to tackle structural impediments to growth. But they know that, while the pain from reform is immediate, gains are typically delayed and their beneficiaries uncertain.

Central bankers face a different problem: inflation that is flirting with the lower bound of their mandate. With interest rates already very low, advanced economies’ central bankers know that they must go beyond ordinary monetary policy – or lose credibility on inflation. They feel that they cannot claim to be out of tools. If all else fails, a ‘helicopter drop, where  the central bank prints money and sprays it on the streets to create inflation.

Monetary policy works by influencing public expectations. If an ever more aggressive policy convinces the public that calamity is around the corner, households may save rather than spend. Conversely, if people were convinced that policies would never change, they might splurge again on assets and take on excessive debt, helping the central bank achieve its objectives in the short run. But policy inevitably changes, and the shifts in asset prices would create enormous dislocation.

Beyond the domestic impacts, all monetary policies have external “spillover” effects. If a country reduces domestic interest rates to boost domestic consumption and investment, its exchange rate depreciates, too, helping exports.

Central banks in developed countries find all sorts of ways to justify their policies, without acknowledging the unmentionable – that the exchange rate may be the primary channel of transmission.

If a policy has positive effects on both home and foreign countries, it would definitely be green. A policy could also be green if it jump-starts the home economy with only temporary negative spillovers for the foreign economy (the policy will still be good for the foreign economy by eventually boosting the home economy’s demand for imports).

An example of a red policy would be when unconventional monetary policies do little to boost a country’s domestic demand – but lead to large capital outflows that provoke asset-price bubbles in emerging markets.

There will be plenty of gray areas (or orange, to stick to the analogy). A policy that has large positive effects for a big economy might have small negative effects for the rest of the world and yet still be positive overall for global welfare. Such a policy would be permissible for some time, but not on a sustained basis.

Can we reach a new international agreement along the lines of Bretton Woods, and some reinterpretation of the mandates of internationally influential central banks.

The international community has a choice. We can pretend all is well with the global monetary non-system and hope that nothing goes spectacularly wrong. Or we can start building a system fit for the integrated world of the twenty-first century.

Costs of health care in the US  are higher than they are in most countries of the world.  And the US does not deliver better care.

In the current election cycle, Mrs. Hillary Clinton has received more money from Big Pharma than any other candidate.  This does not bode well for health care costs if she achieves the Presidency.  People don’t contribute to campaign coffers with no expectations. While the US Supreme Court is trying to limit corruption’s definition to quid pro quo, Zephyr Teachout, a law professor, has shown in her profound book published by the Harvard University Press, that corruption should be conceived more broadly as the breach of the trust between citizen and elected official.

Writing in the Wall Street Journal, jeanne Whalen says that the drug industry has unusual clout in the US.  She reports: The state-run health systems in Norway and many other developed countries drive hard bargains with drug companies: setting price caps, demanding proof of new drugs’ value in comparison to existing ones and sometimes refusing to cover medicines they doubt are worth the cost.

The government systems also are the only large drug buyers in most Scandanavian countries, giving them substantial negotiating power. The U.S. market, by contrast, is highly fragmented, with bill payers ranging from employers to insurance companies to federal and state governments.

Medicare, the largest single U.S. payer for prescription drugs, is by law unable to negotiate pricing. For Medicare Part B, companies report the average price at which they sell medicines to doctors’ offices or to distributors that sell to doctors. By law, Medicare adds 6% to these prices before reimbursing the doctors. Beneficiaries are responsible for 20% of the cost.

The arrangement means Medicare is essentially forfeiting its buying power, leaving bargaining to doctors’ offices that have little negotiating heft, said Sean Sullivan, dean of the School of Pharmacy at the University of Washington.

Asked to comment on the higher prices Medicare pays compared with foreign countries, the Centers for Medicare & Medicaid Services said: “The payment rate for Medicare Part B drugs is specified in statute.”  Medicare Part B, for example, typically covers drugs and services deemed “reasonable and necessary.”

Big Pharma argues that higher U.S. prices also help drug makers afford hefty marketing budgets that in the U.S. include consumer advertising—something Europe doesn’t allow. Pharmaceutical and biotechnology companies in the S&P 1500 earn an average net profit margin of 16%, compared with an average of about 7% for all companies in the index, according to S&P Capital IQ.

No question that the US is currently a captive of Big Pharma.

Stephen Ganden writes: The Federal Reserve decided to keep rates where they were for another month, and indicated that it was only likely to raise rates twice in the next year and four times in 2017.

The Fed has a history of tricking it self into believing the economy is stronger than it really is.

The problem is it’s hard to see why the Fed is so confident, not only that the economy will continue to improve, and to do so enough to whether more rate increases, especially when the first rate increase went pretty terribly.

Despite the falling unemployment rate, there has been little sign of wage increases. Although she said anecdotally there seems to be signs of a pick up in wages. Yellen also sidestepped a question about why consumers haven’t increased spending more given the steep drop in gas prices.

Does this signal that consumers are still worried about the economy? Yellen said it was really hard to say why consumers were doing what they were doing.

Also, it’s been 81 months since the end of the last recession, meaning the current economic expansion is due for a downturn. Perhaps, that’s why default rates on a wide rate of debt from auto loans to high-yield corporate debt is rising faster than it has in years.

Add the risks ahead, which are sure to raise volatility in the market and the economy, including the possibility of England’s “Brexit” from the euro, as well as a contentious election here and it’s hard to see how the Fed will be able to meet its interest rate goals.

The biggest problem though is overseas.  Sales of big international companies. will decease because the dollar is likely to strengthen, causing sales of U.S. multinationals to fall further.

Fed and interest rate hawks will counter that exports only make up a small portion of the overall economy, which is generally still driven by U.S. consumers — and that the Fed would be better off raising rates now so it has room to lower rates later.

The international economy means a lot to the largest stocks in the country, and the stocks that make up the S&P 500; more than it used to.

That’s key because even more than jobs or wages or inflation, perception has the power to drive the economy. As the economy continues to improve, exit polls from the primaries say that the economy remains most voters’ top concern. As long as that remains the case, the Fed’s determination to raise rates is going to remain out of whack with reality.

After all the shouting, are we any closer to knowing whether free trade agreements are good or bad for the country – and for your wallet?

The attempts to provide answers to those questions have been thrust into the spotlight by President Barack Obama’s futile last-minute efforts to salvage his power to freely negotiate what would be the world’s largest free trade pact, the Trans-Pacific Partnership.

In the eyes of those within his own party, including the House minority leader, Nancy Pelosi, free trade agreements have been disastrous for ordinary Americans, hurting their wages, eroding the health of entire manufacturing sectors and putting the United States at a disadvantage against countries that engage in underhand trade practices. Their success last week managed to strip Obama of fast-track negotiating authority, pushing him into an unusual partnership with congressional Republicans in an effort to find a way to rescue the package of legislation by restructuring it. If you thought the political battle over Obamacare was high drama, just wait until Obamatrade really gets going.

Negotiating a free trade agreement is always going to involve a leap of faith – a leap of faith in the future. There are simply far too many variables involved, and too many “unknown unknowns”.

Consider the US-South Korea free trade agreement, completed in 2010 and in effect from 2012. Far from helping US exports to South Korea to climb, they have fallen as imports from South Korea have risen, causing the trade deficit to widen.

The problem with those who try to draw conclusions about free trade agreements in general from this example, however, is twofold. Firstly, it covers the experience of only about two years: an absurdly short time frame. Secondly, economic growth rates in South Korea peaked in 2010, the year the free trade pact was negotiated and all those rosy forecasts about US exports were drawn up. Right now, however, the economic picture looks bleak, and it’s probably fair to say that few expected that would happen.

The picture gets even more muddled if you try to look at the grandaddy of all free trade agreements, the North American Free Trade Agreement, or Nafta. Signed by Canada, the US and Mexico in 1992, Nafta was a model for many of the large trade agreements that followed, including TPP; it also was one of the first free trade pacts between economies with varying standards of living, labor standards and other business and environmental rules.

Critics argue that by 2010, a total of 682,900 jobs had been lost to Mexico, on a net basis. Of these, 415,000 were manufacturing jobs, many of which paid healthy living wages. Meanwhile, a small trade surplus with Mexico had become a deficit by 2000.

Had those jobs not gone to Mexico, would they have stayed in the United States? Not necessarily, suggested Mauro Guillén, a management professor at the Wharton School of Business; they might well have ended up in China. Meanwhile, some of the products made in Mexico are still being designed in the United States, he has noted.

In 1995, the year after Nafta took effect, Mexico had its own financial crisis, causing the value of the peso to nosedive and triggering a recession. As is the case with South Korea today, events that had nothing to do with the free trade agreement itself ended up causing a big drop in Mexican imports from the United States. The timing, however, made it appear as if the trade deficit was tied to free trade – but correlation isn’t causation. More recently, US demand for crude oil produced by Mexico, and the high prices for crude, sent that trade deficit higher again. Once again, that imbalance had nothing to do with free trade and everything to do with a supply/demand imbalance for crude oil within the United States.

American incomes have continued to stagnate in the period since Nafta kicked off the negotiation of free trade agreements. Again, however, correlation isn’t causation. The biggest culprits may include technology that has made it easier for workers in low-wage countries like China to do jobs that were once done here in the United States – or the policies of companies with respect to how they treat their work force. Apple already can choose to make its products in China, Vietnam or the United States. Their choice is clear. David Autor, an economist at MIT, argues that it is the spike in global trade, not free trade agreements, that has led to this result; he calculates that imports from China (not party to any free trade agreement with the United States) are responsible for 21% of the plunge in American manufacturing.

None of this means that the TPP is certain to be a great idea – or a bad one. Folks like the president and David Autor may argue all they like in favor of the pact, suggesting that it will give us an edge against China and, by protecting our intellectual property, help us expand our exports of computer services. Critics can charge that it will be a disaster, costing millions of jobs, accelerating climate change and doing untold damage to everything from our access to healthcare to worker’s rights.

It’s a roll of the dice.