 Welcome to the special Bloomberg television debate. I'm Susan Lee today. We're gonna try to tackle the question Ready for crisis is Asia ready? We had the German and constitutional court ruling on the ESM But as we know and the consensus is the European sovereign debt crisis has a long way to go Also Chinese growth might be coming in at his lowest in 22 years What does that mean for the world economy when you have the growth the engine of the last decade declining? And of course over in the u.s. We have the looming fiscal cliff at the end of this year And we have a special panel of guests today from different backgrounds and industries to answer this question So let's get ready First off to my left a man that really needs no introduction The man who led one of the largest economies around the world's the longest-serving chancellor of the ex-checker in UK modern history The honorable mr. Brown. Thank you so much Pleasure to be here now to his left for a view of one of the largest emerging economies across the Asia Pacific of course from India We have a SP Shukla who is the president of global strategy Mahindra Mahindra Which is one of the largest it is the largest tractor maker in the world I want the largest non-banking financial institutions in India good to have you with us They like it to be and of course we need the Chinese view as well and An academic that is well known for one of the best universities across the country And for the former dean of the prestigious Guanghua school of management. We have professor Zhang Wei Ying joining us today Now we need a banking financial view. Don't we Certainly do and the man that represents the industry today for us is mr. Rodney Ward Who is the chairman of investment banking and corporate lending at the Bank of America Merrill Lynch, and at the End of our panel finally a man that also needs no introduction mr. Fred Hochberg Of course who is the head of the US agency the export and import bank of the US which helps These industries that need financing that can't usually get it Get some money some access to money good to have you with us So we're gonna start off this debate talking about the question at hand ready for crisis Is Asia Pacific ready for yet another global economic shock? Let's put that question to our panel now and mr. Brown. What do you start us off? I hope no I hope we're not gonna have another shock I think that Asia has done remarkably well coming out of the global financial crisis And I think that we're going to see a slowdown in global growth I think it is partly because we're in this transition From an economy that was previously dominated by the West to an economy where the center of gravity is moving to Asia And if you like the producers are in the majority in the emerging markets The consumers are still in the majority in America and Europe And we are having to deal with an unbalanced world economy as a result. My worry would be Financial, I don't think we've learned the lessons from the global financial crisis I don't think we've got sufficient transparency in our financial system I don't think we're able to track what is actually happening Whether in a shadow banking system or in the formal banking system I don't think that we've got standardized rules that should apply in my view to the whole of the Global financial system and that means that the next time there is a crisis people will look back and say Why didn't we learn enough from what happened in America and Europe? During the global financial crisis and apply global financial rules That gave us some standards by which all financial institutions should be working So my fear is still that another financial crisis will arise Because we have failed to deal with the problems that we knew Existed as a result of the last financial crisis Mr. Shookley said five years on we're still talking about crisis. Yes Let me first begin by saying that I'm an eternal optimist and Anyone who has studied economics Optimism itself decides and influences economics. I do believe and I do get views from 150,000 employees in our group who come from 104 countries All Levels of preparedness are relative So I speak right now for India only not for Asia in general and not for emerging economies at all. I Think India is better prepared than many nations today To handle a financial crisis if it comes though I hope as mr. Brown said it doesn't come we are better prepared why I would say There are three factors we can take on that one It sounds very simple But we are still growing at five to six percent It may not sound much in the context of India where we are talking about nine and ten percent But it is still better than most of the world second Financial flows have slowed down. They have now to a small trickle Nothing can go worse than that Whether it is investment flows portfolio flows. They are at such a low level now today in India Coming money coming in from outside that it cannot possibly get worse than that and Third if you talk about social tension, I'm covering the brief which you have given in India we do not have a social security It is a handicap for the society but when seen in pure economic terms in India Governments do not borrow To pay people who are not working I'm putting it in economic terms in social terms. It has many other implications. I'm not getting into that So when that situation does not happen, there is no direct financial impact on government finances of any such Upheaval happening in financial markets when you see these three factors together We believe that our institutional systems are quite well prepared to withstand any shock if it happens at all professor John I think China is not yet ready Lot of decades in terms of economic growth China Is a best decade when it is of social problem? It is worth decades in terms of Reform it is a lot of the decades Or so it's a whole to understand this is why China has had these high growth without Some fundamental reform in past decades Many people miss and stand it. They saw this we have already had good models so called the China model What is China model government? You'd fear he called me state secretary is a very powerful that's quite good but I do why my understanding is why China had a growth high growth because China had Reform before you know first two decades. That is a very important because reform dividend China had you joined this reform dividend What is the Trouble is that not because last decade is a no fundamental reform. So China has already exhausted this reform dividend so it's next the decade will be very difficult I think very difficult for China and Like banks they join the big profit. They saw that they are already efficient They saw they already have good governors, but that's a total wrong They are profitable because they join monopoly Because financial markets know that it open some other state sector like China Telecommunication like oil they all you join monopoly, but they saw they are already efficient So that is trouble and also private sector. I think it's Many people many Privacy people are not very confident about the future because today they still face some Government policy which is quite discredited against the private sector So I think you saw China not just the economic growth will go down and also there will be some I think Other troubles particularly the whole to change this you stay to it There is much depends on what the next generation or on our next government will do Yeah, that's a bearish view on China that you have professor John Ronnie, what's your view? Thank you very much Susan. I think first of all I start off with the view that unfortunately I do think we're going to be in for another financial shock and I can't see Frankly any easy way of avoiding that Secondly, I would say that the financial shock that we've been talking about historically started in 2007 when the two best money markets effectively imploded and So you've had five years already of quotes shock To deal with and if you look at Asia and how Asia has survived those five years It is actually survived those five years Pretty strong and robust When I look ahead and say to myself What will happen in the future? I am very much persuaded by three or four basic factors one Asia has the ability and flexibility on the monetary side If you look at the EU if you look at If you look at the US they have zero interest rates, so they have no capacity Effectively to have any easing They're also in the EU locked into one currency So they can't even allow their currency to take the heat the great thing about Asia is they have the capacity 3% plus Interest rates to reduce interest rates and they have floating currencies which they can accommodate They have enormous fiscal capacity if you look at the US I think the US debt to GDP ratio is around 90% in Europe around 95% if you look at the PRC It's something like 17% if you add on the provincial debt It might take you up to 40% but it's still a huge difference So and I take China as the biggest economy the others are even in more robust situation So they have huge ability to inflate to ease to stimulate their economies and And that's a source of great Comfort to me and also the fact that they have major reserves reserves that they've never had Historically before record reserves throughout the region thirdly demographics Asia has got a young population The one country that might have to worry about that apart from almost a Japan is China China is coming up to its peak labor population in the next five to ten years Apart from China all the other countries who've got huge young mobile people. What does that mean one? Not many old people, but those old people are not expecting entitlement programs the young people much more mobile Look at the EU you would hope that with a common market that there would be mobility But there isn't because there's no language Communality and labor laws are different. So when you look at that Asia has a huge advantage on the demographic front If you look at the banking side I heard what my friend here said ten years ago the banks were effectively organs of the state They have loan loss ratios of something like 20% or thereabouts today If you look at the banks, they're not non-performing loans are less than 1% and I'm talking about the big five banks obviously Less than one fight a lesson 1% They have the capacity to lend if you look at their loan to deposit ratio Huge capacity to lend something like 58% Loan to deposit ratio where you would take 1% as well 100% as being Relatively lend so huge capacity there and then finally I think what we're missing here is huge growth of Inter-regional trade which means much less vulnerability to what's happening Externally and great growth in consumption. So those would be my comments. Okay, Fred from the American perspective I'm a little more optimistic You know for decades the global economy and the US economy relied on the US consumer and a lot of debt That's changed. We're looking much more at an infrastructure play globally Well, it's going to be invest north of two trillion dollars a year China's obviously led the way in infrastructure, but India Vietnam Indonesia are all putting in large infrastructure projects building power plants satellite systems rail networks airports So I think we'll be looking for more balance President Obama in his national export initiative said we need greater balance America needs to consume less produce more and I think that infrastructure is going to pick up some of that slack and China is making an effort as is much of Asia on developing more of a consumer market So I think longer term medium term three to five years. I think things are good You know, I'm not so good at predicting six months at a time But I think that I think it's rejected a lot of the marks are going in the right direction So I'm a little more optimistic than some might go panelist You're sounding very optimistic But when we talk about crisis and financial shock what type of shock could it be? We're talking about something political say from Iran Israel are talking about the euro blowing up What in particular what what crisis might be looming? See? I think we've learned over the last few years that you can have a Macro-economic position that is relatively good. You can have low inflation in American Europe You can have relatively stable growth But if underlying it there is a financial weakness then things can go very very wrong So if you'd looked at the inflation figures if you looked at the growth figures You might have thought they were growing too fast But you would have you would have thought that the kind of crisis we had in 2008 would not have happened And so we've got to be very careful in to look at the volatility within the financial system And I I think I agree with that the rest of the panel that if you look at the macroeconomic position We're going to have lower growth that globally it is going to affect China and the rest of Asia The reason is primarily that Europe in America is not They're not recovering as quickly as they they should have and they're not consuming as much And have got themselves to export as was just being said if they're going to be a balanced and strong growth economy in the future So on the macroeconomic picture you can see problems, but you don't see crises at the moment But on the financial side, I think we've got to be very wary after the experience of 2007 a things look good on the surface And you've got to dig down all the time and look at what is really happening What are the underlying trends that are happening now? I accept everything that's been said that China has got very big reserves that the the defaults and the and the bad debt Ratios look as if the the underperforming assets look as if they're not a problem at the moment But I do sense that we haven't Applied the lessons that we learned in 2008. You see when we set up the G20 In 2008 to manage the crisis We had three aims the first was to get to prevent a depression and we managed to do that The second was to repair the financial system and the third was to get back to stable global growth and the second and the third have not been fully achieved And it's the second that worries me most because in the last two years While we committed ourselves to global standards and global rules What we've actually had in practice is each national regime Deciding to go its own way and so instead of having a common pattern and a common playing field around the world In the management of our financial systems America is doing one thing Part of Europe is doing another thing the rest of Europe is doing another thing Asia is doing another thing and I think in that lies huge risk for the future And that's what I would be most worried about that you can look on the surface and see that things are going very well but in practice you've got to dig down and look at how Resources are being allocated what risks people are actually taking and even if you have very substantial reserves You've got to still worry Because as we knew the debt ratios and the government debt in Europe was not that high at the beginning of the crisis Is exploded at because of the crisis and it's mainly because of a financial crisis that is fed through to the real economy Can I just say that on the financial crisis? I mean it's very interesting if you look at the assets to GDP ratios in say Switzerland They are 470 percent if you look at the UK even the UK is something like 400 plus percent If you look at the US, it's just 70 percent if you look at China. I think it's about 150 percent So there's something wrong when so much of the assets Actually being deployed in non-productive means and I would be interested in you your views on that as chancellor as Whether or not you don't feel that means Inevitably for the foreseeable future That certainly Switzerland and maybe the UK will have to shrink and continue to shrink Their banking systems because they're unsustainable as they are at the moment some some countries as you know have International finance at the heart of their economy and therefore it's bound to be the case I know bound to be the case that Their banks have major major liabilities But of course you've got to look at the regulatory system in each country and the lesson of course we've we've learned In the United Kingdom is that we should have been tougher in our regulatory system But the lesson I learned more generally is that unless you have a level playing field around the world Then there is always a danger that the problem will move from one place to another And I don't think we've thought at that through we've got a global financial stability board We've got a G20 set of recommendations But let's be honest they're not being followed at the moment and we don't have global financial standards that we can be proud of and I keep saying people will say the next crisis Why didn't you deal with it in the last crisis and let's be honest we have not yet dealt with these problems If I can come in there you made a very interesting point about the regulation of the financial markets I think again, I bring the perspective from India a large emerging market When it comes to housing finance which caused many of the problems in the world None of the banks in India will loan you unless you put 30% upfront for your house Only after that the lending begins Bank has absolutely no risk They cannot lose money on lending money for any house now it may keep the growth little lower But risk to the banking system does not exist Similar things prevail our central bank has been so conservative that in its effort to balance growth and Controlling inflation it has been raising interest rates for almost two years today in India Companies pay anywhere from 9% to 12% rate of interest Depending upon the rating of the company That gives a that's the point Rodney made That gives so much leverage to the country that tomorrow if government were to take a view to stimulate the economy a Country where people are used to paying 9% and 12% interest rate even if you are to shave off 2% That is a whole good kicker for the economy But of course RBI is reserve bank is balancing the inflation expectations and therefore keeping the rates high There are so many reserves in place Which can be released if the need be But the bigger problem I see for the emerging economies is that they do not have enough capital Formation and they still depend a lot on external flows and that is where risk lies to Countries which have to import foreign capital to develop their own infrastructure So while pent up demand both for consumer goods as well as capital goods and infrastructure is very high in India if Financing of those needs does not happen that may become a constraint in growth, but by no means it will lead to any crisis Professor John. I think Why China had a no financial crisis when global had financial crisis because Prime Minister To India solved that problem before global financial crisis he used the state budget and he used for reserve Eject big money into all these big four Banks commercial banks that was very important, but now I think it's Next few years will be I think something change Particularly, I think you know more and more companies face a problem because of the pay That's as a non-performance low your increase. I think the Chinese bank. We all also face new problem of Non-performance that is not Not so good as today The only thing I would say about that and I understand the point is that the Capital adequacy ratios of the banks in China have been substantially enhanced pre-buzzle 3 They're still up to 12 to 13 percent That's huge change from where we were 10 years ago so Capital adequacy the strength of their balance sheet the strength of their Non-performing loans there is a shadow banking system. You're absolutely right that probably accounts for 30 odd percent of the lending in China, but that is really targeted at SME smaller Organizations, which frankly the bigger banks are just not equipped to deal with it doesn't mean that those shadow banking loans are bad loans Many of them are very good loans. It's just that unfortunately for the very big banks They don't move the needle in financial terms. I Was just gonna add I think that you know Europe and Asia have the financial wherewithal as well as the United States to Solve its problems. It's a question of political will in different parts of the world So I mean it's not a lack of capital. It's not a lack of resources It's a question of how voters perceive it how leadership Shapes that so that people can have a common purpose and move forward on that. That's true in Europe That's true in the United States. You know, we have it We have some budget and deficit and fiscal issues. It's a question of President Obama has a view Republicans have a view how we find common ground and move forward So it's more about finding common ground whether that's in Europe or whether that's the United States and whether that's as China evolves into More of a consumer economy. It's a question of moving in that direction. So I think that the resources are there It's a question of whether people gonna move there Now mr. Brown you said that we could be on the precipice of another Crisis and we haven't learned the lessons from the past. Can you share with us back in? 2008 when the financial crisis hit as a prime minister of the UK What lessons did you learn and what would you tell Asian leaders right now to do to prepare for another shock? Are they doing the right things in your view? Maybe I give an example. I was at a meeting of the Euro group That's the all the leaders of the countries in the Euro in October 2008 Just after laymen brothers had collapsed and Britain was not part of the Euro as you probably know But I was invited to the meeting because we just recapitalized our banks And we went around the table and listened to every European leader talking about their individual position And they said all of them that this was an American crisis It was Anglo-Saxon if you like Britain had made a mistake because it had gone With a similar financial system to that of America and Europe was really Being infected by what had gone wrong in America and the assumption was that there was very little wrong in Europe And that if only America would sort out its problems then things would be fine And it was only over a period of years that Europe came to recognize that first of all its banks were actually more Highly leveraged than those of America and we just talked talked talked about about that And clearly also it had a competitiveness and growth problem, which is still Not resolved that Europe's got a smaller share of the world economy now As a result of the rise of Asia, of course, but Europe is not sending enough exports to the dynamic Emerging market sectors of the world and therefore Europe is facing a problem about its ability to grow And what I'm really describing here is that even as the crisis hit the world Layman's had gone Bear Stearns have been months before There was still not a recognition that things were quite Fundamental and had to be sort sorted out So you've got to think very clearly of all the time That's the lesson I learned about what are the weaknesses and vulnerabilities in your economy Now what's going to happen in Asia over the next few years is something that the world really has never seen before We're going to see the rise of the global middle class the middle class Will be a majority of the world's population by 2030 if We're right in the predictions we've made most of the expansion is in Asia 40% of global consumer spending will be in Asia in 10 years time only 20% of it in America So you've got this massive expansion taking place and as that expansion takes place You've got to be certain that your financial fundamentals are strong and I accept that Asia particularly China of course has very big reserves and therefore you can fall back on Reserves if things start to go wrong But I'm not certain That faced with this massive expansion huge amount of foreign investment coming into Asia an equity market That is not as strong as the rest of the world Banks being relied on more than in other parts of the world to lend money to businesses The need of businesses who are expanding to get finance I'm not so sure that you can say definitely that all the issues in the financial system Have been thought about and can be dealt with and that's really the point I'm making that you could be sitting here thinking things are fine But underneath there are issues in the financial system that we found out about in Europe too late And America found out to its cost with a terrible shock But at that time it seemed reasonable to invest in housing in retrospect It was a mistake to allow the subprime market to develop and so look at the fundamentals look at how strong they are And I'm absolutely sure when I look around the financial system that not enough has been done to learn the lessons of 2008 So that's that's what I draw from my own experience. Yeah, professor John I just wanted to tap your view of China because you are very bearish basically saying that the next 10 years are Questionable for Chinese growth. Are you saying that China's headed for a crash right now? I would like to say I think we needed to learn right license from all this crisis in 1997 1998 that was the east Asian financial crisis And we learned the right license that the government inferred too much controlled too much chronic capital in but in this global Crisis we learned the wrong license People are most many people saw this gun market field So government has done quite a lot But I think the causes of global crisis was the government Bring the too much money to low interest rate. You're like the too many people spend too much money That's my problem. But today we use is a wrong method To solve this problem that will be our major cause for our future trouble The proper will come from current the government policy Yes, I Was thinking if we look at more social economic context rather than financial context Then some of the issues of emerging economies will be More crystallized in the mind India has been getting growth. So have many other large economies in the emerging world The problem is less of a growth and more of inclusive growth You talked so well about rise of middle class. We need a far bigger middle class than what we have today It is still a small proportion of overall economy So while we talk about India's middle class being 200 million strong What we forget is that it's a 1.2 billion people Often people call it billion people, but I keep correcting them that you're forgetting 200 million this 1.2 billion people Now 200 million is too small a part of overall economy still There are many many others who deserve to be there who ought to be there and are not yet there it is this aspect which is what is holding back economies like India and That is what leads to lack of formation of consensus on urgent economic reforms There is something which one has to remember that we have to first live in the present before we think about the future So very often while building economic consensus on any matter Concerns of present have to be taken care of and the sections the interest which represent those sections They will vociferously put forward the point and as a result present wins Against the future in many of the initiatives in many of the discussions It is that which I believe is an outcome of slowing economic growth. I'm not talking here about crisis I'm talking about constraint As a result growth which could be achieved by economies like India on a pure economic rational Sometimes is partly sacrificed because present has to be taken care of of those who have not yet made it to middle class This is a reality and I do believe that fine-tuning will go on at various levels to handle this We're gonna make this a very interactive session as well. So there will be a Question and answer period where we invite the audience to ask questions to our panels But please wait for a microphone to get to you introduce yourself and then ask your question So we have microphones roaming right now. Would anybody like to ask a question? This lady in front Lin Li from Peking University My question is for mr. Brown. I know you had that down. You did a great job during the crisis Also, you shall experience with the Chinese I Allow me to say more is I Don't very much agree with mr. Zhang's opinion because he seems quite Pessimistic I'm more optimistic about China's future. Actually, I think nobody ready for the crisis The key thing is how what's the ability to deal with the crisis. I I believe Chinese government and the Chinese they have the ability to deal with the crisis They are quick learner. They're hungry to learning and also they work very hard But the back the question for mr. Brown is During the crisis, you know What do you want to do and what you can do given the political structure in the Britain and the compare with the Chinese Political system. So what advice you can give to the Chinese people for the future crisis Or maybe my question is not clear enough is if you suppose you are the Chinese What do you deal with the crisis? Thank you? I know the Chinese are choosing new leaderships at the moment But I don't think I'm being considered I Think what you're asking is is really relevant it I Sense that the Chinese leadership and the Chinese economics Leaders particularly Are thinking very carefully about the next five ten fifteen and twenty years And you may have seen a report that was published jointly with the Chinese government and the World Bank called China 2030 and it itemized all the challenges that China has to face in a way that I think was very Honest and upfront about Inequality being a major problem in China the education system being in need of reform and improvement and having to move faster to get children into Secondary school and to get secondary education and then the ambition. I think of having 300 million University graduates by 2030 and Then it did look at the financial system as well And some of the problems that I'm raising were actually raised in in the report itself about how the financial system could cope with this massive expansion, so I think it's to China's credit that you are Not taking a short-term view. You're taking a long-term view and that you understand the social and economic changes That are needing to be made rural wages The loss of manufacturing jobs which were relocated to other countries where wage levels are at the moment lower than those in China The need to replace these with knowledge intensive capital intensive More technologically sophisticated jobs for the future. So yes. Yes I think I think that my my caveat about financial volatility and the need to be more cautious about the problems that arise from that Which can surprise you is Understood in that report But I think the phenomenal growth of China over the next 10 years is actually going to be something even greater than we've seen in the last 10 years and the development of the Chinese middle class will of course be Probably drive the consumer patterns of not just China and Asia, but drive consumer Patterns of spending right up right across across the world But that means big change and that means you've got to be prepared For the financial aspects of that as well as the social and economic changes that are taking place Next yes My name is Dheeraj Nair. I'm from India my journalist my question for professor Zhang I've been here in China for six days and What I've gathered is that the situation facing the new leadership now Is different from the earlier leaderships one factor social media so people are expressing the discontent more Second is the China's export run Investment run model is run out of steam doesn't that reduce their ability to deal with a crisis should it come in the next five years? What is it about the new Chinese leadership, which would be different given that they've grown up in the same system over the last 30 years How will they deal with these new factors or the technological or economic? I was cited two things most important first ideas What kind of ideas you have what do you believe? second is the leadership you know if we Think about the China's problem in terms of these two issues Lot decades. I think China lost its ideas Before that, you know, China had a strong ideas, you know how to reform or how to have market-oriented reform But your last decades is on people Thought very differently you could be leaders thought of very differently. That is why we lost I cause I would lost decades and also I think that today is more difficult for China's leaders To have enough authority Even they have good ideas. They have they may have not Enough authority to do that. They are to do that. Yeah, what they want. That's also a Problem, but I hope the next Leaders You all do something. I think differently particularly China needs to restart Interrupted reform particularly like privatization of state sectors That is I think only when you know your game more resources to Private sectors like those private entrepreneurs be more confident and China will certainly I think you have good future I'm not a very pessimistic. I just means everything depends on leadership and ideas. What are you will do? No, if you just continue current policy, I think we'll be wrong. China will have no good future Yeah, so that is the other means I like to get change with the times. Yeah Yes, this lady over here Thank you. I'm from Phoenix, Venice. I have one question to ask Mr. Brown And as we all know the dispute island between China and Japan is very seriously now And what do you think the truth and how to prepare for this crisis? Thank you It's between China and Japan Well, this has to do with the political entanglement over disputed island. Of course look look in any region of the world as As you find there are periodic disputes about territory about Historical events that are misunderstood and have to be reinterpreted about historic Problems that have never been properly solved The question is not whether there will be these disputes. This is bound to happen and whether our natural resources involved the disputes are likely to be Quite immediate and and and obviously they involve a lot of Resources and finance the question is whether you can solve these disputes and we have painfully in Europe Had to find means by which we resolve disputes between countries that historically had a history of grievance and animosity and I think the question in Asia is whether the mechanisms that you are developing for regional cooperation Are going to be effective in working in the future and there are many attempts. Of course that regional economic cooperation Many attempts also have been made for security cooperation And I believe that you will find over these next few years that the The pressure to resolve these disputes amicably in the interest of preventing either a loss of income or preventing Further damage Will be will be great. So I think what will happen is that you will develop over a period of time far better mechanisms for dealing with these disputes and the lesson From the rest of the world is that that is something that should be given priority Because you do not want to let problems that are Obviously there get get out of hand. So I look forward to seeing these mechanisms for cooperation developing more successfully over the next few years Thank you. Good afternoon Gerard Lyons, I'm chief economist at standard charter bank based in London question I'd like to ask is about inclusive growth After the financial crisis the annual meeting the Asian Development Bank highlighted that for Asia to move from export Led to domestic driven growth. It needed three things deep and broader bond markets Help to small medium firms to create jobs and also a social safety net to discourage people from Saving too much and to encourage them to spend more. I'd like to ask former Prime Minister Brown Whether he's got any lessons he thinks from Britain and Europe that Asia should heed about setting up a social safety net and The other four speakers as to whether they think Asia can afford the sort of social safety net it might need in the future Thank you Well, one of the fascinating pieces of research that has been done recently and this is about the whole world and not just Asia is How little it would take to remove Everybody in the world from absolute poverty Because we've made huge advances and principally in China in taking people out of poverty Then it is possible with a limited amount of resources to guarantee people that they would be out of the Absolute poverty that still afflicts about 1.4 billion people as far as Safety nets are concerned. I mean 80% of the population of the world is not covered by a safety net at the moment But I see all the developments in India with the guaranteed income and you may dispute how it is actually working in practice But the idea in China with the provision of pensions with a provision of health care I see all these innovative ways of trying to develop a proper safety net And I think it comes back to this question. How much Inequality are we prepared to to tolerate without act acting and there is no doubt that Inequality has got worse and worse in the world Some people argue that that is one of the causes of the financial crisis the pressure particularly on the American middle class To borrow money because they had very little additional earnings As most of the wealth in America in the last 20 years went or the additional wealth went to those at the very top So there is this issue about inequality And whether it is detrimental to growth and you get to a certain level of inequality in your economy That is actually Threatening the stability of your your society and I think that is a serious question that's going to be dealt with in Asia So progress on removing poverty and we now know we could do a lot more But for an acceptable amount of money to get people out of absolute poverty progress and safety nets and of course You know, there are different models the British National Health Services a taxpayer-funded health care system where health is free But other systems are private public partnerships or simply private But I think we've got to get to this question of What level of inequality is is acceptable or unacceptable in a modern economy? And at what point does it actually? Damage the efficiency of the economy and the stability of your society And I know in China that the levels of inequality are now similar to the levels of America And that is I think something that you've got to worry about And I know in India that levels of inequality have got substantially worse And therefore that is a problem about social stability Of course as well as a problem about what effects it has on economic efficiency and it would be really good I think if we could have a genuine open debate about the acceptable levels of Inequality as well as the need for social safety nets and to deal with poverty The only thing I would add to that though I must say is if you look at the United States today You have got baby boomers of around 28 percent Coming towards their entitlement programs social security Medicare and all those related things and the reality Is that this comes at a time when the United States has very little room in which to pay for these Programs, so I actually think that you're going to find and it's the same in Europe for different reasons the social Security entitlement programs are not affordable and so we're going to have to make some very tough choices And I think those very tough choices will involve a curtailment of some of these Very I won't even say they're very generous, but some of these programs if I can come in here Social security has to be seen from the point of view of what is it we are talking about? There is a gross problem of unemployment and What am I doing? I can't Tell anything new to achieve economists, but I'll make an attempt Is the problem giving food to the people or is the problem giving work to the people? So in India social security has been devised that food for work program What the government has done in last two years is a rural employment guarantee scheme named after Mahatma Gandhi and it says that in every family One able person will be entitled to that many days of work in a year Which will be guaranteed to him in rural areas and for that certain minimum ways will be paid It is a work guarantee program and not a non-working work guarantee program So government is not borrowing money To keep people who may be working not working out of choice out of compulsion. I do not know but if they do not have work Government will guarantee them work Certain number of days in a year and they will get paid certain minimum wages And they have an incentive to keep looking for work Which is better paying so that they move out of this minimum wage program to a better paying program I believe that social security is far superior to a social security which says you don't work I will pay you so much every week or so much every month So you keep borrowing across the generations or you keep transferring from those who work to those who don't work We are in the last five minutes of our debate So we have to sum this conversation up now with our panelists and I'm gonna end this conversation Looking forward and also maybe taking in the present as well We're gonna start with Mr. Hockberg at the end What keeps you up at night right now? And how do you see that playing out in the future? What keeps me up at night? I Think there's a lot of uncertainty in the world and when there's uncertainty people don't make decisions And I think that's what's immobilizing. I think from the European debt crisis Some of the issues face the United States is immobilizing business people for making decisions government leaders for making decisions And I think that's that's what keeps me up a lack of decision We're better off making some decisions and moving forward and having some mid-course corrections Then simply being immobilized and not making the proper decisions whether that's in China about moving more towards a consumer economy Whether it's about putting the right infrastructure in place or therefore more people in India have power All of those those types of programs. We need to just go move forward. I think that's what keeps me up Mr. Ward brief final thoughts. I think the thought of listening to you at 6 30 in the morning is one of the more daunting things that keeps me awake Aside from that it would be to be honest Some of these fat tail risks that we've been talking about what happens if the euro cannot be resolved How long can we kick this horrible situation down the road? And I don't think it can be for For very much longer What is going to happen in the United States where you seem to have a paralysis of government and you see that in the Disaffection of people generally around the world. I don't see Extraordinary exuberance or euphoria you get euphoria one day and gloom the next day And I think people are having a real Concern about the organs of government and their effectiveness And what can we do to rekindle the confidence of people that actually government is working for them? Sensibly and intelligently to resolve some of these huge problems that we're looking at That's jam. I think the most serious crisis we face today is not economic but leadership crisis Everywhere There's no real leadership American European China same and we need people like Ronald Reagan Mrs. Sacher Gordon Brown and the Deng Xiaoping That is I think most important. Those people have very great ideas But the currently I think you said I'm we are we have politicians Let's just deal with the world short-term problem. They will create more problem Let's talk about baby or face Wow, so how do you follow that? Yeah? Actually business confidence is one of the most important things needed today in most economies Most of the large companies at least in the country I come from are sitting on large piles of cash and Hesitating to invest on the other hand small medium enterprises have lack of access to capital because interest rates are high and interest rates are high because We want to control the inflation and keep the financial systems robust When you look at all things put together what it comes down to is that? We have imported successfully many of the worries of the global system and rightly so Business confidence will only improve if there are signs of government giving stimulus to the economy and Government will feel confident only if it sees this revenue is rising and inflation coming down So it has become a vicious cycle of one thing feeding upon another and Something has to give to break the cycle and get things going again Mr. Gordon Brown, well, I think what will keep people awake at night is listening to pessimism if If we can I'm actually far more optimistic about the future I if we can solve the problems that we've talked about and they are real financial volatility the euro Problem, I think probably the biggest problem the lack of global coordination Which is perhaps what what you're referring to in our policymaking when we do have a global economy Then the level of technological progress in this world is such The advances being made in medical science are such The dynamism of the entrepreneurs that we see around the world is such that you can only be optimistic about the future So it's a question of solving what are practical problems to enable the technological genius the medical advances the entrepreneurial flair To to make a real difference to the quality of life and the standards of living of millions of people who stand ready to benefit From the changes that can be brought about over the next few years So for these reasons I would be optimistic about the world But it is a challenge as I think you rightly said both to politicians and to those interested in the public good To deal with the real problems that we have and not to ignore them or avoid them or bury your head in the sand If we can do that, I think we should be optimistic Mr. Gordon Brown, Mr. S. P. Schuchla, Professor John Rodney Ward, Mr. Hawkeberg. Thank you so much for your time is taking part in this special Bloomberg television debate at the world with Economic forum and thank you all for attending today. That does it for this conversation. I'm ready for crisis Our Asian growth markets are ready for another global economic shock and we'll see you next time. Thank you so much