 Well, good morning everybody. Let's get going. Delighted to see so many of you here to discuss a critical area about governing global growth, the new context Governing global growth, the new context governing that emphasis there That's going to be very much underpinning the remarks over the next hour from our three panelists And I'd like you to be involved right from the beginning. So I'm going to come to you early on in the discussion We have Gordon Brown until last year the British Prime Minister now still very active Internationally member of Parliament still we also have Tijuan Tiamm who is a group chief executive of Prudential and Giorgio who is now visiting scholar at the Lee Kuan New School of Public Policy But until earlier this year the foreign minister of Singapore since 2004 welcome to you all I just want to underpin the kind of context in which we're discussing this this morning With the kind of remarks that we've been hearing literally in the last few hours Like from Christine Lagarde the managing director of the IMF policy in decision and political dysfunction Her language from Washington the vicious cycle is gaining momentum and frankly. It's been exacerbated by this policy in decision and political dysfunction in the global economic and financial environment we've had what's happened at UBS with one trader Who has been arrested over? two billion Which was misappropriated inside a bank which had been struggling to deal with up to 50 billion Which has not been fully accounted for so the kind of problems we saw from three years ago Are still with us. I remind you what Robert Zellick said president of the World Bank that we're moving now from a moment of drama to a moment of trauma and what Tim Geithner said Last weekend writing in the Financial Times the question is not whether we is not How the economic or financial capability to act is that to strengthen but whether We have the political ability to do the right thing Doing the right thing Gordon Brown. I'd like a few literally four to five minutes maximum from you Your reflections at this moment and then I'm going to open it up when all three of you have spoken to hear from the floor, too Well, first of all, can I say what a what a what a privilege it is to be in Dalyan and to be with Professor Schwab who is the inspiration for what's been achieved by the World Economic Forum and to be able to talk to you About what I think is a critical turning point for the world economy over these next few few months in 2009 when we faced a banking crisis We called together the G20 and We agreed a plan to do three things. The first was to prevent a depression And by the action we took we succeeded in preventing the recession becoming a depression But the two other Agreements we had have not been fulfilled The first was to rebuild the global financial system around at global standards And as you see we are we are descending into national solutions to these problems not global solutions And the third was to have a global growth that agreement whereby the combined efforts of Asia Europe America and other continents could lift the world economy up and Give us a sustained period of growth out of recession and and that never happened a battle over exchange rates a failure to reach an agreement on Surplus and deficits in South Korea at the descent of the process into bickering really about Currencies meant that we have no global growth agreement and that is what is desperately needed at the moment for confidence to be restored The euro area problem is now moving to the center The euro cannot survive in its present form. It's going to have to be Reformed dramatically We are I think an hour to midnight in the way that we Look at this issue in the euro area, but to understand that the euro problem Remember we in Britain had to make a decision about whether to join the euro We did not join the euro for very good reasons that I'll explain in a minute The there are three problems in the European area not just one Well, if you look at the accounts that you tend to find around the world people think of it as a fiscal problem or a debt problem It is actually initially a banking problem and it is still a banking problem and it has never been solved when it has been a banking problem and The British sorry the European banks as a whole are grossly under capitalized They have liabilities far in excess of the American banks Individual countries banks are over leveraged Far in excess of what is allowed in other parts of the of the world and we've never properly Recapitalized the banks and we've now got the interplay between Banks that are not properly capitalized and sovereign debt problems that have arisen partly because we've socialized or accepted responsibility for the banks like liabilities You cannot begin to solve the European problem unless you understand it's a banking problem It's a growth problem the inability of the European economy to grow out of recession as well as being a fiscal problem And you will have to take coordinate a coordinated action in all three areas To be able to achieve a solution to that problem And I believe that the only long-term way that we can actually deal with the Failure to grow in Europe, but also the fiscal and the banking problems We have is that Europe? Looks outwards as well as looks inwards that Europe sees itself as part of a global economy Trading with the rest of the world that instead of only seven percent only seven percent of Europe's exports Going to China India Brazil all the BRIC countries put together It actually thinks globally about how it can export to the rest of the world for the future and therefore it is Important I think that Europe is part of the global growth pack that I'm talking about that Europe can export America can start to export again China increases its consumption India opens up its set markets We have a global agreement that these things will happen that will increase the growth of the world economy and then the confidence that will flow from China knowing it has an export market to America knowing it to can trade with the rest of the world and people can have more confidence in consumption at home The spin-off effects from that and the multiplier effect means that the world could actually have sustainable growth over the next few years But unless there is global coordination and part of that is dealing with the European problem I foresee 10 years of low growth in Europe and America. I foresee very high levels of unemployment And I foresee a failure of coordination that will lead in the end to greater protectionism and Let us recall that that was the problem that locked the world into 10 years of low growth And in some cases negative growth in the 1930s and remained Unresolved all these all these years. We've got to think globally as we answer this problem Mr Brown, can I just press you before I go to George and to John policy indecision and Political dysfunction. This is about leadership. And that's what even Tim Geithner was writing in the Financial Times last week Exactly the problem of the 1930s look in the 1930s Keynes As is now recognized had proposals in the 1930s He put them to the British government of the day in a famous document and on it the head of the Treasury wrote Inflation extravagance bankruptcy now What are other people saying then that the European problem is one of extravagance with the threat of bankruptcy? With the looming threat of inflation if you don't deal with it That is not the problem we face the problem We face is a banking problem that is unresolved a growth a failure to be able to get growth And we've got to find ways of doing that and so yes There is a failure of political leadership, but there's no point I would say you should have a G20 summit at the United Nations in advance of the France summit And I've said that for some months now that they should have an early G20 summit But you've got to have an agenda You've got to know what you want to do and you've got to have proposals And it's when you have the proposals as we did in 2009 to deal with the crisis that you get action There's no point in people meeting for the sake of meeting They've got to meet with an agenda for action And I'm waiting to see that agenda being set out by the leaders that you're talking about Giorgio policy indecision political dysfunction the springboard for your remarks The tectonic shift is The global power structure from an American dominated world to what is increasingly a multi polar world We're all used to the old cathedral Which was really founded on the American plate And now the plates are cracking shifting But the yearning is to show up Restore the old cathedral My fear is this may be unrealistic and the problem of leadership really reflects the change in the power structure When we heard Premier Wen Jiapao two days ago China is not prepared to lead the world China is prepared to be helpful It doesn't want to be led either The reality is On different plates now Different operating systems Must find their own internal balances the Chinese the European the Americans The others each must find its own balance between rights responsibilities Which is really a problem of domestic politics and Somehow you could link them together so that we keep this one world and there are many problems We cannot each solve on his own So we need Greater coordination. Yes, we build on greater respect But you also must acknowledge that the operating systems are Different in that deep internal construction China will always operate a different internal system From America or from Europe So I I fear that there's too much hope invested in the idea that somehow We can rebuild that cathedral. I Don't think it's possible better. We have smaller structures each internally stable each with his own sense of responsibility But require that we open open our homes to one another like a TCP IP arrangement You have your own operating system. I have my own operating system But the condition for membership in a global system is that we must be open to each other and Not overly try to interfere in each other's internal workings Do you feel there is the political ability to do the right thing? to quote Tim Geithner I Think be difficult it requires more coordination We need the G20 because there's no other Assembly which can do this. You'll be messy It's inevitably messy because we are entering a very messy Global power arrangement. I think when there are emergencies like the present run on European banks Then emergency action is required But in terms of larger rebalancing We cannot hope To remove our own pain The pain of readjustment by transferring to a global system or transferring to somebody else The danger in the hope of a global architecture is that somehow I can pass on my problem my pain to my neighbor or To an international organization and that in itself becomes a disincentive towards Deep internal transformation, which in many countries is absolutely what's needed to join Tiamm Again, I pressed same point with you policy indecision and political dysfunction as we examined governing global growth the new context Look for us and we are a Major investor in markets globally What we believe is that there is a crisis of confidence. I completely agree with Christine Lagarde on that If I look at each zone in turn Gordon I wouldn't change the word to what you said we've transformed the banking crisis into a fiscal Deficit and I think that was the right answer. What we don't have is the instruments to manage That fiscal manage through that fiscal crisis without destroying investors confidence in the system For a variety of reasons because I think Europe didn't change its paradigm as the world changed It used to be that if you were a French bank being in Poland was diversification It was 30 years ago 20 years. It's not anymore. I think Europe got caught into a concentration risk trap It just didn't realize that its strategy was really putting all their eggs in the same basket And I agree that they need to diversify their trade and really look outwards and And just change strategy and recognize that there is systemic risk in Europe All the banks are too exposed to sovereign risk There is no confidence in the value of a sovereign debt and therefore the whole system is threatened with collapse So we need to break out of that and frankly the politicians have not so far Given us investors enough confidence that they can deal with those issues leading to massive sell-off Even we as a company have done the same thing We have reduced our exposure to the eurozone and your financials Systematically over the last two years and that is not positive long-term because you have to go back to the macro We are an insurance company. We have liabilities. I promise is to our customers We need returns to deliver them We are going to make all our customers poor if 10 15 20 years down the road We cannot deliver the returns that we have promised It is important to have growth because in the end that is the only way we can meet Liabilities we have so we need to go back to a functioning of a system that allows growth to happen with sound fiscal policies the US I think is a different iteration because it is a very dynamic economy very innovative There is always another Facebook another Google around the corner They are in a difficult political situation until the election will know that I don't think Obama will get anything from the Republicans until then But after that whether it is Obama in a second mandate or new president in the first mandate You can expect more result action and you can affect them to deal with the issues Brings me to my my third and final comment which is about the rest of the world for me And that's where I'm here actually a big part of the answers in China I think that we will only come out of this By the top if we have some form of soft lending that's delivered by China Which is largely a function of things that the premier talked about here yesterday developing domestic consumer demand and Substituting that to the US consumer who drove growth for the year 2000s and cannot do it anymore because he's leveraged and needs to deliver a same thing for all the banks So if you go back to basics earnings are good. The corporate sector is very healthy. The real economy is doing well We were all very profitable as companies the general Balance of the eurozone is healthy debt to GDP is 80 percent What we're dealing with here is policy risk and the risk of policy mistakes Faced with a banking crisis and a sovereign crisis in parallel in the eurozone You've had your own challenges at the top of a prudential But let me put it to you. You are sitting on a platform with two political leaders And you said you don't have confidence Politicians have not given you confidence. What do you want from the political class? Which is necessary to do the right thing? Credible a credible plan of action. I mean Gordon was over the G20 meeting some kind of meeting with some visibility and Credible actions that will give us confidence that we can hold call them euro bonds if you want but we can hold paper we believe in and That will do what it's supposed to do Do you think the political class have the nerve to do what is necessary given that all of them face election cycles? I think I'm gonna defer to no. I'm asking you You are you are entitled to a view. No, I know Look, I Don't think I have a choice Gordon Brown, I think You know your Churchill Winston Churchill described the situation in the 1930s When you had the similar risk of protectionism at a time when you had recession And he said that politicians had been resolved to be a resolute They'd been adamant for drift. They'd been solid for fluidity and they'd been all powerful for impotence And you may want to repeat the words of Shelly when he said that politicians have lost the art of communications But not alas the gift of speech It's easy I think to say that It's a fact of course the political leadership is not Delivered a solution to this latest stage of the economic crisis But it's I think it's because leaders have been looking inwards and not outwards. I Think you've got to recognize that this is a problem that is only susceptible to solution if there is global coordination and let me just Describe what I mean. We're a unique juncture as as you were describing in world economic history For a hundred and fifty years Europe and America have outproduced and out consumed and out manufactured and out treated the rest of the world But in 1910 2010 for the first time in a hundred and fifty years Europe and America were outproduced and Outinvested and out manufactured and out traded by the rest of the world And what has happened as you rightly described is that the global shift of economic power is such That the rest of the world and China and Asia principally are now responsible for the majority of production an investment in the world economy But the Europe and America are responsible for the majority of consumption It means that we are mutually dependent on each other ten years ago America could drive the world economy as a consumer as well as a producer Ten years from now twenty years from now is certainly Asia will be able to drive the whole of the world economy forward by its ability to produce but also It's high levels of consumption, which is the development of the Asian middle class which is happening now But at the moment we're at this juncture Where we're mutually dependent on each other that Asia can produce, but it relies on European and American markets for export and consumption and America relies on its ability to borrow from the rest of the world to enable it to consume That is the juncture that we are at and you've got to have special policy measures to deal with that And so you cannot have a recovery in Europe and America without some agreement with with Asia America like Britain like the rest of Europe wants to export its way out of its problems But it can't do that unilaterally It's got to have some understanding with the rest of the world about how trading relationships are going to develop So I think the bargain is this that China has got to be persuaded to increase its consumption and Premier Wen said yesterday That's what he wanted to do. India has got to open up its markets more To cut the prices for consumers and a whole series of basic goods where it could import At the same time Asia's got to be more open to trade from the rest of the world But America and Europe have got to reform and they've got to invest in infrastructure to equip themselves for the future And the bargain is essentially this that as Asia increases its consumption faster America has got the confidence and so has Europe that it can export to the rest of the world and you create a self-reinforcing Reinforcing cycle of growth that gives people confidence that China that is not going to lose its export markets America that is going to be able to export to the rest of the world And then you've got the basis of moving forward in a situation where American consumption cannot drive the world economy forward But equally at the same time Asian production cannot drive the world economy forward on its own at the moment now That's what I mean by a global growth pact and that's what the G20 should be agreeing at the moment And around that you can deal with the problems of exchange rates inflation You can deal with the problems also of trade agreements and protectionism But you've got to have a vision of a world economy that is capable of Generating a higher level of sustainable growth. It's not that Asia is not growing and it's not that China is not growing fast It's that the basis for sustainable growth is not there at the moment at this unique juncture in history And that's where we need political leadership And that's why the G20 is crucial to the solution of this and that's why in my view the G20 should be meeting and now To look at a global growth pact Reestablishing confidence in the global financial system Special measures to support Europe so that it can actually start to grow again as well as solve its said banking crisis And hopefully getting a better framework for climate change so that we can get investment Run the world in renewables and get to of course trade moving forward in a way that we would like to see with less Protectionism now if we don't do that we will slip back into protectionist that world Unemployment will remain high in Europe and America and Asia will start to lose the momentum It has from being able to export Substantially to the rest of the world. That's the danger we face and that's why political leadership is so important at the moment I'm going to come to you to to come in with questions in a moment Giorgio in your country. You've just had an election where your government Took a bit of a hit because the public didn't have as much confidence as they traditionally have Even though your numbers are very solid and very positive and just picking up what Gordon Brown has just said about Governance and what the public expect and given what President Obama is now about to enter with the reelection process over the next 14 months How much is the public view now a considerable part of the The judgment that has to be made in the political calculations of governing global growth and Moving in the directions that we've heard from all three of you need to be done No with the iPhone and the blackberry in the pocket The this intermediation of hierarchies Is a relentless inexorable process institutions are all coming under attack because The myths the hypocrisies which protected them in the past Are all being punctured by the access to information So whether you're the catholic church or whether you are a big government or big corporation There's going distrust And Singapore is part of the same process that's going on around the world from hierarchies to networks From leadership appropriate to hierarchies To leadership styles more appropriate to networks. There's a shift that we are seeing And those those were able to make that shift I think we'll Will succeed While those who are less able to find themselves cast aside But we are part of that same Global phenomenon sweeping the world But going back to Gordon's point about Restructuring and importance of global coordination global coordination can either help Deep restructuring or make it more difficult I think it's crucial that global restructuring requires as a precondition deep internal restructuring I'm spending a few months in Beijing University as a visiting scholar And I've been going around with the Singapore students there visiting the endometries and trying to understand life From a worm's eye view And comparing student life in China with student life when I was an undergraduate in England and as a postgraduate student in America Material conditions are still Quite backwards Students are exceedingly hardworking They are smart Alive to the changes in the world And determined to compete and get on Now think about it with globalization It's going to equalize around the world Which means that the worker in Greece the worker in America the worker in Wuhan in Singapore Are all subject to the same set of market forces. There could be some friction, but only to a point There's no escaping very painful restructuring in many parts of the world And that this pain will cause great upheavals in domestic politics My fear is The hope invested in global coordination Is really to remove that pain and postpone it but the longer We administer steroids I think the worst that underlying problem Becomes That's my concern But of course without global coordination Internal restructuring will become even more difficult And we need growth Tijan when from your position when you talk unless you want to pick up on that point But when you talked about confidence in politicians or confidence in politicians to do the right thing When you've just had that very frank assessment of the the new upward pressure I agree with that. I'd like to say, you know, it's a famous quote They only do the right thing once they've exhausted all the other options But you know, that's that's what we've been faced with that used to be said about the americans. Yeah But the We the market have had to come in and and be quite tough almost acting like a school master every time people come That's unrealistic, you know, their bonds have been hit all the spreads have gone out because we're saying look This is not serious. And I think we need to to move to a more adult mode of operation Where politicians actually Uh, stop the demagoguery to to be as blunt as george I think that the initial statements made in germany about about the greeks were not helpful I think they've limited the policy options in terms of being able to deal with a greek situation today And I think we need to move to a more responsible discourse because of the expectations from the younger generations And the transparency in information, whether it's from twittering or other things is now almost infinite and instantaneous Do you think that's handicapping the ability of the political leaders to do what you want? No, I think I think they just haven't quite taken the measure of How powerful that is and they are still operating in a world of As rosset hypocrisy and half-truths where they could get away with that Well, that world is gone and they need to address to a new much more transparent world where the sanction is immediate I think a number of times they've been surprised by the market reaction You know, I've said things they've been punished immediately and within a few hours They ended up doing the right thing or saying the right thing after having attempted not to Let before I go to the the audience, I mean gordon brown You sat in g20 meetings and many other meetings While you were prime minister that that Description there of hypocrisy and lack of lack of nerve if you like to do the right thing given the enormity of what is now facing Facing us all Nick is that there is somehow a solution waiting there to be applied The politicians don't have the will to apply it I think the the more correct assessment of the situation is That we've got to understand what needs to be done and agree on that And there is not yet an agreement on what needs to be done. I'm putting forward a set of But I accept that I don't have A consent around the world for the things that I'm proposing But we've got to agree on what needs to be done first and then I believe you could find the political will to do it And I think part of this discussion should be about what needs to be done. You see in 2009 we had a banking crisis That was the result of a financial market breakdown And we tried to solve it in a number of different ways In 2011 it is morphed into what is a political sovereign debt crisis Where the argument is that what is needed is fiscal Contraction and of course that is right But we haven't yet solved the 2009 problem So we've still got a banking problem in europe We've still got a financial sector problem And it's actually being acted out in the interplay Between the liabilities that countries now have for the banking debts As well as for the fiscal position And unless we recognize that in europe will not be able to solve the problem So you can have hundreds of meetings But unless people are prepared to face up to what the problem is they've got to deal with you will not get the right answer And I somehow suspect that there is not yet a consensus in europe about what needs to be done And because there is not a consensus I probably would tend to the conclusion that you will need an international agreement Not simply a euro area agreement To sort out some of the problems that europe now faces and the IMF will be involved at some stage in this in my view Just to build on that I really think that the problem is that what needs to be done fiscally is not politically feasible And that's why you have to revert to some form of international solution It exposes a design flow in the euro the euro assumes that out of the policy mix you give up interest rates You give up currency and you only have one instrument which is fiscal policy in politics That is the bluntest instrument because that means in cutting state expenditure at the trough of a cycle And state expenditure is salary in every country 67% is salary it's people firing thousands of people at the bottom of a cycle and raising taxes So it is not a credible and realistic instrument at the trough So you need more you need Demand and that brings me back to my argument about china and the importance of china starting to consume So that you can bridge because fiscal adjustments take place over time You cannot you know if anybody's done a budget a national budget you cannot do them from one year to another You have to do them over a period of a multi-year period and in the meantime china can come in And provide a bridge for the world economy to get in the right place Jojo and gordon brown just picking up on that point. What has to be done fiscally cannot be done politically jojo I'm not sure that sorry Following on the honey's point about china china will do what is in china's enlightened self-interest China is not going to consume to save the world Because the chinese government is ultimately responsible to its own people So i think that's a key to Create an international structure where Each country will act in its own enlightened self-interest by cooperating I think it's just by pressure By counter threats It's not going to lead to a to a happier outcome Gordon brown Georgia what i'm actually saying is it is in china's self-interest to increase its consumption faster And in asia's interests for those countries that are dependent on exports To also show that they're willing to import Because it will become self-defeating To pursue an export only strategy in a world where america and europe cannot consume as much as they did And therefore Asia has got to be ready to import as well as export For us to be in a position to have Self-reinforcing growth around the world So it is in china's self-interest to increase its consumption So that it can be open as premier wen said yesterday to more imports But at the same time it will be able to continue its exports If there is an american market and a european market that is able to consume so There is mutual self-interest in the proposals i'm putting forward The issue in europe as i think we're starting to agree Is is is financial in terms of its banking system Is its failure to be able to generate growth which means that It's a got deficits that are rising partly because there is no tax revenues and there is a high unemployment And it's a fiscal problem if you don't recognize its three problems in one You'll get to the wrong solutions and my worry is that the By labeling it simply a fiscal problem Then you can impose all the fiscal contraction in the world And you can create all the austerity and if it doesn't work create more austerity But you can drive the economy further into recession And so you see in Greece that they're now expecting 5% negative growth this year And we're not seeing growth recover in spain or in portugal or in italy and ireland in the way that we expected Unless you recognize you've got to stimulate growth you've got to deal with the banking problem As well as deal with the fiscal problem then there is no easy way out for for europe and you will be Locked into at low growth for 10 years. You've got to recognize it's a triple problem Yeah, no, I completely agree that we've created very significant deficits in terms of percentage of GDP They can only be solved over a long period of time and we need growth We need growth to solve them and I think that the governments need to stop worrying about inflation From my perspective as an investor the biggest risk to the world economy is deflation not inflation today And that's what we need to avoid at all costs right. Let's hear please who's plenty of questions To the back and here as well. You've got a microphone. Please at the front here Who's got the microphone there? Further back there. Wait a minute. No there There You've got the microphone Yes, thank you. Uh, I'm brian so from hong kong pcc w I would like to address a question to mr Gordon brown as we observed that as yesterday nights to ecp and other central banks have joined together again to push some liquidity Emerging operation again But actually three years before 208 in september also the central bank do the same things Do you think uh after three years? Do this action again and again the effectiveness is diminishing or is this the good way good direction to direct the crisis We are facing now. Thank you Well, they're dealing with a different situation. Sorry keep going. Yeah in 2008 and 2009 They were intervening because of the problems of the banks In 2011 they're now intervening because there are problems not only of banks, but of of governments And this is what complicates that the problem as you move forward I've got no doubt that the european central bank is central To how we solve the problem in the short term But you will have to have a political agreement about who takes responsibility For either bailing out the banks Or for restoring growth in the european economy And that will require a political a set of political decisions So the ecb is now dealing with a different problem from the one it had in 2008 and 2009 But it's actually a more serious problem Because in 2008 governments could intervene to sort out the problems of banks and now in 2011 banks have problems But so to have governments And that's why we need a better way out of this and I would myself say that Even now European stability fund That was working in other words set up and working able to deliver money The 400 billion is not enough that will not solve the problem You will need a far more coordinated response That will involve the underpinning of the european economy by substantially more resources And perhaps you will need imf and international support to do that And so I do take seriously the proposal that is made by premier when That china would be in a position to do more To help regenerating growth in the world economy. It's it's really back to this You've got to deal with the banking problem You've got to deal with the problem of restoring growth in the european economy As well as deal with the long-term problem of fiscal consolidation Look, I I find it difficult to disagree with you. So I Say you agree. That's fine. Very little to the twat. It's it's the right way We have to keep saying that it's a it's a global problem Coordination and I agree with George is not a cure. It's not sufficient, but it's necessary without coordination We don't have a fighting trunks. Thanks, please Is that yeah, alessandro manioli bocchi from quay china investment company? Thank you very much for the comprehensive analysis of what should happen Moving now from the normative analysis to the positive analysis to what will happen I was trying to get the takeaway message not only from this session But also from the forum and my takeaway is that the situation is urgent But it will take time So and I agree with assessment, right? But that means muddle through stagnation suffering Possibly not disorderly adjustment. Do you agree? Thank you Do you agree? Would like to answer the question give look at the positive side of this george. Well So Joseph schumpeter You've left them speechless creative destruction. I mean we all like the creative bit No one likes the destruction bit But without some destruction There can be no new creation And part of the pain part of the contraction Enables future growth to take place because in the end We cannot avoid massive repricing of factors of production worldwide Because of competition If you compare for an engineer Work earns the hour see works in china And one in india iit graduate with the one in In europe or america That equalization requires a lot of destruction first And it's going to lead to within each country A stretching out of income levels because the owners of land and capital They are going to benefit a lot from globalization But those who are Intellectual and manual labor They will face very stiff competition So unless a social system within each country Allows for a sensitive reallocation so that Society is kept soft and sweet I think there will be a lot of problems, but this pain this restructuring Is a necessary part of the solution I think there's a danger of too much pessimism though Because I believe this is a soluble problem And not an insoluble problem I believe that the central argument that george is putting has got to be answered though I think there's a general agreement that if you could have coordination You could return to a stronger growth path that is more sustainable Than the one we've had for the last two years since that since the world Recession But his argument and it's got to be taken seriously Is it if coordination was at the expense of the restructuring that is necessary Then it would be merely postponing the problem instead of solving the problem My proposals for a global growth pack require very substantial restructuring and structural reform you might say In europe and in america And I believe the only way that america and europe can equip themselves To compete for for for the future Is improving their education system Improving the capital markets the financial markets in a way that was not done before the recession And of course improving their infrastructure And we've got to find a basis on which that that can be done in europe and america You need fiscal consolidation and restructuring But you also need infrastructure investment to equip yourself for the future And that suggests that you need a time based you need a Time frame for the restructuring of debt and the deficit to enable you to begin to growth Begin to return to growth in in parts of europe and america In a way that is sustainable and at the same time get the investment that's needed for the future So I don't disagree with you that you must have the restructuring internally To allow yourself to be in a position to compete in this new global economy But I don't think that should rule out coordination, which is a necessary means By which you get back to growth while at the same time you're undertaking the restructuring that every country Is going to have to be involved in and I would emphasize the urgency as you were suggesting Politicians, I think Are forced by crises to act and we would not have had the action in 2009 at the g20 Had people not sense that the markets were collapsing around us And we had to act now I think people are starting to realize probably a lot later than they should have about the urgency of the situation in the euro But I think also realizing that the world economy Is starting to experience lower growth than we expected as a whole So acting with a global coordination plan now is where we need to be Yeah, I'm also reasonably optimistic. So I think in every crisis It's important to have a right diagnostic not like in 1929 1930 and I think we are converging through these conversations On what's going on? We are converging on on some of the solutions Chinese premier made some very important statements when he said that China would play its role But I think his words were that everybody has to get their house in order And I completely agree with Jean that the dealing with the deficits is key But I also believe that politically that is not feasible unless you have some growth So and that's what all the governments that just go into a state or state without growth realize relatively quickly after two or three years So we need growth picking up Gordon Brown's point Do you think the political leaderships at the moment understand just how profound and deep this crisis really is now I think as of today, they do as of two or three weeks ago. Maybe lately. I think I think lately. I think they do Problem we have to address. I don't believe that national introduce yourself. Arthur Mutambara. Arthur Mutambara Zimbabwe I do not believe that national leadership Can provide global governance politicians with national mandates Who pursue national interests the people who elect them Are not always clear that the national interest is aligned to the global interest Secondly and more importantly business, which is incentivized by profits cannot provide global leadership Business must be incentivized by the impact on the environment and impact on society If those two things are not done To address the issue and the inadequacy of national leadership and also how we define success for business Thank you. Move the microphone forward, please. Arthur Alex Clark universe. Roberta formerly of scotland Often in life we can control the things that are really important and this issue of solvability is key We're dealing with a us political system That appears to be broken and bipartisan and engaged in brinkmanship that could have global implications What specific messages do we give to domestic politicians in the u.s In relation to giving swift effective and decisive leadership So pick up on Arthur Mutambara's points as well. Gordon Brown. Well, I think both questions are about thinking globally really if America America has faced with this this specific set of problems It cannot consume A huge amount in addition to what it's been consuming Because it's high levels of borrowing Its public deficits Are substantial and therefore it's got to cut them Not increase them Public investment therefore cannot rise substantially. Indeed. It might fall Uh America is therefore locked into this position Where it's relying on exports to the rest of the world To become its main driver of growth And it cannot do that without there being a world that is ready to take its exports and is therefore a world economy That's growing So America cannot solve its problem Simply by looking in on itself It's got to look to cooperation with the rest of the world Europe's in exactly the same problem But it cannot either devalue its currencies Because the individual countries are now part of the euro area and have removed that flexibility Which is available to britain available to america and available to most other countries And it has decided that it will not tolerate any defaults And therefore it's got to bail out or do something to support those countries that are in difficulty So both these continents are constrained In their ability to act By decisions that they've they've made But cannot in themselves solve the problem that they've they've got they rely On us having some cooperative arrangement around the world to deal with these problems now Is the world ready To be able to come to these agreements we failed to get a trade agreement wto failed We failed to get a climate change agreement kopenhagen failed We failed to get agreement on global financial standards because we've retreated from the id in 2009 We'd have global standards to having simply national or original agreements about what the financial standards are And we will pay in my view a very heavy price for that when the next financial crisis is is is threatening us And we've of course we failed to get the global growth pact that was promised in 2000 2009 Can to answer the first question The world rise above these national protectionist sentiments And accept it needs to act globally And can america in particular Understand that its problems cannot be solved by a more protectionist response within america But relies on it seeing that it's a vital part of the global economy and depends on the global economy I I think you can persuade people that is in the national self-interest to act In an internationalist way And I think that's really the challenge that the second this g20 faces in november We managed to persuade people to do that in 2009 because there was a huge crisis And now in 2011 there's another kind of crisis I think we can persuade people to do it But to be honest it does depend on people going back from here to their own countries and saying There is no national only Solution to many of the problems we now face in the world You can't have financial stability without all countries participating in financial arrangements You can't have growth to the level we want without an ability to cooperate with each other We saw premier when making an approach and a suggestion yesterday I think now the rest of the world should follow that up and say look Let's get back to the global growth pact idea and let's see if we can coordinate our policies And that will depend on america having a plan not just for america But america having suggestions about how it has a plan for the rest of the world a sort of martial plan type idea Coming out of america would be something that would be incredibly powerful As a result of the proposals made by premier when and others Giorgio do you fear that with the 14 months of political Electioneering in the united states and america now focused on home as the president puts it That this in its own way is going to handicap the chances of creating the good governance for global growth Which all of you are asking for I think all governments are responsible first and foremost to their own people Um That is an inescapable reality It is each in its own enlightened self-interest to cooperate On issues of common concern like the financial system climate change pandemics Terrorism and so on but only up to a point And if there's conflict between your domestic considerations and your international responsibilities Then well through peer pressure through Variety of means we should try to find a good optimum But the world is going to muddle along as it has for much of its history I mean For how long in history have we been globally coordinated? And that did not stop the rise and fall of Empires and great economies China and India are going to grow whatever happens to the global system And three billion people joining the global middle classes. I mean that can be a bad thing for the world But of course we are more interconnected as never before and where we can coordinate We must coordinate and there's got to be a growing sense of common humanity of all of all of us belonging To the same community that will take time. It requires education. It requires goodwill requires leadership But I think that will come so I I'm all in favor of what the governor has proposed in terms of greater global coordination Provided that it reinforces the necessary internal restructuring without which the system Cannot be stable, but can I just press you you talked about muddling on Could the muddling on go on for even longer because of the American political process over the next 14 15 months politicians React best when there's a crisis and leadership is most they want to get reelected as well. They want to get reelected as well Gordon brown Gordon brown the issue of muddling on do you fear? I mean you're you've written about you and you have so much experience of the us political system But do you fear that what is now going to happen? And the complexities of american politics and the inevitabilities of what's happening will slow down the process To produce that unity you're looking for well. I think I think the problem is america Will tend to look in on itself Rather than understand that the solution to its problem lies With coordination with the rest of the world. Do you fear that well the american political system will will push people into more protectionist positions Unless people decide that they've got to find another way of solving that problem I can't say i'm a great advert for putting forward international solutions and persuading national electorates because At the last election in britain. I was very clear that If we didn't take the measures that we were taking then growth would falter unemployment would rise Our deficits would not be solved because we would have problems of low growth leading to less tax revenues and leading to Higher unemployment and and we're seeing exactly that happening But people preferred to take what I think was a more parochial view of the world and said look The debt in britain is a bigger problem And growth can wait For a solution to the debt problem now. I think i'm being proved right obviously, but equally at the same time I've got to show you if i'm proposing a global growth pact that we can go beyond these protectionist answers to Individual countries problems and I think it requires people to have a sense Of the urgency of the problem which is coming Which probably wasn't there a year from now a year a year ago But also a sense of what can be achieved and to be honest a year ago premier when did not say That china wanted to be part of an international solution To the problems of european and american low growth And at that time we did not have the pressure in the same way that we now have from different parts of the world For political leaders to respond So i'm more optimistic than it was a year ago that political leaders can come together But at that time, of course Now we've got to be more pessimistic about the world economy because we're moving into a Down term that we did not anticipate when we came out of I want to get one more question if you don't mind Are you in an agreement here? I was just saying that for me what premier wen said is the most important thing but what happened this week is new And comes from a very sound analysis of china's need for health european and us economy and a willingness to help them And do you fear the impact of the american political process on this process? Yes, I do but democracy has a cost And I think that's a cost of having one more question. Please you've got the microphone From the brazilian newspaper study of san paulo is the grease the full avoidable or the faster it comes the better Well, I mean I can see the way things are going to work themselves out over the next few months So it's not a question which is which way it's not a question of whether you predict It's a question of what you see now happening around you People do not believe at the moment that greek can come through without a default That's that's the position that the markets are now are now taking People fear a bank run in in greece and elsewhere Instead of being alarmist about it and trying to make predictions I would prefer to say look here are the things that now need to be done To avoid some of these scenarios becoming the the the if you like the The dominant set of events around around europe And I would say that you've got to get a grip of the banking problem And I would say you've got to find a policy that returns you to growth And then you've got to be in a position to deal with the the deficits which has Has been said in this table over across europe Deficits are about five percent of gdp and debt is about 80 percent of gdp Deficits are half those of america and japan You've got to be able to find a way of sorting that problem problem out recognizing that that is the The central set of problems that europe faces you need a banking answer You need a growth answer and you need to deal with the fiscal problems over time Dejan should greece be allowed to default or should we expect it now to default? I don't think they will I don't think they will default I think the market thinks they will default I don't think they will because the consequences on the banks in particular Are too significant particularly in front and in germany and I think they won't default But if I can just throw in another thing that really worries me and that I take from my business We've done a study of pensions and aging and demography And if you look at fiscal sustainability all other things being equal in the european countries Don't do anything their budget deficits are going to go from five percent today to about 18 percent by 2030 2040 Just mechanistically under the weight of a changing demography So that's one more reason to say that the deficit issue is absolutely vital It must be tackle and debt to gdp will go to 250 percent. Thanks for cheering us up to jan That all depends on your assumptions about growth The assumption is that europe's trend growth rate is now less than 2 percent But we've already reformed absolutely And the question is whether you're going to base all your assumptions about the future On assuming that europe is incapable of returning to a higher level of sustainable growth You've got to create the structural reforms that make that growth happen Let me offer this view. It may sound a little provocative, but if Greece were to leave the eurozone Then it's more likely that the eurozone can be saved and the restructuring for everybody would be less painful And you will have an illuminating effect On domestic politics throughout europe At that point i'm going to have to pause i'm afraid and ask you For your patience that it's it's time to wrap it up on that provocative note. George. Thank you very much I'm sorry. We can't debate it any further, but thank you very much You've had a very clear message of how global growth can be governed