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tv   With All Due Respect  Bloomberg  July 30, 2016 9:00am-10:01am EDT

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prime minister, thank you very much for making the time to talk to bloomberg after what has been a very difficult week for turkey. you especially about the future, the next steps for turkey after successfully stopping the coup. had, wetion we have have heard a lot from investors and markets in the past week, is purge going one
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now go? how many more will grou be removed from their positions? p.m. yildirim: thank you for giving me this opportunity. i can say frankly turkey save itself from a very big problem. unfortunately, there was a bloody armed coup attempt. it was overcome by the resistance of our nation and the stance of the government and president. things have gone back to normal in our country. those people who were the reason for this coup, nobody could expect them to get themselves out of the situation easily because we have 246 martyrs and thousands of wounded. we will hold them accountable for all they have done. when we investigate their actions, we will not move with feelings of vengeance. instead with justice and airness because turkey is state of law and we will do whatever is expected for the state of law. how deep will it go? it will be up to the judiciary, not the government, to identify
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this. most involved in the coup attempt have been handed over to justice. i don't think there is a high number of people left upcoming. riad: the president did raise the possibility the state of emergency might be extended beyond the current three months. what are the parameters that would determine whether this is required? p.m. yildirim: think of france. there was a terrorist attack. the first state of emergency was not sufficient. it was extended twice. the last for six months. we are not advocating an extension. completedays we cannot investigations, we will eliminate the emergency rule. if we can't, we will not overlook the possibility to do it. the events in france and turkey cannot even be compared. there, there was a terrorist attack and people lost their lives. here, there was an armed attempt to quash democracy and change the regime of the country. there was a serious attempt to end democracy in this country. compared to france, we have more
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justified reasons to declare a state of emergency. i would like to specifically point out the state of emergency is based on the constitution. according to our constitution, there can be a declaration of state of emergency under four conditions. one is when there are severe economic conditions and you cannot meet these needs. secondly, if there is a natural disaster. thirdly, if there is any attempt to change the regime of the country against the legitimate government. then you can declare a state of emergency. this is the provision of the constitution we are using to declare the emergency rule. we should point out the state of emergency is not for citizens. it is declared for the state. it is a state of emergency for the state and government. why? because we need to eliminate the consequences of this coup with the necessary legal processes, performs, and structural changes, and eliminate all conditions that might allow other coup attempts in the future. riad: when you speak of reforms you want to implement, it sounds
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like you want to speed up certain reforms during the state of emergency. do you have any specific reforms and measures in mind? p.m. yildirim: yes, very naturally. the first decree has already been enacted. what does this include? first of all, there are many people that have been detained. we need more time to question these people. we increased the detention from four days to 30 days. on the other hand, there was another provision to designate people who lost their lives during the coup attempt as martyrs because it brings certain privileges for their next of kin. in addition to this, schools and hospitals owned by the terrorist organizations are now confiscated. we only confiscated the ownership. their activities will not be interrupted but will instead be operated under the state supervision. managerstitutions' and directors will be taken to the courts.
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it was another provision of the same degree. those people who have participated in a coup attempt, along with the members of the terrorist organization and members of the judiciary, another provision was meant to lay them off. there will be other measures that will follow this. what are these? first of all, there is a serious need to restructure the armed forces. we have seen during the coup attempt there is a security weakness. there are some problems in the chain of command. we will take relevant steps in terms of restructuring to eliminate these weaknesses. we need certain steps for further democratization. furthermore, we have certain measures we need to take for the economy. but they will not be considered in the context of this state of emergency. they are going to be tackled in normal sessions of parliament. if you want, we can go into details of these measures. riad: you already said the measures you are taking will not fall under the state of emergency measures, that they will be undertaken under normal
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parliament reprocess. -- parliamentary process. of the cost of the coup and aftermath, has there been any estimation of what the cost to the turkish economy has been of the coup and the purges of many institutions following that coup? p.m. yildirim: the coup attempt had an economic effect on the turkish economy. s&p medially decreased our rating. i think that was not an ethical standpoint it took advantage of the situation. we are a nation that has overcome a major coup attempt great we struggled to keep democracy running. such agencies should not be rushing into the situation, should not be deciding immediately. we would have expected them to wait and then decide. this was something that was saddening to us. if you look at the indicators, the turkish economy did not deserve this. when you look at european countries, debt is considerably
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higher than our debt. when we look at that as a proportion of gross national product, it is around 32%. this is at 116% in european union and oecd countries it is 93%. there's almost no country in european union that has met this criteria. but since the 2009 global financial crisis, turkey has had a very smooth performance. the banking sector is very strong and the capital adequacy ratio is 15.5%. this is almost double the 8%, to taking into account all these factors, what criteria do you have to cut turkey's rating? this is not based on scientific or economic criteria. this is an ideological and political decision. we have no doubt about that. of course, we are identifying the damage to the turkish economy. there has been damaged. but i am saying this to give you an idea of the dimensions of the damage.
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when we had a crisis with the russian federation about the russian aircraft, there was some movement in our economic indicators. the movement in the coup attempt have been similar to that. it has not been a devastating effect on the turkish economy affecting all economic values. this was not such a change. there was a minor decrease in the stock exchange. there was a simple fluctuation of the exchange rate. in interest rates there has been some movement. but these are all temporary. i believe in the coming days they will go back to normal levels. ♪
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forecast, it was a strong first quarter for the turkish economy. however, it was very much dependent on consumer spending and government spending. private investment has not really been a great contributor to turkish economic growth in
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quite some time. improvement in net foreign investment into turkey at the beginning before this coup attempt. is it of concern to you that this might now lessen, therefore putting pressure on the turkish deficit the account that remains the third-largest in the g 20 nations? p.m. yildirim: first and foremost, we should make clear from january to july 15, the turkish economy was one of the five major economies that had the highest growth rate at 4.8%. in the european union, we are at the top. we are behind india and china, so growth has been good. the current deficit is narrowing. we have a budget surplus and no restrictions on investment. we have this at a time when global commercial activity is struggling and all around there is conflict and war.
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despite all of this, the turkish economy has been very strong. last year, employment rose by more than one million. since the 2009 global financial crisis, we created more than 7 million jobs. all of this is going very well. we faced a could attempt we were not expecting. of course, this will have negative ramifications. foreign investors are possibly confused about security and safety in turkey and whether they should invest or not. we can pretend it never happened. it did. what we are saying to global investors is this has come and gone and the national will and the will of the citizens has destroyed the plot. life is back to normal in turkey and you can continue your long-term investments and we will eliminate obstacles before you. we are laying out the turquoise carpet in front of investors. we have all kinds of tax incentives, investment incentives with a lot of thought behind them. we are giving priority to value-added investments, taking into account all this we are planning measures that will
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encourage investors to make medium to long-term investments into the real economy instead of portfolio investments, short-term bonds, stocks, etc. there are important measures being worked on. we have three packages that have been planned. the first package was debated in parliament and enacted. it reduced the cost of establishing a business and allows intellectual property to be used as collateral in addition to tangible assets. those who invest in the eastern region will be exempted from some basic burdens such as social security contributions for five or 10 years. we will continue with large-scale investments without putting our foot on the brake. just before the religious holiday on june 30, we opened the bridge. on july 26, the third bridge will be inaugurated. 2018, weginning of will have the first terminal of the largest airport in europe which will be inaugurated december 20. we will have the inauguration of the eurasian tunnel.
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in 2016, we will lay the cornerstones for another bridge, the longest bridge in the world. turkey will continue investing without slowing down. we overcame the 2009 crisis by increasing investments. the only problem we have is the savings level is not at the desired level. savings are around 15%. we want to increase it to 20%. this is not something you can do overnight. what are we going to do? we are going to do large-scale investments, produce more, increase our gross national income, increase employment, all of which will lead to higher savings. our fiscal deficit is at a level that makes it possible to increase investments which means stimulating the economy. riad: are you planning to increase investments? p.m. yildirim: definitely. investment, production, exports. we want to increase all caps are of them. we do what -- we want to target
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the real economy. riad: you are willing to accept higher deficits in the budget for this year and next year than originally planned? p.m. yildirim: when we compare with other countries, our fiscal deficit is at a very comfortable level. we will use resources for investments that mean getting the economy moving. when you bring movement to the economy, it means growth. and of course, the quality of growth is important. it is not growth through consumption but growth with production. we believe investment is important. investment is then turned into production. production is turned into commerce. commerce means increasing purchasing power, the national income. this is a plan which everybody can understand. very simple. but of course, we will not be making any compromises on financial disciplines. the banks are going to keep their loan provision criteria. our banks will shift to a mentality of loans directed toward economic growth without to be generating on their lending criteria -- capitulating
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on their lending criteria. if necessary, preferential rates will be applied to priority areas and the difference will be paid for by the state long-term guaranty fund. in terms of baking, turkey is much more advanced in many other countries. just yesterday, there was a could attempt in following the two there were such warnings. it just yesterday, the bank made a request to increase capital. sector can private get credit from all over the world. after the coup attempt, a turkish company got credit of 230 million turkish lira to issue bonds and 40% was purchased by foreigners. before, the term was three years and this was four years. why? because there was demand for the 500 million. another company just got a loan from the european bank for reconstruction and development for 50 million euros. this shows the trust felt towards the turkish economy is still there.
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any doubts that some are trying to create over the turkish economy we don't believe they are stemming from goodwill. manipulations of this kind cannot disrupt the turkish economy. they are not that powerful because there is a great nation that stands behind this country and we saw in this coup attempt. riad: you mentioned the government would increase investments in productive sectors rather than investment on social spending, but more on the investment side. that would mean it would reinforce in the way of growth that the economy has sinned -- scene which has been dependent on government spending. are you planning measures beyond what you mentioned to encourage private investment rather than foreign investment in bonds and stocks but also maybe direct foreign investment into the turkish economy? are thereelaxing --
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plans to relax labor laws, for example? p.m. yildirim: in terms of flexibility in labor law, we have already brought this flexibility. the international labor force bill is in parliament. the research and patent law are also in the cleaner he of the parliament -- plenary of the parliament. a reform package will be debated in parliament and there are measures encouraging private retirement mechanisms. we are establishing a fund for asset management. we are going to finance investments through this fund instead of the general budget so we will opt for this rather than relying on our general budget so our budget balances will not have any problem. the turkishn in private sector is different from that of other economies in the region. the turkish private sector is a global after. we have european partners big we have partners from the far east. the turkish private sector is a global actor.
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we had european partners. we have partners from the far east big that means we are an economy open to the world. the private sector can meet its own needs. this is something very important. they don't need us. they carry out their negotiations. they have their own warranties and safeguards. they get their own loans. so the turkish economy, the private sector, is even more liberal than the state. so we have no problems with regards to that area. they are able to meet all of their needs for future investment and meet the requirements for loans. what will happen if they have any form of difficulty? then we will be beside them. we have a loan guarantee fund which will be involved in that situation. there will be restructuring and business will run structure -- smoothly as before. they will continue to fulfill their commitments, pay their debts, and continue to work and create investments. we see the economy like this. we are aiming to make it thrive, not to kill it. riad: so you're not planning any emergency measures in the next few months?
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you have setasures are already in parliament? p.m. yildirim: in terms of the economy, no. in terms of economy, there was already a package of promises before the coup attempt. the first part of the package has been enacted. the second part is being negotiated in parliament. the third part is going to be brought to parliament. while we are enacting all of these, we will not need any additional actions to be taken regarding the economy. parliament is continuing normal sessions and these measures are going to be passed through parliament. on the other hand because we have the power of the state of emergency for security and stability of the country, we are taking measures to destroy these terrorist organizations. these are two separate things. we are not thinking about issues pertaining to the economy when we think of the state of emergency. those are things that are going forward under the normal reform process with parliament and the government. the economy is a den of extraction.
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there could be some developing you might need to take precaution for. you will take that precaution. these are things you have to decide in the moment. ♪
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when you became prime minister, you said changing turkey into a presidential system, presidential democracy, was your priority. has anything changed in that after last week? for example, especially regarding the timeline of that change, are you still considering a referendum should parliament not pass this as you desire? is there a possibility of early elections? p.m. yildirim: early elections are out of the question. i am underlining this and being very clear about it.
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there are some circles trying to confuse people by saying the ak party has been strengthened after this coup and will go for an ambush election. this is not even crossing our minds. we don't find it ethical. we have been given authority by the nation for four years and we will use this authority for four years. if anybody a to confiscate this authority from oscar -- from us, we will fall on their heads like a slant hammer and we did. anyone thinking about doing such a thing should watch their step. we had elections three times last year, so we have no time to lose with an election. or us, election means slowing the economy and halting government plans for the future. secondly, the presidential system is not today's matter. the writing of a new constitution is something all political parties in turkey have desired over the last 15 years. the presidential system is something that needs to be discussed within the framework of the debate on the new constitution.
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as the justice and davone a party, we do not have the majority to make a new constitution or change the system so we need to agree on this in parliament. we need at least 330 votes to bring the proposal to a referendum. currently, we don't have that majority. we are extending a call to all political parties. we are telling them we should act together to meet the needs of the entire population of 79 million of this country so everybody owns the constitution and it is presented for the approval of the nation. this is our position today and it was the same position yesterday. why do we need a presidential system? it is necessary for security and stability. under the system, there would be no one attempting such a venture because an absolute political will would be in charge. a weak government would encourage coup plotters and there have been several such attempts during the ak party r eign.
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with voice succeeded in thwarting them because the nation is behind us. if the nation is not behind you, you will be crushed. cannot andhe parties supported the government against the coup attempt. do you see opportunities there as well to try and resolve this issue? this isdirim: of course not something we have tested, but we hope it will be so. i am hoping this will be the case. we have not abstained from this plan. just because there was a coup attempt, it does not mean we will abstain from everything. just because there was a coup attempt, it does not mean we will abstain from everything and will be taking a step back. this should not be expected from us. we will do our utmost. if there's any sacrifice we must do, we will do it. it is enough we are constantly discussing the problems and not leaving them out there. let's talk about the problems.
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but let's take steps for resolution because time has a cost, too. sometimes, it is more valuable than money. you can earn the money you have lost but you cannot get the time back that you have lost, so work on reforms will continue without slowing down. riad: prime minister, thank you very much. p.m. yildirim: one last thing i would like to say, if you allow it. the turkish economy is strong. investors should not have any worries whatsoever. global investors can be comfortable coming to turkey and continuing to make investments. of course, there was a coup attempt. we cannot pretend it never happened. but we have such a strong nation that we immediately overcame the impact of the coup and turned it into a celebration. we have such a strong economy that we escaped this coup attempt with minor wins, so to speak. we did overcome this coup attempt. we are extending an invitation to global investors. turkey is a safe harbor in this time of ongoing global crisis. and i say it is one of the best
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countries to invest in. riad: thank you very much. ♪
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♪ narrator: the challenges facing our world are growing all the time. how do we build stronger economies with equal opportunities for all? how do we build a sustainable world for generations to come? how do we protect our cities and harness the power of technology for our common benefit? humanity has always been good at forward thinking. in this series, using the latest bloomberg research and analysis, we will make sense of the problems of tomorrow,
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sustainability, urbanization, the gender gap, the march of the machines, and the demographic time bomb. and in this film, inequality. it is the issue that preoccupies economists, politicians, and campaigners. what does it mean for the security of our society and strength of our economies? ♪ narrator: our world is a divided and unequal place. >> in a competitive economy, you will always have some inequality, and those who are successful and those who are less so. the issue is the extreme. >> 1% of the wealthiest populations hold half of the world's wealth. 62 of the wealthiest people hold the same kind of wealth as
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the lowest 50% of the world population. it is a very striking statistic. >> if you look at ceo pay, it has gone from 50 times the average worker 30 years ago to 300 times now, potentially not only an issue for investors, but an issue for workers. ♪ narrator: inequality has become the hot button economic issue of the 21st century, but worrying about inequality is not new. >> if we look way back into u.s. history, we saw dramatic income inequality in the gilded age, the 1880's and 1890's. and that went so far, then collapsed, and policies were put in place by a number of presidents and administrations to equalize the playing field. labor laws put in place, tax laws were changed, and that prevailed through the course of world war ii and into the 1960's.
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but then by the 1980's, tax laws were changed and the economy had changed, and so from the early 1980's to the present, we have seen income inequality on the rise. it matters because income inequality eventually contribute to wealth inequality. with wealth comes power in terms of politics and corporate leadership and lots of different facets of the economy, and so when much wealth is held by a very few individuals within an economy or country, then those individuals tend to have an outsized degree of control over economic and political policymaking, and therefore they are able to incorporate policies that will even further increase their levels of wealth. ♪ narrator: inequality is about more than fairness. economists worry that extreme levels of inequality can have dramatic affect on corporations
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' finances and governments. >> it really affects the pace at which the world economy is growing. so to give you an example, the wealthiest as they get more money, they spend less of the marginal dollar. so this way you get less consumption and consequently less growth in these economies. that is one kind of the consequence. another thing is that lower and medium income families tend to work more to support their consumption and it creates risks. narrator: some of the most dramatic levels of inequality can be seen in the developing world. here, inequality appears to have a corrosive effect on the whole economy. >> something else we have seen in emerging markets is a correlation between inequality and corruption levels, where
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government is not effective, or has good education in place to have everyone succeed. if you look at the arab spring in north africa and the middle east, the root cause was economic opportunity. so if you have this extreme inequality and the lack of economic opportunity, you potentially have political unrest. ♪ narrator: if you are at the top of the pile, it is tempting to think inequality does not affect you. but this may be dangerously complacent. >> clearly inequality is bad for people at the bottom, especially at the bottom that is very low. at the top, there is a potential risk to what could extreme inequality bring? could it lead to political unrest, new rules, new taxation? in the short term, even if you are at the top of the economic pyramid, you may be very happy
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with your position, but long-term there is potential for change which may be destabilizing. >> if you think about it in a broader sense and think about economic growth in future generations, it is the best thing because that actually could impact economic growth in the world, so i would say that it is a problem for everybody. narrator: one global economist is convinced that global inequality is dramatically affecting human life even in the richest part of the world, and if we want to maximize growth and social decision, it is an issue we cannot ignore anymore. >> absolute income inequality is where we have to have a debate. there are knock on effects, whether in education access, health care options, but also political and life expectancy challenges. it is very much the case that income equality is now a driver
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in some of these other factors. ♪
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narrator: inequality is one of
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the most hotly debated issues in economics from new york to nairobi. dambisa moyo is a global economist. her work for the world bank and wall street has named her one of the most influential people in the world. she is fascinated by the biggest trends in economics, from the politics of development in africa, to the price of commodities in china. now she is turning her attention to inequality. dambisa: income inequality is particularly problematic in as much as it is a defining factor in many societies for where a society's living standards are going. the data on income inequality has shown that it has grown worse over the last couple of decades. in fact, over the last 30 years, we have seen income equality worsen across the united states, the united kingdom, and across much of europe. in the same vein, we has seen the average income of the top 1%
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in the united states today is 30 times the average income of the rest of the population, the 99%. compare this with 30 years ago, 1978, when it was simply 10 times higher for the top 1%. ♪ narrator: economists worry that inequality ushers in a range of social problems. recent studies in mexico suggest that neighborhoods with high levels of inequality may suffer more violent crime than those where inequality is less pronounced. researchers in other nations have come to similar conclusions. dambisa: a problem with income inequality is the implications and impact it has on a society. the question being is it possible for people of different income levels and without the prospect of improving their lives to live cheek by jowl?
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in the u.s., the bronx is the poorest congressional district in the united states, but it is also 20 minutes i train to one of the richest stops to the upper east side of manhattan. there are real questions around whether living cheek by jowl is actually long-term sustainable given the crime and destitution. there are knock on effects for other forms of inequality, such as health and education, and of course political inequality. in the united states, approximately 158 families are responsible for approximately 50% of campaign funding around the u.s. elections. that really does pose a question about where democracy stands and how that might play into political representation of them in the democratic process. ♪ narrator: americans have always
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prided themselves on levels of social mobility within their country, the ability of people to get ahead whatever circumstances they were born into. but some recent evidence suggests that this is changing. dambisa: there is a more fundamental aspect to dealing with the income inequality challenge, which i argue involves social mobility. social mobility involves people's beliefs and access to improve living standards and their livelihood over a certain period of time. i think the cost of income equality is the breakdown of social mobility, particularly in western societies. to give you a flavor of that, today in the united states, if you are born into the bottom 20% of the income level, then you have only 5% chance of ending up your life in the top 20% without a college degree. clearly that suggests that income inequality is widening, and i think also it shows that
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there is a real issue around social mobility and people's ability to transform their lives and move into higher levels of income. ♪ narrator: as well as hindering social mobility, extreme levels of income inequality may depress growth across whole economies. >> the reason that this is so important is that the oecd estimates that this is causing -- costing developed countries 8.5% gdp points over this period. put another way, because of income equality and the widening effect of the gap between the richest and poorest in the u.s. and across europe, we have seen gdp growth slow by 8.5% over the past 25 years. today, there are real concerns about how this bodes for the longer term in the future. a lot of projections now show that economic growth will be
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slowing, and obvously knock on effects of income equality are likely to be worse. ♪ narrator: this means that inequality is not just a problem for those at the bottom of the economic pile. chronic income inequality may well affect the social and economic health of everyone. dambisa: if you are wealthy and living in an urban setting, for example, the fact that you are every day living with people who have that lower income level, but more importantly, have fewer prospects to improve their livelihood, has an absolute and direct impact on your safety, but also on your own living standard, to the extent that society as a whole will not be growing. and so it is not just about lower living standards for that proportion of society, it's about a lower living standards for the entirety of society because the growth of the
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society is highly linked to how the average person in that society is performing. ♪ narrator: dambisa moyo believes that the key to tackling inequality lies in reactivating social mobility. but to do that, basic needs such as health and education must be catered for first. dambisa: i think the thing that is of paramount urgency is to ensure that all citizens, and particularly people who are at the lower levels of income, are seeing improvements in their living standards over the long period of time. the underlying challenges of income equality in a broader sense, which i would argue are hitched to the idea of social mobility and the challenges there. narrator: but social mobility is propelled by economic growth, and without economic growth, inequality will rise. dambisa: just to be absolutely clear on that, we need to aim for at least 7% gdp growth every
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year in order to double per capita income in one generation. we are far below that target, so it is really the case that we do have real issues around what the long-term prospects for economic growth are. therefore what the long-term prospects of social mobility and our ability to reduce income inequality. ♪ narrator: if the problem of inequality is worrying, then it is compounded in countries with fast-growing, young populations. if these economies are to have any chance of tackling inequality, they must create millions of jobs first. ♪ dambisa: beyond just the developed countries, there is a real concern around income inequality widening, particular in the faster growing, larger emerging market economies such as brazil, india, and south africa. today, there are approximate 85 million young people in emerging markets between 18-25 that are
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out of work. if we are going to try to solve the income inequality challenges, we have to make sure we have growth, but we also have to make sure that we are providing incomes that are growing for this young population. we also have to make sure that people have improved access to education and to health care so that they have the social infrastructure to improve their lives and therefore support social mobility. without those factors, there is a real risk that living standards of not just the impoverished percentage of the population, but society as a whole starts to deteriorate. ♪ narrator: south africa is one of the most unequal countries in the world. here, the consequences of inequality on the safety of society are visible and real. but businesses are trying to restart social mobility and save the economy. ♪
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narrator: inequality is one of the defining challenges of our age. in south africa, the most unequal country on the continent, its consequences can be seen in the continuing poverty of large parts of the country, and the visceral crime in the wealthiest suburbs. >> taking a look at the big picture and the well-being of a country in the long run, it is very unhealthy to have this dramatic distribution of wealth and inequality. it would not be a successful model to live in the world where the halves are isolated in communities with very high walls around those communities while the have-nots are sitting at the gates begging for table scraps. ♪ narrator: in south africa there are more private security guards than police officers. they patrol the country's gated
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suburbs in the most visible example of an unequal society. >> crime is bad, in your home, out of your home, basically all over. i don't want it to sound terrifying. we live with it and have good lives here, however, trying to keep your family safe, your home safe, has become more and more difficult, and that is what we focus on. narrator: css tactical is a johannesburg-based south african security firm employing 750 people. >> multiple layers of security. the vehicle is not just sitting under a tree waiting to be dispatched. they are present in the area, they are patrolling, driving up and down the streets, and we have very intelligent software that alerts to unusual behavior, so if you're walking down the street at 5:00 afternoon going to work, it's more normal than
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-- other than sitting under a tree waiting for an alarm to go off. narrator: fear of crime is splitting johannesburg in two, the city experienced over 21,000 burglaries last year. >> johannesburg is the financial capital, so hence a greater concentration of wealth and wealthy people and lots of stuff to steal, lots of stuff that you can see to steal. there is a massive difference between the haves and have-nots. unfortunately, people have seen the crime as a way to make a living. ♪ narrator: south africa is now more unequal than it was under apartheid. but some businesses across the country are actively trying to address this and get social mobility moving again. >> i was pregnant with my first daughter and i was at home.
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we lived on a farm, so i was home during the day. i would talk to the ladies who worked in the fields next door and that sort of thing. and they were picking whatever, but they really had inside of cash had so much inside of them, but no opportunity to go anywhere. there was no opportunity for training or to get a bit further or anything. and also what i realized, there was no power possibility. erin, along with her sister , decided to set up a health spa. the plan was to recruit their staff from among the rural poor. >> it was literally a couple of ladies from the field next door, so everybody went home and found sisters that were unemployed. we trained them up. i realized the importance and what it could do in south africa, very quickly. realizing the amount of lives
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you could change. ♪ narrator: christine buthelezi was one of the first women who was employed. christine: i was on my way, i remember one weekend, going to church, then i met a maid who gave me a lift. she started chatting to me, are you working, what are you doing at the moment, are you still at school and everything? i said, no, i'm working at a farm, a chicken farm. we were paid like 20 per day. then she said, but why don't you come and join? i said after a week, have got nothing to lose so i went for my , training. from there, i started working at the spa as a therapist. i started at the bottom. i really enjoyed it. within three months, i moved into becoming one of the managers, and then within a year, i was promoted to be a general manager, which for me is such growth in such a small time. ♪
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narrator: it has become a prolific job creation scheme. it is expanding across south africa and propelling women like christine from rural poverty to managerial positions. >> we estimate that we have trained about 20,000 people. we had ladies who have been with us for eight years to nine years and had reached the top. they were now managers. i am also proud to say that every single one of our spas is run by a lady who came up through the ranks. narrator: she is going further, rolling out plans across her spas to give shares of the business to employees. >> at the moment, i own 30% of the business. i wanted them to be part of the business, because when you're doing that many treatments, you are giving so much of yourself. narrator: by training staff, giving them a route to move up, and offering them a stake in their own business, she helps to tackle inequality in south africa.
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>> i can look after my kids. i can look after my family. we've got so many families that we take care of, like i am a breadwinner at home. everybody depends on me. as much as you have the other people that are working, but most of the time, i the one who am is taking that whole responsibility, so it has given us hope. it has made us dreamers. narrator: inequality has come to define south africa's economy, but if more can be done to reactivate social mobility, there's a chance it won't be the case for long. >> when households are in a grinding state of poverty, they can contribute a whole lot to economic well-being. so as lower income demographics are lifted up into working-class or middle-class thresholds, they tend to be better educated, less
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crime, much stronger family structure, and they tend to be a lot more productive in terms of the economy. and they also consume and invest a lot more as well. a strong middle class, a strong working-class, is really the backbone of a healthy democracy. >> i am cautiously optimistic about the future. i believe that the path towards a world of economic growth, of social mobility, and improved income inequality statistics, is one possiblity, but not without there being hard choices. whether it's improving social mobility, increasing growth, we have to address those actors to avoid a situation where a society and members of society become so disappointed. ♪
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john: i am john heilemann. mark: i am mark halperin. >> can you please keep it down? we are trying to make history here. ♪ welcome to this addition of "best of with all due respect." hillary clinton became the first female presidential nominee of a major political party. star-studdedtoric democratic convention and donald trump found ways to make headlines. let's start wiil

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