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tv   Fareed Zakaria GPS  CNN  March 6, 2011 11:00pm-12:00am EST

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he has one of the best lawyers in hollywood. published reports there's no morality clause in his contract so he may have a good case. the network knew who they were getting in bed with. his problems go back at least two decades when he shot his then fiance in the arm, and he went into rehab and the heidi fleiss girls so they knew who they were dealing with so this idea they are suddenly shocked about his behavior. i don't try. >> catch jane's show at 7:00 p.m. on hln. i'm don lemon at cnn headquarters in atlanta. thanks for watching. have a great week. this is a "gps special, restoring the american dream and getting back to number one." welcome to all of you in the united states and around the world. i'm fareed zakaria. i'm going to begin with a cliche. we face new challenges in a new world. now that much is obvious, but it seems very difficult to get the american system to recognize that this means fundamental
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change, radical change. both political parties play the usual political games. no one seems ready for big compromises, big sacrifices. it's as if we can afford to tirng because in the end we're so rich and strong and it always works out. after all, we're number one, right? the most exceptional country in the history of the world >> i believe in american exceptionalism. >> the exceptional character of the nation we serve. >> this belief in american exceptionalism is something that every new generation has got to make its own. >> this is the greatest country in the world. >> i think this is the greatest country in the world. >> the greatest nation on earth. >> now i'm an immigrant. i am not an american by accident of birth but by choice. i voted with my feet and came to this country. so, of course, i do believe that america is exceptional, but i think it's important to examine the facts carefully to figure out just where we stand in
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today's world. america is indisputebly number one by some key measures. we have the world's largest economy, military, scientist establishment, the biggest technology companies. we are just as indisputebly falling behind in many other key areas. well behind other countries. let's take a look at some recent rankings. the united states is the fourth most competitive country in the world economically. good. we're only fifth best country in which to run a business. america's enrollment rate for elementary school, however, ranks 79th in the world. we're only 12th in the percentage of college graduates among rich countries. america's 15-year-olds are ranked 19th in science and 24th in math. our infrastructure ranks 23rd. we're 41st in the world on infant mortality, 49th on life expectancy. perhaps most worrying, america is no longer a place where anyone can make it. last year the oecs issued a
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study of social mobility across generations, basically that's how likely is it will you jump out of your parent's income group? the u.s. did surprisingly poorly coming in behind denmark, norway, sweden, germany, france, canada. two other such studies confirmed this reality. now, i know what my perception is about america. anyone can make it here, and there are lots of high-profile examples of that. but those are anecdotes. the facts say that for the average joe in recent years social mobility has slowed and other countries have moved ahead. similarly among rich countries over the last 25 years our growth rate per person has not been the strongest. now there are clearly places where we are still number one and the number of guns we own far exceeds any other country. we account for 50% of the world's annual production of weapons. we are number one in terms of our total debt to other countries, but there are really many positive places where we are still number one. that's what i began by listing. but my point is the picture
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today is a lot more mixed than boastful rhetoric about america is number one suggests. the question i have really is what would it take to keep america clearly and comfortably at the top and to restore it to that place in areas in which it has slipped? that is what we will be looking at in this hour. it's also what i look at in "time" magazine this week. check out cover at yours newsstands or go to we've got a great cast of characters to help us understand what's going on here. >> if you look at the replay. >> they are hans rosling who will explain why we seem less exceptional these days, harvard professor niall ferguson. >> in some ways america stands on the edge of a cliff because great powers don't gently decline. >> and joseph ny sglet united states is the most powerful country in the world, but we have to rethink what we mean by power. >> the economist dambisa moyo. >> this is america we're talking about. other countries, i'd be a bit
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more skeptical. >> and jeffrey sachs of colum why university. >> basically american society is incredibly divided, and there is a small, very rich part of society. it really runs the show. >> and if innovation is one. places where we're still number one, how do we get that spirit into the rest of the nation? we'll talk to the guys behind one of america's most innovative companies, four square. >> i think there's different ways to measure success. for me personally it's seeing really, you know, everyone in the world start to use the stuff that we're thinking about. >> so let's get started. so why is it that america seems less dominant in so many areas, that its lead has evaporated, that it's falling behind other countries? well, instead of telling you what's happening, i want to show it to you in a way that you probably will never forget. i've asked my friend hans
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rosling to come and do his magic. rosling is a professor in sweden and has an amazing way of showing the world's progression in the last 150 years. the story hans will tell you highlights the central idea we need to understand which is that this is all less about america falling behind than the rest of the world catching up. hans. >> thank you. this is the world in 1860. each bubble is a country, and this axis down here shows wealth, income per person, $500, $5,000 and $50,000 and this acts as health here. the length of life from 20 years all the way to 80 years, and the size of the bubbles here shows the size of the population, and the color marks the continent and the america is blue, europe yellow, asia red and africa green, and in 1860, almost all countries were down in the poor
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and sick corner there, but the industrial revolution had started to pull western country out of poverty. united kingdom and australia was leading, and u.s. was on the third place, and look what happened when i start the world here. as the year passed by, the population in western countries got better education, new discoveries helped to control infectious disease, hygiene improved and the life span increased and the west got health and wealthy on the same time while the rest remained in poor and sick down there. from 1900, look, united states is taking the lead and becomes the engine of progress in the world through the first world war. that was the spanish flu, and through the 1920s, u.s. is leading. it's only during the great depression that u.s. falls back temporarily and gets the lead again and through the second world war and into the cold war and we stop here 1954 at the end of the korean war, and this time the united states was on top.
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europe had fallen behind, and japan was trying to catch up here and interesting, a small country on the equator. singapore was just behind. latin america was in between, and china and india were still down here with low life expectancy and with low incomes, but they have gained their independence and look what happened after 1954. here, u.s. continuing the lead, but europe is close. in europe is closing in, and japan there, they make this amazing catch up with singapore and now the tiger economies in asia and here china and india got education, small families and health before they start this amazing economic growth where they catch in together with more and more emerging economies and they keep up the speed through the last economic crisis and here we are today, 2010, and what is most interesting here is if you look at the replay, you see this very clear how the west took off first and then how the rest is
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following and catching up. and how will this continue? let's make a projection into the future by going backwards, first. this is where china was in 1980. they had very low income over there, you know, and u.s. was all over here in the other end, and we never thought this would happen, that china in 30 years would move so much faster than the united states. if both countries would keep this same speed and economic growth in the coming 30 years, where would u.s. end up? it would end up there, and where would china end up? they would end up here, the same spot, but this is not so probable because when a country gets richer, the population get older, and it's very difficult to keep the same economic growth. we can see that on japan. so more intelligent way of looking at china is to see what already has happened today. i will split china here into its provinces. it's a huge country, and it's
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better to look at the provinces because they are so different. look. shanghai is already here. the catchup is done, and the -- the coastal provinces are in between, and the inland provinces are just like other countries in asia or middle east or latin america. now, singapore and japan were trail blazers, and the others are coming closer, and very soon china and india will come to a place near to you. >> this is fascinating, and it highlights the central idea that it's not that we're falling behind. it's that the whole rest of the world has begun to catch up. and it -- and what it suggests is that it's not so much that people are overtaking us. it's that everybody is moving into the same space, that there's a whole set of advanced countries, european and asian, that are all converging in one space. >> yes. it's a healthy, wealthy corner. that's where people want to live. i live there myself.
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it's a nice place. >> but can so many countries live there? can the united states prosper with so much competition? >> yes. i mean, it's more competition but it's also more customers. >> so you're an optimist? >> no, i'm not an optimist. that's an emotional state. i'm a possiblist state. i say it's possible if we keep peace and keep free trade and we protect human rights, we can all live up in the healthy, wealthy corner because in the end, that's where people want to go. >> that's an optimist for me. hans rosling, thank you very much. >> thank you. >> my guess is that this moment when china overtakes the united states will happen this decade in the next ten years. tdd# 1-800-345-2550 absolutely. i mean, these financial services companies tdd# 1-800-345-2550 are still talking about retirement tdd# 1-800-345-2550 like it's some kind of dream. tdd# 1-800-345-2550 it's either this magic number i'm supposed to reach, or... tdd# 1-800-345-2550 it's beach homes or it's starting a vineyard. tdd# 1-800-345-2550 come on! tdd# 1-800-345-2550 just help me figure it out in a practical,
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sense of where america stands in this new economic order? >> well, in some ways america stands on the edge of a cliff because great powers don't gently decline. they don't sort of fade away over decades. history shows that they very often collapse quite suddenly. they lose power quite dramatically. that -- that was the experience most recently of the soviet union, and i think when one looks at the fiscal position of the united states with the vast explosion of debt, before but particularly after the financial crisis, it's clear that there's a major risk there. >> if ferguson could be accused of seeing the glass half empty, his harvard colleague joseph nye could be accused of seeing it half full. if i were to ask you a simple question, is the united states the most powerful country in the world, is there a simple answer? >> well, yes. the united states is the most powerful country in the world, but we have to rethink what we
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mean by power. you know, classical american narrative of the cowboy gunslinger to put it man in the street terms, that's no longer an accurate way to think about power, but if you think about military power, yes, we'll be number one for quite some time. think about economic power, we'll be ahead, but others are catching up, and if you think about soft power, the ability to get what you want through trackson and persuasion, we're well ahead. >> let's talk about economic power for a moment because even there you tend to think that the rumors of american decline are exaggerated. >> well, i think there is a great tendency to think that china has passed us. i mean, public opinion polls show us that the majority of americans in some polls show china as ahead of the united states. i mean, this is simply not the numbers. i mean, we're three times the size of china in purchasing power and parity and even more if you just do exchange rates. goldman sachs has predict that
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had china's economy will equal the u.s. in size sometime in the 2020s. that's probably right, if you're 1.3 billion growing at 10% a year, that's bound to happen. >> ferguson says those estimates were done before the financial crisis. that the reality now is even worse. >> everything that has happened since then leads me to expect that it will be even sooner than that, because the financial crisis really slowed the united states down, and china, although it slowed somewhat, scarcely missed a beat and continued to grow strongly at rates close to 10%, so my guess is that this moment when china overtakes the united states will happen this decades, in the next ten years. >> so is the problem china, or is the problem the united states? dambisa moyo is a zambian-born economist and author who was once an investment banker at goldman sachs. if you were to look at the big picture. >> yes. >> what you're arguing in your book, it seems to me that you're
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saying that the united states created incentives for people not to invest in productive enterprises, work hard, move to the right kinds of jobs that are productive. >> correct. >> right. >> we've created a set of incentives for -- that are not about economic growth and productivity. >> that's exactly right. that is exactly right and when you look at places likes china or india, what they have learned is that by creating an environment where people want to invest and are motivated and encouraged to do the right thing, go to school, get a mathematics or science degrees, those types of things, save your money, or if you're going to, you know, invest, don't consume, invest in productive gdp-enhancing projects, those types of things. they have actually learned from the success of the west, but somehow in the past few decades the west has been derailed. >> one of the first suspects
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moyo would look at in that derailment is america's presence on the world stage, especially its vast military. >> some people argue we need the military to keep people employed. the question is what is america's role in the world? and should be underwriting global public goods at the expense of her own economic survival? >> a lot of americans must wonder that and i think would agree with you, if you were to say stop spending the money and, you know, protecting the sea links of southeast asia and building schools in afghanistan. >> i'm quite sympathetic to that. i mean, i come from the emerging world so on the one hand i do love the idea of somebody under the umbrella of justice and freedom for all policing the sea lanes, but if i were an american i may have a very different view. i may take the view, look, we've got serious problems, that will mean in the longer term we may not even be able to police the sea lanes anyway, so why don't we really fix what's going on here and get back on track and
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then we can do a better job international >> i harvard's niall ferguson says military spending does have something to do with it, but, of course, he brings it right back to the debt. >> there's a kind of magic moment in the history of all empires when suddenly they find themselves spending more on paying the interest on the debt than they pay on national security, that they arepayer paying more in the treasury securities than in the national security, if you like, and this was true for spain in the 1770s, happened to france in the 18th century and to the ottoman empire in the 19th century and the british empire in the 20th and happening to the united states now, and would i say at risk of overreaching a little bit, there's a law of history here that once a great power or an empower or hedgeman, you can call it yourself what you like, once you are spending more on servicing that debt than you are spending on your army and navy and air force, it's probably the end of the line. >> will the united states meet the same fate as the british
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the scholar samuel huntington noticed that the common mistake that americans make is assume the rest of the world is fascinated and impressed by america because of its values. they are truly fascinated by us, he clal, because of our wealth. that's what makes our values seem so special, that they help
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to produce a rich and powerful civilization. that's why the world was fascinated by britain at its peak, france when it was the center of the world, rome during its period of hegemony. every great empire seems invincible for decades and then it falls. does the same fate lie ahead for the united states, or are we, well, exceptional? let's talk about britain because we tend to think of ourselves as exceptional, having a real entrepreneurial culture, having this extraordinarily advanced economy, but, of course, britain thought all that about itself. it saw itself as the inventor of the industrial revolution, the workshop of the world, the place where all these fascinating new scientific discoveries, inventions were being created, but it didn't stop it from declining. >> the british, of course, had their own story of exceptionalism. it must be said that most countries do, and the british had good reason to believe they
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were exceptional because they real he invented the industrial revolution, so there was a sense when you went to london in the 1850s of tremendous superiority. of course, the british were the best at everything. not only were they the best at industry, they were also the best at agriculture. they were also the best at sailing. they were the best at sport. they were the best at entertainment. they were the best, of course, at empire because they had the world's biggest empire and yet, as early as the late 19th century people began to feel that it was slipping away. germany and the united states both overtook britain in the late 19th century in terms of economic size, and from then on really in the 20th century british history felt like the history of decline and fall. now one reason for that was that britain had to fight two world wars against one of those rivals, germany, and that was an extremely expensive business that eventually more or less bankrupted britain, so one has to remember that decline can be accelerated by major strategic miscalculations or
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confrontations with rivals, and i think there's an important lesson for the united states there. it's not just about economic decline. it's not just that sense of the chinese catching up and maybe overtaking the united states really soon. there's also strategic question. do you end up on a collision course the way the british did with the germans. >> once again our two harvard professors see things through different lenses. here's joseph nigh. >> do you think that there's a historical pattern here, that the british empire once ruled the rule and over time declined. is america in britain's place? >> no. i think that's an oversimplified as one historian put it. britain ruling the world from a little island off the coast of europe was like an oak tree in a potted palm container, and it was unnatural. the united states is the basically in demographic terms very, very different from britain and in economic scale
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different, in total continental size different, so i think the analogies with britain are a bit oversimplified. in addition, there's a social structural change which is as britain got rich, the british elite wanted their young people not to become entrepreneurs but to become landed gentry. in the united states it's very different. you want your child to go out and start up a new silicon valley company. you know, our best and brightest, and many of them see their path to the future as entrepreneurship. that's a source of great creativity in the american economy. >> so will america's entrepreneurial spirit save us? when we come back, you'll meet the guys behind one of america's most innovative entrepreneurial companies. what lessons can we as a nation take from the successes of foursquare? life in baltimore. 20 minutes later, she'll bring one into the world in seattle. later today, she'll help an accident victim in kansas. how can one nurse be in all these places?
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>> i think if you ask the question what is it that americans do best, the answer is it's still the best country in the world to have a really cool idea and turn it into a really profitable business. i still think the united states wins in that particular contest. >> i think niall is right. rather than have you meet a famous ceo of an american company with a long legacy, i thought we should meet with people who had a cool idea and are hoping to be able to turn it into a really profitable business, and the two guys you are about to meet, the founders of foursquare, have the idea,
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and it just might be on its way to success. their company, which will celebrate its second birthday this month, has been valued at one quarter of a billion dollars. foursquare reportedly grew by 3,400% in 2010. its founders are dennis crowley and have a neon self durry and what is foursquare? >> with foursquare we're trying to build applications for mobile phones that help the world easier to explore and people check in with foursquare all places. can you open up foursquare all over the world and give you tidbits of something you shed be doing nearby, check into coffee shops or places to eat or parks and when they get there they will let their friends check in. >> i can find foursquare on the list and broadcast to my friends and that foursquare headquarters with -- with cnn. >> so what makes you think, you
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know what, i'm going to start a company? >> you look at all the things that are out there, and no one is exactly building the things that you want to use, so the only thing can you do is build those things yourself. >> how easy was it to get financing once you had the idea for your company? >> it was pretty hard to get financing, so, you know, we -- we started working on this stuff in january of 2009, and launched it in march of 2009, and we didn't pick up financing until september and that was, you know, since months of going out and knocking on doors and hustling and just figuring out the right story to tell about the company and the product. >> if i were to say to you the president or the secretary of treasury were to call you in and say we need a lot more entrepreneurship in america. we need a lot more innovation. we need a particular technology. what should we do to have lots more of these things, these kinds of companies? >> we've actually been called for advice on similar thing, and
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i think a lot of it is two parts. one is to educate students, youngsters about, this path in life that you can do something on your own and if you fail, you start over again and if you fail, the steady job is waiting to pick you up and bring you back to where you cou be. >> that strikes me as very important. in america it seems like there's no real cost and no social stigma to failure. do you find in a? >> i totally agree, yeah, and the notion of failure is seen differently here in the u.s. than many countries, even countries in europe, for instance. and, i mean, i was traveling in italy recently and heard a lot like how do you start companies so easily in u.s. and japan it was the same thing. they all have smart engineers and really great guys working on interesting projects, but they just don't have the spark of going to start something because there's this stigma that if you fail, everyone is going to look down on you or your family won't welcome you back into the house or something like that. >> what happens if you fail here? >> you pick yourself up and try
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again. >> i feel like, you know, even in my career so far, i've been laid off, and i went almost a year without working and worked on some side projects. went to grad school and had another year i didn't do anything and then had another project that failed and, you know, it took us six months to get financing with foursquare and people have said you've had all these successes. we haven't had it yet. like we're still working towards it. >> what do you think the features or the factors that helped make foursquare possible? >> you know, there's a bunch of them. there's incubation labs. basically got like shared spaces where companies are getting together, five or six different companies, and they are trading resources and trading skill sets and able to make things happen. in new york we're seeing a lot of that is funded by the city. the space might be paid for, some of the office furniture a may be paid for and startups that need to raise capital to get things off the ground can come to these spaces and start to build something >> you think government investment is helpful. >> i think you're seeing in new
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york that it already works. >> do you think that there's something about technology particularly in america? i mean, why is it i look at germany, lots of engineers, amazing technical manpower, but, you know, other than s.a.p. there's really no great computer company to have come out of germany. >> yeah. a lot of software grew up in the u.s. because of the old projects like, you know, darpa and all the other things that brought the internet to life and big companies like ibm to what it is now so that culture and history lends itself naturally to producing even more that kind of talent and that kind of thinking. you're always around those kinds of people so you're more likely to want to do something like that. >> it's interesting because even you talk about darpa which is the defense department's venture capital fund and here you are on the complete commercial edge in new york that you trace your lineage back to stuff that was done by the federal government. >> to some degree we owe a lot to what happened back then, a government-funded thing.
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the entire internet is that story. >> what's next for foursquare? what would be success? what would be, you know, so you've had this nifty idea and you want to make it a really profitable business. how do you do that? >> i think there's different ways to measure success. you know, we started out last year with 100,000 users and now we're at 7 million users so that's one measure of success. you know, the company hasn't gone down the road of monetizing yet and once we figure out how to monetize the business that will be another measure of success. for me personally it's seeing, you know, really everyone in the world start to use the stuff that we're thinking about. >> honestly, is that more important than the money? >> oh, without a doubt. i feel like, i don't know, it's all about just trying to build things that people use, and like we have this division and we're trying to push it out on people and get people to see the world the way we do this. that's why we do it. >> naveen, dennis, thanks so much. >> thank you. next up solutions. how our experts would fix the problem and get america back to number one.
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gluttony-- a farewell long awaited. good night, stuffy. >> ( yawning ) >> good night, outdated. >> ( click ) >> good night, old luxury and all of your wares. good night, bygones everywhere. >> ( engine revs ) >> good morning, illumination. good morning, innovation. good morning, unequaled inspiration. >> ( heartbeats ) i'm don lemon. here are your headlines. [ gunfire ] >> a fierce battle on sunday in the libyan city of misrata. that's about 120 miles east of tripoli. the opposition forces say pro-gadhafi troops tried to retake the town but were beaten back. more than 40 people died in the
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fighting, and nearly 90 were wounded. protesters took to the streets of new york sunday to voice their concerns over congressional hearings this week. the chairman of the homeland security committee, peter king, wants to look into what he's calling the radicalization of american muslims, but demonstrators say muslims are being unfairly targeted, and they are worried that islam is being portrayed as the enemy. a rival much smaller protests took place supporting the hearings took place nearby. those are the headlines this hour. i'm don lemon, keeping you informed. cnn, the most trusted name in news. welcome. i understand you need a little help with your mortgage,
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want to avoid foreclosure. smart move. candy? um-- well, you know, you're in luck. we're experts in this sort of thing, mortgage rigamarole, whatnot. r-really? absolutely, and we guarantee results, you know, for a small fee, of course. such are the benefits of having a professional on your side. [whistles, chuckles] why don't we get a contract? who wants a contract? [honks horn] [circus music plays] here you go, pete. thanks, betty. we're out of toner. [circus music plays] sign it. come on. sign it. [honks horn] around the country. every single day, saving homes. we will talk it over... announcer: if you're facing foreclosure, make sure you're talking to the right people. speak with hud-approved housing counselors free of charge at...
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welcome back to a special edition of "fareed zakaria gps, restoring the american dream, getting back to number one." so what needs to be tackled first to get us on our way back to the top? each of our guests has an important answer to the question. you're going to want to hear all of them. let's start with columbia university economist jeffrey sachs who emphasizes investments
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for the future, but he explains how to pay for them. what would you do to get america back to where it was? >> the first thing i would do is ask the rich to pay their way because everything that we need, whether it's helping our kids to start out life with the safe day care, property nutrition and a decent school or whether it's increasing the quality of our infrastructure, whether it's being able to sustain the science and the technology that brought us to where we are today, whether it's the creating of a new energy system requires some public funding, and we don't have that right now because the taxes on the top have been cut. the corporate tax rates have been gutted by tax havens and secret agreements with the irs
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and u.s. companies to allow them to keep all their money through investments abroad, payment transfers and many schemes that have really, really gutted our tax system all for the top, and now we have a large budget deficit and what we're being told is the only thing we can do is slash the most basic public services. ron paul wants to end the education department. that would be great for america's competitive future. we -- we could have a whole country where our kids, except for the richest, can't get a university degree. that's a real clever strategy, but that's what's happening right now. >> the economist dambisa moyo says for the country to get back to number one politicians in washington need to stop worrying about number one, themselves, and re-election and look long term. >> my perspect sieve government and policy-makers are very rational, and they are basically
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myopic, and that -- by that i mean they are driven by political cycles and political cycles which their nature, and in the united states it's every two years if you include the mid terms, force or encourage or even reward policy-makers for focusing on short-term factors, what we would call tactical short-term factors, things like debts and deficits which are important. they absolutely are, but a lot of the things i'm talking about, captain at all investments, labor investment and education and innovative technology, many are retractable longer term issues that need to be dealt with >> i think the first thing is to get serious about fiscal reform. nothing inries try is absolutely unat rabbly written in stone. the united states is capable of addressing its fiscal problems and with radial form turning itself around and i really passionately hope that it does
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that. >> but it has to be radical. >> it has to be radical. the congressional budget office said the other day if the united states was going to stabilize the ratio of debt to gross domestic product, it would have to increase all federal taxes by 11% or cut all the entitlements, all the payments that the federal government makes by about the same money, 12% actually. that's politically regarded as beyond the pail, imaginably suicidal to do and that's what the cbo says need to be. >> radical politics with not part of professor joseph nye owes politics. he says america needs to remember some of the things that made it a great power in the first place. what would you to to keep america number one? >> i think the most important thing we need to do is keep our openness, our ability to essentially be open to the whole world. >> why is that so important? >> because if you shut yourself off behind protected barriers, you're not competing and when
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you're not compete willing, you're not going to be as efficient. when we can attract the talent of the whole world, that's going to keep us in our position in a way that we couldn't if we tried to shut ourselves off, but the third thing that i would mention is we need to keep the values that we stand for. we need to be standing for democracy and human rights and freedom and openness because that appeals to others. there's a wonderful story of how this work back in the vietnam era. american policies were enormously unpopular in vietnam. there were marches in the street throughout the world, but when you ask what the marchers singing, not the communist, it was martin luther king's we shall overcome and that's what the united states stands for. if we keep the immigrants in policy and immigration and in our value system, i think it
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will be hard for others to equal us. >> when we come back, my prescription for deathing this country back to number one. er ]s history is made in the sky. ♪ in a lab. ♪ in a living room. we have lift-off. on a stage. [ jimi hendrix "foxy lady" intro ] in a garage. [ guys cheering ] and now... at the end of a power cord. introducing the extended range electric volt from chevrolet.
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many americans believe we've heard all this talk of decline before. japan was going to overtake the united states, and it never happened. but if you step back and look at the trends we're talking about historically, you will understand that the rest of the world has been playing catchup with the west and with america for the last 100 years. japan just began the trend, but over the last decade dozens of countries have started playing our game and playing to win. >> if you take a 500-year time
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frame the story of world history is quite simple. for 500 years, the west, not just the united states, it started in western europe, the west patented six killer applications that set it apart from the rest and left the rest essentially stagnating for half a millennium, and those six killer applications were in fact open source. they were available to be condition loaded by any non-western so said that wanted to. the first to do it was japan beginning in the late 19th century, and so what we're seeing actually is the fulfillment of a roughly century-long process whereby one asian country after another has downloaded the killer applications of competition, of modern science, of the rule of law and private property rights, of modern medicine, the consumer society and the work ethics. those things together are the secret things of western civilization. >> countries around the world copied the west's secret to success. that's great for global growth,
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but what lessons can the united states learn? how can it flourish in a word where trade and technology are accelerating every day and new computers are everywhere. jeffrey samms points to a new set of countries that are surprisingly successful while the rest of the world is emerging. people would be surprised to know most european countries on per capita gdp basis have grown as fast or faster than the united states in the last 25 years. >> if you're lucky enough to have the chance to see what life is like in stockholm or sweden or in oslo, norway, copenhagen and denmark, lucky to see it with your own eyes, you see really remarkable flourishing society with essentially a very broad middle class that has seen a dramatic rise of quality of life and on every indicator that we would want to look at, how
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long people are living, the life expectancy, the health of the population, the education levels of the population, the leisure time that people have, the ability to watch for the children, the quality of education. these are flourishing in so size and you normously admire in the places and found the right balance of society, of work, of being able to support the family at the same time, to be able to compete internationally. i have a high technology technology but at the same time not leave people behind. it's a wonderful balance and i wish other parts of the world could find that balance. >> northern countries followed a similar set of policies. their economies are surprisingly free, totally open to trade and investment, that regulations are highly competitive.
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yet, they have higher tax rates than the u.s. and that money is used for large investments in infrastructure, education and technology. it's also used to create a less unweek wall society. the united states cannot and shot not copy blindly from any set of countries. americans are more comfortable with greater levels of inequalities than europeans and tends to create a social european demly will not work at all. plus, tax rates in the west are just not competitive in a world where singapore now has a maximum rate of 20% and almost none of the major competitors, the emerging markets, have any capital gains taxes, but the example of northern europe shows there are ways to stay competitive and yet have a significant safety net which is inevitable and proper in any rich country. the key is that you have to be efficient and flexible. the problem for the u.s. is not that its government is too big or too small. in fact, among rich countries,
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our government takes up a smaller share of the economy. it's that it is highly inefficient. we spend lots of money on the wrong things and too little on the right things. the problem with the u.s. health care system, for example, is not that the government pays for health care. actually our government pays the least as a percent of the total for health care for any rich country. the problem is it's totally unefficient, with procedures and technology that don't actually improve our health. >> similarly huge subsidies for housing, agriculture might be good politics, but they are bad economics, discourting the market and creating false booms and fake industries. much federal spending outside of defense and interest payments on the debt goes to subsidize consumption rather than investment and most of this consumption is for the elderly. the federal government of the united states spends about four times as much money on old people than it does on children
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under 18 years old. that is surely a sign of society that's not building for the future but subsidizing the present. we need to invest in science, technology, infrastructure and education but we can't do it unless we stop the massive subsidies. we don't need more government or less government but different government. we need to be efficient, and we need to be flexible, but to be flexible we need a political system that is flexible and, in fact, we have one that is highly unflexible. the aspects of america that everyone praises as being truly exceptional is our political system. american democracy is rightly seen as a path-breaking exercise in democracy, blazing a trail that the rest of the world followed, but that was in the 18th century. right now we are burdened by that same system with an antiquated electoral college that no one understands, a senate that doesn't work with bizarre laws that make it possible for one senator to
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block the will of the majority wows even explaining why, a crazy quilt pitchwork of tenses of thousands of municipalities that create massive overlaps, multiple bureaucracies and total waste, an electoral system that is geared towards constant fund-raising and pandering to interest rates. now, remember. interest groups represent the present. they lock in the existing structure, the existing mechanisms. there are no interest groups for our children's issues. there are no lobbying groups for the industries of the future, but it is here's i to suggest that we might need to do something about a political system that is totally unable to plan for the future, invest for the future and build for the future! but i will say it nonetheless. i don't worry about the american company. it's amazingly dynamic and companies will find ways to be competitive in this country. i don't worry about mesh society which is the most open, inowe rate issive and amazingly


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