tv U.S. Senate CSPAN January 31, 2011 8:30am-12:00pm EST
you might not know. it's just kind of out there. up in the clouds. >> host: ed felten, chief technologist of the federal trade commission. thanks for spending a few minutes on "the communicators." >> guest: my pleasure. >> to watch these or other interviews again, go to our "communicators" web site at c-span.org. >> ahead on c-span2, a look at how private school voucher programs are being used in the foreign educational systems. >> today, health and human services secretary kathleen sebelius and agriculture secretary tom vilsack reviews new dietary guidelines promoting health and nutrition and reducing obesity. the guidelines are published by their respective agencies every five years.
this news conference can be seen live this morning at 10 eastern. >> jay carney will be the new white house press secretary. he worked as a correspondent for time magazine. watch c-span coverage of his other appearances online at the c-span video library with every c-span program since 1987, all searchable and free. washington your way. >> next, a discussion examining different education systems around the world. speakers from sweden and chile talk about the use of private school voucher programs and how they can be a model for the u.s. this 90-minute forum is hosted by the cato institute. >> well, i think we should be able to get started now. and i'd just like to welcome everyone to the cato institute. my name is andrew coulson, and i direct the cato institute's
certain for educational freedom. now, if you're here today, it's probably because you recognize that there are serious problems with the american education system. and if you're watching us on c-span, that probably goes for you too. unless you just switched other here because the -- over here because the show you were watching went to commercial, in which case i hope you'll stay. but that's the great thing about channel surfing these days. we don't just have broadcast tv, we've got cable and satellite and youtube and video and hulu and netflix. it's easy to flip away from something that's boring or some annoying commercial and find exactly what we're looking for. it's a lot harder to do that in education. it's still the norm today in the united states that the typical child attends a school to which she was assigned by a bureaucrat
who's never met her. and some of those schools are really quite good. and many of them are not. far too many of them are not. we've had the same problem for generations; too many bad schools, not enough good ones. and we've tried a million different things. we've had a new slogan, a new campaign every few years to try to turn that relationship around. and none of that has worked. if you're one of the millions of kids who ends up in a mediocre school, we clip your dreams a little. and if you end up in a really bad school, well, we actually have a term now for the or really bad schools. we call them dropout factories. that's, actually, really weak imagery. it totally fails to capture the horror of what's actually
happening in awful schools. we're not just taking some lump of ore and turning it into a abstract widget of failure. we're taking living, breathing kids who have hopes and dreams, and we're slashing those hopes and dreams to pieces when we fail them educationally. awful schools aren't dropout factories, they're slaughterhouses of dreams. that's a horrible image, it's a horrible image. but it's not horrible because it's ugly, it's horrible because it's true. and despite how horrible that is, there's still hope. we can already point today to schools that do a great job, that continuously, regularly outperform the norm as far as
graduation rates and academic achievement and performance. all we need to do is figure out how to get more of those schools and fewer bad ones, how to replicate excellence, how to clone superman to use the title of this panel. and the thing about that problem, that's a general problem. and it's already been solved in every other field. think about it. think about excellent things, excellent services and products in every other field. it's routine for them to scale up and crowd out products that no longer meet our demands. that's the norm. that's what always happens. the only field in which excellence doesn't just automatically spread and crowd out lower-performing services and products is education. so could it be that if we were to run schools a little bit more like the way we run everything else, we'd see the same scaling up of excellence in education that we see in every other
field? and that's the question that we're going to ask today by looking at two countries that have already, for decades, been moving a step down the road towards a free enterprise approach to education. now, the idea of schools run as businesses, as for-profit businesses, is pretty alien in this country. outrageous, some people would say. but what's more outrageous, rewarding the educators who do the best job of fulfilling children's potential or perpetuating the status quo in which we too often destroy that potential completely? well, helping us to answer these questions is a truly unique panel of speakers. we'll start with pais hay emilsson who is a serial entrepreneur.
after studying at both stockholm university and harvard business school, he founded an international communications company. and a public opinion research firm. and ten years ago a chain of private schools. it's the largest or one of the largest such chains in if sweden, and it's different from from most u.s. private schools in that it is run as a business. it is a for-profit enterprise. and given how crazy that idea sounds in the united states, presumed bastion of capitalism, imagine the reception that peje received when he floatedded the idea in sweden? i hope we'll hear some of that story, actually, if we do. our next speaker will be humberto santos who is a researcher in the public policy institute in chile and a research associate at the center for comparative politics of education at the same university. he previously worked in the
studies department of the chilean ministry of planning, and his current research focuses on the analysis of local education markets, regulations and accountability in be educational systems -- in educational systems which is perfect for the subject matter that we have today. putting these first two presentations in an american perspective and asking some challenging questions will be sarah sparks who covers education research trends and issues for the national education week newspaper. and she also discusses the politics, personalities and for those of you familiar with statistics jargon, the p values behind the research on these topics. and she does that for the blog, "inside school research." prior to joining education week, she spent five years writing about federal and state education regulations and authoring two technical assistance books for school administrators on homeless tiewnts and -- students and english-language learners. so we have a really wonderful
panel, and with that introduction i would like to hand the podium over to peje emilsson. thank you. [applause] >> thank you very much. let me start or by give a little background what happened many -- in sweden because most people are surprised that sweden one of the first countries put this voucher model together. sweden was going very much to the left after 1968. the '70s in sweden were terrible. the trade unions were fighting for trade union funds that would give the majority ownership of the leading corporations within 15-year period. education was not seen as something that was important but to create good personality in the society, let's put it that
way. and the few private schools there were disappeared. we got very monolithic system in education. it was regulated, one example. when my daughter was about 11 years old, it so happened that there came two new children into her school, and that led to the permission to add one more teacher which led to the school saying now your daughter and ten more have to move to another school. and we said, no. there, in a number of rural areas, politicians decided to close schools, and we had an uproar from people in various groups in society. i became 1988 chairman of one of the three remaining private schools.
and the government did whatever they could to close that school. i actually had to go to the supreme court twice when they sent letters telling the children that they weren't in a legal school. and i said, i don't mind going to prison for that. but then the debate turned over not only from the conservative side, but from groups who were in the social democrats and the agrarian party. so 1992 it was society that, look, the same amount of money that cost to go to state school, municipal school you could go to an independent school. and not only that, you could choose any school you like. because there are many municipal schools. and then the government said, look, let's give a voucher that's 85% the value, and then
you could ask parents to pay on top of that. and a few schools started. 1994 was an election, social democrats won. and they then had a really internal discussion, should they stop the system? and the younger generation of social democrats felt, look, if we do that, we will create one system for the rich and noble people as you have in the states and in the u.k. and not unitarian system for all swedes, so it's better to make sure that no one has to pay for going to school. so let's increase the voucher to 100%. and then make sure that you're not allowed to charge one dollar extra. and that has then since it was confirmed 1994 led to a
revolution not only in swedish education, but also starting the whole swedish society where we are changing from the traditional welfare state into a state where you have security systems, you have welfare backed with individual choice. you know, swedes are much more individualistic than you would ever believe. that's the case. so let e me give of you a few facts about -- yeah, you already told me tell them what i was doing. i'm now getting into this freedom explosion, also in elderly care, but that is for another topic. let me show how the school voucher system. today political consensus, and it is unique combination of quality and free market. publicly funded, and it's same national core curriculum for all schools. and independent schools have equal --
[inaudible] for the market. and the children, the parents decide. and they can decide whenever they like. if they don't like the school on a monday, they can take the money away and go to another school. we are not allowed to pick and choose students. first come, first serve. we cannot say we'll take you instead of you. and we cannot charge additional fees. i know some people ask how the hell can you make money with that? i say, well, anything the money does you can, of course, get a better result at 20% lower cost. [laughter] it's very easy. so this system, the freedom explosion, less than 1% in '91 to 11% in compulsory schools and 23% in upper secondary. in some parts of the stockholm area, 50% goes to independent schools. one of five swedish schools is
an independent school, and 60% of independent schools are for-profit companies. all political parties except the communists except profits. i told that to my conservative friends in the u.k. they also haven't understood profits. the independent schools are outperforming public schools in results. and this is very important. if you see, you can have in all grading system 320 max and all the public schools have an average of 209 and all the independent schools 229. it's substantially better. and if you bring out ten chain schools that are building up efficient back offices, our results are even higher. we are providing better educational result. and that's, of course, important
to getting acceptance in sweden. and the recent study of a few weeks ago from the public authorities in sweden show that the cost is about 20 cents lower cost for merit grade rating point in independent schools compared to public schools. we are getting much more education for each invested swedish -- c -- krona. those that believe that you cannot make education more efficient are just wrong. and in all surveys of students, parents and teachers, satisfaction, independent schools perform better or much better. and when independent school have entered cities with public schools, it has increased the quality of the public schools.
competition works. that's the overall system. let me then say a few words about kunskapsskolan because we have -- and the reason we're a success is because we have, in a way, disrupted the decision, the traditional system and found a new way of combining modern technology with teacher participation. so our mission is to develop and operate outstanding schools where students through personalized learning and clear goals will stretch their boundaries and learn more than they thought possible. we are convinced, we know that anyone can do much more if they are given the right kind of chance and inspiration to do that. so we replace old structures of schools for coaching and empowering each individual student. you know, it's funny, to set the
student in the center, that is not the tradition in educational policy. you don't look at each individual. but everyone knows that persons learn in different ways. some when they talk, some when they read, some when they write, some when they listen. and some know this much and some that much. you talk about classroom size. it's impossible if you have 20, 30 or 40 in the classroom. the teacher or whoever he or she is will always lose a number of them on the top and the bottom with different learning skills. so we developed personal schemes instead for each one. we make sure that we have all the curriculum on the computerrer system which means that our teachers spend at least 27 hours a week with the students, it's actually about 30 hours, and in swedish schools it's only 20. so we get much more teacher work with the students.
they are not allowed to sit at home and prepare for their lectures because it's in the system. in private schools sometimes teachers only spend about ten hours a week with the students. when we looked in the u.k. system we said, my god, we could start a private school system, charge half the amount of money what it cost and provide better education. at a much more efficient way. so this is a typical school to us, fairly different from what it is in normal or schools, and this has been made possible only because we have had competition. we opened up our first school in 2000, now we've got about 10,000 pupils and a staff of 800, and there you see our national grade, our average grade is close to 240. we have about the best results in sweden. and in some way i now after ten
years -- you know, the first year i wasn't convinced what would happen, but now i know the fact that you put each individual student in the focus and make sure that it get into system where they can do better, that is the reason for this. the u.k. came to us. i have negotiated with lord hill, minister of education, and they asked us, then, to start two academies and actually now have invested about 60 million pounds in getting our way of education to london. in september this year, we will open in manhattan a charter school. we've got about 400 students waiting in line, so we'll have a very interesting lottery late in this year, later this year. and we have a number of other countries that have come to us. and the reason for this is, of
course, not the voucher system. because even if we seen what that -- [inaudible] in sweden. but the success factor of the swedish model has led different, new ways of education to appear. and there are a number of other changes, experiment with new ways. when i went to school, i wasn't allowed to have a calculator. now all students have all the information in their handheld telephone. so, of course, it's revolution in a way we're going to educate people in the future. most countries have laws saying that a classroom has to be this size. and i'm saying, well, what about laws having -- how big should a factory be? you know, it's a ridiculous regulated down to the small details which, of course, you have to get rid of and look at
the important thing -- what is result? how much do the kids learn when they come in, and how much will they, will they know when they get out? in our school each teacher has got responsible for 20 students, and they sit 15 minutes every week in a personal one-to-one discussion, okay? what are your goals, what have you done last week, what are you going to do next week? and i would claim very few parents spend 15 minutes serious discussion with their children every week. so that's the driving force of coaching and developing the students. the profit, and it's not, you know, we have the same concentration you have got here and the u.k. was in sweden 20 years ago also. and we have had lots of discussion. i'm convinced that if you haven't got the profit incentive, it's much easier -- much more difficult to drive
innovation. but we have positioned ourself that profit is not the objective of the evidence. we tell our headmasters that the main objective of their lives is to make sure that children learn as much as possible. and they have one restriction, they're only allowed to spend $95 out of every 100 because we have to show the black figures. but then you ask us how many producer of textbooks, producers of every equipment in the schools are being -- that's for-profit companies. and those that build the schools are for-profit. our social democratic leader who just resigned, she said in her debate on the socialist side, i cannot understand why it's allowed to make a profit when you build a school, but not to run the school. and i think that's a very, very simple sentence. and if you started to build all schools without profit-making companies, you can make sure they would be much more
expensive. i know that regulation. if i told the british minister looking at one of the schools they are building for us, if we did this in swede withen without all your -- sweden without all your regulations, we would lower the cost 40% immediately. no problem whatsoever, you are overspending. the new swedish model, the conclusion of this is that we are getting more and more into discussion of choice program in other welfare sector. also health care, elderly care. and we are talking about private/public partnership, so an old tradition we have talked about is swedish model. we are getting more and more people are saying, hey, maybe we should change the tradition of responsibility where corporations made money and politicians took care of of money and used them for various welfare -- [inaudible] but have new ways of working together in the same way as we have in the school sector where, of course, politicians put
together the core, the curriculum, they make sure that they go out and inspect the regulations, but the main thing is that you have a competitive system where the ultimate decision making rests with the parents and with the students. and that's what we are now moving into in elderly care and other things, too, which changes the whole perception of the traditional swedish from cradle to grave model into something completely else. so that's why i say it's really the voucher revolution has an enormous impact not only on the schools, but also on other things on how society's being formed. thank you. [applause]
>> hum best toe. -- humberto. >> well, first of all, i want to thank the cato institute for this invitation. let me introduce the debate that motivated, motivates this paper. the optimum skill of operation of a school is one of the most highly-debated issues in current education educational or policy fund discussions. educational services more effectively and efficiently in the smaller independent schools. the proponents of this view also argue that school works promote
sound institutional environments in member schools and also that the network can provide political benefits and creditability in the school's community. but the critics of this view are concerned that the larger schooling operations will create hard-to-manage bureaucracies, and they also worry that schooling operations lower staff motivation because administrators and professionals far removed from the classroom. and because, also because lower student motivation and parent involvement and because promote more standardization and less innovation. and they claim that small, autonomous schools can improve the quality of education. and this two opposite views have sparked -- [inaudible] school management. on the one hand, the district consolidation and funding for private schools. for example, in the u.s. the district consolidation is one of the most significant reforms in
the last years. and, also, there is a growing number of private school networks -- charter schools and educational management organizations. and on the other hand, the smallest school initiative, in this case larger schools are reorganized into smaller, autonomous school. for example, the bill and melinda gates foundation has invested over $1 billion to divide schools in the united states. be but empirical evidence of the optimal size operation of the schools is limited because it's clouded by method logical limitations. also the research suffers from -- [inaudible] programs and also because most educational systems only provide founding for public schools. and empirical findings of the smallest skill programs in the
united states are mixed. for example, the researchers found that the edison school, the performance of this school varies, and the relation of the schools founded by the gates foundation also suggests there is wide variation in the quality of these schools. so what is the objective of this paper? in this paper we tried to compare the achievement of private voucher independent, private voucher franchise and public schools. why the chilean case is -- [inaudible] first, because my country and this is the most important reason. [laughter] also it's important because in 1981 chile began financing public and most private schools with vouchers. and also because non-profit status is not required for private education, and this is different from other countries because in other countries with private voucher schools, these
schools are restricted to be non-profit organizations. for example, in the netherlands the private voucher schools are restrict to be nonfederalnon-pr. and this is not the first paper that compares private and public schools in chile. but this paper defers from this work because compare achievement across private schools according to their net worth size. let me introduce the most important characteristic of the chilean educational system. during the '80s the military government in chile instituted a sweeping educational reform package. first, the government decentralized the administration of the public schools from the minister of education to the municipal government. and also introduced a school voucher system, and under this system the public schools start to receive a parent/student voucher for every child.
the private schools that did not charge tuition also began to receive the same voucher, and finally, the elite private schools continued to operate without public funding. as a result, education has become increasingly privatized since the voucher forms were introduced. in this graph you can see enrollment in private and public schools, the evolution of this share, and for example, in 1979 12% of chilean k-12 students attended private school that received only public subsidy and another 7% attend these subsidized private schools and almost 80% of the students attended public schools. but by 2009 the picture is very different because the private voucher schools now had reached 48% of total enrollment, and now the majority of chilean students are in private schools.
what do we know about the size of schooling operations in be chile? first, we know that private voucher school sector is, essentially,. [inaudible] industry because more than 70% of these private voucher schools are independent schools that don't belong to a franchise. and the private voucher school franchises account for about one-third of of private voucher schools and enrollment. but there is a slight downward trend in the students in this private voucher franchise schools in the recent years, and this -- [inaudible] is explained by a reduction in the person of for-profit and catholic franchises schools. and also we know that most of these franchises are fairly small in scale. for example, 50% of the private voucher franchise schools belong to franchises that have left them for schools.
the for-profit franchise schools spend varying degrees of contrast for private voucher schools. often controlled by a group of site owners represent 42% of all franchise schools in chile. and the independent for-profit voucher schools, most of which are owned and run by formerly public schoolteachers, account for about 88 president of all the ip -- 88% of all the independent schools. and on the other hand, the non-profit voucher schools represent a significant percentage of this private voucher franchise schools. and this non-profit voucher schools including catholic, protestant and secular organizations represent about 58% of franchise schools but only the 12% of these independent schools. and now i will present an
empirical strategy of our paper. and this paper we process the sized that the student achievement can be modeled as a fraction of the student's social characteristics. and we tried to predict the achievement of a typical student in each school category. and to measure the difference in achievement between two school categories, we subtract one prediction from another. and also the estimates -- [inaudible] but this is technical fact. the idea is that every student attending public schools can be different in social and economic characteristics from the student attending a public school. that fact come from chile national standardized test, and the variables that we used in this paper include student demographics, for example, student's gender, household income and number of books in
the house. and also a student peer information which is the average of the individual characteristics of the students across the -- in a given classroom, in the classroom of the student. now i will present most significant findings and results of this paper. this graph you can see the difference between the school types and private voucher independent schools which is the reference category. and for the student with the average characteristics of the private voucher independent school student, and the first column of the two panels of this graph shows the, an adjusted difference. in order, the tested school gap between public schools and private voucher independent schools and private voucher franchise schools and ip i dependent schools before controlling for all the independent variables and for
>> this is the most important finding of this paper because this tells me the private voucher franchise school advantage is not relate to the characteristic of the students, of the peer groups or for selection bias. this is different in the case of the public schools and private voucher. there's a core gap because in this case there's no significant difference between public and private voucher independent schools. in other words, after concern for the social economic characteristics of the students there is no significant difference between these two kinds of schools. so this result, i found evidence of this private voucher franchise school. and neither interesting question is, well, is there -- [inaudible] and we found after confronting
for all independent variables in selection bias that the schools that belong to larger networks of four or more schools outperformed the schools that belong to modern networks of two or three schools. and to prove this finding further we compared the test scores for the religious affiliation of the school, because previous research in chile and also in the united states have demonstrated that catholic schools outperform all the private schools. but the good news is that our results don't change with this. and this suggests that the positive franchise school advantage is not related to the religious affiliation of these schools. and also we ran with others, in this exercise shows that our results are consistent over time. well, this is the summary of the main finding of the paper.
first a private voucher franchise of schools outperform private voucher independent schools. second, the private voucher independent schools or to similar test scores as people as public schools. and third, the larger private school franchises outperform smaller franchises. and most important is this result, after controlling for the effect of the religious affiliation of school. but what are some explanations for this positive franchise effect? this positive franchise effect may be explained by the substantial benefits of the skill of the professionals,. [inaudible] this is the economy of the skill argue. also larger networks may be more
likely to benefit from access to credit and private investment that is the small independent schools. and also, i larger -- [inaudible] between the different vocational agents. however, it has proved private franchises will outperform the private voucher independent schools, we need more information about what are the factors that influence. because, for example, high achieving schools may be more likely to establish a franchise or join a franchise than low quality schools. and such effects is a topic for future research, and we need more information. this is the conclusion also of the paper, because in terms of public policy we found that more information is needed about the
factors that influence the establishment of franchises. for example, we need to know how profitable are private voucher networks work. and also we need to know how risky is this industry for entrepreneurs. and why? well, this information is key to the public policy that try to encourage the networking of the school. but the results of this paper offers some insights for other countries. on school vouchers, and benefits of education on management organization your but the good news is that our results suggest process that tries to make incentive for the school network may have the potential to increasing vocational outcomes. thank you very much for your attention. [applause]
>> if anyone here can tell me if we can have sarah speak from her microphone at her desk? why don't you try speaking and see if it is on now. >> hello? >> great. >> i'm always really interested in how research schools and school district and we schools operate in other countries, and this is particularly interesting in part because one of the big criticisms against looking at international school research is that, well, that's fine but how is it going to work here? and will have very shortly a perfect experiment in how well
the swedish model transfers over to the united states, all of his very different approaches to vouchers and to charter schools and all that stuff. in both of the models were interesting, and certainly the research on them is intriguing. i agree with you that it seems very early research. i'll start with the chile repo report. i was intrigued by the way that the franchise schools were different in how they performed compared to both public and other independent.
and it was interesting to me that there was very little discussion of what at the school looked different. i know that certainly wasn't the topic of your reports, but i hope it's the topic of future. because that will go -- it makes a huge difference for us in using that as a model. if the difference is that these schools have certain efficiencies or differences in more experimental teaching strategies, then those can be incredibly powerful and will be very easy to make a case for moving them over here. it's a little less so i think it's a fact that these multiple
schools are the natural results of competition. i know that sounds odd at the cato institute, but if you think about it, the vast proportion of independent schools -- i mean the vast proportion of the voucher private schools are these independent mom-and-pop shops. and you've got a small cohort of very good schools that come if they have gotten there by being able to franchise out, then we have to look at what are the policies that will prevent it from being a vast majority of experimental designs that mostly fail, and a small percentage of very good models that work for
the students that are there. that i think would be a lot harder to to sell in the united states because parents usually can't switch schools the day after they decide they don't like them. and that means you've got a lot of kids waiting for the same way we have lotteries for charter schools and get the schools and your own charter schools now. so being able to transfer the good things about the schools and understand why these particular chains have done something educationally different as opposed to to just a sort of general small slice out of a very large pool, that
will be really interesting to see. for the swedish -- i really interested in the swedish model coming here, and particularly because it will -- it will be interesting to see how that works in a market where the costs are not quite controlled as much. certainly -- i'm sorry. the curriculum and standards will be the same with the new york, but even they are curriculum from district to district is sometimes school to school could be very different. and one of my major questions to you is how are you changing that model to deal with the
differences in the way vouchers and charters and things of that work in sweden versus here. i would also be interested to see how even in your home country you do with the differences in initial cost. if you have the same voucher amount for every student, and you're not allowed to charge on top of that. and students can we very easily so you don't necessarily have the most stable side mount -- set an outcome how do you manage costs for the differences between active -- a student of severe learning disabilities or who is an immigrant student and
doesn't speak the language, or is very poor and has very little family support. those at least in the u.s. research has shown tend to cost more. so what i'm wondering is how that works. so i ask ago first to you for some of those questions, and i don't like speaking a lot in public, so i will be going to the audience with questions as soon as possible. >> to respond to that, you know, the swedish system is that the voucher varies from municipality to municipality, from about $8000 to 11, $12,000. we take it all in to the company. and then we have schools in some tough areas, some other areas. we have one school will we've got 60% immigrants, probably 20% from iraq.
as you know, we have more immigrants from iraq in one in stockholm than you do in the whole united states. that was a school that got pushed two years ago when it was decided how come that you get the function. we have avoided going into which areas. that was a decision from the beginning, and went into blue-collar workers areas and not the others. but i think the main -- so we have of course we spend more resources in those areas and that's within the company. and there is a possibility to get additional grounds for very specific cases. we cannot refuse to accept -- we have lots of students with lots of disabilities. if they apply to us, we have to accept them. and we very much would like to accept them.
our model having everything on the computer, making sure that you can also work from home. the parents make it easier for those that really learn more. but if i get back, it's about change schools, i think the reason why we have succeeded is we are measuring everything. we have 35 schools. you get five from each. the headmaster make sure they gives as good results is possible. and we go so far as that we look at when a teacher is in charge of 20 students, how much did they know when they start, and how much do they know a year after? and then, of course, we try to make sure that teachers that are better in other carriers -- careers, pursue other careers.
we probably have five, 25 heads of schools if they don't perform at there's no excuse. and live a very close cooperation with the trade unions. when we start the school we made an agreement it's 40 hours a week, it's normal and part of the salary goes to the increase, depends on how well the teacher had performed with his or her group. not the actual grade given but what is the value added? and that's probably something very swedish to have this pragmatic cooperation attitude. but over all, conclusions, i can draw everywhere, and that is you have to compare, you have to measure, you have to make sure that you keep control what is the quality. and your research was extremely interesting, and i think it
inspires us in sweden to look a bit into the 25%, that are expanding. because more poor schools have this difficult sometimes, how do you change into new schools? it's not very easy. so it's a very, very interesti interesting. i'm fascinated that at least in sweden those are in the public psyche, they do not try to run their schools as a chain of schools, at independent schools and independent school board with parents here and parents there, lots of non-professionals who don't understand or know anything, believe they know anything about education but they're not professional education. i think that's a worldwide way of handling education, where you get, when you get change, you measure, compare and to say i can't. they do it. let's do it that way. >> i just had one question for
humberto before i forget, which is increasingly likely as i get older. you mention an agreement earlier that the people who found the independent private schools, the single mom and pop private schools, are different a bit from the people who run the larger franchises. and could you talk about that? >> i will speak in spanish. [speaking in spanish] >> translator: most people that run the private independent schools are former public teachers, that now they took over the schools and they are running it.
[speaking in spanish] >> translator: whereas the change goes belong mostly, like 50%, to networks like nonprofit organizations. [speaking in spanish] >> translator: there are other for-profit chains networks, but they are only like 50% of the total. [speaking in spanish] >> translator: yeah, the main
difference between a private independent schools and the chains coal is that the people who run the private independent schools are former professors that usually have far less resources than the other, the chain schools. and they come from social strata that usually is lower and they don't have -- management skills that the other skills have come and that's why the results show that independent schools don't
perform that much more different than public schools. >> do you have any other questions you want to ask, sarah? >> a little bit. did you want speed it was one thing i did not respond to come and that was how, when we convert i go to the u.k. is very interesting. we don't -- most come to sweden because first education is very much discussed. and we actually employed a british extremely good headmaster to run one of our schools, which we're allowed to do. it's very important. some countries you must have examination for your own country which i think is very silly. we are living in a global world so that was an excellent way in bringing teachers where we have swedish teachers. and then we have taken -- [inaudible] from swedish and english and
we've taken over to schools in responding one very, very rich area in london. to schools that were among 10% worst schools in the united kingdom. they are we are step-by-step introducing our model. and, of course, the challenge is much easier to start from scratch then take over schools, 2000 students there. and we have 1000 in ipswich. so step-by-step we're getting them into the new model. and in the states we have probably 15 teachers of various kinds helping to transform what we have done in the curriculum in new york. and this is, to me, if i look a bit longer-term as i said again in the global world, you know, i say it's exciting that all our students regardless if they are in dolly or stockholm or london
or new york or whatever, can connect to each other every part of the same kind of network. and that's the revolution i believe what's happening in education the next coming 25 years. >> this is a question for both of you. are there any incentives or procedures in place in either of your countries to support successful models and help them expand faster? >> no. the only incentive is that if we are successful, we get more students. and so it's very much more orient. [speaking in spanish] >> translator: there's no public policy whatsoever in chile to incentivize the change
in schools. [speaking in spanish] [speaking in spanish] >> translator: there are several proposals to make it easier for schools to open up and have the backing of a change, and that will make it easier to have the development of change even chile. >> translator:chile. [speaking in spanish] [speaking in spanish] >> translator: gilad promise we don't have enough information to find out why schools are for
change. so it's kind of difficult to see how you can actually incentivize them. >> in the united states we have two separate areas of school choice when people talk about school choice. one is the voucher system of giving someone a chunk of money to go to whatever school they want. and the other -- and that can be to for-profit commercial, it can be to nonprofit, similar to what seems like some of the chains are run by religious or other foundations. or we have the charter side, which is a publicly run but not under the auspices of the school district. and i was interested that when you came over to the united
states you chose a charter rather than starting a private school. and i was wondering if you could say why you decided to do that. and for both of you, what you -- how close do you think your voucher system in your home countries are to straight private schools as we have been in the united states versus charter schools? >> well, the main reason for me coming from sweden, and it started over in the u.k., because we made a study to start on private schools. and we thought we could compete very efficient way when we saw the overpayments to the schools, compared it to results. but then when the minister came and said hey, can't you go in the academy program, which is
within the main tank sector and it is financed by the governme government, we saw that as more interesting. but for me philosophical view, i think i am more keen on making sure bringing education for 95% of the children, not the top five or the rich and noble. they can always manage. so we look the same in the states, obvious, how do we do that. your it's only the short-term model because you have still not realize which, of course, will happen in the states, too, that we should able to run the for-profit can't and all this bureaucracy of the shortage. but that's where we are now. so that's where we are. our aim is now to build a flagship school and show how our education model functions and do that in the u.k. and do it here. and with that, that will help to change the system and make a
more realize that, look, it's good to have competitors and it's okay that you can make a profit also if you provide better education. >> i have a follow up on that actually. because it is so much interest in skating at good schools, i me, it's all across the u.s., and for the past 10 years it's been charter schools that have been the approach people have most look to do for how to scale of excellent. and there are some great charter school networks, that most people and a lot of independent researchers have found do a really good job like kip for instance, who is a really well known network of charter schools, high-performing. and it has grown substantially over time. so is this a model in and of itself for replicating excellence? and the way that kip has grown is by getting philanthropic contribution. so donors have given money to that kip organization in our to replicate itself around the
country. is that a model where people just give money and hope that the school expands, but have no expectation of return on investment that can produce the same effects we see in other fields whether people are giving money to expand and enterprise are doing it with an expectation that they will get their money back? and i wanted to find out. we, so what i'm doing right now is a study in which i've looked at the performance of all 70 or so charter school networks operating in california, including kip and 69 or so others. and i've got data on their performance from a huge range of california state tests have also collected data on how much grant funding each of those charter school networks has received. so we can do a correlation between grant funding and performing. and if it's a high positive number then maybe that's a viable model. if it's not, then maybe it's not.
this isn't going to be the definitive subject but it is at least an interesting start. what i find, and this is a preliminary, the paper will not come out for a couple of months, what i find so far is the correlation between grant funding and performed is 0.07 which is about as close to zero as you ever see because they are usually random correlations between things. there is almost exactly no correlation between the grant funding they receive and how well they perform. just for fun, my wife's idea, i did a correlation between the number of letters in the school's name or the charter networks name and their performance. that's a minus point tonight. it's negative so shorter names are better, and it's four times stronger than the relationship between grant funding and performance. so this makes me a little skeptical about model but again it's pretty preliminary work so we will have to see. >> country did you have any other questions, sarah?
[inaudible] >> let's open it up to the audience. and we have microphones? right up your on the right at the top. >> hello. i'm from the albert shanker institute. first of all, it's great cato institute is that it's important that these discussions. i do wish though that it might be more balanced in terms of some of the information. i have questions based on my reading about these two systems. and i want to go to performance. first of all sweden has gone down since 2000 i read in one place three times as fast as any other country in terms of its reading scores on pisa. it is also gone down in math between 2006 -- know, sides 2006-2000 i. math, 2003-2009. and it would seem to indicate that there might be something wrong with this particular
reform. in the chilly? no, the school comparisons from what i've read, you're right. they don't show much of a difference. but when you go to the individual students within the schools you will find the private doctors to inject a considerable better than the public's. and this may be due to socioeconomic choice. in fact, my hypothesis is we're really talking about neighborhood schools, and that what you're getting is intensified stratification, all the research i've seen says that. you're not getting a true measure of what the schools are doing. so i would like to know what you think about some of that. and hopefully cato will have some other views on this panel the next time. thank you. >> i will start off with peje answering the swedish question. >> i agree it is gone down in sweden. at the same time it's a question the independent schools are
performing much better than the rest of the schools. and the fact that pisa has gone down, pisa is very high in finland. i would also question pisa, the correct measurement of everything that there are many other aspects when you develop young people. so when you get into the swedish discussion i think it's a consensus that the competition and the fact that you have got large independent sector has in the hope become better. but we have a same debate. when we start, when i started kunskapsskolan we were not allowed to measure students in the way that you get grade them, because that was impossible in sweden. that's why we talk about the black and blue and the red slope because that's okay. so we are still -- that's now
been changed into new normal. that's the agreement that came last year. that means that we can give concrete feedback to all the students. so the voucher evolution, it's one part on a wider change uphold swedish system where you require more results than you did in the old system. >> just one follow up on finland and pisa and international testing. there really is wide acceptance that pisa is quite different from the other most well-known international tests, and while finland has consistently performed first, second, third on the pisa for the past several administrations of the test, the last time finland took the tens, different test, same subject, it perform between 10th and 14th. depending on the subject. and perhaps coincidentally in the no longer takes the tens.
they only take a pisa, the when they do it well on and maybe that's just. once it is a not entirely sure. we have a question than you on the front as well. >> i wanted to answer the question. [speaking in spanish] >> translator: like what happens in sweden, there are two distortions to the system of the voucher. [speaking in spanish] >> translator: firstly, the families get charged an additional charge -- the schools can charge an additional fee to parents for schools. [speaking in spanish]
[speaking in spanish] >> translator: even though the selection of students has been bad recently, private schools still managed to do that to the different ways. [speaking in spanish] [speaking in spanish] >> translator: research has shown that that action has an impact because then private schools can charge an additional
fee to parents, and they can select from the highest spread of socioeconomic strata of students. so that definitely has an impact on -- were as the public schools, that has an impact on the results. [speaking in spanish] [speaking in spanish] >> translator: there is some results we look at catholic schools because of their mission, you suppose that they have people from lower income strata. but the results showed they actually have people from higher
incomes strata can't even more than for-profit schools. >> this is something that we discussed a bit and agreement before coming out, and it's actually i think also partly the result of the way the voucher system is designed in chile, the way the funding system is designed in chile. in addition to the voucher the public schools can receive some additional funding. and overall this is not a large amount of funding. but it is concentrated on low income schools and low-income students. and so from the parents perspective, if you're in a low income area and you yourself are a low income family, you can choose between a private school as a voucher amount to spend on your child's public school as the voucher amount, plus-up to 20, 30% of additional funding. and it's a pretty big incentive for parents to choose the public schools and makes it easier for the public schools to offer a better education.
>> hello. my name is greg olsen. i'd like to ask both 9/11 and mr. santos, how free are you independent schools, or what you call them in sweden or franchise or private school that you call in chile, to set compensation and benefits for teachers and other employees of the school system, or i knows that mr. emilsson you mentioned there are unions you deal with. is that a constraint? and then for mr. emilsson, if the independent schools in sweden are doing so well as you pointed out, why then are barely one in 10 of the 11 -- the seven to 16-year-olds enrolled, nine
of 10 still in public schools? >> let's take a second first. you know, some rural areas up to 50%, and if you say you only lost 10, 12 years, it really has taken off and expanding rapidly now. the key constraint for opening more schools is difficult to find locations. so we will continue to grow rapidly. yes, we have made a collective agreement with the trade union. and, of course, they will accept as we can increase salaries as we like, but we get the exact same amount as the other monies -- the other schools get. so it's not very easy to increase. but we have fewer teachers, and we have expanded top salaries
for a number of those, there's a career opportunity, and that is with consent of the teachers union. when i talked to the teacher unions here and in the united kingdom, they are very surprised that the teachers union in sweden are as they are, but they are. i think the reason for this is before the voucher evolution, that was based with only one employer. and now they have opened up, it's also good for teachers of competing possibilities. so that has also changed, change the climate. you will in the next coming 10 years see an increase of compensation for good teachers, because more are -- the indications are they have the best teachers and there's an enormous difference between those that do really good and those that really should do something else.
and that we had a good system in sweden to making sure that those that should pursue alternative careers get that opportunity. [inaudible] >> benefits, it's the same. extremely standardized. [inaudible] >> i have to trade union members on the board of the company. that's also a law in sweden. so the trade unions are represented on the board of the company. [speaking in spanish] >> translator: like what happens in sweden, the large public sectors, in chile is a stark difference between what happens with the teachers in the public sector and teachers and the private sector. [speaking in spanish]
>> translator: in the public sector it's very similar what happens in sweden, and there's even a council of teachers that is collected with the government. [speaking in spanish] >> translator: the private sector, little regulations on teachers. i mean, anybody can be a teacher. and there is -- the only minimal regulation that exists or minimum wage and so on, on
anything else there is a lot of flexibility in private schools when it comes to hiring and salaries and so on. [speaking in spanish] [speaking in spanish] >> translator: the difference has created a big debate now in chile because the current government has passed a law that allows the directors of each school to fire up to 5% of the worst performing teachers. public schools. [speaking in spanish]
[speaking in spanish] >> translator: this change is great a lot of anger from the public sector, teacher unions. but mr. santos believes the whole purpose of a voucher is to instill competition, and if you handicap public schools and the directors can fire were bad performing teachers, then there any pretty bad position to compete. so this reform he thinks is quite appropriate to xl the system. >> do we have other questions? [speaking in spanish] [inaudible]
>> what kind of benefits? [speaking in spanish] [speaking in spanish] >> translator: private school teachers are like any other private sector employees, so the same regulations that apply to any other company,the same regulations that apply to any other company, private company, applies to a private teachers, including health benefits, social security, and so on. >> we have a question on the aisle over here. >> thank you. the public education here in the united states is a tremendous, i believe, amount of resistance to vouchers and charter schools, even though they are gradual
entry into our public education system. how do you deal with, or how as you move in a new york, you have to do with teachers unions, education unions, administrative staff, some, i think there's something that says we don't need more money for our school system. and 32 minutes amount of money team used an administrative costs and overrun because i've worked at two different school systems here in the united states. so, how do you address those issues when it comes to vouchers or charter schools, the fact that you're able to get rid of bad teachers and the union is going to come and say no. i think the money issue, the funding and the administrative, there's been so much money and it doesn't go to classroom. how do you deal with that, work with the and the unions? the resistance here to change is i think is really big issue.
thank you. >> well, i will say we have been very much welcomed, and i have been amazed in new york with all the support we have got from the city of new york, that k., can't you show how you could take your model of education here. of course, it's easier. you were talking one school with 200 students to start with, and then it's sort of an example. so i think we're are probably seen as an experiment. we are not turning the whole system upside down. that may be one reason, but at the same time i've got enormous support from people that say hey, this is interesting, maybe we can use this here, too. so basically i'm very much more
positive than when i hear some of my friends here talking about how difficult it is. yes, it will work spirit and i just had one question about the way that it worked in sweden. is it the case that there was tremendous resistance to the idea of a voucher program nationwide, and that it was only because a party was elected that was more free market oriented and implemented this program, and he was only after people saw it -- >> no. it came because he but were fed up with the schools. they were no good. i started for schools in year 2000 i got 900 students get one. in a brand-new school, no track record whatsoever to they did not come to me because they believed i had a better education. they came to me because they knew it was an alternate. i think that was the place we were. so deep down enough in a system
people say hey, we have to change the. and i think there are some places in the states where people have realized that we need to try something new. >> we have time for another question. [speaking in spanish] >> translator: to reply about how difficult the private schools in chile. [speaking in spanish] >> translator: interesting thing about the introduction of a voucher system in chile is that it happened in a moment in the country's history were debate wasn't pretty much all loud. [speaking in spanish] >> translator: there was no
political debate. it just happened. [speaking in spanish] >> translator: the debate back in the 1980s in chile about education wasn't about quality, but about the coverage of education throughout the country. [speaking in spanish] [speaking in spanish] >> translator: it wasn't until the '90s when coverage reached the levels of developed countries that the debate focused more on quality of education, and this is a debate of -- that is taking place in chile right now.
[speaking in spanish] [speaking in spanish] >> translator: so the debate right now is between public and private schools, and public schools field that they're at a disadvantage because of the regulations that we discussed previously. and there are even some extreme views that are proposing to curtail the expansion of private schools and the creation of private schools. and even they claim that the lowest performing private school should be closed down
altogether. [inaudible] >> you are leaving out a very important part of this picture, is the payment, the taxpayer dollars. so public-private partnership is fine, but what about the funding for these voucher schools or charter schools, still comes from the public. i think the resistance here is public schools don't want to have to put out any money to charter schools, and certainly don't want to put out anything for a voucher because that money has to come from someone. nothing is free, even in sweden or chile. there has to be taxpayer dollars. money has to come from somewhere. so from a public-private partnership would be great but public pays, the private reach the benefit. and i would be the research and the money. so i think that is an important issue. thank you.
>> respond. a substantial amount of all taxpayers money is being used to buy services for corporations that are being run by a profit. i suppose also the states whatever you spend when you build a road or build houses or whatever you do is being done by private companies being run for profit. so the question is, and that's a debate we try to turn in sweden, how do we get as much as possible for the tax on how to get more efficient? at how will we use that fact until we get more education for each dollar we put in? and that's i think in sweden, we see more and more very clear signs that the same issues and other kinds of activities, running as corporations that must make a profit, also makes sense in education. >> go ahead, sir. >> a quick follow-up. i noticed that the place we have
larger market share is not in what we think of k-12. it's really in i guess what would be almost equivalent to our community colleges. in a 16-18. could you talk a little bit about -- >> we thought -- basically, we start with the children are 11, 12 years old. we have been looking at going down to six year old children, but it's a complete different situation because children normally would like to have a school close to where they live. when you go 11, 12 they can travel a bit and get another kind of mixed so that's why we have focused there. but we're looking at them. we will probably take a step further to develop education, more than further to lure ages -- to lower ages. but tremendous system that you
of all the curriculum on webpages. you don't need to have traditional groups. i saw today that they sell more now on the kindle than real books. it's a revolution we're going through now. that's also a revolution that means that you don't learn in a classroom situation, that in many more situations. i don't think we have any final response is of that. we are trying to develop and use the creativite the creativity and the fact that we know -- my grandchildren, the only thing i know it will change dramatically and open possibilities. >> i'm getting the signal we have to wrap it up now i'm afraid. so i will thank you all again very much for coming out today. it was really wonderful. thank you. [applause]
china, india, and the middle east. following his remarks, he takes questions from audience members. this is about 35 minutes. >> i'm proud that david cameron has participated already. it's his fifth visit to davos. but i'm very honored to say, of course, we know it, it's the first time that he has come to davos as the prime minister of the united kingdom. and you see prime minister is a partial neutral organization, how good it is sometimes to invest into your position. a key theme of this annual meeting is about responding to the new reality and there can be no doubt that the prime minister is a kind of champion when we deal with this issue.
he has risen to this challenge of adapting to the new reality with ambition and with great convictions. since taking office in may, 2010, the prime minister has led a governmental coalition with the liberal democrats. it has already delivered more reforms than many governments achieve in an entire electoral term. and you have done so in rather difficult economic circumstances. from sweeping austerity measures, through restructuring health care, and launching a major overhaul of the british social security system, you, mr. prime minister, have shown decisive steps towards restoring financial stability and
delivering economic -- we want to hear it from yourself and so please join me in welcoming, prime minister, david cameron. [applause] >> thank you very much, professor. it's been four decades since you first invited european business leaders up this mountain and you gave them a pretty stark message. modernize and adapt or fall behind and fail. 40 years on, here we are again. no one can deny what a difficult position european is in at the moment. four years of annual growth have been wiped out. unemployment has risen to double digits. yes, recovery has begun but while countries like india, brazil and china are steaming ahead, in europe the drag on
growth has persisted. indeed, europe's share of world output is projected to fall by a third in the next two decades and no one is immune. this week we had disappointing growth estimates back at home. yes, they were partly driven by the terrible weather that shut down airports, factories and schools, but we should be frank. they also brought home something that we have said for months. given the traumas of recent years, the recovery was always going to be choppy. so as we meet at davos, the big questions are these, how are we going to get our economies going? how can we get europe going? how do we go for growth? there are some who say that these slow-growth status for europe is inevitable. they are the pessimists and this if you like are their chaser we
are incapable of solving our debt and debt problems, two, we are unable to compete with dynamic countries because we will be overburdened with regulation and bureaucracy, three, we are somehow hardwired to be consumers not producers. and fourth, we're attached to liberal values that are leaving us behind the juggernaut of authoritarian capitalism. today, i want to make the case for optimism, the case for confidence in our future. we can overcome our problems but we do need a change of direction. huge deficits don't just fall out of the sky. complex rules which restrict our labor markets are not some naturally occurring phenomenon that we can do nothing about. crushing regulation is not some external plague that has somehow been visited upon us. all of these, all of these
result from decisions that we have made. either alone or together. in many ways, we in europe have been our own worst enemy. but that also means the power is within us to change. to make it easier for businesses to start up and prosper, to open new markets within europe and between europe and the rest of the world. and with so many of europe's leaders committed to open markets and reform, i would argue there has never been a better time to do this and pursue this agenda. in less than eight weeks, we will announce our budget for growth at home. and i would also set out a specific plan for growth in europe. today, i want to talk about the new direction that europe needs to talk to take. our first is to kill off massive sovereign death. those who dealing with our deficit and promoting growth are
somehow alternatives are wrong. you cannot put off the first in order to promote the second. average government debt in the european union is almost 80% of gdp. some countries are again 5, 6, 7% gdp for this year. the figure for the u.k. is more than 10%. this is clearly unsustainable and action cannot be put off. and let me put this in context. remember what we started with in the u.k. an economy built on the worst deficit, the most leveraged banks, the most indebted households, the biggest housing boom and unsustainable levels of public spending and immigration. and i think where we need to go to, an economy based not on consumption and debt but on saving and investment. not on government spending but
on entrepreneurial dynamism. not on one industry in one corner of the country but on all our businesses in every part of the country with a new emphasis on manufacturing, exports and trade. now, to get there, to get from where we were to where we need to be is not easy. you cannot just flick on the switch of government spending or pump the bubble back up again. making this transformation, and it is a transformation, requires pain staking work and it takes time. it involves paying down billions of debt. new plants and new victories need to be build. new products designed. new innovations taken to market, new businesses nurtured. it will be tough but we need to see it through. the scale of the task is immense. so we need to be bold in order to build this economy of the future. and the british people i believe
understand these things. they know that there are no shortcuts to a better future. now, we are already making progress. not long ago we were heading towards the danger zone where markets start to question your credibility. yet, in the past eight months we've seen our credit rating, which was on the brink of being downgraded affirmed to the aaa level. we've seen market interest rates, which were in danger of spiraling upwards actually fall. all of this has happened not in spite of our plan to cut the deficit but because of it. that's why we must stick to the course that we have set out. allied to this fiscal discipline has got to be the reform and strengthening of europe's banks. last year's round of stress tests didn't go nearly far enough. they said we were 3.5 billion euros short than six months down the line the irish banks alone
needed 10 times that. this year's tests have got to be tougher. stretching over a three-year period, covering liquidity as well as capital and involving independent bodies like the imf. but above all, more than anything else, what we urgently need in europe is an aggressive pan-continental drive to unleash enterprise. at home we've cuts corporation tax, cut the small business rate, funded a new enterprise alliance and had a grip on regulation. we sent huge delegations sending out the message that britain is open again for business and in the essential work of sorting out the deficit, we made the decision to prioritize growth. so we're making cuts to the welfare budget which is hugely difficult so we can fund big transport projects on our roads and railways. without cutting schools indeed we're boosting the number of apprenticeships even though we're making deep cuts elsewhere. and we're striking the right
balance between tax and spending with spending cuts taking three-quarters of the strain and tax rises just a quarter. and where we are raising taxes it's on what people spend so that we don't have to high cut taxes on jobs or business. but this is not just about what we do in our domestic economies. we need boldness europe, not at least on deregulation. i've had conversations with many european leaders about this, recently with the prime ministers. we are agreed that we cannot afford to go on loading costs on businesses and i believe there are some clear things we need to do. we should bring in a one in/one out rule for europe so every time it increases the regulation, one house to go. we should set a new target to reduce the regulatory burden over the life of this current
commission. we should give the small businesses an chemicaltion from big new regulations. >> if we took them out of eu accounting rules alone, it would save them 2 billion euros. now is the time too to go for a generally single market. nearly 20 years since we agreed the free movement of people and services. we have companies employing teams of lawyers so they can trade over the next door boundary. jack delore once said that nobody can fall in love with a single markets and frankly if we carry on like this, no one ever will. so let us look how we can put an end to all these restrictive rules, who could hold shares in which companies, where businesses can set up, how many people they can employ and most importantly let's deliver on this with a tough, transparent approach to enforcing the single market. failure and we fall further behind and succeed, we can add 180 billion euroses to the
economy. our biggest factor was inoslaying those who invented the ipod and the worldwide web where is the world capital for high quality industrial design? not the u.s. not asia. but europe. we've got the raw material of the good ideas. we have to get better at exploiting them. access to finance is crucial. for every i euros invested in venture capital in europe more than seven times that amount is invested in the u.s. we said to do more to incentivize the same kind of risk-taking investment culture over here. now, back home we've introduced a peyton box offering a 10% tax rate on peyton income but action like this will be worth little if we can't break the deadlock on european-wide peyton system. do you know how long we've been discussing this in europe?
40 years. the truth is, we can talk all we like about making this continent the capital for innovation but while it can cost up to 35,000 euroses to get patents in progress. the possibility of progress is there we just have to seize it. so we can develop even more of the goods and services that the world wants to buy and that's precisely why we in europe shouldn't be cautious about world trade. we should be actively aggressively pushing for it. now, i know that every speaker at events like this stands up and talks about how concluding doha is a matter of urgency but i agree. with you we need to be equally clear how it's actually going to happen. not with more words but with more on the table from all sides. a little more cotton and safeguards in agriculture and goods on emerging markets, more
on all sides on services where the games, frankly, are huge. no more stubbornes, no more hiding offers in back pockets, this is the absolutely crucial moment. 2011 is the make or break year. and there are other things we must do at the same time. last year we signed a free trade agreement with south korea with up to 33 billion euros to eu exporters it's time to do it can canada, latin america and others. we have the goods the world wants to buy. we got to have the confidence to get out there and sell them. now there's one final thing in europe we should have more confidence about, and that is our values. the value of liberal democracy used to be sacred in the west. and now some people are doubting it. they've seen authoritarian capitalism and the way it works. they see political leaders with the prowess of a juggernaut just forcing decisions through.
and some argue that against this, our liberal democratic values are outdated or ineffective, almost an obstacle to success. i completely disagree. it is these values that create the climate for innovation. look at where the big ideas come from, the facebooks, the vast majority are from open societies like ours. that is because good ideas come through freedom, through free-thinking, through free association of like-minded people. our values also create the right climate for business too. if you're looking to set up a headquarters abroad, are you going to invest where it can be taken away from us. where contracts are routinely dishonored where the threat of political upheaval? or are you going to invest where there's property rights, the rule of law, democratic accountability. these values aren't some quaint constitutional add-on. they are an integral and irreducible part of our success today and in the future and we
must never forget that. so my message today is one of confidence. we are an open, trading continent. we have a proud record on innovation. we've get advanced democratic values. but, yes, we got to recognize that europe has got to earn its way. the world doesn't owe us is living. so let us make the choice to do things differently, to fight for that prosperity and i believe if we set our site -- sights high and open up on innovation and trade awake defy the pessimists and together we can recover our dynamism. thank you. [applause] [inaudible] >> silence at davos, that must
be -- that must be an absolute first. [laughter] >> there's a microphone -- there's a roving microphone. there's a lady there, if you could pass it along the line. >> i'm from holland. do you think we need one currency in europe to make your aspirations come true? [laughter] >> i want the euro to succeed. britain will not stay in the euro and i think it's a good idea to stay outside of the euro. let me be clear about this. britain has a real interest in the euro succeeding and sorting out its problems. 50% of our exports go to the eu. 44% go to euro-own countries. so we won't stand in the way in the euro sorting out its own problems. but i believe for a country the size of britain, it actually
makes sense for us to have our own economic policy, our own monetary policy because there are times and we've seen them in recently years -- there are times when different countries need different monetary policies and i want us to have a monetary policy that suits our needs but i understand why countries went ahead and form the eurozone and a strong euro deplete zone is good for britain. a weak eurozone is not good for us. to me it's as simple and practical as that. the lady here. >> i work for wpp. in your speech, you only mentioned china once. [laughter] >> which is rather unusual. so i'm just curious of your view of the u.k. and china relations. thank you. >> well, the relation is extraordinarily strong. we have the highest level of relationship with almost any
country outside of the united states with china. and i welcome that and i want to build on that. i mentioned china once but in an extremely important way, which is that china is one of the engines of the world economy. and that is extraordinarily welcomed in a number of years when growth in the world has been so weak. but i think the british/china relationship is strong and can get stronger for this very good reason. our economies are very complementary. that's why when i went to see president hu, premier wen and very recently vice premier came to the u.k. we talked about growth. because just as china wants markets for its products it is also looking for countries to invest in, in europe and britain is probably the most opening, the most welcoming, the most globalized economy or anywhere in the world. it's one of the easiest places to start a business, to invest in property to float on the stock exchange. so that is one link but also as china develops, i think the
markets in china for services, for intellectual property for the sorts of goods that britain produces is very great so we are partners for growth and one of the things i think we can share with china and that we need to get across in this world today is that trade investment and cross-border flows are not some zero-sum game. this is my worry with doha so many world leaders talk and every export for them is a great success but any import of anyone else is a terrible failure. we've got to get away from this. the prize is hundreds of billions of dollars getting into the world economy. if we accept that by opening up the world trade system still further actually we will all benefit and we will all grow but when world leaders start speaking like that that they'll really be able to instruct their negotiators to get together to put more on the table to make doha happen that can benefit china, that can benefit the u.k.
and deeply benefit the whole world as well. the gentleman here. >> mr. prime minister -- >> i mentioned india once too. [laughter] >> frankly, i want to compliment the way you have elevated the european economy and also given suggestions and solutions to cure it. we have been hearing different views from different leaders. i would like to know how much confident you are on your plans in implementation and what you think the european country will turn around. >> right. well, first of all i'm sure you'll hear different things from different people. we're all individuals. but what i find encouraging at the moment is when i look at fellow leaders in europe, i see
a number of real enthusiasts for the agenda on setting out of more competition, more growth, more investment, more deregulation. i lighter touch government and a lighter touch european union and when i look at those from holland and sweden and sarkozy in france and angela merkel in germany, we had all the countries from the baltic states the first time with the u.k. there and all of us agreeing we need a different approach in europe. so i see quite a common approach that it is time for europe to move in a different direction that really encourages growth in our economies. that's the first point. in terms of what we have to the in the u.k. and what other european countries are doing in terms of getting our deficit under control, my argument is just that you cannot put this off. and for a very good reason. as i said, the e.u. is now at an 80% debt to gdp ratio and you've
got countries borrowing 5, 6, 7% again this year and in our case 10%. you can't -- when you're in that situation you cannot put it off. and the point i would make is this, when we came to power in may, britain was beginning to be linked with countries like greece and ireland, that the markets were questioning. they were beginning to ask are you able to pay your debts? now, we have taken ourselves out of that danger zone by setting out our ambitious program but it is a practice that happens over several years if you have a 10% deficit you can't deal with it all at once. but i'm confident if we stick with this program and we deliver our promises then actually the british economy and the european economy as i argued in my speech can bounce back. we still have some huge advantages in the world. we've got some of the best universities, some of the brightest inventors and some of the world's successful countries. in britain we've got the international language, the center of the time zone and we're also linked into all of the world best organizations
whether it's the eu, the commonwealth, nato or our special relationship with america and we also have very good and growing links with china as i just said and an extremely strong relationship with india. so i think for all those reasons, i'm very confident that britain can be a great success story of this new decade. but as with all turn-arounds you have to deal with the problems in front of you. and if you endlessly put them off, you will end up being confronted by them in a more aggressive fashion. a question over here in the blue shirt. i can't see anyone really. >> i'm peter brower the chairman of bloomberg. obviously the financial engine in the city of london is critical to the success of your administration. would you talk a little bit about how you view the city and your plans for the future? >> yeah.
first of all, britain has a big competitive advantage and commercial advantage of the world that happens to be one of the great capitals of global finance and the city of london and financial institutions are a great strength to our economy. and when i think of the city, i don't just think of big investment banks. i think of people working in call centers, people working insurance, not just in london but in edinburgh, glasgow, birmingham. i think the tragedy of the last decade, a decade where there was a lot of economic growth but that growth was based on too narrow a basis of our economy. when you actually look at -- i think 75% of the growth basically came from financial services, housing, government spending, and immigration. now, that is not a sustainable model for economic growth. and that is why we do need to rebalance our economy with greater emphasis on exports on manufacturing, on high tech, on the new green economies, not ignoring the city of london.
it will go on being a great success but we need to see greater sources of growth for our economy as a whole. because we were so overreliant on the city, because we were so overborrowed and so overleveraged that was one of the reasons why the crash hit us so badly. so i want to learn the lessons from that but i certainly understand the strength that the city of london brings. it is one of our competitive advantages. it is one of the reasons businesses all over the world want to come and invest and grow in britain because of that access to capital and finance and i don't want to us lose that competitive advantage. and as a prime minister, i would always fights extremely hard in the european union in terms of the regulation that's symptoms threatened sometimes but not always but i sense european leaders would share the business that we managed to get in the u.k. and i'm not going to let that go. the lady here. >> prime minister from sab
miller. can i ask -- you talked a lot about the good things that europe has but it also has an aging population with state-funded public health systems and state-funded pension systems. could you talk to us a little bit about how you think those should be tackled? >> yes, i think it's a very, very good question. and too often we sit around in european councils and we -- we talk about some of the current issues in front of europe but we actually don't address the really big issues which is we have failing welfare systems that are costing us far too much money. and we have pension systems for the future that we need to modernize. if you look around europe, almost every country is looking at raising pension ages. that's something we have a program for in the u.k. we've got to create a system which encourages people to save. and the system we inherited was one where there was so much means testing of benefits when you reach pension age that
actually it would almost be wrong for a financial institution to advise someone in their 30s and 40s to save. now, that is crazy. so we have to create a system that encourages greater independence, greater impetus to save and we also have to have one that is affordable and that means recognizing that people are living longer, people actually often want to go on working for longer. and so we need to make these reforms. so we're raising our pension age. we are getting ready of the default retirement age, this rather lazy assumption that people at 65 somehow automatically come to the end of their working life. i see a few people out here clearly still working into later ages and so we need to get in the program. we're doing that in the u.k. but almost every country in europe is doing it and i think the pressure on the eurozone will get greater. and i think it's hard for german taxpayers pay for other people in europe to retire earlier than they do. if you're in the eurozone or not in the eurozone you've still got to compete with the rest of the
working world and that means the burdens you're placing on your taxpayers. last question, let's have the lady over here >> thank you, prime minister. i'm the president of the university of alberta. and i very much enjoyed your words. you commented on the importance of competitiveness and inoslaying and i know it's been a difficult time in terms of investments. how do you plan to invest in universities going forward and what can universities do to support your innovation agenda? >> yeah. well, i think -- if countries like mine are going to succeed in the future, it's going to be around the knowledge-based industries where we invent, create, exploit, export and that's what we got to think about that and universities play a huge part in that. and i take a very logical, sensible straightforward view. you need good universities. you need them to be well funded in order to compete with the rest of the world.
so where's the money going to come from? in the end there are only two possible places. you can ask the taxpayer for more money for your universities or you can get graduates themselves to make a greater contribution. now, from what i've said, it's absolutely clear that countries all over europe are dealing with their budget deficits, are having to cut public spending programs and to argue that at the same time as that we can put more into universities is clearly for the birds. so the only alternative is to look at what you can do in terms of asking graduates to pay more. and we have introduced a very bold, a very big reform but one that i think will be looked at and copied by others where we say that successful graduates will make the greatest contribution. so we're saying to the future graduates that universities will be able to charge. there will be variable fees, up to a maximum of 9,000 pounds.
but you will not start paying back any of that money until you're earning 21,000 pounds, $30,000. and it is progressive in that you don't start paying back the full amount until you're earning something like 40,000 pounds. and so the argument we have to have and win with people and it's not an easy argument to make is that we need these good universities. we want them well funded. we want to take on the world. the taxpayer can't afford to take on more when we're having to reduce budgets and the fairest and the best thing is to ask successful graduates themselves to make the biggest contribution. if you graduate and you don't succeed and your wages are stuck at a relatively low level you won't be paying that money. but if you do succeed, you will pay that money. and on average, graduates earn across their lives about an extra 100,000 pounds compared to nongraduates. so while this is a difficult reform, i think britain is actually showing the way that we can deliver really great
universities that respond more to what the students themselves want in a way that we can afford. and one of the lazy assumptions, i think, in recent years has been somehow that universities are creating degrees that aren't really worthwhile. well, we're now going to find whether that's true or not because the students themselves are going to be making the choice about where they go and bearing a greater part of the burden for the cost of that degree. and they will be more aggressive is this value for money is this a good university? how many lectures do i get? how many professors are going to be teaching me? in the past i think people treated this too much as just part of our lifestyle. now i think both universities are going to have to compete more with each other, to be excellent and students will be asking tougher questions of what they're getting. and when we think how we're going to take on chinese graduates, and indian graduates and beat them in this open globalized competitive world i think this is an incredibly
important move to make and i thank you all for coming this morning and thank you for the warm welcome. i wish you all to have a very successful davos. thank you very much indeed. [applause] >> next more from the world economic forum in davos, switzerland with remarks by german chancellor angela merkel. ?
economic forum in davos with remarks by german chancellor angela merkel. she discusses the future of the euro and calls for more regulation and transparency within the financial system to rebuild the european economy. she speaks for about 30 minutes. [applause] [speaking in native tongue] >> translator: ladies and
gentlemen, i very gladly accepted your invitation. you know probably that i was here two years ago. and this year the theme is -- and i think that essentially describes in a nutshell the new reality. and part and parcel of that is that we have learned that we are mutually dependent on each other. that there's a global network of players who are mutually dependent on each other and whoever was doubting about this, i think just how to look at the collapse of lehman brothers and the aftermath in that because who got about it international, interdependencies about close integration, i think it learned and it was decided that something like that should never
happen again. so the past two years also have actually been very comforting because politicians have demonstrated that they are capable of acting. that the world generally have -- the international community has proved that it can actually work against the crisis and it can tackle the crisis and muster it. we have had the first meeting of the g20 in washington. we have made quite considerable strides in regulations. so all of that shows that politicians the world over show themselves capable. so the poverty lesson we've learned is that the the worst thing we were able to prevent the collapse of the global economy as we know it. but the question that we see, have we actually learned the lessons out of this crisis? can we actually safely say that we will be able to prevent further crisis from happening? can we actually say we already have the necessary mechanisms
and stretches in place to ensure sustainable growth globally and for the duration. and i would say we have laid down the groundwork for this, but generally we have to say we have -- we are not there yet. what we've done is not yet sufficient. and now that we see it doesn't dominate the headlines every day we run the risk that also among them those of the g20 there's perhaps less of the methods and a less of a sense of urgency and i think that is exactly the danger we need to work against us because we have an enormous job yet to be done. those are not yet -- those questions are not yet answered. the main question is can can we actually prevent such a crisis from happening again?
and can we ensure sustainable growth for the world as we know it only when we get -- can get a safe answer to both of these questions have we actually completed the job. we need to do more. we need to regulate more. we have said every financial center, every financial player has to be made subordinate to our position. so far we have as yet not a really truly coordinated in the national response to the question. what happens if a big systematically important institution, a systematically important bank is collapsing. how can we avoid the taxpayer in the end footing the bill. how can we prevent that from happening again? what's more important is what have we actually done in order to ensure lasting and sustainable growth? and the french g20 presidency this year is of prime importance in this context because this marks the transition from crisis
mode to a phase where the world has to work together better and more durably and not only in a crisis but always. but as the french president outlined here i think has put the emphasis on actually on the points. in south korea we agreed on a framework for growth, on a framework for sustainable strong and equitable growth. we have to look at different aspects of this that play a very important role in this respect and which will unable to have this kind of policy. first we have to concentrate on currency systems. i think we have to understand that exchange rates always need to reflect the fundamental data of an individual country so they depend on the economic situation of a given country. exchange rates have to -- the currency system has to be so
robust that it can prevent financial excesses that there will be no destabilizing capital flows. and we also have to see to it that imbalances all over the world are not allowed to play themselves out and restraint. imbalances will always happen when there is a difference and a great despairity. that again will also be our task to try to then put out competitiveness on a more equitable basis. germany gladly accepted the challenge to discuss this together with mexico in a working group to look at the future of the global currency system. i think we have to say that this is a task which we will not be able to save -- to solve overnight but we germans are glad to shoulder that
responsibility. secondly, the most worrying point of the crisis that we have seen is that there are certain indications for more protectionist policies. free trade is probably and arguably the simplest form to give a boost to global growth. and it's also the fairest and the most equitable form. so the conclusion of the doha round is of utmost importance after this speech here, i will have an opportunity to debate this with david cameron because the united kingdom together with turkey and india have initiated a policy where together on the basis of a report by southerland that allows us to finally reach that goal. we are literally meters away from this finishing line, but if we are not meeting this finishing line, and i'm saying this loud and clear, decades
will go by without this opportunity ever offering itself again. and so the conclusion of the doha round is the precondition for fair and equitable and robust growth all over the world. each and everyone needs to do his or her bit but in the end i think it will be worth our while and this goes for each and every country in the world. but we need to concentrate on commodities speculation. on the one hand we need to concentrate on the volatility on the commodity prices which is not only dangerous for those who actually sell them. it's also dangerous obviously for those who buy those commodities. but what's important is also to set up a more transparent system. and when we look at the exploitation of commodities and there has to be also fair access to commodities. there are a number all over the world where it's debated.
we need to concentrate. growth needs to be become predictable. it needs to be become sustainable. it needs to be shaped in an equitable way. so these are the most important points on an agenda for growth. currency, trade and commodities. and then each and every region has to look at its own homework and has to live up to its responsibility. that brings me to my home region, to europe. in the crisis, europe acted in a coordinated fashion and showed its resolve to tackle the crisis head on. we initiated stimulus packages, we saved our banking sector so that demand is quite a lot from us but now we obviously have to contend with the consequences because we now have a very clear crisis of indebtedness.
and let me tell you very clearly there is no crisis of the euro as such. this is essentially a debt crisis and in many ways what could have predicted this crisis from happening but we have to overcome it. we have to tackle it and overcome it. two years ago germany in the crisis as i told you when i came here last decided to -- have a debt break. no matter what political parties will be at the helm of our country, we have to ensure that stability and sound public financing are the order of the day. for germany it's very important because next year we will see a very, very important -- in the next few years we will see a very important demographic change. we have an aging society. there will be a larger number of old people. we have been criticized for the fact that we said -- that we
need we need to proceed this chores we have been told that you need to contribute to growth and concentration less on consultation. let me tell you in the past two years we made a very interesting experience. after this enormous slowdown that we've had -- last year we had 3.6 growth all of a sudden. and this export driven in the beginning quite clearly. i've always said there's going to be a new deck of cards on the table in this crisis, the china, the asian countries will be the big winners emerging from this crisis but we with our export opportunities then also are given the chance to participate in this global growth. what's interesting in the second half of the last year and very strongly this year consumer confidence has returned to germany and we have a very strong booster that was given to the domestic area. savings, sound fiscal policies and growth doesn't need to be a
contradiction in terms. the confidence, consumer confidence, is a very boom that allows you to stimulate growth and so we can say budgetary consill days reminds -- remains of prime importance to us and it has not done us any damage. quite the contrary. now, europe has a problem with high indebtedness. and let me say this clearly very again. >> the euro is our currency. and it's much more than just the currency. it is if you like, it is the embodiment of europe today. i quite often said this, should the euro fail, europe will fail. europe is a work of peace. it's a political construction. europe today for us, a continent of 500 million is in competition with others. it allows us to pool our resources and to defend our common interests. so we are going to defend the
euro. there is no doubt about this. and we need to pursue a policy of stability of the euro. we have to show solidarity. we've shown the solidarity by setting up funds that gave guarantees. that are standing up for those countries that are in difficulties but we also have to be realistic. it's quite often said after all, this is as a result of speculation. yes, but these speculators have also -- these speculations have a root in reality and this is why we have to do away with the root causes of the speculation. and the twist of the market that these debts, these very high debts will actually be reduced once growth picks up, that confidence as yet isn't there on the markets. and so it's so important for me and has always been that solidarity can only ever be one
side of the coin. solidarity is important. we've shown solidarity but solidarity needs to go hand-in-hand with solidity, sound public finances, stability, and budget competitiveness for all of europe. this crisis -- i'm saying this on behalf of the whole of the european union and for the whole of the european union. it has shown one thing very clearly and maybe also has changed the way we think. indebtedness is the biggest danger and the biggest risk for prosperity on this continent. this is why we have to work against debt and work for competitiveness. it needs to be linked for charting a new course. for us the member states of the european union who are joined by the euro as a common currency, this means we need to now do something that we haven't done
to sufficient extent when the euro was introduced, namely, work together in a more coordinated fashion both politically and economically. this will not happen overnight. certain matters will be done fairly quickly. others will take -- a longer period of time will do this in close concert also with france. we want to put out a marker for the euro zone. not only for reducing our debts but also for boosting competitiveness and work together more closely coordinate more closely politically. there will be a number of issues that we shall work on of the next few months. let me just give you one example. you cannot have a common currency and social security system that are completely heterogeneous and one currency, the pension age and the demographic situation should be in some way -- have some kind of
relationship with each other. i think what also needs to be done is we need to free up the possibilities for investments. red tape has to be cut. we need to concentrate on creating jobs, competitive jobs that is. and the reality of the day is that we are not in europe as yet competitive enough at least not in all of the different areas and we haven't yet sufficiently secured our competitiveness for the future. i'm absolutely convinced that we're able to do this and we have all of the preconditions in place but we musn't rest on our current laurels as it were. and we also need to give a boost to the investments and that governments take out as compared to consumption and we have to show all those in a convincing way that are keeping a close eye on europe. that we are actually using as our yardstick the best among us. and not as sort of a medium sort
of average because we don't want to be only similar with each other in europe. that may well lead us down a slippery slope. that's something i don't want. europe must be global competitiveness. and this must be the yardstick for all of our future policies, for all of our future political coordination. we feel committed to this goal and we shall pursue it resolutely. what's part and parcel of this as well is enhancing the stability and growth pack. we know we need to regain confidence at least all of you who have kept a close eye on europe just look what we have done in the past 12 months. we have enhanced stability and growth pack and now we have to prove we abide by the rules. we have allowed it to be orientated more on macroeconomic criteria. this needs to be coupled with a more coordinated political and economic policy. so we need to do our homework.
and solidarity and competitiveness if you like should be one of the same -- should be two sides of one of the same coin of the european competitiveness. and that's why it was so important for me to underline whoever gets solidarity also needs to receive this solidarity in certain conditions. that people need to do their own homework back home. this is what we have to do. this is hour task and we as europeans shall give our regional contribution to what we can put on the table at g20. now, let us reflect a moment on those for whom we do this. in the crisis, when we save banks, when we initiated a fiscal stimulus packages, not only have citizens had the impression that we were actually driven by the economic crisis, that we were constantly lagging behind events and we should -- i
think now take a break and reflect yet again for whom we are doing this. we're doing this in the interest of our citizens the world over. we as politicians are to concentrate on shaping our policies in such a way and that's the great opportunity, the great chance we have after this crisis. we should do this in the interest of our people. using the forces of the market but in the interest and to the benefit of our people. so we know this is not possible without getting closer to each other. i told you this to you two years ago. i'm not going to underline this yet again but we also need global responsibility. we need global bodies that tell us quite clearly this is the wrong kind of policy. and then we have to accept that, this body tells us. that's probably the most difficult learning process that we allow others to tell us where we're wrong. but share norms.
share norm, share norms really what is absolutely essential in order us to enable us to meet the challenges of this new realities to the benefit of the people for whom we are responsible. this ought to be our guideline and it's actually fun to do it. thank you very much. [applause] [speaking in native tongue] >> translator: madam chancellor, many thanks for that visionary outlining of our way forward. you said at the outset that the currency really establishes an individual country's competitiveness strengthen
within europe and outside there are many different levels of competitiveness. how do you see the balance or certainly from the perspective of the euro? do you think it's overvalued or undervalued? [speaking in native tongue] >> translator: i don't want to interfere with the evaluation of that. i mean, that's done through market forces. i feel that there is no really harmonious space to these evaluations. there are stronger and weaker partners so that's why i say we need to steer a very clear course. we're not only a currency union because the currency union you don't have the possibility of individual members to actually devalue their currency. so it's so important not to say indispensable at least not -- there's no reasonable tone to it. to have a more consistent and a
more coherent economic policy and competitiveness because if we were to drift farther apart, the euro and the way it stands and as it's evaluated would be a theoretical kind of exercise and it would not reflect the position of the individual countries and their competitiveness. if we look at the present situation and simply sort of if you like take the median and not look at the more competitive countries actually setting the pace if we were to do that, euro would slip and i think that would really be at the center of a really lively debate at this point but i think we would live up to the responsibility because we need to remain competitive. ..
>> on listening to you i could almost say that your visions is a mark economy with a human face. >> but that's basically what the economy was all about. i think it's actually prove, particularly we have seen that this interaction of both sides of industry have worked very well with the programs that the government set out, were well accepted and help us. i think that this particular issue is something we must live
in spider. the the origin of europe was clearly that this is a continent where over centuries nations fought bitter wars against each other. and that this ought to be a thing of the past. and that peace should be. as i look around these days, there are many, many areas where we would be very, very pleased if they had already reached that particular stage. but what is important is it's not as if now in the present situation this were replaced by something, but it's complemented by something else. in the world today, our ideas of shared values of humanity, and dignity of man, of human rights, we wish to bring these to the floor and wish to fight in this world of today at the same time also for economic prosperity and economic competitiveness. is that something we can argue
if people stand together. we are on the next level if you like but we would lose everything if we put a question mark over these matters of peace and also of a peaceful coalition within a society. you'd be very surprised how quickly then this would go to the old cliché, the old prejudices. many countries have to resort to very harsh policies that they should never result in a situation where we fall back into the sad old patterns of the past. we need to absolutely prevent it. >> one final question. you spoken today before representatives of companies and industry. over the last two years, politicians have taken very difficult decisions, very tough decisions. how do you see the partnership with business and the economy in
achieving the goals which happened to be achieved in setting out a path towards those goals? what would you say to the people in this room? [speaking in native tongue] >> translator: my wish would be that where regulation is necessary, it is not fought against, people think of ideas. maybe people wouldn't say how naïve, she's a politician, quite likely so. if she were in business, she wouldn't be able to think this way. but anyone who's interested in long-term prosperity and long-term success is also a company, should rally around this point if we want to afford a sustainable growth policy, we should not only try to avoid regulation. and we should try to set growth on a continuous and sustainable basis. secondly, i would hope that those who work in the real
economy also tried to bring their interest more to the floor. because the real economy, without having -- without its of accessibility, actually was effective and very negatively affected by the financial crisis. i think there ought to be more of a dialogue between financial institutions and the so-called real economy, what is good for each and everyone. the financial business has to be there. it has brought the world forward. it has enormous growth, but it should actually ideally serve the real economy. because without it, it is without a job. the financial side will be without a job. but globalization and new norms, if only the real economy were to pursue that it will not work. but you i know have a lot of meetings here in davos about this so i think those who are
here already, i mean, i'm preaching probably to the wrong come in the wrong church and preaching to the converted already. you have learned the lesson that each and everyone has to be in on this. >> in light of those words, warm thanks to you, madam chancellor, for having come to us today. and later hopefully we'll have the possibility to discuss further issues with you, particularly the matter of trade. once again, many, many thanks. [applause] [inaudible conversations] [inaudible conversations]
this is about 50 minutes. >> tim geithner joins me now at an appropriate time, a little bit later he will be -- the u.s. theirnment built -- will be releasing their numbers for ther last quarter for the gdp numbers for the last quarter.the last q. we will not know them by the end of this conversation though. when you talk about tim geithnek and ben bernanke, you're talking about two people who have been on the firing line since the beginning of the economic colla. collapse, and ben bernanke remains at the fed and 10 went from the new york fed to secretary of the treasury. prtmay not be a candidate for president obama's basketball team at the center position, bur he is called in the white housel giant tim."g "e looks on two years here ofti.
real legislative accomplishment between health care ands financial reform. and he has had the challenge i r think of saying to everyone about economic reform and aboutt the disaster that we face. it could've been a lot worse. wes and growing economy and we see unemployment beginning to add jobs. he would be the first to tell you that there is a lot that remains to be done. warren buffett told a couple of days ago when we were talking hisut coming out here that th grade for tim was an a-plus. he is a relatively tough credit. if you look at tarp and look at the tanks in which they had
tough calls to make, those calls seem to have paid off. there remains a lot to be done. i would like to begin by welcoming timothy geithner, the secretary of the treasury of the united states. [applause] we will have an hour, but i would also like to get your questions. we will have an opportunity to include your questions. question per se, sometimes define what is on the minds of people. what are you hearing here at this conference? what do people want to know? >> i have not been here in several years. it feels very different. i think there is more confidence now that the most acute part of the crisis is behind us. i think that is even true globally. i have only been here for 24 hours, but what people have been
hal is me about farare europe doing? how about the u.s. and china? and how confident are you that the american political system will be up to the challenges we still face as a country? >> i want to touch on all of those. tell me how confident you are that the american political system can look at the challenge of economic growth to reduce unemployment in a long-term very difficult and very large debt. >> i spent a lot of time around the world talking to my counterparts. i would not trade their challenges -- i would not trade our challenges for theirs. we have a very tough set of choices to make especially on the fiscal side. but we are in a dramatically stronger position to confront
those challenges. we are in a relatively better position to confront them. we are still a younger country and the other major -- and the other major economies. our productivity growth is unique among the major economies. it was very strong to the crisis. we have a much more open economy. we have a more open immigration. we have better positioned to benefit from the extraordinary talent around the world. it's been with the challenges we face, we are in a better position to deal with those challenges. the great strength of the american political system is that it has always risen to the challenge. sometimes it takes a little time. it is sometimes a little messy. it is never perfect.
america always act. if you think about the last two years, if you try to put in context that underlying concern about whether washington will move soon enough on these long- term thanks, washington at a time of crisis did it do exceptionally important things in the last two years, not just in financial reform or even in health care reform, but in terms of starting, i think, the most promising set of reforms in education we have seen in a long time. we are beginning to see a substantial increase in investment in basic science and research. those were changes in reform -- i know they are messy, but the reforms were necessary. it is the american system that
deliver those reforms even at a time of a deeply divided country during a time of crisis. even with acknowledging the formidable nature of our challenges ahead still, our confidence is high. i prefer our studios of many countries. >> any regrets about the last two years in terms of whether you did enough about whether the stimulus should have been changed or should have been larger? >> we did and what we thought was necessary at the beginning. we looked at the experience of countries around the world and the president, to his enormous credit, decided at substantial political cost that he would try to move aggressively at the beginning and use the full arsenal.
because of that, we broke the back of the financial panic very quickly. it started to turn in march of 2009. use of birth comeback extraordinarily quickly given the financial shock. we knew that looking at experience that the typical mistake governments made in crisis is to stop to send, to shift to restraint. we were not going to make that mistake. we knew that even with strong policy measures at the beginning, that we may have to come back and reinforce those measures. change their shape. that is exactly what we have been doing. as the crisis receded and the nature of the challenges shifted, we try to shift the thrust of policy to focus on things like long-term investment and infrastructure.
those are the things you need for long-term growth. >> units and there was a recovery. that recovery seemed to stall in the eyes of some people. are you sure in your assumption as to where we are and where we are going with respect to the u.s. economy? >> let me tell you what i hear from businesses and investors in the united states. there is much more confidence now that we have a sustainable expansion. it is not a boom. it is not an expansion that will offer the possibility of a rapid decline in the unemployment rate. there is much more confidence that we are able to avoid the risk of slipping back into recession or even a long period of low growth. i think that confidence is justified. if elected held sentiments have changed -- it really began in
august or september -- u.s. seen justifiably more confidence that we will be growing at a reasonable rate. economists now say the economy will grow between 3% and 4%. >> you think that is reasonable? >> i am not a forecast or an economist. what matters really is what the average expectation of the market and what is its distribution. what is most encouraging about the sentiment these last few months is that people have been most concerned about the risk of a low-. a long term growth. they seem much more confident that we will be growing at a reasonable pace. our job is to make sure that happens and make sure we do not risk leading the economy with an unacceptably high levels of unemployment for a long time. >> what you think the business
community and the committee that will be feeding consumer demand is looking for? are they looking for certainty where are they looking for something else to say to them it is time to make an investment in capital allocations, it is time to hire people? >> if you're seen that already. private investment in the united states in capital equipment and software grew at roughly 15% last year. it is still growing quite rapidly. you are seeing businesses start to bet on the fact that the world is not going to be growing. we have had 1 million private sector jobs in the last 12 months or so. you are seeing both of those trends start to gain momentum. i think it is worth looking at the big strategic imperative in the united states. we are at the beginning -- i still think the early stages of
what will be a very long time of exceptionally rapid growth in the emerging economies around the world. the united states is exceptionally well-positioned to benefit from that and take advantage of it. the things those economies need to grow, american economies are still uniquely good at. the united states should be tried to make sure that u.s. companies and foreign companies to invest in the united states and that they are going to be a substantial participant in that huge wave of growth ahead. you're seeing it happen now. u.s. exports are growing quite rapidly. china is growing at twice the rate of growth of the rest of the world. things that have been traditional with the american economy -- the basic dynamism of the economy, education, the
adaption to change -- i still think they seem encouragingly strong. that is what the president paid so much attention to animation, education, investment, and the broader reforms to make that possible. the early shape of the recovery should be encouraging. >> some of the numbers have been revised. do you worry about inflation in those emerging nations? >> anybody who is a central banker in an emerging economy -- those countries have been growing quite rapidly -- are seeing more pressure. they are facing a more complicated set of challenges in making sure they can contain inflation and dealing with a big surge of capital flows driven by
optimism over how strong growth will be. those are world-class challenges. they are familiar challenges to policymakers. some countries have decades of experience in managing those challenges. it would be easier for them to manage this challenges if you saw countries like china and other emerging economies softened their link to the dollar. if they do that, there will be more flexibility to manage those inflation pressures and not risk getting behind accelerated inflation. for the global economy, given that two-thirds of the world's major economies are in the early stage of coming out of this recession, i would not put in place and on the global level at the high list of concerns. just to start where you began,
the most important thing now apart from the united states is doing what needs to do to repair the damage caused by this crisis -- i am the always the first to admit, the u.s. made some substantial mistakes in how we ran our financial system. they caused enormous damage to our credibility and to the american economy. will be living with that for a long time. >> when you say that, you are talking about the failure of enforcement of regulatory authority? >> we just ran an indefensible the antiquateda th antiquated financial system. it is an obligation that we acknowledge that mistake and make sure we do everything we can to fix our challenges here. apart from what we do, which is
important to world affairs, i think it is very important to see europe -- and they will do this. i have no doubt they will do this. we have to make sure they put in place a framework that allows the countries that have difficult reform challenges to let those reforms take hold. i am confident they will be able to do that. >> you are confident they can manage this problem? >> i am very confident. they have no alternative but to deliver on their commitment to make sure they are standing behind those countries and their financial systems because they recognize there is no alternative to the reforms. for those reforms to work, they need time to -- funding is the oxygen of economies in the finance system. it requires that kind of commitment from the rest of europe to deliver.
>> let me stay with that for a second. are you convinced they had done enough so far and that they will be prepared? i in your conversations with central bankers and finance ministers, that they are prepared to handle the problem of sovereign debt whether it is greece, spain, portugal, or italy? >> i do not think any of them would say they have done enough. they are now in the process of trying to shape the escalation on the financial side. there is a question for the european authorities. they have made it clear that they are going to hold it together and not take risks that uc reignited. >> what impact did have on the u.s. economy the sovereign debt issue in europe? >> i think it had a significant impact in slowing the recovery
at a delicate time. most of the world was still quite scored by the trauma of the crisis. the memories were still quite wrong. -- quite raw. when they sell this erosion of the political system outside of the united states, that destabilized confidence. use all equity prices in the u.s. fall to 15% in a short time. that was a shock to the american economy. fortunately, in part because europe move to fix it, that was relatively short-lived. after that brief loss of momentum, the u.s. economy started to regain a little strength starting in august or september. >> presidents are cozy and chancellor merkle and said they are confident the bureau will survive. >> i will leave that to them. i share that confidence.
>> when you look at the biggest issues -- lest they japan for a second. standard and poor's lowered its rating for japan's long-term debt. what does that say to you? what does it say about other countries in the industrialized world? what does it say about some possibility of the united states? >> i think i would rather speak to the u.s. question. >> are you surprised with the japanese? >> if it is a very high-savings economy. they had a high level of debt. but japan's main challenge, and this is true everywhere, is how they are going to grow in the future. how to make sure they achieve a level of growth as the population ages back in support them. i think that americans in policy
understand that, and i think it t recognitionnc across the political system that our financial system is unsustainable in the long run. it will require further changes to bring it under control. we are in the process of figuring out how to build a consensus to make that happen in a way that is going to be fair and preserve strong fundamentals for future growth. our system has a lot of strengths in terms of how we make fiscal policy. it has some important witnesses and challenges. our strength are the president is obligated to put out a budget that lays out policies for two years. those are evaluated by an
independent authority, in this case, the congressional budget office, that has to judge what they produce relative to the economy as a whole. when the president lays al his budget in a few weeks, you will see our view of the best way to bring this deficit down over time to a level that is sustainable and how we can do that without hurting not just the near-term expansion, but focus on education and renovation. the fact that we have to do that is an important strength of our system. our challenge is that is just the beginning of the process. congress has to legislate policies. our real problem now is that we do not have a device in the american political system that allows congress to commit itself credibly over a multi-year.
to policies that will offer an enforceable commitment to bring down the deficit to a sustainable level. that is our challenge just to come back to a question you asked a few minutes ago, when businesses and individuals in need is the ability to understand over time help we are going to solve that. we know we have to solve it, but the ideal thing for incentives and for confidence and certainty as to lay out a path for how we are going to solve those things to allow people to plan and adjust. the early -- the earlier we began these reforms, the earlier people can adjust to them. these are within our capacity to solve. >> the political capacity to solve? the political will to deal with the long-term entitlements are at the core of our deficit issues.
>> the program is not fully invested at the moment, but it is coming. there is no alternative to it. there is no way to avoid it. we cannot grow our way out of its period if you look at our position relative to that of the rest of the world, it is going to be easier for us to bring ourselves down to more sustainable levels. we just need to make sure we can start the process soon. >> do we have a real conflict between the necessity of growth because you must deal with unemployment and a deficit issue and a debt issue that goes to the long-term? are they in conflict said that you have to say to everybody, "we are trying to get the growth think going and then we will deal with the deficit and the debt." is that the mantra of what you're saying? >> yes.
i think that as you do this, you have to make sure that you do not hurt the recovery and take so much risk that you do a lot of damage to the early expansion by shifting to prematurely to substantial restraint. we are not want to let that happen. there are people who do not want to hurt the economy, but they want to move quickly to do deep cuts. it is not irresponsible way to do it. it would undermine the objective. we have to have that process start more gradually. i think we can do that, but as a strategy, you have to be able to lock in politically things people can count on and be comfortable will bring down those long-term deficits. >> that is the political debate in washington today. >> it is starting. the hard thing i am thinking
about fiscal reform is not the accounting question of how you narrowed the gap and hello you need to get it, but how to do it in a way that will not hurt growth or incentives. it has to be fair. it has to be fair to the broad community of your citizens. that is always a political challenge. under the system we have, we have to find a way to make congress commit itself to a multi-year framework to bring down those deficits. >> if you have a congressman called you up and ask you to convince them that it is the thing to do when they feel so strongly about spending and the second big issue is the long- term debt. >> no one who lives in the united states or sits in washington can avoid the fundamental reality of the fact that we had this unsustainable
gap. we do not have unlimited resources. i think people realize that now. when we talk about investment in education or research and science or even infrastructure, we have to do that in a way that is affordable, responsible, and consistent with the impaired did of bringing down the deficit. we have to pay for things that cost money not ignoring their basic costs are hoping they fix themselves. those of the constraints we have to live with. the reality is much more widely accepted in washington that it was over the last 10 years or so. you do not hear people in washington say tax cuts paid for themselves -- pay for themselves or that we can grow out of those things. the critical test of credibility for us should be can we find a
way to lock in multi-year commitments so that we can began helping people adjust and what can we do that in a way that will preserve basic incentives for investment so that we are not hurting what has been big classic fundamental strength of the american economy -- innovation, education, things like that. >> what is going to grow the u.s. economy? >> the basic fundamentals of growth are going to be the quality of talent you produced to the education system. they are the capacity of government to make sure its is investing as only governments can do. the market will not produce on its own the right level of investment in basic science and research. improvements in the basic quality of public infrastructure
which have a lot to do with the cost of running a business in the united states. your financial system does a better job of allocating capital to where the returns are higher. >> there is still money from the original stimulus program are as for structure that has not been spent. -- for infrastructure that has not been spent. >> the funds have been committed. a substantial number had been spent. that will not be sufficient to repair and rebuild the basic public infrastructure that all economies need to operate more efficiently. there is a very strong case for a long-term multi-year commitment to make sure that roads, highways, etc. are brought more into the modern era. >> david cameron stop to say
hello to secretary geithner and told him to tell the president that he had great admiration for the state of the union speech and he was going to recommend his speech writer take a look at it. my question is what happened? in terms of competitiveness, there are things the president should have been thinking about. should he have said, "this is a way to connect the dots in terms of growth, in terms of the economy, and at the same time do things we need to do for the long-term help of the united states," or did he wake up and say, "we are really in trouble with competition?" >> these things are part of what he began at the beginning of the administration. of course, they were eclipsed in the public eye in terms of
putting out the financial fire in the early task of designing a reform to make sure americans have health care. >> in terms of this preoccupation or the public dissension? >> i think the latter. it is one thing to say it was not just an economic crisis, it was an economic recession more serious than americans have seen in generations. it happened in a country that is still quite divided politically. we have a very determined, quite formidable opposition that shows a matter of strategy to stand apart from this early and pierre tiv of managing the crisis and reform. i think that made it harder. the basic core of things about
innovation, education, an investment -- what he is doing now is building on those. you can see evidence of this. it is really important, not just in america, but outside the united states, to see examples of people in washington trying to solve basic problems. some of them from the center, ideally. u.s. seen in the last two-weeks of the year a pretty encouraging capacity to actually get some things done that matter a lot. i think that helps confidence. what we have been trying to do -- and we started this process in september when the president proposed reforms to investment -- is to find things that republicans support and can do with us such as corporate tax reform, so that we can help
build more confidence in the united states. there are people watching and willing to come together and solve some problems. again, there are lots of things that divide democrats and republicans. there are people in both parties who want to make sure those contrasts are sharp and compelling to their constituents. we have to find a way to rebuild the capacity to act because we cannot legislate now without democrats and republicans. the things that matter to our growth in the future require congress. there is nothing we can do at the executive branch. >> had been changes -- there have been changes at the white house in terms of the chief of staff and economic advisers. it is said that many of them work for president clinton. it is said that this economic team is more sensitive than the previous.
you are now the captain of the team. but these are more in line with the views of tim geithner. >> that is true. [laughter] >> was part was true? but you're the chief in charge of the team? >> it is an excellent, a talented group. i think the basic center of gravity around the team reflects the president's basic values on these things. i do not think they have changed. i think what has changed is that we have been able to put the worst part of the crisis behind us and we can now focus our attention on things that matter to long-term growth. >> part of the message of the government is that we have made sure that we can survive and now we must focus on the future. quite the immediate, urgent,
overwhelming priority for us -- nothing was possible without it -- was to break the back of the crisis as quickly as possible. the president was going to spend a huge amount of political capital without much support in making this change is early. we have been growing now for six quarters. it is right to try to shift the center of political focus do things that are about education, animation, and investment. those things matter for the long-term. >> it was said by peter becker in the new york times that you and the president have bonded, therefore you have a unique place to define him. christine romer said he was a moderate, middle-of-the-road guy. is he is essentially a pragmatist than what is that where he is in your judgment? >> absolutely.
he recognizes what we all do that the test the policy is what is going to work to make a difference in people's lives. the quality of opportunity we give people. the tests for all of this should be what is going to make a difference? what is the most effective way, stepping back from politics, that is going to make a difference? this president is doing fundamentally necessary, important reforms like in education, health care, or energy. he is doing so in a way that recognizes that the job of government is to help shake the incentives and make sure this basic as for structure and network allows the economy to
function. if you want to call the centrist, that is fine. >> what would you call it? >> i do not think i can characterize it. i will leave that to him to do. >> i will give you one other endorsement of our president. there is a huge gap. you see it all across the world now between what the economy requires and what political systems are comfortable trying to do. it is the basic test of leadership as it heads of state to try to figure out how to make possible politically famous that are in essential economically. you cannot let the political constraints and out there prevent you from living on things that matter. that requires the willingness to
take risk politically and spent a lot of capital. he has been enormously supportive from the beginning of recognizing that you must be willing politically to take this risk early or you'll be living with much longer-termed damage and cost two things that matter to economic health. that is enormously important. >> would you say that most of the measures that took place to thwart the crisis and create a recovery out of this threat of the greatest depression since the great depression simply were matters of things that work and not a question of a philosophy about government and the economy? >> people tend to look at the competing strategies when dealing with a financial crisis and try to categorize them as two extremes. you might call it the
liquidation strategy. let the market solve it. there are some people, to use the pejorative, they say you should use the nationalization of strategy -- have the government masterfully socialite those risks. we had a different message than that. it was enormously successful. we wanted to recapitalize the financial system as quickly as possible with a framework that maximized the chance that private capital would do that work for us. the things we put in motion in the stress tests were designed to make that much more likely. alongside that, we try to take the catastrophic risk of the broader financial markets by making a lot of commitments to make sure there was more
liquidity left in the dollar funding. those were untested strategies, but they were enormously effective very quickly. i think we were lucky that we moved so quickly to adopt them. it allowed us to bring about a very substantial restructuring of our financial system and to get out of the investments much more quickly at a much higher return financially than otherwise would be the case. i will give you an example. the s&l crisis several decades ago was a crisis much more modest in scale, a much tamer financial challenge. that cost the united states about 3% of gdp. the similarly measured cost for the united states -- tar, the
broader investments we made -- are going to be under 1% of gdp. that is an exceptional outcome relative to expectations. it was possible because you had such powerful support for monetary and fiscal policy early on. >> clearly we had an economic recovery on wall street and the corporate sector. clearly in terms of unemployment, we do not have an economic recovery. tell me what you think will be done over the next two years. some people, the cbo among them, believe that unemployment may drop by the end of 2012 to 8%. do you believe those figures? >> the private forecasters say that all the expectation that the u.s. economy grows by 3% to 4%, the unemployment rate will
be at the low end of 2012. these things are inherently uncertain. unemployment only starts to fall when you see economy starts to grow again. growth has to come first. we are now about 1.5 years into positive growth. as this economy continues to process the recovery, you will see more people put back to work. gdp in the united states is now above the pre crisis levels. unemployment is still roughly in the range of 10%. >> why is that? >> it is partly because of the way the u.s. economy works as a whole. you solve a crisis because people were panicked. use all american companies cut deeply into the payrolls with brutal force.
they have been more tentative because of the scale and because of the aftershocks of that trauma. you see our start to increase early. they are tentative about hiring back full-time people. i think it is fundamentally the trauma caused by the shot two basic confidence. we are dealing now. pat will start to improve. a recovery that follows a crisis like this, a result and part of too much borrowing by households and by the nation as a whole -- those recoveries arden -- will be more moderate. there is no way to avoid that.
that consigns us to a much more moderate path. some suggest it will be 2016 until we get back to 5% or 6% unemployment, which is considered full employment. the believe that? >> i do not think the record is good. i am not an economist. all we can do is make sure that people who are responsible in congress and washington are doing things that are going to make it more likely that we grow and we bring the unemployment rate down as quickly as we responsibly can. that is our obligation. again, what is happening is encouraging, but we have a lot of challenges ahead, not just with unemployment or the trauma
you see in the housing markets. >> what are you going to do about freddie mac and fannie mae? >> in a very short time, a few weeks -- and i am glad you raised that. i think the core of the u.s. financial system is much stronger. i think the basic framework of reforms we legislated last year with barney frank and chris dodd leading the charge is a very strong framework of reform. it addresses the court challenges in our system. but we still have a mass in the housing and financial markets. it is almost completely dependent on the market -- on the government. we need to put private capital back into the housing finance business. that will lead us with a system that will not be vulnerable to a tragic, colossal failure such as fannie and freddie.
more consumer protection. >> absolutely. >> are you worried about one of the 50 states or more may go into bankruptcy? >> i would say that it is tough to understate the difficulty you have as a government of the states -- as a governor of the states. it will be hard for a period of time. those pressures are diminishing, but there is a long set of reforms they have to get through. congress did a lot in their first two years of recovery of trying to ease that burden. but the force of the pressure is diminishing, not intensifying.
>> china. hu jintao has said this is not a zero-sum game. you had been a long time follower of china. i believe you speak mandarin. >> i would never claim to speak mandarin. [laughter] >> you have also been part of the security and economic dialogue that has taken place in china and the united states. where are we after the state visit? what came out of it? the the chinese reasonably at the right to say, "we have shown that we are as strong as the united states on the world stage and there is no bigger player than we are?" >> i do not believe the
leadership of china would say that. it is remarkable, the most impressive transformation that we have seen. they had this remarkable capacity to set those long-term goals and basically execute them. the chinese will be the first to tell you that they are -- >> many people do not think they will be one-third. one by one, they are replacing whoever was ahead of them. >> they have they remarkably difficult situation, not just demographically. the labor force will start growing sen. they are at the early stage of building the basic architecture of a market economy. the economy is overwhelmingly dominated by the state where resources are allocated by the state, not the market. they are committed to that path
of reform. what you saw was both president obama and president jintao acknowledged that the world depends on how effectively we together figure a way for us to be growing together to be pursuing policies that are not just in the interest of what we have to do domestically, but are in the growing address of the -- but are in the interests of the growing economy. what we want to do is try to strengthen the incentives china faces to continue on this path of reform to rebalance the economy, to move towards a more market-oriented system and to join us in try to shape a system that will work for both of us going forward.
china was not there when the united states and parts of europe built the post-war economic system. they were not present at the table then. they have taken advantage of the system for the last 30 years or so, but that system has to adapt and change. we are going to have our interests we are going to pursue and they will have their interest they are going to pursue. both countries have to recognize that those interests are closely tied. they are not fundamentally in conflict. they are largely complementary. they have to be comfortable that we are working on a system to benefit our interest as well as theirs. >> will be competing model for other countries around the world? >> if there is no risk of that. >> the as we look at this, you expect to be secretary of chert the treasury -- the secretary of
the treasury for the four years of this administration? >> i am tentative say, "i hope not." [laughter] i will serve as long as the president wants me. >> at the president wins reelection and once you to be part of the government -- it will be hard to turn in dallas? >> the president will win reelection. they will have a chance to make sure he as good people working with him to shape our future. it is a great -- >> the most important lesson you have learned? [laughter] >> there are so many. there is no -- when you talk to
people at a university or people just coming out of college, what i say to them is that you have to work for your country. sometimes there is no greater experience, and no greater privilege, that the more interesting or challenging than economic and economic -- that economic and fiscal policy today in the united states. >> thank you very much. secretary 10 doctor. wait a second. any questions you have before we close off? does anybody want to ask anything? yes. right there. do you have a microphone? thank you, tim. that was great. >> i am very proud of what has been accomplished. in many places in this forum we have been asked whether we should have more or