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tv   The Euro  CSPAN2  October 8, 2016 11:00pm-12:16am EDT

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>> that is hard to argue with. >> and she began redeployment and that change it iraq. >> they were going to germany anywhere, but they were deemed back to iraq. the idea that we needed to rethink the globe and leave the postwar era, leave the post- communist transformation era and look at the world in a completely different way with something she really -- i think
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a secretary clinton continued along that track is not likely they're going to get a lot of promotions from london to rome if they're allowed to do that, which is highly doubtful. the exciting work and a lot of the people come from are from places that a lot of people have to look on the map to find. and we are and more time with more commitment and more personnel in those places because those are the cutting-edge of american foreign-policy and american interest. >> let's conclude on this note, what were your three things i want you to mention them, your three pleas at the end, your three recommendations going forward. >> i do believe that it ought to be declassified on the internet and what is happening now is now is that international students, professors, professors, students of diplomacy have access to them. another set are little less
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secure having a deep dive into them. the cat is out of the bag. >> i also think that we need professional leadership in public diplomacy. many of the other branches of the state department have been well served by officers who have come up through the ranks, worked worked in the field for decades and then assumed leadership another secretary rolls we've had excellent political appointees as well. public diplomacy is one in which the turnover has been too rapid, the depth of expertise and the commitment of the farmer undersecretary of diplomacy has left. i wish at at some point, perhaps the next administration might consider pulling someone from the ranks of the public diplomacy specialist in selecting someone in the leadership role for that. >> i want to say that you have
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written an excellent book. i will put it up at this time, it's very thoughtful. to think any student of foreign-policy, it is not only informative, but it really is fascinating, i learned a number of things that even though i've only had 25 years in government i've learned so much. >> thank you, it it has been fun chatting with you. >> c-span, created by cable television companies and brought you as a public service by your cable or satellite provider. [inaudible]
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[inaudible] >> good evening ladies and gentlemen. welcome to barb's a noble, upper west side. tonight i have the pleasure of introducing joseph stiglitz, he is a best-selling author of a number of titles including "the great divide", he is a columnist for the new york times and the pollen syndicate, he is ready for vanity fair, political, and harper. he and harper. he brings us his new book, "the euro", how common currency -- in
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explaining how euros own policies especially toward crisis countries have further exposed those flood designs. he outlines three possible ways forward. fundamental reforms in the structure of the eurozone and the policies imposed on the member country, a well managed and to the single currency euro experience, or a bold new system dubbed, the flexible euro. the review calls this work of urgent argument of compelling interest to economists and policymakers. without further a do, please join me in welcoming our author, joseph stiglitz. [applause] >> it is a pleasure to be here. i should begin with a question, why should an american like me be writing about europe, doesn't america have enough problems of
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its own that should get our attention? actually think there are number of reasons of why it is important for the united states. as an economist the point is that the euro is a really interesting experiment. we like it interesting experiments even when they are not really great ideas. thank you. what i said is one of the reasons why economists like me are interested in the euro is that it was a really interesting experiment and even if it was a foolish experiment we don't have that many experience in economics and this is one on a grand scale. unfortunately even though it was founded, as i will explain explain with the best of
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intentions, one cannot base a grand experiment of having as much implications for so many people just on a visionary idea. one has has to pay attention to the laws of economics. you can't just repeal them. the political leaders who helped found the euro didn't really understand that. i think they didn't really commit this is a serious accusation, they didn't really understand economics. it was influenced in a sense by some ideas that were very prevalent at the time. this was the beginning of the 90s, after the cold war. and the widespread belief that markets were really triumphant's and the market economy worked well and a particular part of the beliefs was that if only
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government did its part the market would take care of everything else. the idea was that all government had to do was to things. make sure there weren't too big of a deficit. that is a theme you can sometimes here in america. keep deficit low and keep inflation low. and so the european central bank mandate was to keep inflation low. they had a set of restrictions on the members of the eu. the the eurozone to keep their deficits low. if you did those two things, the market would take care of everything else and we guarantee success. well, we should have known even then that those ideas were wrong. that is the crisis evolved it wasn't just greece and greece
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gets a disproportionate amount of attention. it is one country -- and what it did. spain and ireland had actually a surplus before the crisis. the crisis caused their deficits and their data. they actually had a very load debt to gdp ratio. it wasn't the idea of keeping deficits and debt slow would make sure that you had a well performing economy and would not have crisis. that's wrong. the remarkable thing is that years after the crisis germany still doesn't understand this. and so they still think the mistake they made at the beginning, the flawed idea of what was required is what they ought to do. so in a sense they double down on a bad idea. so they told all of the
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countries what you have to do is maintain even stronger fiscal austerity. not a surprise, it hasn't worked. the result of a particular moment in history because they sometimes think if the euro had been founded a few years later after the east asia crisis nobody would have come i should say nobody, know most people would not have had that idea. the east asia crisis was a crisis and a part of the world where those governments had their low inflation, no deficits, and so that crisis which was the biggest crisis up to that point that crisis was caused by misbehave markets so we know that markets can often
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behave very badly, that is what happened in spain, ireland, and elsewhere. so it is interesting how important an idea like that euro founded at a particular time, the very, very time it was founded had an influence in the design and the consequences would happen. there are couple of other reasons why i was interested in studying the euro. one is that it brings out to other themes that i have been interested in for a long time. one is globalization a euro is a form of integration for a large number of countries in europe and bringing them closer together. i think the real mistake was that particular form of
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integration, you you have lots of different forms they thought they thought i was sharing a common currency and i was a mistake as i'll explain. but a more general problem in globalization is a mismatch between economics and politics. when the the pace of globalization and economic it outpaces the out pace of the politics and you can get disastrous outcomes. we see that in the united states in the context of some of the trade integration that we have had. finally, a single financial market a single currency is about finance and of course we all know that's an area where ideology plays an important role, where things often don't work very well.
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so trying to understand what is going on with the euro helps bring out some insights into financial markets. so let me go back to the founding of the euro. it was conceived with the best of intentions not as an economic project, if you turn to economists they would've said this is not a good idea. if you turn to economists they would've said it's not a good idea. it was a political idea. but the politics wasn't really enough to get the project done. so they said what is the next stage in european immigration, they scratch scratch their head and there's many different ideas common defense, and they said
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let's try this thing of a single currency. after all on the other side of the atlantic people have a single currency. it's a strong economic unit, strong economic unit, maybe that is a critical point. that is where they went wrong. while it was a political project, the politics politics wasn't strong enough to do was necessary to make the economic project work. so i'll explain a little later on, we have 50 diverse states in the united states. actually the difference between the richest and the poor state was not that much different between the richest and poorest country in europe at the time the disparity has increased since they opened europe to the eastern european countries. we have a single currency work and it works because we have a set of institutions that make our economy the single economy. they did not put in place those institutions. the result of that was a
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political project which was supposed to bring prosperity and with that prosperity bring the countries closer together than they thought there'd be this positive political dynamic successful prosperity leading to more solidarity and more political integration and it has had the opposite effect. it's been a disaster economically. that economic disaster has led to political divisiveness and making it more and more difficult to address the other issues which your pastor address together like the immigration crisis. so the question was, why has there been this failure of the euro? let me just say that i could go through the numbers about the extent to which the
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economy has not been performing all in the crisis countries like greece, spain, portugal, and ireland. the depth of the depth of the downturn was worse than the great depression. unemployment in spain is they're celebrating, things are getting really good, the on employment rate is only 20%% and youth unemployment is only 50%. that is because one of the great things about spain about europe is that you can move easily. so the reason unemployment rate is only 50% is that a lot of the unemployed young people have moved elsewhere in europe. in greece the youth unemployment rate is 60% and the gdp has gone down by 25%. no matter how you look at it even the best-performing country, germany would be
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greeted a d by any standard if you are not grading on a curve. if you look at what is happening to large parts of germany, large fractions of the economy and citizens are doing very badly, their incomes are going down. from an economic point of view it is clearly not worked. the reason is actually very simple. when he he formed a single currency you took away two of the ways economy six set and societies suggest when you get hit by a shock like the global financial crisis from the united states. you can lower the interest rate, you can lower the exchange rate, and that leads to more exports and that helps your economy grow. so iceland for instance where is a very small country, but iceland had one of the biggest
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crises. it had one of the most poorly behaved financial sectors. but they recovered fairly quickly. one of the reasons is that had a flexible exchange rate. they they were not part of the euro. and then worse, after they had taken away these two mechanisms of adjustment they tied the hands of the european countries further and said you cannot stimulate the economy to fiscal policy. you cannot have more than of 3% deficit. then they said to the central bank, you have to focus on just inflation. so even if there's a lot of unemployment, if you are worried about if there's any sense of unemployment raise interest rates. so they raised interest rates twice. so what i've tried to explain is that in a sense, the euro was
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flawed from birth. and that goes to a major controversy going on about what went wrong in europe with the euro. there's one group of people who say that the only problem is they did the wrong policies. in the fact is, their policies could not have been worse. so it is true that they have given a lot of basis for that as an explanation. the extremes of austerity, the particular policies they have imposed in greece, some of them are really weird, in the middle of the crisis, the house is burning down they have a debate, the group of three countries that dictate the policies to
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greece they have a debate where they discuss how old can milk be and still be called fresh. and the greeks say that we like fresh milk and people from the rest of the area say while your problem with your economy is that you want milk that is only four days old to be fresh, we think it should be ten -day-old milk could be called fresh. that became a major controversy for a while. can you imagine, the economy is in depression and their arguing how many days old milk should be. of course there is a little inkling about what this was about, big dairy farmers and netherlands wanted to ship their
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milk down there to greece, takes a few days, they wanted to be called fresh milk so buyers would know whether it is greek melchor dutch milk, it would've exacerbated and worsen the economic situation in greece because the greek farmers income would go down. this was a policy designed to hurt greece. they were holding up money over issues like this. so lots of ground to say that the european leaders, the troika the troika was not doing the right thing. but the basic idea i argue is that it was a structure of the eurozone itself. because it took away these adjustment mechanisms. now, there were other things when you have a rigid exchange rate there are other things you can do to adjust. you have to change relative exchange rates, it's the real
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exchange rate taking into account prices into countries. so if you can't change the number of euros you get per dollar there only two other, you either have to lower the price increase or raise the price in germany. so that's the only other way of going about it. love you say it doesn't make a difference, well yes it does. because when you lower the prices and wages in greece, greeks a lot of money in euros, if you lower their wages what they oh becomes more burdensome, they can't pay it back and they go into bankruptcy. so what so what is called internal evaluation never works. the alternative was raising the prices in germany.
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but that germany tells a story, inflation is what brought on hitler but that is made up history. the real history of courses as anybody knows it was the unemployment rate. it was a high unemployment, related to the demand of after world war ii to have large surpluses to pay the penalties ever imposed on germany into world war i which was invaded against because they thought it would cause serious economic consequences. so it was these primary surpluses. the irony today is that germany is insisting on greece having huge surpluses to repay the debts they oh. not a surprise, causing the
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depression i described before. so they realize that if you're going to have a diverse set of country share, currency it would it be important to have them come closer together. so they talked about convergence. but actually they set up a system that was diverging and let countries get further for their part. now after 18 years or 17 years of the year the countries, the rich countries get richer and the poor countries get poorer. and and it was predictable this would happen. again it was part of the structure. so why? there's lots of parts of this. let me give you an example. one of the basic aspects of the eurozone was for money to move freely around europe.
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they thought that would leave money to go from the rich countries to the poor countries. that was the ideology. if you took just the elementary economics course you might believe that. hopefully you don't allow people to only have an elementary course be in your policymaking decision. the problem is back in 2008 and nine, and nine, we had a global financial crisis. where did money flow after the crisis? the united states remember was the source of the crisis, our banks had really mismanaged everything. where did money flow? to the united states. why? a simple reason. the united states had the deepest pockets of any country.
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i remember i was in a phone call after -- went down and the question was how do we respond to the bush initiative to have $700 billion being given to the banks essentially alone so it was a democratic party was trying to decide, obama was already running for president so what should we do in response. they were mostly bankers on the conference call and their response was why only $700 billion? and the answer was don't worry the reason it was only 700,000,000,000 was because 1,000,000,000,000 sounded too big but don't worry there's lots more money if you need it. it was very clear that treasury and the federal reserve was a subsidiary of wall street so money naturally flow toward the
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united states. that's the general principle behind any banking system is the government. but if if the spanish government is back in the spanish banks do you want to keep your money in the spanish banks or do you want to put your money in the german banks. it made a lot of sense, a lot of people took their money out of the spanish banks put in the german banks but then the spanish banks can't one money to small businesses in spain. so spain. so there's a contraction of lending so the spanish economy gets weaker, the greek economy gets weaker what happens think? their tax revenue gets weaker. they weaker. they can't bail out the banks their ability goes down and so more money leaves. it is a downward downward vicious circle. that's a system they created. the same thing about the talented people where are they? they have all left greece.
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their leaving spain and the other countries. so it's a a system where the rich get richer and the poor get poorer so rather than convergence you get this this kind of divergence. this is the basic problem. so the question is what is to be done? there's only two ways forward either more europe or less europe or the euros on has to either integrate more or it has to figure out ways of disintegrating. if you think about what is it take to integrate more or what is the minimum necessary natural place to begin is to say what makes it possible for the 50 americans dates to share
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currency and something very easy to migrate from one place to another and that means of california has a problem people moved to other places. there's a fundamental difference between migration in the united states and in europe if everybody leave south dakota because there are many jobs there, no one really cares a lot. a few people in south dakota do but if everybody leaves greece people are not going to be happy at least the greeks are not going to be happy. so the nature of national identity is very different. and that's related to language making migration much more difficult. but far more important or other important parts are the fact that when washington mutual, one of our biggest banks put into
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trouble it wasn't the state of washington that bill that washington mutual, it, it was the federal government, fdic. and when we going to a recession we have a national unemployment system. so the cost cost of additional insurance is picked up nationally. in europe it's the opposite. when a greek bank has a problem greece has to bail it out and that weekends the greek government even more. they have to pay for the unemployment insurance. they have this downward circle. so that gives you a hint about what is required. one of the things you have to have is common deposit insurance otherwise money is going to leave the week countries and go to the strong. the idea of having a banking union is now accepted but germany says not now. sometime in the future. but of course the damage is being done is going to be hard to reverse.
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when money leaves the spanish banking system they're not going to come back quickly. in in the same thing about the people. one of the things europe did unknowingly and i don't think many people realize at the time was they created the sovereign debt crises. something i saw as a cheap economist of the world bank. when you borrow money and a currency you don't control there's a risk of you not been able to repay. the united states will never have a sovereign debt crisis like that which appeared in europe because we all a lot of money but what do we know it in? in in dollars. only trump doesn't understand this. so if we need to pay it, what
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what do we do? we print more dollars. it's only if the printing presses breakdown. or we have no electricity. so you can imagine the disaster but it's almost unimaginable. but in europe they created a situation where greece and spain are borrowing a currency that is not under their control. they created the sovereign debt crisis that they have had in recent years. so to address that you need something like a common borrowing framework which is sometimes card euro bonds. then a system to let the weaker countries catch up to the stronger. you have to have a solidarity fund to have sharing of costs the periods of high unemployment and so forth. most importantly you need a system of adjustment so that countries like germany who have
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big surpluses raise their spending, raise prices so the system adjust when you have this fixed exchange rate when you don't have the ability to adjust to the exchange rate. so doing what is necessary to make the euro work is not a lot economically but it seems to be more than is possible politically. think the degree of unity of economic integration we have in the united states. but germany keeps saying we are not a transfer union. europe is not a transfer union which means we don't share risks with other people we don't bail out other countries. the irony is that while they say that, because of the policies they've wound up bailing out.
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so they've had greater crossed while they try to take the stand of not doing it. so they wind up paying a price for you might say their stance of not creating an institution that would make it work. so that's not that's not possible what are the other ideas? the other is in a divorce, about how how you could break up, separate the different countries maybe into two or three units and you wouldn't have to go back to the 19 different currencies they had before. i think it could be done, not without cost, but you have to remember the current system is extraordinarily costly. the depressions are costly. people are bearing a high price. the final idea is a flexible
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euro, a different kind of halfway house, the basic ideas that you might keep the idea of a single currency as you try to keep the advances that they've had so far but recognize there put the cart before the horse. in other words they were not yet ready to have the single currency and what i describe is a particular way where they could actually test whether they had that. they could get stability among the exchange rates if they succeeded in creating institutions than they could go sometime in the distant future to have a single currency. well where will this all go? forecasting politics is more difficult than forecasting economics. unfortunately if i were to give a forecast this is not going to
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and very pretty. i do not think any of the three alternatives i described is likely to be undertaken. the most likely course is a current course of muddling through. it's a kind of brinkmanship and the danger is that eventually you go over the brink. it will be interaction between markets and politics. we saw in brexit what can happen when you have large numbers of disaffected people. and large numbers of deaths the disaffected people in europe because it's not working. if you been on in a depression for long time if you're young person in the unemployment rate is 50% your unhappy. what they are jeopardizing is not only their economy today but
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their economy in the future. finally let me say why should we care about this? there's not we can do about this. we should care and their several reasons. europe is facing a large number problems, they are at the cutting edge you might say of the global migration crisis and the euro has made it very difficult for them to address this migration crisis. one of the reasons it is so difficult is that if you are migrant where do you want to go? do you want to go to a country with 50% on employment, no. all the migrants want to go to the few countries that have low unemployment rates. that puts an enormous burden on relatively few countries. that of course in those country starts generating resentment of burden sharing.
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so the dysfunctional europe, the dysfunctional euro is making it more difficult for them to address the problems in the other problems they face. the world more generally faces a set of global, economic, social problems, climate change, and europe has been one of the loudest voices on the right side of most of those issues. a divided europe in the europe that is trying to solve this unnecessary problem with a single currency is not going to be as forceful trusteed these global issues. so with that let me open it up for questions. >> i have a microphone here so please raise your hands.
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>> i have two quick questions, one is, do you think that ireland is being idiotic and refusing to take the back taxes owed by apple? the second is if hillary would ask you first treasury secretary would you us except? >> the first question, and i actually did did, i was on irish radio right after the finance minister ireland on that issue. he said yes it was very foolish of them not to do it. let me try to explain very briefly what was going on. it's a little complicated. basically apple was cheating. it wasn't paying the taxes it owed. this is a global problem and another aspect of globalization that has not been working very well. in this particular aspect of cheating ireland was a co-conspirator. so what happened was very simple
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, apple claimed that all the profits they made in all of their european operations were the result of the activities that were occurring in ireland. a few people working in ireland. within ireland they said actually most of them has to do with the home office and then the european commissioner pretending a little bit that she was shocked to discover that they had no employees at this home office that it was the source of all of the profits of all of apple in all of europe. so she just said one simple thing. i am just enforcing a european rule, it's not changing the law and when ireland joined europe,
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the e.u. it said that we agree to obey by european law. one of one of the losses that you cannot give special deals. this was a special deal. they kept it secret and i'll tell you why. they kept it secret until they did the investigation and they said you did the special deal, you have to pay 12 and a half% which is the tax rate, already very low on the profits. were not happy near tax rate but if the profits are made in ireland you have to tax it. they didn't say whether the profits were really there, that was cheating. cheating. it was a windfall to ireland because ireland help cooperated moving all the money to ireland. now the reason of course they kept it secret is that if they have publicized it the bank said it was available to everybody,
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no european country, no american company operating in europe would have any profits in europe. that would be a political scandal. now if the secretary of the u.s. said on that he said well eventually apple was planning to bring some of the profits back to the united states and when we bring it back they should be taxed in the united states if the profits originated from activities in the united states. but if the originally from activities in europe, europe should be getting the profits. he said if they tax it we can't because it's double tax. while while there is a fundamental flaw in our tax system but the answer is very simple, you need taxation based on the eight
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activity and profits generated from that jurisdiction. there are problems of figuring that out but what was clear was it wasn't this home office with no employees that generated the profits. it wasn't even ireland. apple should just say you know what we were cheating but that was the way everybody does it. rather than being honest they tried to be shocked about what happened. >> i also just wanted to say in a sense representing the upper west side is that we appreciate you coming to this barnes & noble's for those of us who never leave the neighborhood. i'm wondering, there's a laboratory of sorts for the kind of things you're speaking about now. i think most people would acknowledge brexit was politically driven. can he speculate on what one could expect to see economically, what
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will the steps and what will happen to the u.k.? >> i think the trouble in the years own did contribute to brexit. if you are on one side of the channel looking across to europe he saw two things going on, you saw dysfunctional europe and he saw germany dominating everybody else in the rigidity and the euro leaders saying just spain is 20% unemployment and the european commission said your deficits are still too high you have to have another dose of austerity. so there's a rigidity that people in the u.k. reacted against. in terms of economically there's uncertainty. a lot of people thought it was going to be a calamity overnight, that has proven to be wrong.
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it still may be bad going forward. there's a lot of companies who have said we won't invest given the uncertainty. the analogy i get that may help, canada and united states have very good economic relationships. we prosper very well. i think most canadians thinks they do pretty well without sharing a common courtesy with united states and without being part of a single market. it's a free flow of goods, we we don't have free flow of people but it's, you can move relatively easily. i do not think on either side there are strong for you to
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economies who do a lot better if we formed a single economic unit. there may be some advantages and some disadvantages. i'm not as pessimistic as a lot of people. i think think the real implication is political. the worry is that it begins the process of european disintegration. there is a movement to bring things closer together. that's one of the reasons people are afraid of letting go of the euro. a point that i argues that if you want to save the european project you should probably left a year ago. >> i am from europe. i wonder why you focus so much on the euro. there's no political will to create really a system supporting the european
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integration so i would rather say that europe was dysfunction in a not the euro and what would happen if you would not have had the euro. what would have happened to the small economies without the euro it would've been more disastrous i think after the lehman scandal so what is your reaction on that. and then on the brexit i think it's good daily because you have your financial center in new york who is running the dollar in the financial strength of the united states while london is the same functioning europe but they didn't move to the euro. so they should not have stay. so could you talk to those. >> so the first is really important. as always if when you talk about describe what happens, they say
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what would've happened otherwise. so the question here is in effect if they hadn't had the euro would things have bed better or worse? the argument is clear, things would've been better. the. the euro has made things worse. in the book i argue that the europe created some of the imbalances that led to the crisis in europe in the first place. for instance, and in combination with some of the ideology that was prevalent at the time and the market failures that are pervasive, so for instance when they formed the euro, a lot of people in the financial markets thought they had taken away exchange rate risk. but they had not taken away all kinds of other commercial sovereign risks.
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markets you can't say how could you think that, markets are really stupid as we know. so what happened is that money flowed in to spain, portugal, greece and ireland and created real estate bubbles, the euro facilitated that. and the euro facilitated creating these crises that had been so difficult to deal with. i remember talking in 2006 and seven in spain talking to some people at the bank insane you should really be worried. you have a bubble going on, their building more homes in spain than the rest of europe put together. clearly something was on and it would break and be ugly. they said who do you think we
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are to be smarter than the market. the euro and the single market and it may be easy from all the money from germany to flow south of the border into spain and the interesting thing is, talk about the greek bailout, more than 90% of the greek bailout money went to? to german and french banks. so it was money that went down and then up again. it was all a charade in that sense. so i feel very strongly that the euro had facilitated creating the imbalances that led to the crisis and has made it more difficult for the countries to respond. there there are a few smaller countries where the balance of cost and benefits may be different but overall for the
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eurozone as a whole you can see how badly they formed and you can look at the countries in europe that are a member of the eurozone and those who are not, you can see very clearly the countries that were not members of the eurozone have done much better than those who are. >> clearly the bogeyman here is the germans. >> i don't want to say that, but the question is about the germans anyway, i wonder about the german experiment before the year which was the integration of the east and the west and as i remember under those circumstances the germans basically raise the financial level of the east with the money from the west which would be a different kind of model for what could've happened in europe. and you think that's true and
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why do you think they ignore that model which is more recent and reverted to a historical -- there was an enormous transfer from west germany to east germany. >> that transfer was part of what you hear, what what you say is that we have already made our share. we have done our contribution so solidarity, which is interesting solidarity with the rest of germany but not the kind of economic solidarity with the rest of europe. >> the designers of euro, if their motivation is more political than economic do you suggest, can we look at the year as a later day marshall plan, an
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attempt to control by financial markets by banks to extend their control? so the real purpose of the marshall plan were a matter of controlling europe. >> i think the real mode of was that they thought this would bring prosperity and economic integration a more political solidarity. but you have to understand, they were strongly and viewed in what i would call a liberal ideology. it was a set of ideas about what it takes to make markets work. any economic economic policy is going to be framed by what you believe is the way markets work. it just just so happened their
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ideas were wrong. their pan a high price for but it was a very simplistic set of ideas about what would make your prosper and what would enable a single currency to work. it was also informed by political dynamic because they thought once they committed themselves and tethered themselves to a single currency that political will to make sure it worked would be strong enough for them to do the next stages in the project. they would realize that if they didn't do it there be severe consequences. that would be the engine that would make a series of reforms amount be part of the process of generating stronger and political integration. that theory did not work out.
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>> the second suggested what is to be done which is greater integration, how would something like dispensing welfare and providing for safety nets -- we don't know of any mechanisms by which this is done on anything but national -- >> something like a solidarity fund you mentioned but that isn't enough institutional groundings. >> at various times there have been ideas like a european ride and unemployment fund funded out of common money or a european wide fund for small businesses, recognizing what i described
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before that in the crisis countries lending has collapsed because the banks have had to contract. so they have recognized that there is somethings like that solidarity. after talking about it they have not been able to do that so far. >> currency evaluations have never worked. i'm in favor in many cases. >> i know, that's why bringing it up. if that was the case, argentina and brazil would be the richest countries in the world and obviously they are not. >> is at the end of the question? >> that's my first question. >> so the issue is the following
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that in some countries when you d value, when you import goods your price level goes up and the effect of the evaluation gets eroded so you do not get realty valuation, but if you asked what happened and you mentioned argentina, in 2002 after the crisis before that the result of that was that by 2000 and their unemployment rate was up to 25 percent. and then they said the system is not working, they devalued and defaulted and the results of it was that they had the fastest economic growth almost every. they became the second fastest
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growing country in the world after china, from then until the financial crisis of 2008. so to me that is a wonderful example of devaluation working. there are cases where it has not worked for the reason i said before. >> my second point is i don't believe generally speaking there is such a thing as market failures, what i do do believe is that the politicians make promises and they mock up at the markets. >> why don't know what you call the 2008 crisis where the banks had lent money to people who they preyed on poor people and let money to people who cannot repay.
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that was clearly a fairly or markets. economists use the term market failure, they use it in a more generic way, not just the most obvious failure like our banking failure, they use it whenever they say adam smith talked about how markets lead as if an invisible man in society and it's really our belief in that, that is the basis of our belief in the market economy. there is a very large large body of work that shows that often that is not true. whenever is there in perfect information or imperfect competition almost always that's not true. so that is why there is a set, it provides the basis of why government has to take certain actions. it doesn't always succeed.
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but no government has ever failed on the scale of our financial markets. keep that in mind. >> sometimes there is debate over economic policies regarding how the pie is going to be divided. the story you're telling seems to be about policies that do not perform the way they were advertised. so the question is what needs to happen for politicians to not and ask policies that don't behave the way that they say they are, that is everybody understands what a policy will do if enacted. >> first thing i want to comment one of the consequences of these policies is that there is not only greater disparity between the rich and poor countries in europe, there's great great inequality within these in europe.
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it's had a disaster effect on poverty. numbers of countries like greece and spain is a disaster. inequality is coming down be for the crisis and now that's not true. so these policies have very large distribution consequences. there is no easy way to prevent these kinds of huge mistakes other than what i hope is one of the reasons i wrote the book which is that it was based on some politician having some misguided idea about economics. it was always a top-down agenda. that was one of the problems with the euro. whenever they put it to a vote the people voted against it. it was a top-down agenda.
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there is not in a public discussion about the economic ideas. they said i hope part of the ideas that markets work on their own. and all you needed to do is make sure inflation was low and countries had deficits will in the market would take care of the rest. this is a tremendous testimony to the fact that those simplistic ideas are not only wrong but very dangerous. >> hello. i have a question when you mention about the am in a cold bowl break out of the countries. i happen to be from italy. if i had -- in italy once i hear
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in the newspaper that governments are talking about it wouldn't be rational for me for the first thing to get all the money out of the banks how would you take that into effect? >> the reality is that when i say amicable i didn't mean it was going to be perfectly smooth. the question is how it's going to end. it's it's an interaction between markets and politics. it doesn't even take the government deciding that. in italy there's a bank now that is on the verge of collapse and all over there's this discussion of what will happen if it collapses. there's a party that might very well if it collapses, that party, that party has said it wants a referendum. if the polls say that it's in a position to win then well before the government starts thinking about it people who have more money than you have will have
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taken out their money from the country and you'll be left with one of the few people in the country. so the point is that that is the kind of run on economy that will lead to the end of the euro. will have to happen is that they will face that kind of crisis almost surely. what will that do impose capital controls. a long time ago people that those were bad idea. today, even the imf has endorsed the idea of capital controls. so we know a lot more about how to impose those in ways that cause the least disturbance. he said not a zero disturbance but the least some people have a lot of experience with those controls. you can call up the imf and find out what to do overnight.
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that is what will happen. so if you're worried about it give money out now. >> i was intrigued by your book by tokens, i wonder if the national government is going to set a ratio between export and import to create a trade surplus how is that address with supply and demand? >> this was an idea, you're the first person who asked about it which i thought was interesting, which is one of the problems is that 35 years ago they open up capital markets very freely the idea that capital flows would help stabilize the economy. what we have learned is that is
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not true. they can be very destabilizing. they can end up with countries in southern europe have trade deficits. one idea to get trade global imbalance before the 2008 crisis eight crisis in the unwinding of those trade balances we have to balance them and the increasing debt can be unsustainable. so one way of dealing with that was the idea that whenever you export the good you get a trade chip. and that gives you the right to import the same value, but it is
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tradable. so somebody wants to import they have to buy a trade chip. then you have a a free market for these trade chips. so then you have the demand and supply of trade chips. then the demand will equal supply. when? at the the point where experts equal imports. that is an automatic way of controlling the trade account. it will make sure the country doesn't line wind up with excessive. and you can say there's no more than a 20% trade deficit or trade surplus. so you you don't have to have exact balance. you can say we don't want more than a 20% deficit or surplus. you can use the system and what it is his that it's a market-based way of ensuring
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they don't have trade deficits or surpluses. and so it's not them saying this is valuable or that his comments these kind of systems with imports when the government ends up having to allocate these and you have these very complicated offices. this leaves it to the market on the way it works is that will automatically ensure that imports equal exports are not exceed. so, by the way this is an idea of warm buffet, it's not a left winged idea. i think people have looked at from conservatives and people left of center have supported this kind of idea for adjusting our trade account. >> any final comments before we sign books?
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>> i think they are good questions always on the upper west side. >> thank you. a. a big round of applause for author. [applause] thank you so much ladies and gentlemen. please remain seated. we are going to have the first two rows stand in line up this way. [inaudible] [inaudible]
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[inaudible] >> here's a look at books being published this week. in the age of jihad, journalists patrick cockburn reports on factors that led to the formation of isis. next, as harvard professors look at the debates which led to the crafting of the constitution is the framers coup. luke mayville explores john adams about america becoming an oligarchy during the late 1700s. in asia falling, lewis explains why he thinks americans are turning away from democracy especially in the 2016 election. scott recalls the experiences of the 4402nd regimental combat team during world war ii, in honor before glory. but for glory. but for these titles in bookstores this week. watch for the authors in the near future on book tv, on c-span2.
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>> it's interesting that it was the nazi ghetto that was the main ghetto that was on my mind growing up because in fact for most of history a few referred to the ghetto you are not referring to anything cannot seized did, you are referring to the get ghetto in venice in 1516 which was the first ghetto that was created for the juice. was the first the first time the word ghetto was used to refer to a copper foundry that the jews were placed in. it was known as the ghetto, the jews replace their and i rely here on talking about this upon another monumental field of history, the field of the early modern historians who have done painstaking work on this topic including benjamin whose work i relied on heavily in this particular count. one of the interesting things
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about the accomplishment of the early modern historians is that they have shown that when the palace of the dodge decided to replace the jews in the ghetto they were really not trying to create a framework of how jews should be treated they were really trying to solve a particular problem at a very particular moment. the problem they were trying to solve was that they needed people to loan money to their lower middle classes and working class and they could not have their working classes in order to get loans to get on a boat and travel 30 or 40 minutes or an hour away to get small loans. they needed them right there in the city. they created a space for them in
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this most catholic city. they were not trying to create a framework framework for how jews should be treated everywhere, but they created a solution for their own problem. then that word came to be known as this place where the jews were living. as i see it, the crucial moment was not venice which is now celebrating its 500 anniversary, in which the jews by the way at least they could say semi- flourished. as the early modern historians have demonstrated they had accomplishments in the production of books, philosophy, drama, and family life, it was not the ghetto of venice really that was the crucial ghetto in my opinion, is really the ghetto of rome which was forged in 1555 by pope paul and according to
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kenneth stowe work on this topic was really created an effort to try to get the jews to convert. and also at a moment in history when the counterreformation was leading to a certain need on the part of the vatican to make rome into a more attractive space. and to create an environment in which the jews could be shown as an example of what happens when you don't convert. but when the pope created this ghetto he wrote it up in his
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palpable bowl and that was distributed around the world. i see that as a very crucial moment in those years. now the ghetto becomes a cognitive framework that becomes an example of how jews should be and can be segregated around the world. >> you can watch this and other programs online at [inaudible] [inaudible] >> at evening. thank you for coming out to book a court tonight. we are thrilled to have dan ackerman here to


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