>> from our studios in new york city, this is "charlie rose." >> larry summers is here. he is president of harvard university. he served as director of president obama's economic council.

last week, the ecb said they will buy more than one trillion in assets. i am pleased to have larry summers back at the table. welcome. >> good to be with you, charlie. >> you were at davos, i was at davos. what was the sense about the economy and the state of the world? because the theme was said to be the context. >> charlie, it was something intermediate. it certainly was not euphoric but not as dark as it was in 2009 or 2010 at the height of the financial crisis. i think there is a growing concern about a deflationary

psychology, a sense of stagnation. very very almost pathologically low interest rates taking hold in many places. there was an undertow of concern. i think people admired what mario draghi did. but, they admired it more than they were confident it would be sufficient to solve europe's very profound problems. >> i understand that is your position too. >> that is what i believe. i think people were also not 100% certain about any place outside of the u.s. or the u.s. growth prospect. they felt better about that than they had at any time earlier. they asked the question i had

asked during the time i was treasury secretary in the 1990's. how long can the world economy continue to fly on a single american engine? the answer was it did not end up flying that much longer. we headed into the recession in 2001. we have to be mindful of it. i think we are in uncharted territory economically. >> driven by? the lack of demand? >> the problem is the lack of demand, not the lack of supply. the problem is that inflation is too low, not that inflation is to live. the problem today is not that central banks are being to activist -- too activist, it is that they may have trouble being activist enough. the problem today is there's too much savings and too little

spending. too little investment. it is a very different world than we are used to. >> give us an economic professor's understanding of the threat of inflation and deflation, or the lack of inflation. >> the usual view, would have been what we had taught our students until a few years ago it would have been about inflation. it would have been that when prices were rising rapidly, it was harder to keep track of things. interest rates were much higher. because interest rates were higher, people wasted a lot of effort making sure they had funds earning interest and the like. just like it really wouldn't do for a yard to be 36 inches yard one year and 38 inches the next, having the price level rising at

a rapid and changing rate they -- made it much harder harder for people to think and plan. we were best off avoiding inflation. if we just committed and were credible and strong against inflation, we could avoid it. there was really no good that came of inflation. it was always tempting because in the short run, you could boost the economy a bit with inflation. but then it all caps off with bash -- catches up with you. >> that is not the opinion today? >> people still that way. if we had the problem of high inflation, they would have that view. we are in a different world. independent central banks, that was conceived to prevent too much inflation. today, the problem is we do not have enough inflation. if you look at indexed bonds bonds that are linked to the

cpi. you can get a market measure of expected inflation. if you look at europe, japan, or the u.s., inflation is expected to be below the 2% target. not just right now. not just a couple of years from now, but between 2020 and 2025. the problem is we have inflation at too low a level. because we have inflation at too low a level and because in europe and japan deflation is still a continuing issue -- >> what is deflation? >> it is one prices are falling and there's another thing, lowflation. that is when prices are rising but rising slower than 2% a year. >> when you talk about the price of things, we are talking about markets for commodities. financial markets. the price of products and wages.

>> economists, they are talking about the price of everything people buy. the price of a dining room table or a shirt. >> food. >> food. but it is also the price of taking the bus the price of taking a vacation the fees associated with getting a bank account, the fees associated with sending your kid to college or going to the hospital. it is not the price of buying a stock because that is different and it is not the wage rate. it is a generalized price level. >> the price of commodities. >> that is an important input. when you have a situation when prices are falling, people say

to themselves, why should i buy something now, it will be cheaper next year. you get a negative psychology where people do not spend because they think things are going to be cheaper next year. because they do not spend, there is enormous pressure to reduce prices. the more prices are reduced, the more people do not spend. you get a negative kind of psychology and it can be a kind of trap that an economy can fall in. related in terms of the cost of deflation. in any economy, there are some people who borrow and some lend. it tends to be richer people who lend and poorer who borrow. it tends to be people who are more in need who borrow money. when prices are falling or when there is not the inflation that

was expected, the borrowers are getting poorer because they are having to pay and more valuable dollars than expected and the creditors are getting richer. that also operates to reduce spending and cause economic contraction. it also operates to be taking from people who are more in need and giving to people who are less in need. it also makes bankruptcies more likely because it is easier to pay back in dollars that are getting less and less valuable than more and more valuable. that is why this phenomenon of deflation and lowflation are so potentially toxic. they do not just make the economy function a little less well, they run the risk of creating a situation where there is not enough spending or demand and there are too many

problems in finance for the economy to be able to employ everybody or produce as much as it could. that is what we have seen for years now. >> i want to get to a number of things. you were at the center for american progress. you talked about inclusive prosperity. a commission. the conclusion was sustained increases in wages and living standards are essential. >> that's right. we were convened by the center for american progress to think about progressive agendas to address common challenges like globalization. like technology. they are applying not just in the u.s. but around the world. it was an effort to build on the kind of discussions that had taken place globally in the

1990's under president clinton and then tony blair. i think the biggest difference between then and now is the centrality of inequality as something that is affecting the middle class and affecting the prospects for middle-class growth. think about this. if the income distribution in the u.s. was the same as it was in 1979, there would be $1 trillion more in the hands of the bottom 80% of the population. there would be $1 trillion less in the hands of the top 1%. that would be $750 less on average per family.

-- $11,000 per family. there would be $1 trillion less in the hands of the top 1%. we have made that worse for the middle-class visit of changes. you have less progressive taxation than we did then. we are investing less in the public sector than we did then. less in the way of protections to strengthen worker rights as we moved to a kind of task rabbit economy where people get hired to perform tasks without benefits where the union movement has not been supported as strongly as it could have been. there have been a variety of changes beyond the financial crisis. they have exacerbated the inequality in the lack of growth. that is what we call for.

we stress, this is an important point, because i think some people are fatalistic and i think that is wrong. there are countries, canada and australia, that by focusing on these basic investments and empowering workers, by strengthening education -- >> regulatory mechanisms. >> they have succeeded in having rising standards of living for the middle class in ways we have not been as successful. should we copy what they did? >> we should not copy. every country has to pursue its own approach. we have a comprehensive agenda. closing tax shelters. infrastructure investment in environmental protection. strengthening worker rights and

worker benefits. >> airports and roads. >> on the infrastructure, you have heard me say this before. it's a moment when we can borrow money at 1.7% for 10 years in a currency we can print ourselves, if that is not the moment to invest in making laguardia airport look like it should, i don't know when that moment will ever come. there are lots of examples. let me give you one other. it really struck me. i have been using that example about kennedy and laguardia airport. eventually a guy from the port authority called me. he discussed the plans we had to fix it. he said some in that was right. he said the real outrage the air traffic control system. we in the u.s. have a air traffic control system based on vacuum tubes. like the old-fashioned television sets. as a consequence, it does not have enough capacity for all the flights.

sometimes they use yellow stickies to the track of all the flights. apart from the fact that it does not make me feel safe, it means less flights can fly and more are circling the airport which wastes energy. they are not training any new 25-year-old to fix vacuum tubes. eventually the people who know how to make it work are going to retire. we have a lot of fundamental infrastructure investment. making them is a major source of middle-class jobs. this is something that increases demand, puts people to work increases the supply potential of the economy, and finally, takes a big burden off our children, because the idea that

when we borrow money, that is burdening our children, but if we defer maintenance and allow the government to run down, that is a just good public policy -- that does not make sense. differing maintenance is just as much of a burden as repressing the deficit. >> what is the consequence of not doing something about income inequality? >> if you look at the public opinion polls, you find confidence in almost every institution has gone down. at its root, that is because most people see that their incomes are not going up fast if at all. they don't have confidence their children are going to live better lives than they did. they are able to see that a very small group seems to be getting a very large fraction of the

economic growth. >> which breeds a sense of unfairness. >> unfairness, lack of confidence. we get caught in a cycle which is very problematic. people lose confidence in government and business. because they lose confidence, they make it harder for government and business to do anything. when they do not do anything they lose more confidence. the whole thing cycles. another way of thinking about it -- john kennedy was able to ask people, ask not what your country can do for you, ask what you can do for your country. that was after the country had delivered 3% a year increase in living standards since the second world war. that was after the interstate

highway system had been built. that was after the fha had created the suburbs. that was after the g.i. bill had sent a generation to work. the government could call on its citizens because the country had delivered for its middle class. if the country does not deliver for its middle class, it becomes much harder for it to call on its middle-class, whether it is to protect the environment, in response to a national security concern, whether it is to look out for the poor, which is obviously a continuing issue for us. it degrades ultimately the character of our democracy. my conviction has always been, and i think the difficulties latin america has had in

particular debt illustrates this democracy does not just mean government by the people. it has to mean government for the people. the way people judge that is by what is happening to them in their ordinary lives. when they do not feel like they are being protected from large forces, that is when they become disillusioned. i do not think there is any more important issue. >> how do you create an economy that is better for the middle class, that creates jobs, that enables people to have a better tomorrow than yesterday? >> there is broad agreement that is the end. there is disagreement about whether framing it that way is it that way is our highest economic priority. some people would say our highest economic priority is to contain growth in government debt.

that is a perspective. i think our chances of controlling government debt are much greater if we are able to grow incomes for the middle class. >> the way to deal with deficits is to grow. >> that was my argument at that time. experience has tended to bear it out. >> especially with deficits. >> that is exactly right. the only reason i raise that is to say yes, there is now a large number of voices talking about the importance of the middle class and recognizing inequality. >> it will probably be central to the 2016 political campaign. >> i'm an economist, not a politician, but i think that is right. >> three things.

number one, oil and energy. the new equation in oil and energy. you and other people say it is a perfect time for a carbon tax. what is the impact of shale oil and the action of saudi arabia and driving down the price of energy? >> a fantastic thing has happened. what has really happened is we are on our way to being the new saudi arabia. our growth in energy supply has changed the fundamental balance. that's why the price of oil has fallen. whether that can be sustained is a question. we need an agenda that goes with it. if ever there was a right moment to put carbon taxes on for the long run global climate, it is a moment when the of gasoline is

lower than people ever thought it would be. if ever there was a good moment to put a gasoline tax in place to fund infrastructure, now would be the time. if ever there was a right moment to eliminate what restrictions made sense, we would put restrictions in the 1970's. we had price controls on oil. we did not want people to avoid the restrictions by exporting oil. that made sense then. right now, it makes no sense to say the u.s. can export gasoline but cannot export crude oil. that makes no sense. if we allowed the u.s. to export crude oil, ironically the result would be lower gasoline prices.

the oil right now gets stuck in texas. gasoline prices in most of the country are tied to what is called the brent price of oil. the world benchmark. if we allowed oil to be exported, there would be more in the world market, which would reduce the price in the world market, which would operate to reduce the price of gasoline. plus, it would create jobs encouraging energy production. in the u.s. part of the right response, in addition to carbon taxes and gasoline taxes, is an emphasis on freeing up restrictions for export. we need to make sure that we regulate fracking and other new technologies in a rigorous way.

we need to figure out how to regulate rigorously and also quickly. we have tended to have trouble doing that. we delay things too long. that is a serious problem. there is a huge opportunity before us. >> when you come down on the keystone pipeline? don't hedge, give me an answer. >> i have been an advocate of the keystone pipeline. nothing has happened to change my mind. what i'm not sure of, in the current economic realities whether it any longer makes sense economically. given the other investments that canada has made. given the changes in the world oil market. i am not sure it is economic to build the keystone pipeline. i have supported the keystone

pipeline because i believe shipping oil around on trucks and trains is a 20th century technology and not the last third of the 20th century. we need a satisfactory pipeline infrastructure. the keystone pipeline is one part. i don't think people who think it is the be all of the u.s. economic development strategy are right. i wish we had gotten on with it. >> this is today's wall street journal. fed flags rate hike for later. that is due no of next year before they will be any increase in interest rates. d agree with the decision of the fed and janet yellen? >> i believe the fed should not raise rates until and unless there is clear evidence of rising inflation. whatever happens to the real economy. i do not think we have yet seen any evidence of rising inflation.

if anything, the evidence is pointing to, in the medium-term, a reduction. janet yellen is right to say it has to hinge on the data. we will see the data as it comes. she is right to say the fed is going to be flexible and respond as events come . >> you read the data different than she does? >> i don't know. i think we both read it the same at this moment. this moment, it is in the right place. i'm not sure how they will read the data. i would differ in emphasis from many people -- i would not raise interest rates as i thought the economy was overheating because it had grown fast. i want to see the proof in what is happening to inflation before

it would be appropriate to raise rates. the reason i think that is if we let inflation rise slightly, we have seen that problem before. we know how to control it. if we allow deflation to happen, that is potentially catastrophic. that is where i would be avoiding risk. >> the flechette in. >> -- deflation. >> on the side of deflation excessively low inflation, that would be the thing i would be most worried about. >> greece had an election. we do not know exactly what the new coalition will do. a coalition between right and left. suppose they say, we demand you renegotiate the debt. you know these people. what do you think the germans will say? what do you think other members

of the eurozone will say? and what should they say? i have been reticle -- critical of the germans for imposing too much a story on the rest of europe. not providing enough stimulus for europe. the evidence has tended to bear me out. that said, there is only so much load that can be carried. the greeks are making a case for adjustments at least in how much they have to pay on the debt for the next few years. they have a strong case on that. >> they are making a strong case. i think they have a case to make. >> they are asked to make too many payments for the next few years. it will hurt their economy, slow down growth, and be counterproductive. on the other hand, the greeks

have a lot of demands to slow down or eliminate privatization. another area of demand is is having new spending. another area of demand is on rejecting eu policy as far sanctions for russia are concerned. i think that the greeks cannot expect there to be flexibility on all of these dimensions. i think the most important dimension for there to be flexibility is debt payments over the next three or four years. i do not think make very much difference whether we declare now that the debt is due in 2029 or whether we reduce the debt. what does make a difference is how much we insist the greeks pay over the next few years. the amount they would be asked to pay under current arrangements probably is not very reasonable. >> it is a serious mistake for the eurozone to break up.

or from one country to leave greece. >> it was a mistake to form the eurozone. clerks because? -- >> because? >> it was too brittle a system to do it without a common fiscal or banking policy. having done it, it would be, i think, a risky act if any part of your system were to dissolve. -- the euro system or to dissolve. -- were to dissolve. >> we know with the results were for the third quarter. 5% gdp growth. do you think we will ever be back to that on an annual basis? >> i do not see it in any foreseeable horizon. >> 4%? >> going to be a while. >> 3%? annually? >> yes. close to 50% chance we will see 3% this year and/or next year.

part of it is that we have a more slowly growing adult population than we used to. for many years, we had a big tailwind from more women going to work. now, that is largely exhausted. women are actually going to the workforce in slightly smaller numbers. part of it is, we are not seeing as much increasing productivity in recent years as we have seen in the past. >> is this an argument you and marc andreessen have? >> we both think technology is enormously important and consequential. he is a bit more serene it is

going to somehow involve jobs and opportunities and work out for everybody. i'm confident it is going to work out for people like you and i. people like mark. i am more worried about the consequences for people whose jobs are going to be less supplemented than replaced by what technology is going to generate. i think technology is making it harder to measure what the gdp is and what growth is. it is phenomenally better to be able to choose between tens of thousands of bits of entertainment at home than to watch three channels. but we do not have good ways of measuring that. i always think back to the fact that the automobile only made it

into the consumer price index in 1935, 20 years after henry ford. i am sure people will look at this moment and point out similar anomalies. >> there are many things to talk about, but i haven't no more time. >> good to be with you. >> larry summers. back in a moment. stay with us. ♪ ayad akhtar is here. his play "disgraced" won the won the 2013 pulitzer prize for drama. it is currently on broadway. it is about a muslim american lawyer who must come to term with his identity. i am pleased to have ayad akhtar here for the first time. welcome. you could not be more timely. don't you agree?

you started -- >> a lot of the work that has come out, i had three plays in new york, all of them dealing with muslim american identity. all of that work, i was inspired to write six or seven years ago. i had gotten through first drafts by five years ago. it is interesting that what is coming out now, a lot of times, people think it is from the headlines. i don't know that that is the case. it is the dialogue in the world that is evolving. >> you're absolutely right. it is both. especially now, it seems to me that i have seen all of these kinds of conversations. the people who do the most obscene violence in the name of islam are kidnapping religion.

i have seen people who are heads of state and muslims who stay to me, i am not a moderate muslim. i'm a muslim. anybody who acts likes isis, they are not muslim. they represent something that is not part of islam. now you have people who write more, tom friedman and others saying there is a conversation taking place within islam, asking questions as to why do we get to this point. >> that is what the work is about. it is about the individual living in the world today as they define themselves as muslims or non-muslims. and how they are grappling with the matter, how they make sense of their own experience given their heritage.

in some cases, there are no contradictions. part of the difficulty of the conversation that is becoming mainstream is i think people want to have some a blanket or unified response to, what is the muslim experience? what does islam mean? is the koran violent? there is no simple answer to any of those questions. people are not reading scripture in a vacuum. they are bringing their own lives, personalities psychologies. that is what i am focused on as an artist. characters, the narratives of the characters. >> i will come back to your play. i love this, at the beginning of the play. plays on the page are neither fish nor fowl. it is meant to be pored over dissected, obeyed.

i love that. that is what it is about. >> exactly. i think the theater at its best it connects us to our ritual origins. it reenacts a situation of presence. the presence of the audience. the presence of the performers who in a way, stand in for a kind of presence of religious rights performers. this transfer of energy that can happen when a narrative story is happening in that situation can reach down into us more deeply than i think any other form of storytelling. you see the bad examples of collective experience, mob mentality.

there is another pole to that. a kind of ecstatic, reflective galvanizing force that the theater can bring into being the way no other artform can. >> how do you write plays? >> that's a good question. i came to writing plays late. i studied theater in college. i have taught acting a good part of my life and being an actor. i have been around playwrights and directors. i spent a lot of time writing prose fiction and screenplays. when i came to writing plays, i had so much experience of the process of working with actors learning how i would approach character when i started writing plays, it was unselfconscious. i just started listening to the characters. with "disgraced," i started following my character.

as faulkner once said, all i do is follow my characters around and write down what they say. in my case, as a playwright yes. that is the first part. you get a draft. that draft, you start sharing with the actors and you have a director. you work around a table. the play reveals things to you in terms of its form. there is a lot of wisdom in form. you understand the nature of the story you are trying to tell paris the story that wishes to be told. there will be a kind of group knowing of when a moment is not working or does not feel organic or feels like it was necessary for another version of the idea. it is a process. another part of it is sharing it with the audience. i have found in my own experience, i don't actually know what it is i have done until i see it for the first time in front of an audience. that is why the first premiere

of a play is often just part of the rehearsal process. the second production is when i know it is right. >> take me to amir and tell me who he is. >> amir kapur -- he has changed his name. he is a corporate attorney working in mergers and acquisitions. a firm here in new york. his bosses are jewish. he has that corporate gene. >> he knows the game. >> he knows the game or thinks he does. he is good at his job. in the wake of 9/11, the truculent political balances around being muslim, has decided to take it into his hands to change his identity. social security number. represent himself as indian, not

pakistani. it emerges in ways that make his colleagues think he is doing this in ways that are duplicitous. the centerpiece of the play is a dinner party is a dinner party where a colleague has come over to dinner. he is with his wife. his life unravels over the course of the dinner party. there is too much drinking. he has a bad day at work where he thinks people are pushing him out of his job. >> this is where he reveals a certain tribal pride he says he feels. >> even if you are one of the last muslims, tipping your after dinner scotch, watching the news and seeing people die in the middle east for values you were taught were pure and true, you

cannot help but feel, just a little bit of pride. pride. yes. pride. >> did you feel pride on september 11th? >> if i am honest, yes. >> amir, you don't really mean that. >> i was horrified by it, all right? >> proud about the towers coming down? people getting killed? >> that we were finally winning. >> we? >> i forgot which we i was. >> you are an american. >> it is tribal. it is in the bones. you have no idea how i was brought up. you have to work hard to root that out. >> you have to keep working. >> i am. >> when you have a line like that, do you know it when you write it? >> no.

mike nichols, the late and great mike nichols, once said the hero is the character with most jokes because the character that gives the most pleasure is the one we will identify with. as a writer, i am on the lookout for writing good jokes for my characters. one of my principles is to have them competing for jokes. it keeps the audience engaged. >> and entertained. >> but if you're too aware of writing a joke, it often ends up not being as funny. there's a bit about the quickness of the wit. it has to come from the previous thing. a lot of times, that happens in the rehearsal room. >> when he talks about tribalism, what is he talking about? the tribalism of of nations? of religion?

ethnicity? >> whatever that identity is -- a program i believe it was on 60 , minutes. there was a study of children. infants. tendencies of identification with tribe at that early age. there is something in us as humans, whether it is a holdover of a different time, membership in a group was necessary to our survival. whatever it is, it is ingrained in us. as we continue to evolve in a multicultural world, being mindful of the fact tribal tendencies is in all of us is important. what he is talking about in that case has to do with his background.

how he was brought up. in a community and family with an opposition to the west. which is a pole of muslim identity. >> when you call it "disgraced?" >> at the end of the play amir's nephew delivers a monologue. i will just read it. it will be easier. he has witnessed his uncle's disintegration. his uncle's inability to find a place. he says, for 300 years, the west has been taking our land. drawing new borders. making us want to be like them look like them, marry their women. they disgraced us. they disgraced us. and then they pretend they do not understand the rage we have. >> some have said this is highly critical of islam.

or is it critical of some thing else? >> i think that amir has a strong critique of what he called the islamic mythos in the play. i don't think the play itself is critical of islam. the play is a space that offers or creates a kind of expansiveness where multiple points of view about the question of islam can coexist. the matter of this conversation happening in the world, is islam the problem, is the dramatic circumstance. it is not coming to a conclusion. it is staging our own relationship to this question which, hopefully by doing so reflecting something about ourselves. >> another clip, roll tape. this is a conflict between two of the characters. >> i'm sure, not all that different than how you feel

about israel sometimes. >> excuse me? >> are you saying you have never felt anything like that? the unexpected blush of pride? >> no, don't feel anything like a blush. >> when you hear about israel throwing its military weight. >> i am critical of israel. many jews are. >> when you hear about israel being wiped into the mediterranean, how do you like -- how do you feel then? >> outraged. blacks -- >> a lot of folks hearing that. >> do you like hearing that? >> i asked if you like hearing it. do you like hearing about israel getting wiped into the ocean? >> sometimes, yes. >> we are supposed to be celebrating. >> i'm saying it is wrong and it comes from somewhere. that somewhere is islam. >> it does not come from islam it comes from you.

islam has no monopoly on fundamentalism. >> do not patronize me. you don't like organized religion, fine. you have an antipathy to the one you were born into, fine. you feel more strongly about it than most of us, fine. i am not interested in your absurd and frankly more than a little terrifying generalizations. what! >> stop it. >> ok! [laughter] >> tell me what i just saw. >> isaac, who is a curator at the whitney and a proponent of upper west side liberal democratic egalitarian values, is taking him to task for his critique of islam. amir, in that way that sometimes

happens when you have had too much to drink, brings up the question of israel. when it is brought up, isaac immediately reveals his own tribal identification. that is something that happens to each of the characters. >> that is the universal theme. >> tribalism. the way in which, under duress which is increasingly where so many of us find ourselves in the world today, these characters have found, time and again, some sense of safety in their tribal identity. it seems to be something that continues. >> what would amir think about paris and what happened to charlie? >> i think he would feel it was fuel for his argument.

i think that as an artist, it is not my place to sit in judgment on my character. sometimes i get confused with amir, even though i have written 15 or 20 other major characters over four works now, many of whom espouse different values. i think he would say it was fuel for his argument. >> you wrote a movie in 2005 "the war within." >> i had spent a long time writing -- i had a wonderful high school teacher who made me want to become a writer. everything i do is an homage to her. her influence on me was her passion for european modernism. i read so much of that stuff my

junior and senior years in high school, i had the notion a great writer was writing like a european modernist. it took me 15 years to come out from under that and understand my own subject matter, my own preoccupations as a kid, as a young adult, those were worthy subjects of storytelling. i was not convinced anybody would care if i wrote about where a was coming from. i had just finished film school. it was an attempt to give shape to the world i knew. >> the play is called "disgraced." i want to give you the information about it. it is going to be at the lithium theater through sunday, march 1. you have one month. thank you for coming. pleasure to have you. thank you for joining us. see you next time. ♪

>> thank you. ♪ >> he's a modern-day silicon valley renegade. chamath palihapitiya is unafraid of breaking the conventional rules, vowing to take bigger risks, solve the bigger problems, and make money big-time. from putting chips in our clothes to starting a university. he is best known for supercharging facebook from 50 million users to 750 million users. but this tech growth legend started on the unlikely path while his country was gripped with civil war. jo