derrik sweeney, derek porter, and luke gates were arrested after being accused of throwing molotov cocktails during clashes in europe. they were released from custody friday. thank you very much for watching "state of the union." i'm candy crowley in washington. you can find today's interviews as well as analysis, web exclusives and more at our web site, cnn.com/sotu. up next for our viewers here in the u.s., "fareed zakaria gps." this is "gps," the "global public square." welcome to all our viewers in the united states and around the world. i'm fareed zakaria. we have a wonderful show today. first up, if you think you've heard all there is to hear about apple founder steve jobs, think again. i talked to steve jobs' biographer, walter isaacson, about the world that created jobs -- california, the 1960s, the defense department. a fascinating conversation about a man and his times. then, why in the world is

there a big, new chill in relations between russia and the u.s.? it's all about one man. i'll explain. next up, where does innovation come from? we'll ask the man who totally reinvented a household appliance you use every week or at least you should. then a look at jobs, inequality, and the economy with the nobel prize-winning economist michael spence. think you can solve the euro crisis? we'll tell you how you can try. first, here's my take. this is thanksgiving week in america, and it's a time we're meant to be thankful. except no one is feeling particularly grateful because we are in a deep funk. the united states seems to have stopped working. discussion of dysfunction and decline now dominate the national conversation. so i thought i would try to bring a note of optimism to the thanksgiving table. every time i turn on the tv, i hear some politician talk about

how europe's woes should be a warning and that we're next. this is a fundamental mistake. the united states is not greece. countries like greece and even italy have a deep economic problem. they don't produce enough goods and services that the world wants at attractive prices. it is a basic competitiveness problem. greece also has a long history of borrowing too much and being unable to pay its debts. over the past 179 years, it has been in default about 50% of the time. its debts are huge and could not be paid under any plausible scenario. and crucially, because it is part of the euro zone, greece does not have control over its currency which means it cannot make its goods cheaper on world markets. italy, which is in much better fundamental shape than greece, would actually face no short-term crisis if it had simply kept its currency, the lira. it could devalue the lira and

make itself more competitive overnight. the u.s. by contrast has control over its currency, which is the reserve currency of the world. okay, but what about japan? isn't america looking a lot like japan with its lost decade -- actually two decades now almost? at a recent debate, larry summers pointed out that japan's collapse in the 1990s was vastly greater than america's. housing prices dropped not by 1/3 but by 75%. the stock market fell about the same. the dow jones would have to hit 2,600, to be at the equivalent level as japan's stock market went to. and the gdp output gap, the loss of economic growth, was up 5% or 6% as it is in america, but almost 50%. japan has a complex economy with many sclerotic lmths and a demographic decline that can t

cannot solve until it takes on immigrants which it does not want to d'amato the united states by contrast remains one of the most competitive economies. it is home to the leading companies in the most advanced industries, houses the largest capital markets, and continues to spawn new companies and, indeed, whole new industries. it exports everything from aircraft to entertainment to health care products around the world. its demographics are strikingly healthy. it will be the only rich country in the world to increase its population over the next 30 years which means more young workers, producers, entrepreneurs, and taxpayers. america's problems are not economic or demographic or technological. they are political. simple policy measures could change our fate. if we built out and repaired our infrastructure, kept monetary policy pro-growth, reformed our tax code to encourage business investment, we would have strong

economic growth, a manageable deficit, and a bright future. so be thankful, americans, that we live in a great country, and then call your congressman and tell him to stop stalling and to start actually doing something. let's get started. thanks for joining me. >> good to be with you, fareed. >> let's first talk about the america that produced steve jobs. what i was struck by is you were describing a california at a time when it was incredibly rich, prosperous, and also full of ferment. i looked this up, 1972, the year he graduates from high school, california's public schools are considered the best in the country. this is the golden land. did it feel like it had you were researching the book? that this was kind of the -- the

future? >> absolutely. and steve jobs felt this. he kept telling me over and over again that california in the early '70s, the bay area in particular, you had two great cultures erupting. one of which is sort of the counterculture, the free speech movement, the hippie culture, the grateful dead and janice joplin, all the music, that sort of explosion of rebellious art. and then secondly, you had the electronics, technology, geeky culture that had come out of the defense industries but was ending propelled by the invention of the microchip and tranexistor, you know, the transistors to the microchip. he was at the confluence. he said it was so great to be one of those people who loved the music passionately. tracking down bob dylan and following the grateful dead. but also -- you know, dropping acid, he said that was important. but also being one of the electronics kids and being able to do that merger of the

counterculture and its rebellious spirit, merging that with the geeky technology culture. that's what silicon valley was all about and what steve jobs was all about. he loved to tell that tale. >> you mention in the book in passing that all this was in an interesting way a byproduct. the geeky part, technology, was a byproduct of the defense department because lockheed and all these big defense engineers had been migrating to california to do air force contract, to do things like that. >> right. and edwin land even told them, they dropped the film from the u2 spy planes and brought them to -- silicon valley to the grumman and other plants there. people were learning spectography, spy satellites. but they were also using how to make use of the microchip. it was -- every person -- steve grew up, his father was just a repo man at a finance car, repossessing cars from people

who hadn't paid back their loans. everybody on the block was working for hewlett-packard, northrop grumman, one of the engineering companies. they would show steve things like carbon microphones and ample fires and do the heath kit radio kits. he said it was just great to grow up in that environment. >> what did he say it his high school? pau because you point out this he lobbied his parents to go to the better high school. the high school was good enough that it trained him and steve wozniak in technology. you talk about the technology teacher they had. but also give them a grounding in liberal arts. certainly jobs never went to college and still -- clearly was a learned guy about all this stuff. >> yeah. it's such a shame when you look at some of our school systems now and the cutbacks that are happening, to realize what a great education a wozniak or jobs could get, you know, from working class families. steve was very willful and loved his grade school. then he gets into middle school, and hey, we all remember middle school, not always the best of times. and he hates his middle school.

and he insists that his parents, who as i say, you know, car mechanic basically, move to a better school district. they moved to cupertino to be in the better school district. that cost them a lot of money. they realized that they had this boy who they had adopted who was totally special, totally smart. they'd do anything to try to help him. he gets in to homestead high school. he's a couple years behinds wozniak. they both have taken this electronics class. there were two classroom shops -- he walked me by the school and pointed out. there was the auto mechanic shop. then there was a new thing that had come along which was the electronics class. that was replacing auto mechanics as the trade school part of the school. >> his experience of high school was happy. >> it was happy. he was a bit of a rebel, a bit of a misfit, as he said his whole life. i think he would have been that way in any school. but he found people including wozniak who had greeted a couple years earlier -- graduated a couple years earlier but was

still emotionally a high school kid so they hung out together. he found people to hang out with. >> then he goes and starts this company, first works for atari, starts this company. do you think there's something that you learned about what it means to be an entrepreneur? because you also wrote a biography of ben franklin. and franklin was also in a sense a great entrepreneur. >> absolutely. franklin is a 17-year-old dropout, runaway, creates a printing shop. and steve jobs is a college dropout, whatever. he wants to start the 21st century of a printing shop. he want to start a company that makes computers. wozniak is at the other extreme. he's the best engineer you can imagine. a steve jobs -- 50 times better than any other engineer. he can hold meetings in his head. but when he creates something including the blue box, the first thing they created which ripped off the phone company for long distance, you know, woz wants to give it to their friends. steve says, no, i can make a really cool case, we can package it and sell it for $66 apiece or

whatever and make some money. that's the pattern. steve jobs is the entrepreneur. he knows how to make insanely, you know, great products, well packaged, and sell them. and woz is just this engineer who writes wonderful, you know, code and circuit boards. >> i remember in the franklin book, as well. the innovation -- we think of innovation as entirely a scientific idea. but the innovation is often a kind of business innovation. i remember reading -- we did a show on innovation. and the singer sewing machine, the singer innovation was the installment plan, and selling to women. >> really -- >> it was not the better machine. and it seems like all of jobs' innovations are like that. they marry some technological advance but with understanding what the customer wants. >> well, he marries technology and great design, and the beauty of it -- and that emotional content. when you look at the ipod, it's emotional. you say, i want it.

you open the box, and it's cradled there. he even took a patent on the box design that he and others did because there's an emotional marketing -- and then you have the silhouette ads. he's a great marketer. which steve jobs is able to do, has pulled together the emotions of everything. the emotions of a great interface, great design, great technology, great marketing, great advertising, great packaging. and that, you know, that was -- you make a good point. what is an entrepreneur? it's not necessarily the guy who writes the code. it's the guy who says, i know how to make people emotions connect with this. >> when we come back, we will talk to walter isaacson about steve jobs, what kind of businessman was he, whether there are business lessons to be learned from steve jobs. stay with us. is a complete multivitamin for adults. plus an excellent source of omega-3 dha in a great tasting gummy. one a day, gummies for grown-ups. long-lasting, too. yeah, i could really use this silverado. i'm a big hunter. oh, what do you hunt?

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we are back with walter isa isaacson. for those five people who have not seen him on television or looked at the book, the author of steve jobs. this is probably one of the most

successful ceos of all time, right? ye yet he violates all the rules. this is a guy who doesn't believe in committee meertings, doesn't believe in market research, doesn't believe in being nice to people. he yells, he screams, he overrules people, he says, i couldn't care less what the market research shows me. is it just that he's -- he's steve jobs, or is there a lesson there? >> well, there's a lesson of really having a passion for perfection. and knowing what you want to do. and -- you know, he said, at the very first retreat that they take when they're doing the original mcintosh, somebody says, we should do some research. he says, how do people know what they want until we've shown them? he quoted henry ford saying, if i used market research, people would tell me when they wanted was a faster horse. he believes in his gut and emotional connection, having, knowing what will really make people feel it's insanely great. secondly, he doesn't have sort of committees and all this structure. he had -- runs a very tightly

centralized thing. people have to know how to react to him. he's very rough on people at times. but the people who learn to deal with it become passionately wedded to him, loyal to him, stay with him. they're inspired by him partly because he prevents what he calls -- when i ask him about it -- the explosion. he says if you're in a velvet glove as you and i might be as a leader, you end up indulging people who will be players. and if you really want a team of all a players, you have to be tough about it. and brutally honest. he said brutal honesty is the price of admission. i can tell people they're full of it, but they can tell me i'm full of it. and if you look at the results, even in his first time at apple when he gets kicked out, his team adores him. love him. at apple the second time around, the most loyal team of a players of any company in america. he may have bitten their heads off a few times, but they stick

with him because they know it's for a particular passion and cause. >> you've met a lot of ceos in your life. how -- how much -- how different is he? how much of an outlier is he? >> he's a bit of an outlier. he is not somebody perfecting the traditional management skills. even though you mention it can be read as a business, i didn't write it as a business. it's a biography about steve jobs and who he was. if people say, well, this lesson in business is you should bite people's heads off if they're b players, i go, no, i'm not an expert in how to run a business. i worked at this network and showed maybe i wasn't an expert at how to run a business. i'm telling the story of a guy who was enormously successful. so this is one way to look at a life where somebody wedded a passion for artistry with technology and built the most valuable company on earth. >> there's an incredible sense of the sheer force of his will. you have this story which i

didn't realize. so when he comes back to apple and he's flirting with being the ceo and he then finally decides he's going to be the ceo, within a week or two or a few months, he tells the entire board they have to resign if he's going to do it. >> yeah. >> now i was thinking to myself, i mean, to use a technical term, who has the chutzpah to do that? like you've barely entered the door, and you say, look, the only way i can make this work, to the people who hired you, is if you all resign. >> one of steve's traits is he did not love authoritiment he was also a -- authority. he was always a rebel, and the board is trying to exercise authority saying, no, you can't reprice stock options, you can't hire this, you can't cut these -- he's like, no. either you want me to do this, but i'm not somebody who's going to easily be chained in by authority. >> you mention in the book that 1955, steve jobs and bill gates are born the same year, built two great technology companies,

couldn't be two different people. >> do they have a rival, yes. do they like each other, yes. are they friends? yes, off and on. it was that very complex relationship that you've seen in government, you've seen in industry, especially in technology, of people who are both friends and rivals and -- you know, it's very, very tricky. and at the very beginning in the 1970s, they are like this. it's like a binary star system where the gravitational pull of the others doing the orbit of the other because they're both working on this great software for the macintosh. most of what microsoft did was write software for apple computer and then the macintosh. >> i forgot how junior a partner it was. apple's revenues you point out in 1982 were over $1 billion. and microsoft's were $30 odd million. >> right. microsoft was the small player and tiny at that time. but that's also why it becomes a complex relationship because there are many, many cycles. and bill gates and microsoft end up taking the graphical user

interface that steve had perfected after seeing it at xerox, perfected it for the macintosh and created windows. steve feels they've copied me. in fact, steve feels even stronger. they've ripped me off, and -- and he's furious. plus, the deep philosophical difference between bill gates and steve jobs is steve has the temperament of an artist. he wants end-to-end control, wants to control the hardware, software, the device, everything so that you have a seamless, beautiful, integrated user experience. bill gates feels we should have more consumer choice. we'll create windows, but we'll license it to h.p. and dell and compaq and ibm and all sorts of computermakers -- >> it's a businessmen's -- >> there's more volume that way. >> and it works. by the end, microsoft has more than 90% of the market share. people think its model has worked better. then cycles turn. this is why it's a complex relationship. in the end, one of the scenes i love is because he really likes

-- bill gates likes him, he likes bill gates. there's sort of a bond that comes from being a competitor. so bill gates visits him a few months ago when steve is sick, on medical leave. and they spend, you know, three, four hours just reminiscing about being the old men of the computer industry. and they're both sort of nice to each other at the end. bill says, you know, you model worked, the integrative model, worked. and he says, your model worked, as well. steve says, yeah, but he didn't make great product. bill says, it could only have been steve who integrated it. the model doesn't make any sense. and you see that both remember and understanding and affection but rivalry they had with each other. >> the professor who wrote -- i think it was in a blog or maybe article, he noticed you compared him to edison and ford. he says, essentially says, enough already. steve jobs is not thomas edison. let me remind you what thomas edison did. he intented the light bulb.

he goes through the series of back-breaking inventions that -- >> a couple things. edison also wasn't a saint. you know, let's not cannonize edison. certainly when steve dies, everybody's asking, is he leonardo, michelangelo -- it's probably better to look at people who married technology with great art and design and indovagds and created good products and transformed industries. you know, edison transforms the music industry with the phonograph. i would suggest control? tunes and the ipod have transformed the music industry fundamentally in the same way the phonograph does. you know, the ipad has transformed publishing. the iphone has totally transformed what our digital devices are. he's transformed the notion that a computer should be friendly and in your home. the home computer revolution is more dependent on the mac than anything else. so, you know, it will be interesting for business professors to probably do case studies, compare the two, and

maybe find out edison is, you know, wins the contest. it's an interesting intellectual contest to have. >> walter isaacson. thank you. >> fareed, good to see you. >> and we will be back. tdd# 1-800-345-2550 tdd# 1-800-345-2550 let's talk about making sense out of tdd# 1-800-345-2550 what's happening right now. tdd# 1-800-345-2550 tdd# 1-800-345-2550 at charles schwab, we're ready with objective insights about tdd# 1-800-345-2550 the current market and economic conditions. tdd# 1-800-345-2550 and we can help turn those insights into a plan tdd# 1-800-345-2550 of action that's right for you. tdd# 1-800-345-2550 so talk to chuck and turn complexity tdd# 1-800-345-2550 tdd# 1-800-345-2550 into clarity. tdd# 1-800-345-2550

now for our "what in the world" segment. something in the papers the other day struck me as odd. russia has placed a number of u.s. officials on a blacklist. they are banned from traveling to russia because of what the kremlin is calling humanitarian crimes. what's going on? isn't the cold war over? well, it turns out that this is a tit for tat reaction to a similar blacklist issued by washington this year. so why are we blacklisting the russians? to explain let me tell you or remind you of a tragic tale. the protagonist is not alive anymore, but his story highlights the amazing impact one person can have on international politics of the highest level. on the 16th of november 2009, a russian lawyer died in a moscow detention center. his name was sergei magnitsky. his death fueled outrage on the streets of moscow. his only crime was to uncover

the largest tax fraud in russian history. $230 million in rebates falsely claimed by corrupt government officials who in effect stole the money from the russian state. the price magnitsky paid for exposing this fraud was to be kept in a dungeon for months. despite pressure, he refused to withdraw his testimony. he was denied clean water or medical care for his ailments. within less than a year, he died. sergei magnitsky could have remained a statistic. one of the 4,000 who die in russia's often brutal prisons every year. instead, his story has become the basis for the so-called magnitsky list. washington's list of russian officials who were involved in the tax fraud and in magnitsky's detention. thanks to lobbying by supporter in the west, the european parliament, canada, and the

netherlands are considering their own visa bans for a list of 60 russians. u.s. action over the magnitsky case has exposed a raw nerve among moscow's elite. you can see it in the kremlin's response. it retaliated by blacklisting u.s. officials, but it also indicated it was targeting american involved in the prosecution of two russian criminals. the articles dealer victor boot and convicted cocaine smuggler. so moscow is comparing the prosecution of notorious arms and drug smugglers with the prosecution and murder of an honest lawyer. in a case that even president medvedev had said required investigation. the underlying issue here is that for all the glitter of having been named a brick, one of the hot emerging markets, russia remains a country where corruption is rampant. it ranks 154th in the world on

transparency international's index and can commit crimes with impunity. the most disturbing aspect of the magnitsky case is that it appears the entire russian state is in some sense involved in corruption and crime. for real change to take place in russia, it has to come from within. and that doesn't seem like any time soon. the current regime seems to have a firm lock on power. but there are some signs of restlessness. last week, prime minister vladimir putin was booed by a crowd at a martial arts fight in moscow. take a look. [ booing ] >> this was on live national television. according to some reports, it was later edited down by state media to show only cheers from the crowd. but the unedited video continues to circulate on youtube. mr. putin probably doesn't need to worry about winning back the post of president next year, but that victory might not be seen as wholly legitimate if this

discontent grows. kremlin russia, an anonymous joke twitter feed said it best -- "the crowd at a no rules fighting match boo'd the champion of no rules elections." and we'll be right back. the starting point if you like is a sort of passionate ainge better something that doesn't work very well. why are you looking up? ♪ get outta the car. get outta the car. ♪ are you ok? the... get in the car. get in the car! [ male announcer ] the epa estimated 42 mpg highway chevy cruze eco. for wherever life takes you. tltltltle emotional here? aren't you getting a little industrial? okay, there's enough energy right here in america. yeah, over 100 years worth. okay, so you mean you just ignore the environment. actually, it's cleaner. and, it provides jobs. and it helps our economy. okay, i'm listening. [announcer] at conoco phillips we're helping power america's economy with cleaner affordable natural gas...

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time for a check of today's top stories. pakistan is calling a nato attack that killed 24 pakistani soldiers totally unacceptable. nato's secretary general says the deaths were tragic and unintended. the nato attack which wounded 13 others in a region bordering afghanistan occurred yesterday. 19 of 22 arab league countries have voted to impose economic sanctions on syria for its deadly crackdown on protesters. syrian government tv says sanctions will be unprecedented and contradict the rules of economic and trade cooperation among arab countries. iran's parliament has voted to reduce its diplomatic ties with britain and expelled britain's ambassador. the move is in response to britain's decision to cut financial relations with iran because of concerns over the country's nuclear program. three american students who were detained in egypt are back home in the united states.

derrik sweeney, gregory porter, and luke gates were arrested last week after being accused of throwing molotov cocktails during recent clashes in egypt. the three men were released from custody friday. those are your top stories. now back to "fareed zakaria gps." look around your home. there are many products in it that haven't changed in decades, if not hundreds of years. the incan desen light bulb in your lamp, pretty much the same one that thomas edison invented. the clock on the wall, the first american patent for one was in 1797. not much has changed there. my next guest, james dyson, is known for his bold reinventions in the home. he forever changed the way we think of vacuum cleaners, fans, heaters, and he intends to alter our vision of much more both within the home and without. thanks for joining me. >> it's a pleasure. >> when one thinks of creative engineers, innovators, you assume they're going to make

really cool products like computers and laptops. what made you think of a vacuum cleaner? >> well, i'm rather attracted to rather prosaic things like vacuum cleaners and hand dryers. where people haven't made them with a love for what they're doing. if you look at, as you say computers, but thing like wind surfers and surf boards, and bicycles, you see the people who make them are passionate about the product they're making. but i didn't get that feeling about vacuum cleaners and hand dryers and fans. so i wanted to apply new technology to these products that we use every day to improve their performance and to improve our enjoyment of them. really to apply technology to make them better. >> so when you are thinking about this, are you thinking about it from the point of view of design or from the point of view of functionality, of engineering, that there's some engineering problem that you're trying to solve? i mean, look, i'm trying to understand how innovation and manufacturing takes place really. >> yes.

well, it's quite a -- an interesting starting point. you just decide there's something awful about that product. it doesn't work well. the hand dryers don't dry your hands. in fact, vacuum cleaners have bags which clog and say you lose suction. so the starring point if you like is a sort of passionate anger about something that doesn't work very well. and then you go looking for a technology or start developing a technology that would solve that problem. that performance and function problem. and sometimes it can take five years, sometimes it takes three years, sometimes it takes 12 years. >> do you think most engineer are creative and passionate the way that you are? the reason i ask is because people think of engineering as sort of a good profession, but slightly boring profession. you're making it sound for exciting. >> it is exciting. i mean, i've been practicing for the last 44 years, and it's the most exciting thing do. the funny thing is that your entire day is full of failure. almost everything you do fails.

to do my vacuum cleaner, i build 5,127 prototypes. that mean i had 5,126 failures. as i went through those failures, i made discoveries. so almost every day we make very interesting discoveries that no one else has made before. it's groundbreaking stuff, hike being an explorer. it's fascinating. >> the british government has tapped you to revive british manufacturing among other people. but we have in the united states the same problem -- you know, western countries in general have it. fewer trained engineers, the ones we have tend to be immigrants or foreigners. what's the reason for this, and how do you fix it? >> the reason is i think that culturally once we become wealthy, we turn our backs on the thing that made us wealthy and that created all the jobs. namely, manufacturing goods that the world wants to buy or that the country wants to buy. it's as though we drift over to the arts, and forget the

sciences. that we want to do things rather than things you do to get your hands dirty like making things, manufacturing things. which is a great pity because both our countries became great on our inventions, on our technology, and on our ability to manufacture things that everybody wants. now what can we do about it? i think there are two things or three things that we can do. the first is to get things right in schools. now we don't teach children in schools to be creative. we don't teach them to experiment. we want them to fill in the right answer, check the right answer in the box. that's teaching them by ropes and you get marks for the most number of correct answers in the box. what we should be doing is giving children a problem and asking them to solve it and come up with solutions and to make mistakes. make experiments and make mistakes. i think we should give children the greatest number of marks that people who make the greatest number of mistakes because they're going to learn from it. the same thing i do is -- we absolutely need to give

scholarships to people to go university for engineering because we're turning out far too fear encouraging graduates and science graduates and in both our country the future explosion in jobs will be in the technology sector, in the engineering sector. but we're not producing enough. we've heavily underproducing. >> do you think that the things you're describing, particularly the educational reform, is this all in the realm of the possible in the united states and britain, or are you railing against a system that's so large it's not likely to change? >> no, i think it can change. and i think it will learn to change. i did a report for david cameron before he was elected to form the conservative policy on innovation. and it included exactly these measures. the next thing we got to do is to make sure that we get this broader-based education, an education where people learn design and technology as part of the standard curriculum. we're just starting it in chicago, my foundation, working

with 30 schools in chicago. and often lesson classes, doing design and technology. and i went to one of these and saw what the children were doing. they are amazingly inventive. they have no fear. and they know exactly what they want to do. they're very -- very sure about it. but the sad thing is they seem to lose that fear of being creative and get taught that the only way to get to university is to put the right answer in the right box. >> james dyson, pleasure to have you on. >> thank you very much. and we will be back. >> if we really wanted to overall come this one fast, what would happen is a political leader would go and say this isn't a war, but it's that kind of challenge. on cruze and traverse over there. oh! that's my beard. [ chuckles ] it's amazing. ♪ [ male announcer ] this holiday, chevy's giving more. now very well qualified lessees can sign and drive a 2012 cruze ls

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occupy wall street has brought inequality in america once again to the fore. what is the larger picture of inequality? where is it happening? what is its effect on national economys? for that and more, my next guest, michael spence, a nobel laureate in economics and professor at nyu's stern school of business. he is also the author of a new book, "the next convergence." welcome. >> thank you, fareed. it's good to be here. >> so one of the things that you did in this book was research on

this issue of the divide between -- you know, among americans and in the advanced world. how would you put it simple? why are we seeing this widening inequality? >> hundreds of millions of people in the developing world have entered the global labor force which is in an -- an increasing global economy. and the affect they have has been principally on or lower to middle income and education spectrum. whether or not the jobs actually moved, i think the effect on the pricing is pretty clear. >> should they put pressure on the wages of mnchlg americans because they -- major americans because they put pressure on the price. correct me if i'm wrong, but the last decade or decade and a half, the only jobs we've created or the vast majority of jobs we've created have been government workers and in health

care. >> that's right, correct. that's 40% of the 27 million jobs we created since 1990 appear to be in those two sectors. you add in construction, retail, hotel, foods, and restaurants, labor-intensive industries, that's up to over 60%. maybe 60% of the total. >> and that tells you that this economy for the last 20, 25 years has had trouble creating the kind of job that creates the american dream, the classic job that has rising wages and benefit and value added and has wage that are kind of the global envy of the world? >> that's right. for that group of people, people describe it in different ways but they're not off base. it's the american middle class basically. >> and what do we do? how do you fix this problem? >> you'd start where everybody starts. this may not be the whole solution but it would be nice if we got on it.

you'd do tax reform, fix the infrastructure problem which you've written about, and you're absolutely right. >> education, tax reform, infrastructure. >> skills gap, maybe you put that under education. there would be a portfolio of activity, a sensible energy policy. then i think the other piece is you would sit down with the business community, particularly the ones at functions globally, and say look, you know, we've got a problem. we've got to generate some of our employment on this side. and there's probably a partnership between the private sector helping us understand where we're close to being competitive, where we could actually capture some -- some jobs and some value-added, help us understand where they are, and help us understand what the public sector investment, commitment, reform, whatever it is that's required to get us there. >> what about the cyclical crisis? the sense that we're still in a situation where growth in america is very weak. job growth is very, very weak. is there something we can do in

the short term? >> well, i mean, yes. in -- and i think the first order of business given our fiscal situation is to have a genuine discussion with lots of different points of view about how fast you bring down the deficits. and the constraints on that would be fast enough to stabilize the fiscal situation on the five to seven-year time horizon, but not so fast as to kick the legs out from underneath the economy. and -- and probably against that standard, we've been too focused on deficit reduction and not quite enough on getting that time path right. and -- >> recognizing that it's a medium term issue, not a -- >> a medium term issue, not short-term issue -- >> it seems to me it's hard to make the case that it's urgent, unlike the european case. the other thing i think, you know, we ought to do and -- this will ever happen, right now,

we're sort of hanging on to the living standards having had a huge shock. and to the extent we're doing that, the people who are paying most of the cost are the unemployed, underemployed, and people who have given up. that doesn't seem to be right. >> you would say extend unemployment benefits -- >> absolutely. yeah. keeping an eye on whether you're really creating a disincentive or not or whether you're trying to help people that are bearing most of the burden. you know, i'm sure you heard this, but, you know, the great depression and its aftermath came to an end in world war ii. two things happened at that point. one, there was a huge fiscal stimulus because we couldn't finance a war effort, you know, on current income. and then we got rid of it over time after. and the second one was we went to people and said, you know what, it's a war. and we're going to have to invest a huge amount of our resources in this, and you're -- your consumption levels are going to have to go down because we can't keep them up and make this big investment. we just don't have the resources.

and because it was a war, people said, okay. and so we created this sort of powerful engine that not only took us through the war, but it took us into the post-war period in pretty high gear. you know, with technology and, you know, manufacturing capabilities and so on. you know, if we really wanted to overcome this one fast, then -- then what would happen is a political leader would if and say, this isn't a war, but it's that kind of challenge. >> create war bonds for the 21st century. >> basically. you know, recovery war bonds. i mean, that's pretty unrealistic. but that -- on the economic side -- >> theoretically that would be -- >> that would really put a jet engine behind this thing, increasingly over time. >> michael spence, pleasure to have you on. >> thank you. fun to be with you. >> and we will be back. [husband:] getting cold out here. [wife:] in here too. we need more affordable engy in this country.

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the annual enrollment period ends december 7th. now is the time to take action. call unitedhealthcare medicare solutions today. every year the apec or asia pacific economic sum, world leaders have posed for a class photo in the traditional garb of the host country. this year in hawaii, president obama broke with the tradition and convinced leaders to wear

dark suits. then a few days later, we saw obama and other leaders wearing these colorful japanese outfits which brings me to the question of the week from the "gps challenge." what summit it was that world leaders posed in japanese garb? the southeastern association for regional corporation or the eas, east sabre an summit? or the a.r.m.s., asian multilateral summit, stay tuned and we'll tell you the correct answer. go to cnn/gps for ten more questions. while you're there, check out our web site, the "global public square." you'll find takes from expert. you can follow on twitter and facebook. my book of the week is "the price of civilization" by frequent "gps" guest jeffrey sachs, an economist at columbia university, sachs spends much of his time advising emerging nations around the world as to

how to solve their economic troubles. here he directs his advice at the united states, his homeland. he puts forth his ideas about what ails us and his prescriptions for how we can recover. even if you don't agree with it, you will find it very thought-provoking. now for the "last look." looking at how europe's leaders are failing to fix their debt crisis, you might be thinking, hey, even i can do a better job. well, there's a game to put that to the test. it's on the web site of the european central bank. in economia, the monetary policy game, you at the controls of the european central bank. at each step, you have to decide whether to raise the key interest rate, lower it, or keep it where it is. the aim is to keep inflation at 2% or slightly lower. you have a team of advisers and all kinds of data to help you along. even with all that, it's not so easy. you, too, could end up bankrupting europe. don't take my word for it, try it for yourself. there's a link on our web t