personal began and i don't want to embarrass my daughter sitting in the audience here who read her social studies textbooks and she was in the sixth grade in 1989 is when i began to address the issue of teaching about religion in the public-school textbooks and establish an organization of islamic education which now has changed its name to institute of religion and civic values

kennedy school of government. he appears frequently on npr and on fox as an analyst. marvin had a 30-year career at cbs and nbc. he was the chief diplomatic correspondent for cbs for many, many years. prior to that, he had been the moscow correspondent for cbs.

an interesting thing for those of you who are college students is the fact that marvin was actually in cambridge studying for a p.h.d. when he got an opportunity to go to moscow for the state department. and that -- a year later then, he was signed on by cbs, the last correspondent hired by edward r. murrow. so he went right from academe to the firing line and was a brilliant cbs correspondent for so many years. later on nbc, he was the moderator of "meet the press." two peabody awards, that's the biggest in broadcast journalism. dupont prize, overseas press club awards, too many to count and a bunch of emmys as well. he has written 10 books, two of them were novels. one of them was co-written with

ted koppel. it was a great spy novel that i asked ted one time, what was the toughest thing about writing the book? he said the sex scenes. after i had read the book, i understood why. marvin is currently working on a book on the american experience in vietnam and we're delighted to have him here this morning as one of our speakers. marvin. [applause] >> thank you. let me start by telling you about the sex scene. [laughter] >> ted and i were working on this book for about a year or two and always delaying handling this problem because both of us felt rather uncomfortable. and yet our publisher was telling us that if we really

wanted to make it big, you had to have a sex scene. he called it the o.s.s., the object bigtry sex scene. -- obligatory sex scene. i said to ted, you're so much smarter than i, why don't you write it. he said no, you're taller than i, you write it. i said you have four children, i only have two which means you are twice as good at it. so why don't you write it? so finally, he wrote it and he gave it to me. it was awful. it was really awful. so i didn't call him back and he called me and he said is it that bad? i said yes. i'm not sure what happened with it. i think what happened was that when they embraced we almost, like a camera, turned to the window where a breeze came

through and that was that. so the book sold maybe 20,000 copies less, but what the heck. ladies and gentlemen, i'm happy to be here. i thank you very much for the invitation. how many of you have been journalists, either in college, secondary school, summertime, any of you? good. ok, then you may be ahead of the track from where i am because i have been asked to speak about the ethics of journalism. as i was driving here this morning, i realized that my fundamental problem is a no longer what journalism is. you can all think that you have a grasp on it. i thought i had a grasp on it. i know longer do. and the reason that i don't is that the craft has changed so dramatically in recent years that it's impossible to know

exactly what it was, what it is, and where it is going. and i admit to my difficulty upfront with you. when steve and i worked in this business, i think we each knew who we were and what hour responsibilities were. -- our responsibilities were. but today i find it very difficult when i watch cable news difficulty, to find out who the journalists are. for example, can i say with both candor and certainty that larry king is a journalist? i cannot. and yet news is committed on his program. there are people who come on to his program and actually make news. so you can say, well, if news is made there, why isn't he a

news man? and in a way he is, but is that the same thing as ted koppel or steve bell working as reporters covering wars, covering political campaigns and the answer has to be no. there is a very marked difference. so then what is the difference? how is one to define who the reporter is? and until you can, how is one to define a set of ethical values that are ascribed to that kind of work? if you are covering a war, there is a certain kind of ethics built in to the very craft of war reporting. likewise, politics. but if you are the host of a program or if you have spent most of your life as a politician and then you lose a race, what happens? these days you generally go

into television. the former governor of alaska is now going to become an analyst on fox. now i do some of that for fox, so i have to say immediately that i'm not sure that this represents an increase in the journalistic value of fox, but it does probably almost certainly in fact add to the ratings potential at fox. therefore, what we're talking about here is bringing on personalities largely political personalities who have done a great deal of work in a certain business of politics into a world of communication, into the world of the media. and then we somehow or another believe that, therefore, they become news people. well, forgive me, but i reject

that. i don't think it's right in any way. but there are ethics involved in the craft of journalism and i would like to talk to you a little bit about that. does a reporter have a right to report everything that he or she knows? if a reporter is covering, as i did, i think, steve, i'm not sure -- covering, let's say, the war in vietnam many years ago, and you came upon a bit of information -- i know this for a fact. i will not mention the reporter's name. a television journalist well known walked into a bar and met there with a young american

pilot who told him, simply because he recognized him as someone he had seen on television, he told him, sir, you know, it's very interesting, tomorrow morning, we're going to go off on a bombing raid over hanoi. at the time the u.s. was not bombing hanoi and the president was saying we don't want to expand the war, and yet here was a young pilot saying tomorrow morning i'm going off to bomb hanoi. what is the ethics involved in the reporting of that story? let me suggest something and when we get to the q & a, you come in with your own point of view. on the one hand, a reporter has most of the time -- most of the time, a right to report the information that he or she has so long as you are fairly

persuaded that the information is accurate. and you try to present it fairly. but does that reporter have a right to put out the information that this young man is going to be taking off in an american fighter plane the next morning to bomb hanoi? i would say no. it's a heck of a good story. you're breaking something quite new. the u.s. is expanding the war and beginning to bomb the capital of north vietnam. this particular reporter did not report that story. i think he did the right thing. let us say in another circumstance less dramatic, a politician on capitol hill, this did happen to me, following a meeting on the senate foreign relations committee came over to me as we

were all walking out and said, marvin, this is off the record, but let me tell you that the democratic majority is going to try to move a resolution condemning this particular aspect of policy. i said, well, thank you, senator, thank you very much. i walked away. he had said this was off the record. now we were all clear -- i got to pause here. off the record means you are not to use the information in any circumstances. it's off the record. there is then on the record, which means go with it as best if you wish. then there are two immediate categories. one is background and one is deep background. and if a government official in this city says to a reporter, this is on background, what the official really means is use the information, but don't quote me.

you can say u.s. officials, plural, you're getting it from one person, u.s. officials say x, y, and z. you can use that formula. that's acceptable. if the source says to you this is on deep background, that means, in effect, you can use the information, but you use it on your own. you can ascribe it to no one. in other words, you write a sentence that it is the feeling here in washington that -- then you use the information. if you wish to do that, remember, you're assuming the information then is right. wisely, you would have checked it beforehand. now, when that senator gave that to me, i assumed it was off the record and i walked away and i did not use it in my piece that night, only to get a call from him the following morning saying why didn't you

use that? i gave it to you to use. i wanted that on the air. and i said, but, senator, you said it was off the record. he said don't be hung up on terminology like that. if i'm giving you information, use it. then it's the reporter's responsibility, should it be the reporter's responsibility to figure out whether the information is of a sort that he the reporter can figure out and use. last night i was -- i'm absolutely hooked on ole miss ris and so i was watching a movie called "north side 777." jimmy stewart made it about 50 years ago. it is about a reporter who approaches a story at first with extreme skepticism. he writes it but doesn't think it's right at all. the information that he is

writing is right, but he doesn't think this particular person is innocent. . the eth he can -- the eth -- the ethics comes in with the knowledge that the story is absolutely right, ready for broadcast or newspaper.

but is that enough? is there not a moral dimension that goes along with the reporting of the news? don't we also have an inner morale compass that says, this is really yobbled the pale we should not be going down that way? and all i can say is that over the years, as the distinction has broken down between a clear-cut reporter and a cable host, all under the umbrella of the median, introducing enormous confusion in people's minds, and i don't blame them. it's unble that there would be the confusion because you're not sure of the product you're working with.

if you get to a certain point where you feel a story isn't right you should simply tell your editor, i can't do that. example, during the iran hostage crisis there was a moment early on in that crisis when six americans were actually not being held at the american embassy held by revolutionary guards of the iranian regime at the moment. but being held in the canadian embassy. it doesn't seem like a big deal now but it was then. there were six lives involved. i had that story and i think someone on nbc had that story, i'm sure somebody at abc had the story, too. but i called up cronkite that night and said, this is the information, it's slutely

accurate. but i can't do this story. president beyond -- i don't think it's right to jeopardize the lives of these six people. i said, however, you know, you guys pay me. this is the information. do what you wish with it. and cronkite thought about it really for two seconds before i even got off the phone and he said, we're not going to do it. let it sit there. somebody else can have it. we didn't do that. we didn't do that because we didn't feel it right to broadcast information that might jeopardize lives. and i think that becomes a cutting-edge issue in all reporting of national security. the ethical line there is if there is a danger that you may jeopardize lives you don't do the story and i think that makes very good sense and i think, by the way, that most reporters do that.

"the washington post," a major newspaper here in d.c., comes upon information regularly that it does not accomplish -- publish and it does not publish the information not because it doesn't like the stories but because it doesn't feel it's right to go with it. and how do u@ brbrb#@ @ rbrb

i've spent a good many years overseas. after a while you get to know those countries that are free, relatively free, and those that are dictatorships or dictatorial in nature. who call them authoritarian for a moment. and you can tell by the way which is which by just going to a local news stand. walk up to a kiosk and just look at the newspapers in front of you, the magazines, and i submit that you can tell almost immediately whether that i cans to exists in a country that is free, sort of free, dictatorial

or sort of dictatorial. how? you can take a look at the newspapers, they all tend to look alike. they're all reporting essentially the same story and not just that, but reporting it the same way. and on the faces, the covers that exist on magazines and journals, there are always the faces of the leaders of the dictatorship, almost every single magazine will have the picture of dictator one. whereas if you go to a news stand in this country and you can buy a tabloid which will have one kind of headline and emphasis and let us say the "new york times" which will have another one, you can see immediately by the face of journalism what the essence of the political system is. and i maintain that a free

press, a free, vibrant, occasionally even irresponsible press is the essence of a free, vibrant and occasionally irresponsible democracy. and that the two go hand in hand. if you have a free press you're going to have a free and open system and if you begin to clamp down on the press you're going to find that your political freedoms are going to be cut down as well. and my concern at the moment, particularly after coming from such an elegant and eloquent panel as you've just been exposed to, i respect -- represent obviously a different generation but also a different vision of journalism. to me it is not sacred but it is appalling, it is something very special, it is, as i've

said a moment ago, for me the essence, literallying the neck tar of an open or free society. and when, due to the explosive force of the new technology, we have a journalism that is much wider, it exposes more people to more information than we have ever had before and that is a good thing. it is at the same time information that is presented that is very thin. it goes across the spectrum but not deeply. it goes across the spectrum in a shallow way. and it also goes across the spectrum in a way that, at the borders there's a fuzzyness between substantive could be

tent that is real and political opinion. that is opinion. that should be in the straight news story, should not be in the straight news story. so i worry deeply that where we're going in journalism today is to lose our soul in pursuit of profit that is understandable and that may be unstoppable given the way revolutions take place, particularly in technology. but that doesn't necessarily make it a good thing. and because you are all, because of your age, going to live with this for the rest of your lives, it becomes your responsibility to make absolutely sure that you're not losing the soul of the business which by my likes is the soul of the democracy. so i am finished with my basic

picture but we do have a lot of time for your questions and by the way we can wander afield well beyond anything i've been talking about. [applause] if you want to just stand up i'll recognize you. oh, there's a microphone? yeah, right in the middle, please, go ahead. >> greetings. i'm from north carolina central university. you discussed the idea of ethics. in your opinion, have ethics changed over the years since the beginning of journalism? >> has ethics changed over the years and the answer is yes because while, as i was trying to say before, while i might have had a standard of ethics that i would apply to a news story in the 1960's and 1970's and 1980's, that might necessarily be appropriate to

judge a news story's value today or the performance of the reporter in getting that story. so the ethics have become a bit fuzzy along with the definition of journalism. so has it changed? absolutely. should it change? well, this is a flight of fancy. so long as the journalist knows that he or she is presenting information believed to be accurate, presenting it in a fair way, i think the ethical impulse is to go with the story so long as it doesn't affect -- so long as potentially it might not affect human life in a military situation. >> thanks. >> thank you. >> i'm from a college in

connecticut. a few years ago there was a young girl about the age of 14 that went missing. and a couple days later, about a mile from her home, her body was found. and there was a reporter on the scene who immediately aired the images of this girl's body. the parents hadn't yet been alerted of the situation and the images that were shown were not very easy ones to look at especially for patients -- parents. what do you feel ethically the reporter should have done in the situation think? understand that they want to be the first one there. i feel that the parents should be told first. >> well, again, by my ethical standards, i probably would not have run the pictures. i might have selected a picture that conveyed the essence of the awfulness of the story

without showing too much guts and gore. look, if you write a good story you're going to convey the awfulness of that kind of a event -- kind of event. and i don't think it is necessary to go too far with the pictures. there used to be an issue that came up on television all the time in my day and that was, since our major programs, cbs evening news with walter cronkite went out at 6:30 or 7:00 in the evening and maybe in the middle of the country at 5:30 or 6:00, but roughfully that time frame, which was dinner time, so walter was always asking the question, if we had a really gorey picture do we put this on while people are having their dinner? and the answer quite often was

no. now, in recent years and again i don't want to give you an old fogey vision of reality, but that's what i'm giving you, but increasingly there's more of the gore on television that is acceptable stuff. more newspapers are putting in gorey pictures because that has become the acceptable thing. more stories about the private lives of public officials are in newspapers now because that has become more the acceptable thing. is that the right thing to do? that's a separate issue these days. president almost anything goes. but i appreciate your dilemma. i thank you for the question. >> thank you. >> hi. i'm zach from texas. and yesterday my small group went to roll call and we were in the meeting with this reporter there at roll call d

and i posed the question, if lives were at stake would you publish the story? and his response to me, which shocked me, was, that's not my job, that's not my problem. do you think that it's because of reporting like that that has contributed to the negative perception of media in recent years? >> are you asking specifically whether as a reporter i have the responsibility to judge the impact of my story when it's published? >> well, that, and do you think that that has -- that mindset that has contributed to the negative perception of the media today? >> yes, of course, it has contributed to the negative perception. alas i'm old enough to remember the time when a vice president named spiroing a due, who was

the first vice president for richard nixon, did a series of broadcasts attacking television news. and he was the first to give that idea of the media cachet, the media sort of -- that word that embraces everything from journalism to public relations. and he also conveyed the impression that the people in the media were really a special elite group ff northeast pinls, he didn't say harvard, but he meant it, and if you come from the northeast and you are a graduate of harvard that that makes you unamerican. and he conveyed that impression because there was the beginning of strong opposition to the vietnam war on the part of the

american people. and they blamed the reporters for instigating that reaction. i think it was since that time that the public perception of the media shifted from essentially positive to fufrl, i don't want to say essentially now negative because i don't think that's true, but certainly a negative impression is there. and the more that journalists go for the jugular, go for the headline, go for the -- got you kind of journalism, in my view, the more ady municipalition in the degree of public respect for journalism and it goes back to my central point again. if journalism loses its

centrality, its importance, its purpose, we all suffer. our political system is sure to suffer. so somehow the journalist's got to get his act together and i think the sooner the better. thank you very much for the question. >> good morning, professor. i'm from sussex university in boston. >> i know well. >> i'm sorry? >> i know it well. we pass it almost every day. >> my question for you is, how would you change the media today to perhaps make it more ethical and abiding by a stronger moral compass than what it has? >> well,@@@ @

undermines the purpose of journalism and likewise introduces into our democratic system a coarseness and an unfairness that we see expressed on almost every talk program that we listen to. i do not see at the moment how journalism makes its way out of this. honestly, i don't. i wish i did because it would leave you all with a more upbeat sense and i would like

to do that but i have to be honest with you, i don't see it at the moment. maybe it will happen. i hope it will happen. for the reason i've already said 10 times. i hope it will happen. i just can't find how that's going to get started. unless all of the young journalists who come in filled with idealism and enthusiasm and energy have the guts at the same time to ask their editor, why? if the editor is moving them in a direction they feel is uncomfortable. because if it's uncomfortable there has to be a reason for that. maybe you're wrong in even raising the question but at least by raising the question you air the problem. and i think that in and of itself is an advance. the more we can discuss this,

mortgage we can have these sessions, the better off we will all be because people will become more aware of the problem. and then ask themselves, wow, am i losing something? is there something i ought to be doing as a citizen? so it's a problem for everybody . it's a journalists' problem, it's a citizen problem, it's a political problem. >> thank you. >> ok. >> jonathan, arkansas state university. i just wanted to know what you think the impact of watergate had on investigative journalism, most specifically the work that they did to lead to the down fall of the nixon presidency? >> wow. well, i have enormous regard for both of those reporters and bob woodward continues to amaze me. he continues to produce these extraordinary books.

presidents and seconds of state, defense, are all -- when they're in power they're all very critical of woodward. but when they leave power they all read those books and try next time he calls to be available and to share some of the stories with him. what watergate did with the reporting of woodward and burn seen it did was make president often tedious job of investigative journalism exciting. because the stories themselves, each one of them was not a blockbuster. there were little pieces of a large jigsaw puzzle. and they were putting it together piece by piece. they didn't have the story. it was a gut sense on their part that this is going up

pretty high. and it may get to the white house. but if it does reach into the white house, before we print that we really have to have the evidence. and so on the part of the editor and the publisher tft "washington post" it was an -- of "the washington post," it was an extremely important and gutsy decision. because sometimes the evidence was not absolutely there. it seemed to be moving toward a conclusion, but it wasn't there. and then of course if the u.s. government at that time under president nixon asked the attorney general to put out an injunction to stop "the washington post" from publication. which could have been a direct interference with freedom of the press. so the supreme court ruled the

right way a week or two later. it all happen very, very swiftly. the impact of the story was enormous. it led to the toppling of the government, to the resignation of a president, two steps ahead of almost certain impeachment. it put the country into a terrible tailspin and i would submit that we're still not out of that. and it ignited in young journalists the belief that they could automatically become a woodward or a burn stein. so on the one hand the excitement into doing investigative reporting is very good. president overexcitement that you could actually be woodward and burnstein overnight was very destructive.

up at the kennedy school we give out a prize every spring time to the best investigative reporting. and i have to tell you that with all of the economic and technological problems now facing newspapers across the country i am always so happy to receive 100, 110, 115 submissions every year. really first-class investigative reporting. first class. and then it becomes extremely difficult for us to have to make a selection as to which one of these is the best. and i always enend up with, when we get do the down to the last five, i say, you can choose any of these five, it almost doesn't matter. so we give out five prizes too often. but my point is that

investigative reporting is still there. it is essential, i'm delighted it continues. its impact, the woodward -burnstein powers were profound. really profound. there have been many books writ been them and there will be many more and i hope even more movies. i mean, just part of our culture, it's important. thank you. >> thank you. >> good morning, my name is alex from sufficient ock, university. my question is, do you think that with the emergence of such media as c-span, as if -- is it now unethical for congressional leaders to hold negotiations of the major bills off the camera? >> this is an issue that s has come up, it has been pushed by the republican side up on capitol hill in order i think to grab on to something that c-span would like very much to do. which is to get its camera in

everywhere on capitol hill. but on the other hand there is clearly a political motivation in all of this and an embarrassment of the president is also a political goal. i answer that on two levels. on one level, theoretical, and on the other level practical. on the theoretical side i totally agree that there ought to be as much coverage as possible and therefore all committee meetings all to be open to the public, therefore open to c-span cameras. and as far as that goes, fine. however, that is not the way legislation is made. it's very much like the production of sausages which you don't ever want to see. because you'll never eat one. legislation comes about in a formal way which is more or less what we see but most of

the deals are made privately and they are made privately because there are deals. you take this, i give you this. look, if the senator from nebraska got a great deal for his people, senator nelson, but he might have -- he was in a position, one senator, senator liebermann from connecticut, in a position to destroy the health care bill. now, you can actually take a picture of senator reid, majority leader, pleading with senator nelson, you know, i'll give you this if you give me that? as a practical matter you're not going to see that. but that is at the heart of politics.

so the camera can expose a lot in form and a good part of it really conveying the -- some of the essence of politics but not all of it because politics is deal making and deal making is done largely on a private basis. >> thank you. >> thank you. >> morning, sir. my name is patrick from sufficient ock university in boston, massachusetts. during president obama's campaign a famous quote was taken from first lady michelle obama during a speech and she said, quote, for the first time in my adult lifetime, i'm really proud of my country. do you believe that this quote was taken out of context? >> um, yes, yes, i do. and it was taken out of context largely to make a political point.

to be as damaging as possible to the obama campaign. now, who would want that to happen? obviously the republicans running against obama. that becomes unfortunately increasingly part of american political campaigning. it doesn't make it right but it does make it obvious. it's just the way it is. what i believe she was saying and as she explained it later, as an american black she suffered, she felt, considerably in different ways. which she has ticked off which in fact her husband has ticked off in a more direct way than she. but she did talk about that. she was simply saying, wow, something that is happening now is so extraordinary that and then she overstated the case. but do i believe that that was

the first time that michelle obama was proud of her country? no. i think she's been proud of her country probably for a lot longer than that and for many more reasons than that. i just listened to her talk about her family and about her father working for the post office. no, i think that she is very proud american who in her choice of words and in the way in which it was picked up perhaps overstated something. >> thank you. >> ok. >> hello. thank you for being here. i'm lidia wood, president of the student government association at miami-dade college. i see that you are a good man and a well respected journalist but have you always been able to stand solid on your ground, refusing to do a report if it was against your ethics and could say no to certain reports jeopardize our jobs as future journalists? >> i've thought about this many

times. i would like to say that i think most of what i have done for many, many -- for many, many years was profession alley sound -- professionaly sound. motivation was clean. fiffs, as steve can attest, a very competitive reporter. but i think at the same time reasonably good and i hope fair. but over the years i have thought about one thing and i'm still not quite sure of the answer. but let me share it with you. i heard brent say the other day that piffs a child of the cold war, quote-unquote. and after he stayed i was

thinking -- said it i was thinking about it and i too was very much a child of the cold war. in other words, when the cold war got started in earnest in the late 1940's, we became very much aware of it in the 1950's, the united states and the soviet union were locked into an if -- a crisis. it was a sort of stable crisis over the years but a crisis nonetheless. we each had enormous nume leer power -- tee nor -- enormous nuclear power. we each had the ability to destroy the other country and in that destroy most of the world. so it produced what was called a balance of terror where both leaders on both sides, whenever there was a real crisis, did not ever want to be pushed to a point of having to use nuclear weapons and that governed the

way we thought about our policy in almost every part of the world. now as a reporter in that environment and as a moscow correspondent and i remember i was a moscow correspondent during some of the most acute berlin crises during the cuban missile crisis, in a number of others as well in the middle east. i believe now that i thought then that in pursuing my story i wanted us to win. i didn't want the soviet union to gain an edge over the united states.

i don't know that i literally wrote stories in order to accomplish that, i doubt it. but i do know and i think now it must have been in my mind, i was anti-communist, remain so, and i wanted, as i said, i wanted the united states to win . so if there was a story during the cuban missile crisis in which i could write that the soviet union was aggressively pursuing an anti-american policy, i would do that without too much thought. but supposing the evidence ran the other way, supposing the evidence were that the united states was pursuing a policy, anti-soviet, that really went over the line, would i have done the same thing? would i have reported it the same way?

probably. but i'm not sure. and this is an issue that has been in my mind over the years, in recent years, because i'm right now in the midst of a writing a book about how american presidents viewed the vietnam war, during the war, and then since the war, how they've viewed the legacy of the vietnam war. and we see that in president obama's handling of afghanistan. he had vietnam in mind. and so i find the book filled with salient points and interesting as heck, but it forced me again to think back to those early days of truman and eisenhower and kennedy and johnson and was i being as absolutely balanced as i could have been? i hope i was and i'm really not

sure. but thank you for that question. >> thank you. >> we have about five or should we wrap it? >> i think we're ready to wrap. >> ok. [applause] >> thank you so much. >> my pleasure. thank you, sir. >> and we thank marvin for his participation this morning and this concludes our regular meetings and you've been a great group. all of you in our tv audience, this is the washington center seminar and it's a wonderful experience for college students from 60 colleges and universities around the country and we're all delighted to be part of it. and we thank you very much. [applause] >> because when i come to these

meetings they see the very vividly the revitalization, which is now going on in this country.

first of all, thank you to the chamber and thank you. let me first. you know that it because you have to be in new york for the funerals. you could understand. he was a very dedicated friend of ours and he has worked in his position as a french-american of the industry of growth. and so he put here in new york area but one year ago about, almost one year, he was introducing the party to celebrate revitalization of this chapter a french-american. and as she underlined we are

happy to see their much for numbers in terms of membership to our 151 when there are only 40 and as well as the number according to the other that is organized it is possibly the best timber of your efforts. so congratulations to all of you. it is striking in a very difficult year which has pulled on the constraints after it might be one of the french chamber in washington. so the more difficult the best. maybe i will give a few words about france like all european and global partners in the troubled economic times since the beginning of 2008.

at the end of 2008, slightly after the year, growth domestic roderick was 2.3% between the middle of 2008 in the middle of 2009 in as many of the countries we had last year since the middle of the 90's. over the year 2009 the unemployment rate wind to 9.5%, very close to the one here. it was the highest since 2005. however, many of us have pointed out that there is part of the french authorities of a crisis of economic and france has gone out of recession as soon as the second chapter of 2009. the plan announced by 25 billion

havarti been spent. and help to sustain household consumption. it measures for small business and lou income households and multiple industry also. it will limit the effect of a downturn, which has been much worse. some of our big neighbors had big problems since 2008 in the middle of 2009, which has the gdp contracting from 5.2 m. german gdp contracted by 4.8. france now a bit better. with 2.8. a bit better than in 2009. it will continue on its path where unemployment is not likely to decrease before the end of this year.

the french government, as you know, was expecting the very modest gdp growth of 2010. their plan for less less than 1% and we have been happy to be a statute of 1.5% which is above its expectations. but all of that will be much more widely committed to your guest of this. thank him warmly for accepting to be the guest speaker. it's a great honor for all of us. he is a political figure in france before coming to bear of national funds. mr. said to is quite hard to summarize it into words, but started the economic are present at the university and he is certainly in his current position.

very soon he has a very successful carrier was elected the french national assembly for the t time in 1986. very done at that time. he was between 2001 and 2007. mr. strauss-kahn was administered for trade from 91 to 93, then becoming president of finance and industry. because it is during this period that the world was put in place and he directly on the very bottom drawer in the allowance of the euro. in between these different political assignments, mr. strauss-kahn also grew to be a very talented business practitioner. he mentioned it is very rich carrier as you know mr. strauss-kahn became the 10th in 2007 becoming its

consequence of the global financial arriving and over the past year not only to restore financial hub like condition, but to improve tremendously. to finish on a more personal note, i was lucky enough to be here when it was time to introduce himself to american authorities and they have to go with them at the white house. then he met with a very high responsibility at the white house to make his decision. the discussion went very well, but at the end of the exchanges were made and the white house was quite surprised to see that mr. strauss-kahn had a much more better performing blackberry than himself. last night [laughter]

let me introduce now mr. strauss-kahn. [applause] >> well, ladies and gentlemen, i'm very happy to be with you for this lunchtime and i'll try to begin by thanking the french-american chamber of commerce for inviting me as well as all of our council. and i am grateful for the kind introduction he made, especially the last point which i happen to bring myself. i'm going to use it again. i'm going to talk a little bit about the outlet and changes facing the country and also maybe on what kind of a post-crisis. we're entering an.

we're starting a new year at the same time we're starting a new decade and one which holds out the promise of creating a more successful global economic system. and that's why i see 2010 is the year of confirmation. on several fronts, on the global economy certainly, it's the first year of the post-crisis. and policymakers are shifting away from the private resolution, turning to challenges of the host prices global economy. so from this point of view certainly there is transformation. there's also a year of transformation when you look at the global institutions and the balance frameworks. they have to evolve to reflect the changing and the@@@ @ @ @

so let's start with. there is some good news and some bad news. the good news that the outlook

for growth has continued to improve. and the recovery can sooner and stronger than anticipated. it always comes in the crisis at the same time almost in the u.s. very rapidly mostly major economy after emerging in countries who are in the same situation. it's not the same thing for the recovery. and the recovery comes with a different speed. obviously, the economy recovery is somewhat sluggish, consumption being depressed by a province on one hand, by family on the other hand.

so, in most the u.s. union, japan, so most of the bad economies recovery would be sluggish. the mize just a word about france while we're here. the french-american chamber of commerce. as you just said, growth came back in france in the second quarter, mainly through the measures which have been demented by the stimulus factors and the financial factors support on the other hand. they played obviously a very important role. but here to recovery would be significant, but rather slow. we expect something between 1% and 2% of growth for next year.

it's much better than 2009. obviously, it's not enough. emerging markets economy are a different situation. and merging market economy is much stronger, especially asia as everybody knows. due mainly to the domestic demand. so that is the good news. in one word, better, better, but fragile and that's the second part. because even if we have this recovery sooner and stronger than did, obviously the recovery is fragile, especially in an advanced economy. and the reason is exactly the reason i just mentioned. in most of the economy's rebound relies on public support and private demand is still very

weak. that would be strong enough to reduce a stable growth that we're out of the woods. and when you look at a numberless figure here in the u.s., they reached somewhere towards 10% and may rise in the coming months. and of course, we all have to keep in mind that there's this huge question of economic recovery. it is even more become a social problem with a lot of frustrating on household pressure and the system existing in a different country. when you look at developing economies, there are in some respects victories of the crisis, but there has been hit

hard even if later than other countries because the connection was a global system not so long been hit by the downturn in growth and enhanced by the slowdown in remittances and these kind of things facilitates a couple of months. but then there have been hard hit and the consequence will be obviously increased poverty for instance on the world bank showing that 90 million extra people were in extreme poverty. because as a direct result after the crisis. so, why is it improving, i would just say we are not out of the width yet. so in this case, let me come to my second point. it can be in what has to be the

major rarity for 2010. i think three of them. first, security of the economic recovery. second, unemployment will go ahead with the financial sector reform. first point securing the recovery. the question everybody is talking about in our economic conference is and even the social dinners is a time to exit. we put these together with huge stimulus with the president effort to try to support demand. that is a very tricky issue. the question of the choice between two soon and too late to be exactly in the right time. so should you choose the strategy which has a risk of being too late for a strategy where you have a risk of being

too soon. from this point of view, what i want to underline is that in our view it will still be absolutely tricky. of course if it is too late from the different type of program as a cost and especially at a time of public debt because most of the programs are investments. so there is huge cost and you shouldn't make too many mistakes. on the other hand, the the very difficult problem of decreasing the public debt would be a problem with most advanced economies for the common decade. i've, six, eight, ten years. it is not that big. when you make a mistake, cut the

cost. the cost is to be compared however you will need long periods of time to fix this problem. on the other hand, issuing too soon, then we are really in trouble. our forecasts, imf, is not that there may be any kind of double dipping as the most are expecting. it's not our preference, but there are some and it would be totally irresponsible to say it cannot happen. and if it happens, it happens because we withdrew the measure to early, then let me say bluntly that i don't know what we can do. all too choose on the monetary side on the fiscal side and even more somehow just invented

during this crisis to tackle the crisis with some success. ..

had been at the same time everywhere. but they indicate is it shows it is time to exit, and it seems clear that it is linked to the recovering private demand and we should not fool ourselves looking only as adamant figures. they are interested in seeing how private demand starts to resume or not and of course as a consequence of this growth in private demand they expect the consequences on the key point of employment. at the same time another thing important is to know in which respect you really did your homework on the financial stability side. we have i like to quote this figure because it seems to me

and seems to you were somewhat surprising. we have an imf since the beginning of the mint to the constitution, 1994, an experience 102 banking crisis, so some of us one bank and one country. some are rather big but 122. and all very different. different countries, different time, different kind of crisis and there are very few constant but some and there are a hand you you see across all the crisis one is you never really recovered the cleansing of the balancing of the financial sector having an been completed. and it very well known examples of course is the japanese situation where the japanese government put billions in the economy trying to recover without any kind of result. and ten years later decided

finally to clean up the balance sheet and the recovery takes place. so, i may get a [inaudible] but it's very important even if you can handle problem in a different way and the balance sheet to deal with but it is critical to be sure that at least the largest part, the big part of the problems in the financial system have been full salt and depending upon the country everywhere a lot has been done but depending on the country you close the completion or are not close to the completion. and then the question is how to accept. -- exit. in countries the top priority will be fiscal consolation because the main consequence of the crisis is of course an increase in budget to gdp ratio. most of this counter the risk of inflation is rather low. i'm not seeing there is no risk

but it is rather low and said the monetary policy cannot afford to stay in use for some time and the focus has to be put on fiscal. which doesn't mean again that fiscal conservation everywhere has to start today because then we will go back and discover new downturn but it means everywhere the problem is to prepare this fiscal compilation to make it transparently, markets need to know the government had planned to have the right focus for the coming years so that the problem will be addressed and for instance many fees like anti, programs or things like this where you can prepare things what effectively only come in a couple of years. so prepare now, depending exactly where you are in the cycle implement now or implement

leader. in other countries mostly those where which didn't face large bank bailout costs the problem can be different. they don't have such an important fiscal problems in front of them and so the monetary tightening can be the first step and several economies already have been following this route including australia, china, israel, big economies, small economies. they all pretty start withdrawing monetary support and are beginning to now the amount of liquidity which has been put in to face the crisis. of course all of this need some international cooperation because everybody understands when you were doing in your country affects other countries, and so if it is really a

clockwork to try to know the right time to exit them if you don't take it you have no chance of success. and of course it's more difficult to have this cooperation now that when all of the g20 leaders were scared -- i remember the meeting in london where you had the 20, or injected a little more than 20 because the g20 is always a little fatter than 20, but 23, 24 had a state or heads of government around the table, and they were so scared they were likely to do anything and work together. they were the best people in the world. [laughter] when the crisis. there was of course good news, everybody goes back to its own domestic problem, which is understandable, and then the will of -- i don't see it has to disappear. hopefully not, but it isn't as strong now as it was before especially when it has to last very long because the time to

exit is the one time decision but something which will last, which will take months depending on the countries. so in the national corporation is as important in excitant strategy than it was in the demanding of the stimulus and a huge amount which has been used to rescue the financial sector. is a bit more difficult to manage than it was the case last april and even in pittsburgh last september. now let's turn to my second point in the challenge of 2010 after securing the economic recovery. the second point has to do with on employment and the social cost of the crisis. and here the point is well known. in advanced economies the risk, i say this bluntly as simple as that is a jobless recovery. the risk as a recovery where the growth will be back but what jobs. and of course the problem then

as i said before are not only economic problems that many countries it may become alpheus economies and even more in emerging countries for low-income countries social problems and beyond the social problems some credit problems with social unrest and beyond the democratic problem you may also have some problem which may go to the question of war or peace, and we have a lot of examples in the past where social and economic instability leads to social instability and social instability to social unrest with a lot of possible consequences. so, the question is not only the question of fixing the economy, which of course is the main problem but also to do it in a way that will not pull all the burden on one part of the population and the part of fun in plymouth is clearly one of the good examples of that which

may create some countries especially the countries where it isn't as strong as ours which may create a lot of political problems. that's why our advice and the imf is to use the part that has already been decided and which are going to be effective in 2010 to try to focus them to support employment and reinforce the social safety net. we did that ourself in small-scale of course in the programs we have in different countries where we are helping, and that's probably one of the big differences to be the imf and so-called old imf, which is the only we are trying to put the countries of the right economic path given the right economic advice as good as we can. not only what we provide resources to help do this, but at the same time we push the country to put in place for one

part of the deficit which we read together to forecast for next year for instance and to take a little part of it to improve the social safety net to create this kind of safety net for they don't exist because the most vulnerable are the ones most hit by this program. so from ukraine to pakistan there's always something like 0.3 come 0.5, 0.6 gdp in deficit which is directly earmarked to be used to help the population and most vulnerable part of the population to cope with the crisis. now, the third priority is to keep up the momentum of the financial sector reform and that is a real concern.

as i said before about the difficulty of keeping the consensus and national corporation while the crisis abates is even stronger looking at the financial sector reform. a lot has been said during 2008 and during 2009 about the need to do something, the lessons of the crisis were the clear failure and regulation, more failure and supervision of the financial sector. we need something which is stronger even more than strong we need something which is smarter. fine. the problem is not only to talk about it or even to design it but to implement it. and that is a long story. they do a very good job with input of the imf already some important reforms have been implemented there is still look

to do with to priorities to get one has to do with systemic risk, the so-called too big to fail problem, and the other one which is directly in our backyard and the imf has to do with cross country resolution and that is a very difficult problem because you may have the best system in each country that don't cooperate, then the question of banks have and subsidiaries in other countries and outweigh what happens in one country happens to another and it may become the biggest source of trouble. so, at least on the two questions there are issues and systemic risk getting we still have a lot to do. the political will is still there but it takes a long time to do something like that, and will the political will last long enough? battle to rules took two years

to be defined -- 12 years. and some -- i wasn't among them -- who still have in mind the work done for the question that their accounting and mark to market value said it took 30 years to convince for bdy to go there so we don't have 30 years. we don't even have 12 years. we have 12 months or 24 months to be able to set up something which will be i won't say totally safe but safe -- to release a financial sector doesn't exist, but at least safer and more likely to resist and avoid the kind of problem we just met. of course linked with that we have another question which is the question of the cost. it is a question of fairness. we cannot afford a system which privatizes and socializes loss.

everybody agrees with it. fine. how do you do that? already in the cost of the current crisis and looking forward how do we do it to be able to address the same kind of problem of the financial crisis, the explanation five years from now, ten years from now. nobody can say it's impossible order it won't happen. and i am convinced the most parliaments the congress here in the united states, the national assembly in france, was minister of the u.k. and others will be very reluctant to say the least to give money again to the financial sector especially when they see how the financial sector bjs. so it's the following: i can see no one at least in the developed countries likely to come back into consistency in five years from now and say you

know, you guys have got to pay again because the financial sector is again in a mess so if we are convinced of this we absolutely need to find a process first of course to try to decrease the risk of such a crisis but also to create the resolution process which will be helpful at this time without going back to the traditional way of asking taxpayers money and that is a question a stake when people are talking about a contribution of the financial center to bring the kind of an insurance system that could be useful in due time. again i think it is a rather good idea. we are working on the sg 20 has asked the imf to provide a report on this question for april and we will. it is a very tricky question you can understand and there are a lot of constituencies having different opinions. it's not only the bankers of

course. it is clear. there are constituencies and it is difficult to solve but it is a problem we need to solve. going back to the business as usual is absolutely impossible and it will be putting the whole system at risk. i don't know when. maybe in two years, maybe only ten years but it will be totally unreasonable to believe that we will never again fees' the risk of another financial crisis comes absolutely we now need to be able to address these kind of problems. so i come now to my last point. i have spoken too long already i am afraid. i wanted to say a few words on the priority not for the year but for the decade and let me limit myself to two of them. one is the so-called look for and search for new sources of

growth and the second is to say a few words about this several times since the small remarks which is an international cooperation and collaboration. the new sources. the problem is well known the u.s. household saving rate is increasing. probably as a response to the crisis because people want to ask and don't rely as much as before on credits and want to save more. if it is a short-term problem or let's say short-term change in behavior, fine. has no importance but i don't believe so. many economists to believe there is unchanged and we are already at the 6% or 7% of gdp that has never happened for a decade and many expect the 6% will become seven, eight, nine, why not,

maybe ten. so there are consequences to read the good news always as bad news. good news is good for the deficits. more, the work will save the more it will help fix the problem after the deficit and as a consequence of the current account deficit. that's very good. on the of your hand, it means less consumption and everybody knows the u.s. consumer has been the main motor, the main trigger during the last decade so if he disappears at least if he is weak and who is going to replace the u.s. consumer on the global growth? that is that obvious answer. everybody turns their eyes to asia and is this ok emerging country especially asian country we consume more and this will offset the decrease in the u.s. consumption. it is not that easy. first it is not obvious emerging-market conception will go that fast.

second is not the same kind of goods and there are a lot of reasons you cannot just even on the sheet of paper try to offset one by the other one so easy. so the question of the new sources of growth is really at stake. and that is why the g20 has set up what they call the framework for strong sustainable and balanced growth which is in the process where basically the imf is asked to provide analysis, resources and taking the data from the countries and putting them together and looking at the consistency between what the chinese want to do in the coming three years and the u.s. and european and japan, and of course he knew that is inconsistent and so the policy has to be changed to make it consistent because it goes in an inconsistent way then we will have some kind of a disruption in crisis. so trying to deal together with

this problem so we started this process and in january collecting the data from the different countries and we will provide the first round of this exercise for the finance minister rajiv 20 meeting in washington and then will go to the leaders in june and if it works well, and it has to work well it will show what goes well and what in the global economy is impossible to pursue what has to be changed and then hopefully the government will be, have enough good will to say okay we have to make an effort. the effort has to be shared. the burden sharing problem will be of course very difficult but everybody facing the fact the decision made by the different actors are not consistent that this decision will have to be made to avoid a different possibilities of crisis. so the idea is strong,

sustainable, balance. strong growth means where are the new sources of growth. certainly in developing and emerging countries. but again it doesn't match that easily. also you have this discussion about the green economy and new sources on this site. but there is a long way between speeches of the real economy in the fact that it really produces jobs. then you have the sustainable question which is directly linked to the fiscal problem must many countries the fact the same time we are looking for new sources of growth we have a huge debt problem which to fix the problem requires measures which go in the opposite direction but when we want to force to growth and the last point of course is balance because the new growth model that we want is obviously there. the new growth model has to be more balanced and we want to avoid other balances in disruption between the countries

having of course of your body thinks about china and the u.s. but they are not the only two examples. we may have a win-win situation in which more stable international systems and more sustainable growth model could be put in place but of course it relies upon the kind of cooperation of at least all of the big economies, the one such orrin g. 20 and my second point is on the global corporation. the recent experience get some great hope we have contemplated and precedent. it never happened in the history of mankind that all the countries of the same time facing the same problem use the same tools and succeed. it never happens.

it is enough for politicians to go ahead depends on the opinion you have about politicians. i think it is enough, but of course we are not sure and the way the nation of the world proved together to respond as this profound economic and potentially human calamity thus redeeming the promise of the international corporation all of this in my view is one of the main outcomes of this crisis that the g20 has emerged during this period was the main body with this kind of discussion can take place even there is a lot of discussion about who should be out. nevertheless it has worked and what i said before the so-called framework where all this debt will be collected and assimilation mainland policy

advice given by the imf is i think number two that has been created to try to make a step forward and it relies a lot on the imf and that is why my last point it requires also changes in the imf because the institution becomes a big part of the solution. already a lot of changes have taken place and the increased availability of lending and we have created new facilities like flexible credit line for those of you are interested in details. we have issues 250 billion of special rights that have never happen in the past and clearly for many countries during the crisis the way we put in place conditionality in the program has been streamlined, a lot of things have changed but there is only a first step. the next steps are and the way

the concern of a mandate, the mandate which has been defined in 44 is not bold enough. it was about balance of payment gap problem in currency is the only problem seven financial stability obviously not so with the mandate. what about the resources, resources have been increased by the troubling in london last april and it's not done. we have the money will see in the pocket but available. is it enough? no. it was necessary to do that but if we are facing in the future something even bigger the question has to be discussed. the lending facilities themselves then just improve them right. it did we do enough?

what kind of new facility do we need to tackle the modern crisis? what kind of insurance can we get to countries? can the imf play the lender of last resort which was the beginning of the ideas of the founders and the fed never really implemented, that is also a question. and then the last question of course is the core business imf which is the civilian business and let's be candid civilian hasn't been good enough and even if you look carefully you can find interesting pages and reports especially world economic outlook of 2007 at the sub prime morning. it is a limited number of pages. we haven't been vocal enough and we could save the crisis has been forcing clearly. we have to enhance the process. there was an early warning

process that we are just implementing now, looking more at macrofinancial linkages. this crisis is the crisis of the linkage between the financial sector and the real sector and there is no other institution likely to do that. there's a lot of institutions working under the real economy in the treasury and around the world, think tanks and so on and a lot of institutions working in the financial sector and many others but no institution but the imf, exactly at the corner of main street and also working on the linkages of the two and this crisis will be the crisis of the linkages and feedback between the real economy and the financial sector so again our defending of this at the same time as our understanding of cross-country's been over and the crisis of one country dustin

other countries of the things have to be understood better and that also changes we need to make in the coming year not to talk about the question of governance, legitimacy, the quarters in the institution and in the voice and a presentation of the different parts of the world so let me conclude this financial crisis which effected in the u.s. but spread like wildfire across the world i think really affected deeply the way we think about economic and financial policies. and so if i may say 2008 was a year of humility. our confidence and markets, institutions and established status quo turn out to be complacency and we learned since then how are fallible, fragile

and also in connected we are. so 2009 was a year of unity was unprecedented international corporation take place. 2010 has to be a year of transformation. a year we complete this global project to address the failings of regulation, supervision, economic policy and global governance all failings that lead behind this crisis and of course as i said to do this certainly looking to narrowly to think the imf is the only institution that state but because the new rule given by the g20 we certainly need to transform ourselves to better over members but not only our members as was the case in the past in the bilateral way the

imf dealing with the u.s., with the island or with brazil, but in a more comprehensive way because it's very simple to say it might even but i think it is true the main lesson of the crisis is we are in a globalized world. before the crisis all of us are most of us made speeches, declaration, wrote op-ed about the globalization, but the idea, the fact the global economy was really global was just an idea. the crisis showed we are in a globalized world, and so that has no domestic response to the global problem. we need to have global institutions likely to be with a global problem and that's the work all of us have to do and institutions like the imf and other institutions during the coming decade. some have been much too long but

nevertheless i happy to answer questions if there are any. [applause] >> thank you. >> thank you mr. strauss-kahn for your probing experts say. i'm the executive director [inaudible] we've gathered together eight questions for you. first question is from the u.s. chamber of commerce. how does the imf work with the financial stability board? >> well, you want me to elaborate a little more? [laughter] unai with the financial stability board is before the financial stability for on this something that has been created by the g7 ministers will the year 2000. i was the finance minister of my

country and i came from the president of the bank at this time and then the idea was the following we have the imf and the imf to have some emerging and low income countries so they build something for ourselves just to get rid of the imf. so i said that is a good idea, let's do it. so we created this financial stability for them which is basically meeting of the most important central bankers plus some finance ministers plus some time dealing with private sector and very useful to have this kind of forum where the discussion can take place and the decision has been made in september that we need to have this a bit more formalized and that is why the change of name it remains an institution which

the role of which is mainly to take together others, the institution is served 15 people but to take people together the committee on the banking side and the institution on the other side the accounting and all this kind of thing including the imf and try to see together what kind of cross experience we may have so it's very useful and of course one there is some overlap between what the imf is doing but not that much. basically the idea is they have to think about regulation and provide the regulation, the design the regulation then if adopted this has to be implemented in different countries that goes through national parliament and then comes the role of the imf which is to make sure that this is correctly implemented in the country. so we have a cooperation.

again there's always overlap and some discussion about borders. but basically it goes well. >> next question is from david branton thornton. can you raise your hand when i call your name? sees the author -- yes. can you comment on the financial market stability? >> yes, well, yes and no. we are trying to define the mandate. of course we don't have the new mandate swiss difficult for me to tell you. i can tell you what i wish, what i think it will be useful. will it be accepted by the membership, how will it take? i can't answer to this. but the idea is that when you come in the building of the imf maybe you did this already in the past -- you see a lot of people, very clever, very well trained, hundreds of thousands

of ph.d. all having degrees in economics. then you say okay in society where markets place like rall so how many market people do you have in the building? that is a difficult point. many reasons for his. one is the history which is a change that is rather new compared to the way the institution has been built a decade ago. the other is those guys are difficult to pay because i'm not saying the people in the autumn for badly paid but it's hard to compete with wall street and so to hire somebody having a big experience these days is a bit easier. [laughter] to hire somebody having big experience in markets is not that easy but besides all of this it was a question of the way of thinking about the global economy and what i said before we now realize clearly that what we have to realize is the

difference between the financial sector and the real economy needs us of course to have much market people and to be more active and provide analysis, ideas in the way the financial markets should be some part regulated some part managed at least also informed of what is going on. financial markets worked so well with good information, basic economy will and i'm sure we can totally rely on the kind of information which is giving about rating agency and others to provide the market information as the imf is not the only one that can be part of this new process if we won the market to be effective we really need this market to have the best possible information which means more policy and the things like this and obviously that was a big failure of the past.

>> the next question is from [inaudible] where are you? thank you. [speaking in french] do you have the intention as when you took your post in 2007 to go to the end of your mandate in 2012? [laughter] >> i like about my friend that he is a constant man. [laughter] no meeting when we are to get where he doesn't ask the same question. and so he won't be surprised i gave this answer. [laughter] i have been chosen for this position for five years, and today i have no intention to change. if your question is is it possible that in the future you may change your opinion my answer would be a traditional which is i don't answer to these

questions. [laughter] [applause] the next question is from dorothy from the media productions. there she is. can you please update us with the imf efforts with haiti on debt relief, loans and other activities the will help the island as quickly as possible? >> of course. i think all of you will have been very shocked by what happens. what we did in the imf, taking into account we are not really the kind of agency likely to provide immediate help like zinni today is people, hospitals, food, this kind of thing which know how to do this we are likely to provide resources so we have made the decision to provide 100 million of fresh money to haiti. it happened the same as the u.s. decided the same amount and it

has to be a decision which is not only the decision by the director of the board and the board will meet in the coming weeks, not the coming weeks the the coming week to make the decisions. and so we will be able to provide the resources very rapidly. beyond this there is the question of at least suspending all kind of prepayments by the debt, that is the question they are working on this and have seen that ret authorities today and monday and i guess it will go well but my problem is beyond this. my problem is in this country is absolutely incredible but is regularly hit by a different kind of calamity as others, food and fuel crisis but after the hurricanes and the incredible

earthquake and so i believe that, and i'm ready to take the lead on this that international agencies have to go together and try to define something which is a country into a plan to rebuild the economy. we cannot go as previously in a piecemeal approach where everybody comes with some money to try to fix one problem then another one. it probably has to be taken from scratch. this could not come that way. this is one of the proven economies of the world. that has been done previously is destroyed so we really need to change the brackett and go in a different league. it is not such a big countries of the total amount which are needed are important but not impossible to reach and so in the coming weeks i am going to

work with my friend bob sell look from the world bank and others to try to see how the business from today i save lives as much as possible but in two months from now we can be able to provide something which is much more comprehensive and it would be on a much bigger scale. >> thank you to read the next question is not signed. it is about oil prices. are the oil prices factored heavily in the imf forecast and what are the price parameters being used? >> well, we'll -- oil -- who has the question? just to look at you. oil prices are important, prices in general but in the forecast we can make generally we are

just very close to market data looking at the future in the market, and so the forecasts we are going to release and a couple of days are based on something which is around $80 a barrel which is exactly what the market says. you have specialists in terms of oil price forecasts. the specialists have been proven not that good during the last two or three years so we have our own expectations and artery close as i told you to the market. >> another question not signed about scientific innovation. can you raise your hand who wrote the question? is a scientific innovation is so fundamental to economic growth why are there so few scientists in the staff of the imf and the world bank? [laughter] >> don't know.

[laughter] well, you know, the imf is not supposed to finance companies, even leading companies in terms of innovation. we are financing states and in the states have the business to use the money in the best possible way. so, we are not deciding country to into the world bank. the world bank is financing projects, so we are not deciding this is a good one, this is another good one, we are going to find this one and not this one. our job is to prepare a kind of say convenient and effective environment, economic environment so that after we have done that the different development agencies in the world bank, the regional development bank or others are likely to invest for a long time because we've prepared economic background which it possible. so our role is mainly

macroeconomic and while you see mainly not that simple but mainly microeconomics that may be one of the reasons. but it could be a good idea at least in the research department to have some and you say scientists i believe you have in mind economics are not scientists? [laughter] okay, i understood this point? [laughter] and so, we may have -- probably may have some hard scientists giving some bitter feeling of how to -- with the discussions are and certainly they will be useful. that is an interesting point. >> [inaudible] they have almost no scientists. the have thousands of economists put in the capacity predict nothing, okay? and so forth.

>> [inaudible] >> severe but true. how many people think about what's coming on over the past -- and degette they don't even have a scientific advisory board. >> okey -- began a one point there was a nobel laureate named leon hu recommended is oriented advisor. it wasn't well taken. >> no. i think the world bank is much more appropriate for the reason i just said. when you say that a lot of economists are forecasting nothing you were talking about world bank, huh? [laughter] listen, forecast is a difficult exercise, but let me remind you april, the spring meeting of the imf and world bank, the g-7 meeting in washington, april of 2008 -- we had forecasts very bad. and we have been killed by

everybody saying you are much too pessimistic. i remember meeting with one of the major, not the u.s. finance ministers for the g-7 country telling me the french -- [laughter] -- telling me i know my economy better than you guys and so don't tell me this and we will do much better than that and so on and so forth and finally the guy came back and said very enough you were right and it's because we had this bad forecast that as soon as january 2008 the idea is needed by a global 2% and the reason we had this bad forecast and we ask for the stimulus is the reason i said before we basically are the only one working on the right thing today which is the linkages between real and factory economies. so i agree with you. forecast are very often of right and when they are wrong we see what i said at the beginning of

his remarks the recovery grows stronger and sooner than expected which means we plan the recovery not as strong as which means we were wrong so i see this in a nice way but it is true. on the other hand, i do believe the exercise i was describing previously was a framework in the g20 [inaudible] -- because the advantage of a system like the imf until now was already existing which is that we make our forecast country by country but we try to make it consistent from one part of the world to the other one and there's a lot between the country and imf because of course of the end of the day the export has to be equal to the input from the u.s. from china so and of course when you take the basic figures it doesn't match. so, we already had this kind of process. but not globally. on the ballot as what you tell

us is not consistent or what we know from another one and in the guice is go to hell i don't care. and so it wasn't that easy to make it consistent. now, if it works we have a process where everybody agrees to work together so the inconsistency will be on the table and then we need really to address this. so the four test system itself may improve orloff in the coming years hopefully. >> next question is from [inaudible] thank you. a great tragedy ahead, question mark. statute's prevent them from bailing out greece. we dismissed yesterday the idea excluding an ember from the year o'clock. the questio what should prevent us from believing greece is drifting away, argentina style, what are the risks of spinning out to portugal, spain etc? >> i think the situation of greece is fairly different from

the other argentinian example for instance. it is more difficult and on safe it's more difficult because greece is facing a huge deficit, accumulation of deficit and huge debt and it's more difficult than other countries because they don't have the control of one of the main ones which is the exit rate. so for us to do with a problem without having any possibility to move make us even more difficult than the fiscal side so the adjustment that is needed increase is even bigger than the same data that will be needed from other countries where part of the job could be done by just the extra weight. from this point of view it is difficult to read from another it is easier because it is a member of the zone and so the constraint on greece or constrained in the markets

financing the deficit but they don't have a constraint of current. they are not likely to just collapse overnight because they won't be able to finance the gap because there's no extent on the gap. of course they are inside the border and protected by the zone. the real question is how are they going to do it, and i said my friends in the european commission, and i can say it openly that we want to be helpful and if they can do the job dealing with the problem at all it will be fine for us. we are already at the request of the increase mission on the technical problems, fiscal problems, tax problems working with the government. but if the european union especially the euro zone is likely to deal with the problems there is no problem. if they need us we will be able to have also but i would be very happy if they can fix the problem without us.

and i understand how difficult it is for a country to need to call on the audit of course it will be nice if not we will be happy to help. >> we have two questions. this is from debbie of kpmg. sorry for the pronunciation. do you think it is realistic or just a matter of time that the sdr replaces the u.s. dollar as the reserves of currencies in the world if the letter would you think is the timeline? if something is a very long time when the question is realistic. winston churchill's answer was too soon to tell. [laughter]

so what may happen in a very long period of time i just don't know. but i don't believe even in two, five, ten years the al-awlaki's can become this. the role of the dollar is very surprising and the weight of the crisis was very surprising. let's imagine that in 2006, 2007 even before the crisis in this room was the 50 best economists in the world, 49 being american and the other i don't know coming from where. [laughter] and they said look we are going to have a crisis originate in the housing market in the u.s. with immediate spillover and advanced economies and then big

downturn negative growth consequences and emerging markets no part of the world will be immune. all this kind of thing and then okay, now what do you believe will happen to the dollar? everybody i guess said it would be a collapse and the confidence in the dollar and value of the dollar. it didn't happen. well, on the contrary we can be challenged but it didn't happen. why? because even in the bad times like this one there are a lot of people, corporate and even countries believing that finally the best thing to do was to go on with the u.s. dollar. so, all of last forever? probably not. is this role in the economy being challenged? yes, by the euro, party by the yen, tamar lardy after tomorrow by the chinese and partly why

the sdr's. but before -- so, if the question is are we going to in the coming decade more military power, more current system? certainly, yes. of the question is do you see of the will of the dollar to italy disappearing? no, i don't. i don't. i would like to have the sdr become the international currency. but i'm afraid it isn't going to happen soon. >> okay. one last question. again from dorothy from the media. a challenging one. you sold gold to india recently. what will you do with the billions? [laughter] >> you want part of it. well, the imf is a funny institution. our job is certainly to provide resources to countries having trouble in crisis. that's what you see on the headlines when it happens.

but our job today is to try to provide technical assistance, policy advice to avoid the crisis comes of in some respects we can say it is when we fail the crisis, but the more, the best we work the less crisis we have. but this institution has been building away which looks like any financial institution. we don't have countries like the u.n. or the cd or others to finance the institution budget. we have to live on our own and come from our lending so the less crisis the less we land, the less the land of the less money. so the better we do our job the more we have which is a system that is rewarding. [laughter] and we are not like any kind of commercial bank where we can look for new customers. i cannot go to countries telling you you are in rather good shape but it would help me if you take some of my loan. it doesn't work.

after the crisis there has been a very long period without crisis which is very good of course. maybe partly because the imf worked well maybe many other reasons of course but that's the fact. and so, we didn't have a free much money out so we didn't have very much income, and so it has been a high-profile company which has been created by andrew crockett to say we should have another income level for this institution. it's totally rational that things are good for the imf and bad for the world economy. [laughter] a lot of proposals have been made. one of these, probably the most important was to say okay, you have a lot of gold, without entering the details as to the kind of cooled and the imf and

it is technically complicated. one part of it, 403 tons is certainly the property of imf. the rest is questionable. maybe the company of the membership. so you can use it. and one of the ways to have a more sustainable budget would be just to sell it, and test and then have the income and then we have a steady situation where you can like normal. and by the way, it can be helpful because we can have less rely on the income of lending so you can land cheaper. fine. then everybody says great idea, but it won't work. it won't work because the u.s. executive director and the board of the imf explicitly as asked by the congress to oppose any sale of gold without approval of congress. that will never happen. so forget about it. it will not happen for many

reasons. a long list why the congress would be opposed including the lobby after the gold producer who don't want to see 400 tons of gold coming in the market. so, we are stuck. when i arrived at the end of 2007 that was the situation. so i decided to lobbied myself the treasury, it wasn't easy, it was very helpful, and then to lobby to congress to see if really it was truly impossible to make this that was totally become very simple and to obtain finally a vote from the congress the willingness to sell the gold and after a long list and i want to make a short now it happened with the help of this administration very helpful asking the congress to go forward. so, finally, great news. last september we were likely to

go forward selling the gold. now, you don't sell the gold that easily. you can just not open a shop and say do you want it? so, we created a first period and which we could have the direct sale to several banks and this was the framework which we can get down out of the 400 to the bank and some others to others and now we have the second period we're going to sell the market. sell on the market. the idea -- sorry i made this a very long but for you to understand the original idea it was to use it to put it in a kind of a fund and take the return of the fund for financing the fund, and between the crisis has led us to commit ourselves to use in large part of it, of this and come to help the

low-income countries. and we have created, i know this because we worked and in september to do that, we create for the low-income countries which never existed in the past which is a zero interest rate lending facility. so from now on should the end of 2011 we will see if we put our own on this time all low-income countries which 76 countries if i remember right last count, borrowing to the fund of zero interest-rate it a subsidy of course to be the difference is the market price given by the return from the gold. ..

then what the imf did with it and it marked what do you think it improves the mark in payoffs. and second, in your press conference yesterday, you said that i am going to march about the crime that change. you mentioned about technology

existing. so, in the climate change, most important is the manufacturing technology. do you think i would suggest that imf should take credit for the margin of our country? thank you. >> well, i'm the first one, if i understood you correctly, we have a relationship with the u.s. as with other countries. and of course, part of our civilian showed failure in the supervision system and the relation system for other countries. now the question is now, how are we going to deal with a new system in a new kind of relationship. so i don't understand exactly if your question was about a way we are working with the u.s. or --

[inaudible] >> ima province in the u.s. and second -- >> if we found something in the u.s. that doesn't go well it's in the consular report which is a forced article agreement which gives rights to make this kind of inquiries in the country's economy. so we reserve the board the same way for the other countries. then of course we don't have the authority to change ourselves what we feel does work in the economy on the other one as the country itself to move ahead. now the climate change, you're right. it's very -- when i look at the mandate at least exists today.

but on the other hand, the climate change problem can become a problem for many countries with carbon taxes implemented and negative consequences of trade and so on. so there are ways to which we are working on that. and i agree with you that some innovative way have you be found to finance not only the economy but the climate change. the failure of the copenhagen meeting conference was not only a question of the integrity to agree on the goals and the different players, but also behind this the fact that it is a huge amount of resources to do something effect to and, you know, people are talking about 100 billion a year. that is a figure when you listen

to what has been said and copenhagen europe 1 quintillion plus one plus one plus ten plus 15. so it's about the magnitude. and if we really want to address this problem as it has been for the future as many say to believe it is true, then we need to find more innovative ways of financing

>> good evening.

my name is leon, a fellow at agi and it is my pleasure to welcome you to this bradley lecture, the first of the new year and to extend a special welcome also to those of you joining us to the wonderful efforts of c-span. the next bradley lecture will take place on monday, february 8 when professor gerard alexander of the university of virginia will speak on the topic, to liberals know best, intellectual self-confidence and it claims to a monopoly of knowledge. it is for me an enormous pleasure and distinct personal privilege to be able to introduce today's speaker, my former students and colleague and now my friend and teacher, yuval levin. editor of the new quarterly magazine, national affairs. offering advice about teaching,

leo strauss once wisely suggested that one should always assume that there is one silence student in your class he was by far superior to you in head and in hard. yuval levin won first appearing a decade ago in my classes at the university of chicago was not quite silent, but it soon became apparent, most especially from his writings and his manner, that he was precisely the sort of student strauss wanted teachers to imagine, smart, deep, wise and humanly admirable. and emigrant from israel to new jersey abby chait yuval came to the committee on social thought from a staff position on capitol hill working for newt gingrich, a job he landed fresh from completing his undergraduate studies in political science at american university. his bachelor's thesis, a youthfully ambitious account of the world of recent and social thought from antiquity to modern

times-- [laughter] was published in 2000 under the title, the tyranny of reason. although distinguished himself in graduate school, yuval fortunately for us was drawn more to public affairs than to the professory awe anti-joined my staff on the president's council on bioethics, serving in several capacities and rising to become its executive director. he then served as associate director of the white house domestic policy council in the george w. bush administration were his portfolio included health care, bioethics and culture of life issues before taking up residence at the ethics of public policy center in 2006. there he has been senior editor of the new plant is, become a contributing editor of national review and is written many important essays and reviews also for commentary, "the weekly standard," "the wall street journal," "the washington post" and now also regularly for

"newsweek" on topics ranging from immigration, social indicators of welfare to health care, stem cell policy to schrute assessments of partisan politics and major political candidates. on this side as a bird he has also managed to edit with crist demute they raise and a ad volume on religion in the american teacher and is produced a remarkable book of his own, imagining the future of science and american democracy a silver looked beneath current disputes to reveal the deep and decisive differences between liberals and conservatives regarding how they think about the future. there is more. in the midst of his daily attention to current affairs, he is produced a truly magisterial doctoral dissertation, soon i hope to become a book, on the thought of edmund. thomas pain which is bounds comprehensibly it's the differences between them faithful to their time and thought it also in ways that

eliminate the fundamental differences between liberal and conservative thought today. finally, september 2009 so the first issue of national affairs under yuval's impressive. which represents for those of us that were nurtured by as nothing less than the rebirth of the public interest risen like a phoenix from the ashes. happily early dear friend and colleague irvin kristol live to see this rebirth then who wrote perhaps his last letter noted encouragement to yuval. you have all not unlike irving a man of wide learning come clear thought, putin goodson suntree judgement possessing remarkable equanimity liking of pettiness and rancor and blessed with a quick pen and generous spirit and a prodigious capacity for good works. lincoln's hero burke, yuval holds together respect for tradition and the spirit of

reform by a love of country had a profound appreciation of the decent life that makes possible for so many. teachers often flatter their students by telling them that they have learned more from then than they have in-- but in the present case is the absolute truth. is latika anticipation that i look forward to his lecture for covering the case for capitalism, which promises to instruct the home team of economists on how best to understand and defend the economic system under which we live and for the most part flourish. please join me in giving a warm welcome to yuval levin. [applause] >> well, thank you very very much. i can tell you how much that means to me and how much i appreciate it.

i thank all of you for being here and many thanks to a e5 for the invitation to speak tonight. it is really a great-- thank you. i've done that many times in the course of the last few years. it is really for me a great and a coupling honor to be asked to deliver a-- and while i certainly know that i don't belong in the week of people that generally deliver them it is thrilling to be in their company and i appreciated very much. agi is the proper place the thing to take up the subject want to talk about tonight, the question of capitalism in this very complicated moment we are living in, and so let's thing together for a while about that question and that moment. four friends of capitalism, the last two years of not been pleasant. first came a cascade of market calamities that seemed almost designed to confirm the most khalid jaden hackneyed criticisms of free enterprise

complete with reckless investors careless lending and irresponsible borrowing wild speculation and an assortment of charlatans, a financial collapse, cavender regulation retirees losing their life savings while wall street fat-cats get their bonuses and even this side of alan greenspan apologizing to a congressional committee for keeping the reins to lose. then came the response from washington which was the least as disconcerting it partially excusable by a pervading sense of panic. by the middle class to the government essentially owns the nation's largest bank, largest insurance company and largest automaker manages substantial part of the financial sector and was declaring winners and losers in massive corporate deals more less ad hoc. meanwhile government spending exploded and lawmakers are busy building new entitlement programs even as our existing ones fall into bankruptcy for. for a moment it seemed as though all this would cause the american people to lose faith in the american economy.

last apr scott rasmussen found 53% of americans agreed with the proposition that capitalism was better than socialism. but that moment passed and has been replaced by way of a populist discontent directed as much as government as the market. the defenders of free enterprise should not take too much heart from this turn in public opinion geppart was just people are uneasy with the instability of the day but it does not form itself into an argument in defense of american capitalism or a coherent case against the emerging contentions of the democratic majority in washington. to direct the public towards such a case we will need to explain what is at risk and what is at stake and why it matters. such an explanation is no simple matter and after decades of defending wintrier another many friends of capitalism have lost sight of the forest of what democratic capitalism as, virtues and vices, strengths and weaknesses, its political and moral as well as economic justifications.

our first task now was there for recovery of that understanding which will clarify both their objections to the policy direction of the moment in their prescriptions for a better way. i hope to walker here one brief sketch of what such a recovery mida balkan where it might direct us. it recovery of the case for capitalist and should begin at the beginning. as always when we want to become reacquainted with ourselves we americans would be wise to start with a refreshing dip into the late 18th century when our way of life was born. in this case we should begin by getting into adam smith the original case for capitalist and before returning to our own time. the father of modern economics was a moral philosopher, studentcam in nature and social institutions and his theories of political economy were an element of his larger project for the direction of human passions and appetites. smith began within the you have nature the 2:00 p.m. or cynical. a bleeped of the human beings were fundamentally self-interest we could be guided toward sympathy and benevolence for

gore sentiments he said began with a powerful self regard that expresses itself in our desire for attention, praise and recognition and motivates a great deal of human behavior. even aricept fatigue begins with our sells. we feel for someone in distress because we can imagine ourselves and his predicament but for some of the fact that our supper garte expresses itself and the desire for preapproval offers an opening for mollification for moderating both the passions and animal apatites to make civilized life possible. our ability to step into seminal susus allows us to reflect on our own behavior to lefkow what i am doing look to some observing me and in the question in that imaginary impartial spectator smith would say is the beginning of social order in self-restraint and so the first temples to moral conformity and common social norms. this is how it will function society in their sentimental tendency to self regard him become inclinations to sympathy indecency but that will

functioning society takes work for coder choir socialists attentions designed to channel the sentiments for this kind of moral formation. those institutions were smith's lifelong obsession. he was above all a scholar of how show-- social arrangement secret of education to direct vanity to proper objects he wrote in his first book, the theory of moral sentiments published in 1759. note that he says his aim is education. the id is not the full two acting well or put the products of directing pearly to send publican part of the ideas to shape the character and behavior, to channel human passion for the public good. this is a peculiar kind of moral education. smiths said plainly that there is no use in trying to persuade men to be virtuous, no amount of recitations of character will do the trick. rather it is the experience of life and society that the delegates to the experience to build the human beings moderate virtues that smith things are

essential, prudence, restraint, industry frugality sobriety honesty civility and reliability. these are the virtues of liberal society. there slow but solid virtues which can be very widely shared cannot is cultivated by a few and they'll love for stable and productive lives so make moral corruption by the state less necessary. these moderate virtues are in a sense versions of one larger version, self commander self control. if this is what smith thinks is really the key to the liberal society, subcommand uberwrites is not only itself the great virtue but from it all the other purchasing to derive their principle. indie defines subcommand is the capacity for delayed gratification restraints upon the appetite or in a word, discipline. smith's great project is the transformation of self regarding to self demand by means of social institutions and director vanity to proper objects.

by ranging human relations so that there is praise of benefit to be gained by discipline, he hopes to allow people to exercise virtue and improve their circumstances. smith send missions are very practical. look and free society he writes consists of quote the uniform constanta none interruptive pfeiffer debra manned to better his condition. the moderate virtues make this kind of improvement possible and the wise legislator will arrange things so that the moderate virtues are valued and rewarded. smith knew that this arrangement and not be a matter of direct a portion or management. socialites is too complicated for that. like his teacher adam ferguson and others of the scottish and lightman smith was endlessly fascinated by the paschal sutley between the intentions motivating our actions and consequences of those sections so rather than by coercion such arrangement would be accomplished in a general way through institutional forms that establish rules of the game intended to draw self-interest

to people towards the sum means of it banting their interest but without forcing particular outcomes. smith made the case for this general approach to this theory of moral sentiments in four years later his lectures on jurisprudence he traced the social norms created this way can to be formalized into laws in specific areas of social life. he then collected and expanded the portions of those lectures dealing with questions of labor and commerce into a book about political economy a book called the wealth of nations and published in that fateful year of great ideas, 1776. is economics was one element of smith's larger vision but there was a particularly important one. as a good liberal the bleeped material prosperity was essential to happiness and so should be at the center of moral philosophy. he also thought well was a precondition for a decent society under sympathy. we can't care for others if we ourselves are hungry. his vision of social life therefore required to develop the economic teaching built around institutional

arrangements that could help produce prosperity while encouraging discipline and the modern virtues by making self demanded means of bettering our condition. the wealth of nations offers just such a teaching in just such an institution, the market. the wealth of nations begins with a fat, not an argument. the that the division of labor which been growing for centuries and european economies made possible enormous improvements in efficiency and quality of production. the fighting in subdividing manufacturing processes and to specialize tacit the great deal of time and effort in more importantly created specialization expertise. rabid binnie chanelle lengel little bedell lott each becomes an expert in something in particular and sales in return for money. that way all work is done by experts and so is done better in each person can trade on value of his expertise given him reason to improve his prowess and his products. this process of a change smith calls the market.

it is the rinn in which labor capital goods and services are of value traded in part and lies at the heart of modern economy. but the rules of the market enough self legislated or naturally obvious. on the contrary smith argues, the market is a public institution and requires rule send pope-- imposed by legislators to understand its purpose. this is where his great insight comes in. and smith bostom under the raining economic philosophy, each of the european powers and market rules that serve the interest of the few large domestic manufacturers and training companies to work closely with the government putting economic policy in the service of what they took to be the national interest to unbends the nation's trading position. instead smith argues legislator should govern the markets in the interest of a common consumer. he writes quote, consumption is the sole end and purpose of all production and the interest of the producer ought to be attended to only so far as it may be necessary for promoting

that of the consumer. the maximus koessel tippen it would be absurd to attempt to prove it but the mercantile system, in the market the system the interest of the consumers almost constantly sacrificed. by turning the logic of mccain's ballistic economics on its head in establishing a market designed for the good of the consumer smith believes the government's can hunley simmons productivity and wealth and create economic institutions that encourage discipline of moderation and order. serving the good of the consumer would mean imposing uniform rules of open competition on all buyers and sellers which would lower prices and spur economic growth. these rules which smith calls the system of natural liberty would allow participants in the market to set prices and values by opening free negotiation in which no player is allowed to use political muscle or other coercion to compel the price of food and that determined by the framework of the market. the system involves natural liberty not in the sense that

this somehow work of nature but rather no player or outsider and especially not government may impose artificial crisis and so only the natural price, the price arrived at by the buyer and seller can prevail. this would make pricing more efficient reducing costs for consumers direct capital more efficiently than a legislator could and would help the best producers prosper so bennett that the nation as a whole. that does not mean it would serve every individual self-interest. smith it not think there was a perfect harmony of the interests in society. many merchants would certainly be better off without competition and in fact many merchants seek to use their power or to call on friendly politicians to help them avoid it but a system of uniformly applied rules which doesn't prefer larger power for merchants would better serve most people and so better vintage the wealth of the nation as a whole. smith has a very unusual definition of the wealth of nations. the wealth of the state consist of the cheapness of provision

and all other necessary inconveniences' of life he writes so the nation as wealthy in effect when consumer items are inexpensive of these relative to the means of the common people. vaticination as wealth unity select is within the reach of most. this is a very democratic and populist notions of the purpose of the market. the broader the reach of the market, the more efficient will be so smith wants to encompass everyone and to have society become one large market in which he writes, everyman lives by exchanging are becoming some measure of merchants and the society itself grows to be what is properly called the commercials society. and a commercial society smith insists is also a good society. for one thing wealth is necessary for a good society because it reduces the mystery of the poor and it allows everyone to be more sympathetic and generous. if our own misery pinches us very severely we have no leisure to attend to that of our neighbor. and at least as import and the

market is not just a mechanism for wealth creation. it is also a civilizing institutions. for one thing it makes human relations more dignified smith argues. the system of exchange opposed to the more aristocratic system owner and tenant allows even the less privileged to address society in terms of what they have to wafter rather than what they need hosts most puts it in one of his most famous passages, it is not for the benevolence of the boucher the brew or the baker that we expected dinner but from there regarded their own interest a we address ourselves not to humanity but to their self-love and never talked to them of our necessities but have their advantages. nobody but it bedrid chooses to depend chiefly upon the benevolence of his fellow citizens. smith is not saying that benevolences degrading but dependence upon the benevolence of others is the moralizing. extending the rule of the market helps most to avoid this fate so allows them to function as dignified equals.

the fundamentally popular democratic character of the system imposes also important moral points for smith. ..

as it turns individual self-interest to the general good of the market there for might also turn individual aphorists into a source of productive energy, self discipline indeed unconstructive risk and enterprise. it's crucial to seize of command and discipline not freedom lay at the heart of smith's case for capitalism. yes, the market involves free competition but that means three of undue influence of some competitors and political compatriots not free as an existential or ideological. in fact competitors forced into the markets by government power and kept by regulation and law for the greater good. as joseph has put it smith at a kid capitalism because it makes freedom possible, not because it is freedom. and it makes freedom possible by guiding people to choose to obey the rules.

the question smith sought to answer is given the man are profoundly in perfect can they be made to want to do good so that they do not have to be forced to do good? smith insists three's riding the answer is yes and the three market is more important means of making that happen. it is an answer to the problem of appetite not unleashing of appetites, it is a case for the possibility of discipline and self restraint not argument against the need for them. but as smith might be the first to say the fact this was his intention hardly guarantees the consequences and without question the moral case for capitalism and especially the case for capitalism as a system of discipline. has long been subject to serious criticism. to recover the case for capitalism beyond m. smith of original formulation we have to take this criticism seriously. there is not today and never has

been a serious economic critique of the fundamental tenets of capitalism. there are only morrill critiques. even those opponents of capitalism who propose alternative systems like the socialists and communists of centuries past offered moral systems, not a genuine economic theory. the moral critique of capitalism tended to fall into two categories. bonn, popular with the socialists and communists is capitalism as unfair to the war. this is to put it on to become bluntly nonsense. the poor in the west and increasingly elsewhere have had no greater deliver than adam smith. it is true inequality persists of course. but the standard of living of the poor has risen dramatically under capitalism and the potential for a speeding poverty is nowhere greater than in capitalist economies. today in america because of persistent poverty have far more to do with culture and economic injustice. but that very point brings us to the second and more serious moral critique of capitalism.

that it empties social life of any higher meaning and so leaves society morally bankrupt even at an to the crisis occurs materially wealthy. it's capitalism in fact a means of replacing material poverty but spiritual poverty? is it in effect the moneymaking machine that durham social capitalism for its fuel leaving in its wheat the society of nihilists. this line of criticism has a long pedigree in the right and left from some of their earliest critics of capitalism to the present day. from romantics to moralist's from post-modernist and neoconservatives. it also recalls the classical christian critiques of merchants as lacking in moral bearings and especially in discipline. trade in the profits wrote st. thomas is mr. principal since the desire for the game knows no bounds. adam smith expected on the contrary the market with a disciplined society and precisely set the balance, or appetite. but as it turns out, our capitalist age is not an age of

discipline. far from it. our society is a study in on down the appetite. our chief public health problem is obesity. our foremost social pathologies result from absence of sexual restraint and personal responsibility. our popular culture much of the time is a diabolical mix of babylonian decadence and vulgarity and our public life is unrestrained gluttonous feast upon the flesh of the future. we borrow more than we can pay. we spend more than we have and use more than we need for all of our immense wealth we manage to live beyond our means. in fact it's almost fair to say we lack for nothing except discipline. but as adam smith can tell discipline above all is what we require to be freed. this is no small problem for the case for capitalism. so what happened? in part as a smith surely understated the challenges of sustaining moral norms and economic dynamism. his expectations rested on the assumption of what to us seems

like exceptional social and moral consensus but to him was the reality of british life in 18th-century. the loss of that consensus about no small part by capitalist economy itself. it is a defining factorrbrb @ @ institutions. for the family and religion and tradition. democratic cabalism as at its best is never an easy match but one well worth sustaining. but in heard we also corrupted

smith's vision of capitalism in ways that undermine precisely its civilizing powers and make it increasingly difficult to reap the benefits of the market system as we correct its deficiencies. the morrill features of his political economy is democratic or popular character and it's disappointing effect have been under assault in our time. the first especially by a growing collusion between government and large corporations and the the second especially by a welfare state expanding its reach beyond the meeting. the case for capitalism is nothing if not a case against these to ruinous trends, trends that have long been with us but have dangerously combined and intensified in the age of obama. neither trend would have shocked adam smith. he knew some among the wealthy and powerful but always look for exemptions from the rigors of competition and he urged legislators to resist the pressure.

to grant them. though he was a champion and free markets, smith was no fan of the business. large merchants and principles of joint stock companies and corporations, smith writes or an order of men whose interest is never exactly the same with that of the public and who have generally in interest to deceive and oppress the public and who according we have on many occasions both received and oppressed. this does not mean they should be oppressed and returned. only they should be subject to the rules of open competition without exceptions. rules that will turn their self-interest to work more constructive paths. otherwise both the efficiency of the market and public's confidence in the fairness and legitimacy of the system will be dangerously undercut. capitalism is a fundamentally populist enterprise governed in the interest of the mass of consumers and it depends upon a clear separation between government and business. if that line is blurred many of the benefits of the system with economic and moral are badly

undermined. meanwhile smith also makes clear donner university of the of the market is essential to its civilizing effect upon individual workers as well as large corporations. as for individuals too are shielded were excluded from the market the organizing and discipline in power of the system will lane dramatically leading the vacuum that will no doubt be filled by eager legislators brimming with ideas. the modern welfare state has had just this affect. welfare rose as an understandable response to the dislocations wrought by capitalism and to the poverty we will always have with us. when it comes to the poorest of the poor cannot subsist without help a decent society is not only bright but obliged to offer help. the modern welfare state extends well beyond the individual. the largest portion of an tire, systems by far is directed to the elderly and is not means tested to be sure only those among them who need help receive it. other middle class entitlements abound with more to come. the health care bill now being advanced by democrats in

washington for instance would offer a premium subsidies to families making twice the median income. the way they are not assigned enormous and thomas are not before and they are aiming at bankruptcy, and i do mean eminent social security for instance will begin running deficits this year. casts a giant shadow over the future of the country but even if they were paid for as they probably will be some de by an enormously expanded tax burden, that will mean undercutting the basic logic of the capitalist economy. it will mean citizens increasingly give their wealth to legislators who then decide how to allocate rather than let the marketplace the mediating role. this is not about public aid for the destitute. it is a gradual but unmistakable transformation of the character of our political economy. it is at least implicitly reaction against the essence of capitalism, a system that leaves economic decisions in the hands of the mass of consumers and subjects nearly everyone to the uniform records of market rules. both the growing collusion of big business and government and

growing middle class welfare state or expressions of a longstanding technocratic distaste on the left for the market economy and especially for the space character of capitalism. there are attempts to allocate more than the wives of consumer preferences and to provide material benefits to the public without the discipline of market rules. the core of adam smith's argument for not by two centuries of evidence is that such micromanagement and concentration of power is neither more efficient work and practice more benevolent than the market. in the wealth of nations, smith was scornful the statesman who imagined so he could get it just right noting that, quote he seems to imagine he can arrange the different members of the great society with as much ease as the hand arranges the different pieces upon a chessboard. he does not consider the pieces in the chest board of know the principal of motion besides that which the hand and presses on it that in the great chessboard of human society every single piece as a principal of motion of its own altogether different from that which the legislature might

choose to impress upon it. legislators can't know enough yet can't sufficiently of the influence of political motives and interest to micromanage the market successfully. but the technocratic age persists because capitalism can never be tidy enough to satisfy the deep progressive urge for rational control. this is an old story. the modern age from its beginnings as evolved to great forces pulling in very different directions. we might call them crudely science and democracy. science said there is hard verifiable knowledgeable about the workings of the material world and that the material world is all there is so we will best meet our needs by letting ourselves be guided by technical expertise. democracies as we should let ourselves be guided by the preferences and wishes of the people mostly leaves individuals free to pursue their happiness as they wish. the two forces, science and democracy and technology and populism are always at odds but often are and the struggle between them, capitalism is

certainly on the side of democracy and the picture earlier and true insight that lawful chaos rather than managed order is the way to balance liberty and prosperity, justice and wealth. for all the quantifiable variables available to the modern economics, capitalism isn't a technical or scientific system. it is basically a system for diffusing of 40 and decision making power and letting people have what they want to read it or do since the market success as a matter of speaking to people's preferences leaving decisions of the level of the individual exchange is almost always going to work better produce more wealth and more happiness. that doesn't mean society has to look at the mercy of base preferences but it means we get beyond them by educating people preferences and judgments rather than taking them over by moral education rather than national control. this is why the technocratic term in federal policy is a problem for capitalism and why

the populist leader of the reaction these days is the appropriately for. but it is also why the reaction needs to be informed, refined and elevated by computer argument, the case for capitalism. federal policy in the age of obama is simply put a combination of corporate government collusion. following a crisis itself made possible by decades of increasingly cozy relationships between government and big finance some of the largest corporations in america become words of the state, shielded from the consequences of their own actions and decisions and subject to the control of the political class. and while the technocratic logic of the welfare state give the money and we will choose how to use it has become the overarching vision of american domestic policy. it is of course shortridge ran the economic dynamism of the least as important on its moral consequences. its effect on the ability of the market to exercise discipline on

our commercial society and encourage the moderate virtues. properly understood, the case for capitalism isn't a case for a license or laissez-faire. it is a case for national wealth as a moral good, for the interest of the mass of consumers as the guide policy, for clear and uniform rules of competition imposed upon all, for letting the market said prices, letting the buyers make choices and producers make what they think they can sell while protecting consumers and punishing abusers. it is the case for avoiding concentration of power, keeping business and government separate and letting those who can meet their own needs to so and it is the case for the moderate virtues and courage by market pressures but finally drawn from the deeper wells from the wisdom of tradition, the love of the family and the divine mysteries tug of love beyond love all of which must in turn be supported in courage and strength and. and here finally is perhaps the most daunting challenge confronting the friends of

capitalism today. adam smith was right to say that the virtues of self command and discipline are utterly essential to capitalism and the global society more generally. but he was wrong to think that space capitalism could produce them on its own. these virtues in fact run against the grain of the liberal capitalist culture and so have to be sustained by constant resistance and friction and constant recurrence to older liberal source of wisdom. this can be unpleasant and it is a duty to easy to shirk. the cause of restraint, for delhi and discipline certainly lacks the visceral appeal. even many of those in society most likely to be drawn to such a cause, social and religious conservatives have in the recent years tended to avoid it in favor of bolder and more heroic humanitarian missions like the plight of the sick and were especially abroad. these are no witnesses recall links of course but of not come entirely at the expense of the more commonplace resistance to the decadence of time.

without the assistance we could not hope to remain strong and calfee to be of much use to the door of the world. free and prosperous societies are in constant need of a social conservatism to come to the car remind them of the list in august of their freedom and prosperity depend upon restraint is of command. district is of the essence of the case for capitalism. i american capitalism is in trouble because we've grown for the fall of the case for it and it is under assault by socialist ideologues but misguided technocrats who know not what the do. the public is unhappy and even angry at the site of the recklessness and popular picture of the moment is to write it since it is the popular character of space capitalism that is threatened most. but to pitch alone will want to come and the anchor of elbridge could be easily turned against market as marshalled in its defense. in greek as we are we we must be clear about our purpose. our purpose is to protect and strengthen our way of life, to stand up for a social and

economic systems that has lifted billions out of poverty and vastly improved the world and back to the countless ways it seems lacking and forthright defenders. and to avert the careless like to social democratic melancholy and decline. this general purpose of course has to take form in specific instances and choices and exactly how the broad conceptual argument for capitalism should be translated into policy is always a matter of case by case prudence. but that doesn't mean we can do without the broad argument. the argument first dreamed by adam smith and refined by two centuries of fury and practice. the argument that helps us see what space capitalism means and why and how we should sustain it. in the coming years it is incumbent upon the trends capitalism to rise to its defense and therefore first to understand its character as both an economic and moral enterprise. one whose health and strength are essential to the future of the larger american enterprise. thank you. [applause]

>> the floor is open to questions and afterwards we will have a reception inside. please wait for the microphone. i appreciate you taking your name and preferably questions rather than long speeches. >> fred smith, you touched upon [inaudible] the question of joseph challenge capitalism, he basically argued intellectuals because of envy and self aggrandizement and undermine the legitimacy of the market that it is extremely hard to achieve the agenda you have, i eat the eyes of the world or account for example, but what advice do you have of bringing the intellectual forces that we

minorities represent and of the economic forces that seem to be totally unaware that a cultural war is going on. >> it is a free good question. they're certainly is some truth to the notion that when you lose the intellectuals you lose some of your capacity for self justification. but i think it is a limited truth. i think that the large problem we have, the major source of the loss of legitimacy to the extent it has been lost is actually the collapse of the moral foundations of the portion of our culture where the poor live, not where the intellectuals live, that this we are looking at -- will go to adam smith. smith says there will always be two sets of morals in any society. he calls them loose and tight morals, and he says the rich are always going to be loose morals,

they are always going to live the way they want and they are going to be wild. the poor are always went to have tight morals, and our society it is basically the other way around. we have a kind of upside down victorianism, and it@@@rbrb intellectuals come from our intellectuals. it's just not come into the question is is there a way for those of us who are fighting these battles of ideas to legitimate the kinds of moral institutions that are going to

be necessary for the poor to be able to improve their situation? it is a cultural problem more than an economic problem and so you need cultural elites as well as intellectual elites. now that's the problem, that's not the solution. i wish i had the solution for you. i think it worked like the kind of work done today and other places around washington in the country is important. it's one way to get their, to empower local and our institutions, the sort of thing that bill schaumburg talked about at the lectures a month ago is extremely important. it is essential to getting out of this problem but i don't think the way he described the problem is quite the nature of the problem we have today. what we have is a massive social dysfunction at the bottom of society and it's the responsibility of everybody else to deal with that. certainly our intellectuals are more blind to that responsibility than most people

but i don't think that it's fundamentally going to be an intellectual challenge, it is a moral challenge and america in the past has proven to be surprisingly capable of dealing with these kind of things whether that will happen in the future though is an open question. >> thank you. great elector. my question is how can you bring the poor and middle class [inaudible] -- a quarter of americans are without health care and cost everybody, and also another question on immigration, whether those two issues will bring those people come solve the problem in the future we are facing. >> well those are not easy

questions. i would say a couple of things. first of all, i think there is a way of looking at our health care problem that says the problem is we have a market system and it's not working for the poor. i think that's not correct. the basic problem in health care is the costs are exploding and the reasons for that have more to do with the lack of market mechanisms than the presence of market mechanisms in part because of the middle class welfare state that basically protects people from the consequences of their decisions and keeps them from doing prices and costs and has a lot to do with why the costs are exploding. so this isn't a very creative answer. it's the basic conservative answer health care is a place where more market mechanisms would do more good for more people. how much the test of bringing people to the middle class is hard to say. i think it has to do to the

extent the cost of living is a problem and as adam smith said the wealth of the nation has to do it cheapness of necessities and we do control health care in the city and we are trying to make it cheaper. it's not clear to be easy. >> yes, that's true. the immigration problem search and his elected with the economic situation and vice versa. we are attractive because we are a strong economy and we have a lot of problems at the bottom of the labour market because we've a lot of legal immigration. the immigration question should be addressed though in my view not as an economic problem but as a first of all question of basic lawfulness, the border shouldn't be wide open, and it shouldn't be so easy to come here illegally but i think also as a matter of basic humanity.

it should be easier i think to come here legally. i guess i don't take that to be fundamentally an economic question. in the back. >> ben from a eitc when paul samuelson died the other day, the obituaries were uniformly favorable, and i assume deservedly so sentence or a paragraph in his famous textbook that said socialism creates wealth more rapidly and more efficiently than does space

capitalism. i wonder if i am remembering correctly and be, how prevalent does that view in the economic profession? >> well i can't tell you if you are remembering correctly. i just don't know. i would certainly say that today a few dozen seems to be terribly prevalent in the economic profession. whether it once was, i think it is still the case as irving kristol wrote in 1980 there basically is no such thing as long capitalist economic theory. if only in the sense what we think of is the discipline of economics as an extension of adam smith's work and as a way of thinking about how economic man functions and a system that begins by denying economic man is a different system and in the case of socialism is fundamentally a morally different system. it's not a different set of economic theories so much. but again i can't speak to the prevalence of the few in the

academy. >> free-lance correspondent. in the introduction, the bioethics is mentioned as one of the fields studied. i have two questions. s to stem cell research, the bush policy and obama policy are quite different. could you comment on both of them? and then in your judgment and your opinion what is the proper stem cell research to be? and second is to the agent orange. the treatment of the american

vietnam veterans and a vietnamese people -- [inaudible] treatment. t want to comment on that? thank you. >> on the first and happy to talk with you afterwards about bioethics and, second i can do much good even afterwards. [laughter] so let's take another question. >> new york times. i wonder if you could comment a little i hate to bog us down and weeds of policy but based on your own experience on the lessons of the bush era for the challenges that you're talking about because it seems as though you could make a case the bush administration represented a broad attempt to come to grips with exactly the challenge that

you're talking about, how to marry a defense of capitalism to a kind of cultural critique of the culture that it summon up the i think in hindsight both on the left and now on the right the bush era is regarded in a way as a kind of precursor to the trends that you're talking about in the age of obama so the owners of society, the rhetoric looks like industrial policy in the housing market a foretaste of the current health care debate and so on so i'm curious what is your take to be the broad lessons of the bush era for the problems that you're discussing? >> i think in a way both sides of the way that you that ? right. that is there was a desire to find a means of expressing the need to balance the cultural

problems of the capitalist society with a free-market economics of american conservatism. i would say that in practice the former was the more than the latter because it is easy to do rhetorically. a lot of it is a matter of time, and some of that talking was done. in terms of actual policy, i would say on whole what we saw, what we did i should say not entirely up to draft the bush administration, was basically an extension of the middle class welfare state. it was walked into more or less backwards. it was not the design with the intention generally though in some cases it was. but if you look at the effect, the consequences i think it is

fair to say that is what happened. now, the other leg of this, the collusion of corporate america and federal government certainly extends back very far into both republican and democratic administrations. that too big to fail regime is a product of the middle 1980's of the height of the reagan administration. certainly our middle class welfare state in general has been around a very long time. these trends were not curtailed in the bush years, let's put it that way. some old friends here will still be friends if i put it that way. [laughter] at the very end of course, we saw the beginning of the contention with the economic crisis things were done that certainly would not have been contemplated earlier in the bush administration.

and it's very hard to judge those decisions because they were undertaken in circumstances of extreme panic and they may have well been right but that does not preclude us from judging the consequences on the merits and i think the consequences have been a serious problem. >> alex pollock of aei. thank you very much for the most interesting talks, and especially for emphasizing the key point which is the point of capitalism is to benefit the vast majority of the people which obviously does. but somehow that most basic point as you say gets lost in most of the discussion, and i also agree on the notion of how an order for that to happen it has to be married to a regime of self discipline a little bit, the british law of the real

family. but could you see some more about how we might actually do that to make progress on the soft supply-side? >> in a way it is where i try to in that which is to say we need more cranks, social conservatism, unapologetic you know, be a kind of social conservatism, and it's no fun and it doesn't, you know, it doesn't make good television and all that, but it is simply an essential to the proper functioning of a capitalist society, and there has to be preconditions. there has to be some conditions that allow people to find that we've been attractive to see that as their proper place in society and it's very complicated. there are social conservatives but i would say social conservatives in a liberal democracy due to sorts of

things. one is or for their sense of justice and another is the restraint appetites and these are two very different things. they are done in very different tones and in different times of american history social conservatives tended to do one or another much more. and i do think we are in a moment where the inclination to look out for the interests of the week which is of course noble and admirable inclination, very much prevails over the inclination to restrain the appetite of society. that's been grateful to the pro-life movement and it's been very good for efforts to help the sick and africa and these have done wonderful things in both cases. but it has not been so good for the moral condition of society, and as i said before especially the condition of the poor and so i think we need a revitalized social conservatism.

how you get there again is maybe next month's lecture. [laughter] all about, it is all rights, economic rights, my right to own this and by that, my right to live the life i want

to do it's almost as if that language of sexual mores has been incorporated into the economic activity. and my question for you is number one, do you believe that talk is a valuable part in the case for capitalism and second of all do you think it is actually correct? >> welcome it is to simply give a yes or no and to that but if i am compelled i would say no i don't think that it is a particularly valuable thing either for the case of cabalism or the larger endeavor. i don't think capitalism is a matter of rights. the market i think smith was right the market is a public institution, social institution created with a purpose and it's not a matter of rights, it's not a function of natural rights, and i think that the more

libertarian way of thinking about this question that does prevail on the right mix it difficult to seek the balance between prosperity and morality and the balance is not impossible to sustain. it has been sustained a long time in america but i think it would be impossible to sustain if we take the case to be fundamentally a libertarian case. there is a lot of good in with the libertarians have to say, there's a lot of truth. but i personally don't think the fundamental core actually is true as a matter of describing human life, human nature, and so there is certainly a problem there and i would try for a very different kind. i think social and fiscal conservatives can be natural allies, not perfect allies. there are vast differences on a very real differences but i think they can be allies if they

both are neither liberal nor libertarian conservative, conservative and you don't want me to store on edmund burke because i don't stop but conservative and a sense that seeks just that kind of balance that has a vision of the liberal society as an achievement rather than as a beginning, rather than a set of principles that than have to be applied before malae and arithmetic onto social life. so, the view of things like present here is as much criticism of libertarians as liberals. >> [inaudible] [laughter] >> thought you might. [laughter] >> of course. [laughter] the classical liberal as i understand is that an aesthetic ideas. it was institutional idea and

the progress of success was less than when back capitalism that in pre-empting its ability of the market to move into new areas and values emerge, environmental areas, but also preventing the educational systems and others, driving them into the political regime and forcing this on to this confrontational area where the rights approach leave me alone became antivalued in a sense, i think it's not quite fair to blame the libertarians. [laughter] >> i'm not so much planning libertarians as saying they don't hold the answer to the problem. i don't think the are the reason. but i do think that there are two different kinds of ways of thinking about the original classical liberal inside and there always have been. we say classical but there never actually was a simple classical liberalism. the dispute has always been there and it's a disagreement about whether the liberal society is fundamentally an

achievement of western civilization achieved by countless generations of slow and careful buildings of social and moral and political institutions or whether it is a break from western civilization, a set of principles that have been discovered and should not be applied to social life in the hope of moving beyond politics to a more rational way of living. these are both liberal ways of thinking. they are -- one is a kind of conservative liberalism that wants to sustain the achievement , and the other is a kind of progressive liberalism that wants to move beyond liberalism. that is our politics that's also the politics 200 years ago. it's politics at least since the french revolution, and it isn't always clear to me where libertarians are in the division

>> national review. yuval committee portrait the collusion between the big government and big business and the growth of the middle class welfare state as the product of contemporary liberal technocrats distaste for capitalism. but i wonder if that is quite fair in technocratic liberals who after all do not regard themselves as being hostile to capitalism. they think of themselves as saving capitalism from its characteristic fall and excess for example if they think that you need to create a certain amount of stability there for example increasing access to health insurance and that will enable things like support for free trade and i just wonder whether you've been quite fair and --

>> i suppose no one could ever accuse me of being fair. [laughter] but i think that smith's view that capitalism was fundamentally a space system and committed to as i say a kind of lawful chaos as the essence of social order is not taken by everyone to be of the essence of capitalism. there are a lot of people and a lot of economists to take capitalism to be a very orderly systematic kind of thing that requires precisely a rational system of organization, and that is a way in which the kind of people who today call themselves progressive capitalists miniet hamandiyah obama administration can say i think with a straight face that is truthfully that they are trying to defend the

system, not undermine the system. but i think they began from a different notion with that system is to undermine the also than capitalism. they begin from an ideal that i think is not what we have had and it is probably what we should not have. they are not communists. they aren't trying out for it to undermine capitalism, and they believe in free enterprise for a certain degree. they believe and economic freedom to a certain degree. but i don't think they believe and the space principles that actually underlie those things and they think that capitalism is more amenable to the kind of rational control they are after the and i think it is. >> thank you. you have spent at least of the

criticisms have been sort of leveled at the collusion between big business and government though early in the talks indicated that there was a kind of moral critique of capitalism in which capitalism in a way in its own moral foundation was strongly. not much time has actually been spent on that and you've tried to recover the case for capitalism as if he meant to give it three cheers, not irving kristol's two of them. the question is, maybe this would be refocusing it. has the character of capitalism in our lifetime, my lifetime changed so much that the teachings of adam smith and the

hopes adam smith had for this are really very problematic, only not so much only to what the government welfare state has done but what capitalism has become on its own and how intact is precisely responsible for the inflation of kneip list is a lawyer and the weakening of those kind of institutions that you insist are necessary beyond capitalism to sustain it? >> i do agree and that is the way in which i think as i said at the end of the talk smith was mistaken to think that capitalism could sustain itself morally, but is it always needs to be fed by a third sources of moral authority and without question it undermines those other sources by its very functioning. it undermines allegiance, it makes us less interested in what they have to say. to me that suggests not that smith's teachings don't have anything to say to us but that

what we need above all is a recovery of some of the moral and social authorities of those institutions that made it possible for him to say what he said, that made it possible for him to see, to envision a way that capitalism and a decent society not only would coexist the would reinforce one another. and without question, we are in trouble on that front, deep trouble, so three cheers or two cheers. i think that in the way that irving kristol put the two cheers for capitalism i agree with him, but it has to be the case that we do something about it and try to restore what capitalism is missing. it's not easy to do and it's not easy to do especially in a capitalist society. but to my mind as i said at the end of the talk that is the most challenging and most important element of the case for capitalism which is it has to be

a case for not only non-capitalist but not on liberals that institutions that have to continue to sustain our society. maybe that is impossible but i think the history of liberal democracy suggests it's not necessarily impossible. that's probably the best we can do. >> i want to follow on leon's question because this is bugging me a little bit, too. you said at the beginning that adam smith operated in the context of 1776 of the time period in which certain standards existed, certain balance existed. that was then, this is now, the way we live now seems to me

somewhat different. short of the utopian revival you seek. my friend used to say this is the american enterprise institute for public policy. so short of that, what do you see as the reordering of the various balances between individuals, between individuals in the state that might give you time to have toward committee work while the rest of us at a lower level try to set in place band-aids to keep the patient alive? >> well, that's obviously the difficult question that's come up from a number of people in a number of ways. again, i think that the basic

character of my prescription is for first of all as a beginning for the defenders of capitalism for conservatives especially to recognize what they are defending is also a moral system. it's also social conservatism, the religious traditions of our society and that's not a policy prescription, but i think that is a necessary precondition to our doing anything worthwhile tall and necessary not only in a conceptual sense but necessary because we are not doing it now. it's something we ought to be doing differently. exactly what that means i don't think a moral revival is a matter of public policy. i don't think you can make it happen. it's been tried in certain respects, and it was even tried in the bush administration in certain respects. but in the end, the united states has been fortunate to have experienced religious revivals at a very key moments

that have made it possible to continue to function the way that we have. you can't just order those on command. if you could we should put in an order. [laughter] we could really use one. we could do some things to help make that a little easier to not stand in the way but could i tell you exactly what they are? i couldn't. it is useful to know what is needed even without knowing exactly how because at least you can tell some decent ideas apart from some terrible ideas. but an exact roadmap i certainly don't have. >> probably take one more. >> one more question. okay. >> i have a question. i don't quite understand the case that the social malaise and access the texas are caused by capitalism and one could make a case that it is the lack of

having to be responsible for your own actions and its the welfare state and crony capitalism and loose money policies and all of that, so i really missed it. i didn't catch it. i don't see why capitalism causes social excess. other systems can do the same thing. >> first of all, part of the answer is capitalism doesn't prevent social access, human beings cause social access. we are creatures of excess, and the fundamental social question for every society is how do you restrain that. so i don't simply blame capitalism for the fact that we are human beings. on the other hand, it does in power a certain kind of thing that certain kinds of sentiments and appetites. it tells you ought to have when you want, which is not always the best thing to tell everybody. if what you're after is social

restraint and restrict of social access. now, the basic case i try to make is that adam smith's contention that capitalism would counteract that seems not to have proven him true at the very least. i think it is also true that capitalism has exacerbated that, that a system of satisfying appetites is a system that produces more of what your satisfying. it's kind of an economic principal in a way. that means we need some other way to restrain ourselves, that means we need some other way to impose moral order in society. you can't do without it. it's not going to work and so it's not capitalism. i think it is a matter of friendly corrections. thank you. [applause]