the early exploration to its significance during times of war. that tonight, prime time on both robert reich says the economic collapse was not wall street, but it ever economic quality, even the middle class as mr. reich at three decent standard of living. the hour-long event posts by the drucker businesswoman pasadena, california lasts about an hour. [applause] >> welcome. it's good to see you all here. mr. reich, thank you for joining us. i'm sure we can't offer you the political drama. but nonetheless, the issues we have -- it's funny how the name just mentioning partly can sometimes bring a laugh. the issues we have to discuss

here are big important ones, ones that i think we've all been grappling with. you've written a very short book about, so i think without purview will drive into your central issues. >> it's much harder to write a short book in a long bout. i mean that. this is the shortest book i've written and it was the hardest of two ray. it's like a haiku. you're trying to boil things down. but i think that per page i give the reader much more than i ever did e4. [laughter] >> well, were at the end of the historical financial crisis. most americans understand the complexities that would have been in the financial system and yet they feel they have a fairly good grasp of exactly why it happened. it was too much at that. maybe we took it on because the house prices were going up.

it was health consumption, greedy careless thinkers. they couldn't control themselves. and according to your book, none of this was the cause at all. it was something entirely different. what's been going on? >> i think the greedy bankers who treated much as they -- but their responsibility as money that they could send in that and invest in any way they wanted to make a short-term gain. they were partly responsible. the approximate cost of the great recession. but i don't know what it was the costs. if you peel the onion back, there is the deeper cause and that is americans spend more than they could afford. but that can't be the end of it either because then you have to ask a more fundamental question, which is why did army not grow for 30 years, when the median

wage for the typical millworker -- and i say millworker because 30 years before that, most workers in this country work mail workers. why did the typical worker adjusted for inflation not grow, even though the economy grew. in other words, why did see my sign themselves with the necessity -- first of all happy when they moved in to work and then everybody working longer hours. and then they were going deeper and deeper and deeper into debt just to maintain their means and just to maintain their standard of living. that's the deepest question. and i think until we resolve that question and understand its future implications, we may never get out of the great recession. >> people love too spending too much. >> we were spending too much relative to what they have. the underlying question is why didn't they have more? that is, the economy was

growing -- in fact had grown over 30 years. the median wage was stagnant. where did all the money go? and why didn't more than middle-class, defined very broadly to include working class, most americans, why did most americans have more -- why did they not have more today? can we ever get out of this great recession until the vast american middle class does have more because that's where they demand comes from and the society. >> leaving aside that i would get out of it, let's go back to how we get into it. you talk about people's reasonable expectation to be able to spend more, to earn more, spend more. for many people this has been seen as a very much moral issue that overconsumption and the willingness to take on personal debt is simply a malfunction of the consumer society that's gone a i'm not. people basically spent too much.

>> well, you can take a moralistic view. and indeed, in 1930, 31, 32, and many who looked upon the great crash and the fundamental reasons for the great depression did take a moralistic view. economists and business leaders said, including andrew mellon, herbert hoover's secretary of treasury, said we have to purge the raw from the system. this is basically a moral problem. people spent more they could and should therefore we've got to let them just basically rot. well, you continue a moralistic position, but that doesn't really advance the cause of getting out of the economic programs. it doesn't tell you much about the structure of the economy. gas undoubtedly, people should not spend more than they have. but unless you progress toward fundamental question, which is how to be given into the predicament, where the economy

kept growing, but most will have to go into debt in order to keep up their standard of living. then you're not really addressing the underlying problem. and that was the problem with herbert hoover and andrew mellon and a lot of those late twenties and early 30s. they had a moralistic view, but they didn't like at the system. >> we're hearing he did and from president obama now that people need to spend less. they need to borrow less. we need to export more. these are the current mustering if you like. are they wrong? >> yes, they're wrong. they're wrong in the following sense. because if you don't deal with the fact that so much of the nation's income and wealth has gone to the top, a record degree -- i mean, we have seen this concentration at the top since 1928. unless you deal with that, you are simply saying to people, you've got to give poor. you've got to save more, you've got to let the dollar drop.

you've got to thereby spend more for foreign goods. you got to -- if you want to, cello for wages. all of this year spanish side economics may be technically wages. all of this year's spanish side economics may be technically wages. all of this year's spanish side economics may be technically wages. all of this year's spanish side economics may be technically but it is not correct and what a growing economy should be able. >> perhaps one might make a strong argument for less inequality in income. economically though, where -- perhaps some people are better off not spending money. perhaps the middle-class can't consume export and trade and you should be able to plug in some of that gap. why do you feel that it will take middle-class spending in the globalized economy to save the u.s. economy? >> for a couple reasons.

number one, i draw in this book from the work and writing to the fellow who was almost forgotten today, mariner beckles. his name adorns the federal reserve board building in washington and is the chair of the fed from 1934 intel 1948. an agrarian man, one of the leading industrialist report that job in one of the richest men west of the rocky mountains. he set his mind to understand why the great depression took such a great pull. his conclusion was so much money went to the top and accumulated at the top by 1928, that the vast majority of americans have been the buying power unless they went deeper and deeper into debt. at that level is unsustainable. he looked what happened in three

decades leading up to 2007 and there are remarkable parallels. you see, this country theoretically could rely more and more in exports. we could let the dollar continued to drop and we could hope that the demand will be supported by exports, but that would take a huge change and not only the organization of this community, but organization of global economy. it is an outcome of so many countries are dependent on united states consumers and we would get into very, very quickly competitive consumers the evaluations. we fool ourselves if we think we can get china to very rapidly appreciate this currency. all that as i suggested a moment ago requires americans settle for lower standard of living because everything they summoned from abroad would cost more. and that is an unrealistic short trend strategy in any event. >> perhaps in the short-term the orthodox of many communities now is a long-term solution.

>> this is an important. because the orthodoxy is that long-term is the only solution. most economists -- indeed most policymakers in washington refuse to look at distribution of income. now what i said to a moment ago, that we have now -- in fact one last look, in 2007, 23.5% of total income going to the top 1% in the united states. compare that to the late 70s. we have that time 9% of total national income going to the top 1%. the last time in this country were we at anything close to 23.5% of total national income went to the top 1% was 1928. now, i'm not suggesting any direct pundits, but i think it's unrealistic -- [inaudible] [laughter]

>> am suggesting that it is ill advised for policymakers to simply decide the distribution of income of no consequence at all. but not a significant part of the problem. not only economically, but politically. look at that in a moment. >> you talked about going back to 28 and then have distribution of income had concentrated so much by 70. in your book come you cover up the last 150 years into some very big chunks. you said there is a 30 year period after the second world war, were you caught the great prosperity, were actually income distribution was wider and social safety net were built. these are the halcyon days of the economy. and yet it's only a 30 year period that you isolate. given that the rest of the economic history has seen much

greater inequality, infinite fair to say that much of the inequality is the norm. that is, like it or not, the basic structure of the u.s. economic system and actually the prospect pretty well over a century and a half? >> that begs the question of what is prosperity. it feels median wages declining, how can you say that's prosperity? between 2001 and 2007, the median wage in this country for inflation actually declined. there was no trickle down from the top it all. so prosperity to me means widespread enjoyment of the fruits of economic growth. prosperity to me is not defined as a few people enjoy most of the benefits and growth. and then slowing down because there is not enough aggregate demand coming from everybody else. now back to your question. i do divide american -- modern

american industrialist capital into three periods, roughly the first. from 18821929, 1930, being a period of consolidation of income and wealth. and i do believe as did mariner apples that that did contribute to the great depression. but it was not sustainable. and then you have a second period, beginning in the 1930s, but really reaching a kind of victorious crescendo and the three decades pass the second world war, in which the games for economic growth were much more widely shared. and that in turn generated a kind of a virtuous cycle. because of the gains for growth were widely shared, the country had not only enough aggregate demand, but the country could do

many things. investment in education. the national defense highway act, rebuilding europe, rebuilding japan, doing things that we could never conceive of affording, but we could afford was a very poignant economy. and taxes that were the kind of tax rates on the wealthy that we would never even entertain. >> i want to get to that in a minute. >> and then a. after 1980, when the pendulum swung back and we saw more and more concentration of income. and i daresay, so the seeds of the great recession. i think the pendulum is going to swing back again because it must. >> looking at that. after world war ii raise any spectacles at that point? invented in the 1970s and inflation, and chronic loss of competitiveness by u.s. industry of confidence indeed in the

world. i mean, the pendulum swung back in 1980 very strongly. did not show that actually the previous system had failed to some degree? >> no, not at all. the double-digit inflation of the late 1970s was brought on largely by the oil producers, jacking up the price of oil. i'm not of course flow through the system and generated double-digit inflation. jimmy carter was blamed. paul volker came in and broke the back of inflation by raising short-term interest rates and also broke the back of jimmy carter because i was the end of the carter administration. but now, i think the great prosperity and it largely because the structure of the economy was no longer conducive to widespread prosperity. beginning in the late 70s, you had a substantial sharp diminution in the strength of

the fundamental change in the organization of production towards deregulation and privatization. many people say yes, but the economy did so while under the reagan actuary type ideas. but then what is the economy? you see, the median wage and i keep going back to this because i think if you define an economy from the ground up, as what do most people experience in terms of their wages in their benefit, median wages and benefits through the 19 -- late 40s, 50s, 60s and early 70s kept going up at a very remarkable pace. and then what happened in the late 70s, particularly after an 1880, stagnation. >> a lot of people felt at the end of the 70s but they were experiencing was not very pleasant and they voted for reagan on the basis of that. and you're suggesting that

somehow the system was subverted because of inflation caused by oil. if that mobley simplistic? perhaps a bit salient of culture economics. >> is that not overly simplistic, if that not a trick question you just asked? and income you look at the data. i think the economy from the standpoint of the average working krishan was actually functioning very well, except for the late 70s inflation brought on by oil oil crisis. after we saw after 1980 after median wages stagnated and as many people discovered that they have less job security, their benefits were eroded. health benefits -- pennridge and benefits. the people at the top it better and better in the stock or gets better and better. those industries of economic growth and prosperity did better and better. if you are an average working

krishan, when the middle class broadly conceived, and no, 1980, you have not done better and better. and now is exactly the problem we fundamentally could avoid through these coping mechanisms. women going into paid work and everybody working longer hours. and finally everybody using their houses as atm devices. but we've come to the end of those coping mechanisms. now everybody has to face the awkward fact as adjusted for inflation. most airlines are better off than they were years ago. >> deregulation started in 1880 and was carried through the clinton administration of which you are a part. many people in the east a great sort of prosperity, perhaps none is distributed as widely as he would've liked. are you saying that everything will look for was perhaps a maras?

>> now, some of the deregulation was good. economic regulation of airlines were by and large good. deregulation of tracking anything by him much good. [inaudible] >> no, that was bad. i think the repealing of the classical act was a mistake. that was under the clinton administration certainly and congress at that time. i think that also a failure by alan greenspan -- larry summers and bob rubin to heed berkeley born conference at the commodity future trading commission about derivatives, their failure to basically agree with her, see her, the dangers that she thought into it is getting out of control. but also contributed to the problem. >> the complete redelegation is i think part of the very

damaging legacy would live with thereafter. >> deregulation and lower taxes from 1980 onward is widely credited with unleashing much greater entrepreneurs of energies into the u.s. economy. >> certainly a threat, undoubtedly. i mean, one of the great strengths of the u.s. economy is not only entrepreneurial son, but also a venture capital community that supported this entrepreneurs. but by the time you get to the late 90s, most of the ashburn orioles and was occurring on wall street. it was not entrepreneurialism in terms of new gadgets. this entrepreneurialism in terms of new financial devices. and that was a zero-sum game. it took money from one pocket and put it into another. it was creating a casino capitalism but ultimately was its own undoing. you see, part of the problem has to do with financial incentives.

and it's not so simple. and here, you and i are probably much greater agreement and your questions might suggest. [laughter] >> i'm just asking the questions. >> i think actually the construct in some people's minds as they overhear his government is unduly simplistic because government shapes the market. they would be no market if he did not government rules as to rules as to how the market is to be organized. and when franklin d. roosevelt said in his labor secretary, frances perkins, one of the great they were secretaries in history -- basically 1935, created opportunity in the legal basis for collective bargaining and created social security and a minimum wage and a 40 hour workweek with china have for overtime. and all sorts of other incentives to change the

organization of the market, followed by a period of time in the late 40s and 50s and 60s, when the country invested in education, higher education, primary school, secondary schools, infrastructure or to a huge degree. the national defense highway act. i mean, we as a country, as a government, working sometimes against business, sometimes with his nascar would completely organize american capitalism and may work for everyone. >> i mean, to quote one thing from the book from her. that you seem to quote with approval, you talk about how american businesses time and a half and you quote all our employees not donis. placing the system depends on rules for bureaucratic intrigue promotion. he seemed to say in a quick

bureaucracy of how the leveling effect on income -- corporate bureaucracies have 11 effect on incomes. so, most people look back now at bureaucratic times as an economic disincentive. >> yes, i agree with your point. i did not quote that list of praise. i was a sociology textbook at the time. i was kind of doing that with tongue-in-cheek. i know the mass bureaucracies of those -- of the time. those all look off police. and they were really thick almost all police. three major auto producers and five major, coproducers and four major steel producers. they detailed mac innovation. although they did hope in their way foster unionization because much needs to be unionized around oligopolies than it is to run a much more competitive industrial structures. innovation was not nearly what

it could be and what it should be. my only point there was that the economy was in many respects designed so that instead of ceos earning 350 times the average workers are in, which is what they do today, a typical ceo than those earning 35 times what an average worker was earning. people on wall street were not coming close to the seven, eight, nine figures they're not earning. wall street with a handmade industry, rather than the boss of american industry. it is a time when we had many social problems. i mean, look at madman. i mean, who would want to go back to a period where women were treated so poorly to more blacks were second-class citizens? at least by the 60s, not only where we enjoyed widespread prosperity, but we were making some headway, avoiding a civil

rights act. we were conscious, beginning to be conscious about women's opportunities and lowering many of those barriers. >> one thing that comes across quite strongly in the turning point that happen at the end of the 70s is a sense that vested interests somehow we exerted himself. can you talk a lot about how the game is rigged against your person. let's talk a little bit more about that. i mean, how -- in what ways have the ordinary underclass disenfranchised economically and how do you fix that system? >> well, i say the game is rigged. i actually am reflecting upon the way many people are viewing the system today. a wall street bailout, for example, if you look at polls and i have some of them in their eyes to how ordinary americans view that, it's not just the tea parties on the right.

>> you're angry, too. >> who say that was a capitulation to wall street by taxpayers and by the government with no strings attached. but there's many liberals, many democrats who say about the wall street bailout may have been necessary, to do it in such way that there were no conditions, really very few conditions put on wall street. i mean, they didn't have to and ascents allow homeowners to reorganize their mortgage obligations if they were deeply deeply imperiled. there was no or very little demand to limit the pay of wall street workers and bonuses. there was very little requirement with regard to loaning or lending money to small businesses and on and on down the list. but we ended up after the wall street bailout is fewer big banks, each of whom was more

likely to be too big to fail. and so for the typical american, unfortunately this is not -- i really think this is a terrible thing, who was already discovering that his or her coping mechanisms for running out. the wall street bailout -- i think on top of the history of enron and i am crowed and olive the 2002 depredations became to look like the system was not working. >> without a loss of political merits of the white house? the >> it's a good question. i think that the obama administration did inherit a terrible economy and its inherent the troubled assets relief program, t.a.r.p., the wall street bailout.

i think in retrospect and it's easy to be a monday morning quarterback. i think in retro stacked hank paulson and tim geithner and others could have been tougher on the banks and could have insisted, particularly when it came to financial former legislation that derivatives be better controlled. there are no loopholes and that new law, so big to allow a letter traders to trade their first rate through them. i think that if -- it would've been possible to put a cap on the size of large banks. i think it would have been possible to tie executive compensation and traders compensation to longer-term profits, rather than the kind of quarter to quarter, year to year that they are now bound to. written with much more successful in certain ways than has been in terms of financial reform and has been the united states. >> the potential in a much bigger hall to dig them out.

>> yes, britain is in a deep hole. and i mention in that book but it's not by coincidence that britain is the most unequal of all european countries in terms of the distribution of income and wealth. >> so i can come away with wall street bailout sloughed? why was it mishandled? >> i think what happens when wealth and income go to the top, to such an astounding to decree as the scene over the last 30 years is about accusing anybody of malfeasance, inevitably there is more political power at the top. every politician in washington is much more dependent on wall street and big business and rich donors than ever before. i mean, i've spent -- let's see, i think about half of my adult life in washington, beginning in

1967 in nl. in washington is entirely different than what used to be because there's so much money and most of the money is coming from big corporations and wall street and very wealthy individuals. .. >> that is on top of george w. bush's medicare expansion for the drug industry which also i think was a payoff to big

pharmacies. it was powerful in washington. they hope insurance agencies were extraordinary powerful, and in order to move something like health care, there had to be payoffs, but the problem is with these payoffs, ultimately, americans would be paying more. there's very little cost control in the health care legislation largely because all these invested interests said you're not going to control our costs. >> yeahment let's move on -- yeah. let's move on to the threats of the risk of your analysis. you talked about the rise of pop pew lism, and indeed it seemed strong 18 months ago during the financial crisis, and now we're in a period where that is ebbing somewhat. people are getting on with their lives. >> i don't believe that for a moment. i think populist anger is showing up all over in this midterm election.

it tends to be more visible on the right and the republican party is dealing with the tea parties, but every poll i see and everybody i talk with and the free floating focus groups i maintain around the country in terms of talking of people, i've never heard people so angry. you see, it's not, i think, rocket science. when people are scared about losing their jobs or their savings or homes when they are economically frustrated and anxious and they have a tendency to want to find somebody to blame. you see historically in this country and tragically in europe, these situations are do breed the possibility of synagogues to say, well, your problems are related to them or them or them. the upsurge in antiimmigrant

sentiment in this country now i think is indirectly or sometimes directly related to the economic pressures people feel. the upsurge in antimuslim sentiments. you know, the ironny is after 9/11, you didn't see the ugliness, the hatefulness that we are now seeing. you didn't see it after, well, we could go on and on and on. you get the point. it's happening in europe as well, an antiimmigrant sentiment, right wonk, nationalism, isolationism. we had it in the 1930s. we had the tariffs, lots of right wing and very left wing antiforeign upsurge in feelings. i worry that that kind of anger can be very dangerous for the economy and for society.

>> president obama tells us, you know, that the band-aid across the financial system is holding. the stimulus spending is starting to have an effect, job numbers starting to creep up very slightly in recent reports, so he's telling us actually, you know, stick with it, things are coming around. do you feel that confidence? do you feel wooer on the right -- do you feel we're on the right path? >> no. i do agree with the president to one extent, and that is inevitably to the extent this is a business cycle phenomena that is the reverse of issac newton's law of what goes up must come down. eventually factories and businesses have to replace machinery and inventories have to be replenished, but you look at what big business is doing in

this country with $1.8 trillion of cash, they are not creating jobs or expanding. why? because there's not sufficient customers. why? because consumers are hunkering down. why? because they are scared and still coming out from under a huge, huge amount of debt, and they are worried about their jobs, and so what are businesses doing with the $1.8 trillion of cash? they are buying other businesses, merges and acquisitions are going up. they are going abroad. they are defining markets abroad, buying back their shares of stock, but none of this creates job, so when the president says everything will return or the job situation is getting better, i can understand where that on optimism comes from, but i'm afraid unless we as an economy, as a society deal with this fundamental imbalance that i point to in this book, we're really not going to be

getting very far. aggregate demand which i believe is central to an economy is just not going to be there. >> president obama talked about a more progressive agenda protecting people from the market, regulating the markets more closely and so on. i see that's an agenda you sub vibe -- subscribe to. >> i really am a great fan of the president. i think he is a wonderful president and we are very, very lucky to have him. if i were trying to be constructively critical, however, i would say he could do more to connect the dots, to show people that what he is trying to do and the problems they face are very much related to this find --

fundamental imbalance in the system and he need to mobilize and energize supporters around this balance. no democrats own certainly no republicans that i know are are going to the people saying not only do i feel your pain or anger, but i don't want you to be resentful or angry at the risk. this is a matter of understanding that for organizational reasons, for structural reasons, we have got to the point where we are so misaligned in terms of who gets what that even people at the top would do better off having a smaller share of a rapidly growing economy in which politics was positive than a large share as they do now of an economy that is almost dead in the water and with politics it's getting more and more negative.

>> we have not touched on your solutions to this, and we'll go to questions shortly, but in very bold terms, it seems that in america, there is no political backing for progressive agenda, for higher marginal tax rates on the wealthy, for income support for the less wealthy and so on. what political hope do you think there is that such an agenda will come? you talk in the beginning about the pendulum swinging back. why is it going to swing back? >> well, i think it's going to swing back because in the year or two or three when the stagnation within the recovery continuing and many people see that the forces of gene phobia and nationalism is growing that many conclude the only option is

fundamental reform that i mentioned here. now, i'm not suggesting anything as radical as dwight david eisenhower presided over when he was president. nobody i cuesed -- accused him of being a socialist, but the marginal income tax on the highest earners was 91%. [laughter] now, again, i'm not going there. [laughter] i'm not -- but i do i want to remind people that we did think differently about this 30 years ago, and the big debate in washington now is do you say to the top 2% who got the share of the bush tax caught cuts in 2001 and 2003, but i'm sorry the tax cuts were never intended to last ten years anyway, by the way, you can't have them, you have to go back to the clinton marginal tax rate of 39%.

is that so bad? the economy did pretty well under bill clinton. we have a long term deficit. if we don't say to the top 2%, i'm sorry, you got to go back as expected to the clinton tax rates, then we're going to blow a $36 billion hole next year in 2011 in the federal budget because that's the wind fall that the top 2% would make. >> what is the chance of getting back to 40%, 50% ? >> well, i think if you look at the totals tax system, i mean, most 80% of the americans pay more a payroll taxes than income taxes, and the payroll tax system has become regressive over time. americans now pay hugely in sales taxes which is very regressive because the poor and middle class pay takes much,

much larger chunk out of their income than the very wealthy. the tax system is getting more and more and more regressive. this puts a huge burden on the middle class and working class and poor already who are burdened. i think we do need to -- >> the answer is yes? yowled agree -- you'd agree? >> if you look at all the tax systems, absolutely. absolutely. >> all right. let's go to questions. we have a couple of microphones in the audience, and we'll take one in the back. i did find that introducing yourself, thank you. >> hi, i'm johnson, my question is i'm assuming that you would have some sort of higher tax on the extremely wealthy people if income disperty is a problem, but if you rely on the upper percent of earners in a country,

then if they don't do well, then your economy tanks and the responsibility of 5% of people whereas if you tax everyone equally, you have a more stable economy because you rely on the whole population instead of the top 5%. >> well, we're talking about a matter of balance here. againing don't accuse me of being dwight eisenhower. i'm not going there, but john leonard kane in 1946 in the general theory admitted we need and an economy based itself on equality otherwise there's not an incentive for people to build businesses, but the question is how much inequality do you need in john was looking at the degree of inequality in britain in the late 20s saying we don't need nearly this degree.

that was a problem with capitalism that it tended too overtime move to more and more concentration of income and wealth. i'm just saying trickle down economics as supply ciders have tried to sell it doesn't work. the bush tax cuttings did not trickle down. the median wage after 2001 and 2003 actually dropped adjusted for inflation. there were not a lot of new jobs created. in fact, between 2001 and 2007, a very tiny fraction of jobs created, so don't buy the ideology -- i mean, i think, and i mean this, we have to get beyond the labels and name calling and look at the data and i think anybody looking at the data would say our distribution of income is nuts, and we want to do something about it and we do have a long term deficit, and we

do have to make investments in education and job training and infrastructure, and with all of that wealth and income at the top, i mean, it just stands to reason we need a more progressive tax system. >> let's take one over here, the lady in the third row. >> i'm pennington, and i would love to hear from you if you've identified other nations that have managed this and handled the redistribution of income, and if you have seen models that we could aspire too, particularly noneuropean models because i agree with the interviewer. thank you. >> i would, and in the book, rather than go to our own history, and at the advantage of our own history is that we see we did it and not only did we do it, but we did it successfully

between 1947 and 1975, and tax rates on the wealthy were higher, marginal taxes, we organized society in ways # that we for a whole variety of ways and means generated an economy that permitted the recipients of wages to turn around and p buy what they produced. it was sort of the model that henry ford in 1914 originated. it's kind of odd to think of henry food as a huge progressive because he wasn't politically, but business, he was. i'm beginning to pay my workers $5 a day, five times than what the industrial worker was earning because they are siewrls. they -- consumers. they will buy model t's.

the "wall street journal" accused henry ford of being an economic criminal. he was accused of being a socialist for doing this, but he was a something like that businessman. -- he was a smart businessman, and we as a society put into effect that henry ford principle between 1947 and 1975 approximately, started in the 1930s, so let's not go to another nation, but look what we did. >> one thing that we haven't talked about this morning is the impact of globalization, and arguably henry ford would not be able to do that or a modern henry ford could not do that because of global competition, and it's a fact that doesn't play high in your analysis, and yet it's behind a lot of people's feelings of job insecurity and they fear the wages. is that a big factor in >> i

think globalization is a factor, but we fool ourselves into thinking that it's all about globalization, but it's more about technology. remember we used to have a lot of telephone operators and service station attendidn'ts and bank tellers. they lost their job not because of global decision, but technology. even factories today, automated factories, look into as i do when i have the chance modern factories in the united states that are still here, you see machine controlled tools and robotics and technicians behind computers. i mean, the whole idea that manufacturing is like the old assembly line, labor intensive does not view the reality of technology, and so to blame globalization on what's going on in terms of the difficulty that we as workers, not what peter

called knowledge workers, and i'm not talking about your personal service workers in retail, restaurant, hotel, transportation, all the people who are sheltered from global competition, but i'm talking about the routine workers who can be replaced by workers abroad or more likely software. >> for whatever reason, it's hard to justify paying those people more you're suggesting? that's what i'm saying. >> i know we want to go on, but when you just said it's hard to justify paying those people more, i would love to examine that language. hard to justify? who? what? economically? >> when you can be replaced by software. >> yeah, and that's a strong argument for education. >> let's take a question now. >> i'm afraid that you have taken my questions. between 1947 and 1975 because of the damage to europe and asia, there wasn't much economic

competition, but now in a global ized colt, the american wages should not be compared to american wages, but to wages overseas and how can we compete with the wages overseas. >> let me cut to you one the big problems the american economy faced after the second world war was a demolished europe and a japan that basically was unproductive. we rebuilt europe and japan not only to prevent the soviet threat from extending into europe and japan, but because our leaders understood that a dynamic europe and a dynamic japanese economy would help. it's not a zero-sum game. the better they produce, the better we can have markets and produce. this gets back to what we were just about to talk about. in a globalize the economy, in a

high-tech economy, we have to invest much more and much better in education and in infrastructure here including early chillhood education, including free, public higher education. i teach at, i believe, the best institution of public higher education in america or perhaps the world, and it is being designated in terms of budget cuts. the exact opposite of which we ought to be doing. we're cutting teachers. i mean, how can we actually layoff teachers? that's exactly the opposite of what we ought to be doing. you see how -- >> i hear invested interest here. [laughter] let's move on. >> i'm going back to your statement where you said it is $1.8 trillion with the corporations keeping it and

spending it outside the country. instead of taxes them, why don't you insent vise them to spend or use the money in the state? my problem is always when you tax somebody, it goes to the government, and the government spend it the way they want it. you better off if you incentivize it to spend the money here and go from there. >> please don't get me wrong. we've tended to focus in terms of my prescriptions on higher marginal income taxes, but that's a small part of what i talk about in the book. i'm not talking about increasing taxes on corporations at all. in fact, as i said in my last book, i would rather get rid of the corporate income tax all together. i think it's ridiculous. corporation is not a person. they don't pay taxes. when you start taxes corporations, you invite

grotesque supreme court decisions who treat corporations like people with 1st amendment rights. don't go down that road. no, i was saying something different. the reason they are sitting on $1.8 trillion is because there are not consumers to buy in the united states their goods and the reason there's not consumers is because they are afraid right now. the stimlotion package was not -- the stimulus package was not big enough to get people confident and the underlying income and the failure and popture of the coping mechanisms i talked about before is they don't have the money. it's not that they are doing anything malicious by not investing or creating jobs, no, they are being rational. we have to focus on rebuilding the middle class, working class,

creating the capacity among the people who have a higher standard of living. >> my name is jim flan began. if we benefited from the rebuilding of europe and jay pap's economy -- japan's economy, now we have the internet and the greatest opportunities in the world of building consumer societies, 2 billion new working people in the working economy in china, india, and so forth, why are we not receiving the same broad benefit in the united states from the opportunities that are available there? >> i think we're not receiving the same broad benefits because, and it goes exactly back to our discussion. in terms of who is sufficiently educated and sufficiently connected into the global economy increase increasingly

technology driven to get the benefits of trade is a sliver of americans. most americans are actually turning against trade. if you look at the latest polls, they feel it's burdens and not benefits. >> [inaudible] >> i'm sorry? >> wait for the microphone so you can hear. >> you are threatened with protectionism and the attendant phobia of nationalism and so forth. the protection is a very real threat. >> exactly. >> and benefits don't. >> my point is unless we get very serious about coming up with -- and again, my ideas in the book may not be the only ones and i don't presume they are the only ways forward, but unless we talk about the circle of prosperity so more merps gain from global trade and technology changes and more americans actually een joy

-- enjoy the benefits of an expanding economy, not only do we have a problem of aggregate demand, but there's a political backlash against trade, immigration, against many of the things that enable americans to, an america to look god ward rather than -- outward rather than inward. >> i'm jenn lee. thanks for the opportunity. i'm totally convinced by your description about the eisenhower prosperity marginal tax, and i want to switch gears now. my understanding of your point is that the oldest myth is caused by overspending and overburdened with the debt vimgly and as a country, but -- individually and as a country, but it is keeping the law at 0%

and encouraging people to borrow more money, get into deeper debt, so my question is how are we going to get out of this hole? are they doing the right thing? [laughter] >> what i want to emphasize is that in the short term, we do need fiscal and monetary policies because when the private sector including especially consumers are deleveraging, then as john canes taught us, and i think we are moving back into his period, you know, for a number of years the biggest threat was inflag -- inflation, and the biggest threat beginning in 2008 was deflation. as we move back, we do need an

expensive monetary fiscal policy. my point is that's not enough. that's like pushing on a wet noodle. we got to expand and enhance the ability of the vast american middle class to improve its standard of living. otherwise, we're relying only on government, and we can't do that forever. we have a big deficit, and we do risk inflation by just keeping interest rateown at some point, but also we can't rely solely on exports because for all the reasons we talked about. i think there's big export markets, but exports can want be solely relied on, and i want to emphasize this point. the only way we can build much of the markets is by letting the dollar drop which has all sorts of repercussions around the world, and it also means that everything we buy from the rest of the world costs more which is

another way of us getting poorer. there's no secret to creating more jobs by getting poorer. believe me, i can give you many, many ways. we can create more jobs by getting poorer. that's not the goal. it cannot be the goal. >> it's more comp my kateed -- complicated as a country, but as an individual if you have a credit card debt and the only way to get out of it is to pay it back, so i appreciate this. read the book. thank you. >> in the front here, in a minute, we'll let you sign some of these. do you sign other versions as well? i -- >> i will. i'll sign anything. i'll sign your forehead. [laughter] >> this question might seem impert, but what would peter say

about the book, and this of course, gives you the opportunity to share how he might agree with you, but also, can you think of any issues that he might share a contrasting view or, well, enough said. >> well, i have the great privilege of knowing peter, and corresponding with him, and we had a number of discussions about many issues. in the 1980s, peter d was not only an extraordinary brilliant invisionary leader and thinker, but he also was very concerned as i am about failure of a society to invest adequately in education and in infrastructure and build up the work force. he was very concerned that managers were not paying sufficient heed to their