stood by my battery during the cannon. so there he was having of the health problems in that. so, in the sense of the machine that he created partly came apart in gettysburg, but yet i don't want to not emphasize you can't take away from william scott hancock, you can't take away from george and irish brigade and philadelphia brigade to do that. it discredits history and those men did put up a heck of a fight and be to the army in northern virginia. it is as simple as that. and the reason we deal with it is we know they've lost the

history of the civil war. the losers wrote a bitter history of the war than the winners because most northerners have gone on with our lives saying we won, get over it. [laughter] you know, but down there -- i respect that. down there they've heard the stories. they heard about the grandfather's farm being burned and other things, and you've got to respect that heritage that who they have and that sense of family and history. and to them there's only one war down there. [laughter] you know, really to us in that sense i think northerners have moved on. i don't know how true it is any more but the old adage in the book if you want to write a civil war book they are going to be sold south.

to write in the yankees is to not sell books. [laughter] i've written them both. ..

>> i tried to portray a sense for mistakes and leadership but if you look at joe there is a wonderful book based on a lot of years of research. i use it because it profiles of numbers and what he does but there are chapters on the campaign and that was not his purpose. my purpose primarily is focusing on the campaign and the battles and in this sense of what the army was doing. that is where we differ. [applause]we would like to thanu

for being here with us today for that insightful and informative presentation. we hope you come back to visit the heritage museum and now he will sign some books. give yourself a great round of applause a. [applause] [inaudible conversations] >> to books and right now. one book called 1861 i think by jeffrey goldberg and it is about the beginning of the civil war those are the

two books is. >> everybody sits down. good. let me say a few words in 1977, when i joined the harvard economics department it is safe to say it was not a congenial place with the

kingdoms of king said you did not feel very well come but those few people who deferred from an asset and one of them was when we match. and took me under his wing and made life much easier and nicer for me. you have to realize that the time i was a lowly assistant professor and he was already got or close to that. [laughter] he had done breakthrough work and had major results and for those of you who have worked on forms they can get very messy very quickly and the duty is that mike's work was incredibly beautiful there was content, but i think we were

and not him and that is when we became friends ever since. then mike decided it was too easy and moving on as a dean at harvard than stanford then double in high-tech and learning a lot about the world and then we he met the dead in china in 2007 we were asked to analyze lire ast with the problems of china would be and we had a great time and with a lot of modesty, a lawyer were causes some preliminary that we think what should happen we nailed.

it was a great treasure to work in a very different capacity as we had many years earlier. so today we listened to mike's ideas which contain the book that you can buy a. [laughter] and mike has put his finger on the main economic event of the last 50 years which is the fact those countries which recall the emerging countries not that they are basically catching up to the technological frontier and this is changing the world in ways clearly for themselves but also other countries and this book is an attempt to get the issues to try to look back and forward and it is a very

important book. i have read it. [laughter] but i will stop there. you want to talk half an hour then take questions? >> >> thank you so much. that was generous. i have to tell you i have had many failures in my life and the one that i regret most is the loss of the gifted faculty member had and when he went back to m.i.t. that was at the top of the list. i will not try to tell you everything in the book but i would like to tell you a little bit about what is in it and why i wrote it. i had the privilege of working in china with a

number of others and a huge privilege to chair the growth commission with a distinguish group of political and policy leaders and as i said in a preface i learned an enormous amount from our colleagues. and came to have a better understanding or the idea of the dynamics of high-speed growth in the emerging economies of the developing world. and i wanted to share some of that because talking to investors, the growth, it is somewhat puzzling so is it sustainable? look at the dynamics for what we know seem to work to have a missing piece. but i frame that in a much longer time horizon. something like this. we know from the work of

angus madison and others there wasn't much growth in a period of the british industrial revolution and we know that the pattern changed dramatically at that point* in the u.k. and continental europe and what is called the european offshoots. the canadians in australian and new zealand but that affected roughly 15% of the world's population and the colonial system was in place and basically the remaining 85% of the global population approximately state on the course as before with some effects from the industrialization going well. that went on 200 years until the end of world war ii when the colonial empire broke down and a bunch of lies people created the imf and world bank said out to make sure the disasters performed

that vanquished after world war i was not repeated the global economy opened up and then started to function and technology produced a huge head wind and we started something i think it's fair to say nobody could see at the time which was starting points a pattern that's he eventually what i call convergence which is a process of taking the privileged and starting to close the gap but at the end of this century what we are a little more than halfway through, if we're lucky, a 75 or 80% and we are well on our way.

i don't want to sound flip there is hard work that goes into sustaining growth and now increasingly global to create stability in which it can occur but it is a reasonable guess if something bad doesn't happen we will triple gdp in the next couple years may be 20 it should be hard to triple by 2030 what i try to do is set the stage to present what is now known as common knowledge with you and the growth commission and the world of people who have worked very hard to sustain the growth and people could understand the growth model

then look to the future. i do believe that we are at a bit of a crossroads where the way i tried to describe this is those in the room, and started growing 31 years ago at a pretty high rate to accelerate quite rapidly at about 9% growth. but if you drop back 20 years to say what difference does that make? the answer is very little. fast forward 20 years and you get nine or 10% growth than very large ships in the competition but it is the cumulative effect of what it is interesting and we are at a crossroads where the emerging economies are systemically important and

that does not come as news to you but you can fool yourself to say we had 31 years of high-speed growth that is the world we live in but mackenzie global study says that the declining investment rate we experienced in the 50 years after world war ii will reverse is essentially because they are higher in the emerging economies and the economy is bigger. >> i want to anticipate there is a challenge with respect you are supposed to give the answer i don't think we have answers. i think we're going on a journey together to figure them how much as the emerging economies go on a journey to solve problems in

the experimental mode in which you don't have the answer but i think it is a fascinating time of the global economy and what are the challenges? one is clearly governance. and it is a fairly rapidly moving environment. we switch over to the g20 with the help of the crisis. this teetwenty is struggling to find a way to promote stability and coordinate policy on a global basis. i am not pessimistic about that but think of that as the long term project and one that is very difficult into the heterogeneous people involved with their state of development and in

china there is a real tension. china has become systemically important at of low per-capita at income more than any other predecessor. there is the instinct to say growth and development an agenda is pretty hard. with the international advisers and also internal people to say that is just not those but it is not in our interest to ignore the systematic he facts and china will have to conduct a balancing act with the international institutions and the rest of the systemically important countries to do with these

things as just a fact of life. india is in the same position so by my estimate estimate, at high growth rates is 50 years behind china in the course of this. >> one thing josh feldman and i were talking about starting to think about let me say it to raise it is pretty clear in the concentration and industry way to think about how alondra lists dick -- of ballistic it would be and others, we know that it is obvious the global economy is concentrating because of the smaller entities are growing quickly.

but i did not know that pattern would reverse and about 10 years. because of the size of the high growth part of the global economy. i may be wrong on the timing but we're on the 10 or 15 your time horizon to be in a position where the economy is dominated by eight europe the united states or north america china and india. many don't have to go very four before you have two economic giants. one of the challenges to handle the global issues the relative size is moving fast but 3.8 billion people not quite close to 60% of the world population. if we stay on the trajectory

we are on know this pattern is convergent with the absolute amount of growth in the global economy with the tripling or quadrupling of the economy. what happens in a a shia's we think of challenging global issues with all kinds of problems relating to natural resources, the environment, climate change, are starting to be internalize because there is such an important part of the incremental pressure through prices and consumption and to grow, they start to realize, this is a new, addressing the issues is not so global for them but a question of long-term

growth strategy and success to complete the process of marching to high technology. what that means, i don't think we have time to think about but changes the incentive structure of the game's best around sustainability. if there is one a two players, or region to internalize, it is in the long term self-interest, i will close with a little talk of terminology. i encountered this with friends in asia under the heading of lifestyle. two say this has to be different.

what are we talking about? you are in a blu sure and i wear sandals and somebody has a ponytail. we talk about individual choices with the broad spectrum of where we think of people free to make individual choices and it is nobody's business. not a social issue with relatively few constraints. what the chinese mean by lifestyle is something completely different. it doesn't fall into the realm of individual choice but of collective choice. how you build cities and what transportation system you have and how many kids your allowed to have. and whether you can drive a car and what kind of car. , etc.. that is a clash of civilization because in the

asian setting among the countries, the notion that there is a very large area that is predefined constitutionally is free from interference. from society and government, it is not the accepted proposition. and probably functionafunctiona lly so when we talk about that many people cutting back close together so they feel three to have policies affecting demographics and they feel free to constrain choices of the cost is to threaten the sustainability of the growth. and i believe we have the up can't -- upcoming communication and problem. maybe the values problem but certainly communication because the one line version is we have to change our

lifestyle and a slightly longer version is we can use the gross model in the an altered form that was used by the predecessors. that puts you in the world and then then a path nobody knows what it is there will be choices made and trade offs made along the line but i would love to be younger and confident of this journey that i tried to describe but it i now think that is a good bet it but i hope to be around all little longer to see it as quite fascinating. here is a little bit that i will not talk about today that has to talk about the

crisis and sustainability and now we are clear on those issues the crisis was so handled globally including the emerging markets that obviously have learned a ton from past experience the restoration of growth was extraordinary with the brac countries or three of those and we can still use bricks but not the term emerging economies any more. so what will we say? we have the high-growth economies which is a pessimistic version of the advanced countries and i don't find next 11 elway to

refer to the smaller high-growth countries, but in any case come on sustainability we probably have a reasonable consensus unlike 10 years ago they, meaning the developing countries while leading the charge could sustain high growth even if we limp along in america for some time. the degree of decoupling is new. not complete the i am sure that if we have a problem on the fiscal side to produce a big downturn hear that will slow them down. there is one other very large change that you see when looking at the emerging economies, and if you go back to ask how correlated were the emerging economies of the growth rate, you

would have answered they were correlated with us. relatively and correlated with each other because what produce problems lowered deceleration was idiosyncratic. that is not true anymore they're highly correlated. if china miss this one step of the middle income transition, which the economies have success -- successfully go through high growth, i imagine, i am pretty sure that will flow with the rest of the developing world. that is different in that respect. if you are in the emerging country other than china you would write out instability of the global economy a downturn in europe and america and in china. i think that is enough for

me. i hope some of you have a chance to take a look at it and find it useful to provide a frame of reference to think about the highly dynamic world that we are in. the floor is open. >> my question is are we all going to benefit from the emerging economies? strictly made from the colony's perspective, will everyone benefit? or will we have many losers to worry about and how to address this? >> that is extreme. i am glad you asked the question. that is what i started

thinking about after writing the book and some of you have heard this and i apologize for that. quote part of the impact of the movement up of the value added chain is a different pattern of impact on the structure and price of the advanced countries. i am in mid process of trying to understand the structural changes the correlated structural changes of these a banished economies that can go along with the abolition of the global economy and emerging markets. so i will report briefly, if you look at the american any economy, since 1990 up to the crisis, all employment was in the nine tradeable sector. net to.

look at the tradeable sector , the ones where the united states is competitive computer design, management and consulting there is growth and everything of income, value added per person and value-added and employment. and then look at the long supply chain what we call manufacturing even though a lot of those components, i the lowered value added parts ease offshore. and that is where the middle or lower part of the spectrum in terms of education on the tradeable side was employed. we could have had the unemployment problem but first the noncharitable sector of source then you look where that is. government, health

care, construction care, construction, retail, all of the employment sectors. government and health care was 40%. economists are not supposed to have a crystal balls and i don't but i wonder if that trajectory is going to continue in the future. all of the evolution combined with laborsaving technical changes consistent of income distribution in the country. whatever the right answer, it deserves attention and almost surely distributional effects which means different show impacts of the structure of the global economy on a subset of the population in advanced economies. my next project is to sort out what the germans did and why there is a different pattern of structure and

growth going on now. we are in mid process and mckinsey global institute is to do similar things for all major economies in the world with a sense of structural evolution. frankly, what i am trying to do is reintroduce the idea of a structural change which is a long-term journey rather than a cyclical event overtime is part of the policy discussion. not to the exclusion of crisis recovery but in addition. i suspect the effects are large and getting larger. what i said in the book if you look at those distributional effects for the first 50 years of the 100 year pattern, and more recovery, not much unemployment in the advanced countries, a declining

prices and stuff like labor-intensive manufacture products. huge amounts of growth, accelerated growth and poverty reduction in much of the rest of the world. so i suspect at this point* where a lot of things are changing with the cumulative effect of growth we're at a different point* to pay attention to the distribution and structural aspects. >> thank you. always been fascinated by medicine work, if you

look, you will look to countries like canada and the united states, new zealand and australia but also argentina. after one century use the almost everybody but argentina. what was the difference? basically the political economy model of a quite equitable country that we are naturally in doubt with natural resources. we're difference between new zealand and australia and canada where the behavior dominated the politics. now my question is almost everything depends from no one what will happen with china or india or brazil. is it your view that china could replicate what japan did? because talk about

re-engineering but also it is about imitation. is the political economy distributed the way in your view, could be an obstacle when they reach higher levels of men come? because of the checks and balances and the lack of democracy and eventually could be a big hurdle? >> that is a wonderful question in. i will preface the answer because i cannot answer all parts but i do think so political economy being done now to help us understand understand, really understand come in the interactions between government on the one hand and the dynamics of the economic process on the other is tremendously important and yielding insights and has a way to

go. i think i will endorse a proposition under the heading that even though we don't completely understand how the political economy forces to put themselves out there and you cited the most dramatic example of divergence. i think if you froze the chinese government system the way that it is now, it is evolving. i was a drop the chance of it getting to advanced country status. there has to be a coalition. none of us know what it will look like. but we do know based on it some understanding of the middle and come transition and the market has to be more decisive in the economic process that price distortion past to be fixed, as the low return

investment behavior and the public sector and the state enterprise sector in the economy has to be eliminated. that is easy to say intel what doo-doo do? corporate governance diminishes bill the financial system give the and come to the buy-out -- households and make them give it back? i am being flip but it is a huge array of stuff to get done. but the underlying theme is a multiple dimensions this structure will have to move along side and i think best guess busta predecessors' japan and korea and taiwan were dominant single party structures have that it evolved in part because of the leadership of the democracy when the economy reaches a certain stage of

development. it is not a bad guess ultimately they will end up in that position. if you interview people are members of the communist party, you probably will not hear that. fe may invent a new model they think they have. so some of the evolution may o her inside the shell so you don't cv evolution as clearly as you would with a more formal structure. >> another china related question you may have answered part of that but talk about chinese life style, to have social implications with the cars to drive also constraining

choices to prevent long-term growth. but my question is do you believe the market prices is much better with the least problems and the state intervention in the form that you see restricting the one child policy that we have? doesn't matter how it is done? >> it is a very good question a but i think the answer now is market prices work better than others and the use and price signals in the area of the emission reduction in the sulphur dioxide area has demonstrated a clear democrat -- with the efficiency that goes along

with it does not think you want to step out with the price systems that the best way to go, my to be but at least i don't think i have enough of a basis to make the claim. in the emerging economy where the models the we've predict policies they are useful but have to be modified we have a pattern of behavior that i call navigating. making judgments and see this every where. they manage their currencies and know if you sit on a used all the transformation and repute leaded appreciate to quickly and then it

cannot keep up. way now understand it for that leaves you in a position to make judgments rather than adopting the clean clear model. i think it will be a pragmatic and experimental makes but the clash we may have with the emerging markets but in particular with china is we have a different conception of for the private sector should stop and private should start even though we've vary across the country is we have systems both in a sharp distinction with nine strategic sectors were they don't plan to own the state ownership summer to interact with these differences and

it is a challenge. >> aren't you surprised at how all these countries all go very high rate seem incredibly different? associate organizations? india and china none of us would have expected them most of us 20 years ago would have said see what india has and china for laugh of -- lack of democracy to go nowhere but they did find it. organize completely

different name but good driving force is the ecological progress of getting to the frontier. then you really have to screw up. [laughter] but i am struck by how these different structures that may make us optimistic. >> it does. let me elaborate. if the growth commission ended and spend a lot of time but we did start to pay attention to what are the success factors? when me just say what olivia said it is a blizzard of diversity with a respect form of government. look at the economy is better much lower performance use the blizzard

and terms of form or diversity. there is failing democracies that those that have talked about and documented and of course, you can easily find autocratic systems that produce disastrous economic results. if you look at good and bad performers with democratic and autocratic crude approximation and you can fill in every item. there is a few highly demonstrated cases but to the conclusion that leads me to believe is the political economy is free don't understand this and the second is it isn't just the form but something else. you can draw two

conclusions. the government isn't in verification very important it is you get a different form and it is the driving forces of the economy or the government is pretty important complementary player to the private sector in the open global economy but that isn't what matters. it is confidence, the intent to benefit the vast majority of people and the ability to bring people to gather around a tough agenda with a high savings rate to build consensus although i cannot prove it to the latter that the state has an important complementary role as regulator investor of public goods and so on budget it is sent the form but it isn't good enough relative to what

we hope 10 years from now but it strikes me as vaguely consistent with the facts but does improve the proposition or disprove the proposition this state, of a great degree of latitude and performance that is consistent and i don't think we can reject that hypothesis. >> one of the same as you mentioned is that you are fairly comfortable of those that were out there but with the differences with the systems to get that going is more difficult and what do have been terms of history? but those that would step up to analyze the issues talk

about many other aspects as well. >> we don't have a lot of evidence. that is one way to put it i could be quite wrong but it is this is likely to happen in china talk about historical performance. this like a number of other countries with lots of variations has a clear objective, long-term objective with a long-term time horizon and a reasonably track record for anticipating problems that come at the next day gem growth. it is on the basis of the track record i would lean to the conclusion to internalize that. otherwise you would point*

to the environmental performance with the chinese economy which is probably the most extreme version dealing with eight environmental consequences later which turns out to produce a big mess and a hugely costly challenge going forward. that lowers the growth rate target at 7% which leads them a huge amount of leeway given much they can probably accomplish in the next 10 years. and at the sustainability issues and that is smart to buy that degree of freedom and they have been toning down expectations with economic performance to moon know we're moving in a multi dimensional performance that

is focused and quality of life and sustainability. you would not one to use the track record to prove what i just said for sure. [laughter] >> it is always somewhat risky to project high growth we have been here before with eastern europe but to say we will bury you and some of the game in the mid '80s with japan been projected for this suggestion it is double the size of the u.s. now matter how many decades, how are things different this time? >> bigger population. we just have to modify. that is what they are doing.

not adopting the centrally planned models and learning from us many of you spend a lot of time in china. but with china is the speed of learning. in a world where there is a lot of learning going on, it is the highest learning environment we have ever been in. all of which doesn't point to the absence of bumps along the road where major sudden stops you would not want to reject that. that is like ignoring left or right the distribution but the fundamental point* is they have adopted in modified form the model the advanced countries let you -- use the rest is not

on outperforming but in beijing they don't think we will disappear but the hyper competitive members of the advanced global economy. in response to the other question there are some transitional issues that are long term that we should pay attention but nobody barry's another so that is the frame of reference that leads you in conjunction with a skillful navigation ability. it could be the objectives marvell from economic development into a more aggressive dominance depends how society goes. i cannot tell you that you can reject that hypothesis

at all but it does not look like the current trajectory. the bottom line is the future economic giants just because the populations are four times the amount. >> can you maybe say something about the another area of of africa and contrast what you see happening there? >> there are people in this room who are more expert on africa than i am, but correct me if i get this wrong, there has been a clear pattern of growth acceleration, navigation through the crisis. generation of young leadership that takes responsibility on behalf of

the future and a long period of building identity as a fundamental foundation for building a society with a set of objectives and then you have the the power of asia that wants to interact with after-tax as a tailwind we didn't talk about this, but the importance of china middle and come transition, they will exit the national territory for how they operate with comparative a vantage and that will create common this is the imf we know that you cannot have no comparative advantage. but in africa there is a widespread view that the social return to public-sector investment is

lower than the of a competitor like china sitting there and as they exit the stage and then the return may rise and that will help accelerate growth. not only that, you have a bigger economy that is a major export destination including india, brazil, coriander and it goes on. or all of those reasons, internal and extern all, there is a reasonable basis notwithstanding the late start for accelerating pattern of growth. having said that, in the middle east and north africa a point* of maximum uncertainty if this will come out with a reasonably

solid government structures and a pattern of economic management to promote growth or something more chaotic. the jury is out on that and that is a major risk factor for the global economy. i love operating in this environment but one thing recently i will blurt out. the japan tsunami, the nuclear problem and disruption of the supply chain has one important the fact going forward that the people who run that, if you sit down and talk to them realize the global supply chains are to be efficient and wound too tight. so the capacity of a relatively minor, in a sense of the entire global supply chain disruption, not to call that minor but it in

context, it is capable of amplified disruption and why you will see is a response to that. and they will on wind this tout -- tightly wound set of characteristics. it is a network that is highly vulnerable when they start to become efficient you lose -- use redundancy head is one little dimension of the global economy. >> do you look at per-capita income? those that say they have been remarkably stable with those countries going up and down, the majority by a big

expense is it coming back to the starting point*? eastern and western europe use the the convergence has been minimal with respect to the u.s. in particular as a leader. in this context of other countries for them to grow in the decade seems to do that because of market penetration. china does not have the luxury. they're becoming large. for them to keep growing i don't know but for them to keep growing for ever they have to do it domestically but they don't have said the business-- to supplant in terms of quality and efficiency so they may revert to those that may

have experienced to a certain level and then you may stagnate. >> is a distinct possibility. this is a treacherous passage to describe accurately the key components. they will go up the value added chain in them market sector regardless of what portion of the chain is big enough, that is what is inefficient to drive growth. now has to come from the domestic economy and aggregate demand that has to be the right mix of consumption and investment and it will guide the evolution of the supply-side much more prominently thin what happens when the domestic market does not matter. that is the right to perk up

so there's a lot of places where discipline or price distortions. of what has worried china most hasn't been documented very well is the declining fraction of disposable house holidays household income from 70 to 60%. that is part that they're operating almost 50% of the population with the countryside. that's all year grip of the surplus labor seems to be relaxed based on a pattern of rapidly rising wages and a coastal sector starting last summer. they may have the tailwind in this dimension in they were not aic