family. and that was winston churchill's stepfather's castle where they were renting. mrs. bateman inherited everything that he had. he left some money to sisters in be small accounts and an allowance to his wife, but prosecution bateman -- mrs. bateman received almost everything. this was very traumatic, and a series of lawsuits followed which were rather scandalous to say the least. mrs. low, however, finally found her own coverage when she moved out of her home, wells burn house. she went on a trip up the nile with her sister. she met several of britain's military geniuses and generals who were in the egyptian region at that time, and she became fast friends over time with one of them who was lord powell. of course, he created the boy caughts in england, and mrs. low

decided this could be replicated in america. this is when she finally found her voice, and she ends up coming back to savannah to create an organization, as she said, for the girls in savannah n georgia, in the united states and everywhere else. and she started the program of girl scouts here in savannah. the carriage house behind the building where we sit now was fitted out as the first national headquarters. and to girl scouts today who own that building, just the carriage house, it is still their first national headquarters. they're very proud of it. when they come to savannah to see the birthplace of daisy low, they always visit the first national headquarters here in savannah. and, of course, now we sit in the home that mrs. low knew. this was andrew low jr.'s home that he built for his first wife

who never live today see it. he brought his second wife here, and after her death this house was mostly closed up except for his occasional trips to america after the civil war. because by then they were british citizens, they were not going to live in the poverty of the south after the war. and mrs. low received this after finally contesting the, um, will of her husband. and this became her residence until the day she died. so this, too, is very important to americans as the home of the founder of the girl scouts. >> and now on booktv michael spence, winner of the nobel prize in economics, talks about how the global economy will evolve over the next 50 yearses and what this will mean for people living in both advanced and developing economies. it's a little over an hour. >> okay. everybody sit could down?

yes. good, welcome. let me just say a few words to introduce mike. in 1977 when i joined the harvard economics department, i think it's fair to say that this was not a con congenial place. it was a big juxtaposition of kingdoms and kings. and you didn't feel very welcome. but there were a few people who were very different from that, and one of them was mike, and that's when we met. and he took me under his wing and made life much easier for me, much nicer for me. and you have to realize at the time i was a lowly assistant professor, and he was already god or very close to that. [laughter] i mean, he had done this

breakthrough work on signaling, he was dealing with asymmetric information, had major results, and for those of you who have worked on metric information, it can get very messy very quickly. and the beauty of it was that mike's work was incredibly beautiful from just an aesthetic point of view. i think there was content to it as well. so i think we were all in awe of him, and that's when we became friends, and it has lasted ever since. then mike decided that here was too easy, i think, or something like this, and moved on to be first a dean at harvard and then a dean at stanford and then doubled in high-tech and finance -- dabbled in if high-tech and finance and a lot about the world. we met off and on, but we met again in china in 2007, i think,

in which we were asked to analyze what was going on and what the problems of china were going to be. we had a great time, and i would say with a lot of modesty that our work was -- [inaudible] in the sense that much of what has happened and we think now should happen, basically, we nailed. it was just a great pleasure to work with mike in a different capacity as we had many years earlier. so, today we, basically, are going to listen to mike's ideas which are contained this book that you can buy, i think, outside. [laughter] and i think mike has put his finger on maybe the main economic event of the last 50 and the next 50 years which is the fact that a very large group

of countries, what we call the emerging countries but that's more a result of what they are doing, have, basically, are catching up. are basically going from poverty to technological frontier. and this is changing things for themselves and for advanced countries and for the tensions which emerge. his book is an attempt to get at the issues, try to look back and try to look forward. and i think it's a very important book. i've read it -- [laughter] and i think it's a very important book. but let me just stop here. i think, mike, you want to talk for half an hour and then take questions? thank you. very good. >> thank you so much, oliver. that was awfully generous. i have to tell you, i've had many failures in my life, and the ones that i regret most are the loss of a gifted faculty member. and when oliver went back to

mit, that one got to the top of the list and as he rain mad -- and has remained there for the rest of my life. i'd like to, i'm not going to try to tell you everything in the book. i think what i would like to do is tell you a little bit about what's in it and why i wrote it. you know, i had the privilege of working, um, in china with oliver and a number of others. i had the huge privilege of chairing the growth commission with a divisioned group of political and policy leaders, and as i said in the preface to the book, i learned an enormous amount from our colleagues. and came to have a better understanding, at least than i did, of the sort of dynamics of high-speed growth in the catch-up mode in the emerging economies and the developing world. and i wanted to share some of that because i found in talking to investors this what -- and

others, you know, this growth is it's relative he remote from their lives, it's somewhat puzzling. so they say questions like is it sustain signal and i say, well, you have to look at the dynamics that we know seem to work and see if you can find a missing piece and so on. so that's what i was after. but i framed it in a much longer time horizon. something like this; that we know from the work of angus madison and others that there wasn't much growth in the period up to the british industrial revolution, and we know that the pattern changed dramatically at that point this u.k. and then continental europe and what angus madison calls the european offshoots, that's us, and the canadians and australians and new zealand. but that affected roughly 18% of the world's population, and basically the remaining 58% of a

glow -- 85% of around growing population stayed on the way they had before with some effects of globalization. and that went on for 200 years until the end of world war ii when the colonial empires broke down, when a bunch of wise people created the imf and the world bank set out to make sure that the disastrous performance of the vanquished after world war i was not repeated, the global economy was opened up when the gap was created and started to function, and technology produced a huge headwind in opening the global economy. and we started something that, i think, it's fair to say nobody could see at the time which was with faltering starts and varying starting points a pattern that i eventually came to call convergence which is this process of taking the 15 privileged percent that in this two centuries of divergence and

starting to close the gap with the guess that -- a hopeful guess, but i think a realistic one -- that at the end of this century, let's start it after world war ii which we're a little more than halfway through. you know, we'll have if we're lucky 75, maybe 80% of the world's population, and we're well on our way. the two future economic giants are in high-growth mode. i don't want to sound flip about this. there's a lot of hard work that goes into sustaining growth like this both within countries and now increasingly globally to create stability and an environment in which it can occur. but i think it's a reasonable guess that if something really bad doesn't happen, we'll triple the global gdp in the next few years. probably 20, maybe more than triple. i mean, it only takes 3.7% growth globally to triple a global gdp by 2030. so i think what oliver said is

right. so what i tried to do in the book is to sort of set the stage, then present what i think is now common knowledge among all of you, among members of the growth commission, the world of people who have worked very hard to accelerate and sustain this growth so people could understand the growth model and then look to the future. and i do believe that we are at a bit of a crossroads in the global economy where the way i tried to describe it to less expert groups of people than those in this room is, you know, china started growing 31 years ago at pretty high rates, accelerated quite rapidly to somewhere around 9% growth. but if you drop back 20 years and say what difference did that make in the global economy, the answer was very little, right?

be fast forward 20 years to the president, and you get 9 or 10% growth, and you're talking about, you know, very large shifts in the composition and what not of the global economy. and so it isn't just growth, but it's the cumulative effect of growth that's interesting, and i believe we're at a crossroads in which the emerging economies are systemically important in multiple dimensions. again, that won't come as news to you. but it isn't just growth. i mean, you can fool yourself by saying, well, we've had 31 years of high-speed growth, that's the world we're living in, and you can see it in all kinds of places. the mckenzie global institute study on global investment rate suggests, i think, quite positively that the declining investment rate we experienced in the years after world war ii is about to reverse essentially because the investment rates are higher in the growing economies and their weight is bigger.

so i wanted to sort of anticipate some of these problems. now, there's a challenge here. when you anticipate a problem at least with respect to some part of media, you're supposed to give the answer. and i don't think we have answers to many of these things. and i think we're going on a journey together to try to figure them out much as the emerging economies go on a journey to try to solve problems and in a kind of experimental mode in which you don't really have the answer sort of before you start. but it's, i think it's a fascinating time in the global economy, and i think the people -- so what are these challenges? let me spend a moment on that. up with of them's clearly -- one of them's clearly governance. and it was a fairly rapidly-moving environment. we switched over to the g20 partly with the help of the crisis.

the g20 is now struggling to find a way to promote stability and coordinate policy on a global basis. i'm not pessimistic about that, but i think it's realistic to think about that as a long-term project and one that's very difficult given the relative meter yes nayty of the countries involved in sort of their state of development. you know, in the china there's a real tension. china has become successicly -- systemically terribly important at a very, very low level of per capita income relative to any of their predecessors. and so there's a very powerful instinct in china to say, look, you know, the growth and development, domestic agenda's pretty hard, we'll stick with it. and wise international advisers and, also, the internal people say, no, you know, it's not the

best hand to play to global responsibilities of $4,000, but it is not in our or your interest to ignore these systemic effects. and, in fact, china is going to have to conduct balancing act in collaboration with the international institutions and the rest of the systemically important countries, advanced and emerging, in sort of dealing with these things. and it's just a fact of life. india will be in the same position though by my estimate india's at high growth rate somewhere around 13 years, you know, behind china in the course of this. i will tell you one thing that josh feldman and i were talking about that's relatively new thought and comes post the book, that i have started to think about as a base, on the basis of conversations in asia recently. so let me say it in two ways. first of all, it's pretty clear those of you know industrial

organization, you know we measure concentration in an industry as a kind of way of thinking about how old develop listic it will be. ..

two economic giants. so i think one of the challenges of handling these global issues is that the relative size is changing very fast. it's sort of like a moving target. now back to asia. ages populists, not quite that close to 60 percent of the world population. if we stay on up approximately this trajectory that we seem to be on now this pattern of convergence, they will account for some very large fraction of the absolute amount of growth in the world economy. applied by tripling or quadrupling the global economy. what is happening in asia is that what we think of the challenging global issues where there are kinds of free ready problems that relate to forces, the environment, climate change, and someone are starting to be

internalized in the big countries like china because there is such an important part of the incremental pressure, you know, through prices, consumption, and growth. they are starting to realize, and i think this is new. knew there and new in the global economy. addressing these issues is so much a global issue for them but a question of long-term growth strategy and success in completing the process of marching to advanced country, high-technology. so what that means i don't think we have had time to think about, but it changes the incentive structure of the game that surrounds sustainability and so on. if there are one or two players or region that internalize this, it is in their long-term

self-interest. i will close with a little bit of a talk on terminology. i encountered this with friends in asia under the heading of lifestyle. i thought, you know, our lifestyle is going to have to change. it's going to have to be different from the advanced countries and our predecessors. what does this have to do with lifestyle. what are we talking about? you wear a blue shirt and i where sandals and somebody else as a pony tail. when we say lifestyle we are talking about individual choices as a broad spectrum of where we think of people as free to make individual choices. it's nobody's business so speak. it is not a social issue where there are relatively few constraints. what chinese means by lifestyle is something completely

different. it doesn't fall into the realm of individual choice. falls into the round of collective choice. they mean how you build cities and what transportation systems you have and how many kids you are allowed to have because that has social consequence. whether you can drive a car and what kind of car, except to. and i think their is a bit of civilization because in the asian setting their lots of differences among countries. this notion that there is a very large area that is pre defined constitutionally is free from interference, from society, from government. not an accepted proposition. and probably functionally so whether you're talking about that many people, you know, that close together. and so they feel free to have policies that affect

demographics. they feel free to constrain choices if the cost of failing to constrain the choice is the threat and the sustainability of the growth. and we have, i believe, and upcoming communication problem. you know, maybe of values problem. certainly a communication problem because the sort of one line version of this is we are going have to change our lifestyle. the site of the longer version is we can't use the growth model in an unaltered form that was used by all our predecessors, advanced in emerging. that puts you in the world of having to invent a new path as you go along. choices and tradeoffs made along the lines. but, you know, i would love to be under and be reasonably

confident of seeing completion of this journey that i tried to describe in the book. i don't think that is a very good balance. but i am hoping to be around for at least a little bit longer to see some of this. i think it is really, really quite. there is a little bit that i want to talk about today which has to do with the crisis and what was learned about the crisis and the sustainability of the emerging market growth after the crisis. aviano pretty clear. crisis was well handled locally including by the emerging markets. they obviously had lots who had learned a ton of past experience, restoration of growth, extraordinary in china, india, and brazil. jim o'neill says, by the way,

that we can still use bricks, but we can't use the term emerging economies any more. that leaves us with what are we going to say? the high-growth economy with respect to the advance families the smaller high-growth countries. on sustainability i think we have probably a reasonable consensus that unlike ten years ago they can probably, they committing the developing countries with emerging munson, they can probably sustain really quite high-growth, even if we move along. that is a big change. the degree of the coupling is

new. it produces a big downturn. a very large change. people back 15 years. there correlated with us. and relatively and correlated with each other because problems are decelerating and were lustily idiosyncratic to the country or the reason. china messes this step in the middle income transition that transition in which five economies successfully nearing

high-growth. all of the rest of the developing world. risk factors, instability and slow economy financial system. the downturn. i hope, i hope some of you have a chance to take a look at it a frame of reference for thinking about the dynamic world. >> i hope there is a question. >> my question is how we are

going to benefit from this conversion in the american economy? will we have many to worry about how to address this? >> i'm awfully glad you asked that question. that was what i started thinking about right after writing the book in this past nine months. some of you have heard some of this. i apologize for that. part of the impact of rising size and movement up the value chain is a different pattern of impact on the structure of the advanced countries. one kind of mid process in trying to understand the

structural changes, the correlated structural changes in the advanced economy that go along with the evolution of the global economy if you look at the american economy since 1990 up to the crisis it's in the non tradable sector. if you look at the trade will sector what you find is that the ones where the united states is quite competitive, finance, computers designed, managing, multinational enterprises, there is growth in everything, and come, value added per person, value added, growth in employment. then you look at the long supply chains and that things we call manufacturing even though a lot of the components of the supply chain i services.

and they're moving offshore. and that is where the middle, the lower, middle to lower part of the spectrum in terms of education, income, and so want on the charitable side was employed. we could have had an unemployment problem. the non travel sector is cecily goes up or it was absorbed. the answer is government, health care, construction, retail, all of the big employment sectors. government and healthcare was 40%. you know, cardinals aren't supposed to have a crystal balls, and i at least wonder whether the bad trajectory is going to continue in the future. evolution combined with saving technical change. it is consistent with the evolution of the income distribution. so the bottom line is whether the right answer is it deserves

attention, and there is almost surely distributional effects which means differential impact of the evolving structure in the global economy on subsets of the population in advanced economies. my next project is to try to sort out the last ten years and why there is this fundamentally quite different pattern. structure and growth. we are kind of in this process. the mckinsey global institute is a great collaboration to try to do similar things for all the major economies in the world. structural revolution. and frankly, what i am trying to do is read introduce the idea that the structural change is a long-term journey rather than a civil event that is to be part, over time is to be part of the policy discussion, not to the exclusion of cyclical things, a

crisis recovery and so on. in addition. i suspect the effects of large and are getting larger. if what i said in the book, if you look at the distributional effects of globalization for the first 50 years of this 100 year pattern, convergences pretty benign. not much unemployment in the advanced countries. term growth rates. declining prices, stuff like labor-intensive manufacturing. huge amounts of growth and accelerating growth. the rest of the world. so it's hard to worry about that then the effective growth, at a

different point where we might want to pay a little more attention to the distribution as structural. >> yes, sir. okay. either one. yes. >> thank you. fascinated by madison. if you would like the word, you look to a bunch of countries like canada and even the united states. australia. the top. argentina. after one century you see everyone but one, argentina. so what was the difference? basically that the chemical to top political economy model, the quite equitable countries that are naturally endowed with natural resources were very different between new zealand,

australia, canada, and argentina whereas bad behavior dominated politics. my question now is almost everything depends from now on on what is going to happen on china, india, brazil. is your view that china could replicate in no way what japan did? because one hears that japan is re-engineering, but china is all about. the way power is distributed in your view could it be an obstacle whenever their reach higher levels of income? the check and balance and a lack of democracy and eventually. >> that is a wonderful question. i can't answer all parts of it.

i do believe that the work of the political economy being done now helps us understand, really understand the interactions the trend government on the one hand and the then mix of the economic process on the other. tremendously important promising to yield insights. it has better ways to go. in that think i will just endorse your proposition under that heading that even though we don't completely understand how the political economy, you know, forces. clearly different in different countries. partly the most dramatic example. divergent. and so to answer your question about china, i think it confirms the chinese government system the way it is now, if you froze it i would drop the chance of getting to advanced country

status. so there is going to have to be a coevolution. none of us know exactly what it will look like, well we do know based upon our fat least some understanding of the middle income transition that market has to be more incisive in the economic process. prius distortion has to be fixed. the low return investment behavior in the public sector and a state-owned enterprise sector is more than half the net fixed assets in the economy. it's going to have to be eliminated. that is easy to say until you start thinking about what you have to duty of rivet. corporate governance diminish the importance of the party bill bennett's a system. make them give it back. the return. it may be a little slip, but it is a huge array that they're trying to get done. but the underlying thing, in

multiple positions the government structure will have to move along side. i think the best guess based on predecessors, japan, korea, and taiwan, more dominance in the party structures that involved in part because of good is a multi-party democracy. the economy reaches a certain state. so it is not a bad guess that ultimately china will end up in that position. now, if you go into the people in china who are members of the communist party you probably won't hear that. and they may have a new model. they invented the new model for doing great things so that some of this evolution may occur inside the shell which is the party structure. so you sort of don't see the evolution as clearly as a

formally more familiar structure >> i'm sorry. china, the question. you may have answered one of my questions. let me ask. you mentioned about the chinese live staff, building cities, how many kids to have, social implications, the cars to drive. you also talked about this strange choice is to preserve long-term growth which is something. my question is, do you believe market slash prices are much better to handle these problems that state intervention in the form that uc restricting policy that they have? does it matter how it is done? >> i have -- a very good question, and i'm not sure.

i would like to sit and think about it more. i think the right answer pragmatically is that market prices work better in some environments than others. i would say that the use of market prices and price signals in the area, pollution or emissions reduction in the sulfur dioxide area have demonstrated the clear benefits of taking that approach and the efficiency that goes along with that. i think i wouldn't want to go out on a limb and say with respect to demographic price systems are necessarily the best way to go. it might be, but at least i don't think i have enough of a basis for making that claim. you know, in the emerging economy is where the models that we use to predict the impact of policy decisions are useful, but not -- but have to be modified

based on that development of the economy. you have a pattern of behavior that i call navigating. solving problems, making judgments. you see this everywhere. emerging markets manage currencies. he also hope that you install the structural. she let it appreciate too quickly than the structure and evolution and the economy can't keep up. you know, we'll understand it. but that leaves you in the position of making judgments rather than adopting a clean and clear model of the type that we use in advanced countries. so i think it is going to be a pragmatic and somewhat experimental max. but the clash that we may have with some of the emerging markets, but particularly china. we have very different conceptually of where the

private sector should stop and the public sector should start even though we vary across advanced countries. we have systems built on a fairly sharp distinctions. you know, an economy that has nine strategic sectors where they don't plan the state ownership. so there will be lots of challenges navigating through these -- as we interact more with each other, these fairly fundamental differences in a way that we decide to organize ourselves. i don't know what the answer would be, but it is a challenge. [laughter] >> what you said. how all of these countries, financial market countries are of growing and very high rates. incredibly different systems,

organizations, you know, andy and china, i think, something none of us would have expected. most of those 20 years ago would have said, look, the administration that india has, forget it. only china with a lack of democracy and fixed prices of state fixed-price is, they did fine. singapore, hong kong which organized completely differently. the driving force is the technology of -- technological process of getting to the frontier. once it is there some how you really have to screw up. high growth. i am struck by how the different structures accommodate all these different structures which might make us. >> yes. it does. it does. let me just elaborate on this interesting point. the book does talk about this. did not spend a lot of time, but

we did start paying attention to what are the factors. so let me just say, look. if you look at this thing, high-growth countries, diversity with respect to what i call the foreign government. and if you look at the economy's that are much lower performance or even failing you will see the reform of diversity. so there is failing democracies. you know, documented. and of course you can easily find autocratic systems that produce disastrous economic results. so if you think of it as a box with good and bad economic performance toward democratic and autocratic as a kind of approximation to these two dimensions you can fill in everything.

there are a few up their demonstrated highly successful. and so the conclusion let me to believe that the political economy research is important and we don't really understand it. the second one is something else. now, you can draw two conclusions from that. one is the government is not very important in some sense because you get all these different forms. it is really the driving forces of the economy. or you can say the government is pretty complementary to the private sector in an open global economy, but is in the form the matters. it is competence, intense, objective function, and tend to benefit the vast majority of people, the ability to bring people together around pretty tough to gen this with high savings rates and poor

countries, building defenses and so on. that latter. the state has an important complementary role as regulator, investor and public goods and so on. but it is in the form. in that think that is not good enough relative to what we hope we know ten years from now as a result of the work on the political economy, but is vaguely consistent with the facts. it doesn't prove that the proposition, it doesn't disprove the proposition that the state is sort of, there is a great degree of latitude in form and performance. very high economic performance, and i don't think we can reject that. >> yes? >> one of the things you

mentioned was you said you are fairly comfortable as compared -- countries get bigger that we will internalize. by the same time, as you just mentioned, there are differences through the system of giving the externalities' growing. it may be more difficult. what do we have in terms of history. pointing to countries as they grew larger in the past. actually willing to step up and in to analyze some of these issues. talking about environmental, many other aspects as well. >> we don't have a lot. so this is, you know, one way of putting it. that could be quite wrong. when i stated it is likely to happen in china it is based on their historical performance, not a lot of other data. i just like the number of other countries with lots of variations, a country that has a clear objective, long term objective, very long term

horizon, and the ability to persist in pursuing that. a reasonably decent directive track record for anticipating problems that come at the next is a growth. so it would be on the basis of that kind of track record that i think i would lean to the conclusion that they will internalize that. now, against did you would simply point to the environmental performance of today to in the chinese economy which is probably the most extreme version on how to deal with the environmental project. which is producing an awfully big mess and a hugely costly challenge going forward. i mean, targeting growth rate of 7% which leaves them a huge amount of leeway that given what they probably can accomplish in the next ten years. equity and equality issues,

social pension is what they call it. and the environmental sustainability is used. i think that is smart. by themselves that degree of freedom. what they're really doing is turning down the expectations of that dimension of the economic performance and saying we are really moving in that direction of the dimensional performance measure focused on quality in the environment and quality of life and sustainability. but you wouldn't want to use the track to prove what i just said, for sure. >> it is always somewhat risky to projects growth rates. i guess especially high growth rates for work a dictator to. i guess, you know, we have been europe.

we will bury you. similarly in the mid 80's with japan this is projected for it. the suggestion that japan would become, you know, double the size of the u.s. within a matter of how many decades. how are things different this time? >> a bigger population. all they have to do is modify and imitate art, which i think is what they're doing. conducting fluoride, centrally planned models, learning. i mean, spend a lot of time in china. the thing that strikes me most about china it is, you know, in a world where there is lots of learning going on, is the highest environment i have ever been and. all of which, i think one points to the absence of bumps along the road or even major stops.

you wouldn't want to reject that, your investment. you for sure. that is like ignoring the left and right tail of distribution. it's just not very smart. but i think the fundamental point is that they have adopted in modified form the model that the advanced countries use and the rest of the projection is based not on outperforming as a barrier. in beijing they don't think we're going to disappear. they think we are going to be members of, you know, and advanced global economy, and i agree with them. i don't see anything going on. in response to this other question, there are some distribution and transitional issues that of long-term enough that we should pay attention to them, but nobody is burying anybody as far as i can see. that is kind of the frame of reference. it will lead you in conjunction

with navigation abilities to do it. now, the world goes differently. it could be the objectives trend more from economic development and to some kind of more aggressive dominance depending on how the governments and society goes. i can't tell you that you can reject that hypothesis and all. but it doesn't look like the current trajectory. the bottom line is the future economic, the populations are forthcoming. >> sir. >> can you may be say something, a big area with lots of people. maybe contrast or what you see happening there. >> so, there are people including people in this room who are more expert on africa

than i am. but my impression, and correct me if i get any of this wrong. there has been a clear pattern of growth acceleration or reasonably successful navigation through the crisis. a generation of young leaders taking responsibility on behalf of the country for their future. a long time of building national identity, reasonably successfully as a kind of fundamental foundation for building a society as a set of objectives including the economic ones. so i would say, and then you have the power of asia which wants to interact with africa. a tail wind. we have been talking about it. the importance of the middle and come transition, the natural territory for countries operated

in terms of comparative a vantages. this is the imf. we know that you can't have no comparative advantage. exchange rates will take care of that. but in africa there has been a widespread view that the social return to public sector investment designed to stimulate growth is lower. you know, sort of sitting there competing. if they exit the state's then i think that return may very well. that will help to accelerate growth. not only that, you know, you have a big economy that has become the major export of the nation including india, brazil, korea, and it goes on. so for all those reasons, internal and external there is a

reasonable basis for optimism about not withstanding the late start for an accelerating pattern of growth. you know, in the middle east and north africa we are at the point of maximum uncertainty about whether this will come out reasonably solid government structures and economic management that promotes growth. i think the jury is out on that. that is a major risk factor for them and for the global economy. i love operating in this environment. that's just blurt out. the japan tsunami, the nuclear problem and the destruction of the supply chain cause one affect. going for it, the global supply

chain. the people who run that play is to sit down and talk to them, the global supply chain said to efficient. wound too tight. and so the capacity is relatively minor and sense of the entire global supply chain. you understand what i mean in this context. capable of producing, you know, amplified disruption. what you will see is the response to that. there will be a response. they're going to unwind those kind of a tightly run medicare things so there is way more redundancy. it is a network. very much like networks that are highly vulnerable. they start to become efficient and lose their redundancy. one little dimension. the global economy.

>> just another follow-up on convergence. if you look at most countries in relations to the u.s., over a long time this has been remarkably stable. countries have gone up 20 or 30 points. by example, going up and down, but most, the majority by a big extent has ended up coming back to their starting point. if you exclude eastern and western europe you see that even in this country the convergence has been minimal with respect to the u.s. in this context other countries have been able to grow. they seem to have been able to do it because of market penetration. more economies in the street. china doesn't have that luxury.

they're becoming large. for them to keep growing, i don't know. but they keep growing forever as a share of work. so we have to do it domestically. they do not have the discipline that foreign markets imposed on the quality, efficiency, all those things. then may revert. other countries. he stagnates. i wonder. >> a distinct possibility. this is that pressure to cut treacherous passage and it is described accurately. the key component of it, especially for big country. so they will go up the value added chain in the export. their market share regardless of what type of a value-added chain is big enough. the investments will drive growth. it's got to come from the domestic economy. aggregate demand and the domestic economy.

that has to be the right mix of consumption and investment. it will guide the evolution of the supply side of the economy much more prominently than happens when they were or any other country is poor. the domestic doesn't matter. that is not exactly right. and there are lots of places where discipline or price distortions are other things. the thing that has worried china most, documented very well, the declining fraction of household and disposable household income and national income from 70 and 60%. and so in some sense it is in part operating with almost 50 percent of the population plus/minus. that eyeing grip of the surplus

labor seems to be being relaxed. that is based on this the patterns of widening rages starting last summer. so they may have a talent in this dimension that there weren't anticipating, was the new would come but did not know when. even as little as the area we're talking about the need for the government consumption on a crucial services like education and health care, especially in the world sectors being needed because of the sort of transition mechanisms. you waited for the economy to start, start with the relative price increase of labor in motion. that looks like it is now starting. that will give them even if they screw out and give state enterprises, they just part is somewhere. that will produce a movement in

the right direction in terms of the demand side structure. but i accept your general conclusion which is there are all kinds of places to fall off the boat. it is a very complex and coordinated structural change in supporting policy. and i guess, you know, countries to pull that off. all of latin america, the rest of the high growth countries. so there have to be lots of stupid people. the one thing you do not have in asia is you do not have the coefficient north of .6. you do not have countries in which the concentrated ownership of assets even approximates the colonial legacy in latin america. while i not sure we have a definitive political army count, the chances that when ownership of assets including land of that

concentrated, if you are seriously influencing the policy of the country and the direction of protecting the growth and so on, i don't think one should project that. there are too many dual economies like the one that brazil had that sort of illustrate that point where you basically, sometimes described brazil, not now because this gap is rapidly closing. the coefficient is coming down, but a middle-income country that consists of an advanced country and a poor country. that is not the high-growth environment. one left. >> i enjoyed the talk about

china's demographic structure for looking very long term, the long-term growth trajectory and perhaps the long-term budget for the next few months. >> right. a very good question. the experts like peter diamond and make our than others that have advised the government said there still in the window with this day balance seat which is gigantic, sort this out. it's not going to last forever. uncharacteristically, the tendency to move very quickly when a problem is identified is demonstrated in the social security area. a problem for probably ten years. they started to elaborate.

as gated. so this is a real challenge. i think it is nowhere near the theory as it is in europe in terms of, you know, adjusting principal and other arrangements or japan or its at its most extreme form, but it's on the horizon. if they don't deal with it fairly early it can slow them down. i am trying to slow project three. the markets have different opinions. david bloom at harvard says if you make enough institutional adjustments including how much people work, how many transitions then make, what you may or may not think our realistic assumptions, there is no reason to think. a falloff from potential adjustments and multiple

dimensions. and in addition cut you know, china is now calling it to doublings away. that doesn't put an end to it. 47,000 they're going to slow down on the catch of saudi barely send. they probably have another slightly less than a decade of high growth rate. and so that is what ag will probably slow them down. not necessarily a bad thing. you know, to go back briefly to an earlier question, when we say china will get their we mean to the advanced countries status. the lower end of the spectrum.

whether or not they continue, you know, and become more like singapore or the country i live in most of the time, elite, you know, is a function of a whole different set of considerations which is a trade-off between the incentive of labor market mobility and all the things that we talked about in the events countries. that is really a different set of considerations. no idea how china will make those choices and where there will end up. the advanced countries. >> george. >> so how do you perceive china's dealings getting off its export growth? is that point to be something that is natural or is that going to be -- >> that is a very good question.

so there are two parts to that. it's not natural. you have to solve this problem on the ivory demand. the savings rate is 30%. and that will make a contribution. you can solve the problem with just that. asian countries tend to do it by rate. it really has to do with an come mostly. and then the question, outsiders and insiders worry. the next -- the export sector that used to exist as it is about to be, you know, replaced by higher value added export sector and loose its relative significance then where are the 400 million people who still have to move to the urban areas?

and the answer that people frequently come up with is, there isn't anywhere to go. that was hit in the modern economy. the upgrading of skills and so on. i think that's wrong. i think the answer to the question where are they going to go is into the massive service sectors that will be built in the massively expanding urban environments. that is a different route into the modern economy, but if that, if that, you know, railway closes down then you will get that thing that people really fear which is the dual economy structure. and probably one of the reasons the chinese are a little bit cautious about the exchange-rate mechanism or probably biased toward the undervaluation, even for people, you know, outside

who are sympathetic to the idea of managing that is the uncertainty about the effectiveness and speed of the sort of urban service sector that has built this mechanism. i know they have huge fears of having some version of polish forces pull where people move to the city's because in the rural areas the opportunity declined so dramatically there is nowhere else to go. we have seen that in other parts of the world. they're scared to death of that. one of the reasons they drag their feet on dismantling their urban residents is precisely because that essentially turns this process of urbanization and market forces and incentives. it can go very wrong.

thank you very much for having me. [applause] [applause] [inaudible conversations] [inaudible conversations] >> book tv has over 100,000 twitter followers. be a part of the excitement. follow book tv on twitter to get publishing news, scheduling updates, author information, and talk directly with of this during our live programming. >> next up take a tour of the celts had home of flannery o'connor. the historic city of savannah, georgia with the help of our

savannah affiliate, comcast, to learn more of the areas literary culture. >> welcome to the flannery o'connor childhood home here in savannah, georgia. our pleasure to have you here today to talk and share a few of the stories about this unique and creative writer. one of the first stories, born 86 years ago. we still get visitors from time to time that knew her. in 2009i had a chance to be visited her up across-the-board. this is a the house marry

flattery was just different. and so we love to tell all those differences about her that happened here in her childhood. now, we have a photograph here at age three. we always like to insure that there is no hint of the ducktails this she was about to write later on in her life, but things are about to change significantly not long after this photograph was taken. the best we can figure is summer retreat for an six she decided she was an adult. restart of the age for because that is, we have photographs of her up to age four. after age for their gone. we in that age 61931 because of the events. one was that was the year her classmates told us that she had to go call her parents had word in regina. on a first name basis. they are okay with that.

in fact, not only okay with that, but they go ahead and invite her to join them at the adult mass at the cathedral. so just across the square. that raised a few eyebrows, but not as many when she started attending st. vincent's preschool for gross run by the sisters of mercy. they insisted that she attend their compulsory children's mass instead of going to the adult mass. her response to that was the catholic church will not dictate the time i10 service. so being very different. interestingly enough her mother was very precocious as a young girl growing up in milledgeville in georgia. so two very similar personalities. in fact, i would like to share down here. the differences of opinion with two strong personalities, not to be unexpected. but regina always wanted her

daughter to be a lady at all times. when she was around her mother's cba itself. however, allow her to visit a classmate here. she could relax standards a great deal. in fact, what is great about this house is that they had a lot. the house was presented with this picture around eight or nine years of age visiting her friend here, betty jean mcguire. very interesting that regina is not around. so the one on your left relaxed standards a great deal and her friend is sitting exactly how you're supposed to be sitting. i have never seen more message coming out of a person's eyes. the o'connor's, going back to her parents, edward and regina, 1923, moved into an apartment

that evidently was unacceptable to a cousin they had my marriage. and we have her photograph on top of the old south radio. cousin katie his name was mary catherine flannery sens was very generous. when she heard that her cousin moved into an apartment, no, she on several pieces of property. this just being one. and so they move again. of course 1925. the house has been historically restored for the most part thanks to the generosity. we were able to do that two dozen 6-2 dozen seven. thanks to a student at savannah college of art and design and needed a master's thesis project for her degree. she did that paint analysis. so this is the color green actually on the wall when the a connoisseur here. she had to work and find out

that they were gilded. that was because a cousin katie move again. will we have in the corner belongs to the o'connor's. and then on the other side of this we have a few more items that belonged to the o'connor's. this was very flattery's pram. we know it was a gift from cousin kate. fortunately it has suffered from being in storage for so many years. one of the great things about it is that true to a cousin katie's taste and everything we have very flatteries monogram on the side just as cousin katie would have it. let's go back to the library

which was the o'connor's dining room, of course. and in this room we have four of her first additions starting off with her first novel in 1952. above it we have 59 edition. it's not in english but french. she was being translated early on. last year we received visitors from 24 in countries that knew about mary flannery and her work and wanted to come over here and visit the house. this book belongs to the o'connors. in a we are very fortunate to have two of her childhood bucks. we don't have them open any more because you would have loved to write in her books. she wrote in pencil. we don't want that to fade away. we have gone ahead and made photocopies because she would critique the childbo