that involves the direction of em breess you. no the much change in regulating the private sector. that's one of the most amazing things from the comparative perspective. the idea that we separate out research that's government funding and have huge polarizing debates about that and yet, lots of stuff goes on the private sector without much oversight. >> professor thomas of georgetown. em brees it's published by cornell university press. he's an associate professor here at georgetown. part of the government department and the school of foreign service. this is book tv on c-span2. pulitzer prize winning author david traveled the globe to research president obama the story visiting places like kenya and kansas to exam the president's family tree. book tv will give you a preview including our relationship kenya

with the author in january 2010. join us on sunday at 6:00 p.m. eastern and 7:po the same night. your phone calls, e-mails and tweets for david on c-span2 book tv. talks about which country will make the economic success stories in the future. next on book tv. this is about an hour and a half. welcome to the substitute. my name is ian. director center for global liberty and prosperity. everybody is looking for the next economic success story. in the 1960s and '70 sers it was supposed to be brazil. at other times the ivory coast, mexico, kenya, sense venezuela and a number of other countries that have turned out to have less than stellar performances. instead, some sometimes

surprising list of countries in the past couple of decades include pulled ahead, georgia, india, peru and ease stone ya. professional economists, political scientists and all sort of pun pundits are not particularly good at predicting success. for that matter, they're not good at looking back and explaining why some countries have succeed and some failed. the inability to predict the future is understandable. since that depends on all sorts of complex factors and very frequent arbitrary decisions of politicians. there is, however, such a thick as detecting patterns of development and causes for growth. we here have done quite a bit of work with our friends and colleaguesed at the fraser substitute in canada on the importance of economic freedom in establishing prosperity.

and while we publish an index of economic freedom around the world, that does establish strong imper call relationships with human progress. that index by itself cannot tell you why some countries are more likely to reform or why some will stick to building the types of sound institutions that lead to growth. to do that, requires a lot more details about the particular country circumstances and eye for relevant information. i'm pleased today we have rucir shama. developed 9 skillings. dwiep a good sense of what is proper policy environment with keen observation what's going on inside the country.

other factors that can determine where a country is heading. his book is a useful guide to understanding the growth potential of countries around the world and contains much insight and ununexpected conclusions. the business culture, for example is different than of moscows. vietnam is not in fact following in the footsteps of china as many people believe. business cartels explain why mexico's markets are hot stock market is hot but it's economy is not. and the future may look brighter than many people think in the united states and germany. breakout "breakout nations" is a reminder that understanding the process is which intelligent people can disagree and the development cannot be understood by taking a debt any karattic approach. all the more reason we should be

skeptical of grand schemes coming out of the of the agencies or other sources claiming to have the answers to the world's i diverse set of nations. fortunately he doesn't suffer from mess begannic approach. he offers rules of the road which is very universal in the book. let me introduce you to him and arrow you to -- allow you to judge how sound his evaluations are. he is the head of global emerging markets and global marco at morgan stanley. he is a column nist at news week and writes for "the wall street journal" and other leading newspapers around the world. he is the regular contributor to the economic times in india and has been writing financial columns since the early 1990's. please help me welcome him. [applause]

thank you very much. it's a pleasure to be here. this is the first time in the auditor i didn't mean as well. -- auditorium. it's a delight to be here. as you mention, i've been an investors for nearly two decades now in the develop world. i -- about one week each month in some country. obsessing about it i find that at least for me, there's no substitute than to be on the ground in some country and to meet with all the people there from the corporate ceos to local investors. and that's what i've done for nearly two decades now and try a form a view on each country on a

continuous basis. but i've been a writer for longer than i've been an investor. i started writing back in 1990 when i started back in india. and those days when i started out to write, there was very little interest in india about what is happening in the global economy. and i decided back then about writing a column exactly based on that. i was young when i started out. but precisely because nobody was interested in talking about the global economy, i managed to squeeze my sort of column in large part due to negligence. because he was the editor back at the economic times. so that's i started out writing then. and finally, after nearly two decades of writing, i said i have to write my own book. that's what the effort lead to. i spent much last year of

putting together my parts about verging markets and tried to write something in the form of an economic travel log which is impressionist views off each emerging market. obviously, on some economic observation as i've gone around the countries. what caused me to write the book is partly a big idea that want to write a book. you need a big idea behind it. and the big idea that struck me was late 2010 in terms of what's going on. i've been investing in emerging markets for nearly two decades. i've seen a lot of cycles. i see the phase when we started out. there was a -- [inaudible] and we had a series of crisis after that. emerging markets between 1994 and 2002, were considered the problem child of the world

economy. the crisis included the financial crisis, the russian default, the argue teen began crisis in 2001 and it all started with mexico in late 1994. so that's where the history went there. and then there was the -- [inaudible] 2003 from onwards. every single developing country did well. to 2008. captured in a couple of circumstances. between 2003 and 2008, the average of the developing world was 7.5%. just as a global economy in regard history had never gone through so many emerging markets grew in such a manner. in the growth of emerging markets in the 1980s and aye 90s used to be about 3.5% so

or. and the long time -- was about 5%. we went through the period the average growth rate was. 7 psht 5%. as rising tide of countries doing well, left no country in the wake. in 2007, the -- [inaudible] economy tracked by the imf only three economies contracted and those were fee ji, congo, and zimbabwe. who cares, right? and the history otherwise is the history otherwise is that any particular year looked back, typical about 20% of economies report a negative gdp growth rate in any year on average. around 20%. only about one-third of economies are able to grow at about 5%. that's the spread in terms of the regard. in 2007, the -- we had three economies which reported a negative growth rate.

and we had more than 50% of the world's economies growing at about 5%. this is very -- [inaudible] but the question was what cause exceptional? and it lead to the [inaudible] about history of economic development what causes it was two or three special factors. one was the fact these economies were catching up. after the poor performance in 1980s and 1990s. because of the poor performance with a lot of the blanks sheets had been cleaned up in the economy in terms of the macroeconomics from indonesia to russia paid down the debt and a lot of improvements in the mark cro exacts which is emerging markets tend to reform. after the crisis these economies reformed considerably. they were catching up. the second most important point

which is underestimated is as we know in the western world there was a huge increase in financial leverage. and in over all, indebtness. and a lot of that liquid think flew to emerging marks as will. we analyzed our the liquidity created the housing wobble in the u.s. and the problems in the europe in some many european countries. also lead to a big flight of -- [inaudible] emerging markets and lowered their risk of returns in terms of the cost of capital. and the strong -- [inaudible] helped trigger the export. this combination of factors of catching up from the very bad year in the 1980s and 1990s. abundant global liquidity which lowered the cost of capital and the fact that u.s. consumer was

reasonably strong in a big source of explosion market and the emerging markets to the exceptionally high levels from the '03 to '08 period. now, after the crisis happened in 2009, only of the emerging markets were to use some of the unspent to try and keep going for awhile for like india, china there was a lot of stimulus put spot pipeline to keep demand going. what's happening now is many of the countries countries countries are experiencing their own difficulties are slowing down quite a bit. i think this is what is hitting the stage for a very different kind of outcome now in the decades. i think we have rewarding to the -- reverting to the old emerging market expedience there will be

some slops as well. it's not going to be the exceptional we had last decade every single e americaing market regarded high growth rates on the back of liquidity. it is no longer there to lift every single emerging market now. and i think that what we need to do here is start distingishing again. the history of economic development is that the -- national rather than success is economic development. look at the economy today, the global economy the economies only 25 are developed economies. everyone else is emerging. as you mentioned at the outset, you have one good decade for any particular economy or region and that sort of economy falls because of the gains -- [inaudible]

it ends which is so of go up some. you get bitten by a snake. you come back down. you start all over again. some get lucky and are able to leapfrog and it -- [inaudible] the game doesn't happen. which go from the top in a straight line. but that's exactly the kind of belief i think -- [inaudible] because so many emerging markets did well. and that's capture in the fact that the acronyms became very poplar. the most poplar was b. r. i. c. k. it captured the imagination of the as the four largest e economies in the world. in the developing world. every single emerging market was doing well, it seemed the maximum spotlight on them. it was the largest economies. and there were all sort of in a

grow -- [inaudible] historical average it is seemed that something special was going on. the ak acronyms went on and on it was the most ridiculous one i heard by the end of the decade was something called [inaudible] which is some name et. cetera and the only reason that it was formed because it sounded good for the countries which is threw into the mix included klum -- columbia, egypt, vietnam. all countries have nothing to do with each other. they package it well. and these things work because every single o'mergeing market was doing well. no matter what acronym you created. it sounded to be in a very sexy because like everything was fine. that's what was going on by the end of the last decade. the emerging market in -- [inaudible] my interest is to go out there and sell emerging markets and people that are willing to buy because you are emerging

market. you're bound to grow faster. that's where the opportunity lies. support i diverse fie that way and that's your road to becoming rich. but i find that as someone who invested for many years the frame of mind you don't go -- [inaudible] you basically distinguish and you see what's the flow in the conventional argument all the time. a couple of ante-dotes -- it has gone too far and the trend also many other trends have gone. they become very poplar for one decade and continue to be poplar in the subsequent decade. the big thing was technology. 1980s the big bang was -- [inaudible] '0*eu7s had to do the inflation was thing concerned about in the 1960s it was about the u.s. and the a 50

here. they captured the imagination of people politician of investors and by the time that everybody buys into it, the fad sort of gone out. there's a couple of ante-dotes that happened in 2010. what was gone back to india, as i frequently do for one of my visits. i was invited to the fringes of the -- [inaudible] they call them farmhouse parties. the farmers have long left for the farms houses because they got the land still exist for many of the rich to have their fancy sort of homes out there. sprawling mansions which have some fancy features. and the one they went to for the party had a -- [inaudible] running around it as part of the extravagance. you enter there and you get ships -- chefs from all over the world preparing the food. it's a deck dance.

here was at the party in late 2010 i got into a conversation with a young 25-year-old. he was a typical type. a tight black t-shirt. he was a son to be an exporter. a guy was making money on the quick. and this guy had all these worked with his dad 25 sort of chatted me for a bit. he quickly figures out i'm a global investors who back in india looking for opportunities. that's what he believes in. he goes to me, where else does the money go. such overconfidence that the west is decline. the money it going to come here. where else is it going to go? [inaudible] what i think a lot of wanted to believe he was in the western -- decline and the money is bound to flow to the, you know, places. and that's where it's ghost to

go. along with another -- [inaudible] moscow shortly thereafter about, you know, the coming decade. the other ante-dote which is that i went to moscow there was a conference being organized out there. and the prime minister putin wanted somebody to present to him at the conference about the state of affairs in russia. and then so the conference organizers and putin asked if i'd make the presentation. i said, fine, i'll do it. there i was making the presentation to putin. i didn't know it was going to be a big deal. i met him before. here are the televised the cameras were on an stuff. i was in the conference sitting next to putin. i gave a russia how i was optimistic a decade ago when things were chaotic. and a decade later --

[inaudible] and that russia basically was regreasing rather than processing just being rerecent on gas is not enough. a rich country makes good goods. it better get some sort of manufacture sector going or new businesses going has a poor track record going. it was a bland assessment of how russia was doing. and, you know, putin ended up being really good. he was taking notes down as if he was actually listening. the next day i found out the entire russian media went after me. the control and sort of was that, you know, who need your money. in 2010 -- [inaudible] to hell with all of your advice. who need your money? and they assured me how the attitude had changed for the country. and i visited quite frequently

over the years. and right then after there was a client conference we had organized for the clients. in that client conference we called for president bush to be the speaker. i was having a chalt with him before thed a yens. i asked him, what is that you saw in putin, you know, really commented like a decade ago that, you know, you looked him in the eye and saw friend. i said what is that you saw. he told me something with sort of my own change in russia and he said how the attitude of putin had changed. when putin first got to the white house back the early 200 he was talking about his dead. debt.

he remembers one of the visits introduced him to the dog barn any or whatever. and putin looked at him and didn't reability much. he said at the peak of the boom in 2007 he went to putin and he took him to his hoition. by them, the confidence was huge. he was really believing that, you know, russia had truly e emerged because of the massive boom russia enjoyed. he said that, you know, like putin's questions were about neelgding bush about mortgage-backed securities and other debt that the u.s. had. and out of the blue, putin goes to bush do you want to meet my dog. he said, okay. out comes like, you know, putin's dog the big dog. he says to bush, see, bigger, better, stronger. this is a massive change in

attitude which had taken place. all he was doing was telling me about how the attitudes had changed in emerging markets. that a decade ago when we had to sell e americaing markets. nobody was going to listen to us. everything was cheap and the place appeared to be a mess. and now a decade later, any sort of country with an emerging america market had a hype around it. that's when i decided to write the book. the idea of the book was that if you look at economic history, you dis-- nearly 40% of the global market. you can't treat them asen entity. the differences are incredible. the countries in africa a per-capita-income with $1,000. you have large economies like india with -- [inaudible] and you have korea with income of $20,000 plus.

in the middle you have a bunch of countries like brazil, mexico, turkey, russia with a per per-capita-income. and china things have changed dramatically. the per-capita-income is $6 ,000. if you look at economic history, typical when countries get to the income level, [inaudible] evaluation it tends to slow down. in china's case, china exactly what japan was the 1970s in terms of economic development of korea and taiwan was subsequent in the 1980s and 1909s. to me like something happening in china as we speak and yet,

the such that the moment you speak to people the china -- [inaudible] because it projects the next five years china more than 8%. and you have sort of game which i find very which it will be 2018. 8% gdp growth. in the future. appreciate a little bit. it's only a matter of time that china overtakes the u.s. economy. this is completely ignore the the fact if you're going through the -- economic history that offer at this stage of economic development things get -- [inaudible] separate concept and a debated concept. i'm talking about a middle

income deceleration. i think that the -- [inaudible] world is not prepared for this especially some of the commodity porting countries. they massive back to the, you know, like in the arguments about how the world is running out of everything from oil to corn because they are doing supplies aren't keeping pace. if you look at the 200 year history of commodities. it's a consistent. one decade up, two decades down. and you had that one decade up. and the reason for this is that even demand increased continuously over time, the human inbeginty in terms of innovation and other factors are another sub city the cost of production and the commodity prices over time. -- [inaudible] tell people that commodities are the class compared to stocks or

bonds. this is the worst performancing asset class. it should be why should people sort of make too much money essentially digging dirt out of the ground. that's what i think the commodity business is. [inaudible] i was looking at the thing that a decade ago the number of billionaires who came from the sector represented about one-third of the -- [inaudible] today the number of billionaires coming from the commodity sex or it are more than one-third of the global -- [inaudible] of the world. bill areas out there. as i that sort of gone -- [inaudible] in the i try and come up with some rules. ic that the have done a good job of coming up with, you know, the all the academic stuff which is in terms of the quality of institution, education,

education matters and all sorts of matters you need investors who pay attention to feely stuff. the four-seasons index. we get to travel the world and stay in the four seasons hotel and often you look at the price of the hotel and company in doing business or not. i find it shocking when you get to russia, you pay for higher room rates there $1,000 a night. and you're like in places like east asia with, you know, are better with the china or korea or south asia, indonesia, thailand, philippines you pay about $300 a night. and to me, this is a problem -- [inaudible] appreciated massively because of the commodity boom and the fact that the interest rates are eeltively high leading to a huge

amount of capitol -- capital. nobody is producing much in brazil. even though they have a commodity bomb to back them up. shudder to think if what happens to them if commodity prices fall which i anticipate they will within the few years. i can see it as problem same thing for russia. a decade ago, the price of oil was --..

>> in is a problem with long term forecasting as well. the 1960s of the greatest institutions in the world say the next east asian would be asia and sley lain cay. maybe we went there, but i turned to philippines because i saw there was a lot of angst there in society, they had been asked by releasing east asian countries in terms of their capital income, and for them, the time nail in the coffin was

indonesia to be a greater country than they were. you find out they with trying to have a leader out there more focused on economic reform and delivering some sort of an investment in them again, and that's what is positive about the philippines. what i see here, for me, the destination is more important. it's not as important as the journey. the journey is more important. if they are doing it alone, they need to be flexible and not be locked into views for too long. another thing i have contempt for is long term forecast. you know, like, i say in the book that the older tool for forecasting is make as many forecasts as possible and remind people when you are right. the now nod elf forecasting now is forecast out in the future that either you or i will know who is right. you know, i hate to say that, but, about, you know, what happened in the world in 2020 or

2050. who cares. who will be around to figure that out? i do this, too, and we live in a practical world. i wish i could find a client who would check performance in 2030 or politicians said, listen, you elect me in 2035, i'll deliver then. the world does not work on that. the entire business, the books, you know, it's staggering that, you know, something happened in the year 1400 or 15 hirks, and therefore, that's a good guide for us to tell what happened 20 years from now. you know, again, there's no practical value. what we try to do here is to try to sort of forecast the horizon which i think is maximum a day-to-day and be flexible about it. that's the problem with acronyms. i see some of my counterparts and others listening and turning all the time, like brick, you

know, because in their defense, russia, too deep, already an acronym now. it's hard to drop on that, and completely into the stuff, but the whole concept i put out here is that you got to sort of figure out who exceeds expectations, and which ones disappoint and be flexible about it. you have to have rules of the road, and it could be the index, and some involved in assessing as to which country had their backs to the wall and willing to reform. some of them are political rules, a little of control, argument over, like, being objective is it does not matter what's your economic system, which is that i looked at about all the cases in the world over the past three decades and

figured out what was a political regime backing them? was it a totalitarian or democratic one? at the cases i looked at, it was 50/50. it didn't matter the system backing it. how good the chinese model is because of the modern control system. really? want a system that works, i show you one that does not. the biggest disappointment has been vietnam, the next die know of the region, and tough to form that prematurely, and yet, they try to copy everything china did, which now have results that are disappointing from inflation and economic growth falling rapidly from the highs they had three or four years ago. what we need is flexibility, some sort of rules about what works and what does not.

the last nation, which, i think paying attention to is expectation. expectations are really key. people ask and say, listen, fight for china or india the break out nation although you expect the growth rate to be okay. it's growthing faster than the western world and china that much faster, but to me, if india grows down now to 6% and china is below 8%, and the domestic rule in those countries is oblique. india, this morning, i was watching a debate on television, and it was about the fact that is india, you know, like, aggression in india, question mark. it's growing 8% to 9%. expectations are key. what makes a breakout nation in the country to exceed expectations because that's what

the politicians, the investors, the business community has come to expect. they grew at 5%, and for a country with per capita income of $1500 feels like a dpreption back home. same thing with china. china's economy, i think, has been a remarkable success, and the economy now is just maturing because it's grown very quickly, and 120 million chinese move to open areas over the past decade. they reached 50%, and things slow down. the number to move over from the coming decade is a fraction of what happened over the previous decade. things naturally slow down because of factors, but i think that what people forget is the fact that economies tend to slow down naturally, and yet, when you ask people, like, in my

community, questions like often asked is does china have a hard landing? define a hard landing? 7% growth or less. that's what happened. expectations get inflated. disappointed with expectations it feels as if it will be a real problem. that's what's happened with emerging markets and a decade ago, if i had emerging markets, a lot of what i'm qualified to do in the midst of the tech boom here in the u.s., they had emerging markets to get them started from the u.s. because nobody wanted to listen to that. by the middle of the decade, we were at the stage where every man and his dog had money for emerging markets. at the end of the decade, just a dog will do. what happened is we are assessing ourselves, and the

emerging markets and go back to distinguishing them on an individual basis, and, for me, using the book and when there is no wind blow, which is you just do not expect it like you did over the past decade when money was really cheap and starting from a low base catching up after the poor performance. each needs to reform and come up with their own sort of agenda to try and catch up with the developed world. that, to me, is the main outline and the main argument of the book. happy to take any questions after this. thanks. [applause] >> thanks very much. it's my pleasure to introduce a friend of my at the cato institute, and a senior fellow for prosperity and a regular

columnist at the times of india and at the economic times in india. he's been the correspondent for the economist magazine, author of the book called escape from the zoo keepers, collection of essays, and he's a very prominent and freaked commentator -- frequent commentator in the major media. please help me welcome him. [applause] >> well very good. there's all kinds of up sights, make you laugh and think of things earlier. apart from being a muslim banker who in india, but whenever there's this election, there's a bank of journalists who don't

listen and we watch the elections, and then we have a vote on how many votes is this party going to get, who is going to win? let me tell you over the last 14 # years, the guy who got it right most often is not typical 1% of the wall street guys forecasting. must agree with him, this book, i mean, certainly, you had this enormous boom over the last decade, but this was something utterly weird about it. we had that situation where the rescue of the bad economies, there were no bad economies so the imf had nowhere else to do. we got in the situation with the imf to back stock, and we have nobody to lend to. why did you have nobody to lend to?

the united states ran up the human deficits, and everybody else was -- it's obvious to somebody that this cannot last. should be ringing out there. i was very clear, you know, india's 9% was unsustainable. you in africa went from 2.5% to 6%. it's no great deal. we are under performing everything. i was not prepared, and what number -- you wrote the book a year ago almost. had he made the predictions about the world slowing down, going down at that time it came out, and sometimes it's all progress, and we discuss the slow down, the commodities as predicted already happening, very clear. this presentation seems to be

left out important things, which are in the book, and i think, you know, it's worth mentioning some of those. most interesting prediction that he makes is that of the two guys who are going to be the breakout nations, very important ones, are going to be islamic democracy, indonesia likely to be the break out nations in the next few years. this is interesting, not just from investment points view, and the idea of civilization. foe cues on the middle east, i understand knee sha has more people than the entire middle east. that's where everybody are. middle east. huge area of this, and if you just concentrate on the middle east, you don't understand what this land is. what happened is because money

was there, those countries like bangladesh and 6 million people, mostly muslim, but they are poor. indonesia had 200 million people, the numbers were there. in a sense, you can all make success of the middle east with the countries. come up with them into a leadership role in the islamic world, and addressed, of course, by the fact that the holy traces of islam were in saudi saudi ar. that had a consequence. the consequence was that even in bangladesh and indonesia, women began to have head dress. that never happened. began to have an effect in all areas. if right, if we are now going to see a fall inned commodity prices -- in commodity prices, it will

shrink, there's budgetary trouble. saudi arabia gets into trouble if the price fall below 1700 or 1800. he's right. there's going to be a situation where the oil producers in the middle east that lower the level in the islamic world, and they are not going to rise, fundamentally secular, i understand indonesia is fundamentally secular. if that happens, there's results infinitely more than american adventures in iraq, afghanistan, or any proposed add venture in syria. also says that in europe is the czech republic and poland. not countries you immediately think of, but finds a large number of forms different from

others. they don't have high deficits. they become competitive, and other countries that may not have looked like outstanding countries in the past will do very well in the future. i think that's possible. of course, earlier on, the politics briefly, and the great recession in pretty good sthaip for the sake of the public. the reason why i think it could be wrong is the european banking system. now, the imf came out just the other day, and after all that happened, the banking system is still so over leveraged. it has to deleverage $3 trillion, $3 trillion. now, a lot of the money is not loaned by european banks or other europeans. they are in america, one more reason to be skeptical of brazil

and argentina, but this was significantly affecting central europe, and for this reason, i think that, you know, they are gung ho on poland and the czech republic. i think there's a close argue that the banking system collapses, the whole world is affected, not just a few european countries. i think the ecb rescues the banking system one way or another, but never to some of the potential benefits. i think in general, he's right. there's been a huge boom with everything going up. it gave a shame to brazil, argentina, and russia, which will not be defeated, and thinks, you know, one good commodity by two bad ones, and i

think he's wrong there. i think we have to -- the reason i think he's wrong is what we have today is an tension environment, a tense environment that does not allow -- never been done in history before. every wanted to -- all kinds of areas with oil. you only have the united states, which banned all drilling on the east coast and west coast. there's only three states that allow drilling for it at all offshore. everybody else say no. now prices go up, and another large gas bubble, and there was a bubble, okay. you know, we don't want oil polluting and willing to drill for better pollution. incredible rationing, yeah, and

how do you know -- [inaudible] environmental conscious for every other kind of mining. put a new mine in many countries, and you have the third largest reserves in the world, but because of problems in -- india is now the biggest importer of oil. i wrote a column says just europe import oil for the same? massive import because of the environment, and so in for this reason, and except i would agree

with him that that's in the united states, and technology can be chi that -- once again there's an expert and all of that. prt opec countries i feel not good at all. only if they are constrained, you know large commodityies because -- [inaudible] so so i think talking in india and only doing 5% or just 7%,

but, you know, it's the political field, reluck at that particular time to respond. many other things have gone wrong at the same time. the great recession, and 6% or 9%, and the two subsequent years and so now you are suddenly slid down to one year, 6.9, and what are the fundamental to the euro. i don't think they can. again, i think it's quite dismissive in the book about india's so-called demographic. india's a country which usually have a problem with operation explosion. that's being renamed demographic dividend. you have too many guys. somebody think, wow, you have an expanding workload.

population boom, and the one size policy, and a complete split, and the growth, especially the working group, the working age, growth very slowly, and india, working up to 300 billion people next year. it's not just all the people. what is the number of work force? and the people are in the work force. and india, i believe, is only 39. look for those, doing much better. china is doing it at 3% and only

39%. i mean, what is the thing that happened in india and why did this happen? and say the working class people, and middle class and india. well, as i india rise p, others- risen, others withdrawn. ultimately, the demographics struggle as women get more educated and they re-enter the work force and grow. i do see very major benefits coming for india in the form of demography. that is a find. the other thing he does touch on in the book is a question of

catch up possibilities. the ability to grow up and catch for some time is quite high. india's not only a poor country, but catching up chances are high, and there's only 1700 per capita. we will catch up possibilities. within india, we have a large number of well below national norms. they have 200 million people. had it been a country with one of the largest countries in the world, and though grow as 3% or 4%. this grows as seven something. the back ward state we had is beyond all redemption is at 11%. india has a modest problem, and rebellion, and thigh can't go

there, which seems to be the problem in india. the biggest, smallest problem is ultimately nearly backwards. the one decade grope at 10%. catch up possibility of india, and with the advancement like -- [inaudible] i do believe growth is somewhat better than what is the existing 5% or 6%, and the national "wall street journal" thinks it's quite a good investment. thanks. [applause] if you have a question, wait for the microphone, identify yourself, and who you are asking the question to.

you have really good -- have you been to egypt, and what do you see for egypt? my second question is you mentioned in india, and where do people go now with their money? [laughter] >> it's a country we were warming up to before the crisis, and the political crisis in like in 2010, and because i remember this meeting i had with mubarak in 2009, and this is march 2009, a year i was going to a conference that would be there, and i met mubarak at a meeting there in march 2009, and there

was so much talk in the world about the end of capitalism, the end of the free market because it was in the mix of the financial crisis out there, and i ask what do you make of this is opening up globalization, but there really was a fear back then, and what he said to me something, struck me, and said it at a great time, because more optimistic of the world back then, said that the problem here is not that we need more regulation, but better regulation. he said there's no turning back. for the people like us in egypt, we still remember the bad experience we had with socialism for so many years out here. there's no turning back. as another naziism -- beginning to open up the economy again. that give me optimism that that part of the world would shut

itself down and globalization we -- reduce and that this is going to gets better. egypt's disappointed subsequently because the political change and i still see egypt having a chance. when i was in turkey last year, and i was spending time with the turkish leadership, and they tell me it's impressive even the muslim brotherhood in turkey would come to them to ask for advice do like turkey do. turkey would go down the islamic fundamentalist way when the party came to lead a decade ago, and yet they focus on economic reform and have the hard line leadership agenda. i still think they are in a mess now, and nay have to sort this out, but if you -- and i have no money like in e just a minute, you know, like, getting burned

like in the year 2010, but i say that now looking at it, and on the mystic road map for egypt going down the turkish way taking their advise, despite criticism because a decade ago, the same fears existed about turkey. i think at this point that was made, and if cur key and indonesia emerges brake out nations, the economies in the world today are the size of a trillion dollars. if they join, next two ones, what may forecast is in the next three to five years, everybody has effects including for egypt.

[inaudible] the business boom -- [inaudible] >> question in the back. >> my question was based on the concept of human rights and developing countries, and as the u.s. loses, i guess, you say its economy in global markets and some of these more emerging markets gaining prom nans, how would you say that our relationship either with hard power or soft power will change towards some of these countries that may have historically, may have historically had issues with human rights, repression, ect., and personal liberties as well? how do you see our relationship with some of these former dictatorships and just, i guess you'd say repressive democracies as you might say? in the future?

how do you think that that will change? >> basic point made is the fact that i don't think the u.s. sort of listened, and i don't think the countries influence them, that much the u.s. was seeing at any point in time. over the past two decades, high growth examples came from the most repressive, anti-democratic kind of regimes. subsequently, oil matured and became democratic, the taiwans of the world, but my point is that i don't think either the u.s. influence on these countries has been that great anyway like to go by the last 20 # or 30 -- 20 or 40 years, and all freedom of enterprise, freedom, ect., but just very hard conclusion is that, to me, that does not

matter for economic growth. it's basically 50/50. it's the quality of the leadership at the top that matters so i don't see this as a game changer in any way or u.s. declining in the world changes the comic systems or human rights anywhere in the world. these countries do exactly what they feel like, and i don't see that having implication on economic growth either. >> we'll take a question in the center right there. >> [inaudible] >> verify yourself. >> thank you. africa fits into your description. one theory is there's the economies, and the other argument is no, it's a commodity boom, have not reformed, not yet in the basic supply chain and so on, and india itself is trying

to play a bigger role in africa, but the chinese seem to get all the headlines despite the great effort by the indians. it's a two part question for you. what do you picture africa in your picture, and, of course, is india really going to play a role in these countries or going to be a chinese decade or chinese 50 years, i don't know. those are the two questions. thank you very much. >> yeah, the first thing i think the biggest thing africa suffers from is generalization. that's what happens. africa is the economy, and i think you're right that a lot of the -- a lot is driven by the commodity boom going up and down, and the example is this that the economists, they invest of great value, the magazine, because it's out of great value. i mean, if you look at the economist like a decade ago, they had a cover story that went to the hopeless continent.

you know, when prices were absolutely at their low. three months ago, they had the hopeful continent because commodity prices, i guess, were high. in after ri -- africa, they suffer from regime -- generalization. you have to take economies one by one. like in africa, one economy, i do feel optimistic on nigeria. this is one economy that's exposed to commodities. how come? my point is that in nigeria, they went through such a time of discovering oil, and then it was before, and the problem is the political leadership of extremely poor in nigeria. first time they got somebody out there, because that's in the history of nigeria, and that's part of that. concern to me has got to be a case-by-case basis and study countries individually, and be

cognizant of the fact that some economies are better than they are. to me, it's back to the economic and political management of each country rather than making generalizations about africa, which is what i think a lot of us seem to do for that continue innocent. >> they have consolidated the problems, and i think probably has considerable good prospects prospects -- [inaudible] for us, indians and the chinese. the presence always in africa because along with the british and set up -- business people

and they were much hated by the locals, and i indians and africn countries became independent, and indians were forced to leave one way or another, and businesses in tanzania were nationalized, and doing things and huge bias. chinese didn't suffer from that because the chinese basically were not there. okay. in the last seven to eight years, chinese went in a big way with investments. it has made them important. it certainly has not made them liked. if you want to build a chinese road, they bring in 5,000 chinese labors from china and not really -- the world bank,

which earlier tried to do using local level came upon many of these projects, and it's for various reasons. project after project of building roads in the congo, and then the guys need assistance and more money was given to that assistance, and then that disappeared. people worked on the problem, and just want to swallow money and not build roads. that's the real why why -- that's the reel -- real reason why the roads don't get built. it has helped them, i'll say in some sense, because they got in a time of prices, and if commodity prices collapse, a lot of things look less interesting than they are right now. china has large surplus.

question is what you do with this? american treasuries at 1% or something else? i think part of the investment there in africa has been a form of diversifying. india, on the other hand, is much, much smaller, less than one-third percent of gdp. all it does to the extent that we want to export them after nay go form. they are willing to give credits back, and all the credits now i'm told up to 5 billion is available, but it disperses very, very slowly. on the other hand, some have gone back. the big global giant and took it away, and all this called, and

there are few examples like that of the successful entry, but by age large, there's no competition. they are over your head. >> question right here. >> international my quick question is what do you think of the level, rising levels of turkey because i know you are talking, well, about the economy, but i am worried about that. >> talking -- [inaudible] gdp ratios improved significantly from a decade ago. >> do you feel that way? >> yeah, i mean, i think so. it is app issue in turkey, and the whole issue, but i think the

party is by the fact this is one emerging market which has zero commodities, zero, and i think a lot of that comes on, but turkey's overall indebtedness, not concerned because i think they did stabilize it, and growth has been rapid, and there's some signs of poor leading on that front, but oil indebtedness in turkey remains pretty mangle. >> there's a question in the back, please. >> [inaudible] first question. what's your take on the middle income path? i know you spoke about middle income exploration, but vietnam, brazil, russia, take your picture. anything mentioned in the book? where's the next growth going to come from?

question for you both. >> well, i think that my point about broke outs is to identify what countries do better than we think and worse than we think. average growth forecast emerging markets is 4.5% to 5% or so which is reasonable, but it will be high. i think other countries are optimistic in exceeding expectations, ones i mentioned, which is indonesia, thailand as a political situation there, signs of settling down, and i think that many of the -- i think turkey is reasonably well. india, china a concern with the growth rate remaining high and a basis of the western world and what expectations are with a lot of that. i think adjustments slowly happening as we speak. the frontier markets also. you can see nigeria like i speak about. i think in south asia i find

that sri lanka benefits from a peace dividend, and there's markets out there to do well. the explosion is wide, but will be broad coming from different places and locations that succeeded. >> where does the money go? >> i think what india, i mean, the risk now is -- >> do you believe in the notion of the middle income trap? >> i think they know better. we looked at it for the problems of the book and the problem with the income track is is it is so wide you can drive anything through it. look at the economic development, countries suffered an income trap after being at just 10% of the per capita income level of the lead economy, and others suffered # 30% or 40%, and others like from argentina, venezuela, converged to 60% per capita and then began

to regress. i think the problem with this is it is a lose concept covering a huge range, and to me, all it's suggesting is some level, things begin to spoil, but there's no point to identify that. >> likely to stall for commodity exporters. you know, there's been huge increase, and when that happens, the regions get blown up, and you have a situation like latin america or eastern europe where on one hand, we're not as productive as america and clients not as loyal as india and china. i was in south africa talking about education and said the blacks have been left behind.

white germings earn 200 -- engineers earn 200,000 a year, 17 years of education, and then they learn, and what happens when they have to compete with india willing to work at 20,000 a year. she turns to me, and says i don't want to think about it. these are the problems. the problem is not the productivity. some of the low rate countries work with the middle income countries and will continue to do. >> i'm not sure i buy that argument, but i have a question for rich here. what about argentina suggesting they are not doing so bad. look at the growth record, and the people who criticize them for policies are practicing bad journalism. we have been criticizing the policies for a long time

suggesting this can't go on. what's your view on that? >> i mean, i think that, i mean, lucky for me, like it's too small, it's been like sort of like fallen off the cliff, sort of become an economy of who cares about, but i mean, to cite argentina bad economic virtue -- one thing is look at the growth rate at superficial level, but what about inflation as well? the growth rates falling off, and like any economy, you know, like improve four to five years, massive expansion in the debt, and play off that, but in argentina, what's happening today, is the low inflation world and high inflation, and bigger tags on the poor than having a high inflation rate, and everybody knows the inflation rate does not even be effective for what's going op out there. i mean, like it's a jerk in the community of argentina, and

anyone who wants to quote that there, i mean, to me is coming from the extreme. >> question in the back. >> hi, i'm -- [inaudible] i have a question. you know, the indian market is well, and you probably agree with that; right? how's it fit in with elements of the book talking about commodities and aspects of your talk, but how do you explain the indian stock market given the contents of your book? >> it's not different in terms of volatility. i think markets have found is that getting the gdp growth in dollar terms is important in terms of predicting how the

stock market do. it's leading the trend on what's going on. it talks about the fact that indians, like they have a chance to be a break out nation are 50/50. you know, i say 50/50 on that. as far as stock market is concerned, the problem is that it had growth expectations built into it of 8% to 9%. coming down expectations built into to 6% or 7%. depends on what you your pick is. if is grows at 7%, it's a buy, and if it's, like, gdp growth fall below that, the stock market is going to fail. i mean, i say that on most countries, like in the book, and even in the portfolio, i have a strong view. india's the only one that i'm 50/50. >> okay.

we have time just for a couple more questions. we'll take two questions at once. one from him and him, and then we'll let you answer both. >> thank you very much. i'm ty o'neill with the national journalism center. >> speak up just a little bit. >> sure. i'm tyler o'neill with the washington beacon, and i'd like to ask the question, the elephant in the room. earlier on you mentioned you think the united states and germany, western nations, will -- that they have a bright future ahead of them. what makes you optimistic? >> okay, sure. >> we'll take a question from him, please. >> i'm -- [inaudible] i'm with mei, and my question is

have you factored in going forward geopolitical factors into play? for example, fragments of the harsh counterparts, have you global destabilizing factors into your predictions? >> right, yeah. the first question in terms -- like the book, i'm relatively optimistic on the u.s.. i think the whole point here is about expectations, again, that after the great financial crisis, the u.s. goes down the part of japan with a long period of stagnation type scenario. what's beyond that is as far as the u.s. as far is concerned, ts how i conclude the book. i go down the world, and come back to the u.s. as not being as

bad a place as it's made out to be. we touched about the whole oil boom taking place here, and, in fact, oil supplies on the upside, and u.s.' foreign energy dependence declining on the last five to seven years. this is related to another point about technology. the u.s. continues to remain its lead op, and this was shown by the facebook ipo last week, remains on the culting edge of technology innovation. anything new, like world defining still happens in the u.s. from cloud computing to social networks to, you know, like the iphones and other things because one part of the global in the world takes place in the u.s., one-third, and i think that's a very high number, and it's very different from the japanese because once you know the japanese also come out with

sort of products, and they seem to be much more sort of focused on their own domestic market. it does work that well in the global market place, but u.s. production, comes very well in the foreign market space as well because of the society, i feel it's compared to jay pap. the other part of the u.s. is just how cheap the space has become. the u.s. dollar today is the cheapest it's been in history. if you -- if you just, you know, the inflation, and i think that's -- that's why we are # seeing a manufacturing in the country with jobs moving back in the manufacturing sector because europe, the fact that growth is very low. the fact is the lower wage drop, a cheap dollar is leading to sort of, like, you know, a slow survival in the sector, and it's growth in the other countries,

especially china being rapid over the past few years, and it's in five years time. what's happening is there's a big difference taking place. the chinese currency appreciates and rises rapidly adjusted for productivity compared to what's happening in the u.s.. these reasons are why i'm optimistic in the u.s. systems side. i think as far as germany's concerns, i mean, the same reasons that, you know, i think that it's got not any of the accesses from the other countries in europe, the german banks, otherwise, it's not there. the corp -- currency is super competitive and helping them out in productivity, and that's optimistic. relative to expectations with the u.s., the u.s. as it grows from 1950 to 2007 was 3.5%.

we don't get back 20 that because -- to that because indebtedness here is too high, but japanese are 1% as well because of the facts i just pointed out because of technology and more open society and cheap exchange rates. last question, and i've taken into account political leadership and nigeria, and i write a book because the predictability is so, so limited. nobody sees them coming in any which way. hard to forecast economics and political regime. i talk about politics in the book how the average life of a political leader at the top is seven to eight years, and we begin to make mistakes after that, and that goes into that, but it's the geopolitical fog tore, and there's such discontinuous events to forecast them and that's really difficult.

>> germany versus u.s., i have no in and out germany comes out on top. main reason is germany has good brains, but only german brains, not from asia, china, or anywhere else. u.s. is a great country despite the lousy education system. all the dice come from india, england, and silicon valley, 50% are indian and chinese. the reason why america is on top, i mean, i heard of this discussion back 30 years ago, american and guy from singapore, and we all going to overtake you, and they looked balk and said we will win because this is our -- there's no other countries where this stigma could be made. that's a u.s. advantage.

in the geopolitical thing, they have the eurozone, and i think that was a bad idea, but there's so much political capital in it that it's going to be long and difficult to take. i think europe will be up to three in no time. >> time will tell if your predictions come true or not, and some of us will try to remember. we've run out of time i'm afraid. please help me thank both of our speakers. [applause] >> since i am a sike analyst and not a political analyst, i will not predict who's winning in

what makes it a disorder is that it becomes the driving factor in everything he thinks and does so he ends up, obama ends up negotiating with himself before he even negotiates with the public, and that's one reason it's a problem, and the second reason is that he thinks, and we'll get into this later today, is he thinks he can reason with people who actually are not interested in reasoning with him. they are actually only interested in defeating him making him a one-term president. he has a fantasy he can reason with them, and if he just says it the right way or gaves them what they want, they can get along, and that's what makes it a neurosis.

the thing about eisenhower reminds me of something that was said -- i was not prepared to talk about eisenhower particularly, but in 1956 in the second election, they talked about segregation and integration. i don't know if you remember that or read about all of that, and stevenson said that he thought that immigration in the south should take place gradually, and a southern democrat said he thought it should take place moderately, and eisenhower proposed a compromise between those two extremes. [laughter] that's my view on eisenhower. [laughter] >> very good. i wrote this book really because

obama was a man who blazed across the national scene in 2004. i heard of him before 2004 because my son, gabe, was a student at the university of chicago, and he called me up one night after a speech in 2002, and obama was still a state senator, and he said there's a guy who sounds like a sike analyst, dad, talking about putting yourself in other people's shoes, and he said, i don't remember his name, but he was pretty cool. well, in 2004, he gave a speech, which everybody knows, which is when he talked about he doesn't see red states and blue states, but the united states, one country, and it really struck accord with a lot of people who had been feeling about one way or another the elections and the stream court, and there was a

lot of division in this country, and people really rallied to him as everybody knows, but it turned out in retrospect that there were two obamas, not two americas, and that after he became president, he was very different from candidate obama. everybody who is elected is going to be different from how they are running for office. you can't keep all your promises, but in his case, is seemed like he was more different than that, especially when it came to issues about negotiations, issues about appointments, issues about backing down on guantanamo, closing, ect., and also on the people that he hired to work for him in the beginning which were all a lot of wall street experts in the clinton administration part of the economic disaster that had been happening. i decided i would try