year in knowledge and power. >> for more information on this and other summer reading lists visit booktv.org. >> which countries will make up the economic success stories in the future next on book tv. this is about an hour-and-a-half. >> welcome to the cato institute. i direct the center for global liberty and prosperity. everybody is always looking for the next economic success story. in the 1960's and 70's that was supposed to be brazil. at other times it has been the ivory coast, mexico, kenya, venezuela, and a number of other countries that have turned out to have less than stellar performances. instead, they sometimes surprising list of countries in the past couple of decades have pulled ahead, including georgia,

india, peru, and estonia, for example. professional economists and investors, political scientists, and all sorts abundance are not particularly good at predicting success for that matter. many are not even good at looking back and explaining why some countries have succeeded and why some have failed. the inability to predict the future is understandable, since that depends on all sorts of complex factors and also a very frequent, arbitrary decision of politicians. there is, however, such a thing as detecting patterns of development and causes for growth. we at the cato institute have done quite a bit of work with our friends and colleagues at the fraser institute 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 empirical 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 detail about a particular country's circumstances and an eye for relevant information. i am pleased that today we have the author of breakout nation's, pursuit of the next economic miracles. it developed precisely those skills to combine egg good sense of what is a proper policy environment with "final victory: fdr's extraordinary world war ii presidential campaign" observation about what is going on inside of the country in terms of politics, social attitudes, economic trends, and 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 some unexpected conclusions. warsaw's business culture, for example, is fundamentally different than that of moscow's. vietnam is not, in fact, following in the footsteps of china as many people believe. business cartels explain why mexico's markets are high, stock market is hot when its economy is not. the future may look brighter than many people think in the united states and germany. a breakout nation is a reminder that understanding the development process requires a lot of judgment about which intelligent people can disagree and that development cannot be understood by taking a technocratic approach. all the more reason why we should be skeptical of grand schemes coming out of aid agencies or other sources claiming to have the answer us

to the world's very diverse set of nations. fortunately it is not suffer from a messianic approach. he just offers rules of the road, which i think a very useful. let me introduce you. i'll allow you to judge for yourself how sound is evaluations are. the head of global emerging markets and global macro at morgan stanley investment management. he is a columnist at newsweek and writes for publications like the wall street journal and other leading newspapers around the world. he is a regular contributor to the economic times in india and has been writing financial columns since the early 1990's. please help me welcome. [applause]

>> thank you very much. it is a pleasure to be here at this institute. until this is the first time for this auditorium as well. abcaeight. it's a delight to be here. as he mentioned, i have been an investor for nearly two decades now in the developing world. i try and spend about one week each month in some country. i find that at least for me there is no substitute them to be on the ground in some country and to meet with all the people that are various players from the top government officials to corporate ceos the local investors. and that is what i have done for nearly two decades now. try and put a formal view on each country on a continuous basis. i have been a writer for longer

than i have been an investor. i started writing back in 1991. i started out back in india. and those days when i first target out to right, there was very little interest in india about what is happening in the rest of the global economy. and i had this idea back then about writing a column exactly based on that. i was pretty young when i started out, but precisely because nobody else was interested in talking about the global economy i managed to squeeze my column in, in large part due to us the negligence. because even the editor back at the economic times. so i started out writing then. if finally, after nearly two decades of riding d'agata read my own book. that is what this effort led to. as spent much of last year putting together all my talks about various emerging markets and tried to write something in the form of an economic

travelogue which is sort of the impressionist views of each emerging market, but a lot of it is also based obviously on some economic observations as have gone around those countries. what got me to write this book is partly a big idea. you want to read a book. i always felt that you need a big idea behind it. the dignity that sort of struck me was in late 2010 in terms of what's going on. investing in emerging markets for two decades and had seen a lot of cycles. i had seen the phase where we started out. first started investing in emerging markets. there was a boom on in the mid-1990s. and then we had a series of crisis after that. emerging market between 1994 and 2002 were considered the problem child of the world economy. the crisis included the east asian financial crisis, the russian defaults, the argentine

crisis in 2001, and then it all started with mexico in late 1994. so that's the part of history we went through. and then there was this magical time from 2003 onward that every single developing country did well. from all -- 2003-2008. a couple of statistics. between 2003 and 2008 the average growth rate of the developing world was seven and a half%. the global economy and recorded history had never gone through such a time where so many emerging markets grew in such a synchronous manner. so the growth rate of emerging markets in the 1980's in 1990's used to be about three and a half percentage so. the long-term growth rate of emerging markets in post-world history was about 5%. we went through this time from

2003-8 where the average growth rate was seven and a half%. and the rising tide of countries doing well left no country in its wake. in 2007 the peak of the bone, 180 odd economies tracked by the imf, only three economies contracted. those were fiji, condo, and zimbabwe. who cares. and the history otherwise the the history otherwise is that in any particular year if you look back typically about 20 percent of the economy's report on-gdp growth rate in any year on average. around 20%. and only about one-third of economies are able to grow at about 5%. that is the spread in terms of what we got. 2007, the peak year. only three economies out of 183 which report a negative gdp growth rate. we had more than 50 percent of the world economy growing at

about 5%. so this is really a very exceptional time. the question was, what caused this? and then it led to a lot of myths about the history of economic development. what causes this exceptional time was these special factors. one was the fact that these economies were catching up. after a very poor performance in 1980's and 1990's. because of the poor performance a lot of the balance sheets had been cleaned up in these economies in terms of the macroeconomics finances that had been put in orders from indonesia, russia to the sort of pay down their debt. a lot of improvements to the macroeconomics fund. they just did not. so after the crisis these economies performed considerably and so they were catching up. the second most important point which i think is really underestimated. as you know, and the western

world there was a huge increase in financial leverage. and in overall indebtedness. and a lot of that liquidity flew to an emerging markets as well. so we analyzed about a whole lot of that creativity has created a housing bubble in the u.s. or other problems in europe in terms of the housing boom. also, a big slide of capital to the emerging markets and lowered debt risk returns in terms of what it takes, the cost of capital, rather, and the very strong demand in the u.s. help the triggered a big export boom. so this combination of factors of catching up from of very bad time in the 1980's and 1990's, global liquidity restored the cost of capital. also, the fact that the u.s. consumer was reasonably strong and a big source of explosive

emerging markets help with the growth rate of emerging markets to these exceptionally high levels from a 03-08. now, after the crisis happened in 2000 and 2009, some of these emerging markets were able to use some of the un spent bullets to try and keep demand going for a while. so, like, that with india, china. a lot of stimulus was put into the pipeline to try and keep demand going. what is happening now is that many of these countries are experiencing their own difficulties and growth rates across emerging markets are slowing down quite a bit. i think this is what is setting the stage for a very different kind of outcome now. i think we are reverting to the old emerging market experience. there will be some. this is not going to be the exceptional time that we had

last decade where every single emerging market recorded high growth rates on the back of easier liquidity. they're rising tide of global liquidity is no longer there to lift every single emerging market. and i think that what we need to do is start distinguishing. the long history of economic developments is that there are more flops that starts. failure rather than success is the rule. there are sort of spending this time, as you mentioned at the outset, one good ticket for any particular economy or region. then that sort of economy falters because they fritter away the gains which come from the boom on the stock reforming. they take place in societies often when they have their backs to the walk. that is what will happen.

development as a being a process. you sort of go up some, you get bitten by a snake, you come back down and start all over again. some get lucky. they're able to leap and make it to the top. the agreement -- the game of extrapolation does not happen. you go from the bottom to the top in a straight line. that is exactly the kind of belief i think they got built over the past decade because so many emerging markets did well. and that was captured in the fact that these acronyms became very popular. the most popular of them, of course, was brick. why did that become so popular? it captured the imagination as it was the four largest economies in the world. i'm sorry, in the developing world. and because every single emerging market was doing well it seems break out the maximum spotlight on them because they were the largest economies. they were all sort of growing above historical averages, so it seemed that something special

was going on. but this went on and on. after brick we have something called the in 11. the most ridiculous one i had heard was something called phillips which is some cat named. the only reason why this was because it sounds good. the countries that were truly, including colombia, indonesia, vietnam, egypt. all countries have nothing to do with each other. the package it well. a good marketing term. these things worked because every single emerging market was doing well, no matter what acronym you created. it sounded to be sort of very sexy because everything was flying. that is what was going on by the end of the last decade. now, i am in in the emerging market. my interest is to sort of go out there and sell emerging markets. a lot of people are willing to buy this argument. emerging market. bound to grow faster. that is where the opportunity lies, but more often and

diversify that way. that is you're sort of road to becoming rich. but i find that as someone who has invested for many years, the contrarian frame of mind, you don't go with the herd. you basically distinguish and see what is the flow in the conventional argument. and a couple of anecdotes which took place in late 2010. this is with told me that this trend is gone too far. this trend also will go down the way that many other trends have gone, which is they become very popular for one ticket and then really continue to be popular in the subsequent decade. the 1990's, the big fat was technology. 1980's, the big fat was such a panel will world. the big fat had to do with all their resources. inflation was the thing that we were all concerned about. in the 1960's it was all about the u.s. and the nifty 50, as we call the. the capture the imagination of people.

politicians and investors. by the time that everyone buys into it it tends to run out. so a couple of adjectives which happen in late 2010. well, one was -- i had gone back to india. as i frequently do. i was invited to one of these fancy parties on the fringes. they call these farm house parties. the farmers of delhi have long left. the farm houses, they got these land concession rates still exists out there for many of the rich to have their fancy sort of homes out there, mansions which have also some fancy features. and the one that i went to for this party at our railroad running around it. part of the extravagance. he would ship to all over the world. it is a complete atmosphere of decadence. here i was at this party in late 2010. i got into a conversation with

this young 25 year old. he was a typical deli type wearing a tight black t-shirt, hair spiked, gelled, the son of what they call to be an exporter. a guy who is making some money on the quick. and so this guy had only worked with his dad, 25. he sort of chats with me for a bit and ss is me and put the figures out that i am like a global investor who is backing in the looking for opportunities in these that's what he was to believe in. he goes to me. where else does the money go? and such overconfidence. you know, that the west is in decline. the money has got to come here. rouses point to go? a lot of us came to believe. the money is bound to flow to these places. that is where it's got to go. this along with another and to

really set the scene for this book. the other and to is that i went to moscow. a conference being organized out there. the prime minister wanted somebody to present to him at the conference about the state of affairs in russia. and then, the conference organizers and his office asked me that i would make a presentation. fine, i'll do it. there was, making this presentation. i did not know it would be a big deal. i met him before, but i here, it was being televised, the cameras are on. i give a very blunt assessment about l.i. was optimistic a decade ago when things were completely chaotic in values were cheapened people hated it. a decade later the per capita income was $12,000 russia

basically was regressing rather than pressing. just being reliant on oil and gas was not enough. some sort of a manufacturing sector or some new businesses going. so an investment, a pretty blunt assessment of how russia was doing. and, you know, .. was, of course , being very courteous. they're taking us down as if he was very curious. i found out what this was about because the entire russian media went after me. there take was, who needs your money? the boom in 2010. you know, the hell with all your advice. who really needs your money? and this sort of showed me how the attitude had changed as far as russia was concerned. i visited quite frequently over the years. and right there after there was

a client conference that we had organized. in that climate conference we had called the public president george bush to be the guest speaker. i was having a fireside chat with him in that format, like an interview for the audience. aston, what is it that you saw in putin? he lifted me in the eyes and saw a friend. he told me something which mirrored my own sort of change in russia. he said, how the attitude of putin had changed. when putin would first come to the white house back in the early 2000's he would talk about his death and how he is spending down his debt and what all he's doing. one of those visits, bush introduced into his talk,

barney, or whenever. putin lifted in did not react much. he said at the peak of the boom in 2007 he went to moscow and tune in to come -- putin took him. by then his confidence was huge. he was believing that russia had truly reemerged because of the massive bill that russia had enjoyed. and so he said that putin questions are much more about needling bush about the mortgage-backed securities and other debts which the u.s. had. and then come out of the blue katie goes to bush, would you like to meet my dog? okay. let's make your dog. out comes his dog, this big dog. he says, s.c., bigger, better, stronger. this is a massive change in attitude which has taken place as far as this is concerned. telling me about how seriously

the attitudes are changed in emerging markets. a decade ago emerging markets, no one was willing to listen to us. evaluations were really cheap. the whole sort of place appeared to be a real mess. now all of a sudden a decade later in the country with emerging market ties had a lot of hype around it. so that is when i decided i'm going to write this book. the idea of the book really was that if you look at economic history you have to it sort of distinguished emerging markets are now nearly 40 percent of the global economy. you cannot treat them as a homogeneous entity. the differences are incredible. you have countries in africa with a per-capita income of less than a thousand dollars. large economies like india with a per-capita of ten. then maria with 20,000 plus. in the middle you have a whole bunch of countries like brazil, mexico, turkey, russia with a

per-capita income of 10-12000. even china, things have changed dramatically. the chinese per-capita income level is now $6,000. if you look at economic history, typically when countries get to that sort of per-capita income level, obviously extreme valuations, growth tends to slow down. in china's case, china today is exactly what japan was in the 1970's in terms of its state of economic development. korea and taiwan were subsequently the 1980's and 1990's. now, these are the gold medalists of growth, countries that have gone on to successfully industrialize themselves. even the gold medalists of growth and is of slowing down at that sort of per-capita income level. and i think that that is got to me, like something what is happening in china as we speak. and yet, the angling bias is such that the moment you speak tech people in china and the

economy may grow. a lot of nervousness. even the imf projects china's growth rate will be more than 8%. and you have -- and the sort of sociological game which i find very quarrying is this thing about when china will overtake the u.s. all sorts of arguments which are going on around this in terms of 2018, 2021. all based on this straight line extrapolation, 8% gdp growth. currency will appreciate a bit. so in dollar terms it is only a matter of time that china overtakes the u.s. economy, and this is completely ignoring the fact that we have gone through this entire time in economic history that often at this stage of economic development things get much tougher. the middle income trap. a separate concept in the much debated concept. i'm talking about a middle income deceleration. the world is not prepared for some of this, it's especially

some of the commodity exporting countries. they have now come to believe that where it in some sort of massive commodity cycle. back to, you know, these arguments about how the world is running out of everything from oil said it reached a corn because demand is growing. supply is not keeping pace. yet, if you look at the 200 year history of commodities it is a consistent factor. one decade up, two decades down. we just said that one decade up. the reason, even though demand is increasing, the human ingenuity in terms of innovation and other factors in terms of drawing the cost of extraction and other subsidies which have brought down the cost of production and basic commodity prices over time. even non i'll let as -- asset allocation mixes, commodities is the worst performing asset class compared to stocks or bonds. this is the worst performing asset class, and it should be.

why should people make too much money for essentially taking third out of the ground? and that is exactly what i think the commodity businesses. the sociological signs of success are there. i'm looking at this thing, a decade ago the number of millionaires who came from the tech sector represented about one-third of the total number in the world. today the number of billionaires coming from the commodity sector by one-third of the total billionaires' in the world. so this is a massive price movement. inflated their fortunes in market capitalization of a lot of millionaires out there. so as a sort of go down this economic travelogue i try and come up with some rules of the road. think that the imf, world bank, and other academics have been a pretty good job of coming up with the -- like all the academic stuff which is in terms of the quality of institutions, education matters. rule of law matters.

sometimes as investors, a lot of attention to touchy-feely stuff. one thing that i come up with in the book is something called the four seasons in next. it to travel the world and stay in the four seasons hotels or the luxury hotels. often, when you look at the prices of these hotels they tell you whether country's competitive for doing business are not. you pay for high in the room rate that are a thousand dollars a night. you know, places like east asia, the currency game is much better figured out, with china, korea, southeast asia, indonesia, thailand, philippines, you pay about two, $300 a night for a similar a tolerance of. and this is very telling of the entire problem. it has appreciated to appreciated massively. interest rates are high. but the economy is getting hollowed out. nobody is really producing much

in brazil. running a current account deficit, even though they have a commodity boom to back them up. i shudder to think what is going to happen to them if commodity prices fall as i suspect there will in the coming few years? i think that could be as serious problem for the likes of brazil and the san thing for russia. russia, a decade ago, the price was $25 a barrel. paranoid. what, happen to us? they just suffered from that sort of experience in the late 1990's. today russia cannot balance its budget of $110 a barrel. so just gets embedded. that is where the problems arise. and yet, the country that i see a bit more optimistic, countries that i still feel are countries that i feel which are coming back from the abyss are countries that are reforming because they have been back to the wall and need to attract

capital. you want to be with those countries. one example which i find that i get a lot of push back from is the philippines.

you can't get locked into views for tong. and another thing is long-term forecasting. like i say until the book, that the forecasting used to to be that you make as in as possible and remind people of your right. the forecast now is forecast so out in the future neither you or i will know if we were right. you know, like i hate to say that. the book is written about you know what will happen to the world 2030 or 2015. who cares who is going to be around to figure it out?

most much us like -- [inaudible] i wish i could find -- [inaudible] i wish like politicians would sort of, you know, say listen in 030 -- [inaudible] the world doesn't work on the parameters. and it's the business like, you know, like because something happened in the year 1400 or something happened in the year 1500. that is a good guide to tell us what happened twenty years from now. this is from no practical value. what i'm trying to do here is keep the horizon to a practical which is three to five years, maximum i think. and to be flexible with it. i think that's the problem with acronyms and i see my counter parts twisting and turning all the time. trying to defend russia as to how -- like it should be because

they're in an acronym now. it doesn't sound as cool anymore. into the stuff -- but the concept of breakout nation when i put out here you have to figure out which country will exceed expectations and which ones will disappoint and be flexible about it. if you travel the world, some can be easy like the -- some of them like assessing as to which country willing to reform. some of them, you know, in particular -- one thing that come up -- [inaudible] i looked a at all the cases and figured out the political regime was the -- [inaudible]

or the democratic one? and i found 124 cases i looked at it was 50/50. it doesn't matter the system backing it. someone like no matter how good the chinese are -- i said yeah a control system that works. i can show you one that country. and the biggest disappointment the last four to five years has been vietnam. which was sort of a next china region and greatness upon it and -- vietnam tried to copy everything that china was doing to come up with the results which are disappointing from the inflation and economic growth that is now falling very rapidly from the highs they had three to four years ago. you need flexibility. you need rules wheabtd will work and what will not. that's the concept of the breakout nation. the fact the breakout nation which i think pay a lot of

attention to expectations. the expectations are key. some people can, listen, you don't site china as a breakout nation or india even though you expect it to be okay is that like 6% it's growing faster than the western world or if china grows at 6% that's faster. but to me if indian's growth were to slow down 6% and china now below 8% and the domestic mood in the countries is rather bleak. not so much in china. but indianed ya. this morning in india i was watching in debate on television and it was about the fact depression in india question mark. because it was slipping from 8 to 9%. expectations is a key. the breakout country is able to exceed expectations. it has come expect that. the 5% appeared to be high but

with a country with a per-capita-income of 1500 it will feel like a minidepression. china's economy has been a remarkable success and the economy now is just maturing because it has grown like very quickly. 120 million chinese move to urban areas over the past decade. china has reached 50 percent and that's typical which things begin to slow down. the number to move from urban areas in cometting decade is a fraction of what happened over the previous decade. things slow down because of those factor. what people sphergt the fact that it economies tend to slow down naturally and yet, when you ask even people in my community the question like will china have a hard landing? how do they define that?

7% growth orless. i think that's what happened. expectations get inflated and disappoint those expectations it feel as if it'll be a real problem. i think that's what happening with the emerging market. that's something i try to talk about is a decade ago emerging market a lot of my colleagues tried to predict them in the middle of the boom in the u.s. -- emerging market to try to get some start from the u.s. because nobody want to listen to that. the middle of the decade every man and his dog could raise money for the emerging market. we would be at stage with the dog. once again reassessing ourself as -- [inaudible] e merchling market and that we have to go back to distinguishing these emerging market on individuals basis policy makers ask me, you know,

like what should we do? like for me the closing line in the book and the mantra is when there is no wind, grow. you can't expect sort of con voling the world like you did over the past decade when money was cheap and it was starting from a lower base and catching up after the poor performance. each market has to reform and come up with their own agenda to try and catch up with the developed world. that to me is an main outline of the book. i'll take any questions after this. thanks. [applause] thanks very much. it's my pleasure to introduce -- a colleague of mine here at the cato institute. a research fellow for the center of global liberty and prosperity. a regular column nist at the times of india and the economic

times in india. he has been a correspondent for the economist magazine. the author of a book called "escape from zoo keepers" which is a clerks of the essay. he is a prominent and frequent common at a timer in the major media in india and asia. please help me welcome him. [applause] just by listening to him -- a very readable book. something that has all kind of insights it'll make you laugh and wonder why you didn't think of some of the things earlier. i have to tell you -- in india [inaudible] whenever there is a election he takes a band of journalist around with him. and we go into the areas, we watch all the elections and talk to the guys, and then we have a

vote on how many votes the party going to get. who is going to win. and let me tell you over the last 14 years, the guy who got it right most often was this guy. he's not the typical one person of wall street guys. there's much to agree with the bock. -- we the enormous book of the last decade, [inaudible] -- national we had a situation where the imf which is supposed to be rescuing bad economies. there was no bad economies left. they had no work to do. we got to a situation imf was slacking. we have knob nobody to lend to. the united states had an enormous deficit.

[inaudible] africa has gone up too. india from 6 to 8%. we are under performing africa. so, you know, when the whole thing came down, i was not surprised. you must remember he wrote this book a year ago almost. had he made the predictses -- [inaudible] the commodity have gone down. many things predicted already happening. it's very clear. he had covered a certain number of countries in the presentation. it seems to me he left some out some very important things which are in the book. and i think, you know, it's worth mentioning some of those.

the most interesting predicts he makes is the two countries that are going to be the "breakout nations" are going to be islamic democracies. these specifically in indonesia and turkey are likely to be two countries that become "breakout nations." it's interesting not from the investment but the political system point of view. [inaudible] i was among those who rooted for that. they focused on the middle east. indonesia has more people than the entire middle east. [inaudible] it's a huge area of -- [inaudible] and on the middle east you don't understand what the slum is. because the money was there the opec countries were rich. we had 150 million people mostly

muslims. and indonesia had 200 million. so all of the numbers were there, in a sense, the economic success of the middle east especially saab saudi arabia and opec companies put them into a leadership role in the islamic world and the fact that the holly place of islam was in saudi arabia. that had a consequence, the consequence was that even in bang bangladesh and indonesia women wore head scarves. it never happened for centuries. you found the rise of military beginning to have an effect of islam. if he is right, if you are now going see a falling commodity prices, the oil of opec is going to shrink. russia is going to be in budgetary country if the price falls. saudi arabia is beginning to get

into trouble if the the price falls below that. he is right. we are going to have a situation where the oil producers in the middle east those guys are going to shrink considerably within the islamic world. the guys are going to rise up is turkey. which is fundamentally secular and indonesia which is fundamentally secular. i think if we have extremely positive outcomes more than the american adventures in iraq or afghanistan or syria. [inaudible] two of the breakthrough ken cay companies are the he find a number of -- [inaudible]

they're going to do very well in the future. it is possible. and yes, they have gone through the great recession in good shape. the reason why i think russia might turn out wrong is the european banking system. they come up with the numbers saying after all that happened the european banking system is still so hugely lib resist. it has to be liberalist by $3 trillion. a lot of the money is not necessarily lost by european banks. a lot is lost to latin america. which is one more reason to be conservative kl about the prospects. but this was significantly

affect the eastern and central europe. for this reason, i think that, you know, he is -- you can argue that in the european banking system collapsing the whole world will be effected not just theth yoap began countries. they will rescue the banking system but never -- [inaudible] commodity prices there has been a huge boom where everything was going up five or six times. give some to argue teen that, russia, and et. cetera. one good commodity -- [inaudible] two bad ones. i think he's wrong there. we have to get into specifics. the reason i think he's wrong what we have today.

-- [inaudible] the united states which is banned all drilling on the east and west coast. there are only three states that allow drilling offshore which is texas, louisiana, and alabama. everybody else doesn't allow it. another large gas spet on the east and west coast. okay, you know, that oil is -- [inaudible] i'm willing to develop a solution. -- [inaudible] how do you know you won't strike

oil? for the first time in history -- [inaudible] every other kind of mining. india has the third largest reserve in the world because of -- [inaudible] india has become one of the big et. cetera em porters. i tried to write a column saying it imports oil. [inaudible] because of the difficulty. because started to open other commodities somewhat more resilient than he thinks except i would agree with him that oil and gas. the discovery of shell oil and shell gas in the united states that particularly technology is

simple technology. it can be replicated enormous shale deposits over the world. china has the biggest, probably. they have once again become an exporter. they export all of that. for the opec countries is not good at all. on the other hand if the commodities are going to be relatively concentrated, the perspectives of large commodity imports like india and china have -- [inaudible] because, i mean, what india and china had tons of trade effect -- [inaudible] with the rise in the commodity prices. it wouldn't be so bad. especially about india and i think there's a little bit of time on that. since we have bought out from india. maybe only 6%. look, you know, he's right in saying on the political scheme

there's -- [inaudible] india did 8.4%. [inaudible] now you suddenly slipped down to 6.9%. i mean, what are the fundamentals that created the -- [inaudible] i don't think they can. again, it's dismissive in the book about india demographic diff dent. it is a sun that used to have a problem with -- [inaudible] explosion population explosion is now being named demographic dividend. they have an expanding work force. they have a one child policy. they have a complete -- the

population growth especially the working group, the working is going to rise slowly and actually going decline. india on the other hand is their different to working maybe 300 million people next year. it's the number of people. the work force in the particular age group -- [inaudible] a percentage of them are members of the work force. in the country of the west, it's typically up to 70% of the people in the work force. the figure i have seen from china is 83%. india believe it or not is the only 39%. the china are doing better they are doing well india is doing 8%. -- [inaudible] 73% of the working guys in the work force. india is only 3 9%.

[inaudible] the thing ha happened in india is collapse of female participation in the work force. and the question is why is this happening? [inaudible] all the working class people needs to send everyone out the middle class in india don't send their women out to work. part-time have been withdrawn much more in education and in the work force. [inaudible] fortunately the demographic shows that as women get more educated and they become college going people the work force improves. i see it coming to india in the future. that is a plus thing. the other thing that hoe touches on in the book, the question of catchup possibility. if you do very badly. your ability to grow fast and catch up is quite high. india is not only a poor

country, having -- [inaudible] your chances of catching up are high. india is only 1 -- [inaudible] so we have the catch up possibility. even with india, we have a large number of back states which is well below the national norm. these are large states. it they have 200 million people. if it hadn't been an independent country it would be the largest in the world. this is over 3 or 4 fortunate. they have begun to grow 7%. it's beyond all redeems at 11%. or 10%. -- [inaudible] they have a problem in a large number of jungle areas. [inaudible] it seems to be a biggest problem in india.

[inaudible] i believe for these reasons india has perspectives are better than the he said in his book. that's what the "the wall street journal" thinks i think india -- [inaudible] [applause] >> thanks very much. we now have time for questions. so if you have a question, raise your hand and wait for the microphone and identify yourself and who you're asking the question to. first question in the back. >> my name is mohamed from the egypt.

it seems from all over the place -- [inaudible] have you been to egypt? and what do you see in egypt where do people go now with the money? [laughter] frankly, i mean, egypt or something which in fact i have to say that with all before the outbreak of the crisis the political crisis in like in, you know, 2010. that was partly because in mubarak in in 2009 this will give optimism. it was march 2009 for a conference there was there and i get mubarak in a meeting in march of 2009. and there was so much talk in the world about the end of capitalism, the end of free market because in the midst of

the financial crisis out there, and i ask him mubarak, what do you make out of this the war turning his back on opening of your -- [inaudible] that was the. what he said to me something really struck me, in fact he said -- optimistic on the war back then, he said that is that, you know, -- the problem here is not we need more regular? we need more regulation there's no turning back. it was people in the egypt we remember the bad experience we had with socialism for so many years out here. there's no turning back. and, you know, in the last years of the mubarak regime they were opening up the economy begin. that give me optimist at that point in time the war shut itself down and move to -- [inaudible]

even though the muslim brotherhood to come to and ask -- remember a decade ago in turkey would go down the islamic fundamentalist way a decade ago. and yet they focus very much on economic reform and set aside some of their hardline religious agenda. so i still feel that egypt is mess now they need to sort it out.

if it goes down the turkish way and takes advice from the party despite all the critd -- criticism, the same fears existed about turkey as well. i think at this point turkey and indonesia emerge as breakout nation want fifteen economies in the world today is the size of trillion dollars. if turkey and indonesia join. those are the next two, that's my forecast in the next three to five years. it's great including for egypt. the question about whether people sort of putting their money parting so widely the parties still going on. so i don't know i'm not seeing any damping on the parties -- [inaudible] as far as india is concerned. even though the business gloom is picking up quickly.

>> another question in the back. my name is robert my question is based on concept of human rights in some of the qoping countries. as the u.s. lose, i guess you say an ton my in global markets in the emerging markets gain prominence. how would you say that our relationship either hard power or soft power will change some of the -- historically had issues with human rights repression, et. cetera, and personal liberty as well. how do you see our relationship with some of these former dictatorship and repressive democracies a you might say. in the future, how do you think it will change? >> i don't know. if i really sort of comment much

on that, i mean, like, basic point that i made here it is the fact i don't think that the u.s. sort of listened, i mean, i don't think these country, you know, would influence that much at what the u.s. was saying any point of time. if you see look at what happened the high growth examples have come from the most repressive antidemocracy kind of regimes. subsequently ummah sure and -- [inaudible]

i don't see it as a game changer either way in i terms i don't see the u.s. influence the declining in the war has anything to do with changing economic systems or human rights. in these countries do exactly what they feel like. i don't see it having any combination for economic growth either. >> we'll take a questioned in the center there. right there. i came in late. you may have mentioned africa but i didn't hear it if you did. -- [inaudible] thank you. >> i'm curious on africa fits into your description two theories. one theory turns the corner the other argument is no, it's a commodity bomb. -- boom they ha. the basic change. india itself is trying to play a bigger role but the chinese get

bigger headlines. two-part question. one for both of you. what do you picture africa in your picture? is india going to play a role in these countries or is it going to be a chinese decade or fief tie years, i don't know. those are the two questions. thankthank you very. >> the first biggest thing that africa suffers is from -- [inaudible] i think that's what happens. how do you look at africa the 48th economy is africa. i think you're right that a lot of the, you know, driven by the commodity boom going up and down. the example is that economist -- like, for me as an investors is a great value. [inaudible] so, i mean, if you look at the economy a someday ago, they had a [inaudible] ran the while continent. when the commodity prices were at the low. like, three months ago, they had a cover saying that the hopeful

continue nentd. because commodity prices, i guess, would have been high. i think africa does suffer from generalization but for me, my entire approach in the book and regard to africa, you have to take the economies one by one. like in africa, an economy i feel a bit optimistic in nigeria. this is one economy that is exposed to comdties. people ask how come. my point is they went through a terrible 0 time of discovering oil. -- [inaudible] the problem in the political leadership was poor in nigh jeer nigeria. they got somebody for the first time out there. it's been the history of them. i think that as far as can is concerned to me it's going to be a case by case basis you have to study countries individually. and listen to the fact that some of these economies look better than they are because of the commodity boom that may not

last. it's back to the political and economic management of each country. rather than the making generalizations of africa. [inaudible] >> yes? he's right. i [inaudible] the country like tan saddam -- [inaudible] the country has considerably good perspectives. they have done a lot of good work on this. even though they're not talked about as commodity. they will a future. you asked about the indian and the chinese. the stable indian presence in africa because [inaudible] the label are clear along with the british and set up shop there. they begin business people and as slew of business people they were hated by the local people. [laughter] with regard to money lenders.

so i know indians didn't have a good cache when african countries became intd pent many indians were forced to leave one way or the other. [inaudible] they were nationalized. -- [inaudible] okay in the last seven or eight years. they have gone in a big way investment -- [inaudible] i it has made them important. it has not necessarily made them liked. they were bringing 5,000 chinese laborists. [inaudible] [laughter]

[inaudible] project after project of billing in the jungle. [inaudible] and much later people like -- [inaudible] [laughter] [inaudible] okay. chinese are coming in. they have done a lot of. they have a lot of -- just at the right time. and it has helped them in some sense because they have got in at the time of prices. if he is right, comotty prices going to collapse. a lot of those things are going to look a lot less impressive. china has -- [inaudible] the question for you -- [inaudible]

or do you do something else? part of the investments taking places in africa has been a form of diversitying their own public interest. india is poorer. less than one-third of the per catch that are much less. [inaudible] ics port some capital goods. up to 5 billion is available but it disperses very slowsly. on the other hand, some indians have gone back. [inaudible] historically the biggest copper mine in the world. and american this big global giant and privatization give up and indian -- [inaudible]

question right here. >> [inaudible] business trading firm. my quick question is what do you think about the debt levels rising dealt levels of turkey? because i know you are talking wl off the turkish economy. i am worried about it. >> turkey has come down significantly. are you talking about because the gdp ratios have improved significantly from where they were a decade ago. >> do you feel that way. >> yes. i think so. it is an issue in turkey. [inaudible] by the fact that this is one emerging market which has zero commodity. zero.

and i think that -- [inaudible] i'm not that too concerned about it. but like in cur key it remains pretty manageable. >> thanks. >> question in the back, please. >> thanks. [inaudible] just question what's your take on the middle income trap? i i know you spoke about middle income. but vietnam, brazil, russia, take your pick. is it something you mentioned in the book. what's the next growth going to come from? question of both of you. >> i think that, you know, like my point about break yowlt nation is identify which

countries will do better than we think and worse than we think. i think the gross will -- any growth forecast for the merging market is .5 or 5% or so. it is going to be high. i think that the countries relatively more optist on expectations are the ones i mentioned which is the southeast asia, indonesia, possibly thailand, they show signs of settling down. i think that, you know, i think turkey can do well. as far as india and china are concerned, the growth rates will remain high on a relative basis on the western world. what expectations are in terms that. i think a lot of that adjustments already happening as we speak. i think that that some of the frontier markets you can see growth in nigeria. i think in south asia i find that sir lank can may benefit from a dividend. the frontier market which could

do well. the dispersion is going to be wide and it's going to be broad coming from different places where expectations are exceeded. >> [inaudible] [laughter] >> where does the money go? >> i think the adjustment is over. currently what india is at the risk of now is facing -- [inaudible] >> do you believe in the notion of the middle income? >> i think that, you know, it'll be looked at for the purpose of the book. the problem with the trap it is so wide. you can deprive anything through it. like, you know, look at the history of economic -- [inaudible] after being at 10 or 15% of the per-capita-income of the lead economy. others suffer 40%. and you have others like argue teen ya venezuela that converge to 60 percent per-capita-income and begin to regress. i think the problem with the component is very loose concept.

which covers a huge range. and to me, all it suggests as some level of per-capita-income things become to -- there's no scientific point which you can identify that. >> i would likely say it's the store for the commodity exporter. you know, once upon a time you land -- [inaudible] before. huge increases are possible the other problems that is when it happens, they get driven up. you have a situation where [inaudible] in eastern europe on the one hand, we're not as productive as america and they are not as low as china or india. the goes in the middle get squeezed. i was in south africa talking to someone in charge of education, she said, you know, the blacks are being left behind. the white engineers earning $250,000 a year.

now blacks -- they have education and $200,000 grand a year. what happened when they are willing to work at $2,000. she turned peal pale and said i don't want to think about it. there the truth is protectivity in the long-range economy -- for the middle income countries don't. >> i'm not sure i buy that argument. i have a question. what about argue teen argue addressing argentina that is not doing so bad. look at the growth record over the past ten or so years and the people who criticize argentina for the policies are practicing bad economics or bad journalist. some of us, of course, have been criticizing for the long time and suggesting it can't go on. what's your view on that? >> well, i think that, i mean,

luckily for me it's too small. sort fall off the cliff. it's become an economy that no one cares about. to cite addressing [inaudible] how about inflation as well? so, you know, currently the growth rates are beginning to fall off. any economy can improve in four to five years. if you have as manyive expansion in the debt and clear the system on that. but argentina what is happening today the inflation rate is also low inflation -- very high inflation rate and i can't think a bigger tax than having a big inflation rate. they know the inflation rate is not even deflective what's going on out there. i think that, i mean, like, it's a bit of joke in the investment community about addressing tina. anybody that wants to go there

is coming from the extreme. >> question in the back. i had name is -- [inaudible] i had a question for. the india is stock market is volatile. you agree with that. that how does it fit in with the elements in your book. you talk about commodities, you talk about various aspects you mention through your talk 0 today. how do you explain the indian stock market given the con at the present times of your book. -- contents of your book? >> i think the indian stock market is no different than any other emerging market. i think that emerging market whey found is that getting the country's gdp growth rates -- in temples how it were to do in terms of expectations. so i think the indian stock market is sort of measuring the trend on what's going. the book talks about the fact

that the indians that, you know, like the indians chance of a breakout nation is a 50/50. not as pessimistic as he makes it out to be. [inaudible] it concerned the problem is that united growth expectations biment into it of 8 to 9%. coming down to growth expectations of about 6 to 7% and depend what your spike. if you think it's going to grow at 6 or 7%. if you think the gdp growth is going to fall below that. it is still -- [inaudible] , i mean, like i said on most countries in like in the book, even many my portfolio. i have a strong view of india is the only one where i'm 50/50. >> okay. we have time for just a couple more questions. okay. we will take what we'll do is take questions at once.

one from him and him and let you answer both. >> thank you very much. [inaudible] my name is tyler o'neal. and could . >> could you speak up a little bit. >> sure. my i'm with a the washington free decon. i'd like to ask the question the elephant if the room. earlier on you mentioned you think the united states and germany western nations who will -- they have a bright future ahead of them. what makes you optimistic. >> okay. sure. >> okay. let's take a question from him, please. >> [inaudible] my name is [inaudible] and my question is -- i'm with nei. have you factored in going forward agree owe political

factors into play, for example, if syria gets under control and fragments the adam springs becomes a harsh winter or pakistan falls apart or euro falls apart. if you factored into the global -- the [inaudible] >> thanks. your first question in terms of like the book comes out relatively optimistic on the u.s. but i think the whole point here about expectations again. after the great financial crisis, the conventional belief that the u.s. was going go down the path of jp. it was a long road. and i think what rerecognizing is the u.s. is concerned -- [inaudible] three important factors. and this is how con cloud the book -- conclude the book. i say it's not bad place as it's made out to be. the reason for that is one i think that what he touched upon

is the oil boom takes place and the shale that is happening. on the upside systemically and u.s. foreign energy dependence has been declining but it continues basis on the five to seven years. it brought up the point about technology. which is that one thing the u.s. continues to lead on. it was shown on facebook last week. it remains on the edge of technology. [inaudible] one-third of the global in the world takes place in the u.s. one point. and i think that that's a very high number. and very different than the japanese. [inaudible] one thing you notice is the japanese come out sort of products. but they tend to be much more sort of centered around their own domestic market, which don't

work that easily. [inaudible] but the u.s. production takes -- does very well in the foreign marketplaces because of the idea compared to japan. the other point about the u.s. is -- [inaudible] just how cheap it is to come. it is cheapest it's been in the history. if you -- [inaudible] we're seeing manufacturing take place in the country jobs are moving back in the manufacturing sector because hearing about the fact growth is very low. along with the cheap dollar is leading to sort of, you know, like slow revival take place in the sector. they have been extremely rapid over the last few years.

be sure that the gap nearly close out in five years' time. what's happening in the big [inaudible] appreciates and compared to what's happening in the u.s. for these reasons i feel optimistic as far as the u.s. is concerned. i think that germany is concerned, i think it's, you know, it's not any of the accesses the other countries in europe german banks have excess i have. but they are not there. currency is super competitive out there as well. they can help out given their productivity. but i find it's more optimistic. relative to expectations is the u.s. arch growth from 1950 to 2007 was 3.5%. i don't think we get to back to that. because our set too high here. we have can a-- [inaudible]

1% as well. because the factors i pointed in terms of technology and more open society and the cheap exchange rate. the last question on go owe politics. ic that i'm taken into account political factors a lot into the book. i've given a lot of credit to -- [inaudible] agree yo politics i find wild card to put in a bock. the predictability is so limited. nobody sees the things coming. it's hard to forecast economics and the political regime. i talk about politickings in the book how the average life of political leader at the top is about seven to eight years and they begin to make mistakes after that it . goes into that. the geopolitical factor the continuous events. [inaudible] it's difficult on that front. >> germany -- i have no doubt the u.s. will come out on top. the main reason is that germany

has good -- but it does not attract people from asia or china. the u.s. is great despite a lousy education system. -- they come from indian -- silicon valley is start up of indian and chinese the reason why america is on top, i mean, i heard of the discussion back twenty years ago doing an american and guy from singapore. the singapore guy said you are -- [inaudible] and american turned back and said we will win because our asians will beat your asians. thing is the u.s. advantage. that will get the u.s. on top. on the geopolitical thing.

the jones is in trouble. it is a bad idea. they have dam linked to it. it's going a long difficult -- [inaudible] europe is going to be up the creek for some time. >> time will tell whether your predictses will come true or not. some of us will try to remember. i'm afraid we have run out of time. please help me in thanking both of our speakers. [applause] [inaudible conversations]. >> we'd like to hear from you. tweet your feedback twitter.com/booktv. here at book expo america annual convention in new york city. we are joined by crack who is chairman and president of the norton company. we want to ask you about some of the books that norton has coming out this fall 2012, and i'm

going to start with this one. >> david qualm's book "spillover" a scary book about a important subject. this is what happens humans are moving deeper and deeper into the interlands and as they do so we're getting a lot more animal diseases that are being transportedded over to the human population. it's not just aids and czars anymore, it's other kinds of diseases you haven't heard of it. david has been out studying around the world. bats, monkeys, gorillas. he's a wonderful writer. his other book did great. it's going to be an exciting book for us. >> is it happening in the u.s. or other nations mainly? >> this is world-wide problem. with the transit of people around the world now, you know diseases move very quickly. >> also wanted to ask you about the "last refuge" another book that is coming out by gregory

johnson. >> greg johnson, sure. if you want to understand terrorism. you probably need to understand yemen if you want to understand yemen greg johnson is a terrific guy. he lived there for a long time on the growngd and speaks the language. he has traininged the ambassadors going over to yemen. it is a poor country, as most people know, it is a big source for al qaeda and terrorism. it's a country you want to know about. >> david coolmen. >> he has done a book called "fourteenth day." it's fiftyth an geezer i are for the cow ban missile crisis. his question is how about the fourteen day. the day of the cuban missile crisis. mainly build from the --

transcripts from the kennedy white house, about how kennedy sort of managed the outcome from making sure that the missiles really were removed from cuban to managing congress, and the results of the crisis. >> what's his background? >> is the university of virginia both history department and the miller center. >> how long have you been with norton and how long have you been chairman and president? >> okay. 36 years at norton. i started right out of college. i have running are the place for the last 18 years and have been chairman since 2000. >> when comes to e-books and real books, what's the break down revenue wise and so on? >> so on our trade sales in the last year, which we finished up we were tracking about 21% e-books to real book sales. which is about industry average. some genre publishers are seeing

higher figures in perm ant. when we look at the fiction sales on individual title. on one occasion, we saw over 508% e-book sales to p book sales. >> you predict in the next couple of years e books will take 50 percent and more. >> i think we'll hit a plateau and could be at at 50 percent range. we will plateau i'm not locking ahead to the death of the printed book. i'm looking ahead to a world where a lot of people enjoy reading their book on e-book reader an others enjoy ink and paper. we'll be ready for both. >> what is another trend in publishing we should be looking for in the next couple of years? >> that's interesting. i would say that -- i watch the growth but i watch what's happening with independent publishing houses. i like the fact there's more access to the marketplace these

days. it's going to be healthy thing for norton which is an independent publishing house but lots of smaller independent who was growing. >> who was w. w. norton? >> founded the firm in 1923 89-year-old at this point. he had been in the import, export business. his wife was deep involved in the founding the firm. she had a passion for books. he was in the import, export business by cay but publishing books by night. three years later doing it time and the vest history. >> you revived a 1930 20s imprint? we are. we have owned that imprint since the early 1970s. they are the publishers of ee cummings, first publishers of faulkner, first publishes in the united states of ene