the new york times rounding out a list of the kids killed in the newtown shooting at you see the ages, 6, 6, 7, 6, 7, just crushes you, it gets you as a person and the reason it does is because journalists actually did their job and told stories of heroism, teachers who saved the

kids's lives, the story sticks with me of three kids hiding in the closet and all of us remember some story, the boston marathon bombing, watching callot who lost his son in iraq runs towards the blast in that iconic picture of him. i guarantee you have seen his face, the cowboy hat, carrying the double amputee, taught a cloth around his leg to stop the bleeding and the adorable 8-year-old kid in the picture that went viral on facebook, a short time before he was killed that day calling for peace and a graduate student killed in the boston marathon bombing and another one from china and recently when i was in boston on this with a friend who is chinese and she was telling me that president obama said that woman's in a man and it was a big story in china. does it really? yes. there was a blog pose the when top viral and was where you die

matters. the most powerful man in the world never would have mentioned that woman's name if she had died and factory explosion making the product for american consumers. heard that matters and her life matters because we know who she was because of where she died but there are lessons to be drawn from that. if we as journalists did our job and stop referring to people as collateral damage and casualties and we knew the stories of the little girls whose families were wiped out when president obama authorize the cruise missile attack, if we saw their art work they had done before their parents were taken away, or if we knew the stories who had been destroyed in trone strikes. then it is harder to dehumanize the other, only a few civilians being killed but these are surgical. this is a clean way of waging

war. it wouldn't be possible. we can be an incredibly empathetic society as americans and we show our best side in crisis and it is really true. in those schools shootings there is a sense of community. we walk around and we are all share a common experience because we consider it our own. we have a moral obligation as presidents or citizens of most powerful nation on earth to own some parts of what happens on the other side of our missile because it is being done in our name, with our money and ultimately going to affect our ability sell our challenge is quite a simple one but is the bold move to make in life. have empathy for people who don't reside next door to us or appear on our newscast, make our business to know the name or story of a person who lost something because the next time someone tries to use the phrase collateral damage or casualties have a real story to tell the man that is our challenge, thank

you very much. [applause] >> thank you. thank you for that. [applause] >> there are microphones here, thank you. there are microphones here, if people come up, phil donahue. this young man over here. we trying to add some gender balance? men raise their hands first. 30 seconds. >> over the past week we learned two news networks have succumbed to mounting pressures that are politically powerful and financially wealthy. and op-ed written by a professor who writes frequently about

israeli-palestinian issues and pbs affiliate reneges on a decision to air a documentary critical of the koch brothers, media companies bowling to political pressure isn't necessarily new news. what concerns me about these cases is these are networks traditionally thought of as independent and fearless in the coverage they provide and pressures mounted against them are they mounting against journalists who are truly independent in every sense of the word, journalists such as yourself, and if so, what have you done or what can we do to help you maintain your independence? the work that you do is a jam. >> thank you for raising that. will whitehouse and the justice department were on journalism is reprehensible, the targeting of the associated press and procedure of their phone records, they did a wide sweep against the. they try to say it is one story

they did about divulging classified information about an alleged underwear bomb plot in yemen a year or so ago. it was part of a much larger hunt against the associated press, they did the best reporting on the cia and widening corporate boys. the reporters that are covering the associated press are top-notch reporters, reporters for corporate news outlet but they are top-notch major powerful news outlet and top-notch reporters but they were targeted because they were getting too close to stories the white house did not want in public domain and what they would do not what journalists are supposed to be doing. when you have official leaks, there is wiki leaks and white house leaks and that is what they want you to be told because it fits their political agenda. john brennan is out major league responsible for so much bs flooded after the osama bin laden rate and rejected everything because it was false and journalists are taken for a ride every day by this white house and those the independent

and ask questions there ils of being intercepted and internet survivors are provided with national security letters and phone records being seized. i have no love in my heart for fox news but what they did to this reporter james rosen is shameful where they try to criminalize the process of being an actual reporter. this sent a chill through the journalism community in the relatively small world of reporters that cover these national security issues. used to be the case that i would use an encrypted e-mail and coty our software to have been scripted chats with sources. no one will touch it anymore. i am talking within government, encryption not even broken. we have to be luddites to communicate with sources because no one wants to leave additional footprint, no one wants to communicate in that way. used to be they would have someone break into the office of a reporter. now they attack your e-mail or get a warrant and you may or may not find out years later. when you combine that with the war on whistle-blowers people

like thomas drake who was an nsa official who blew the whistle on criminality in the george bush era the obama justice department went after him and tried to ruin his career. he works at an apple story and used to be one of the top people at the nsa working and sensitive programs and is working at an apple store. nothing wrong with working out an apples or to make a living but he had his career ruined because he stood up and blew the whistle and provided information to the press that he believed the american people and right to know because he thought it was criminal. when you take the war on journalism and the war on whistle-blowers and put it together and look all the former ceo of shea operative is in prison right now in part for blowing the whistle on torture while jose rodriguez who was one of the architects of the torture program is donna book tour that says a lot about where we are in this country, look forward, not backwards stuff. try that next time you get stopped for speeding, look forward and not backward. it is chilling. there is censorship that goes on

and in the case of the koch brothers, money talks. a are incredibly powerful nefarious forces in our society involved -- tentacles that reach into almost every anti-democratic lot going on in this country. >> if we can get to a young woman. it can be any woman. >> you can call me young, it is all right. >> you qualified. not trying to the ages here. >> my question was as i listen to your talk and everything you are talking about and everything we have seen with our constitutional retrained president continuing terrible george bush policies. >> it is not on. >> very easy to be on the verge of despair. our political leaders, political

leadership is bought and sold, military-industrial complex is completely off the rails and we have are populists that just happily handed over our civil rights for the patriot act starting their and continuing and so my question to you is in your work and your research have you been able to draw any conclusions are there any points of vulnerability left in this system, this machine? i don't feel like we can go to our legislators and argue for jeans anymore? your thoughts on that. >> thank you for that. i don't think anything will fundamentally change in our society unless we confront and expel corporations from the electoral process. from dominating. members of congress served two year terms, probably spend 18 to

20 months of those two year terms raising fundss and who are the biggest donors? a remarkable study. when you look at how the defense industry spends its dollars a lot of people assume they get most of their money to republicans. no. when the winds said blowing the democratic direction they give more money to the democrats and the republicans. you have a situation where they literally are bought. i was talking to a friend from a different country recently and we were at a gathering with nancy pelosi. i won't say who he is but he said to me i want nancy pelosi to see your movie and he goes what if we raised $100,000 and paid her to watch the movie? he goes we could do that in my country, figure out a way to get president to do that. the corruption here is formalized. we could give it to her campaign. we can't pay her. we could do that. thinking about it i could give $100,000 to nancy pelosi to

watch the movie, just the need to her pack or something. that is how our system is set up. when you have politicians that can get bankrolled by a huge defense contractors or big oil a big energy what incentive do they have to have a conscience on those issues. there are no longer representing their constituents but their paymasters. the best chance we have to start to chisel away at this was mccain feingold, the legislation on campaign finance reform. wasn't perfect but would have been supported the gwen obama of the out of public funding and went nuclear with the private cash it destroyed it. mccain was forced to go toe to toe with the private money fund raising against obama and that crushed it. i do think some segments of our society has to make it their business to try to change that aspect of how politics are done because all the rest of it is just speeches we are giving and pressure begins writing letters to members of congress seldom

move them in any way. money talks and money runs the system and it is the bleak outlook and i don't mean to be passing out razor blades but it is a bleak situation. let's switch back and forth. go-ahead, whichever. >> you talk about the military drones but there are also end drones being used in this country like the fort dix which is one of the most egregious cases of these 500 muslim men in prison now where they use undercover agents provocateurs, use a lot of legal secret testimony and these arcane guru courts in the united states, in

new jersey, the person who is now the governor of new jersey, the district attorneys that prosecuted, many articles written about how all these cases are unjust and hearken back to the imprisoning of the japanese during world war ii. >> is there a question you're getting to? i am familiar with all those cases. >> they think that is also in just, as unjust as using drones overseas, also won just -- >> the fbi has been adept at breaking up its own terror plot. it has happened repeatedly. i am saying that seriously. there is a pattern here. sometimes they target mentally unstable individuals and tap into that instability and there are a number of cases where the individuals who go to prison for

a long time are people who have serious mental challenges and the fbi will infiltrate in some cases seemed to be the ones encouraging them to plot an actual bomb attack. people contemplating some action or that they were becoming medicalized and you have an fbi informant who pops out of the scene and it's the know they have an actual plot underway and they are setting people up and part of it is creating a climate of fear, there is the demand for results but what is happening at home is deeply connected to what is going on a broad. there have been so many muslims that have been railroaded in this country and demonized and set up it is not that there aren't active terror plot. they are and i hope we do best the mud. we should not be breaking the baritone terror plot. that says something dark about what is going on with law-enforcement. tangentially relates to what you are saying. i am very concerned about the power militarization of law enforcement in the u.s..

it is a serious concern where you have part of the issues about domestic use of drones in a number of municipalities, citizens getting together to ban the use of drones but it is much deeper than that. we have police becoming paramilitary forces and the wars in iraq and afghanistan coming home and everything moving toward slot style tactics. in boston when they were hunting down this cop in los angeles this looks like special operations raids that are happening, certainly in poor communities and communities of color across this country people have been facing this reality for years and years where urban areas in the united states are effectively war zones and night radar part of daily life just as they eye in canada are, afghanistan and when you combine that with the privatization of certain law enforcement functions and the power of militarization of the

u.s./mexico border everything is being militarize. the kid in boston who is in custody in connection with the marathon bombing. some republicans wanted him treated as an enemy combatants despite the fact that he is a u.s. citizen. this knee-jerk military reaction to stains, to crises, something we have to confront in our society but it really threatens our democratic existence when everything becomes a paramilitary solution. it is a very serious problem. to the other side. i can see that. we saw an effort to get to the back. >> thank you for speaking today. i was wondering, i heard a report that the cia says it will transfer its jerome program to the pentagon. heard that on democracy now this morning and wondering at lack of public explanation which obama

says he will give about the drone program, to what extent that is covering up struggles and turf wars between the cia and the pentagon and the white house and to what extent as other questioners have said a war machine that no longer considers itself bound by the rule of law. >> this has been talked about for some time. in reality what this is a dog and pony show. they talk about john brennan like he is like st. augustine, looking to this later it is incredible. these articles talking about how he and obama of these months running the drone program and brandon, part of the dog and pony show, he couldn't become cia director when obama first tried to nominate him because democrats stood up and said we don't want a guy who praised tortured to be the director of the cia and years later it is rand paul and the crazy parade

opposing him which shows you how far we have come and we're going to move the drone program to the military because there is greater transparency. the military has been running a parallel drone program for the duration of what has been called the aurora on terror. in pakistan the joys special operations command operates drones. in yemen they operate drones. it is intended to give the perception something is being done, that they are listening to the public but in reality it is going to continue business as usual. some people are under the misperception the military cannot do a covert action, only the cia. they do cover actions every day around the globe. i am not saying is not quite makes no difference whatsoever but i think it could make it worse to have less oversight. there are actual tough questioners on the intelligence committee and the house. and that is propaganda to show

something is happening. in the back. >> thanks for coming. i am listening to your work and reading your articles. i wouldn't be doing my job as a human being if i didn't correct you, i didn't bomb and whar, i didn't send these drones to pakistan. i would like to correct you on that. i am certainly an aggressive military resistor. >> you don't pay taxes. >> i'm working on it. >> you will confront me about my use of the word we. we don't all realize if we accomplish that, then we are whistling past the graveyard.

we are deeply complex. >> i respect that. >> i admire your spirit. >> what woke you up to this? your t-shirt says not a terrorist. glad you clarified that for the record. can someone remove him from asking a tough question? i love that when officials do that. the first amendment x. it's right there to throw him up. i remember hearing a good man on the radio for the first time, i wanted to be a teacher. i have never taken a journalism class in my life and i heard amy goodman on the radio, i want to do that so i started stocking her in a non creepy way. i started writing her letters and asking if she had a cat i will feed her cat or watch her dog, she acted to decide whether to get a restraining order or

let me come and volunteer. i started radio and the way a plumber or electrician, and my early work what i started out doing, one of the first trips i took was to iraq, in the 90s, voices in the wilderness. and they were symbolically breaking sanctions on medical supplies banned by the u.s. from iraq and it opened our eyes, i couldn't believe what was being done in our name. i wasn't an investigative reporter, i had a tape recorder as much of what i did is ask people to tell me their stories and try to edit it into cogent narrative and say here is this person, this mother in the hospital and gave birth to a baby that has a gaping hole that stretches from nose to throats and it is a result of the munitions used during the gulf war that had uranium in them and much of my early work was listening to people who lived on

the other side of the barrel of the gun and i never looked back. that is what i wanted to do and it was so important for people in this country to have names and faces on the other side of the story and so many people i met along the way that humble me. the journalist to expose the u.s. missile strike is in prison in yemen in part because president obama is keeping them. he was convicted on charges of being a member of al qaeda in the court set up by the dictator of yemen, and when the president of yemen was going to pardon him, news leaks in the yemeni media that this was going to happen and president obama called the dictator of yemen and said the u.s. wants him to remain in prison and that journalist has been in prison three years and he was a well-known journalist who did work for the washington post, abc news, al-jazeera and was a

fiercely independent guy with a very critical of al qaeda and did of interviews with a critical -- leaders of al qaeda is in prison because of our constitutional law professor president. if you look at my books, my book is dedicated to journalists in prison for telling the truth and those who die in pursuit of the truth and the last line of my book is a yemeni journalist should be set free. i do my work in the spirit of on famous journalists who don't get invited to speeches broadcast on c-span or go on the racial matt out show, those are my heroes that keep me going. >> i have a quick question, with probably a long answer. can you tell something about what your investigations have shown as to israel's involvement in "dirty wars," drone wars, as

a model, producer of jones. >> the israelis, the israeli model with these assassinations, really what the u.s. based its program on, israel and the united states are deep in bed together in all sorts of covert actions and the u.s. gets tremendous military support. if people watch this film called the gatekeepers, interviews with former heads -- it is a flawed movie but important movie and definitely worth seeing, these guys, people running the killed program described how they saw it playing out and what the actual end result has been and there has been some pretty sobering remarks, israel and the fact that it possesses hundreds of nuclear-weapons, no one is allowed to talk about, when a

scientist blue the whistle on the nuclear program they put him in prison and drove him in sane and the united states won't talk about israel's nuclear program. there is a reason other countries want nuclear-weapons as a deterrent against israel. i think if there's going to be an attack on iran will be and is really lead a tax. there is a lot of reason to suspect that israel has been involved in the assassination of the iranian nuclear scientists. i don't know if anything has been definitively proven but someone is killing iranian nuclear scientists and israel has taken a most belligerent stance toward iran. israel engaged in its own dirty work, doesn't even need to -- deep into its own actions. i am happy even if people don't want to buy a book, i am happy -- i would be happy if you didn't get a chance to ask your

question to do it. i don't know -- thank you. >> i feel that we are arranged outraged by what you reported that also since not many people are surprised because we have been inundated with reports as someone else mentioned earlier, the military-industrial complex, division of powers, the extensions of that. my question to you is in looking at the legacy of oliver stone and other people before you tried to blow the whistle, do you really feel this is an issue of information that is not getting out or do we just need extras like you to run for political office to make change? >> not on your life, brother. i appreciate the question. too many skeletons in my closet.

to take your questions seriously i do think unless we break the duopoly, unless we have an actual multi-party system where we won't get anywhere with the democratic and republican parties their agenda is to support big business and to keep sort of the idea that america is the exception in the world, that is a requirement to be president of the united states. i really admire people particularly on a local level to try to organize third-party challenges to democrats and republicans because it is the most democratic thing you can do, to try to fight to actually break the stranglehold of the 2 parties have particularly when it comes to the national security state. there are differences in domestic policy between democrats and republicans. when it comes to the national security state they are the war party, period. that you raise it and maybe there are young people in this room who will try to run for

those offices and get involved in the school board level, you can have changes, that and confronting corporate money, issues that i cover, issues i care about personally and in my personal life those are issues i work on and along with trying to end the death penalty. i think you very much for coming, happy to answer questions. >> we would like to hear from you. tweet us your feedback, twitter.com/booktv. >> what are you reading this summer? booktv wants to know. ♪

♪ ♪ >> let us know what you are reading this summer, tweet us at booktv. posted on our facebook page or send us an e-mail at booktv@c-span.org. coming up next, just under an hour, matthew hancock who is a member of british parliament argues until we have a better understanding of human nature we will inevitably experience another economic crash. [applause] >> thank you very much indeed. is a great honor to be here

speaking at the appropriately named margaret thatcher center for freedom at the heritage foundation and the sad passing of baroness thatcher reminded conservatives on both sides of the atlantic of the values we hold in common and delighted to be contributing in my own small way to the great dialogue of ideas which has always existed between our two big countries and it is relevant today because margaret thatcher's view of capitalism has a very contemporary bearing i feel on the debate about how we fix the relationship between the financial system and the economy that it exists to support and this is at the center of "masters of nothing: human nature, big finance, and the fight for the soul of capitalism" and the book we're launching this week. throughout her life lady

thatcher passionately believed that capitalism was not only the most effective form of economic organization that had ever been invented but also the most moral and today the first of those points is almost undisputed and we should all be grateful to the market liberals of west and of east who in freeing the peoples of the former communist bloc through fought and beat, so liberated billions in china and india and indonesia and beyond from grinding poverty and proved once and for all that free markets are the greatest source of prosperity known to man. the free market is a moral force for good is less well understood.

this moral authority hinges on two crucial factor is, first that free markets are fair because reward is proportionate to effort. when markets work those who prosper are those who work hard and risk their capital to succeed in making other people's lives, their customers's lives better and fairness is a form of reciprocity, that you get out according to what you put in and for most people this is more important than fairness as the quality and free markets make that principle real. free markets support personal responsibility, if the state takes responsibility away from people, then people tend to behave irresponsibly. in britain the shabby management of the nationalized industries in the 1970s through the irresponsible spending of the

2,000s the examples are legion and margaret thatcher held that the only way, the way people behave, the moral implications of that behavior should be at the heart of how we think about capitalism. she supported small-business, the challenger, the entrepreneur, not the corporate giants distorting the market, whether in the public sector or the private sector and we must do the same. for too long from before the crisis, middle income a package stagnated and we on the political right must have and show that we have the answers to ensure everyone can benefit from the prosperity of the market can generate. i am not one of those conservatives who looks at many mistakes by government and concludes the private sector has

no case to answer. before the crash lot of people especially in the finance industry got very rich not by making money for their clients but by making money from them. the moral underpinnings of free market, personal responsibility, and something for something, that reciprocity were badly undermined by this behavior and we argue in this book "masters of nothing: human nature, big finance, and the fight for the soul of capitalism" that that happened because the markets at work were not truly free. the story in noaa book about administrator assistant who was investigating america west back in 2003 ordered them to hand over a sample of their loan data and ten boxes of files arrived at his office and he tools around the man found a borrower was listed as an antiques dealer and he went through these boxes

of files and pull out another and another and every file said the same saying listed the borrower as an antiques dealer and clearly the loans were forged but they had already been bottled up and sold off and you can blame government for making life easier for companies like america west. lending to people with poor credit have explicit political backing then of course the america wests of the world will operate with greater impunity but by focusing solely on government's failings we tacitly excuse the behavior of loan officers who lied on forms and wall street banks who practiced loans without asking the difficult questions and the rating agencies who close their eyes and put a aaa on finished securities. in his famous as a milton friedman wrote the social

responsibility of business is to increase its profit but rather too many people on wall street seem to have read the title and ignored the argument so freedman goes on to say it is the social responsibility of business to make, quote, as much money as possible while conforming to the basic rules of society, both those embodied in law and embodied in ethical custom. ethical custom. some on the right have taken the crisis as evidence that government should get out of the business of trying to manage the economy altogether and this book very much argues that it is the role of government to recognize flaws and all of our failings but to ensure that we regulate

appropriately rather than not at all. john allison from the cato institute suggested that we abolish central banking and deposit insurance and move to a system of private money based on gold, an argument that you hear occasionally on the right but in fact we already have a system of private money because the difference between what banks take in and deposit and choose to lend out is indeed private money. history shows collectively banks sometimes make the wrong call even when the individual banks have the right decision for them and in a century or so before the fed was founded the u.s. experienced five major banking panics with numerous smaller ones in between. the panic of 1873 which coincided with the birth of the railway bubble triggered a global recession which lasted nine years so i am skeptical of

the ideas that eliminating central banking and management of the economy is the answer to all our problems, not least because the global financial system is infinitely more complex than in the 1870s and indeed in the book we go back further and widen our perspective to look at the panorama of financial crises from tulipomania to the tech bubble and it becomes clear there is one constant and the constant is not central banking or deposit insurance but the constant is human nature, at the height of the bobble in 1720 dozens of fictitious trading companies were set up to cash in on public appetite for company stock and in one famous example stock was issued on behalf of, quote, a company carrying out a great undertaking advantage but nobody knows what it is so very

well. we can laugh today at the credulity of the 18th-century investor and how much smarter we are, who would invest in such a thing? are we smart? with the purchases of synthetic ceos any wiser? the most dangerous idea in economics is the delusion that the economy exists independently of the flaws and failures of people. from that idea flows the assumption that self-interest to decision is always a rational and well informed, from that in turn is modern economics. let me ask you this. news thinks they are always rational? who thinks their friends are always rational? for "masters of nothing: human nature, big finance, and the fight for the soul of capitalism" we ask these questions of the american public. 48% of the american public thought that they were always

rational but only 32% thought their friends were always rational and that rather approves the point. i as a politician often get when i make this point get asked surely you think you are always rational and i say no. have you ever fallen in love? have you ever made a mistake through being tired? we all have. all humans have. we need to base the management of the economy on that knowledge so let me ask the second question. imagine you are given a choice between a certain game and the chance to gamble for more, specifically. if i offered you $450 now or gamble with the 50/50 chance of winning a thousand dollars but an equal chance of walking away with nothing to, who would choose to take the risk?

that is very telling. in this instance 8% of the american public said they would take the gamble even though the expected value of the gamble is higher, but then to demonstrate risk aversion we changed the game around so you lose $450 for sure or you gamble with half a chance of living--losing a thousand dollars but have a chance you knew nothing and because people don't like a loss, in the second place volvo the expected value is actually higher, the gamble was found to be more attractive you could sense intuitively. 25% of the american public would choose to gamble to lose to avoid the loss where 8% would gamble to make a greater gain. this is because we are naturally inclined to gamble to avoid a

loss because of the very human traits of lost love version. this could explain why in the critical period between 2006-2008 the average ratios of bear stearns and lehman brothers actually increased after the housing bubble had begun to burst. another example of irrationality is decisionmaking so casinos and big money game shows demonstrate past gains exert a powerful influence on decisions in the present even when they ought to change. it is the chemical rush we find from the physiology, the chemical rush of a big win means a high roller will rarely quit while they are ahead. you may think there's no analogy between wall street and impulsive game show contestants but aig's business model was premised on the idea that u.s.

house prices would rise in the future. psychologists know about these policies and have known about them for decades. the problem is nobody told the economists and rather than confront the messy subjective reality of how people actually behave economists clung to this curious objectivity of mathematical modeling based on invalid assumption. none of this would matter so long as markets as a whole were rational even when individuals are not but this doesn't square with what we know of group psychology. being a highly social species we humans are not, we are naturally inclined to follow the herd. in november of 2008 her majesty the queen was asked a group of eminent economists at the london school of economics why didn't anyone see it coming?

but some people did see it coming. the problem was no one in a position to act wanted to listen. in the u.k. sir andrew large, governor of the bank of england made a series of speeches warning of overleveraged financial system which had grown bigger and complex, no one knew where the risks truly day. mary larue beanie predicted the bursting of the housing bubble and the global recession that followed. the chief economist of the imf spoke out of jackson hole of the dangers of a bonus culture fuelling irresponsible risktaking on an unprecedented scale. and all three cases they were derided or ignored by the global economic establishment and again this is common in psychology and the lessons from psychology need to be brought into economics. i don't know how many of those in the audience watching a big

mountaineers but if you ever go up a big mountain the psychology of important advice, don't go in a big group. mountaineering groups of more in four are likely, more likely to suffer fatalities. this is slightly unexpected. you would have fought the more people on your mountaineering trip, grouping can the social pressure of the shared goal makes people more reluctant to suggest heading back when the weather starts to turn and bad weather is the biggest cause of fatality on mountain climbing expeditions and this dynamic was replicated in board rooms and finance ministries across the world. those with private misgivings kept them to themselves and the few who did speak out ostracized. we call them the fools in the corner.

those who made the case for the problems but were set apart by the system. if you except the root of the financial crisis lies in human behavior what should we do about it and what should government do? after all, we can't legislate away human irrationality, and many of the problems of the world would have been sold. the left argue we need more rules and more regulators the problem is we already tried this. in the u.k. the financial rulebook tripled in size in the run-up to the crisis. u.s. government spending on financial regulation has increased seven twenty-five million in 1980 to over two billion in 2007. the basel framework to grew from 30 pages in 1988 to 350 in 2004. the system demanded increasing compliance with the detailed and

complex rules but this degenerated into some provincial process and box kicking. not 1 wall street bank was in breach of the regulation council requirements at the time of the cracks and as the rules will apply and grew more complex they became more easily gained and crucially linking back to the moral purpose i spoke about at the start people stopped asking is this right and instead started asking is this legal and by the end asked can we get away with it? so the answer is not more rules and more box kicking and this argument leads instead to three broad conclusions for how we run our economy. regulators need to move away from trying to micromanage individual bankers and instead be prepared to make countercyclical judgments against the big picture. culture and social norms will

always be the best regulators. the vast majority of economic activity that takes place every day depends not on formal rules but on people choosing to do the right coin. when i pay a restaurant is not because i am scared of being arrested by the police force to buy the restaurant but because it is the right thing to do. strong cultures and good social norms are supported by simple way and clear rules and was, not complex and confusing rules. getting the culture of banking right been stronger boards, tougher sanctions for those who believe recklessly and without integrity, greater shareholder empowerment and better incentives. that is the first response, the call for simpler and clearer rules. second, we are all human, things can and will go on. everyone, even the regulators behave at times in ways that are

irrational so we need to reduce the damage when banks do go wrong. in the u. k that led to the vickers rumor, utility banking from investment banking. all markets exist in a framework, the rule of law, contract calls places for markets to work can be truly free and finally we as conservatives and supporters of free markets need to recognize human behavior for what it is, make sure the rules of the game free us from the overmighty weather in banking or energy or government and support the challenge, the competitor, the entrepreneur and the innovator, of whether the business start-ups for the aspiring homeowner, mrs. thatcher was on the side of the insurgent and so west we be. the liberty and future prosperity of our great nation

will once again spring, thank you very much. [applause] >> thank you for a thought-provoking, timely analysis and i would like to invite questions from the audience suggests the trend if i take the liberty of answering the first question, switching gears slightly to europe, an issue very close to lady thatcher's powered, bearing in mind the tremendous financial turmoil from the euro zone, prime minister david cameron pledged to hold a referendum that 2017, membership of the european union provided for for the conservatives when reelection in 2013 and cameron

has pledged to renegotiate britain's relationship with the e.u. to seek urgent reform within the european union. is this in your view a viable strategy, can you indeed reform the european union and make it work effectively and advance natural authority within the e.u. can you go against the tide being pushed forward by the french and germans towards unions? >> you picked up on an element of the book which i didn't mention in the speech which is also important and britain's relationship with the e.u. which has been based on a referendum on entry into staying within the common market in the 1970s, we believe needs to be put once again resolved and with the euro

crisis, of we were talking about the irrationality of human beings and the euro crisis, there are some parallels. the euro crisis means there is an inevitable drive within the euro zone for some closer collaboration and i understand that because they have a monetary unit but the u.k. does not want to be part of that but the trading relationship with the e.u. is a beneficial one to the u.k.. we have set out a clear strategy to renegotiate our relationship based more on trade and put the results to the british people in a referendum and i have every confidence that the prime minister not least because of the referendum at the end of that process will be able to

negotiate a good settlement conlan and we are at the moment in the process of assessing what the balance of competency between the u.k. and the e.u. is and we will set out what we seek to renegotiate and put the result in a referendum. i think it is a very clear strategy to get us to the position where we get the best from the e.u. and have a positive trading relationship but allows them to go on with the necessary changes they need to make of which we don't want to be a part. >> very persuasive thesis, but i would ask you to reexamine your example to prove how free markets also lead to bubbles which of course they do but when you shows, the government was all involved in railroads not to

mention giving free land and other cities, governments very much involved in that bubble. i would choose a better example. your argument about free market is a good one but at a certain point it -- everybody will work out fine. there is an argument from another part of the right going back to the catholic church which is self-interest has to be tempered with certain judeo-christian principles to work most effectively. there is as you know a criticism from the right in britain, a group -- what do you make of his arguments against the free market or in addition to the free market? how do you put yourself with his argument? >> it is a very good question. there are a legion of examples of bubbles and of course in many of them some government

involvement. but that doesn't get private behavior off the hook. the tulip bubble was one example where there is little government involvement and another bubble was far more government involvement likewise. i think the need for and ethical behavior within business which is the argument that you mention coming from you could call it the catholic rite has a great deal of validity. and indeed i strongly believe that is an argument that margaret thatcher would have made and friedman was making because he talked about the ethical boundaries of behavior and social norms and indeed that sort of cultural, whether it be

religious or otherwise that cultural restraints is a stronger and better regulators and the rulebook, it is both valuable for insuring that we get the best out of the market that people don't -- avoid the most damaging consequences. ..

>> how do you see the future of chie ?a? i guess my basic question is what's your take on china [laughter] >> well, there's a subject for a whole new speech. we've had to -- the heritage foundation can never be criticized for small thinking because the two questions from the heritage foundation fellows have been what about the europe and what about china? each worth of a speech in their own right. china, i think, tells us two things. the first and the biggest single lesson from china over the last 30 years is that the free market is the roots to prosperity. the best route to prosperity mankind ever invented, and the engagement of hundreds of

millions, indeed a billion people with the free market, not only in china, but other countries too, india being the prime other example, has lifted more people out of poverty than socialism could ever achieve, and it's this engagement with the global economy, which has led to enormous, very positive changes that we've seen 234 the last few decades, indeed. i understand the imf produced its annual forum on china suggesting growth in china will be 7.7 # 5%, a downgrade from 8% next year, something that we in the west would be thrilled to have the market carefully, and

they have insisted in contrast to some of the eastern block in the early 1990s that once they free their markets, they try to promote competitive markets and not as much as possible collapse into algarchy and the lesson there, without a framework, it's difficult to have a strong market because -- this is emphatically not a libertarian doctrine. it's a doctrine for the system in which free markets can operate. >> from the safe foundation. i think your conclusion was right the crash was t