we're c-span, created by the cable tv industry 35 years ago and brought to you as a public service by your local cable or satellite provider. watch us in h.d., like us on facebook >> microsoft founder bill gates poverty.ut global president obama announces new economic sanctions against russia. then a preview of the president's upcoming trip to the european union summit. later, the special inspector general for afghanistan reconstruction on the problem of corruption in afghanistan. next, former microsoft ceo bill povertylks about global and the bill and melinda gates foundation, which funds health care and education efforts in developing countries. forbes magazine estimates bill 76 billionorth at

dollars. from the american enterprise institute, this is just over an hour. >> good afternoon ladies and gentlemen. i'm arthur brooks, president of the american enterprise institute. and we're delighted to welcome all of you today to this event, entitled poverty to prosperity. so, this is bill gates. >> thank you. >> with his wife, melinda, he's the co-chair and co-founder of america's largest private foundation, the bill and melinda gates foundation. they work to reduce poverty and expand health care overseas and to improve education here in the united states among other things. previously, he was the chairman and ceo of microsoft, the world's largest software company, which he co-founded in 1973. most importantly, like me, he's a native of seattle and somewhat of a seahawks fan, which is

good. but that's not what we're here to talk about. we're here to talk about his incredibly important work with the foundation, the work that he's doing here and around the world. he shares so many of the priorities of the american enterprise institute to build a better life for people here and everyplace people who suffer from need, people who suffer from disease, people who suffer from tyranny. what can we do about these things? well, he's asking the big questions and he's putting his own resources behind the answers. and we're going to hear what he has to say about his latest work. so, welcome to aei. it's an honor to have you and to be among all of our friends here. you just issued your annual letter for 2014. i recommend that everybody read it. it's a very interesting piece of work. it's detailed, and it explodes a lot of myths about poverty around the world. and you offer an incredibly bold prediction. you say that there will be almost no poor countries remaining by the year 2035. what do you mean by that? >> well, the primary measure,

which has all sorts of challenges, is gdp per person. but it's still we don't have a substitute measure. so just if you take that world bank classified countries with over 1,200 per person per year as moving up into a middle-income bracket, so moving from low income to middle income. and we have today 45 countries that are still in that low-income category. and what i'm saying is that, by 2035, there should be less than 10, and they'll mostly be either places like north korea, where you have a political system that basically creates poverty, or landlocked african countries where the geography, the disease burden, the disparate ethnicities mean that they haven't been able to bring

together a government that in terms of education, infrastructure, health does even the most minimum things for them. and so we're on this rising tide that's not recognized. it's overwhelming how prosperity is spread around the world, say from 1960, where there were very few rich countries and a gigantic number of poor countries. now most countries are middle- income countries, and poor countries are much smaller. now, just saying that they'll all move up past that threshold doesn't mean they won't have poor people within the countries, it doesn't say their governments will be fantastic, but it will be a lot better on average than it is today. >> that's an extraordinary thing. we have a tendency to despair when we look around the world, and we have a tendency to say the world's not getting better because of the way that we see the news. but you're saying that's a myth, right? >> yeah. i think that a deep problem in

perception is that if you want something to improve, you have a tendency to be bothered by the status quo and to think that it's much worse than it is. and that can be beneficial because you don't like, say, the level of violence in the world, the level of poverty, the level of number of kids dying. but if you divorce yourself from the true facts of improvement and look at the exemplars, look at what's worked if you get sort of a general despair about is the world improving, then you won't latch on to those examples. the steven pinker example, one of my favorite books of all time, is that if you ask people, is this one of the most violent eras in history?, they will say yes. overwhelmingly, americans say yes. well, it's overwhelmingly the least violent era in history. and so what it means is your disgust with violence actually increases, and that's partly why we take steps and why within our

own society and the world at large it's come down so dramatically. >> i love your optimism. and so, based on your optimism, given the fact that the world will have only a few poor countries in the year 2035, what's the gates foundation going to be doing in 2036? >> well, there are a lot of diseases. over 80%of the difference of why a poor child is 20 times more likely to die than a child in a middle-income country, it's these infectious diseases. it's diarrhea, pneumonia, malaria. and then there's a few adult diseases which are way more prevalent in poor countries tb, hiv. and we've taken on as a central mission it's a little bit over half of what we do to get rid of those diseases. and so that will remain our priority until we're basically done with those.

and those are tough enough that i'd expect us it will take us 30 to 40 years to really be done with those. and then we will have a crisis because we will have the problem of success and we'll have to say, ok, what is the health inequity between well-off countries and poor countries? is it, you know, obesity, heart disease, and what interventions? and even before 30 years are up, we'll start to think about this. but right now, we're sort of maniacally focused in our health on those poor world conditions because we see that between research and getting things like vaccines and drugs out there, we can basically save a life for about $2,000. but everything we do should be benchmarked if it's not that effective, then we shouldn't do it. so, you know, we're pretty specialized in making

breakthroughs in those areas. >> you've been involved in projects all over the place, from eradicating polio outside the united states to improving schools in cities and even in rural areas around the united states. what do you consider at this point, given all of the resources that you put into these important projects, to be your most important victory or your area of greatest success, and what did you learn from it? >> well, we've had the most success in global health. you know, there's over six million people alive today that wouldn't be alive if it wasn't for the vaccine coverage and new vaccine delivery that we've funded. and so it's very measurable stuff. and, in fact, if you applied a very tough lens to our work, you can almost say, ok, why are you even involved in u.s. education? well, we have a reason that you could say is not all that

numerical, which is that the success that i had, that melinda had, came from the u.s. education system. it came from the u.s. system of encouraging innovation and business and, you know, protecting the intellectual property. and so we feel like we need to have take what we think is the greatest cause of inequity, the greatest challenge to america's continued leadership in innovation, which is the failures of the education system, that we need to be dedicated to that even though the risk that we might not have a dramatic impact is much higher in that work than it is in any of our health or agricultural or sanitation or financial service work, which focuses on the poor countries. you know, we feel that it's critical that america get improved education, but that's very hard work.

and, over the last 20 years, where government spending in this area and philanthropic spending, although it's a tiny percentage, has gone up dramatically, the proof in achievement in terms of reading ability, math ability, dropout rates, you know, kids graduating college, there's been hardly any improvement at all despite massive resource increases that have gone into the area. so it's critical, but it's not easy and there's no proof that it's necessarily going to be dramatically better 10 or 20 years from now. >> so let me ask you about that intransigent set of problems that we have in u.s. education. and i understand that there are certain problems that you can you can eradicate the guinea worm. you can't necessarily eradicate ignorance. here at aei we're trying to improve the free enterprise system. that doesn't mean we'll be done at some point. i mean, that's just the nature of social enterprise as i understand. here in washington, d.c., we

talk about public education all the time. this is the capital of the free world. we should have the best education system, and it should be an exemplar to the whole world. i think we should we should agree. we're pumping more than $18,000 per kid per year in the system, and 15%of eighth graders read at a nationally acceptable standard. so what do we do? >> well, it is phenomenal the variance in how much is spent per student. you know, utah's below $6,000 per student per year. a lot of states are in the $7,500 per student per year range. you've got some that spend more than d.c. new jersey would spend a fair bit more. the northeast as a whole is where the biggest spending takes place. and yet, there is no correlation between the amount spent and the excellence that comes out, you know. yes, massachusetts is good, but if you take the high-spending states as a whole, then you get pennsylvania, new jersey, washington, d.c., mixed into that, and it doesn't look like

there's any correlation. so it's a very strange system. washington, d.c., on a relative basis, actually has improved a fair bit over the last three or four years a combination of improved personnel policies, shutting some schools, letting the charter schools take a somewhat higher share of the cohort. it's about the fourth largest of all the districts in the nation, new orleans being number one in terms of the percentage kids go to charter schools. and the charter schools here on average are quite good. so, you know, there are some things that have gone well, but it's still an abysmal system. and, you know, the fact that there isn't more of a consensus on what should we be doing to the personnel system and using innovation to, say, be almost as good as the countries in asia, it's got to be a concern both from an equity point of view and from an overall country competitiveness point of view.

>> so if spending more money is not the answer i mean, it would be great if it were, because as a rich country we can do that. but there are innovation ideas about choice, charters, etc. if it's the disruptive innovations that are going to make it happen, how do we inject those ideas more systematically into public bureaucracies, not just in schools, but in government in general? >> well, if you look at the education system, the amount of actual research that goes on to understand why some teachers are so extremely good, giving their kids more than two years of math learning in a year, and why the teachers who are at the other extreme, giving less than half a year of learning in a year why we're not taking those best practices and at least trying to transfer those into the other teachers by doing observation and feedback, you know, having the schools of education really drive for high-quality teaching,

it's not a personnel system that right now is focused on teacher improvement. teachers get almost no feedback. they get almost no sense of, ok, i'm good at this and i should share that with other people. i'm not very good at this, and therefore i should learn from other people. it's very different than most other so-called professions. and, at the same time, technology is coming along in terms of taking the classroom video, and, you know, sharing it, having people commenting on it, delivering personalized learning to your kids so that you can assess where each of them are and tune lessons according to what they're having the challenge with. the opportunity is there, and that's what our foundation invests in. it invests in studying the very, very good teachers. we took 20,000 hours of video and looked at various measures, you know, what were they doing

differently? and we created a lot of model districts where there are so- called peer evaluators who are in the classroom, observing, giving feedback. and, you know, it looks like the results on that are very good. and so there are points of light that if we could get it adopted permanently and scale it up, it would start to move the dropout rate and the math and reading achievement. as you say, it's tough, though, because when we invented the malaria vaccine, no school board gets to vote to uninvent it, whereas, you know, if you make an advance on personnel system senator alexander, when he was governor of tennessee in the 1980s did a pretty good system where people got feedback and evaluation, and, you know, it looked like it was starting to work pretty well. and yet, it disappeared. >> the malaria virus is not unionized.

excuse me. i'm sorry. that's not my place. please. >> yeah. ok. i certainly agree that there are various groups that can stand for the status quo. when you want to come in and change things, they are worried not as much for the students, but for the teachers. so they can defend the status quo. but if it was the case in america that the less unionized places were like singapore and more unionized places were poor, and if you had some direct thing, and you said, ok, well, here it is, and now we can explain it, that would be one thing. that is not true. our education is very poor across the entire country, and it does not correlate to unionization. massachusetts, pretty heavily unionized, they do relatively better. you know, some other places not unionized, like actually, on an absolute scale, ok, take arizona it isn't there is no single factor you can say that in the 50 states,

when that's been removed financial constraints, union constraints that something like asia is taking place. >> let's go back outside the united states just for a minute again. you wrote in your letter that there's a lot of misunderstanding about u.s. foreign aid. now, if you read what people are writing about aid, there are a lot of critics who think it's just hopelessly ineffective. some think it's actually positively destructive. what's the misunderstanding about foreign aid from your point of view? >> well, whenever we give foreign aid, you have to, for any particular grant, say what your goal is for that grant. if you goal is famine relief, then you should measure the grant by whether people have been starved to death. you shouldn't go in and say, ok, did the gdp go up? if you're trying to have a political friend like, you know, you want egypt to sign a treaty and be a friend and that is your

goal, then you just and you're not measuring the dollars according to human development then don't come back later and say, oh, their gdp didn't go up or you didn't achieve human development. so a lot of foreign aid, things are labeled foreign aid, to take an extreme case like sending money to mobutu when he was the dictator of zaire, it was labeled foreign aid but it was just kind of a joke that, you know, people act like, well, yeah, that's going to help the people in that country. well, ha, ha, ha. now, because you don't have that cold- war imperative, a lot of the aid is actually trying to uplift their health or agriculture, you know, get these countries to self-sufficiency. and so the aid community does a lot more measurement. we've learned. we have a lot more rich countries. korea was a huge recipient. now it's turned around and is a very significant donor. so you have more rich countries

giving to far less poor countries china, brazil, mexico, thailand, they were aid recipients in varying degrees. now they're no longer aid recipients. india, the aid it needs is very targeted. a very small part of it is gdp. within 10, 15 years, they won't need to be an aid recipient. so this is a field that makes advances. and when you label it aid, it seems mysterious. when it comes to inventing the seeds of the green revolution that avoided famine in asia or the smallpox eradication that was a u.s.led effort, that a disease that was killing two million people a year hasn't killed a single person since 1979, when you look at that, you say, well, was that worth it? well, i guess it was worth it. there are so-called global public goods creating seeds, medicines or -- vaccines for these infectious diseases that

the normal market mechanism does not work, that is, it's not rational for a profit-seeking company to do a malaria vaccine because there is even though it kills a million children a year, the parents of those children don't have enough money to justify the research. and so it's a market failure. now, markets are extremely good. they work you know, they're the best mechanism we have. the more you can use them, whenever you can use them, that is you know, that's one of the key mechanisms along with science and government that have led us to be so much better off than we are than we were hundreds of years ago. but for the diseases that we work on, there is no the r&d would not show up except for government aid and philanthropy. >> well, so your philanthropy is working alongside government aid to be sure. and you show that in your letter and we've known that for a long time. but there are a lot of people who believe very strongly that

the presence of philanthropy like yours is evidence that the government simply isn't doing enough to help people. and i'm going to quote ralph nader, who once said that that's not a laugh line, you people. there's a rowdy crowd here. ralph nader once said, a society that has more justice is a society that needs less charity. what do you say to that? >> you don't want to depend on charity for justice. charity is small. i mean, the private sector's like 90%, and government's like 9%, and philanthropy is less than 1%. there are things in terms of trying out social programs in innovative ways that government is just because of the way the job incentives work they're not going to try out new designs like philanthropy can and they're not going to have volunteer hours coming in to leverage the resources like philanthropy can.

so philanthropy plays a unique role. it is not a substitute for government at all. when you want to give every child in america a good education or make sure they're not starving, that's got to be government because philanthropy isn't there day in and day out serving the entire population. it's just not of the scale or the design to do that. it's there to try out things, including funding disease research or, you know, academic not starving, that's got to be government because philanthropy isn't there day in and day out serving the entire population. studies to see if something is more effective. so i'd agree with that nader quote. if you want broad justice, you'd better be doing that through government mechanisms. >> does that mean that we need less charity, however, if we have enough justice? >> well, i guess if you have perfection, then you don't need charity anymore. charity plays a huge role in america. our universities, one of the reasons that they are world-class is because there's a tendency of the graduates who do

well to give back to those universities. and that is the envy of the world. every other country is trying to think, ok, how do they get this magic cycle going where they create successful people in their universities and then they more effective. help make those universities be a lot stronger? in terms of various scientific ideas, you know, hughes medical foundation there's just a whole ton of things rockefeller foundation, if you go back in time, they invented things that the government research projects were not moving into those areas, not doing that work. the march of dimes invented the polio vaccine. you know, the thing that we're using to go out and eradicate, make it the second disease after smallpox that gets eradicated, this is the oral polio vaccine. that's 10 doses, and this thing costs $1.30, so 13 cents per kid. that was philanthropic money,

march of dimes money, that caused both its predecessor called ipv, which was the salk shot -- this is the sabin oral -- they created those things, so philanthropy has, you know, some amazing hits to go along with lots of money that was probably wasted. >> now, there's a related question to my last one, which is the number of people who talk about charity and free enterprise as if they were in conflict. they believe that capitalism, that people who trust capitalism because they don't believe charity is a good solution to problems, etc. in other words, there's an antagonism between markets and nonmarket mechanisms that are philanthropic, and how do you square those? i think i understand, but i'd like to hear your thoughts on that as well, given the fact that you've been involved in one of the most important capitalistic endeavors in the history of our economy as well as the biggest foundation in our country. >> well, once you get past basic

research and drawing the boundary of how much is government funded and how do you define is a tricky area. there is a market failure for research as a whole, not just research for the poorest. but, once you get past that, most innovation is driven by private enterprise the magic of the chip, the optic fiber, software, the magic of new drugs, new vaccines, all of that stuff how you come up with it, how you make it safe, that's happening in private enterprise. so, for our foundation, where we're trying to help the poorest, our relationship with the pharmaceutical companies has been fantastic. and it's great every time they're successful, they come up with a new drug, they manage to keep profitable because of that. that's great for us because it means they're going to have a little bit more understanding to help us with our issues and a little bit more on the way of resources, all totally voluntary on their part to pitch in. and so the private sector

you know, we've got to bring private-sector agriculture in all of these countries. that is the ultimate sustainable solution. charity, as i said, won't be there all the time. government aid won't be there all the time. the question is how do you get them out of the poverty trap? you need you know, right now 40%of their kids don't in africa, don't develop mentally so that they could ever, say, be fully literate. that is through malnutrition, treatable malaria, a variety of health insults, they're not achieving anywhere near their cognitive potential. and so do you need to go in and remove that barrier, that friction, in order to get them into a sustainable situation? in africa, and particularly the disease burden, the way the geography works, the split of ethnicities, it's been given the toughest problem, to create

countries that are totally self-supporting, you know, running a middle income or above democratic-type system. they'll get there, but they, for a variety of reasons will be the last most of the last to achieve that. >> philanthropy can stimulate the mechanisms of free enterprise, which will then become self-sustaining and help these people well beyond the scope of your foundation or any bit of government aid? >> yeah. absolutely. the poor farmers, the real solution for them is to be farmers who are in the marketplace, selling enough of their produce to diversify the diet of their kids, to be able to buy the school uniforms where those are necessary, and even when a tough year comes along to have saved up enough that they're not starving during the year where weather is working against them. >> people think a lot about leveraging technology in international development. we hear about that constantly,

you know, the big headlines like give every child a laptop, etc. and these are great ideas. and what i want to know is from your point of view, what's the most exciting opportunity for technology to change lives today? >> well, i think the greatest injustice in the area of health. and, you know, that's my bias. that's the area that i spend time in. and i think a child dying is an injustice no matter where that takes place in the world. and this is another one of those good news stories that's not well known. in 1960, 20 million children a year under five were dying a year. now we're down below six million, and we have over twice as many people in that age cohort, so the rate reduction is pretty phenomenal. and we can see a path by working on diarrhea, pneumonia, malaria we can see a path to get that over the next 20 years below three million a year. and, at the same time as you do that, you're not only reducing deaths. you're taking all these kids who

survived and yet don't survive intact that is their brain never fully develops, their body never fully develops. and you're reducing that quite dramatically. and so i'd say health is a necessary condition to get a country to have kids who, when they go to school, they can learn to read, and, you know, therefore, it's the thing we've chosen as the big priority and i think will unlock the potential of these countries. >> so a lot of us in this room are probably looking at your incredible successes and thinking, you know, if i could construct the world's largest foundation, i could do a lot of great things. but for the rest of us, who can't do that, you must have thought about how each one of us can make a difference as well. what kind of advice do you give to everybody who wants to act philanthropically notwithstanding the limits on

their own personal resources? >> well, certainly, picking that cause of inequity, whatever it is you know, pick a local charter school, pick a disease that somebody you know was touched by, go out to a poor country and see what's going on with the health or education there you know, all these problems require volunteer hours, expertise, somebody who's articulate. and a lot of people get frozen just seeing that the need is infinite and say, ok, when i pick, will it be the best pick? well, there's no sort of deeply rational way we're going to have time to enumerate all the things you could work on, and, you know, compare all those factors and then jump into that. it's best wherever you can get your passion engaged to pick something and jump in. for most people, the first philanthropic thing they'll do will be something in their neighborhood where they can go and, you know, put their hands on it, meet the kids at the charter school where they're

volunteering their time, meet the kids that they're mentoring and see the progress that they're making. if you could connect up with the poor countries, the marginal impact of your time or even pretty small resources is higher in many cases than anywhere else you're going to look, but it's harder to access that and figure out how you're going to, you know, stay involved in a sustained way. so as long as you're engaged with something, then throughout your career, maybe more time will be freed up, maybe you'll be able to draw your friends into that. and, if you're lucky financially, then you can apply resources against it. and so the diversity i mean, when de tocqueville came to the u.s. and saw all these nonprofit things people were doing, he was amazed. and other countries have not to this day gotten the level of civil engagement that we've gotten. there are factors that show that

it's even going down somewhat in america, that we're less unique in this respect than we've been, and that's unfortunate because it is a real strength. >> so you recommend that each of us given whatever resources that we have do something that we can touch and see with these particular resources, thus giving us a sense of the good that we're creating. and i appreciate that advice. i want to turn now to some of our colleagues here and start with one of our colleagues from education. your foundation has generously made it possible for us to do a lot of reform work on k-12 education and higher ed as well. and so i want to go mike mcshane, who is over here. mike has got a question that's been coming up all over twitter and across our email hoping that we would ask you this question. mike. >> thank you so much. your foundation has been known for supporting the common core curriculum standards that have become increasingly controversial. and the question that i have is, why? what promise do you see of the common core standards?

how do you see them as a lever for improving the american education system? >> ok. so what is the common core? it's a very simple thing. it's a written explanation of what knowledge kids should achieve at very various milestones in their educational career. so it's writing down in sixth grade which math things should you know, in ninth grade which math things should you know, in twelfth grade which math things should you know. and you might be surprised to learn how poor those i'll call those standards, but to be clear, it's not curriculum. it's not a textbook. it's not a way of teaching. it's just writing down should you know this part of algebra? should you know trigonometric functions? should you know be able to recognize a graph of this type? and doing that very well is hard because there are certain dependencies, if you teach it in

the wrong order, if you try and teach too much at once, too much too early, which the u.s. was doing a lot of that, it can be very, very poor. and if you compare we have 50 of these things and there was quite a bit of divergence. some states had trigonometry, some didn't. some had pie charts, some didn't. so, ironically, what had happened was the textbook companies had gone in and told the committees that make these things up that they should add things over time. and so we had math textbooks over double the size of any of the asian countries. and we had the ordering in almost every one of our 50 which is strange. you think if you had 50, one of them would randomly be really, really well ordered. some were more ambitious than others. so, for example, being high, that is, having the twelfth grade expectation be high, there were a few like massachusetts

that were quite good in that respect. and so when kids from massachusetts take international tests or the sat, anything, they do better, better than the rest of the country. and so often, when you see those country rankings, they'll take massachusetts and show you where it would be if it was a separate country. and it's way past the u.s., that now is virtually at the bottom of any of the well-off countries, with the asian countries totally dominating the top six slots now. finland had a brief time where they were up high, and now they're not even the european leader anymore. so a bunch of governors said, hey, you know, why are we buying these expensive textbooks? why are they getting so thick? you know, are standards high enough or quality enough? and i think it was the national governors association that said we ought to get together on this. a bunch of teachers met with a bunch of experts, and so in

reading and writing and math, these knowledge levels were written down. and at some point 46 states had adopted that curriculum, a variety of competitive curriculum, now that small companies can get into it because it's not just doing a book for florida, and so the sort of barrier to entry that was created by the large firms there goes away. the idea that you those committees rig it so you can't use the old textbooks, you know, that idea will go away because in math, this can have real durability. changing your math standards is not like some new form of math that's being invented. and there has been in a sense a national expectation. when you take the sat test, it has trigonometry on it, so if you're in a state that doesn't have that, you're going to get a low score. and they use a certain notation in the way they do math and certain states were different than that, so you're screwed.

if you move from state to state -- >> in the vernacular. >> you experience discontinuity because of this. and it's made it very hard to compare things. and this is an era where we have things like khan academy that are trying to be a national resource and yet they you sit down, it will tell you, are you up to the sixth grade level? are you up to the ninth grade level? are you ready to graduate from high school? and so this common core was put together. if somebody and states will decide this thing. nobody is suggesting that the federal government will, even in this area, which is not curriculum, dictate these things. states can opt in. they can opt out. as they do that, they should look at this status quo, which is poor. they should look and find something that's high achievement, that's got quality. and if they can find something that's that, if they have two

they're comparing, they ought to probably pick something in common, because to some degree, this is an area where if you do have commonality it's like an electrical plug you get more free market competition. scale is good for free market competition. individual state regulatory capture is not good for competition. and so this thing, in terms of driving innovation, you'd think that sort of pro- capitalistic market-driven people would be in favor of it, but, you know, somehow, it's gotten to be controversial. and, you know, states will decide. whatever they want to decide is fine. but, at the end of the day, it does affect the quality of your teaching, does affect when your kids go to take what are national-level tests, whether they are going to do well or not do well. >> speaking of competition,

let's go to competition outside of the united states and the extent to which it helps people who are poor. and i want to turn to paul wolfowitz now. >> thanks very much for coming. it's terrific to have you here. i have a quick comment and then the question. the question is about trade. but the comment is about this issue of waste in foreign aid. the amazing work that you're doing in the foundation, that the u.s. government is doing with pepfar, other things demonstrate that there are lots of ways to spend foreign aid that are the opposite of wasteful, they're accountable, they're measurable, they make a huge difference in people's lives. but i would submit that there is a lot of waste. and i'll give you just an example. if you give $100 million to a government that is so tyrannical that you really have no idea what's happened to that money, by your numbers, that's $100 million that could have saved 50,000 lives. and i think you'll have a stronger case for foreign aid if

you go after the things that are wasteful as well as the things that are good. but here's my question. in talking about foreign aid, you correctly say, we spend less than 1%. we could afford to spend more. in fact, we spend more in agricultural subsidies. well, the agricultural subsidies aren't just a waste of money. they are making it harder for poor countries to export the very products that their competitive natural advantages would lead them to, which is in agriculture. i wonder what you think about our agricultural subsidy systems and what its impact is on the poor countries that you visit in terms of their trade opportunities. >> well, we certainly distorted the market in agriculture prices. there are some cases where it's fairly extreme, like sugar. and there are some cases where it's more modest, like the big the big cereal crops. in africa there's a few things like cotton, horticulture, where you can make a clear case that the sort of dumping out of the rich countries because of strange subsidies actually is affecting their income. they're not yet as competitive

in the big-value crops as they need to be. so we have a lot of work to do in africa. africa right now can barely feed itself. so the huge rise in productivity it's called the green revolution, that was more than a factor of two increase in asian cereal crops that never happened in africa because it has a unique ecosystem, so even maize and wheat in africa are very low productivity. that's very fixable, both with conventional breeding and with gmo-type breeding to give much, much better seeds. and so the effect of trade barriers once we fix african agriculture, the impact of trade barriers, then the numbers will get very, very large. and, you know, it's just too bad that both europe and the u.s. sort of and japan compete to distort those markets.

and, you know, it doesn't look like there's going to be any change in that. now it's called mispriced insurance instead of price supports, but it's still money. and, as you say, it reduces some level of efficiency in terms of who should be providing which products. >> one of the most striking statistics that i've seen as an economist comes from a catalan economist, his name is xavier sala-i-martin at columbia university, who notes that since you and i were kids, the percentage of the world's population living on $1 a day or less has declined by 80%. it's just amazing. this question is related to that and it comes from our economist michael strain, who says that the spread of free enterprise has dramatically reduced the share of the world living on $1 a day or less, this standard that we've had since we were kids. is that the right standard? you're looking at 2035 to wipe out at least average poverty across all but maybe 10

countries in the world. what should the standard be? what kind of measurements are you using, and how should we be thinking about it to update those measures? >> well, any single measure isn't going to capture what needs to go on. the extreme poverty line now s $1.25 a day, and the poverty line is $2 a day. and you can certainly argue that they should be a bit higher than that. also the way that gdp is measured in poor countries is extremely random not random. it's inaccurate. the errors bars are gigantic. there's a book by jerven called "poor numbers" that just talks about you know, for example, for a subsistence farmer, what are you putting into that gdp number, you don't have some market transaction. and there's a book by charles kenny, the getting better book, that talks about the fact that gdp misses a lot of things. if something comes in, like a measles vaccine or increased

literacy, that improvement in human condition doesn't necessarily show up in gdp at all. in fact, there were radical advances in health and literacy in africa during a 30-year period that its gdp per person moved not at all, zero. and so you want to put into a human development index, you want to put in gdp, you want to put in some health, maybe under-five mortality, maternal mortality. you'd want to put in something about education, something about freedom. and people like mo ibrahim have a variety of, in his case, mostly governance measures that i think are throwing light on these things. there's still some work to be done to capture this. gdp, if you have to pick one single thing, i'd still say it is

it is the measure. even within rich countries, you do have relative poverty. and so the idea of do you worry about getting enough to eat, if you have a medical condition, can you expect to get treatment, there are things like that that even if the economics kind of look ok, you know, then you shouldn't be satisfied. and so the field of economists giving themselves a hard time about how weak these measures are, i think over the next decade, there can be a real contribution to how we look at well-being beyond gdp. >> let's talk about poverty right here in the united states a little bit more. and i want to turn to my colleague, robert doar. >> thank you very much for coming, and thank you for all that you do for people around the world. poverty in the united states is often related to employment and economic growth. and i wanted to test your

optimism a little bit and ask whether you thought we could get back to a 4%annual gdp growth in the united states, and if so, how? what would be the key things to make that happen? >> yeah. you know, i'm not a fan of the way time-series adjustment for comparing gdp between various points in time is done. i think it meaningfully understates the rate of progress. if you take, say, how you get news, your ability to get news, as far as the gdp is concerned, the news business is down. it's employing less people. it's gathering less money. and are you impoverished in terms of your ability to search and read articles today versus, say, 30 years ago? probably not. you know, buying encyclopedias, you know, i bought it my parents bought a world book. i read it. you know, i had to learn the world alphabetically. very weird way to learn things.

you know, now, every kid who has internet access has wikipedia. and so whether it's in the area of technology or medicine or various things, you're there's a lot of a qualitative nature that's not captured in those things. so whether the gross number goes up or not, the rate of improvement in livelihood, you know, i think will be very rapid in the future. i do think tax structures will have to move away from taxing payroll because society has a desire to have employment. of all the inputs, you know, wood, coal plastic, cement, there's one that plays a special purpose, which is labor. and the fact that we've been able to tax labor as opposed to capital or consumption, you know, just shows that demand for labor was good relative to other things. well, technology in general will make capital more attractive than labor over time. software substitution, you know,

whether it's for drivers or waiters or nurses or even, you know, whatever it is you do >> we wonder that too sometimes. >> it's progressing. and that's going to force us to rethink how these tax structures work in order to maximize employment, you know, given that, you know, capitalism in general, over time, will create more inequality and technology, over time, will reduce demand for jobs particularly at the lower end of the skill set. and so, you know, we have to adjust, and these things are coming fast. twenty years from now, labor demand for lots of skill sets will be substantially lower, and i don't think people have that in their mental model. >> so aligning the incentives in our economy to move away from taxing labor, moving to something like a progressive

consumption tax is just a smart thing to do to stimulate to have an economy that's better aligned? >> well, i think economists would have said that a progressive consumption tax is a better construct, you know, at any point in history. what i'm saying is that it's even more important as we go forward because it the distortion i want to distort in the favor of labor. and so not only will we not tax labor, things like the earned income tax credit, you know, when people say we should raise the minimum wage, i think, boy, you know, i know some economists disagree. but i think, boy, i worry about what that does to job creation. the idea that through the income tax credit you would end up with a certain minimum wage that you'd receive, that i understand better than potentially damping demand in the part of the labor spectrum that i'm most worried about. >> so something like a guaranteed minimum income for

people who are working full time through an expansion on the eitc or a wage subsidy seems like the right way to go. >> yeah, one of my favorite aei papers i didn't get time to look it up last night >> he's going to give us his top 10 list here. >> no, it's the looking at consumption instead of the income. because income's complicated. if i'm a student who's, you know, making no income, but i'm investing in my capabilities ok, my income looks funny. if i'm a trader who had a bad year, my income looks funny. consumption really is what you care about. so when people say, hey, >> you should feel guilty because you have so much money, well, it's not that i have money. it's my consumption i should you know, if i'm supposed to feel guilty, it's my consumption. the part that is going to philanthropy really is in a sense in the pocket of the poorest, assuming that we're smart about getting it to benefit them. and the idea that consumption should be progressively taxed, i think that makes a lot of sense.

people have tried to do that by doing particular taxes on luxury goods, some things like that. that's very not very effective. it's sort of picking favorites type things. but yes, consumption should be progressively taxed. and we should understand the consumption. inequality of consumption is more an injustice than a number in a book is. >> so inequality of consumption is the real inequality we should be worried about. i suppose you'd also say that inequality of opportunity is that which is the greatest affront to dignity. i think i'm sort of paraphrasing >> yeah, no, i agree with that. >> is that fair to say? >> yeah, absolutely. both measures, we should understand inequality of opportunity and inequality of consumption way better than we do today. >> right. we've been doing a lot we've had a lot of interactions with dignitaries from india. we just had the dalai lama here a couple of weeks ago. and we're going to have sri sri ravi shankar, who is a very

prominent guru, who has many, many millions of followers here. and we're talking about indian issues, in particular, of late. sadanand dhume is our scholar in indian studies. and he has a question about that country. >> thank you very much. i have a broad question about india. when you look at your engagement with the country, what do you think it's done well, and where do you think it needs to do the most work? >> well, india has a lot of very socialistic policies having to do with labor and land and the fact that it has not risen as a manufacturing power is an indictment of its government policies. that is, as china's incomes went up, the place that the world should have moved to next, as the manufacturing hub of the world absolutely should be india. and that's only happening to a very, very tiny extent.

and it has to do with, you know, regulatory complexities, infrastructure quality. now, you know, i'm optimistic about india. we've put more into india than any country in the world. india benefits from a funny form of competition, which is competition between the states. and so, you know, when one state really gets its act together, the other states tend to feel jealous and they, you know, are kind of looking at what policies led to that. the states in the north that we're particularly focused on, bihar, uttar pradesh should lead in every human development number, as well as income. but the improvements and we have a big partnership with nitish kumar, who's chief minister in bihar. the new chief minister in uttar pradesh decided that these health things that we care about he'd get very involved with. and so we're seeing a very fast rate of improvement there. vaccination coverage. we got polio.

the last polio case there was three years ago, which is an amazing triumph. we've taken the polio quality audit group and we've turned it into a primary health care audit group that's looking at where do workers not show up? where does supply chain not work? why don't people go? india's health is very complicated because they have a lot of these a private sector that's very low quality. and the government hasn't figured out how to get the private sector to be high quality. and yet, they haven't built the capacity in the public sector. but you know, things time is on our side in india. it's just frustrating, you know, they haven't adopted a few new vaccines. that between there's two new vaccines that will save over 400,000 lives per year in just india alone. and they're being quite slow on that issue. so india's great. and in 15 years, you know, we'll probably be out of india because its budget will get bigger and it'll allocate more of it to health.

>> why did the -- what result the delays and actually the permitting and what owes to that? i suppose the virus has been unionized there. >> the suspicion of the bureaucrats really like the status quo. the way their career system works, you're much better off not to change things. and so getting somebody to say, yes, we'd like to spend more money on a new vaccine, knowing that there's a crowd that's going to come in and attack that. there's a little bit of conservatism. and there's an election coming up, hopefully you know if you get close to an election, you get particular paralysis in the bureaucracy. post the election, there's a lot of optimism that things will, both in terms of deregulation and taking on new health initiatives, that things will be even more aggressive.

>> your work all over the world is in so many facets and so many different areas. and i asked you to survey the sample of things that you've done to talk about the things you were proudest of, the greatest successes, what you've learned from that. i suppose i should ask you also what was, you think, in your view, your greatest failure and what you learned from that? >> well, we fail all the time because we back scientific approaches for creating vaccines and drugs that fail. we did a thing in education, which was changing the high school size to be more like 400 than 1,500. that actually where we created a community, where the adults and all the kids, they had an expectation of what the kids were doing. that actually had good results. it raised attendance. it lowered violence. it actually raised completion rate about 15%. what it didn't do on any

meaningful level was raise the educational level of the kids who graduated. and so we called it college readiness. but we had a view of what sort of the reading, writing, math skills you'd have on graduation. it hardly moved that at all. and so when our goal was to get more kids to have the income uplift that a four- year degree provides you, it didn't look like we were we weren't going to get to what we wanted to at all. and so we step back and say no. we have to get involved with helping teachers be more effective. we've got to learn about why the teachers in this country are not being more effective. and so that was a big change of strategy. some people call it a failure. it's a failure in the sense that our high goals for four-year completion were not going to be achieved. the kids were all better off in the smaller schools, measurably better off than they had been in

the gigantic high schools. >> now, the reason that that's an encouraging lesson is that you learned something and you didn't adhere dogmatically to what you wished worked, but rather what did work. are you able to take this lesson to public policymakers who tend to stay with the public policies that they wish worked, but manifestly don't? >> well, public policy we need more people examining effective ways to achieve public policy goals. and it's unfortunate that, a little bit, the idea of making things more effective and getting rid of things, those are, you know, separate issues. so there should be a, you know, a class of people willing to say, ok, in terms of helping with deprivation in america, could we, by having less vertical programs, maybe achieve that for you know, even be neutral about for the same amount of money we spend today?

and then, as a separate question, ok, you know, is that are we spending too little or too much? because the complexity of improvement is high gathering data, trying different things out, and political dialogue isn't very good at very complex things, a lot of the airtime, instead of being about relative approach, is about more or less, more or less. you know, take health care costs. left, right, center show me your best ideas for bending the health cost curve. just getting rid of something, ok, is that going to bend the health care cost curve? what is the, you know, what is the, you know, supply-demand equation, the nature of the professional rules, the nature of the innovation pipeline and the incentives in the innovation pipeline? i think there's a dearth of

ideas that are being really discussed that relate to what other than education may be the biggest, you know, government budget issue we face, which is are those health care costs going to crowd out every other government function. >> this is submitted from one of our friends by email. the gates foundation divides its attention between philanthropic priorities here in the united states and overseas. there's a real need and there's a lot of inequality, opportunity inequality and consumption inequality, as you and i've discussed, here at home. so how and this is, i guess, a question about the execution of philanthropy how do you decide how you're going to allocate the resources between these competing needs here in the united states and overseas? >> well, melinda and i picked two things. we picked what we thought was the greatest inequity in the country that had created the conditions that allowed us to have this outside success. and that was education, both

k-12 and higher ed. and then we decided what's the greatest inequity globally. and there we started. and the core work is around global health. and that's expanded a bit. now, it's got sanitation, agriculture, financial services, three or four additional things that are there to help uplift the poor. so we you know, we've got two centers of activity. and you do have to specialize. and so far education has been our big domestic we did a few other things. we put compurs on libraries. we do a fair bit of things locally in the seattle area, washington state. but the big thing has been education. >> i want to turn now to my colleague john makin. >> do i ask a question? >> if you could, put your statement in the form of a

question. >> yes, i would. well, we have two things in common. we both spent a lot of time in seattle, i teaching at uw, while you were revolutionizing the world. and we also think a lot about economics. but my question really has to do with the relationship between the gates foundation and the world bank. when i started to think about questions for you, i looked at the world bank's budget and i saw that they i believe they lay out around between $40 and $60 billion a year on a wide range of topics. so when you entered this field, did you feel did you believe you probably did but how did you think about approaching it? would you be catalytic with respect to the world bank? in other words, get them to do things that or do things yourself that they're not doing? for example, the reduction in infant mortality, which is certainly a big success story, really was not underway for a lot of the time that the world

bank had substantial resources. was that something that attracted you? do you think that you can be more flexible than the world bank in terms of moving from one priority to another? really, how do you mesh with the world bank? thanks. >> yeah, we do a lot with the world bank. i had dinner with jim kim a long dinner last night, because we overlap a lot in health and agriculture, and even areas we don't overlap. we don't do roads, but our agricultural programs work a lot better when there's a road. you want to get the inputs in and the outputs out. a road is a very clever way to do that. and you know, it's tragic. africa, both in terms of power infrastructure that we need and roads is way, way behind. and they're and africa really is bumping up on gdp levels that won't go up unless they solve those infrastructure problems. they've got to solve the health

problems. they've got to solve the agriculture productivity. you know, unfortunately economic advance requires a lot of ends, a lot of things that come together, including education and governance as well. the world bank numbers, though, you can't really compare them directly to our numbers because those are loan numbers. and so you have ibrd loans that are market rate loans. and you know, they tend you know libor they tend to be pretty competitive. but it's the ida piece and sort of the forgiveness part of that loan portfolio that is the really significant overlap with what our foundation does. and there're a number of actors out there. unicef, in the childhood space. the agency that did the most for child mortality was a guy named jim grant during the 1980s, where he convinced countries they needed to raise vaccination rates. and they were below 30%when he

started. and they went up to over 70%within that decade. so he probably saved more children's lives than anyone. now, there's various inventors of vaccines. there's deng xiaoping. there's various people who did things that saved a lot of children's lives. but he'd be certainly high on the list. there's an area we operate that world bank doesn't operate in, which is upstream research. so the invention of the malaria vaccine, world bank does not put any money into that. they don't have people who know about that. the only the other big funder of that is the national institutes of health, particularly the national institute for allergy

and infectious diseases, tony fauci's part of nih. they and over 80%of the infectious disease research funding comes either from us or from them. so they are a deep collaborator there. with world bank, the thing that we're super excited about there's two things we're super excited about doing together. and it's basically a personnel system. and we're doing a report card, like the world bank doing business report card. and we're going to do that in the agricultural space, which is really about how do you turn your agricultural sector into to make it as market driven as possible. are you taking the latest seeds? are you educating your farmers? are your pricing policy, storage policies such that your farmers are being uplifted that the productivity and incomes are going up? so we have some ambitious goals of things we want to do with the

bank. we actually a lot of funding we do is through the bank. it shows up because we create like our polio account gets graded through the bank. so they ended up facilitating things. they have a lot of iq. and jim kim has stated the goal that he wants to unlock that iq in a more technical advice way, not just connected to the loans. now, that's an ambitious goal. that goal's been stated before. so you know, now, he's trying to drive that even further. so they're a very good partner. there's a lot of partnering involved in this, the development world. >> we're out of time. before we finish, i just want to say it's an honor to on behalf of all of my colleagues at aei to share an objective of a better world, particularly on behalf of those who can't fight for themselves and that aren't here represented today, but we are their intellectual and action representatives. what you're doing is truly important. we endorse it, and we appreciate it very much. before mr. gates leaves, i would

like to ask that you all stay seated, so that he can get out. but of course, join me in thanking him for joining us. [captions copyright national cable satellite corp. 2014] [captioning performed by national captioning institute] the role of health centers. in the health center medical director discusses the variety of service provided by health centers. the current and future impact of the affordable care act. "washington journal" begins at 7:00 a.m. eastern on c-span. >> friday, vice president joe beginsnd live coverage at 10:00 a.m. eastern. >> to the families of my personal friends, mike smith, mcnair, del, ron

mcauliffe, anda greg jarvis, we extend to you yourhoughts and prayers to family and friends at the time andhis hour of your loss .ur shared grief the space program has been marvelous for america to expand. it will continue to be so in the future as long as man has the thirst for knowledge, we will continue to press outward. in the process, there is risk.

that risk is taken by each one of us every day and that risk is understood by all the members of a crew that climbed into the -- loadedeship spaceship. mike included remarks would be as we reflect upon this tragedy, a tragedy that this whole nation breathes in, let's remember the remarks by someone who knew something about risk a gallant lady named helen keller when she spoke about risk and security. this is what she said. security is mostly a superstition. it does not exist in nature, nor do the children of men as a whole experience it.

avoiding the danger is no safer in the long run then outright exposure. listen to what she ends with. life is either a daring adventure or nothing. bless, i've be with, and keep in the palm of his hands our departed brothers and adventurersir ring aring adventurers and made a find help with their families and friends. >> east been created by cable companies 35 years give them brought to you today as a public service by her local cable or satellite provider. >> president obama today announced additional sanctions

against russia for its annexation of crimea. these new measures target 20 more russian officials, .usinessmen he made the announcement on the software on. lawn.th >> good morning, everybody. i wanted to provide an update on the situation in ukraine and the steps the united states is taking in response. over the last several days, we have continued to be deeply concerned by events in ukraine. we have seen an illegal referendum in crimea, and illegitimate moved by the russians to annex crimea, and ainge risk risks of escalation, -- dangerous risks of escalation, including threats to ukrainian personnel in crimea and threats to southern and eastern ukraine as well. these are all choices the

russian government has made. choices that have been rejected by the international community as well as the government of ukraine. because of these choices, the united states is today moving, as we said we would, to impose additional costs on russia. we are imposing sanctions on more senior officials of the russian government. in addition, we are today sanctioning a number of other individuals with substantial resources and influence who provide material support to the russian leadership all stop as well as a bank that provides material support to these individuals. we are taking these steps as a part of our responsibility in response to a russia has done in crimea.

at the same time, the world is watching with grave concern as russia has positioned its military in a way that could lead to further incursions into southern and eastern ukraine. for this reason, we have been working closely with our european partners to develop more severe actions that could be taken if russia continues to escalate the situation. as part of that process, i signed a new executive order today that gives us the authority to impose sanctions not just on individuals, but on key sectors of the russian economy. this is not our preferred outcome. these sanctions would not only have a significant impact on the

russian economy but could also be disruptive to the global economy. however, russia must know further escalation will only isolate it further from the international community. the basic principles that govern relationships between nations and around the world must be upheld in the 21st century. that includes respect for sovereignty and territorial integrity. the notion that nations do not simply redraw borders or make decisions at the expense of their neighbors because they are larger or more powerful. one of our other top priorities continues to be providing assistance to the government of ukraine so it can stabilize its economy and meet the needs of the ukrainian people. as i travel to europe next week to meet with the g7 and other european and asian allies, i urge congress to pass legislation necessary to provide this assistance and do it right we need action. i also hope the imf moves swiftly to provide a package of support for ukrainians as they pursue reforms. in europe, i will be reinforcing a message vice president biden carried to the baltic states this week.

american support for our nato allies are unwavering. we are bound together by our article five commitment to defend each other and a set of shared values so me generations sacrificed for. we have increased support for our eastern european allies and we will strengthen nato's collective defense and step up our work with europe on economic and energy issues as well. let me close by making a final point -- diplomacy between the united states and russia continues. we have emphasized russia still has a different path available, one that the escalate the situation and one that involves russia pursuing a diplomatic solution with the government in kiev with the support of the international community. the russian people need to know in mr. putin needs to understand that the ukrainians should not have to choose between the west and russia.

we want the ukrainian people to determine their own destiny and have good relations with the united states, russia, europe, with anyone they choose. that can only happen if russia also recognizes the rights of all ukrainian people to determine their future as free individuals and as a sovereign nation. a right that all in nations all around the world understand and support. thank you very much, everybody. thank you. russia responded the sanctions of their own against several u.s. officials barring them from travel to russia and freezing any assets they have an russian financial fusions. targeted, senator john mccain issued a statement saying --

ukraine and russia are on the agenda for next week's european union summit which president obama plans to attend. a panel at the strategic international studies previewed the summit and looked at how they are responding to the russian annexation of crimea. this is one hour and 10 minutes. >> thank you all for joining us. if there is a nirvana for european analysts, i've been in it in the last several days to be surrounded by the people that i listen to very closely to help me understand world events and they all came to williamsburg and we talked about the future .f europe we talked about the seismic

event that occurred while we talked about the annexation of crimea by russia. what at tell you pleasure and delight it is for me to share minor frond with you and we can share three insightful journalists who have agreed to be with us today. rachman, the chief foreign affairs commentator and a weekly columnist for "the financial times." we have dr. joseph joffe, the editor of german weekly "die zeit". and all having journalistic careers. when the president does a visit overseas we do a briefing for the press and tell them what is important and what to look out for. we'll do that with csis scholars tomorrow morning. i thought there could be no

better opportunity to talk about the president's trip to europe next week with roger gideon and joe to get their insights what they think is important. i'm sure when the white house was planning this trip very long ago they had no idea that this trip would be this critical, this vital. i think they started out thinking yes, this third summit of the nuclear security summit an initiative president obama started this is part of a important legacy for him. he would visit brussels perhaps to buttress criticism that he has never been to brussels as president. he made eight trips to europe but never visited the capital of europe and so hitting that as well. then he is off to rome i think for to see pope francis but now to meet the new italian prime minister, prime minister renzi. then he is off to saudi arabia for even more difficult conversation and even more

difficult bilateral relationship. but now the world has changed and so this trip has changed. so i thought what we would do is talk, have a conversation with gideon, roger and joe about, not only what's at stake for this mission. i won't call it mission impossible but it will be a tough mission for the president, as he confronts this new challenge but i'd also love your take, the three, on really what the state state of the mood in . we had, this is the first time the president will travel after the full and devastating impact of the nsa revelations particularly the impact on the german revelations. we have in two months the european parliament elections which will perhaps change europe how democratically they speak to the future of the e.u. there are lots going on. i can't think of three people who i want to listen and their thoughts. with that we'll start with gideon and go to joe and roger

weill:up. we'll a clean up here and welcome you into the conversation. with that, gideon. thank you, again. >> thank you, heather, for a very kind introduction perhaps excessively kind but i'll take it. it was very nice of you and arranging the whole forum and it is a great time to be here in washington to figure out how the americans will react to this joint challenge that we now face after the crimea incursion and indeed annexation. i think we have one small thing to thank president putin for which is that he made what would have been a rather peculiarly timed trip into a very well-timed trip. it was peculiarly timed to have a u.s.-e.u. summit now was a bit strange because as heather mentioned, the whole of the european establishment is about to change. we'll have european parliamentary elections. the commission is going to be reshuffled over the summer. so the people obama is meeting won't be there in a couple

months time. i realize that is typical kind of european wind. you said for years you haven't come to brussels, you haven't come to brussels and he comes to brussels and you're coming at wrong time. he was sort of coming at the wrong time. now suddenly this is very relevant trip. the u.s.-ue -- e.u. summit is will have a g7 summit in the margins. the g7 is back. the g8 is no more. that will be an extremely important meeting. interestingly i saw originally president putin was expected to come to the nuclear summit and finds himself otherwise engaged. leader of china will be there. and it will be almost a mini u.n. happening in the hague after the ue-e.u. summit. let's backtrack briefly and look at the u.s.-european agenda.

what will obama and the leaders be talking about? it won't be just the commission. you will get the leaders of the european nations meeting. some of the old agenda, most of it will survive although recast in this new framework of the events that just happened in russia. i think one of the big questions is, will ptip, the effort to create a transatlantic free trade area, will it get a big boost because of what's happened in crimea? and theoretically one would imagine it would because it always had a kind of geostrategic or geopolitical rationale behind it. of course people want an extra economic boost after the kind of tough types we've been through on both sides of the atlantic but there was also a sense maybe we on both sides of the atlantic kind of have to rediscover each other and create a large block, oddly not vis-a-vis russia but vis-a-vis china. you heard from both american

officials and european officials if the west were to have a chance to continue to shape the global economic agenda and free trade framework, perhaps it was no longer enough to be the e.u. and the us. if we have a economic spin-off it would have political spin-offs. that political agenda has now been ramped up by what happened in russia. however i must say i'm skeptical i think you will see increase in the rhetoric how necessary it is. i don't see it enough to over come the entrenched obstacles which you have on both sides of atlantic. will harry reid suddenly say i will give obama fast track? i doubt it. maybe americans no better. will the french farmers or other protectionist groups in europe suddenly say, because of what happened in russia we drop our objections to this treaty? i don't think so. so there might be a little boost to it but politics and political concerns are pretty entrenched. so, i doubt we're going to get a

huge surge in ttip. heather referred to the nsa and how we will get over that. everyone i suspect will tiptoe a little bit around the issue. i don't think it is particularly in the americans interest to have a long, open discussion about it. i think the europeans having registered their disapproval don't want to turn this into an operatic larly now at this time. it has done damage to america's image as well as britain because we're complicit in the whole thing and germany where this issue was taken seriously and merkel's phone being bug. i would add, i think that one of the central tasks of facing american foreign policy and obama in particular, and even more important now, in the context of what is going on with russia is to rebuild the german-u.s. relationship. which is the key relationship. and is in much worse shape than

i think people realize. the bit they have seen is the rau over the nsa and the stuff in the german papers and cite crosby her standards, statements by angela merkel. i think even before that it was in disrepair because of a rau happened over syria where the germans, failed to sign a joint letter that the americans were putting together backing obama's position, about military action on syria but that provoked a really bitter rau between the principles in the white house and chancellery which i can tell has not been mended. the fact these people don't get on with each other or speak to each other regularly is a problem and has to be fixed i think, now more than ever because what germany decides to do on sanctions will be almost as important as what the u.s. tries to do. the germans, as well as being the largest economic power are

also at one end of the european debates what to do about russia. they have always for economic and political reasons, in another context we call constructive engagement with russia. they continue to have a big economic interests. not just pure, filthy lucre and dividends for energy companies. there are actually direct implications for the living standards of germans. 30% of their energy comes from russia. our colleague wolfgang who is with us, said to me in a conversation, if they don't get russian gas, germans will freeze because, we're going into the summer but this could be a long standoff. so it is really serious issue for merkel. so how the germans react will be very important. think one of the things that obama will swiftly discover, i'm

sure he knows it already but he will see in person, there is as ever no single european position on this i think the europeans realize they have to be an effort at european unity. and the germans in particular will very much want to try to stay on the same page as the poles who are, you know, obviously neighbors. the eastern end of the e.u. but they represent the people who are most alarmed by russians and most keen on a tough response. and the at beginning of this crisis you saw the polish and german foreign ministers together with france going to kiev together and i think people were very pleased with the symbolism of that because the two end of the european debate, the poles and the germans had a common position. whether that common position can survive this now much more prescient situation is going to be very important and i think the americans potentially can play a constructive role in

trying to bring the sides together and to make sure that at least we don't display our divisions in public to the russians because that of course can only encourage them. trying to think how the europe and u.s. will react to this. we know issues they will talk about, sanctions and so on. i think nobody has any appetite for military response. there will be some discussion about how tough you are and reiterating article five. whether you start moving military assets into the baltic states. whether you begin to offer the ukrainians something rather more substantial than a meal ready to eat as potential assistance. those issues will be very important. therethere will be this questio,

what kind of sanctions and how can we make sure we all suffer equally because the, the odd thing about globalization or this economic relationship between developed with russia is that it does differentiate from the situation in the cold where where there wasn't an economic relationship. there weren't huge russian banks with stakes in the city of london and so on. that's changed and it give us leverage over them but it also gives them leverage over us. we have to work out, are we prepared, we can certainly do them some damage economically but we in doing so would damage ourselves and how do we strike that balance and how much pain are we willing to take and so on? and also, we have to try and begin to think through the russian reaction because, you know, if putin is in full great patriotic war mode one thing we know about the russians is they can take a great deal of

privation when they feel national interests are at stake. i don't think we can feel overconfident that these economic sanctions will with russia in internationalistic mode will change course but we have to try to do something. i think a lot of the reaction of the europe and u.s. together will come down to personalities of leaders as it often does. i think it is potentially significant that the two most important leaders, obama and merkel, are both intrinsically quite people. you saw that in the libyan crisis when obama and merkel were both very reluctant to go for military intervention and that was driven by cameron and sarkozy and quite hotheaded. cameron despite his lange quid air he is faced with a crisis of somebody who wants to act. i think obama is somebody who wants to think. we'll know more about it but he

seems slightly paradoxical at home. he seems quite paralyzed. overseas he has been quite activist with marley and so-and-so. he might be in the sort of cameron we've got to do something camp. i think in the end obama and merkel are more important and their instincts just as human beings and leaders have been more intrinsically cautious. so i suspect we're going to get, we're not growing to get sort of churchillian, harry truman type speeches. we'll get something that looks to be firm and aims to avoid looking ridiculously weak and so on but that's not going to be tough something. i think a bit like, i don't know, some you probably heard scowcroft and bra brzezinski last night. they said we may not get there but keep some sort of space with russians and i suspect that is the ink tinge for the moment will prevail.

this is moving situation. who knows what it will look like by the time obama arrives in europe, if there have been incidents and the russians are beginning to look greed i wily at eastern ukraine and the whole situation is different once again. a final point. about how the russians might be reading this and how everybody has based. i think it is important that we look forward and not have a who lost crimea debate. very striking for me in your visits to the city to see that the shape of the u.s. debate about, well is this all consequence of obama's weakness and he was cautious over libya. that he, on syria obviously drew a red line and erased it. and that's an interesting debate but i think that, if my guess is that actually as much as thinking about america's reaction or lack of reaction or weakness or lack of weakness, president putin will have looked

at european weakness. and, european reaction. after all, remember this started as a tussle with the european union over the fate of ukraine. and, a bit like stalin has meant to have said to the pope, how many divisions does the pope have? how many divisions does the e.u. have? the e.u. doesn't really do military power. doesn't think in those terms. thinks of itself as a soft power. has nascent military ambitions and but very, very small stuff. just more generally what putin was facing as a european union that is incredibly internally focused. obsessed with the euro crisis. that is recovering barely from a very severe recession, a couple of these countries are still, deep, deep economic trouble. european union is facing european parliamentary elections where pop you is, far right, far left could get up to the 25% of the vote. this is not a european union really up for a confrontation

with russia. it may have to gird itself and get there anyway but i think if i was sitting in moscow you would think these guys are shallow. they're internally divided. they're obsessed with their own little problems. they're not thinking strategically. they're not really going to be a problem. around for the european union to overcome that, actually fairly accurate assessment and get its act together is going to be a really big challenge but not just for next week. but for the next couple of years and more. >> gideon. thank you so much. that was terrific. joe, i'm sure you have some thoughts on the u.s.-german relationship and the role that germany will play throughout this crisis. >> thank you, heather. i don't pretend to know what obama is going to say and do in europe but i, so i want make it easier for myself and just step back and describe the new stage

where both he and the europeans are going to be operating and isolate to draw the contrast is to look back at 2008 and before the election when obama had a real triumphant gig, and i mean gig, at the victory column in berlin. he drew 200,000 people which is probably, as much as free concert of the rolling stones would have gotten. from that, he bestowed the stage then as -- bestrode as a rock star and redeemer. footnote between him and angela merkel who had told him no, you can't do a reagan, you can't speak in front of the brandenburg gate. he had to move off half a mile to the columns. it didn't start off on a good foot between them. but putin as i tell you in a

moment has done worse to merkel. he is the rock star and redeemer. as you know mortal redeemers never deliver what they promise some disappointment was about to set in very quickly and if you say go into the pew charitable trust figures you see that approval rates for obama began to decline pretty quickly after the, down by double digits in all of europe and the middle east by the way. so why, what, but there's, so how do we explain the decline? of course frustrated expectations. earthly redeemers don't redeem but europeans didn't like a few

other things like the drone, drone violence which up compared to the bush administration. and of course more recently the nsa snooping in europe. europeans conveniently forget the brits in gshq and french with doing exactly the same thing although on somewhat smaller scale but the brits being in a much better position than the nsa because they set astride eight transatlantic cables which all end up in london. so nsa snooping, disappointment in somebody who couldn't possibly deliver but people expected him and i think most importantly perhaps was a sense of, hey, this guy, this guy treats us differently than previous american presidents.

previous american presidents had spats with them, big spats but never were we faced with a kind of indifference obama seeps to exude and indifference of course became more concrete in these, like rebalancing pivot, europe. it has no longer a problem. we have to play the next power game in asia. so this was kind of a, of course, where america actually did pivot to not so much towards china the pacific and middle east and you know all the syria and iran and only to buoy with this. this was the stage until two, three weeks ago. now the new stage is really quite interesting because it, it

displays two pretty interesting watersheds in the affairs of nations. and the european-american alliance. what surprises me is two things. first, first time there was the american superpower no longer taking the lead as it had done the last 70 years. and so the action kind of fell upon others, notably, notably on germany. and that is the second surprise because that is not the game plan for germany. hasn't been for the last 50, 60 years. it was happy in its cocoon of alliance integration and not happy, indeed loathe to take a strategic role. i will take this, germans moved to center stage because they're so strong but mainly because the

others at this point, are so weak. think about france. and libya -- takes lead in bombing. you don't hear much from paris these days. the brits, who for decades faithful american lieutenants, always buy its side. what do they do? they vote in the commons not to get engaged in syria. which kind of pulled the rug under obama but i think he was happy to have the rug pulled out from under him because he was pretty leery to actually use force in syria. so, here is that first watershed, the surprise about how the old prayers shaped up and showed up in a new way. the second watershed, we've been talking about, everybody has been talking about the last two, three weeks, what you might recall the return of history.

the return of the kind of history which dominated the first part of the 20th and 19th and 18th century. power politics. zero sum games. he constant readiness to use force for all the great players. and, surprise, surprise, after 70 years or so this was the first time borders were changed or by violence after the verdict of world war ii. lots of borders of course had been changed by violence. two water sheds and surprises. if this is the return ever history as i just outlined. it is turning out, what does the

stage look like? look at the two key players i must mentioned. they share similarities though they are far apart in size, economy and so on. i would submit that neither germany nor the u.s. is very comfortable with its role. why so? well the u.s., has been in reaction mode. obama's america has been in retraction mode. i don't have to go through the details except to stress one key engine of retraction which is this offrepeated phrase by the president, time for a little nation-building at home. i think he said it about a dozen times in speeches. retraction in a way, final victory of george mcgovern and his campaign slogan, come home

america. plus of course the opinion figures in this country which tell us pretty much, pretty clearly, we've had it with all this war stuff. iraq, iraq, afghanistan. enormous application of force, enormous expenditure but not much to show forfeit we look at what the middle east is doing. so suddenly the united states is being dragged back into a game in europe it thought it could safely abandon. the germans, unlike the germ mans of the 20th century are not exactly pushing on to center stage. they found out that, they didn't do very well in 20th century trying to grab germany and a -- more misery. they're not kind of rushing in like a latter day william the

ii. they have been kind of dragged into it like the united states is being dragged into it. so, you know, hacks like us, we always have to come up with a nice little phrase to amuse or, not to lose our readers so i will do this one. i will call them, i call both of them the two great garbled powers. a bit older and know the movie cannon, may remember greta garbo and her famous line, i want to be alone. and she had her huge sun grasses on. -- sun glass glass. there is a greta garbo here. i want to be aloan. expressed by mitt romney when obama chided romney, hey, man, haven't you figured out, haven't you realized the cold war is over? well the cold war is back but it

is not a cold war in a classic sense but idealogical dimension is missing. now the germans totally abandoned the strategic role in the last two generations. and they kind of saw themselves, what they call a civilian power and one that is lodged in the heart of the e.u. called the empire of peace. we don't do war. we do all kind of other stuff. we trade, we give aid, we help people build democratic institutions. we're diplomats. we're intermediaries. we don't do war. and so but you know, this is, this is kind of the situation. i mean this is the mind-set with which these two key players bestrode the stage. strategy by hard power is back. zero sum games are back.

zero sum games meaning your gain is my loss. and both of them are facing an opponent who i think is probably the most brilliant strategist on the global stage today. this is no czar nicholas i who got russia into crimean war in the 1850s and sustained enormous losses. he was impulsive and vain. this guy is not impulsive and not vain. he is very smart. he knows an opportunity when he sees one. boy it was hard to resist this opportunity. my turf. i have some historical claim to it. the west is far away. the balance of interests is on my side. local power is on my side. it's, it was perfect. notice i'm not making any moral

judgments. i'm just giving you like a theater critique. somebody turned out to be a brilliant, brilliant actor. minimum force, maximum gain and even better, the man has by doing so gained what we call street credit. why is street cred important? once you establish a reputation for the willingness and ability to use force and to be ruthless about it, you don't have to use force and conquer next time. you just establish a reputation as a nasty bastard and so people will, you don't have to wield power in order to have it. so he may stop here because he has now so much intimidated the ukraine that the ukraine will do his bidding. however, if he goes, if he goes farther, i don't think we're going to do much about it

either, because again, it is our periphery but his century. he is close. he is got the determination. he has got the street cred. how in the end will the game unfold? one, i don't think we'll use military force. i'm pretty sure, to dislodge, to dislodge putin. to dislodge somebody is a hello of hell of a lot more dangerous than to slip in when nobody is looking. too much risk. so both the u.s. and germany will use civilian incursion. you know what it is like. kick them out of the g8. travel bans. freeze bank accounts. the e.u. is now extending again an association agreement to, to the ukraine.

and we'll do a number of demonstrations of military power. demonstrations, not use of military power, on the eastern edge of nato to reassure poles and baltics. the problem with this is that the time frames don't match. i mean putin has grabbed the crimea and he will now consolidate. these civilian sanctions outlined will take a long time to, to achieve its goal. it doesn't, you can't redirect gas flows overnight. you can't redirect frayed flows overnight. and if you look longer into the future it take as while to reverse what is true for the entire west which is long-term decline of defense spending. those chickens have finally come to roost in the united states too. take the great power of germany

which spend 24% of gdp and much less than the brits. much less than the french and certainly a lot less than the united states. >> joe, you want to wind up real fast. >> i'm be almost done. so what are we doing here? we're looking at a, maybe there is a new cold war but minus the idealogical component. certainly putin has won the first round and may win the second round if he goes to the eastern ukraine. and, because the ukraine is more important to him than is to us and i think we're not, we really do not, we find it very hard to reverse some of the trends that, that i mentioned. but if this game persists you can't just let the other guy play the game.

we wily nilly have to restart playing the old game of power politics again. >> thank you so much, joe. roger. >> thank you very much, heather. i must say nirvana for european analysts had been pretty high on my list of oxymorons before you suggested that. it might actually exist in reality. so i'm grateful to you for that. i'm not sure i can add a whole lot after those two brilliant exogesiss from gideon and joe. but this is a very important trip to he europe, much more important than it would have been a couple months back. brussels is not, brussels is a rather anodine dateline. it is not zare sarajevo, it is

not paris or berlin. but think the moment has come despite the dateline for some powerful symbolism. i think the body language will be almost as important as anything to demonstrate that, the transatlantic unity is not just some quaint idea from the 20th century but he is still there. and still matters. let's face it. president putin has acted because he is perceived the european union as weak and, president obama, the united states in general, as distracted, looking elsewhere, pivoting to asia. winding down on the post-9/11 wars in a phrase of retrenchment. and that is the basis on which he has acted. and i don't think we can have any illusions any longer about

him. i think we were inclined to think he really thinks the breakup of the soviet union was one of the great, the greatest strategic tragedy of the 20th century and it was such a almost farcical statement that we waved it away. but the fact is if you look at the invasion of georgia in 2008 as a kind of a trial run for this, as his whole perception of the post-cold war humiliation of russia, the need to recreate, if you like, the soviet space, there is coherence, there's a plan as joe just said. there's a strategic mind at work. and he means what he says. and he cares about it. and if the language he understands is force and i think, unless there is a strong response and a united response

above all from the united states and europe together to this and a reassertion of the importance of the transatlantic alliance and of nato, then we could be heading in a very worrying direction. if you look at putin's speech it's really worth reading for anybody in the room who hasn't yet read the whole thing. it's very clear the way he's thinking. he talks no only of the grab for crimea that, unjust way in which crimea was taken away from russia but he talks repeatedly of eastern ukraine and southeastern ukraine in exactly the same language. so it is far from impossible that crimea will have a sequel and i think we need to be very realistic and clear about that. clearly we're not move and the president has said it, we're not moving in the direction of the use of military force but

certainly ukraine has requested communications equipment, intelligence-sharing assistance. other materiel and i think they should get it. i think we should make that clear. as joe said, we should underscore the importance of article v, the fact that is a solemn commitment to the baltic states and make that very, very clear. i think there was a powerful piece in my newspaper today about the possibility of, these second-tier lieutenant who is were targeted in these sanctions that really was, that combined with meals ready to eat, that just does not cut it, ladies and gentlemen. and i think the lang width -- languid leg crossing by the white house throughout this crisis that doesn't cut it either. this guy doesn't cross his legs in the kremlin.

he just doesn't. we need, we need a sense of resolve. this doesn't mean we're hurt telling to war. as soon as you say something like that, people, a lot of people these days immediately, you know, start talking about iraq and afghanistan and these have been long and extremely burdensome wars that have marked the united states and will for many years to come. but, u.s. resolve matters in world affairs. u.s. red lines matter. and i hope that we will get from this visit, a series of coordinated, my sense of germany is, you know, germany acts with caution and germany is hesitant about leading for obvious reasons but there is real shock and indignation in germany. this is real. it goes from chancellor merkel on down. i mean germany thought it had a

relationship with russia wherein it could use its influence to prevent this kind of thing and you know, it did not happen. so i think there is resolve. these two leaders as gideon said are cautious but i think, i think both have a sense that this is a watershed moment. this is pivotal moment. there hasn't been an annexation in europe since world war ii. the german for that is ancelus we know what happened then. the situation is combustible. i think the best way to make it less combustible is not through weakness but through resolve, cali greated resolve, intelligent resolve but sill that resolve that is to be there. i will be brief because we don't have a whole lot of time. i would like to say a couple of words about the germ man-american relationship which i think is, is absolutely key and i think is in the worst

condition i've seen it in for a very long time. it goes down from the leaders. joe alluded to the unhappy beginning with chancellor merkel. you're just a candidate. you can't hold a rally at the brandenburg gate. this did not go down well with the president or his aides. ever since there have been problems. there were huge problems over syria as gideon pointed out. history means that privacy as central and cardinal value in german society that may be hard for americans to understand and as a result, the whole nsa scandal has had an impact in germany unlike elsewhere. so i think there's a, a lot of work to be done in trying to repair that german-american relationship. i think