>> rose: welcome to the program. we begin this evening with the economy and martin wolf of "the financial times". his book is called the shifts and the shocks: what we've learned and still have to learn from the financial crisis. >> i think we were blinded by ideology. and i was part of this, in an important way. and so partly the book is my recognition of what i got right and what i got wrong. the macroeconomic side, the stress has been created by rising leverage, rising is capital flows into the u.s., being wasted in housing. that was clear. but i think we came to the view which widely shared by economists, not all, but by economists, by policymakers, in the finance ministries and central banks, that

nation and as a republic. based upon broad popular suffrage, obviously not as broad as today because women couldn't vote, and most states blacks couldn't vote. but more than any other country in the world. >> and it insured that that nation as lincoln said in the gettysburg address would not perish from the earth. and it's-- by abolishing slavery it he venly got rid of the institution that had made a mockery of american professions of freedom. and set the stage for the development of the united states in the last 150

years. >> martin wolf and james mcpherson when we continue. >> funding for charlie rose is provided by the following: additional funding provided by: captioning sponsored by rose communications from our studios in new york city, this is charlie rose. e: martin wolf is here. he is associate editor and chief economics commentator for "the financial times". his columns are required reading for the global elite. he has written a new book

called the shifts and the shocks, what we've learned and still have to learn from the financial crisis. larry summers has said his superb book may be the best of all those spawned by the great recession, it is analytical and rigorous without ever succumbing to fatalism or complacency it should be read by anyone concerned with macroeconomic or financial policy going forward. i am pleased to have martin wolf back at this table. welcome. >> it's a great pleasure. >> congratulations. >> thank you. so wonderful to finish. >> how long was this in the making? >>. >> i suppose about three years. i write my books in the summer since i have a day job. and i can't write books like this while i'm doing so i started in 2012. it actually turned out very favorable because i feel we got to a pause in the crisis as i was finishing. so the episode to some degree was over, one could begin to assess it. >> you just saw paul krugman on this program. and he talked about his own sense of the global economy and financial reform and the

stock market and demand and how europe was different from other places. and you said, well, the two of you differ, he was very complimentary, about the book, and the new york review books. but you said you differ in three ways. what were the three ways? >> well, we differ in some ways. i think the most important point is this. that sort of one aspect of the way you approached this is to look at how the crisis occurred. and to invent a way to prevent such events. and that's a very big focus of pie book. and i think he agrees with the analysis as he said it in his review of how it happened. but he is more optimistic, at least that's the sense i get, of our ability to cope with economies after crises hit. and though he's disappointed with what happened, he thinks we could have done much better easily. i'm much more skeptical for both political and economic reasons.

so i have put a lot of weig on the importance of avoiding repetitions of the crisis. and obviously, the more optimistic you are about how well we can treat crises, the less concerned you will be about that. it's an interesting point that when you go back and look at the keynes general theory from which paul grew a lot. >> and larry summers too. >> but he doesn't discuss how kleis ease happened at all. it's just about what you do after them so pie book is soft -- you mean keynes. >> that is keynesee to kuchlts i don't want to put words in his mouth, but i think paul shares those views. but in practice, whether we know in theory what to do, the reality is when crises hit, policymakers or politicians are at a loss. they never do enough. the long-term cost of crises are absolutely enormous. the u.s. economy is far smaller today than it would have been if the crisis hadn't happened. >> rose: isn't that part of the problem with the

japanese in terms of how they responded? >> well, the japanese responded particularly ineffectively. an object lesson but the europeans have done an even worse job, by the way, than the japanese. >> rose: at different times. >> now. the europeans responded to this crisis significantly worse than the japanese responded to theirs. the u.s. sort of is a bit in between. so the lesson i draw from this is that if a big crisis happens, nearly every government, policy system, will fail. they won't do enough to deal with it quickly. even if they could, and that's a controversial issue. so the first lesson, like with persons health, is don't get into such a terrible state in the first place. and that, of course, becomes crucially about how you arrange the financial system. >> rose: i will come back to what you do after the countries is hits. but do you believe-- after the crisis hits, but dow believe that the financial reform that was created is sufficient to prevent a crisis again? >> no, i don't. i think there are genuine

improvements. but i argue in the book that if you look at this, that in essence the financial system we have today is similar to the financial system we have before the crisis. in some ways, it's even more concentrated, even more reliant on a limited number of institutions which really remain too big to fail. i think that criticism stands. so the fundamental fragility of the financial system remains, in particular the institutions are extraordinarily highly leveraged. they are just insanely leveraged than before the crisis and we depend very heavily on what has come to be called, horrible jargon, macro credential policy. what does that mean? it means the central banks and regulatory authorities ability to recognize risks in time, and to diffuse them by regulatory changes. and i think that is extraordinarily optimistic given the past. we need a much more robust financial sector and less leverage in our economies. and we have done very little

about that. >> rose: and how would we have done that? >> well, this is a long-term proposition. and we would have had to take the view that were we got to in the years running up to the crisis is a mistake. but i think there are two essential elements. the first is that the leverage in the banking sector should have been reduced substantially. i think ten-1 leverage rather than 25-31 is what we should have been looking at. >> rose: at some cases it what 40 to 1. >> in some case 50s-1. essentially no capital all. so i think there is evidence and i argue this that 10 to 1 should be the floor, and that is a big change. and i also look at, and i'm not the on one, the fact we have huge subsidies in our tax system for debt. we encourage people to take on debt, both households an corporates. >> rose: in terms of the kinds of deductions we give them opinions absolutely. you can't deduct for equity but you can deduck for debt. it's very important in addition to that relates to the tax system, that we rely some of on debt contracts

for making ode transactions. when you buy a house, you do a straight debt contract. an alternative which some economists have recommended, i think very sensible, is to have contracts which actually explicitly share the risks, so that if house prices go down, the loan is reduced. if house prices go up, the loan is increased so the risk is shared with the suppliers of the funds and the borrowers. this is where if you like, an automatic reduction in debt as a bankruptcy procedure would otherwise do, without the consequences, foreclosures and all the men's of bankruptcy procedures. so i think we need to think much more radically about how our financial system and our economy works in in relationship to debt. >> is that politically possible? >> well, it is certainly not politically possible now. indeed, i have even more radical ideas which we haven't come to. but i think the crucial thing is to put these ideas out, to make clear that they're perfectly respectable views, their

views held by many economists, and get them into the public dedomain, so if i i don't want this to happen but if it is quite possible, we get into another crisis, as leverage builds up again, we are encouraging it to restart. house prices are rising. there's going to be a buildup of leverage again. from what is already quite a high level. yes, we reduced leverage a bit in our economies but only back to the early 2,000 level so we don't have any years, so if we get another croiss is, god forbid, say in the 2020s, then i think we will have an agenda which when people will say well, that wasn't enough. you've got to do more. well then let's look at these ideas, so i see this as preparing the ground for more radical progress in the future. >> rose: why didn't we recognize it was coming? >> well, i think we were blinded by ideology. and i was part of this, in an important way. and so partly the book is my recognition of what i got right and what i got wrong. the macro economic side, the stress being created by rising leverage, rising

capital flows into the u.s., being wasted in housing, that was clear. but i think we tended to the view which widely shared by economists, not all, but by economists, by policymakers, in the finance ministries and central banks, that essentially the financial sector knew what it was doing. people borrowed, they were not borrowing more than they could afford. they could evaluate the risks in the housing sector. >> historic said housing prices never go do down. >> that was particularly true here, in the '30s which was the last financial disaster, was 70 years-- years or more. everybody had forgotten what happened in 209s. it was just out of living memory. so we just got incredibly care kls-- careless. >> rose: when you look at the response of paulson, quitener, bernanke, do you give-- quietner, bernanke,

do you give them high marks? >> it wasn't perfect but they were operating within a tightly constrained political system in a crisis situation, very importantly, uniquely, the u.s. treasury did not have legislative authority to use government money. so they relied very much on the central bank. made it difficult for them to act. given those constraints until the tarp came along, and i know how politically unpopular it is and was, but i think it was necessary, given those constraints, i give them high marks for avoiding what i thought will be another great, could be another great depression. >> rose: the system could have collapsed. >> they stopped the collapse of the economy. we had basic two terrible quarters, and then it recovered. it was nothing like the collapse of the '30s. it was terrible, unemployment was terrible. and we never recovered it. that's what we've learned. we never recovered the growth. we've learned that these crises are very damaging. but they did what i think had to be gone.

it was very unpopular, but the alternatives available were all worse. >> rose: i talked to christine la guard last night, interviewed her. she talks about a new mediocrity. which you have written about, i think today. >> yes, indeed. >> rose: and she talked about a sort of new normal. do you agree with her? >> well, we now have a much better sense of what has happened after the crisis. and there are two things we know. first the developed countries have never recovered their previous rate of growth, even their rate of growth, and they've lost enormously relative to the previous restraints. so in the case of the u.s., roughly speaking, the u.s. economy is smaller, about a sixth, more than 15%, than it would have been if the previous trend it gone, and europe is even worse. so we have these huge losses, and that is our new normal. slower growth than before, slower rises in economies per head. and we ask:discuss why. meanwhile this is a new phenomenon that we have

begun to relize is, a lot of emerging countries are doing much worse than we previously thought. in some cases like china, the slowdown is natural and normal but they also have now some very big problems because they made many of our mistakes in responding to our crisis. they created a huge credit boom which they now have to handle. so if you look across the emerging world, which is still 85% of the population of the world, they are also deteriorating. their growth is still very good. we shouldn't exaggerate what's happening there. but consistently they're downgrading forecasts. >> rose: don't they have pressures coming up from the ground roots, so to speak. >> of course. >> rose: in terms of labor contracts, in terms of urban rule. >> there are many, i mean they have far worse problems than ours. will you look at lack inmanager rdz the primary example. >> brazilian is a terrible example. russia is another, but it is also completely stagnant. india's growth is declined on three or four percentage points a year. a whole slew of emerging economies are much worse.

>> and the central reason is the absence of demand? >> there are two-- that's one big factor, external demand much weaker, the commodity price boom is over because china is slowing. they failed to make reforms in the good years. there are still huge political and economic problems in these countries. so i think some of that is nothing to do with us. some of it is. but the fact is that the world economy does look as though it is weakening in these different ways. so perhaps the new immediate oak certificate not a bad description. >> is there a way to create the demand that's necessary, other than public expenditures? >> i think in the short, to medium run, it's very difficult to see a way in the developed world which won't involve some form of public spending including public investment, particularly public investment. which i've been arguing for for years an may now be a bit late. generating the demand in the private sector, i think,

spontaneously, without another bubble, that's the key thing, we don't want to do this again. i think it's going to be quite difficult. and this gets back to my reading of the past that lead up to the crisis, we have a severely unbalanced global economy. >> but in countries, unbalanced economy, because in essence, a big part of it, the emerging world where all the good investment opportunities are, is not able to accept the flows of capitals can otherwise provide t just doesn't want to do so. and a lot of the investment opportunities they have are not add quittly developed because-- adequately developed because its policy regimes are so terrible that means we have to generate demand internally, and the way we found to develop demands internally in the developed countries is to get house holds to borrow money they can't afford to buy houses they don't need. or that they can't really afford to buy. and that's a dysfunctional arrangement. so i think we are probably going to be back to the public sector one way or the

other, if you want a really strong -- >> that's ezer-- easier for the chinese than us. >> the europeans have ruled it out, which is why i think demand has been so stagnant. real demand in the euro zone is five percent less now than it was before the crisis, while in the u.s. it 18% up so there is real progress here. but the political resistance to more government investment, more government spending, to the view that government is part of the solution, is overwhelming. and it's a big, big constraint. meanwhile, the changes in income distribution were seeing the rising inequality, all tends to increase savings an erode spending and all makes it more difficult for us to balance our economy, the unwillingness of corporations to invest. but they're accumulating cash s another factor. why aren't they investing, they don't see a future in our economy. it's a vicious circle. >> america's economy is the most impressive in the world at this moment. >> certainly among the developed world, no question.

of the big countries, yes. >> but it is to the big enough to lead a global country. >> no, certainly not. nor i do think that the way it did it before the crisis, which is this ever increasing consumer borrowing, in taking ined goos from the rest of the world, i argued then in my last book, unsustainable process. >> rose: buy money from china so you can buy their products or borrow money to buy their products. >> unworkable model. you can't go back to that. we have to think of another model. >> rose: what do you think is a great, a reasonable expectation over the next five years for a growth in gdp in the united states, for the united states economy? >> 2 to 3%. >> rose: not 4? >> there is-- 4 is possible. it is possible because there's a lot of catch-up. you know, you had an exceptionally long period of by your standards weak growth. if optimism returns, if corporations really start investing, thinking well, we better invest now, there's a long big battle on here

because there's been very weak investment for the many, many years. housing, investment in housing must improve. one of the points i make in this column is household formation in the u.s. has been running at about half its precrisis rate. let's suppose all these young people in america say well, now we can sort of get together, form a household, buy a house, buy all the furniture, and you know getgoing again. you might have a period which is normal in the u.s. of four or five percent growth. i really hope for a wonderful world and for the u.s. but at the moment i think the drag, the overhang of debt, the continued weak demand coming from the government, though that's diminishing, i think it's-- and the very weak world economy might keep it down. >> is that the reason the stock market went down, is we taped this on wednesday. is that the reason the stock market went down so badly today? >> i think corrections are due. the, for various reasons the stock market got ahead of the world economy, as it

were. more optimistic than the economy justified. >> justified. partly because there was alternative, if you see, if you are getting zero interest rates on your and close to, a couple percent on your safe government bonds you have to take more risk. and that was what the central banks wanted. they wanted people to take more risk, buy stocks. but i think the stock market was very fully valued. and people get more nervous about what's going on. they look at what is happening in europe, in the emerging world. there are all these elements of concern. and the stock market just-- the stock market corrects a bit. >> i think it was due for it. i at the moment i don't see this as a disaster. to me the oil price fall is more interesting than the stock market because that really is telling you that people expect weakening demand for petroleum products. >> yes, and that means weakening demand in the world economy. >> isn't that also part of a decision paid by the saudi government. >> it might be part of it.

>> and the u.s. government? >> that might be part of it. but i think the bed rom kbrb -- bedrock is we are looking at what might be one of those big corrections in oil prices. they might have been too high for some time. >> they were over a hundred, now they are down to what. >> the latest i saw is about 80. >> but oil prices can move very quickly when they start moving like this to a new trading range. so we might see further falls. i don't forecast oil prices, i've seen how foolish that is. but it seems to me another indicator which supports-- . >> rose: what does that mean, tom freedman had an economy about that today, what does that mean for the economies of iran and russia? >> i tend to the view that it's very bad news for people, i would rather like having some bad news it. so for russia it's very bad. there's no question. but with a few exceptions, and i can list them, the oil producers are not countries that i would particularly like to have more revenue. >> rose: we put a lot of

demand on central banks, haven't we? >> they have the whole game. they're not merely demand on them, we expect them to be our saviours. and in a situation of deflationary threat, what i sometimes called the managed de-- managed depression or contained depression, they were the game. they were right to do t many people feared hyperinflation tomorrow, you remember a few years ago, these policies. but they didn't. but of course they can't fix the underlying imbalances and demand and supply, the underlying waentions in innovation, the decline in productivity growth we're seeing across the west, which is very disturbing. the weakness of investment from the corporate sector, they can just buy us time. so the really big questions is how we create a new and better balanced economy. >> rose: i'm intrigued by what i once heard a secretary of the treasury say. the economy is about the politics. and if the politics don't work, you can't force the economy to work. >> well, i don't think of it

as quite so close. the economy has a life of its own. >> rose: but certainly -- >> certainly in the west. but it works both ways. i mean that is to say politics becomes economics, of course. the government is a huge factor in any economy. the policy regime is crucial. and people's expectations about that, about how well they're going to perform will affect the economy, and of course the other way it works. if the economy over a very long period fails to generate rising living standards for the majority of the people in a democratic society, as it has done here and in other western countries, if the economy generates huge crises t undermines democratic politics and that's how the book ends. this is, whether or not politics caused the crisis, i have no doubt the economic crisis is a political crisis too. it's one of the reasons governance and government is weakened, its prestige is weakened across all our countries. >> the economic cries sis a political crisis. >> of course it is, a huge

one. >> it is a devastating cries fris the west. >> chancellor merkel makes decisions for the economy based on what she thinks the politics are. >> of course. >> because politician like to get re-elected. >> of course. she has the particular problem, she's basically in charge of europe but the electorate she's accountable do is just the german electorate. >> rose: they don't want to be europe's bankers. >> you could imagine, let's suppose that the president of the united states, the person making the policies for the united states were elected by texas alone, you would have a rather strange set of policies. the germans have done better than that. >> rose: you have also said it is important, notwithstanding what we've said, it is important not to exaggerate the story of slowdown in the world economy. >> yes, i think that's very important. i mean i made the point that the imf continues to forecast that the emerging world will continue to grow in the medium at five percent a year. that is mostly because of asia. that latin america, middle east, russia is terrible. but five percent a year, five percent a year roughly

speaking, the emerging economies will double in size every 4 or 15 years. >> rose: and that's a lot of demand. >> it's much more wealth, it's a huge shift in power. so i think it's important not to say this is the end of the world. it's much better than it looked like in 2008. >> rose: at the same time, when they thought she had revised their estimates down yard-- downward but 1sch10 of a percent. >> cumulatively they revised their forecasts down by about 2 percentage points in several years, mostly for other parts of emerging world. for asia it's holding up reasonably well, if that were to continue, it would have to be much more worried and i discuss that in my piece. but as things are at the moment, five percent growth in the emerging world, maybe 2% in the developed world, world average, 3 to 4, well, there is not a disaster if we can keep it going. >> rose: so in the end, you are guardedly what. >> i am always watchful is the way i view it.

but i think the big part of this book is to say we have had one such crisis. it is enormous and it's the biggest of a run of crises over the last 10, 15 years. 20 years. we really have to avoid having another. we can't afford the political and economic consequences of another such crisis. and that's a key element. >> so we have to avoid it because the discussions of another such cries like we went through would do what? >> another huge loss in economic output, another huge shock to labor demand, another huge jump in public sector debt which has already risen a great deal, might be much more difficult to manage. another huge shock to the credibility of the open world economy and our financial system. i think we would then be in danger of the sort of politics we saw in different ways in the 30s. and one of the things i have been insistent upon throughout this whole crisis is we must manage it collectively and sensibly in order to avoid the race to

the bottom of politics which we discussed. nationalism is returned. racism is returned. you can see this everywhere in the west. this is bad, and if we have another such crisis, elite-- gets destroyed in their credibility. when elites are destroyed in their credibility, you get some pretty wild populist politics an if i may say so, you can see that here too. >> rose: in america you have seen it with the tea party. >> the tea party and the we have-- we have seen it all over the west. we can't survive another such thing with any comfort. >> rose: because you have paralysis, you had will not have -- >> you will have para-- paralysis and bad policy, that can be very destructive. >> rose: it lead to world woor 2. >> it lead to the loll cost. i don't want to overplay this but we have to remember, as you pointed out, really bad economics has devastating political consequences. >> rose: the book is called the shifts and the shocks, what we've learned and how still to learn from the financial crisis. i read from you the last

paragraph with one other sen continues. the economies of the western world is poorer than they imagined ten years ago. they must look forward to a long period of retrenchment. making them both the an a pair fair matters. every ert must be made to restore economies to growth on both the demand and supply side. every effort must be made to insurance that a similar crisis will not reo without eliminating the aspects of the open world economy and -- this will require more radicalism than most recognized. we must not only learn the lessons about how the world economy went awry, we must also act upon them. if we do not, next time, to repeat what you just said, a big crisis arrives, even our open world economy cone up in the fire, wow. thank you, a good book, great book, thank you. >> thank you very much. >> martin wolf, back in a moment, stay with us.

ness james mcpherson is here, professor of history emeritus in princeton. his work on the civil war has earned him a pulitzer. he was chauled my generation's finest civil war historian. his latest book explores the first and only president of the confederacy. i'm pleased to have james mcpherson at this table. for the first time. well i share what doris concerns goodwin who has been here many times has said but. why in your long career, jefferson davis now? >> well, i did a book on abraham lincoln as command never chief six years ago. that is only half of the equation. if one is going to understand the course of the civil war, the outcome of the civil war, its consequence, you have to look at both halves of the story. so it's like looking only at lincoln is like looking at a

partner dancing by himself. it takes two to tango and it takes two to understand why and how things happened the way they did. >> rose: what is it that you understand, obviously the scholarship that you engage in will give you a lot of insight. but is there significant modification of your impression of the confederacy because you now know jefferson davis so well? >> i don't think it changed my perception of the confederacy so much as it changed some of my perceptions of jefferson davis. i had the stereotypical view of davis as an abrasive, unlovable, inept president of the confederacy who not only was a traitor to his country by leading a rebellion against the legitimate united states government, but a failed leader of the confederacy.

and a failed leader of a rebellion. but the more i got into his life, his personality, his actions as president of the confederacy, the more complex he appeared to be and the more understandable his actions and his personality was. so i think i came out with a more sympathetic understanding of jefferson davis than i had had when he was a stock caricature. >> he was not a fire breathing secessionist. >> that's correct. up until almost the last minute he was trying to find some kind of solution to the sectional crieses that erupted after lincoln's election. he was a member of the united states senate and he was appointed to a committee of 13 in the senate, to try to find some resolution of this conflict.

and until it became clear that there would not be any kind of compromise that would resolve its issues of both sides in this controversy an until his own state of mississippi seceded, up until that last minute hoped for a resolution to the crisis. however once he became a committed confederate, he never looked back. and he in the end, in 1865, he was the last con fed rass standing. he was the last major figure in the confederacy to concede that the war was lost. up until even richmond fell, even after lee surrendered, he was still hoping to revive the confederacy and continue fighting for independence. >> rose: i suspect you have been asked this many times, but was there a circumstance or a combination of circumstances that might have lead to a different result? some kind of compromise or

something else rather than unconditional surrender? >> i have written that the only possible solution of the civil war was total victory by one side or another. because the issues turned out to be noncompromiseable. at least as long as abraham lincoln and jefferson davis were presidents of their respective causes. lincoln insisted that there could be no peace, no solution, short of peser vacation of the united states as one nation, indivisible. and as the war went on, that came to include a second warring for the north. and that is emancipation of the slaves and eventually complete abolition of slavery from jefferson davis's point of view, these were unacceptable. and he said there could be no end to this conflict short of complete confederate independence. there was really no middle ground as long as they were

the leaders of their respective causes. now if abraham lincoln had been defeated for re-election in 1864 an replaced by george-- who ran against him, it is hard to say what would have happened. mccollum would not have insisted on the abolition of slavery but at least if we were to take him at his word, he would have insisted on reunion as the-- of any kind of resolution to the conflict. so i think that the war is only going to end in a surrender of what they were fighting for by one side or the other. >> rose: unconditional surrender. >> once lincoln was re-elected it was clear that the handwriting was on the wall for the confederacy. because it was on the ropes by that time. and now there was no hope of a president making any concessions to the confederacy. >> rose: we'll come back to davis in a moment. but you saw the movie lincoln, stephen spielberg,

tan yell day lewis. >> uh-huh. >> rose: did it resonate with you with what you perceived lincoln to be, taking the fact it was a movie and they had to take some artistic licence. >> they did take some artistic licence, but i thought it got the essential history correct and the essence of lincoln correct. >> rose: what is the essence of lincoln. >> lincoln was a determined nationalist. a democrat with a small d and he saw secession a violation of not only the integrity of the united states, but also as a denial of democracy. if the losing party in an election can refuse to recognize the legitimacy of the outcome and said all right, we're going to leave the country, there's an end to democracy. that's really the essential message of lincoln's gettysburg address. and he never deviated from it. >> rose: back to davis. ulysses s grant said that

jefferson davis had an exalted opinion of himself as a military genius. >> that's partlyight. but the more i looked a at-- grant's statement that davis had an exalted opinion of himself is partly based on a correct appraisal am but i think it's a characteric ture more than it is an expression of reality. and grant said this in 1885 in his memoirs. i'm not sure we would have said that 20 years earlier during the war itself. davis, of course, was blamed-- blamed by his con fed rass kpat ree ots for the loss of the war because the man at the top has to take the blame. and it's quite true-- . >> rose: was he blamed-- should he be blamed for decision he made? >> you can certainly crit seem-- criticize some of the decisions he made. but a lot of that is the monday morning

quarterbacking. and-- . >> rose: some of that was robert e lee too. >> well, lee and davis saw eye-to-eye on many strategic issues. >> rose: and then whatever happened to gettysburg -- >> well, davis completely supported lee both before, during and after the gettysburg campaign. i think where lee would have been critical-- critical of davis might have been in davis's decision to replace joseph johnston as command of the second largest confederate army and to replace him with john bell hood and to support hood's aggressive counterattacks against sherman. there are some other decisions that might be questioned by jefferson davis but you can say the same thing about lincoln, you can say the same thing about any leader in a war. >> rose: who was jefferson davis's greatest general? >> lee no question about it. i think there's no question that lee was the greatest general of the confederacy. >> rose: was he the greatest-- was he a better

general than -- >> i don't think so. maybe tactically, could manning armies on the battlefield itself. but i think grant had a broader strategic vision of what was necessary to win this war. grant, i think, was stronger in his understanding of the importance of logistics than lee. so when grant became general and chief an was responsible for all union armies, he was in the right place. >> rose: why did lincoln choose grant? >> because grant had approved-- grant had proved himself to be bt most successful general. >> rose: he had. >> he worked his way up from brigadier-general corporation mannedding brigade, he had been successful at every level. he didn't give lincoln any kind of trouble the way so many of his generals did. he didn't complain about lack of support by the government the way so many of lincoln's generals did, or for that matter so, many

of davis's generals did. and lee never complained about lack of support. >> rose: he never did. >> how about stonewall jackson, how significant a loss was that. >> it was significant i think for the army of northern virginia. jackson was a core commander within that army. i done know whether jackson would have been successful as an army commander responsible for strategy as wells attack particulars. but clearly it was an important loss. lee i think put it very concisely when he said to johnson that you have lost your left arm, but i have lost my right arm when jackson was put out of action. >> and william tecumseh sherman, the man who, this is my own amateur historian's recollection so, bear with me if i'm wrong. was a man who hated war. but believed that if you are going to fight a war, leave no stone unturned, just go and make war so hated that

the other side will give up. >> exactly right. a hard war but a soft piece. and the harder the war, the sooner it will be over. and in the end, maybe the less suffering, the sooner it's over. lincoln came to have the same point of view. lincoln was a man of great humanity. he suffered great sadness for the carnage that the civil war exacted on the american people, both north and south. but said that the sooner we bring this war to an end, even if it takes harsh measures to accomplish it, the better off we'll be in the long run. >> rose: was any effort to somehow bridge a piece in terms of envoys, trying to talk to the other side to give up? >> there were efforts along that line. in 1863, at the time that lee invaded pennsylvania and

the campaign that lead to the battle of gettysburg, jefferson davis appointed his vice president, alexander stevens as an envoy to go to under flag of truce to washington to talk to lincoln whom he had known when they were fellow members of congress back in the 1840s and fellow wigs when the wig party still existed. >> ride through the territory -- >> he had to go down to fort monroe and under flag of truce, and send word to washington, and the ostensible purpose was to deal with some problems that had come up with the prisoner of war exchange cartel. but the real purpose was with the hope that as lee was in pennsylvania, lincoln would recognize the necessity of bringing this war to an end. well, when lincoln got word of the outcome of the battle of gettysburg, he sent work back, no, don't bother to come. >> and then -- >> this is no longer an option.

>> that's right. then in february 1865 when the confederacy was on the ropes, lincoln actually met with three confederate envoys at fort monroe at the mouth of the james river. and lincoln laid out his terms for peace which was basically surrender by the confederacy. and the three con fed rass envoys, one of whom this time was alexander stevens knew that davis would not approve of those terms. so they went back and had to tell davis no soap. and davis still hoped that something could be, that this war could be won. that's why i say, he was the last con fed rass standing because after lee, after john breckenridge, the secretary of war, after most con fed rass-- confederates recognized it was all over, lee himself, davis still hoped to continue the fight. >> rose: how would the country be different if lincoln had survived? >> i think the

reconstruction process-- . >> rose: would not have happened? >> well, it would have been more successful and less acrimonious than it was. the problem was that andrew johnson was a much different. >> rose: from tennessee. >> he was a southerner. he had been a democrat.?;ñ he had been put on they< ticket in order to broaden the appeal of the republican party which called it self in 1864 the union party, johnson was of course a unionist. but once lincoln was gone, johnson kind of reverse-- reverted to his southernness and his democratic allegiance. and that set up the polarization between the president and the republican majority in congress which lead to all the acrimony that affected the formation of the reconstruction policiment and actually lead to johnson's impeachment in 1868. and he fell only one slow short of being convicted and removed from office. >> rose: one vote. >> one vote in the senate, that's right. >> rose: what is the biggest misconception about abraham lincoln. i'm tacking advantage of the

fact you have written about him as well,. >> i think the biggest misconception about abraham lincoln is that he was this folksy joke ster storyteller, kind of a lightweight who somehow got lucky. >> rose: this was the perception at the time. >> at the time. >> rose: by his -- >> by many contemporaries. >> rose: that he somehow-- was harmless. >> that's right. but people, biggest misconception now, i'm not sure what that would be, to tell the truth. i don't know. >> rose: he is the greatest man you've ever-- written about. >> i think he was our greatest president. certainly george washington would be a competitor for that. the two of them faced the greatest i think tasks, in washington's case, nation building, in lincoln's case, nation saving. and they-- they triumphed in the end. they carried through against enormous obstacles, enormous difficulties. >> rose: how big was lincoln's ego. >> lincoln did not have an

ego problem at all. quite the opposite. he was quite ready to recognize that other people might know more than he did on certain questions. he was quite ready to take advice and to seek advice. he was thick skinned about criticism, unlike davis who was very thin-skinned about criticism. lincoln did not have this outsized sense of honor by which you have to defend your honor against criticism against insult against people trying to demean your reputation. lincoln was willing to work with his critics more readily than davis was. and i think that might be the biggest difference between the two of them. >> rose: what did ulysses s grant say to robert e lee when he met him at epomatocs. >> they first talked about the mexican war. they had both been fighting on the same side. and grant told lee that he

remembered him, meeting hill during the mexican war, and lee maybe not quite so graciously said he didn't remember meeting grant. lee, of course, at the time of the mexican war was senior to grant. but both of them made the important contributions to american victory in that war. but after that, the next thing after they talked for a while about the mexican war, lee told grant well maybe we should get down to the reason to taking care of the business that we came here together to do. >> rose: enough small talk. >> enough small talk. and so grant sat down and wrote out the surrender terms. >> he wrote it out himself. >> he did. >> did he know what he was going to write down. >> he had it in his head, exactly the terms that he want. and they were quite generous terms, they basically paroled all the confederate soldiers and said if you go home and observe the laws and they placed where you live. >> rose: very generous. >> very generous. and lee was very gratified by those generous terms. >> rose: and so when he left,

that long train of union soldiers what was it they did? did they stand up or salute him or-- tip their hat. >> they tipped their hats to him, yes. >> in recognition. >> in recognition of -- he is a worthy foe and a gentleman. >> and then lee went on to become president of washington lee university. >> it was called washington college this time after he died. >> in lexington virginia. >> yes, and renamed. >> an jefferson davis. >> well, jefferson davis fled richmond. went to danville then went to greensboro, north carly-- carolina and was one step ahead of union calf allry that was scouring the countryside looking for him. because as long as he remained quote, unquote, at large, the confederacy might still be able to carry on the war. jefferson davis was urging southerners to continue fighting as guerrillas. and he finally, he wouldn't

give up. and he was finally captured by union cavalry in georgia on may 10th. this is a whole month after lee has surrendered. and once he's captured, the war is truly over. and he was imprisoned for two years while the united states government tried to decide whether to try him for treason. and they finally decided not to because under the constitution, treason must be, there must be a jury trial for anyone committed or accused of treason. and the trial must take place in the jurisdiction where the alleged crime was committed. and the government was concerned that they could never get a jury conviction by trial in richmond, virginia. so they decided to let him go. and partly by that time the sense that to reunit the

nation might require a degree of reconciliation between the two old foes. this was partly also a reason for deciding not to prosecute jefferson davis. and then he lived another 22 years after he was released from prison. >> he lived mostly in mississippi. >> right. >> for a while he lived in new orleans but mississippi was his home state. >> rose: and what happened to sherman. >> sherman remained in the army for the rest of his life. he became general in chief in the 1870s. >> that's basically -- >> the military officer -- >> that's correct. and he was in charge of the army attempt to pacify the indians which involved a lot of warfare in the west in the 1870s. and then sherman died in 1890. >> famously having said if nominated i will not run. >> yes. >> and if elected i will not serve. >> that's exactly right.

that came up in 1880 i believe. >> you said that if you had to recommend one book for president obama to read, he may have read it, i done know, it would be the bully pulpit. >> yes. >> by door insurance concerns goodman. why did you say that. >> well, because both president theodore roosevelt and william howard taft which the book is about, faced some of the same kinds of problems that president obama faces with congress. and with the opposition party. and had their ways of dealing with it or failing to deal with it. roosevelt was much more successful, even though the conservative wing of his own party disliked what he was doing. he was a reformed republican, they considered him a radical. taft lost control of congress and the ways in which this happened and the ways in which they tried to deal with it would be something that president obama could certainly ire

identify with but also maybe gain some insight. >> rose: what do you think of, i just interviewed lee on panetta, a new book of which there is some criticism of president obama. >> uh-huh. >> rose: hillary clinton made some note of the differences she had on syria. >> uh-huh. >> rose: robert gates made some criticism, but in each case, each of these memoirs, are fulsom in their praise about aspects of the president should be said. and then the question comes up, should they wait until after the president has finished serving his term before writing these books as a historian, what dow say? >> well, i think there's probably a good case for waiting. because criticizing a sitting president who is still facing some of the same issues might have a tendency to undercut his ability to continue dealing with these issues. i don't know whether that has been the case or will be the case in the two

instances that you cite. but i think you can make a kiss that it might have been wise tore wait-- . >> rose: what is your assessment of president obama? >> i think that in many respects, he's been inspirational leader and a good president. but he has-- he lacks the lyndon johnson touch, that made it possible for lyndon johnson to get things done. >> rose: but that's also the abraham lincoln touch, isn't it? >> well, it was. it was the abraham lincoln touch. now of course lincoln and johnson, their parties controlled congress by a substantial margins. and that has not been the case with obama. so in some respects, i think obama has been a victim of bad luck. >> rose: when it comes to the makeup of the opposition. >> in the terms of the makeup of the opposition and their implacable determination to oppose everything he stands for.

>> rose: you were once told that you would be forced to choose between becoming a popular historian or a historian's historian. did you ever make that choice? >> i believe you can be both. >> rose: that's exactly what i was going to say. >> so i think-- . >> rose: because history is exciting and popular. >> yes. and i think that history can be serious. can be educational, and at the same time, can be entertaining. >> rose: yes. >> if it is well written. >> if it's well written. and if it has a great story to tell. >> rose: if there's passion for the people. >> if there's passion, that's exactly right. >> rose: why dow have such passion for the civil war? >> well, i think it's because the civil war is the hinge of everything that has happened in american history. it fulfilled the promise of the revolution and the constitution that the united states would survive as a nation and as a republic. based on broad popular sufferage. obviously not as broad as today because women couldn't vote and most states blacks couldn't vote. but more than any other

country in the world. and it insured that that nation as lincoln said in the gettysburg address would not perish from the earth. and it's-- and by abolishing slavery, it eventually got rid of the institution that had made a mockery of american professions of freedom. and set the stage for the development of the united states in the last 150 years. >> rose: this book is called embattle rebel, jefferson davis as command never chief, james mcpherson, one of our great civil war historians, and doris concerns eyes, the best. thank you for joining us. see you next time. >> for more about this program and early episodes, visit us on-line at pbs.org an charlie rose.com.

qb funning for charlie rose has been provided by the coca-cola company supporting this program since 2002. american express-- american express, additional funning provided by: and by bloomberg, a provider of multimedia news and information services worldwide. >> you're watching pbs.

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