market. find out what's really happening to the global economy for a no holds barred look at the global financial headlines new cars are reporting on our dream. car again this is our c and these other week's top stories presents made bed of these speculation about russia stopped cold by proposing prime minister bedroom abuse into ron paul says and they're trying to twelve elections that are that if unsound promises to continue his modernization agenda as prime minister if he successfully leads the united russia party to victory i'll mention elections in december. the palestinian bid for statehood is launched with the united nations welcomed with standing ovations at the general assembly new but by the clashes with israeli forces at the building in the west bank. and also finished praised speaking

out against a trenchant terrorist website claims themselves dropped on disgraced with his plight ignored by the mainstream media. than greek default is inevitable and easy top officials know it leaked reports reveal the recession could go even deeper than the if. up next out of a show crosstalk which today focuses on the world economic situation and host people about ask his guests whether the world should still rely on the free market and if it's a retreat in favor of the rich. if

you can see. the full. blown evening welcome to cross talk on peter lavelle as the great global economic financial contraction continues unabated is it time to rethink capitalism as we know it today should the world still rely on markets to generate wealth when the rich only get richer and middle class is crushed and is that of capitalism they can serve the interests of all. students. to cross not the future of capitalism i'm joined by

com palmer in washington he's a senior fellow at the kotto institute in new york across their own he is the founding editor of the independent newspaper and in bangkok we have richard duncan he is an author and chief economist at black horse asset management in singapore all right gentlemen crosstalk rules in effect that means you can jump in anytime you want but for a smash i'd like to go to you is capitalism doomed it depends on who you ask peter for many western consumerist producers managers and owners capitalism has been more than an exercise in wealth generation and distribution has been a fundamental belief. when deregulation that fuel consumption or lower taxes and more political power for capital than for labor but the meltdown of two thousand and eight and failed growth attempts since then have exposed the myths capitalism has built up over a generation and many are now asking if the preceding generation was an aberration and of capitalism as we know it is dead karl marx it seems was partly right in arguing that globalization financial intermediation run amok and redistribution of

income and wealth from labor to capital could lead capitalism to self-destruct if it isn't death then it's radical change with key people are stretched to their limit free trade which the doha round in passed in two thousand and six carbon trading still sees developing nations saying they shouldn't have to pay for what developed nations have already done just concerns have heightened economic parochialism and deregulation that path led to banking bonuses lehman brothers tarp and massive banking socialization but when it comes to ordinary people we suffer cuts we suffer austerity measures so it's about making up his clothing and making it clear the problems of capitalism itself says the global economy teeters the generation of our capital isn't the same as a self-evident and righteous and has passed if it isn't dead it will be different and on the road ahead more questions will be asked of capitalism and who is working for back to you peter thank you very much for that all right i'd like to go to

richard first in bangkok when people say it's the end of capitalism what is what do you think it means what do you think they think it means petero actually i don't think the economic system that we have now is capitalism capitalism was a record on that system in which the private sector controlled the production process through savings capital accumulation and investment and the government played very little rock well now the u.s. federal government spending twenty five dollars out of every one. hundred dollar spent in the economy and the central bank is creating the money i mean if you are doing is a value moreover the production process is no longer driven by saving and investment instead it's driven by borrowing and consumption. in one nine hundred sixty four the total credit in the us was one trillion dollars now it's fifty trillion dollars there's been a fifty fold increase in credit in the last fifty years less than fifty years this

credit expansion is completely transformed the size of the economy and the structure of the economy and in fact the economic system itself and my view we've moved from capitalism to credit ism for lack of a better word and how credit ism is in crisis because the private sector is incapable of repaying its debt ok and then if i go to you it to you in new york and good at it so they should take something you don't really need you now dependent and when you go to new york here that's a very interesting point that richard brings up but we don't even have capitalism anymore we don't mean to talk about it and because going to totally different system anyway what do you think about that. well i think we could talk about the myth of capitalism the myth of the free market there never has been such a thing as a free market governments have have always intervened usually for the benefit of capital the railroad boom of course involved a massive transfer of wealth especially in terms of land to the railroad industry

the post world war two capitalism boom was in many ways especially in the west was a fusion of the state and corporate interests so there's nothing you unique about that and in terms of credit and financialization these are nothing unique either in the one nine hundred twenty s. you also saw a huge expansion of credit that fueled the stock market boom financialization goes hand in hand with capital we should see the post world war two boom as the aberration i know we're going to keep coming back to this but this was a period of unparalleled growth for a unique historical circumstances and i we do have a hybrid. system a largely it is controlled by corporate interests and the thing is capitalism tends to words monopolies of as we've seen in many historical period and these monopolies will exert power over the government to increase their share of the need to increase their wallet wealth to increase the upward transfer of their wealth and

that's what is really going on in this period and again it's nothing unique historically ok tom i'd like to go to you in washington what is what is different about this economic turndown for capitalism and we've already heard about credit was it be digged regulation was it just preferential treatment towards corporation tax policy what is unique about the challenges that capitalism is facing today. well the big problem with a crisis of interventionism indeed richard pointed out the state institutions the central banks pumped out gigantic amounts of credit i mean setting interest rates into negative territory two thousand and four two thousand and six the fed had negative interest rates this is not a capitalist phenomenon this is politicians intervening into the economy to pump it up and create a short term boom this created an asset bubble this is a completely predictable result of expansionary monetary policy of that sort and then interventionism through fannie mae freddie mac.

the basil accords poison the world financial systems so what we've seen is a real failure of interventionism and cronyism not free market capitalism we have a real case of mistaken identity here as to what is responsible for the crisis people such as a room who say it's an increase in greed look greed is a pretty constant thing in human society and there's no metric that showed it increased but we do have very good metrics of fed policy and governmental policy to create an asset bubble that then burst and now we're living with the consequences what we have seen and this is in the really beers repeating he's a huge increase in per capita incomes around the world because of free market capitalism india and china china after nine hundred seventy eight india after one thousand nine hundred one literally hundreds of millions of people lifted from terrible poverty caused by socialism and lifted into middle class prosperity this is the largest poverty reduction experience and all of human history that's

happened in our lifetimes really look like you want to jump in there i mean one of the interesting things about today's capital is already to the capitalism of our generation we've always associated capitalism with civil liberties and a strong middle class now what we just heard from tom is that here you have rising middle classes in the emerging world and we have emerged the industrialized world we have middle classes that are being polled arise ok so capitalism means something different to different people in different places apparently. well first of all in terms of india having been there frequently that that's a nice fantasy to tell people that hundreds of millions of people have been lifted out of poverty something like over eighty percent of the population is in moderate to extreme poverty a few tens of millions of families have had been lifted out but when you're talking

about a population of over a billion it's not that significant and what you have also is massive dispossession going on and we cannot and that's important to remember because we cannot separate any particular capitalist economy from the rest of the world so the post world war two us. led boom was in many ways based on super exploitation in the third world remember so it was in the era of all sorts of wars and great instability in the in the post colonial world and a lot of it had to do with ensuring the flow of cheap come oddities copper from chile him from bolivia oil from the middle east bogside from indonesia and supporting all sorts of repressive regimes to ensure that this is just so you can see that we're hearing what we've seen is that the instability has now moved to the center and you have these austerity programs that are now being imposed on the western nations themselves whereas in the eighty's and ninety's they were being

imposed on the periphery because the demand is always the same by those who control the economy that they need to have their profits they need to have the wealth flow upward so what we see is a system that is breaking down but again i don't think this is anything a historically if we're talking about the last couple of centuries unique what is going on in this moment in terms of financial institution and i was like a likely time i just laid off and it's you know it's go back to richard first before we go to the break ok i've lived in asia for most of the last twenty five years and i've watched. be transformed by the economic boom that's taken place but the boom here is a current for one reason and one reason only it's because of the u.s. trade deficit the u.s. trade deficit grew to be eight hundred billion dollars that was two million dollars a minute that's what enrich the rest of asia that's what made it is a boom and that trade deficit was paid for on credit now that brings us back to our

credit crisis now this economic paradigm credit expanded every year in the united states from one nine hundred forty seven until two thousand and nine and when it started to correct then the crisis started so we're now at the end of this forty fifty year bet fueled economic paradigm and it looks like it's going to implode when you think about that time earlier you said fantasy go ahead and it will take a short time ago we heard from a rumor a lot of what we heard just a lot of the rehashed dime store marxism and it doesn't stand up to the facts let's look at some actual facts on trade flows take the american economy does a much greater trade with canada next door that's the largest undefended border in the world and over six hundred billion dollars a year of trade goes back and forth across that border thank you the matter is that people in poor countries in africa for example suffer from a lack of trade not too much trade so this whole periphery couper. it's

a dime store marxism just doesn't stand out to analysis of the facts and if you look at india and i recommend bosses very good book on the job and here i want you to continue this point after a short break and after that break we'll continue our discussion of capitalism state the party. twenty years ago. largest country in. the surveillance of. what had been a chance. to speak on a journey. where did it take the. if . any is leave.

fifty feet. into the. sea. world. the latest in science and technology from around the russian. we've got the future of covered. can. welcome back across time peter lavelle to remind you we're discussing if capitalism

is due. to kick. start. and i think we'll go back to a room in new york ok you're accused of dime store cap marxism ok you can respond to that when you want but one thing is gentlemen one thing is undeniable is the the income distribution in the united states and ends and some tax and in europe now is getting worse and worse with never seen anything like it since the beginning of the great depression in one nine hundred twenty nine now is that has something to do with the current model of capitalism the rich just get richer and the poor just can't pour a room go ahead. well of course if we look at the neo liberal turn in the one nine hundred seventy s. what's going on is that at that point wealth and income had dropped to historic lows for the upper one percent the upper ten percent the point one per side and so you have a reagan coming in the us that you're coming in into england and you see

a massive outward transfer of wealth so for example by the mid one nine hundred seventy s. the top one percent of the population held about twenty percent of the well that was a historical low by the late one nine hundred eighty s. barely a decade later it was up to thirty five percent and recently we are now above gilded age levels so four hundred richest families in the country in america have more wealth than fifty percent of the population that are hundred fifty million people and we need to really understand we can talk about the neoliberal moment in terms of deregulation flexible was asian trade liberalization personal responsibility we can talk about the idiology and tools of it but really what it is is about a massive upward transfer of wealth because even though the idiology is market fundamentalism that government should not intervene in markets government always intervenes in markets and it depends on whose side they're intervening on the

keynesian moment you did have some intervention on the side of labor but now what it is it's on the side of capital so with all the various debt crisis such as the mexican peso crisis in the one nine hundred eighty s. the station financial crisis and the credit crisis now we see government intervening to aid corporations to ensure that bondholders are whole that that is what this is about i think we need to do away with the fantasy of the free market that is i'm uncomfortable purchase like to paddle ok richard if i go back to you in bangkok i mean i really brings up a very interesting point is that governments around the world are propping up capitalism because capitalism is really to the benefit of corporations and not to labor and. to civil society in general is that how capitalism is changed it would say since 1980's well during my my lifetime it seems to me that everyone has become much richer of course the income disparity has become greater but its credit has expanded to fifty trillion dollars us created

a great deal of wealth globally the problem is now that. debt on one side is an asset for someone else and so when the dead against the blow up as it is now it also destroys up the assets so the banking system is extremely vulnerable because its assets are being destroyed with the debt destruction and if the credit begins to contract now all of us are going to become very much poor the rich and the poor and so whatever a time when i left the house again we have around three billion old men or together and try to fix that two dollars is going to record. really i repeat what i had. i said let's not forget that over three billion people in the world live on less than two dollars a day i think all this abstract well actually forgets the reality of the extreme deprivation of poverty is that this is a. poll that. life expectancy for russian bail from the soviet union went from approximately seventy three years old

to fifty nine years old and what you're seeing is the destruction of people itself what we call the out there is a reverse there's a reverse true. goodness is reversed here is getting better ok but now i see your point that said that's an extreme crash that is that is unprecedented in human history for an industrialized country to achieve a drop in life expectancy outside of a war was no absolutely true the collapse of the soviet union and you can see why russians are very sensitive about the nine hundred ninety s. because of the shock therapy that was a practice in this country and people haven't forgotten it tom you've been wanting to jump in go ahead this is a very important point that a room brought up but he's got it backwards if we look at the percentage of the population that's living two or three dollars a day it's a business really high but it's falling and that is the key it used to be that

almost everyone except for the tiny ruling elites who controlled the states lived at such an abysmal level of poverty that percentage has been falling as a percentage of world population he mentioned the case of india he said well still it's the case for lots of poor people in india have always been wake up and the question is are they getting richer or poorer that's the relevant question poverty is the natural state of mankind and wealth has to be created it's created by free market capitalism by investment by production and by. exchange so if you want to look at india the question is has it been changing since ninety ninety one for better or for worse and the question is unmistakable for better or the same thing in china i visit both countries all right and i did change gears gentlemen literally commission we're going to go back to richard in bangkok ok let's look at the great contraction going back to the two thousand and eight i mean from way i the way i look at it is that you've seen banks bailed out we've seen corporations

bailed out if you go to tarp and united states i mean it's always the rich people being bailed out is that how capitalism is supposed to work because are these the people only creating jobs for the rest of us. once again i think that the government recognizes that whether it thinks that we have capitalism or not is irrelevant it is clear that if they don't bail out the banks and for that matter the major automobile companies that if the banks go bankrupt it's going to destroy everyone's wealth that fifty trillion dollars i keep talking about would completely disappear and we would all be hungry so they had no choice but you know this is not classical capitalism capitalism. capitalism is based on a gold standard the reason we have the roaring twenties and the great depression is because the gold standard broke down in world war one and created a big credit bubble in the twenty's the same things happened this time the gold standard broke down with the bretton woods system in one nine hundred seventy one it created

a very long credit boom and now the credit boom is going up and we're likely to collapse into a new great depression unless we come up with a very clever new strategy is to resolve this crisis tom what do you think about that because a lot of people say that the the western in financial institutions of their tool box is empty right now that is a contraction is not like we've had recession since the second world war there's something fundamentally wrong and there has to be some fundamentally new answers to the problems that capitalism face today what would you say to that. so the first question is bailouts are not a feature of capitalism it's not a feature of the free market that someone whose best friend is the treasury secretary gets a giant truck like goldman sachs that this is cronyism it's pure unadulterated cronyism that we're suffering from right now bailouts of the banks bailouts of companies initialisation of general motors by the american government and what's happening in other countries around the world as well is cronyism we have seen is a real crisis of interventionism is what caused this crisis so i would have let

them curl would have let them crash. i absolutely would have let them reluctant to last part of the we do not know about a few words our economy is firms can rise if the producer value satisfied customers and they go out of business literally agree with you this is ok i want the room i want to go. to system we have capitalism for the rich and we have nothing else for i'm sure we have socialism for the rich and we have capitalism for the poor how do you like that do you agree with that phrase or not. i think that's a very very way recommitting it and i think that richard brings up an important point in terms of yet something had to be done what we see free marketers like. the house down. let it burn down is that what's happening now what happened with the credit crisis is that the

governments nationalize the losses they should have national actually nationalize the bags it is in the public interest to have control over the credit system and that could have easily been achieved and this is the point making as we can see again and again and again bailouts are actually the norm there's been hundreds of these financial crises and with increasing frequency over the last thirty to forty years under the neo liberal regime and you have all sorts of bail out the mexican peso crisis was a massive bail. baggs long term capital management was a bailout that you have these bailouts again and again and again because the only other option is to let the economy crash which would be extremely devastating now the way the bailouts are structured they're structured mainly for the benefit of the corporations and wealthy and certainly some benefits flowed out trickle down words in terms of that the credit system keeps pumping but we need much more of a human centered system rather than a problem it's

a very good point and i have to go to richard on this point here what is the future of capitalism here because i think a lot of people would agree in respect of your ideological trajectories that it's reached a certain you know critical mass that you can't obviously we can't keep going on the way we are now what needs to fundamentally change where we are because you said that there is no capitalism and if you're a proponent of that system what needs to be done to bring it back on line. right i think as i've said we have a government directed economy now to a very large extent through these bailouts and the government spending so much money but in order to revert to something closer to economic orthodoxy that perhaps good should ensure a sustainable growth what we need to do is we need to stop borrowing and consuming and instead we need to borrow and invest what i'd like to say my fear is that if the credit begins to contract then this economic system built on credit is going to implode therefore how can we ensure that credit continues to expand but it expands

in a way that generates a productive return rather than just borrowing and consuming as we've been doing for decades i'd like to see the government borrowing invest for example i'd like to see the u.s. government borrow a trillion dollars at two percent interest and develop solar energy over the next ten years then that would be an investment that would yield returns for eternity that would also pay for itself we could bring down the budget deficit by two hundred billion dollars i mean because you've been here many thanks my guest today in washington new york in bangkok and thanks to our viewers for watching if you don't you see an expanded member. take a deep deep deep. deep deep deep .

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