>> rose: welce to our program. this evening, jim o'neill, chairman of goldman sachs asset management in london, and a man that a lot of people who manage a lot of money and look to what's happening in the world listen to. in europe, what could happen? what's likely to happen, and what would be our indication thatt is happening? >> let me start with-- i'll state the most-- at might be regarded by your audience as a most outlandish. i think th most likely thing to happen is that everybody is still in it, including greece, because the cost of exit are so unknown, and here the sort of parallels with 2008 and thinking and that brief period when people did about lehman being

archaloud to go are quite real. you can't measure clearly some of the legal ramifications of greece and exiting in terms of whose contract is recognized and what does that do to the implied probability of businesspeople all over the world factoring in, well, they've gone. is portugal going to go? what about italy? what about spain? even though there's a case to be said that greece and others should never have joined in the first place, it's a much more difficult issue about letting them leave. d so my hunch is, particularly given the way european policy makers operate, they're all gointo be in still by the end of the year. >> rose: a loof people will be happy to hear that jim o'neill thinks that. >> y, but a lot of people in the investing world, particularly in the anglo-saxon world, partly because they think this thing never should have happened in the first place, automatically conclude, because it now all looks so weak it will all unravel and won't exist.

it's not going to be as easy as that, i don't think. >> rose: jim o'neill for the hour, next.

caioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> rose: jim o'neill is here. he is the chairman of goldman sachs asset management. a decada ago he coined the term brics whicrefer to four of the world's fastest emerging economies, brazil, russia, india and china. that term has become a household name in glal economics. he revisits the bric phenomenon in this new book called "the growth map." i am pleased to have jim o'neill back on the program. welcome. >> thank you very much for having me again. >> rose: here's what's frofrom--interesting to me, we a program on a range of subjects havi to do with you, and the kinds of things you were doing, what were the distinguishing

characteristics of emerging marketmarkets will, how you camo define brics. a lot of that is in the book. in the back you're looking back and looking forward. why did you write it? >> that's e key question. i think the specific thing that started me off was around november 2010-- i'm getting my years right-- yeah, 2010, i was on a trip, long trip to china and india together and korea. obviously, i've been to each of those places quite often, especially china. but it's the first time i'd ever been to china and india on the same trip without going home. and i always deliberately resift the sort of comparison of china versus india, which is onis the better, the more sustainable. >> and found myself getting into that. but more broadly, when you are coming back from a long trip and you're on the flight, i kind of thought to myself, even i-- even i, mr. bric, haven't quite got the dimension of what this thing

is. so maybe i need to find a new way of writing about this. and in addition, i think in hindsight was the key. it was the first time i'd actually been to korea for number of years, and i hadn't at all appreciated how much korea was adapting and changing, and linked in the title, something i'm trying to introduce across the culture-- and the clients. why do we call south korea an emerging economy any more? i get into it a bit in there and i have all these indicators i look at about development and productivity. and korea scores better than every gheav 7 country, except canada. and yet we call it an emerging economy. >> rose: why is that? we'll come back to why yo wrote e book. >> i think it's because of the easiness and the laziness of business culture and history,

really. >> rose: in other words, they don't pay attention to that kind of distinction and recognizing that it's neither fish nor fowl or something? >> yeah, i think that's right. this is why i call the four brics and the few others these days the growth markets because i think they need to be regarded as something different than-- they're clearly not developed in the way the u.s. or parts of europe-- at least appear to be. >> rose: yes, exactly. >> but they're clearly not developing. i mean, as we talked about last time, even more in my head these days. you know, the four brics alone this year in dollar terms probably will create close to another italy in one year. why are we calling them developing countries again? and korea and a whole range of indicators, use of technology. way above the united states. we call it a developing economy? >> rose: by 2025, bric

countries will have how much of the g.d.p. of the world? >> uh, well -- >> whatever benchmark you want use, 2025, 2030. >> way before them. in the next three years they're going to become bigger thanhe u.s. collectively, in the dollar rms, 2015 they'll be bigger than the u.s. by-- which is, therefore close to 25%. >> rose: u.s. has what percentage of the g.d.p. today? 25? a little bess. >> rose: if they get to 25 they're bigger than the u.s. in terms of g.d.p. of the world. what's the fastest growing economy now? >>robably somewhere in africa in terms of growth rates. >> rose: because ty're such a low base. >> in terms of contributions to the world-- some people have picked up on aspects of this-- china's growth rate is almost definitely going into a phase of lor g.d.p. growth, but because

they're so big, their contribution to the world is continuing to rise dramatically. so as i said a minute ago, the four brics collectively create the equivalent of anothe italy this year. china will be responsible for half of that alone, another greece every four months. >> rose: i want to go in four different directions here. first i want to go to europe. tell me what's happening in europe today, and greece, what's going to happen in the end? >> in the end. > rose: or in the near term, or is the end in the near term? >> the unfolding drama in europe is one of the most complex, but also exciting things ie come across in my career. and i was raised on all this stuff. italy was the first country i was ever let loose on professionally to look at. so i -- >> why is it that way because you don't know what the end is? >> we don't know what the end

is. it's this fantastic combination of pure politics, geopolitics, and econics, and the three thgs colliding. and so there's a whole host of end games that could happen. i find myself occasionally waking up in the morning and i'm sort of having dreamt somebody's woke me up in the night and told meet french have decided to pull the plug on emu. and i think i'm going to stop think about it. that okay the end game. i subscribe to the school that believes emu was primarily -- >> teleus what emu is. >> the european... union, the product of avoiding world war again. >> rose: and created the euro. >> and germany and france put it together. >> se: but france would jump out. >> part is a black friday i think from a lot of french intellects that it would be a way constraining german

convtional economic policy. and 12 years on, doesn't seem as thgh that works, and the downades that have haened. germany is the only one left of the big guys with a.a.a. france has lost it. big blow to their pride. bundis bank calling the ots on everything the e.b.c. does. some french people must be thinking about this isn't what we had i mind. occasionally, i think, you know, the french election, charlie, you probably know this better-- i like to believe when i got off the plane yesterday, lapens daughter is apparently up there with sarkozy independent weekend polls. q. there was a story like thatt" >> whichas astonishing on some level under anything like this. where that's going to take it, one has to keep an open mind. throw in another geopolitical scandal, i believe the emu, european monetary union, couldn't happen without italy

being in on the start. as weak as italy has been economically, northern italy has many parts of it at are just as comtitive as germany. so can you have an emu that involves germany and france? >> rose: the manufacturing sector? >> it's the hub of small manufacturing, italy, a lot of the luxury goods companies are based around the area surrounding milan. >> rose: through your eyes, look at the next year. >> yup. >> ro: in europ what could happen? what's likely to happen? and what would be our indication that it is happening? >> let me start-i'll state the most-- what might be regarded by your oddaience as the most outlansh. i think the most likely thing to happen is that everybody is still in it, including greece. because the cost of exit are so known, and here the sort of parallels with 2008, and thinking and that brief period when people did about lehman

being allowed to go are quite real. you know, we don't-- you can't measure clearly some the legal ramifications of greece and exiting in terms of whose contract is recognized and what does that do to the implied probability of businesspeople all over the world factoring in-- well, they've gone. it portugal going to go? what about italy? what about spain? and so even though there's a case to be sa that greece and others should never have joined in the first place, it's a much more difficult issue out leing them leave. so my hunch is, particularly given the way the european policy makers operate, they're all going to be in still by the end of this year. >> rose: a lot of people will be happy to hear that jim o'neill thinks that. >> well-- yes, but a lot of people in the investing world particularly in the anglo-saxon world, partly because they believe this thing never should have happened in the first place, automatically conclude, because it now looks so weak, it all is going to unral and it

won't exist. you know, it's not going to be as eas as that i don't think. >> rose: you think it's a serious case that somebody-- that they may separate the euro zo into north and south? >> because of italy, it's too hard to do that. you'd probably have to cut italy in half. i don't see-- i-- i have this-- i have some quiet and serious people considering this idea. but i don't think germany with go with a northern euro that didn't involve france because of what i said earlie i think the euro and the european monetary union are trying to avoid the past. there is a lot of history as to why germany sticks with this thing. and as i've said, what would do you with italy? italy, economically, superficially, would be with the south. but what would all those companies on the german borders

with italy, what would they think about that? if you go back to 1998 in the year that emu waseing created and who was going to be in and who wasn't, a lot of really conservative german people, many bundis bank people would have said there's no way italy will be part of the euro, for all the reasons people think aboutity at italy, but it does. a lot of corporate germany said there's no way we're developing this thing withouthem being in. so it's very complex. >> rose: at's the likely scenario. >> my best guess. >> rose: and what's the worst scenario, and what number would you put as its probability? the. >> the worst scenario involves two separate paths that could collide. one would be-- you know, we can't get through a sensible negotiation about the greek debt restructuring, and sometime in the next f weeks, we suddey

wake up one day, and a greek leader has said,un" what, guys, we're not paying any of it back." and there's a very messy greek default. on the back of, that some german policy makers lose their patience, especially because they perceive many domestic gean voters don't like paying for all these guys, so germany ys, "you're out." >> rose: you get a kind of nationalist politician on both ends. >> yes, so that is a very dangerous path because tn it starts to bring back some memories of distant europe. and then, particularl if it were to be close to the french election and lapens is still doing well in the polls, and holland is ahead, as it currently is -- >> and probably would win in that case. >>e'd say this fiscal compart germany has been telling us is so important, we're out of that, and if you want to push us so far, maybe this euro isn't a great thing and there's mass

panic about the euro's existence, and that's a scenario we could flirt with. >> rose: that's not an unreal scenario. >> it's not unreal. >> rose: 10%? >> probably less than that. probably closer to five. in the world of investing and thinking about such things, it's not immaterial. >> rose: in the rst-case scenario that something terrible happens, the repercussions for china are what? >> probably ---- less -- >> it loseaise big market or not? >> well, unless these countries vanished -- >> yes, that's true. >> i think people exaggerate some of this stuff. >> rose: that's why you're here. >> they wouldn't lose that market. it would just be a diminished market for some while. but, you know, going back to why i, again, in some ways, i tried to write this book in a more common way. un, china's future depends on itself. and since i was last on with you, a really interested to hear

if any of your guests, particularly from at part of the world, have suggested this. i smell and certainly hear a detect that what happened in august last year, the current incidence of thes &p downgrade here in the u.s. and the calation was european crisis has scared the chinese. and the thing that has led the to conclude is cannot depend on these guys. >rose: exactly. i've heardhat more than once. >> so we need to do more to make su our future is driven by us. >> rose: exactly. >> in my view of the world, that's a good thing, and it makes what happens in europe less important for china because they've already decided to go down that path. >> rose: they made two important decision. they got a five-year plan. they have a change in leadership next year but it will probably be a ctinuation of leadership. and the two things driving them orbit one hand, the need to turn from an export economy to a demand economy.

and, number two, it is a need that they feel to go out and sign up as much natural risources as they possly can in termsf contracts, especially in africa and around the world. >> yeah, i think that's right. >> rose: to be lock up? >.>> i would go so far as suggested-- this would never become a stated goal, i don't think, but i am now assuming these guys are aiming for effective convertibility of the r.m.b. by 2015. >> rose: i hear that, too. and how do they get there? >> they get there by-- and this is very exciting for the world of investment, which i don't think enough people in the slightest really start to focus on because if that's true, this is-- this is three years off. so it's not-- it's not some big picture. this is three years away. to get there, they have to undertake further accelerated reforms of things related to their own bond markets, their own equity marketsas well as, of course, more mov towards free movement of the chinese

currency. just yesterday, as i was treling here, the u.k. finance minister, george osborn out there with quite a bit of fanfare, signin signing this deh the hong kong authorities about london becoming some big center forrading. that doesn't mean anything in the next few weeks, but by 2015, particularly at a time when london's position is being threaten on some of these european issues--a at least in some people's minds-- huge things. >> rose: and you see steps of what they're doing biliterally with respect to currency. >> very much so, with a whole host of countries around the world. these are big things. what's interesting about the context of you asking me about europe, thi it is the fear of bg too dependent on exporting to these places, which i think that's driving them to do it and i thinthat's a good thing. >> rose: when y look at their economy and the decline in the g.d.p., already making the

point it's so huge that economy has the consequences even if the g.d.p.-- i think iaw something today, they're looking for new forecasts of 8%-plus. >> we got the numbers earlier today for the fouh quarter which came out at 8.9, which is the lowest, i think, for 10 quarters. but it was higher than expected, and along with a lot of other indicators that were better than expected. so this simplistic notionf a soft landing is now back in favor and the chinese market had its biggest rally in over a year on the back of it. >> rose: so this suggested a soft landing for their economy, not a hard landing that would have real consequences. >> the past couple of days not being a great time for those that believe in the hard-- scenario, that's for sure. if this is the softest china is going to go to, it's stronger than i think and i'm the one who is supposed to see it all in distorted, glassy eyes. q. you look through rose colore. a soft landing is slipping down a little bit to eight-plus

percent. >> i'm assuming this decade, seven and a half. >> rose: for the decade. >> yeah. d, of course, as you probably know, in the five-year plan it's 7.5. >> rose: right. >> which is interesng because two yes ago, people generally believed anything below eight was something china cooped live with, andyetere they are themselves saying our five-year plan is 7.5. and that's involved some painful things and will involve some more painful things. but i think big picture that's a real smart thing for china to . >> rose: what would a hard landing number china? >> in simplistic numbers? >> rose: yes. >> my view would be something quickly that was 5%, 6%, and lookinlike it might state that low for more than a year. that would feel like a hard land glg and do you see any kind of bubble over there in terms of real estate or anything else, construction? >> you know, i think there have

been pockets of bubbles. clearly, the top end of the real estate market in coastal chinese cities, the biggest ones, definitely. but what-- what is really important for people to realize from the west is the simplistic comparison to housing bubbles in the west, which in my country, the u.k., is reoccurring, and, of course, here in the u.s. and -- >> it was catastrophic. >> catastrophic, but the first one everso it's paly why it s so catastrophic. the chinese deliberately stopped their house prices going up, which makes any superficial simple comparison completely redundt, and it astonishes me how many observers made that comparison. house prices in china stopped going up because they stopped it. and what-- so-- if one reflects back, the fed probably should have done that, in a world where

they didn't have to worry about politicapromises of every person owning thei house, en if they didn't have the income, and the feds' roll as part of this democracy. the fed probably should have stopped house prices going up, but they didn't. >> rose: i wonder why they didn't. because they-- >> because it's tough in a democracy. how can-- you know, particularly after such a longe period of house prices going up and seemingly there being no damage from it, and everybody feels more prosperous, and everybody is like, "oh, wow, you can buy a house as well. wow, this is great." and so, you know, the fed occasionally flirted with statements about it, but to actually instigate it, it's a tough thing for -- >> are you saying that with the value of hindsight or did you say that at the time, you or anyone else? >> well -- >> was there any kind of serious conversation that said-- >> for the record, and in those days, of course, i was still-- and many years after-- immersed in my life as the chief

economist. so i credit myguys in new york were saying back in '05, '06, that u.s. house prices had entered bubble territory and would decline in the future. because it was -- >> but you weren't really seeing a subprime crisis at the time. >> no, no, no, no. that part of it, no. but the notion that house prices would go down, yeah, it was pretty obvious to me. >> rose: what's the outlook for t u.s.? >> i find myself thinking that the u.s. might-- might pleasantly surprise people. you know, there's, obviously, huge dilemmas still, especially related to fiscal policy surrounding the-- what seems to me the slightly weird state of u.s. politics. having lived in new york twice, i can't fully get my head around it. >> rose: word might be right. >> occasionally, when i really think about it, it bothers me, i'm not quite sure big picture we have any confidence-- whether this is just some temporary weird game or whether ts is

part of -- >> what is it that makes you say that? >> well, i always thought from a european and british perspective, there wasn't that much difference between republicans and democrats. and today, there seems to be, rtainly on anmotional basis, this huge polarization. and that's all new to-- new and if that's-- if that's a permanent state of affairs, then there are longer term real dilemmas about that, that is very hard to fathom out easily. >> rose: is the argument-- i assume you're referring to the notion the tea party's impact it's republican rty has been so-- so-- >> profound. >> rose: so profound that in fact it has paralyzed negotiation. >> yes, clearly, clearly, clearly done so. and if that's lasti, then i don't know how the system here is going to cope with that. >> rose: you saw that in the debt ceiling debate. >> right, right. i made the naive assumption-- partly because in the time-- you know, i was living in the u.s. in the days of

gramm-rudman-hollands and some of those games we saw in the buildup to the debt ceiling used to go on in those days and it was a game and it happened. i just assumed the samehing would happen. of course, because of the degree of tea party influence, i think that's why it didn't happen. so big picture-- but if i can put that aside, i think there's a number of other things going on in the u.s. economy which are quite encouraging. >> rose: like. >> bringing about the house price thing, the flip side of why it's been so painful, house prices have dropped so much, that house prices now to personal income are about to where they were at the start of the 1990s. so looking forward as opposed to past, at is a good position to be in. so affordability is now-- is now there. and so over the next five years, housing market is going to be a source of positive influence. >> rose: first you have to get rid of the old stock. >> there's, obviously, the overhang of the stock, but as we work our way through that and there are some signs of that

happening, that's going to be a positive thing. secondly with wh it, given the critical role that house price collapse play and it's reoccurred across the game plan throughout the developed world in banking systems,nce that starts to shift the other way, that's a great thing for the health of the u.s. banking system going forward, particularly the bigger commercial banks with that exposure. that's got to be a good thing. thirdly and separately fro that, and i am no energy expert, but it seems to me the u.s. is developing a lot of energy supplies that are a by-product of this sustained period of higher prices, which, by the way, when all these people talk about capitalism failing, there's a great example as to why it's not. and i spent a charter on some-- i wish i knew some of this evidence at the time i wrote it because i would incorporate it

because it's so important. you kw, way back when i did a ph.d. about oil prices and supply and demand, and people underestimated the long-term speed of supply and demand response. we always think because of the short term, supply and demand don't respond to rising prices, but it looks to me like, indeed, that's exactly what's happening. you have all the supply coming on stream in the u.s., and the u.s. appears to be possibly going down a path of domestic suainability of energy suppl >> rose: but how long will it take to do that, to have domestic suainability from the discovery of whether the use of natural gas-- >> shale gas and -- >> the discovery. they know it's there. they've never been able to extract it with some kind of cost efficiency. >> well, you know, i have my ears perked up more and more when i think about this, and i follow stuff that some of the real experts are saying and it seems to me this is a big story for the u.s. the next few years.

>> rose: i do, too, a great story. >> if that's not enough, on top of that, there's this sort of pessimistic view, the whole product... improsecute was a myth and a figment of imagination, that it appeared to be the case because of finance and that's broken. one of the fascinating things is the data stillhows u.s product services is pretty strong, despite the problems in housing and finance. and at the end of the day, and according to my bric philosophy, long-term growth is all about the number of people that work and the productivity. so if the u.s. productivity numbers are coming through, the housing market proem, which was vast is towards the end of it being a problem and switching the, way, and you've got this energy situation changing, that's not a bad deck of cds. >> rose: so if the president came to you and said we have this problemn america with job creation. what we need to have job creation. we need companies to have demand, and, therefore,

companies, once they have demand, build their inventory. therefore, they need new people. we need them to make that bet on their own company and, therefore oamerica. >> yeah. >> rose: that's what we need. what's missing from that happening? two scenarios, and neighbor a thd. one scenario says they're uncertain-- they argue about this. they're uncertain about demand and regulation and tax reform and all stuff. >> i think there are three bits which are missing, one of which perhaps is a simple thing called time. >> rose: right. >> as we creep forward at the margin, i think time is delivering a bit more stability and confidence. you see. you look at the-- when i was last in town in october, i went to a lunch with a bunch of-- very small hedge fund guys, what was the big surprise going to be the next year? and i said maybe u.s. unemployment drops more than anybody thinks, and people wanted to kick me out of the room. >> rose: exactly, that's right. >> and actually at the margin,

because of the past two months' data, that'snow not such a crazy possibility. you look at some of the leading indicators of job growth, they're looking a bit better. so, first of all, time. secondly, you touche on it, confidence about where is the demand? where is the future about policy? >> rose: what will regulation do? >> what will regulation be? and so the election in that sense is, obviously, a hugely important thing, and where the tea party's influence in the republican side is, obviously, as part of a big thing, i suspect, too. and then thirdly, linked to the whole issue of the brics in china and a continued source of potential positive surprise that i-- a lot of america just doesn't really believe, but again, since i've last seen you, i think the boston consulting group guys have issued a very interesting report arguing that within five years, the u.s. restored its manufacturing

competitiveness with china, and -- >> and how do they do that? >> the flip side of that is right now, going back to the five-year plan, one of th major things the chinese are doing is deliberately raising wages, which is done to try and broaden those thatre benefitting from the chinese story. but one of the consequences it's reducing their competitiveness, which means for a lot of-- let's not forget, a lot of the investment and business that wenthere was driven by u.s. companies. the great attraction to producing in china is rapidly disappearing, and it's coming back to this side of the world. i think mexico is a winner in this but i think it will help e u.s. as wl. i hear it from corporations. i hear it. if you look at the data - >> don't count america out. >> you look at the data and it amazese that more political figures don't-- i guess it doesn't suit some of their superficial -- >> the president ought to be making this argument every day.

>> i think he should. we've just seen the latest trade data for the end of last year. china's trade surplus only just over 2% of g.d.p. 2008 it was 10. something's changing. and i think the u.s. might be a-- looking for a bigger beneficiary of this than people realize and the president should be making more out of it, i think so. i definitely think so. >> rose: when you look at the united states in terms of the deficit issue, and as a political argument as well, i mean, should the president be focusing more in the short term on growth or deficit reduction? >> i-- i'm in the-- i think it's kind of got it about right. i mentioned about graham rudman earlier. rather bizarrely, because of the inability of the political fig towers agree, this sort of scheme that was dreamt up, these automatic cuts as you go through time, it's not a bad prciple. because it's there hanging over all the time. but it's highly important that

it-- you know, i prefer that approach, and let's call it the germanic one, where you cut now and don't really worry about the short-term consequences because as we're seeing in some of the troubled european countries, if you cut too much, all it doess boost the deficit. >> rose: that's what we're seeing in britain, isn't it? >> yes, but within the euro zone, one of the most disturbing pieces of evidence in the brief period of this year to date is e spanish numbers. new spanish government divulged that the deficit is actually 8% of g.d.p., and not 6. so the consequence of that is to keep the germans happy and in their own minds at least is to come up with even turf measures to cut the deficit further. >> rose: and that-- that-- >> if all that does is weaken the economy, it's probably going to make the deficit even bigger and it's not smart economics, in my opinion. >> rose: i want to go to a quick issue thathas always been part of your understanding of bric countries and is in this book, demographics. demographics favor the united states?

>> yes, they do, very definitely, relative to the rest of the developed world. >> rose: explain me that case. clearly, with contrast to japan. >> yeah. >> rose: and, clearly, with contrast to russia. and europe. >> also to large parts of westn europe as well. >> rose: so those big three, western europe, russia-- although russia is a bric country, too. >> yeah. so the u.s. is in a very good position. this is where the product servicing thinis so important because over the long term having more people means your potential labor force is bigger. that's how you get more growth. people get jobs. they get income. they spend, creates jobs for others, they're all productive and that's how life goes forward. in some ways it's relatively straightforward stuff. >> rose: that works -- it seems to me-- president clinton makes th argument all the time the american demographic picture will in fact help it in terms of its-- not losing its competitive edge. >> definitely. i think it's a huge advantage

relative to most of the rest of the developed world, and within the bric, certainly to russia, and to some degree, at least over the next 15-20 years, also to china because of china's one child licy, baked in the cake that china's demographics are going to start turning before -- >> here's what's interesting. i don' quite understand this. explain it to me. russia has an aging population. >> yup. >> rose: but it's a bric country. >> it h an aging population but there are 140 million. so see -- >> size trumps-- >> size of the nber ofeople, particularly coming from a low base. you know we have to remember, still barely 20 years to the soviet union disappeared. >> rose: right. >> and these people are coming out of a very low level of development. and if you apply technology-- a lot of people find it easy to focus on all those obvious, real problem atical areas of rsia. but one of the remnants of the sowf err aves quite an educated

population and adaptability to technology for positive purposes. so use of the internet, use of the mobile. russia scores very highly on these things, and that is really important for developing countries. q. they score high on the use oe phones, smart phones. >> yes. they find it very easy to be at ease >> rose: is that an important issue for any economy you look at, how well they adopt to the internet-- >> big time. >> rose: technology, smart phones. >> when i look at the bricks and what i call the next 11, which is the largest 11 population countries after the brics. so 15 countries affect are two-third of the world's population. if i look at all the-- that are relevant for productivity, korea is the top scoring one of those countries as i said earlier. it's about most of the g-7, except canada. one of the reasons is they are

the best usersf technology. and it's almost like 100% of t population is into it. and it's pretty powerful. when i think more broadly, i find myself thinking despite the enormous of the challenges in parts of africa, maybe some of this technology is going to help some of theseguys jump through stages of development that otherwise wouldn't be there >> rose: what's the biggest misconception for you about the way the world wor-- works. the global economic world? >> the general biggest misconption is there is one right way. >> rose: to develop an economy. so state capitalism has a place, market capitalism has a place. >> and trying to find-- and importantly, and in some ways i find brazil the most intriguing, aptability to different aspects of each of those at

different moments in time is also, i think, pretty important. some strange ways. you see it a bit with china. gll i was going to say, yeah. >> one of the things that slightly bothers me occasionally about brazil right now, some brazilian policy advisers to t the-- to the post--- leadership thinks they can use the state to create g.d.p., which they may or may not be able to succeed with. they're doing that at a time when china is trying to pull away from them and bome a little more market driven. very intriguing. and having the ability to not have such a passionate-- you know, restrictive framework to believe this is the only way. that's the biggest misconception. i think it's partly why so many western people find china so hard to understand because they think it's communist. it can't work. >> rose: are the chinese

leaders wrong in their obsession about stability and security? or are they absolutely right, and, therefore, communism itself is at stake if they allow too much freedom. >> i love the way-- i think it was the "financial times" described the chinese communist party on the day of the 90th anniversary. they called it the world'sa biggest chamber of commerce. >> rose: that's great. >> and i think that is the right way tong about it. this is not really a communist party in anything other than name. it's a party that leeks to have the power that it has, but it knows it can only succeed by changing it, through time, and allowing more success and freedom for its people. so it's not really communist. >> rose: and it knows that the further you get from beiji beijing, the less control they have.

>> yeah, clearly, clearly. so the answer is make sure these guys can have some of the success. and irony of all this, of course, if you look at superficial-- not superficial-- important measures of inequality, one of the unfortunate consequence of the past decade is china seems to have more inequitable income growth than perhaps even the u.s. >> rose: yes. >> but guess what? they're doing something about that which comes right back to why they're pushing up wages so much because they know that is not a sustainable thing. >> rose: and when ey want to do something about it they don't have political paralysis. >> so could we. there is also this, finally. the notion-- suppose as happens in the world, all people like you, big hedge fun managers, people who are economists and people who manage money, and people in private equity, and people who are part of the

central bank come together for a huge conference. what's the top three questions on the agenda? >> right now? >> rose: right now. >> i know what 99% of the other ople that would be in that room with me, it would be europe, europe, and europe. >> rose: 90%. >>eah, 99%. >> rose: 99%, okay you would say? >> it would be how can we get-- the number one thing for me how can we find a more optimal global governance struck the that you are accommodates tse diffent ways of choosing to do thin domestically. somebody asked me a great question at an event, is it conceivable you would have a chinese head of the i.m.f.? would that person be able to make a decision in a room without calling beijing? good question. i don't know the answer to that. and i suspectntil the answer is, yes, they could, then china is not in a position to be head

of the i.m.f. one thing is for sure, some time this decade, somebody from the bric countries has a lot more ght to be head of the i.m.f. than we appear to have given them in the -- st. so the number one decision-- i read in the papers today, how do you make the world's governance system for equitable. we have the i.m.f. being lenient are parts of europe. were they like that in asia in '97, '98? which makes, on top of these voting right, a number o these countries think, thi isn't right. it's not fair. the u.s. in that regard i think is in a position to take some leadership in all of that. that's the number one question for me. enemnumber two is linked to the possible changing energy situation here in the u.s. is how can we find the nex great form of energy that lessons the

paranoia-- justifiable paranoia-- we have about energy prices and availability? that to me is the second big question. and the third one might be europe. how do we keep this positive human spirit that the european union came out of, but without it being economically suicidal. so, yes it's great to have all of these guys together doing all these things but you can't go down the path of this constant fiscal austeritiy believing it's going to help everybody. >> rose: where do you put in the following thing. the act of political act, ether it is-- i'm trying to mine or bomb the straits of hormuz is one example. some very successful cyber attack from one country to another. some unexpected blow-up in which we find out that somebody actually has stolen an atomic

weapon from the russians or the pack takens and they don't give a damn? >> you know, that -- >> all bets are off. >> all bets areff. but one of the reasons why i say global governance is important-- and, again, since i've last seen you i feel a bit embarrassed about this-- i like to think of myself as being very global. i went to the israel only for the first time in my life, twice since i last saw you. >> rose: you had never been? >> never been. i feel embarrassed, but now i've been twice. >> rose: tell me what you saw when you were there. >> just the whole jerusalem thing is so incredible, sort of slightly bizarre in many ways. and i had the privilege of meeting some highly important israeli figures of today andiest kerryear. and i sort of gingerly said to them, you know, "rather tn-- i think i can vaguely understand your paranoia, but why not try to do something to help egypt or

thinthink of turkey as being a t of a model? you' surrounded by this change, where the tough questions you asked me about cyber atcks -- a lot of those fears come from those things-- why not jump forward and do something to help the places that appear to be other for the first time in my professional or adult life, seemingly wanting some form of change which is not at its basis religious based but if we're not careful we'll quickly become religiously driv. i think they have a big role t play in this. >> rose: what did they say when you raised that question? did they say we'll get-- get-- o ahead. >> they say, you don't understand. you don't understand -- >> you don't understand the opposition, the challenge, the threat to us. you don't understand what we have to live through upon you don't understand how close they are to us. >> what i would say, one of the

people said one of the most profound things i had heard was very simple. he said, "however, globalization is the single best thing against racism." and i thought it's so true. and so the-- you know, and in that sense, technology that we touched on for some of these other place so powerful, which appears what the mobile phone and the internet's role in some of these revolutions, it's so powerful. and to harness that for positive ways to help change with some of these complex situations, that to me, you know, has got to be a big thing, big thing. >> rose: talk to me finally about big ideals having to do with economics but not. there is, to ort-rm it, to draw the picture but not to explain it-- occupy wall street. there is this, in some cases in america, the 99 and 1.

is there, in your sen, a growing fling about the disparity in the world? >> clearly, clearly. >> rose: and does it have consequences? >> if it--if it goes ignored, yeah, there will be consequences. you know, where my-- where my own office is, is close to the london branch of occupy wall street so i warned past it frequently. and, you know, my mind is immediately taken to whats it these guys are really on about? and, of course-- well, of course, i think it relate toles the severity of this economic cycle on top of the apparent widening deviation between the haves and the have-notes. >> rose: the 99 and 1. >> yeah. so you have to listen to that because ultimately, it's something i've said to colleagues of mine over the

course of our own challens the mast couple of years, that know-- it's a big challenge for large corporatis that have been successful that want to stay successful. you have to be constantly trying to-- and it's tough-- to adapt and listen and anticipate and help. because if you don't, you can't stay-- you don't really have any right to stay so powerful and strong because you've got make se more and more people benefit from what you to. otherwise, what is your legitimacy? >> rose: are you successful in getting a conversation about that idea at goldman sachs where you are, obviously, a primary player? >> uhm, i don't think we've cracked it yet, but i think we're going in the right direction. it's something i'm highly interested in, you know. it goes back partly in some ways why i created the whole bric idea, enlightened self-interest. in these countries there are hundreds of millions of people

being taken out of poverty. that is, obviously, really good for them. it's actually really indicative of narrowing truly global inequality. >> rose: and it's really good for business. >> and it's ultimately good for us, not just direct let's businesse do -- >> i meain terms of people who want to sell things to-- more purchasing power people have in the world the more things they want to buy, the more things they want to baker the more companies have employ people. obviously, there are all kind of issues-- i see it a little bit in-- through some sort of generational things. i have two kids that a in their early 20s are, andyou know, they challenge me about-- you know, they're not in my world. >> rose: what do they challenge you? >> about what i do and what we do and is this good? are we a net-positive force for the world? it's rather refreshing to have that challenge frommy own qidz kids because, you know, i like to-- it's form of engaging

with them that otherwise might not be there. but they ask good questions and, you know, i think about it in terms of the younger generation. they don't-- they-- they may be in some western societies because they've had the benefits of of the rising living standards that we've all enjoyed, and so they they maybe in some ways have a slightly more brought vision of what is desirable in the future. and, you know, i say this to some of my colleagues. you know, working 18 hours a day for the sake of whatever the narrow thing you're on -- >>xactly, right, for another $10 million. >> if we're not-- with all forms of society, it's not ultimately that good for you, never mind-- i think in some ways the n ways of adaptability, we've got to deal with. >> rose: i mean it really is somehow-- it's the idea away from the sort of greed is good in part. >> oh, yeah. >> rose: it is, to some

sense, a better society is good pyou know, a pla wre people can get an education, a place where people have adequate shelter and heth care is good for-- is goo also, for the possibilitying of conflict, which is disastrous. >> i'm quite close to the british branch of teach for america. >> roseright. >> i don't know if you have heard -- >> we have. >> i'm now on the board of teach for all the global-- and one of the things i love to tell people is in the u.k., teach first, which is the british version, for theeyears running has been a more popular place for the top graduates to join than goldman sachs. >> rose: you love that, don't you? >> i think it's a fantastic thing. it's a fantastic thing because, you know, you should be getting brighter people wanting to be in education because ultimately, of

all the things that are relevant, i think education is the most important. >> rose: it is, indeed, and not discussed much in terms-- this politicalebate has not been about edution, for example, here. >> no, not enough. >> rose: what kind of ideas-- which brings me to another idea i know you're part of and how do you assess it, which is 10,000 women? >> yup, yup, yup. again, it's-- by the way, in the context of the-- i don't know, a strange part of me first answer ago the call of the challenge country is now italy, wch is a big country. if they were to get further toward the greek side, that would be a real disaster. >> rose: beuse the enomy is so much bigger. >> the eighth largestconomy in the world. but one of italy's most basic problems i think is not much more than 40% of women work. so one of the things italy needs to do is develop a society where they actually embrace more women working. and so that-- you know, it's so basic but it's so key in that

sense. i love what we've adopted as 10,000 wilin terms of those directly trying to help women in many emerging parts of the world develop a business mentality and to be able to run businesses. i think it's very exciting very exciting. >> rose: the empowerment of women i think will be one of the great stories of the 21st century. and, clearly, i don't know where all the push-back is, but it is clearly because of the consequences it has, because it's 50% of the population. >> of course, fantastic thing, fantastic thing. >> rose: you would not want too forward, i would think, if you were in any society, with part of the population not contributing their own i.q. to the problems at hand. >> i mean, to me it's common sense. >> rose: yeah. it's always great to have you here, my friend. >> thank you very much for having me. >> rose: it is always. jim o'nel is the chairman of goldman sachs-- that's right goldman sas asset management, one the creators-- or the creator of the ideof bric

countries. the book is called "the grow map: economic opportunity in the brics and beyond." jim o'neill. thank you for joining us. we will see you next time. captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org