Davos 2015 - The BBC World Debate A Richer World but for Whom

for the next hour on BBC World News we're live from Davos in Switzerland for a special BBC World debate and we're talking about a subject much on the minds of those here inequality after the financial crisis of 2008 many people hoped a more equal world would emerge that we might see a fresh start reform of the banks a narrowing of the gap between rich and poor and it hasn't quite gone to that plan the richest 1% in the world not only have lots of power they're said to still own nearly half the world's wealth so today we're asking a richer world but for whom I'm joined by our panelists two leading policymakers Christine Lagarde from the International Monetary Fund and Mark Carney governor of the Bank of England we're also joined by two chief executives of companies with branches all around the globe Sir Martin Sorrell and Klaus Kleinfeld and also Robert Shiller okay economics Nobel Prize winner and from Oxfam international Winnie Bieniemy but first the latest news from David EADS in London two-minute news summary then we bye yeah okay okay good good thanks fella I can't hear David EADS you're just going to take you but it is David EADS I'm hoping okay David thank you well welcome back to Davos I'm evan Davis we're live for the next hour to ask whether reward whether we're all in it together at a crucial time for the world economy to the rich deserve their riches would any kind of reform improve things and technology is it entrenching economic power or dispersing it lots to talk about joining me here at the annual meeting of the World Economic Forum in Davos first to policy makers who are both publicly accountable Christine Lagarde whose managing director of the International Monetary Fund Mark Carney governor of the Bank of England other panelists include Martin Sorrell who's chief executive of the global advertising group WPP Winnie be an Emer executive director at Oxfam international Klaus Kleinfelds the chief executive of Alcoa a global company and metals technology engineering and manufacturing and Robert Shiller who's professor of economics at Yale University and a nobel-prize co laureate in economics ladies and gentlemen let's welcome our panel well you can tell we have a large audience here with us a business political and civil society leaders will be taking comments as we talk from Twitter so tweet your thoughts whether you're in the room or out there use the hashtag BBC World debate now first let's just get out of Davos because we went onto the streets of India Spain Brazil in the UK to ask people out there what they feel about the gap between rich and poor here's what they told us well I I live it well in my country but I realized that there is a lot of inequality and we have to improve with the opportunity to all but some people scraping at one end trying to just make 11 in no more and other people that have enough money to go and buy paintings a half a million pound this is not fair we all can see that rich are going going to be more rich and the poor are getting more poor it is very frustrating obviously we share the same planet we share the same city the same country so equality should should come with the kind of mentality the kind of tradition the kind of culture you're sharing not with what area you put up in or what car you own inequalities is rising because of two things unemployment basically a huge amount of people unemployed and the one the ones who have the opportunity to get employed they have ridiculously low wages I think it's mainly the government birthing is also businesses to rather kind of not looking into this old boys club of all the kind of top sort of elite people have have all the opportunities it's like actually opening it out to a much wider field also the banks have not been transparent probably their low regulations were not helping and governments definitely and they've they've stolen a lot from the from the people look at all these candles that we can hear about if only this money could be reverted to actual education infrastructure and truck even transportations is a problem because kids can get to school they can get to at work I think in the government could there could levy the tax he's a little bit better that the rich should be tastes a bit more and above that should go to help the poorer people with it and they need it well some public views that are raising many issues we'll get to in the next hour and I think showing this is truly a world debate well let's get a response first from two important policymakers I think it's fair to say neither has a background that makes them cheerleaders for a revolution but both have expressed some concerns but the direction the world has been taking christine lagarde let me start with you because the International Monetary Fund used to be thought of as a giant force for conservatism and then last year a bombshell it published a report a working paper that said lower net inequality that is more equality is robustly correlated with faster and more durable growth that you get more growth in a more equal society it's a big change right yes it is a big change and I'll never forget the skepticism that I met when two years ago after having given a speech here where I raised the issue of inequality and climate change some of my kana mists and quite a few of my board members around the table said this is not mainstream you know this is not core business for the IMF and I have to say that now it is mainstream and I was very pleased to see that many of the IMF economists actually embraced the project and produced several pieces of analytical research and if I may I would like to just mention three points that they made number one what you just said that is excessive inequality is not conducive to sustainable growth strong correlation number two they're finding that distribution per se matters in other words if you increase the income share of the poorest you get a multiplying effect that you do not get if you increase the income share of the richest so it is good for the economy it is good for growth there is a multiplying effect that you find in that dimension third factor redistribution policies are not counterproductive for growth and that is not that was not conventional wisdom it was generally accepted on the odd you know to the contrary that redistribution policy was not necessarily good for growth so on these three fronts they're saying you know inequality is not good for growth inequality in my view is not good for women because that's a particular inequality that I'm especially concerned about the gender inequality just give us what's underlying now what is the reason why very unequal societies can damage their own economic prospect well you see the correlation between sustainable growth on the one hand and high and increasing inequality why well it's a factor of this multiplying effect that I have mentioned it's a factor of people not being integrated into society and it's a factor as one of the persons you know on your little film said jobs jobs employment our critical points to to really improve upon we'll get a plenty of these bit of time to follow up all this mark carney governor of the Bank of England now you want in a speech last year pretty interesting line actually just as any revolution eats its children unchecked market funder length fundamentalism can devour the social capital essential for the long term dynamism of capitalism itself just elaborate on that well I think one of the things that's happened is that we went through a period in the run-up to the crisis where belief in market and market solutions extended to all most aspects of not just economic and financial policy but many aspects of public policy so the the marketization if you will of a social policy public policy what was lost and there was a lot of good in that but what was lost in that was the importance of social capital and this is something this is not new that we need to recall the importance of social capital Adam Smith to Hayek to others understood the importance of shared set of beliefs and a sense of trust and shared value in the system we'd undervalued that it was masked for a period of time I know you're going to talk about globalization and technology later but globalization and technology magnify market distributions and that was mass for a period of time through some good financial innovation but also some misguided financial innovation which allowed consumption to continue to grow even though income didn't grow in pace Robert Shiller drew attention to most of this and the point being that in the words of one of my colleagues at the Bank of England it was it was a policy of let them eat credit for a period that masks these differences so we're in a situation where we've had to start to reinvest in that social capital to maintain the dynamism of capitalism but to rebuild the trust in the system and reorient towards a longer-term perspective and I hopefully will come to some of the medicine well that's a very important statement of the kind of shift in the intellectual climate over the last few years well we're dividing this debate into three sections I'll introduce them as we go along but to start off I want us to talk about the rich that 1% that owned maybe half of global wealth or even more importantly that nought point one percent who have done so well in recent decades and for this first section I want us to ask what are the rich ever done for us ask yourself do you think they put more into society or take more out are they producers or predators obviously your view on this will determine your view of inequality to some extent here first of all our two voices from business capital isn't better than any other system enables people as Lincoln put it to improve their lot in life people don't mind the late bill that the later Steve Jobs got rich or the Bill Gates has tens of billions of dollars what people want is the opportunity as Lincoln put it to improve their lot in life the abra have the opportunity to move ahead when free markets are allowed to operate with sound money sensible low taxes sensible regulation people do move up I think is very important in all the debate about inequality that we do not demonize the wealth creators do not criticize them relentlessly as fat cats or as the plutocrats because I think that a society that demonizes capitalism and wealth creation is doomed to a lack of investment and a leakage of talent and will suffer the economic consequences of such an attitude so to pro rich views there and two propositions underlie the views we've just heard first at the rich that they do good to the world and second that they need to be rewarded for that or they may not do that good let's focus on those ideas essentially whether the rich give us value or not in winny being yama i want to come to you on this do you essentially see that 0.1% an Oxfam have made quite a lot of about their their wealth do you see them as producers or predators of course they are producers of wealth but the issue is about political capture that extreme wealth takes over the process of public decision-making the rules of the market and the rules that govern society becomes skewed in favor of the extremely wealthy and that's why you get unchecked and controllable rise of inequality let me give you an example in the United States alone the financial lobbyists spent four hundred million dollars in 2013 lobbying influencing political and economic decision-making they spent five hundred and seventy 1 million dollars in campaign contributions in the 2012 election here in the EU a hundred and fifty million dollars spent in lobbying the the European governments and the European Union this is about shaping the rules of the market in their favor in an ideal situation we would have all people shaping the way the economy is governed and societies governed that is the problem that extreme wealth results in political capture and then from their own public decision-making is in the interests of the wealthy so wealth entrenches wealth even if there's no merit to it some artists sorry I just want to get a little bit more balance into the debate and we got we had Steve I don't know whether Steve all this is balanced or not we have that Lukas more about balance so I make no apology for having started the company 30 years ago with two people having 179 thousand people in 111 countries and investing in human capital each year to the tune of at least 12 billion dollars a year so there's I make no apology for that work whatsoever the other thing I want to say is this over the last 40 or 50 years we have seen significant improvements in the number of people that have been taken out of poverty in the number of people that have been put into the middle class and people use that phrase and I find it somewhat objectionable how it is used and the definitions whether you look at the World Bank when you look at others whatever the definitions are certainly billions of people in emerging markets what we call fast growth in markets are in that that clock and have come in to that class Gini coefficients have improved significantly since 1960 these are the measures of inequality since 2000 they've gone backwards marginally but they have significantly improved and finally it's not it's not well publicized even by organizations such as Oxfam for whom we work right but in The Lancet for example for in The Lancet for example in the last 30 days would be very interesting art about the number of diseases and reduction diseases and reduction in the years of lives lost which has been very significant again in the last 40 or 50 years so we had made improvements the question is have we made sufficient improvements as we get into there are two things I just want to say funny one is the World Economic Forum which some has done some very interesting work on what needs to be done in terms of categories to improve equality by the way Christine it is not proven that equality eat the reverse of what you said is true that equality drives growth eg Venezuela right not the second thing is the second thing in terms of employment in the private sector we are in a low-growth trap companies are not increasing employment we've talked about this before mark there's a slow growth economy there's too much focus on cost not enough focus on expansion on growth I take that there's seven trillion dollars to win his Boyd sitting on balance sheets on the uninvested I'm going to win e quickly quick reply to Martin yes no honestly since the financial crisis we're seeing rising inequality the gap between the rich and poor is widening very fast last year we issued a report awesome issued a report that said that 85 richest people in the world own as much wealth as the bottom 50 percent this year the figure has come down to 80 the rate of growing inequality is not on the bottom the bottom and we're very large number of people oh nothing at all so we may have well that people who have nothing so these will even have a tiny bit of wealth have more than the bottom so you know in human capital yes that's another thing but but and we know the reasons you know the reasons we know that many wealthy companies and individuals are not paying their fair share of taxes there's a global tax system that's leaking we need to fix that I want to go back to our two chief executives here because when he made a very important point and we've had it on Facebook too in Charlton from Australia the rich make the rules he says they pay less tax they own the media they influence elections so we need to get rid of them it's a sentiment sentiment plenty people have look maybe the clothes my my he be one of the interesting arish we did one of these areas one of these areas where inequality that has driven some engrossed in it in inequality in developed countries has been growing chief executive salary now isn't this an area where the rich make the rules and then pay themselves a lot so Klaus I want to ask you a very specific question you've got a great job right and you're a huntsman yes would you do that job for half as much I don't know I never intended to in my life to to become a CEO I mean my life got me there and and apparently people thought I'm good at that but can I actually go back because I got some numbers here now because I think I think it's important that we are not throwing out the baby with the bath tub because I think that we are kind of tempted to debate it in the current context but in reality I think we have to analyze the data and the facts what and I'd looked it up before this debate what Martin just said the global emergence of poverty I mean people live it being living in poverty the share of the world population living in poverty 1820 94 % have been living in poverty 1950 72% 2011 which is the last number I could get hold of 14.5 percent right so middle class defined by 3000 to $900 purchasing power parity and 18 22 % of the world's population were in that category in 1950 23 percent right and 22 2010 50 54 % I come to that but I do you know what I do want to just I like the direction about a recent phenomenon and I think we have to be careful to analyze it as a recent phenomenon and I think we have to stratify it with a timeframe of a recency and think what happened there what changed in this enormous wealth creation that we have been generating through basic industrialization and and and globalization and the second thing is it's very different that we have to be careful that the debate is not focused just on the West but also on the rest because I think we're seeing very different phenomena also when you talk about measures what's happening in the Western world and what's happening in the rest of the world 3 I would answer pay-for-performance that come back to the CEO question pay-for-performance if it's pay is there pay for performance yes ok nitrogen I hope I do want to bring Robert Shiller in this case a Nobel prize-winning economist wrote comment on what you've heard so far the proposition the inequality problem is been around for millennia and there have been efforts to deal with it tithing is in both the Muslim and Christian religions there's there's a lot of history to this it's a complicated problem as you were saying a different side here as you were saying the rich can dominate and they can be obnoxious sometime in defending their interest on the other hand we have to give incentives to - and you our class are exactly right the capitalist you're not the first person to make this observation it's known all over the world that's why a lot of formerly communist countries are embracing market solution and I assume you agree and basically so it's a subtle problem that we have of trying to create rules and institutions that inspire bet you do it for half the money by the way come back China China is state-directed capitalism the Chinese ironically paradoxically have chosen a system post things helpings famous speech in 1985 to stimulate the growth of middle class through state direct the capitalist Mark Carney make so let me just bring mark carney mark carney I mean you work for Goldman Sachs and we're hands to be paid there I'm sure what what is do pay is Zarafa is there a feature of the world that means that we're more keen to cut costs for people at the bottom of the spectrum than people at the top of the spectrum IP there there are technological dynamics which we'll get to I think later on which are keeping lower skilled wages flattered than they would otherwise be okay so I think we should recognize that let me a couple points first this this point about reduction in poverty absolutely essential hugely important but that is a global that is a process of global globalization and its convergence across countries that's good news in virtually every country including those countries that are growing those big emerging markets inequality is increasing and increasing quite dramatically so this issue is an issue it as much an issue in China as it is in the UK for example and in terms of this these questions around the structure of wages and where where opportunity is found to reduce cost the returns to skills are magnified in a globalized economy Steve Jobs brilliance is applied globally as opposed to locally and that changes the returns and those who those who work within the skilled jobs there and so we recognize those dynamics we should just recognize those dynamics is nothing wrong with those dynamics but then the question comes in you know the the common theme of your interviews on the street is about equality of opportunity or opportunity for all when one man put it and so it's how within this structure and as the system evolves do you maintain that equality of opportunity christine lee when he made a stronger point though which he was saying that the rich set the rules implying that they are somehow over rewarding themselves by setting the rules for what they had delivered now do you believe that or not you have different forces here and and I think the answer will will depend on whether you're in a democratic environment where people have a voice have a vote and where it is counterbalanced by this excessive power of conviction that is not in the ballot box but in the wallet right so all these as you know has to be looked at on on on a per democracy or per other regime basis that's one second I confirm what I said Martin it's I didn't say that equality is conducive to grow I said excessive inequality is not a good for sustainable growth that's what our research indicates but I think we should also look at what can be done about it because there has been a worsening of the situation particularly since the financial crisis and we have to look at why that is we're going to do that in a minute we're going to come to if I can just say why that is you have had a massive increase of wealth caused by an increase of the asset prices under the current circumstances so I think we have to distinguish between the income disparity the wealth disparity and for each of those two we need to think about what can be done about it in order to reduce the excessive inequality that hamper growth that hamper jobs and that prevent women from accessing the economy just to finish the section winning I want to ask you is the question at the Steve Jobs question if all that point one percent were kind of Steve John Tyson characters well Steve Jobs is more than the top one percent uh if there were all Steve Jobs type people would you feel any problem with global inequality and there and that busload of people who owned as much as half the world ok when we put out these statistics we we we are trying to show how a trend we are not trying to say that this 1 percent or 0.1 percent are the bad guys to focus on this is not about who flew in here on a private jet and who did not what we are talking about is that the very wealthy all over the world can buy for themselves longer healthier happier lives while poor people at the bottom are trapped and their children are trapped in poverty for generations if you take the level of inequality as it exists now in the United States for example a child born in a poor family will become a poor adult so the American Dream is just that a dream it's not true because of the level of extreme Inuk of inequality so what we're talking about here is that there are solutions and we want to focus on those solutions the things that have worked that reduce economic now look what we've seen so far this is it's quite hard to trap people into binary position on the yeah the value of the value of the rich but I do just want to do a show of hands in this audience which could probably not be less typical of the world outside but I do order just to get the sort of the mood of the meeting look let's just do a little sort of show of hands of whether you think that the top not 0.1% are net contributors to the world they're kind of if you like the Steve Jobs types or whether they're net extractors they're very clever people who invent spurious financial products and take out very high salaries how many of you here would say their net contributors how many of you would say their net extractors of value from okay I would say that was about nine eight to one in favor of the contributors so the mood of this meeting that they are net contributes well let's move on everyone's been saying we need to talk about what we do about it and as we've heard for all the gloom about inequality global capitalism has been doing something right it has been lifting people out of poverty according to the World Bank the proportion of the world living below a dollar 25 a day has gone from 36% back in 1990 to 15% today so you might ask do we need to reform that system well we asked one Laureus of the Nobel Peace Prize Muhammad Yunus he's the man credited with inventing microcredit why we should care about reform nothing has changed before the 2008 crisis and after the 2008 crisis we only took time to get back to the same old thing that we left behind in 2008 so we are back in pre 2008 institution didn't change policies didn't change nothing has changed just a sad thing because we thought this financial crisis will teach us a lesson that we have to redo things we didn't redo things we are talking about a banking system financial system is very much biased towards the rich people so as a result of the way human being has been interpreted in the economic theory economic structure that we build around us became a sucking machine all it does such juice from the bottom and transport in the top so that's unacceptable and it will get worse it will not get better it will become a big big crisis the whole society will explode at one time seeing what has happened all the wealth of a nation any nation will be the hands of a few people and other people will be just lying there trying to struggle for making ends meet that's not something we have learned from 2008 so now we have to go back and redesign the system there is no option than doing that views of Muhammad Yunus there we actually had a tweet from Eric Previn he says you can debate the numbers all you want people perceive the world as being unequal so not solving it will spark social unrest so what we want to do about it let's have a think about reform and whether it will achieve much this is a chance to talk about tax and similar issues um take us away how radical would you be Bob Shiller well I've written four books about this I feel these as complicated problems first of all who are we Muhammad Yunus referred to we are there's a fundamental thing called civil society and it has developed it it's not entirely your winning you're right that but we about unequal power but we still and I'm not sure we all understand how it works but even the rich can be shamed out of pursuing it too much ultimately we do campaign law somehow these things happen they're not perfect but we move ahead but now do you want me to talk about my particular proposal I think I think that it is so complicated and there's such a long history I think we should be generally happy that inequality is not worse and and but but we can I think you're right Winnie Oxfam is doing a good thing to draw attention to these problems so can i what we're a karateka Jupe how radical would you be in reforming the current global economic system there's apparently there's some perception that it's not working for everybody well I think I think of myself as a radical but not in the Communist side I believe that it's a problem of economics it's a problem of risk management it's a problem of incentivization and it's a political problem so what I like to think of is going toward the concepts of the financial and economic theory and based on also our knowledge of human psychology and human instincts about fairness people have very strong emotions we have to design institutions so give us an example give you two general categories that I talk about in my book but but they don't solve all the problems so complicated one thing is improving private insurance we have disability insurance that helps I want to give a s for appreciation of what insurance people do disability insurance is a huge factor of reducing inequality okay we can improve disability insurance by making it cover livelihood risks of a much broader nature and then I want to give us your manifesto we've had we've had one one idea and I just want to hear some ideas and then we'll put them to our other Globo tax reform Oxfam estimates that there's 18 trillion dollars stashed out somewhere in tax havens that's not being taxed that's money that could be plowed back in the economy to create jobs and to give opportunity to poor people to lift themselves from poverty so fixing the tax systems to reduce tax dodging and to tax progressively that's one we also know that giving a minimum wage lifts reduces inequality significantly Brazil did it it increased the minimum wage by 50 percent between 1995 and 2011 that considerably reduced inequality and lifted people let's propose to our chief executives Klaus and well I think what's what I think a bit of what's missing in the current debate is I mean we dry Versailles mean we're always referring to times I mean after 2008 as though nothing else has happened and my view what's missing in the debate is there is a gigantic new factor and that's technology and the way technology changes changes the world and it is in it in a speed that we haven't seen before it does good things you know for we're gonna talk about I just want the tax you start on the tank side well I'm not the expert on the tech side to be honest you know I leave it to to Marty so did you meet your colleagues island your poll just proved that turkeys don't vote for Christmas second point cheap cheap money has driven the acid appreciation since Lehman in 2008 so central bank policy has ruined we got another dose of it yes three what happened our share price went up three percent did things change fundamentally was there structural reform in Europe no the third point is when I left University many many years ago what was the fundamental tenant of economic policy it was full in Berlin there was think all the Phillips curve which said what's the level of inflation of full employment today it's the complete reverse six-point plan and I take liquid Rick's announced in human capital ie education employment and labor compensation entrepreneurship and investment corruption and concentration of rents fiscal transfers about equalization of taxation and basic services and infrastructure both hard and soft that's a-ok well you've done that you've done the job that we Jonathan Ferrand from Jamaica asked you to do which is you want to hear from the rich themselves how they would make it better for the poor you've given us a lot to chew on but you mentioned monetary policy driving it I did want to ask Mark Carney you are a central bank governor firstly for a comment on what happened yesterday at the European Central Bank and didn't does the whole issue about quantitative easing has that actually been playing pot some role in this particularly the distribution of wealth well all first thing welcome the steps that the ECB took yesterday absolutely necessary to preserve the prospects of medium-term prosperity in Europe but as Martin indicates that this doesn't deliver medium-term prosperity it just it creates the conditions for it first point secondly some of the necessary conditions secondly all monetary policy as distributional consequences we lower interest rates it helps debtors at the expense of savers questions of distribution are rightly the province of elected governments that their societal questions they're not quite for central bank's third point if I may what's absolutely crucial is that we have inflation in the right spot inflation need I remind you hurts the poor more than anyone else the poor use cash they can't hedge themselves they don't have access to any form of insurance hurts them more than anyone else and deflation which is one of the bigger risks at the moment globally will hurt those who are indebted those who became indebted in the run-up to the crisis those who didn't see their wages increase in the run-up to the crisis that will make the weight of those debts that much worse so getting this right whether it's the Bank of England or the ECB in order to deliver one of the necessary conditions ultimately so that governments society civil society as a whole can address these broader issues okay we have a window of opportunity the price of oil has gone down significantly and probably for a period of time now is the time to actually remove the world over the subsidies to use of energy you have doormen they're two trillion dollars if you include the sort of damage caused to the environment as a result of extensive use of energy so you remove those subsidies to trillions you put 1 trillion on job creation that is you reduce the social charges on job creation so you accelerate that and you put 1 trillion on education and you particularly focus on women to trillions available you split them in half other option that you can also consider as well as the subsidy removal is Financial Inclusion critical to make sure that people actually have the benefit of financial social financial inclusion and a lot of corruption actually can disappear by the same token can i before we move on I just want to say a couple words on financial reform because I don't think it's a fair characterization two thing to say nothing has changed since 2008 but we have we're working to recenter finance as a servant of the real economy it's its rightful role they financial institutions may have spent a lot of money lobbying they wasted a lot of money lobbying capital requirements for financial institutions for banks have increased ten times since the financial crisis we have worked to put in place mechanisms to end too big to fail perceptions matter one of the big issues is the fairness of the system as group Oxfam rightly draws attention to this in their report but the subsidy there has come down and it's a subsidy this implicit subsidy from us to banks come down from about 130 billion in the UK sterling to about 30 billion today we're looking to eliminate it by changing things the other aspects that have to change though is the effectiveness of markets the fairness of markets allusions to the scandals I think in your initial element and there's some reality there and part of the way we get at that goes to your pay for performance which is performance in all senses of the word not short-term returns but whether there's excessive risk-taking and very importantly whether conduct is appropriate so we're putting in place new structures for pay so that pay can be taken back from those who took excessive risks or certainly who contributed to any of these types of scandals and that's essential to get fairness back in the system to build trust it's not as Bob Shiller said it's not all the answer but it's part of the answer well I'm I'm encouraged because we've had a loss of ideas we've had financial reform talked about we've had a very specific idea about insurance which would help those at the bottom end we've had Martin Sorrels six-point plan rick samans donation I want to come you see this fifty percent at the bottom that we talked about that has the same wealth as the 80 at the top who are they they are modern ninety percent of them are people in Africa in Latin America in some Asian countries they are from poor developing countries and who is a 1% seventy percent of the 1% are rich people in the northern countries now if you look at these developing countries they are also the same countries that are exporting commodities many of them and we know that a hundred billion dollars is lost to these countries every year through tax dodging and unhealthy tax competition so unless we fix the global tax rules so that these countries can collect what is due to them they're not going to be able to lift their people out of poverty so we need to fix the global tax tree Christine to God you might be have a role in that coordinating things potentially going what you actually we actually do and we provide a lot of the developing countries with technical assistance in order to reform their tax regime in order to improve their collection of revenues and in order to be more transparent about the relationship that they have with the purchases of those commodities because there is leakage there is base erosion there is profit optimization going on that often is detrimental to the low-income countries that are providing those commodities but it's not you know I would agree with Professor Shiller it's it's complicated it's not it has to be done it has to be improved but it's a complicated matter and there are no sort of you know black and white solution it has to be really done properly but to win his point through to 2030 the rise in the middle class in the BRICS despite some of the current difficulties short-term difficulties I believe that some of those bricks have the the forecasts are that the middle classes and poverty level middle classes will rise poverty levels will fall and general wealth of all the problem will be not so much in those fast growth markets and you saw it a little bit in your film clips the problem all will be in Western Europe in France and Italy in Spain because that's where the unemployment particularly youth unemployment is so high and ironically that's not going to be the issue in by 20 and 30 oxalá I think Martin and Winnie are both doing good things in different spheres you are helping produce wealth you are helping deal with a fundamental human problem that if I don't see for poor people I blanked them out if you walking down the street found a star anyone here I assume walking down the street found a starving child you would help but you know there are people like that to help but you don't see them so what Oxfam does is it brings that to our attention and I think it's a force for the good yes one out of nine people in the world today will go to bed hungry tonight that's not right it shouldn't happen 1 billion people still live on less than a dollar a day that shouldn't be we can't just keep saying that there's a growing middle class when there's 1 billion people in a world full of riches that are hungry and a living desperate life but winning what what is the what do those figures mean to you about the very large reduction in the proportion of the world living in poverty I mean do you recognize that that is a system that needs to be preserved and just nudged or do you see it as a system that needs to be overthrown does it not no I'm not ideological not against capitalism or even against communism I'm just looking for solutions that will give everyone in the world a decent life and we know there are solutions we know there solutions in fair taxation and spending if that can happen if we can have a global system of rules that enable that that will help us if we can plow resources into education and health we know that works that is a virtual income to the poor it lifts people out of poverty we want those solutions Klaus Kleinfeld you said you're not an expert on tax how big a part does tax play in the business decisions that you make if we put taxes up on your company would it damage the output the employment all the things we might like a core just celebrated as hundred and twenty-fifth anniversary last year you know in many of the businesses when we invest we stay there for the next hundred years I mean we make decisions today that impact communities over a very very long term I mean tax policy usually is very very volatile if I make a decision and base it poorly on tax policy I would not do a little job to be honest and say it does influence it very significantly so to win his point to get change you have to have coordinated policy it can't be a race to the bottom I mean for example in the UK one of the reasons that UK economy has been so effective and efficient and George has done such a good job as CFO the UK economy is because the tax rate is internationally highly point it has to be competitive and I think we're talking about a flat world and a flat world what what you really have to do is you have to have a tax policy where you have a level playing field house in America the US companies complained their tax rates are too high and that is true let me say this very briefly for the companies here that I come to tell to give them uncomfortable messages if pharmaceutical companies are putting 50 million dollars every year here in Europe to lobby what are they lobbying about it's mainly about taxation it's so that they can get away with literal taxation so they let them stop lobbying why must they keep lobbying okay let him put the money in medicine get some that's it we do need to move on we've gotten so much to talk about we've had lots and lots of different ideas not from the debate on equality is forward by the fact that we don't hear very much about what one might do about it we've had plenty to go away and chew on I want us to move on to a brief final section here to talk about whether our system is in extra be driving us to more inequality or potentially less through technology so here's the basic question is the internet and all that goes with it is that a force for redistribution or for allowing the haves to have yet more now we asked Tim berners-lee who's the inventor of the world wide web for view and he warned that a large chunk of the world's population is being left behind to a certain extent the original vision of the web was that it should be something where individuals citizens consumers participate the web seems on the face of it to be a tremendous equalizing measure and it's often hailed as being something which breaks down national boundaries allows anybody to connect so let's think about that for me well first of all when we think about anybody can connect actually a minority of people around 40% of people in the world use the web at all so for the other 60% in fact every time the power of the web increases every time it's possible to do more things online they're actually those 60% are left further behind so it will certain extent while the Webster only available to 40% of the people in the world it is increasing the the gap between they have the haves and the have-nots Tim berners-lee there will the web obviously has some beneficial effects in reducing concentrations of wealth empowering increases competition it improves education and the transmission of information but it might give more help to those who have the best access and of course it does threaten jobs and disruption often to those already struggling so good effects and then bad for the next five minutes and Klaus Kleinfeld I'm interested in your take on whether technology and the way it impacts say your company whether that is if you like diffusing economic power or whether that's concentrating and the answer is have dust both I mean in a way technology has really made the world very flat that's it's a digitization of things right I mean Marc Andreessen said software is eating the world and we see that we see that everywhere I mean you I've also pulled up some data here on also on the rest of the world I mean if you look at mobile cellular subscriptions I mean from 2005 1.2 billion of people in the rest of the world has exit nodes 5.1 billion people and when you look at what happens when farmers get their hands around simply a cell phone that has access to market information I mean the average income increases Srilanka 23% India 19 who Gondar 15 through 13 so that's great when you go to the to the developed world you see another phenomenon you see for instance if you pick out the job of a call center which can be done as we all know anywhere in the world I mean the cost of that is is in the u.s. it's 81 thousand dollars a year and in years forty three thousand dollars a year so guess what's going to happen right so it's clear it's gonna attest ballsy sex Bob Shiller I think we're living at a time of panic about artificial intelligence not just the internet think of it more broadly and and I think we're panicked by new things that are scaring us about our in the future Siri came out in 2011 it's about four years ago with a with a cell phone that talks answers your questions I now have one I turned it off in my pocket but I could say ok Google what should we do about inequality and a voice would come out of my pocket that would join into this completed price is yours that Robin so the point is and people are scared and they are right to be scared we don't know where this is going artificial intelligence is coming and it will replace your job all right well these bring you in combinational it's not only your division I mean it's 3d printing robotics we see in the Alcoa manufacturing process we don't know to Robert's point and we don't know in our industry to how much how many jobs are created or not one point I hesitate to disagree with berners-lee Tim berners-lee but take Egypt for example which we're discussing last night 44% Internet penetration 115 percent penetration on mobile the difference is the smart phone China 475 million smart phones the difference is the smart phone shall me 45 billion dollars of value after four years these things are changing forever a Grameen Bank built on the those telephone women that rented out phones mobile technology is fundamentally changing away and altering supply chains and legacy businesses in a very threatening way okay we've got a tweet making the point the robotics lead to capital intensive productions and then unemployment and tech thus drives inequality winny are you as pessimistic about technology as that no not one the potential of technology to give a good life to everyone lifts people from poverty is enormous we work in many countries around the world using technology to help poor people find solutions one of the proudest project one of the projects I'm proudest of is a project that gives young people post-crisis coming out of war in northern Uganda tunity to access global markets through the internet doing some outsourcing work for companies in America that's great but we have to understand that today people are dying from Ebola there's no vaccine for Ebola malaria is still killing millions of people it could be treated and why because it's an over-reliance on intellectual property for for research and development in technology if we can put research and Technology more as a public good and have investments by governments for the development of technologies that can empower people then we are on track but when it's driven by private interests and intellectual property rights it doesn't lift people from wrong I think you've been a little more pessimistic than I was expecting about technology for - let's get the mood of the hall here let me just ask a very simple binary question new technology is it going to create jobs over the next 20 years or is it going to destroy jobs over the next 20 years how many of you think it will create jobs and how many of you think it will destroy jobs I would say that was about 3/4 1/4 how many don't know 3/4 we have in time for the don't knows Martin's 3/4 think it will create it will create jobs ok let me go back to my because we are tight we are now sort of wrapping up first of all Mark Carney are you pessimistic on technology because of course technology in the past has tended to create as many jobs as it destroyed no I'm an optimist on technology I'm not a secular stagnation ax stiff you will in that in that sense of the word but the disruption element is is very large here and there will be a period of adjustment and so picking 20 years is actually quite helpful if your question was in the next five it'd be much more difficult make a couple points on technology first we should recognize actually some of the biggest the firms that take most advantage of international tax rules are technology companies the amount of tax that's actually paid by technology companies is very small relative to the return so that IP and and so a sense of responsibility for the system I I would point to that to two final points on technology the first is that as Robert Shiller alludes to artificial intelligence it's not even just the intelligence it's actually the algorithmic power of the ability to for technology to displace very what we see as cognitive jobs today but actually everything I did at Goldman Sachs actually can be replaced by technology which tells you something which is why I had to leave and there's some we think everything I do today would be better that's replaced by technology but the the point being that in that that disruption a series of sort of quote white-collar middle-class jobs people have to improve their skills to move to the higher creativity jobs a lot of them in the interim this is the job polarization point compete they're over skilled for the jobs they compete and that helps keep wages down so the issue becomes how do you have education how do you have lifelong learning how do you have training so you for a world where we're actually creating an opportunity for mass creativity those are the types of jobs will ultimately need but it's it's going to take a while to get from here to to there we've just got 90 seconds left I want but if I wrap up the whole debate with you christine lagarde um it feels like there's been a big shift in the intellectual climates in the last five or ten years we talked about that at the beginning do you think there's a political will well grab some of the issues that we've talked about perhaps think about do some of the policies that we discussed you know if I can move the IMF in the direction of looking as at inequality as main main stream and core business if the Republican Party in the United States is now looking at inequality as an issue as was reported in The New York Times this morning then certainly there is a shift and we have to take advantage of that shift in order to make sure that what is excessive becomes sensible reasonable and conducive to good creation of market value to good creation of jobs and to a bit more fairness around the world twenty seconds were you excited by President Obama's State of the Union message on Monday you can implement half of it yes and the tax stock the type stuff half of it yes all right well look we've had a very interesting debate sometimes these issues are always far more complicated than you'd like them to be far more complicated in the public would like them to be but we do now need to bring a close to our debate today of course the conversation can continue you might want to follow up some of the points you've something you heard you can continue the conversation online in homes and in workplaces around the world but let me say a very heartfelt thank you to all of you who've contributed your thoughts and questions there's some more tweets I could have read thank you to our global audience around the world on television radio and online and of course above all thanks to our panel here but that is all from the world debate in Davos from me evan Davis goodbye

Channel: World Economic Forum

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Keywords: world economic forum, WEF, Davos, Davos2015

Id: 9Zuk9Huqdrg

Length: 57min 14sec (3434 seconds)

Published: Wed Feb 04 2015