16/05/2012 Newsnight


In-depth investigation and analysis of the stories behind the day's headlines with Jeremy Paxman.

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As caretakers jobs go, it is quite a big one, run the country for a


month until we can find someone else. The political mess in Greece


may be resolved in new elections next month. Fears of cash pouring


out of the country in the meantime leave it in an even more uncertain


position. So, this was just a warm-up for the


swearing in of another Greek Prime Minister next month.


Greek prime ministers are none of our business, but if the Greeks


decide they have to leave the euro, it certainly will be. Germany's


Deputy Finance Minister remains bluffly confident it won't come to


that. When the governor of the Bank of


England, says as he said today, that the eurozone is tearing itself


apart, he's just wrong? We are a free country, a free Europe,


everybody is free to misjudge the political will of the European


Union. But if the citizens don't like it,


how can Governments get them to take the medicine. Is the wisdom of


crowds that you can't cut and grow at the same time actually right?


The Chinese age quake, they supposedly restrict families to one


child. So why are they running fertility campaigns, encouraging


women to conceive. How do ideas people have in the


bath get to become political policy. The President of the EU bureaucracy


did what the union usually does on these occasions and said today they


would respect the democratic will of the Greek, but wanted them to


remember there were 16 other democracies in the euro. No


suggestion of pressure, then. The fact that such a vast chunk of the


Greek population wants to stay in the euro, but doesn't want to pay


the price demanded for doing so, led today to the equivalent of Mr


Justice Cocklecarrot being sworn in as the interim Prime Minister,


until somebody else can be found who might form a Government after


elections next month. Nobody is paying in this country,


they steal money, they eat money, the politicians and them, they live


and nobody goes to jail. Never tell a taxi driver you are going to meet


a politician, it always sets them off. But in Greece, five years into


an economic crisis almost universally blamed on a supposedly


self-serving elite, the Athens cabbie seems to speak for the


nation. The people are very angry, they want to punish them. You can't


take the money from the pension of an old man and all these people


with billions of dollars not to pay anything. This is unfair, of course.


Today, ten days after inconclusive elections, the President of Greece


appointed a caretaker Prime Minister, who can't be punished,


because he's not a politician, but a senior judge. He and his new


technocratic cabinet will govern for one month, until voters are


asked their opinion again on June 17th. It has no clear mandate to


make binding deals with Greece's cred ditors -- creditors, or stop


the cuts they are demanding. It is at the banks people are spreading a


fear, which the head of state says could turn into panic. Greeks


withdrew 700 million euros in the weeks during the election, as they


contemplated a return to their old currency, the drachma. With the


current uncertainty, who wouldn't rather have their euros in their


hand, available for use across the continent, rather than leave them


in a Greek bank and risk them being stamped as a transitional currency,


or even worse, as some fear, forcibly converted into drachmas,


which will probably then lose most of their value. The liquidity


crisis is growing, meanwhile further installments of bail out


funds from the European Union and the IMF, are dependant on further


austerity, that voters have rejected. Soon there may be no cash


to pay Government wages. TRANSLATION: According to the


Ministry of Finance, the money available will last up to the end


of June. Families are afraid at the moment, they are taking their money


out of the banking system. This is the big danger. That is why we need


political stability so badly. the party leaders who failed to


come up with any workable coalition can't provide that stability. Among


them in talks with the President today, Alexis Tsipras, leader of


the radical left grouping, Syriza, which came an unexpected second in


the last election, and some think may win next time. Today, in a BBC


interview, he was again defiant in rejecting the terms of Greece's


bail out. TRANSLATION: Throughout Europe now the citizens understand


that the disease of austerity, if it destroys Greece, will spread to


the rest of Europe. Therefore, European leadership, and especially


Mrs Merkel, need to stop playing poker with the lives of people.


Some within his own party now want him to go further, and reject the


euro. A currency Syriza is still officially committed to keeping.


When we have our currency, we have Mrs Merkel's currency now, it is


totally craze year, a country in such a recession, to have a very


expensive currency. So, I think that a national currency will solve


the great problem in Greece, the problem of liquidity. The centre


right New Democracy, which narrowly won the last election, aims to


convince voters that a return to the drachma would be a catastrophy.


It means that there will be chaos, the banking system will collapse,


what else, savings, everything, it will just go, we will be back to


drachma, I'm not sure what the rate will be between a euro and the new


drachma. For now, most Greeks continue to believe they can have


it all, the euro without the strings. It may turn out to be a


dangerous fantasy. Every country has a plan for the Greek exit,


Greece has not a plan for a Greece exit. The Greek exit still looks


like scare mongering, it would hurt the Germans more thant Greeks,


wouldn't it? I don't think the Germans want us out of Europe,


because it will cost a lot of money for them to take us out of Europe,


more money than our loan is, I don't think they like that. They


want to be a strong country with investments, to pay them back, and


to have a good life, everybody, nobody wants to come to the drachma


again and lose so much money, I don't think the European people


want that. I believe they find a solution, I believe they will do


that. Europe hasn't had to make that


calculation yet. But it is ever more likely that it will have to


sooner or later, if the Greeks fail to decide themselves.


Tim is still in Athens. Now we know vast sums of cash are being


withdrawn from Greek banks, so is the banking system now becoming a


bigger problem than the political system?


That's right. We thought that the Greek crisis was on hold, roughly,


for a month, until the next elections, but, of course, that is


not turning out to be the case at all. And the financial pressures


are mounting all the time. First, as you say, is the question of the


run on the banks. We can only assume the amount of money taken


out of banks will get greater and greater, as the prospect, that is


what the polls suggest, the likely prospect of a left-wing victory in


the next election increases. Then there is the situation that the


European Central Bank today has said that it will stop providing


cheap loans to some Greek banks, for routine operations. Now, there


is still a way the Greek banks will get money through another channel,


that will be also stopped if the ECB considers those banks to be


insolvent. You can see there possibly a developing liquidity


crisis that could lead to a collapse of the Greek banking


system. Then we would be back to the question of another bail out,


or a forced exit from the euro, while the caretaker Government,


which has no real mandate, is still in place. This is a nightmare high


pop sis, there is a lot of ifs -- hypothesis, there is a lot of "ifs"


there, but the groks are saying, no reason to pan -- Greeks are saying,


no reason to panic yet. The governor of the Bank of England,


said he thought the eurozone was tearing itself apart. Such is the


view from Threadneedle Street, but it is not the talk they like in the


biggest member of the eurozone. The deputy Germany Finance Minister was


in London today, I took the opportunity to corner him on the


issues? Do you think in a year there will be 17 members of the


euro? Yes. You can't be 100% certain? No, but the result of what


will be a reality in one year is not only by chance but political


will. The activities and engagment of the European Union and the


European Central Bank, over the last two years, was to keep Greece


back on track, we will go on. But that means we require a stable


Government in Greece, but the path is regaining competitiveness, and


stability. When the governor of the Bank of


England, says as he said today, that the eurozone is tearing itself


apart, he's just wrong? We are a free country, we are a free Europe,


everybody is free to misjudge the political will of the European


Union. He has done that, he has misjudged that? I think he's


misjudging the activities of the heads of state. We have achieved, I


think, quite a case of stability. We achieved the private sector


involvement, and now we have some challenges, because of unstable


Governments, but I'm expecting, as a result of the election mid-June,


a stable, pro-European Government, that is committed today the


memorandum of understanding. when the British Prime Minister,


David Cameron, says the eurozone has to decide whether to make up or


break up, he also has misunderstood the situation, there is a decision?


This is clear, but we have already taken the decision two years ago.


Make up. So he's misread it? the decision was quite clear, when


we started the engagment, for solidarity towards Greece, in


exchange to that, we asked the Greek people to get back on track


to reform the country, to stablise the budget, to make structural


reform, to come back on a growth path. This is actually what we are


doing for the last two years. boss says the Greek people have to


decide whether they want to be inside the euro or outside the euro,


haven't they decided they want to be both? Actually, yes. But if you


have a participating with the several advantages you have by the


currency, you have to fulfil the complication - obligations. But you


must have thought about Greece being unable to maintain its


position in the euro? The question that Greece would be competitive


within weeks, which some of the political debaters seem to have, is


wrong. It would take a decade. Our programme is not based on weeks,


but on years, to support Greece, and to re gain political movement -


- regain political movement towards competitiveness. They can't stay


within the euro and reject the austerity package? You are right in


that judgment. They seem to think they can? I don't think that they


think that. They are disappointed with their Government, that is


quite clear. What they are not now facing is not the result of the


European integration, it is the result of the lack of reforms over


the last decade. For Germany the euro is working, but it is not


working for much of the rest of Europe, and you know it is not


working? Actually I disagree with your judgment on that one, it is a


win-win situation for both of the participants. Those who gain more


solidarity, and those who invest in sol darty. Stability is what we


gain for -- solidarity. Stability is what we gain for both sides.


they say the price of staying in the euro is too great, they are


free to leave, aren't they? Technically they are not, but we


can't keep them if they don't want. If you look on the polls, there is


a majority of the Greek people who want to stay within the euro. And


my clear answer, if you want to participate in the advantages, and


I think they are big, you should change the course of politics.


Plenty of voters, and not just in Greece, but in France as well, now


think there may be an alternative towards austerity, is there?


course there is an alternative. What is it? The alternative is not


only calling for catastrophy in Greece, but enhancing their chances,


taking the time they need. But on the other hand, in exchange to them,


that we have to keep them on track. Greece is in a very complicated


situation, politically, socially and economically. Do you actually


think that arguing that this will lead into a catastrophy is any help


to improve the situation. I'm not trying to help anybody, I'm asking


why you haven't thought about it? haven't said I haven't thought


about it. You have, what do you think it would be like? I think it


would be worse than the situation we have now. And what about the


philosophical alternative, that Francois Hollande poses in France.


Do you think there is an alternative to austerity, as he


says? I wouldn't use the word "austerity". It is his word? This


is the first measure mainly misunderstood. The growth


strategies have to be based on fiscal conditions that gain trust


from the market. Growth and consolidation, I would call it.


Both sides of one medal, called "economic stability". Whatever Mr


Hollande says or other European statesmen say, Germany will not


change its position? Germany will develop its position, we have a


very good meeting between Chancellor Merkel and Francois


Hollande. It came clear to me as a result, we are not renegotiating


the Fiscal Compact. Because fiscal conditions have to be stable. But


we take up the ideas the European heads of state, including David


Cameron, are organising since autumn last year, to re-focus the


debate back from crisis, on to growth strategies. Thank you very


much. David Cameron warned that it was


make-or-break time on the euro today. As you heard just there. Our


political editor, Allegra Stratton is here. What is it about? We were


supposed to be getting a speech tomorrow on parenting and family


issues. Instead, it is a sign of the choppyness in Government right


now, and the issues we have just been hearing about, that they are


actually doing a speech on the euro and the economy. Today in Prime


Minister's Questions, David Cameron gave us a flash of what he will be


mentioning. The eurozone has to make a choice, if the eurozone


wants to continue as it is, then it has got to build a proper firewall,


it has to take steps to secure the weakest members of the eurozone, or


it has to work it out and go in a different direction. It has to make


up or look at a potential break up, that is the choice they have to


make, and it can't be long put off. That is an ultimatum, it sounds


like a civil servant rewriting John Wayne. It is an ultimatum by a man


who hasn't a dog in the fight? is aimed at the tkhesic audience,


not at the central banks around -- domestic audience, not the central


banks around Europe. That frustration is about a certificate


yues of things, relating to the -- series of things, relating to the


interview just done. For a while the Government has talked about has


Germany done enough to think about the idea of eurobonds, reaching out


to Greece. Has there been enough done to put a firewall around Spain


and Italy. It is frustration. It is the moment they are saying to the


British public, if it gets choppy and bad, we saw it coming, it is


not an extension of the incompetence issue, we were on top


of it and issuing advice. Briefly what will the speech be about


tomorrow? It is the old friend, austerity versus growth, they will


say they are sticking to Plan A. They are looking at a way to get


growth in the future through austerity. There is serious concern


what might happen should there be a euro break up. The paradox in


politics at the moment, which I keep saying in the packages, is the


deficit is the most controversial decision this Government has made,


but also the one the British public, for the time being, believe they


are right about. The events in Europe allow them a vivid display


of why they are at it. Thank you.


Tomorrow the Prime Minister is going to tell us austerity, or --


why austerity, isn't the enemy of growth. As you will have seen if


you were watching the German Finance Minister earlier, the "A"


word makes many politicians agitated. What does austerity do to


growth? That we have a rampent deficit that


needs urgent attention, is not disputed, how and how fast it


should go cut is. Most people will describe the current mix of


spending cuts and some tax rises as austerity, but is it really. Can


you grow your economy, while cutting back at the same time.


Certainly the coalition thinks so, it aims to take �81 billion out of


the UK economy between now and 2015. It feels that by cutting borrowing,


what you save on bank interest can be used to invest in long-term


projects. And things started well, unemployment has stayed relatively


low, and the cost of borrowing for Britain, for example, its bond


yields, are also at record lows. But the planned rebalancing of


Britain's economy away from borrowing and consumption, and


towards manufacturing and exports, is faltering.


The Government's austerity plan was to take money out of the public


sector, and hope that private sector companies would rush in to


fill the void, as well as a cheap pound leading to an export-led


recovery. But the Government hasn't exactly had the wind at its back,


there is a spike in commodities, et cetera specially oil prices, banks


-- especially oil price, banks are so weak they won't lend to


companies or consumers. And the markets into which exporters hope


to sell their goods, particularly western Europe, are still very


feeble. On top of that, the planned cuts have barely started. If you


think things are austere now, you might want to ask your grandparents


what they were like in post-war Britain. Rampent joblessness was


widespread, and benefits didn't exist and healthcare was primitive.


Across the Irish Sea they know a thing about austerity. Since 2008,


most salaries, including the well unionised public sector have been


cut by a fifth. Unploilt is twice that of Britain's, and house prices


have collapsed. Britain won't need that kind of correction, because


the boom wasn't as big as Ireland's. Will British voters have the


stomach for that kind of drop in living standards. When people talk


about reefrpbt austerity, as if there were -- recent austerity, as


if there were spending cuts and the economic slowing down. That is a


misconception, the spending cuts have yet to come. So the British


public think they are in the middle of a major windback by the British


Government ain't seen nothing yet? It has barely started. So if


austerity, as an economic model, is in danger, can aiming for growth by


borrowing even more money be the answer? President Hollande got


elected on that very premise, and across the pond, the US is showing


robust signs of growth on the back of President Obama's two short-term


stimuli, first through I infrastructure, and recently


through tax rebates. The problems with President Obama's growth plan,


a good old fashioned Keynsian stimulus, is it dicks the debt


mountain can down the road. By injected thrillions of dollars into


the US economy you will create growth and you may get re-elected,


but you are postponeing the problem to a future President or future


generation. But can American-style growth be achieved here, by


borrowing even more money. On the latest projections they will borrow


something like �150 billion more over the course of this parliament


than they originally intended. They are borrowing �150 billion more


because their plan has failed. Tax revenues aren't as strong as they


hoped, because the social security bill is stronger than they hoped.


They are borrowing money, it would be better to borrow money to get


the economy moving, paying people to be in work, rather than paying


people to be out of work. Could there be a third way? Can an


economic stimulus and cutbacks work in tandem. Francois Hollande thinks


so, he's already banging that drum in Brussels? Austerity and growth


are not mutually exclusive. Some countries need to take tough action


to reduce their amount of borrowing, it is the rate which you do it,


what is sensible. If you don't have policies for growth, the risk is


you crash the economy, we are back in a double-dip recession now, if


you look at what is happening in Europe, it is a scene of


unremitting gloom. Tomorrow David Cameron will attempt to steel our


nerves for the long but rewarding battle against debt. The economy


and ultimately voters will decide whether it is worth fighting for


now. Here now are the Conservative MP,


and former adviser to the Chancellor, Matthew Hancock, the


economist, Ann Pettifor, and the chief executive of the city broker,


Priebke, Terry Smith. It is -- Priebke preb. It is clear that


austerity isn't doing anything for growth? As Alastair Darling said in


the clip there, the two aren't mutually exclusive. You need to


deal with the deficit to have sustainable growth. We have the


lowest interest rates since 1703, we found out this week. We can cite


any number of statistics, the fact is we are back in recession. Only


today the growth forecasts were downgraded? Of course they were.


That is nothing to do with austerity? There is a sharp


increase in commodity price, and we have seen from the first package


what has happened in the eurozone. But the crucial question is, and


the question that people will be asking, and we should all ask, is


what can you do to try to get out of this, given that we are in a


debt crisis. And if you...Everybody Wants to get out of it. But the


other way of putting your excuse, is that Government policy has had


no effect? That's not true. It is all external factors, the euro


crisis, commodity prices and the rest? Let me tell you where it has


had an effect, the deficit has come back down by a quarter over the


past two years. That means we are a quarter of the way, broadly,


through the difficulties. You know, does that mean there is three


quarters to go, and does it mean it will be difficult? Yes. But we are


a quarter of the way through, the deficit is coming down, yes it is


difficult. There are head winds that aren't helping, but if you


don't try to deal with your debts, then you won't get growth. We have


seen in the euroarea, what happens if you leave it. Where is the


evidence that the austerity is hurting growth? Well, it's in


Europe, across Europe, of course. What about in this country? In this


country it is in the evidence that Mr Justin King of Sainsbury's has


given us. That customers are not walking through his door. It is in


the evidence of the banks, who are frightened to lend because they can


see the contraction getting worse. It is in the evidence of the


companies who have are hording -- who have been hording cash, because


they are so in fear of the Government policies and contraction,


that they will not take risks in investment. That is where the


evidence is. It is in rising unemployment. I know the


unemployment numbers today looked a little bit better, but the vacancy


numbers were down. And the long- term unemployed were up. I think it


is better when there is good figures, like today's unemployment


figures, to welcome those figures, and welcome areas that are growing,


like exports to the rest of the world that isn't Europe, which are


up by 16%. There are good signs. But the point is this, you can't


borrow your way out of debt. I have said it endlessly. Can I say about


that, if that is the case, why did the Chancellor say in his 2012


budget, just recently, that net borrowing was going to increase by


�100 billion, over the next year or two. Because the size of the


deficit that he's dealing with is vast. And of course, it has to come


down, you have to deal with the deficit before you can then deal


with the debt. This is the appropriate point to bring you in,


you claim there isn't any real austerity here? There is no


austerity so far. Even with the Government's figures. The reduction


in Government spending is 1.5%, that is 0.7% of GDP. That can't


have caused the problem with the economy, it is just not big enough.


The economy never got out of recession. He's right that the


policy hasn't caused the difficulties, but he has the wrong


policy, because he hasn't got one at all? To debate the policy in a


moment. We never got out of the recession. �500 billion of deficit


spending, �300 billion on quanative easing, and the interest rates are


the lowest for 300 years. Einstein said, repeating the same action and


expecting the same result is a definition of insanity, it hasn't


produced a result in the economy. List a few things you think should


be cut in Government spending? only things you can cut in those


circumstances, the benefits bill, and the National Health Service.


You can't make very big cuts elsewhere. Cut the health service


and the number of people on benefits, presumptionably and the


level of benefits? You can't make cuts by tinkering at the edges,


that is the definition of austerity, in your view? It is not really the


only part of austerity. I think you need to cut the tax take, and the


whole size of the state, unless you believe the Government is more


efficient at spending money than the individuals. The Government is


doing just that. It can't cut the Welfare Bill, it can't cut pensions.


It is having real difficulties with that bit of the budget. But it is


slashing capital investment. Let's look at the facts here. It is


slashing productive investment. amount of people on out of work


benefits is lower than at the election two years ago. And the


benefits have been capped, there is a big row about that. And making


sure that people have to try to get work, if they are getting benefit.


Terry Smith is no clown, he understands how economies work, he


has come to a completely different conclusion? Not the case. Terry


said there are cuts. There has been no significant austerity.


deficit is down. Is my 1.5% number correct. I will explain. Is it


correct? I take it that's yes, is it. No, my number is not correct?


The deficit is down from �160 billion at the time of the election,


and down now. Have you cut spending by more than 1.5% of Government


spending in the last year? Yes. must have missed that, I thought it


was about �680 million now, it was about �690 million before? You have


to look at the impact. Terry, 270,000 Government civil servants


have lost their jobs. That's cuts in spending. What they haven't done


and what hasn't happened, is that spending on the revenue side, on


benefits and pensions has risen. But what is being cut is spending


on managed expenditure and capital investment. Very drastically cut.


That's the bit of investment, Jeremy, that will generate jobs and


generate income for companies like Sainsbury's. And construction


companies. You are comparing apples and oranges here, do you have any


inclination towards either an apple or orange. Which two on these two


in analysis do you come down in favour of? As we see somebody


saying that the Government is cutting too fast, and somebody


saying that the Government isn't cutting enough, that is normally a


sign that the Government is getting it about right. I would like to


explore an idea that Ann Pettifor has got here, explain to us the


thing that is usually said, you can't increase spending, to


increase spending increases more borrowing? The deficit doesn't tell


you anything about what is going on in the economy. Because the fact is,


the deficit is rising, or falling, because of what's happening in the


rest of the economy. And the fact is, we have had hollowed out from


the economy something like �120 billion, since the start of the


financial crisis. As Terry says, the Government intends to take out


another �85 billion. What is your solution? We have this create hole


in the economy, somebody has to invest in it, the private sector


won't because it is too nervous and indebted. The only sector that can


is Government, it can do that with fingerprintsing from the Bank of


England. The idea that the deficit doesn't matter. Is delusional.


is dangerous. I didn't say it didn't matter, I said it didn't


reflect what is really going on. Anne has discovered the secret


source of finance we can use is frankly delusional. The Bank of


England has been financing the budget deficit. It has been doing


it indirectly, but it has been financing the deficit. It hadn't


escaped our notice, if it is that easy, why not get the Bank of


England to lend the Government all the money it needs to pay off the


debt. Why didn't we think of that? It is not enough for the money it


pay off the debt. It has to be invested in sound infrastructure


projects, which, for example, would boost private sector activity in


the construction sector. Which would boost economic activity,


enable companies to make profits, people who have jobs, and income to


be generated to pay the taxes which will reduce the deficit. This idea


that you spend more, and therefore borrow less is frankly, for the


birds. I think it is delusional. The British economy is predicted to


grow at just under 1% next year. China is hoping for 7.5%. In the


space of a single generation the size of China's economy has


overtaken most of those in western Europe. But China's also set to


overtake Europe in another key area. Thanks to longer life expectancy,


and plummeting birth rates, China's population is getting older.


Mukul Devichand roorns, 30 years after China implemented its one-


child policy, the Government faces a crisis of too many elderly.


This is one of the fastest-ageing places on earth. In Shanghai there


are twice as many old people as there are young. As the city has


developed, people are having fewer and fewer children. The one-child


policy has accelerated the decline in the birth rate. And where


Shanghai leads, China follows. Break-neck economic growth in


China's cities, has been accompanied by an astonishingly


rapid ageing of their populations. China is growing old, at a rate


unprecedented in human history. This ageing could bring the


country's seemingly irrepressible March out of poverty to an end.


This woman spend her working life in a factory, her husband is a


tailor, they have been married for 53 years.


Now, she has Alzheimer's. Every day he bathes her, dresses her, and


brings her to this drop-in centre for lunch.


He says it is hardest when she doesn't know who he is.


TRANSLATION: Before she got sick she was full of life. She loved the


opera, now she doesn't really understand what is going on. Her


mind is gone. Life has become difficult. But I must take care of


her, anyone in my position would do the same. This is all the help the


state can provide. A basic welfare system does exist in China, but it


is many years behind anything in the west. Nationally, the


Government says ten million care workers are needed. So far, only


100,000 have been trained. Providing for the elderly will


create a massive drain on China's future wealth.


Chinese society has not been fully prepared for its pension and social


security systems, so people are worried, what will be the case if


they do not have kids, and they do not have the social security, what


can they do when they become old? Traditionally in Chinese families,


this didn't used to be a problem. The elderly were cared for at home.


But as the birth rate is declining, there are now not enough of the


younger generation, to look after the old.


Those what who can afford it end up somewhere like this, recently


opened, one of the new private care homes in the city. This man has


been here since he had a stroke, four months ago.


His daughter wishes she could care for him at home. But, she says, she


needs to go out to work. She, herself, has only one child. She


worries about who will look after her, when her time comes. By the


year 2050, one third of China's population will be over 60. That's


450 million people. This huge imbalance has been caused by


China's showcase development policy, the one-child programme. It has


forced down the numbers of young people, just when they are needed


most. China's economic model is in danger.


The lack of young workers is already slowing down the economy.


Having too few young people is a serious threat in itself. China's


economic engine has been fuelled by a seemingly endless supply of cheap


and young labour. If that supply now runs out, then China's ability


to keep on growing could be seriously undermined.


In this factory south of Shanghai, workers make jewellery and


accessories that end up in high streets across Britain. Research


suggests that one quarter of China's economic growth has come


from the supply of cheap labour. It is here that the impact of


demographic change is being felt most keenly. The shortage of the


labour force is inevitable to increase the labour costs. This


will force China to restructure its economy. To move from the labour-


intensive export-orientated economy, towards a more capital-intensive or


technology-intensive economy. aren't enough young people for the


model on which China's economy depends. In addition main migrant


workers have moved back to their home towns, to care for their


elderly parents. Around Shanghai there is an acute labour shortage.


TRANSLATION: It is really tough to find new workers because the cost


of labour keeps increasing. Workers are asking for more pay and better


conditions when we hire them. At the same time as labour costs


are rising, the pressure from retailers is for ever cheaper stock.


TRANSLATION: We are becoming uncompetitive, it is affordable for


companies to move from China to Thailand. All of this means that


China's one-child policy is beginning to lose loosen, and


Shanghai is in the vanguard. In this family planning clinic, young


women are no longer instructed in contraception and abortion, but in


fertility, and how to conceive more successfully. In Chinese terms,


this is something of a revolution. TRANSLATION: We hope people will


follow the regulations and have a second child. We are offering


parenting classes as well as fertility clinics. If you are an


only child and you marry someone else who is also an only child, you


have always been allowed to have two children. But now we are trying


to encourage everyone to do so. many Chinese people aren't


listening. The majority in Shanghai still choose to have one child.


They believe their children's life chances are better, that they


themselves are richer in small families.


In fact, some academics think China's future lies in a smaller


population. That increasing the birth rate is a matter of buying


time. Amidst vast social change. To modify the policy cannot reverse


the ageing process, but at least it can slow down the process,


providing more time for Chinese society to get ready, to prepare


for the restructure of the society. In that case we can cope with


ageing issues more easily and properly. One thing this couple


don't have, is time. He says as long as he has the


strength, he will always care for his wife. He says if she was put in


care home, he would be apart from her, at least this way they can be


together. TRANSLATION: There's nothing more


we can do now. At least we have the past. All we can hope for is that


her illness progresses slowly, and we can both enjoy what little time


we have left. China is facing up to the fact that it is ageing. And at


a rate that few societies have ever experienced. It will have to find a


way to pay for the costs of ageing, without the economic wealth


supplied by so many young people. There is a special phrase for why


they worry, "China might become too old to get rich".


As we all know, thanks to the experiences of Jim Hacker, real


power in Britain is wielded by masses of anonymous sir Humphreys,


that used to be the case until Tony Blair and Malcolm Tucker came along.


Now the man known as David Cameron's brain, Steve Hilton, has


disappeared on a Saab battle. He was known for wandering -


sabbatical, he was known for running around without any shoes


and coming up with original ideas. Who does the blue-sky thinking now.


And in these storm tossed times, do we need more blue sky. The nearest


we can get to it are here, Danny Kruger, who now runs a charity,


helping prisoners and young people at risk of crime, and an adviser to


Ed Miliband until last week, and prefers the company of the Social


Research Unit now. Where do ideas in Government come from? Probably


the ideas we had in opposition, mostly. Interestingly the most


inventive stuff seems to have been thought up beforehand. The job of


Government, often seems to be the job of handling the daily crises.


Can I pay tribute to Steve Hilton, I worked with him in opposition. I


don't know what it was like working in Government, it must be have been


frustrating, he found it frustrating working with us in


opposition. He was one of the most imaginative I have worked with. And


contributed a huge amount to the creativeness and inventiveness the


party came to Government with. have been living in this mail trom


and firmive of ideas in opposition? Is that what it is like? There are


lots of places political parties get ideas, in Government or


opposition. They look at research, universities, they look abroad.


This idea that we don't have enough big ideas out there, that is not


the issue with what's begin doing going on with Government in the


last -- been going on with the Government in the last few years.


Nobody will say this Government hasn't had big ideas, they clearly


have. The real issue is how you apply those ideas. What your


analysis of an issue is. They do need to reform the NHS and what


does success look like? Until you have those things straight, it is


hard to understand how the big ideas will come along and change


the world. The circumstances under which you take office, and try to


act out these schemes that you cooked up in opposition, are


clearly critical, there are times for great ideas, and there are


times for just trying to get your head down and get on with things,


aren't there? This Government is occasional low stuck on the horns


that have dilemma. They have some very large ideas, and they have


come into office with a clear determination to change the country.


And yet they are managing a terrible economic situation, as


well as all sorts of external things going on, and the daily


crisis of Government. It looks like and feels like, from the outside


looking in, they are constantly battling the determination to


change the country and do radical and substantial things, with a need


to manage the crisis of the day. It must be incredibly difficult to


balance the two. If I could just jump in, I would say never


underestimate the power of the small idea. It is not just about


big ideas. For example, if you want to improve how children are doing


at school, we know that the most important thing is the quality of


teach anything their classroom. Trying to change that experience


through one big idea, one silver bullet, one structural reform of


our school systems very, very difficult. We know it is the small


things that add up to change. How we train our teachers, how we teach


our professional development in schools. I think it is very


important. Big ideas are great, we all need them. If we are really


interested in serious change, you shouldn't underestimate the power


of doing lots of small things well. What about this idea, and one has


heard it promogated, Tony Blair talked about it a bit, the


institutional boundaries, notably exsemplified in the Civil Service,


always said to be a great break upon change s that fair on the


Civil Service, do you think? haven't worked in Government, you


sense the frustration when you watch politicians trying to get


their way, and having spoken about the grand changes they are going to


make, finding them some what diluted in office. But I also think


there is a sense in which they are obliged by their own ideology, the


loyalties they have to their party, and what they said in opposition,


and to the grand ideas they came into Government with, then they run


into the sands of reality. That is probably a healthy process, tough


run fast through the sand, it is good they start running quickly.


that your impression too? I don't think that is quite fair. NHS


reform, for example, nobody would argue the Government has found


itself in some of the difficulties they have around NHS reform,


because the Civil Service has acted as a break on reform. -- brake on


reform, but it is the politics that are an issue and the way it


developed in the political system. I don't think it is fair to say the


Civil Service are always a brake on what ministers want to. Do I would


argue you see politicians who want too much change, and too much


change can be just as bad, as not enough.


Thank you very much. Tomorrow That's all tonight. Emily will be


here with more tomorrow, until then, goodnight.


Good evening, not as cold tonight as last night. Thanks to a lot more


cloud. It makes for grey start in the morning. Some brightness across


north-east England, that will disappear. Brive, bright or sunny


spells across the south. Northern Britain dull. Outbreaks of rain and


drizzle coming throughout the day across northern England. Generally


from Birmingham southwards it will be dry. Any showers in the south


will be few and far between. Cloudier than today, still some


brightness coming through. A hint or two of sunshine, just about


lifting the temperatures into the teens. Feeling cool because of the


strength of the breeze. The breeze picking up slowly across Wales. A


bright day in the south. The outbreaks of rain and drizzle on


the north coast, rain and drizzle will come and go throughout the day.


Dull, dump and chilly, temperatures stuck in single figures, as across


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