23/01/2014 Newsnight


23/01/2014

Jeremy Paxman presents a Newsnight special from the World Economic Forum in Davos, and interviews Bank of England governor Mark Carney and Microsoft founder Bill Gates.


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Transcript


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Good evening from Davos, if you throw a snowball here at the right

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time of the day you can hit a plutocrat and one of the gorillas

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protecting them. None of those who run the world are women. In this get

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together the World Economic Forum thinks it sets the agenda about what

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will happen to mere mortals in the 12 months ahead. We will hear from

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the Governor of the Bank of England. Have you spoken to Ed Miliband since

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you dissed his banking policy. Since the second part of the question

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isn't true... You did! We will see figures about the state

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of the world that give quite enough problems for its leaders to engage

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with. We have a minor constellation of

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famous, infamous figures to gnaw on that, to see whether or not anyone

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in this non-environmentally friendly stance, an overheated conference

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centre in an alpine ski resort, has had the chance to think of

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solutions. We will ask Bill Gates, one of the

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richest m in the world why the might of people in the developing world is

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any concern of ours. I get so confused, it is like the

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middle school. I was the chairman. Well now, the sheer weirdness of

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this gathering takes some getting your head around, of course it is

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good to talk, but to be here at all as a corporate partner you have to

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be able to stump up about $70,000, and even as we speak many

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organisations are spending hundreds of thousands more on

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no-expense-spared parties across this town. The World Economic Forum

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now invites charities and the like to take part. One of them, Oxfam,

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came up with the astonishing fact that the total wealth of the poorest

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3. 5 billion people in the world is equalled by the mere 85 of the

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world's richest people. Believe it if you can. Events inside this

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conference centre seem to have commandeered much of the world's

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headlines. Who are these people and in whose interests do they speak in

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# Picture a mountain top with snow From the outside it might be any

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conference, a gathering of spark plug manufacturers, or laxative

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makers! But among them are some of the most powerful and richest people

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in the world. The people who determine what we earn, what we pay

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for our mortgages and in some unfortunate places whether we live

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or die. Most of those milling around aren't the directors of our destiny.

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They are advisers and goers and guards -- gofferes and guards and

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those who fancy where the action is. Hold it like a pair of binoculars...

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Among them are a handful of ernest good folk trying to open the eyes of

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the world to tragedy largely beneath the attention of the rich and

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powerful. We put you on a street in Aleppo, everything you hear is the

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same as a real event. Everything you are listening to is a documentary in

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VR. It is essentially what it is like. Call it immersive journal I.

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Others with -- Journalism. Others with ideas to transform economies.

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What would I do if I was a new producer? So you mean an entire

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human. Something useful? Let's see we want to print the ear of a new

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producer. So you can start by printing a cell, scaffolding, then

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you can have cells go through the scaffolding matrix and then

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differentiate into an ear. But the central pitch of Davos is that by

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bringing together billionares and Presidents, professors and

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functionaries, the world can be made a better place. It is not an ignoble

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aim nor a modest one. This is the world being carved up between big

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businesses, Governments and NGOs, is it? Absolutely not, as you have

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represented society as a whole, so if society is carving up society,

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that is true! For all big names here deciding our future, one thing is

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striking, they are not doing it in public. You still never get anywhere

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near what is happening here, that is the big lie, that some how it all

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takes place in the open, it doesn't. There is a lot of

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behind-closed-doors meetings you or I don't go into. This isn't a

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gathering of self-made and women, no less than the Queen of Belgium is

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here. Britain is partly represented by an institution you can only join

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by having the right parents. This gathering may be about many things,

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it may even do some good somewhere, but it is not what you would call a

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democracy. Now people have seen stuff about

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Davos coming out of their televisions all day. But why are we

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all here? With us now is Martin Sorrell, boss of the world's biggest

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advertising agency, Za national curriculums Bedows, Economics Editor

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of the Economist, and Felix Salmon, a disgruntled journalist from

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Reuters. Let's look at who these people are, there is a lot of jolly

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smug people as far as I can see looking outside and inside. You are

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looking at me. I'm looking at the supposed movers and shakers, is that

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fair comment? The cynicism in your introduction is reasonably well

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placed. This is a gathering of plutocrats, a gathering of power

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brokers and hangers on. They are very smug, there is a lot of power,

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they know it. There is a lot of platitudes, what is the title this

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year "reshaping the world". Lots of platitude, lots of discussion that

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is platitude, but that said, there is a lot of useful stuff. You have a

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lot of leaders in their field, from all over the world. Scientist,

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academics, all manner of people. I learn a tonne here. Who would have

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thought an Iranian President. So you have big-picture stuff and big

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political moments. You also have an awful lot of people get together

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doing smaller inYIFSH, I think a lot of stuff comes out of it. You are a

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fan obviously? I have been doing it on and off, mostly on for 25 years.

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It was very different in the old days, making we sound very old, it

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was slightly more personal, it is more impersonal now, there are 2,500

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people here, there are 300 Government people. This is the

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largest contingent of Government leaders that we have had at Davos. I

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think as a talking shop, which is I think what you were getting round

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to, as a piece of communication it is extremely valuable. It gets more

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valuable every year. If you look at the agenda it is truly remarkable

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what they cover. And you are absolutely right, for example, today

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I was involved in an inYIFSH in the consumers goods industries which is

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in terms of sustainability is extremely valuable, and I think

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extremely important. There is no value in just intoneconsumers goods

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industries which is in terms of sustainability is extremely

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valuable, and I think extremely important. There is no value in just

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intoning This is doing, multinationals will engage

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millennials in sustainability... What is that? Younger people in

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sustainability. The chances of them engaging them in anything is zero. I

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would agree. Would you agree there is virtue in some people meeting and

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talking? The real value was Martin in his party where he invites Larry

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Summers and Ronaldo to play together, that is where people get

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to know each other and hang out. There was a strong purpose, this is

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the year of the Brazilian World Cup, having the World Cup's leading

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scorer here was a pivitol moment for many, like you, not so much Larry

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Summer, but Ronaldo. It is all part of it. The Brazilian World Cup and

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the Olympics are emblematic events for Brazil and Latin America in the

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context of worldwide development. Douma is coming here tomorrow, I

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would be interested to hear what she says about the World Cup, which

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there is some controversy about, as you know, and about the Olympics,

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where the infrastructure investment is not being put in place. Don't you

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get the feeling there is a lot of people on transmit and very few on

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receive here? I think that is probably true. There is a lot of

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people on transmit. Even if you have a few people on receive, there is a

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lot of journalists here on receive I hope, rather than transmit. I think

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that you get something out of that. Even if you have a very high noise

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to signal ratio, there is something that comes out of it. People like

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you wouldn't pay for doing this if you didn't get something out of it

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righ What do you get out of it? We are instructed to think about the

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big issues, forget about the financial crisis, and I think that's

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a mistake. To focus on the youth unemployment, inequality,

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healthcare, climate change. To start thinking about those big issues

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rather than worry about the financial crisis or the Middle East

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or whatever. That is a mistake, there is still the grey swans going

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on in the world that may cause problems. I will give you one good

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example of an insight we got here. This was the suggestion that there

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might be a military conflict over the islands between China and Japan.

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And that was something I think most people had dismissed, but both the

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Chinese, or rep presentatives of the Chinese have said it is --

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representatives of the Chinese have said it is a military option, and

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the Japanese Prime Minister did not rule it out as an option. And you

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have a number of extremely worried people as a result of this. The

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parallels are made to previous situations. The World Economic Forum

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has actually this year has become the World Political forum, we have

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had the Japanese President making wave, the Chinese, the Ukrainian,

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the Syrian, I think all the Central Bank governors and finance ministers

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who have historically been the centre of this event have been

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sidelined. I don't think it has bun centre any more, it is too big for

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that. To try to say there is one big Davos team is also a mistake, if you

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do try to do that it becomes platitudeness. I think there is a

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lot of things going on with different people in different

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industries, whether it is the water people or the new technology people,

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they are all doing useful stuff, talking to each other. And crossing

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over. We meet the media people, they meeting with the technology people.

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I went to the health thing this morning, I got this as a result. I'm

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much health year. We are all wearing things! We will be back with with

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you in a moment or two. Of the various advanced economies, plunged

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into misfortune by the folly of bankers, Britain seems to be

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recovering better than some, at least according to the International

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Monetary Fund. Acknowledging there is still a long way to go though. In

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his only broadcast interview in Davos I spoke earlier to the

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governor of the the Bank of England, Mark Carney.

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Mark Carney, when Central Bankers like you get together here or

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elsewhere, and you think about the state of the world economy, do you

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think thank heavens that is all behind us? No, not at all. You know

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where we are, some, its worst of the crisis is behind us, but the

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aftermath of the crisis is very much with us. In a number of our

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economies, including the UK, the financial system isn't fully

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repaired, it is not functioning as well as it could or shut. -- should.

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We have debt overhangs holding back recoveries for Governments. We have

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a great deal of uncertainty out there amongst households,

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individuals and businesses that are preventing particularly investment.

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So we think those factor, those three factors are going to persist

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for some time and that helps effect, or that does effect how we set

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policy. We in Britain had four or five very tough years, so we're just

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getting to the point where the level of economic activity in Britain is

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the same it was in 2008 before the crisis. That is some what

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unprecedented period of time in order to come back. But there is

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momentum in that economy. The one fly in the ointment is the Bank of

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England's economic forecasting isn't it? Well, if... It is not good? If

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our forecast is going to be wrong it is better to be wrong in the

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direction it was. This is, let's be clear, good news is good news here,

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we have got unemployment coming down faster, these are private sector

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jobs, they are high-quality jobs. This is two years ahead of when you

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said it would happen? It is two years ahead of a, of the most likely

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scenario we saw at the time. If I can put this into the context of the

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recovery, it is quite important to the sustainability of the recovery

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is one of the big questions for the UK more than any other major

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advanced economy is what will happen to productivity in the economy. When

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is that going to start to pick up. And what has happened in the early

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stages of the recovery is there has been very little productivity

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growth. That is the bad news. The good news is there is this

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employment growth. We need both ultimately to have this sustainable

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recovery. We are almost at the point now where you had thought it might

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be appropriate to look at interest rate levels? We made an easy call

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when I came in, and which is to say it would not be appropriate to even

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begin to think about, even begin to think about raising interest rates,

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until we saw the economy really growing, jobs really growing,

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incomes really growing. Now we used one figure in order to capture that

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idea. Was that a mistake? No, not at all. We are now almost at t the

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unemployment figure? Would you rather be at it two years from now

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or now. I go back, good news is good news. We have got inflation on

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target, we have got unemployment coming down, we have got the economy

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picking up at a rate, finally, that is above its trend, finally starting

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to close the gap of where it should be relative to where it was. So this

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is good news and we made it very clear to businesses, and to

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households across the country, that we're going to take stock once we

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get to 7%, once the economy gets to 7% unemployment rate and consider

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the appropriate stands on the monetary policy. We don't see a need

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to change the monetary policy, we said that thissies. I will enforce

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-- this week. I will enforce it and say when monetary policy changes,

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and given the head winds very much affecting Britain, we would expect

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any adjustment to be very grabbed actual. The important thing is to

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set monetary policy in a way, in a fashion that's going to ensure that

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this economy is really and sustainably growing. So it will be

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re-examined when we get to 7%? We have an inflation report, I know you

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are an avid reader, it is coming out in February! We will do the

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examination there, we are close enough to do the co-operation people

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want to know. Would you imagine that interest rates might rise? There is

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no immediate need to increase interest rates. If I may give a

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little more colour to that. Is what we have seen is the unemployment

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rate come down, we have also seen a lot more Britains Britons want to

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work, we have seen they want to work longer hours than previously, that

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is partly because of where wages are going. There are indications of more

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slack in that labour market. The figure you have chosen of 7% is your

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choice, could it be defined and be 6%, 6. 5 perks 6. 6.9%? There is a

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broad range of things that we could do. I wouldn't jump to that

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conclusion though. First off it is a decision of the entire monetary

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policy committee. And secondly, what we are trying to get across, and

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what has, people understand, it is really about overall conditions in

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the labour market, overall amount of slack in companies. That's what

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affects it. So we wouldn't want to distract from that focus which is

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really properly developed in the market and in amongst business

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people by unnecessarily focussing too much on just one indicator. It

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has a nice clarity to it doesn't it? It has. I will remind, if I may,

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that when we put this in place we were just coming off the cusp, the

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of a triple-dip scare for a recession. There was tremendous

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uncertainty about the stance of monetary policy, there was a split

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MPC committee. And business had been facing a lot of uncertainty and

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households. We were looking to provide collaterality. I think we

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are in a different place now. Sound to me as if you feel like a man

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rather on the hook of his own making which he wishes he didn't have. I

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will repeat myself, inflation is back on target, 300,000 jobs,

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private sector created in the last quarter measured. One of the

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strongest growing economies in the advanced world, the recovery has

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taken hold, and the question is converting it into a sustainable and

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balanced recovery. Do you worry about a housing bubble? We worry

:17:57.:18:00.

about the momentum picking up in the housing market, that without

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question. What we have done, what we did in November is we took some

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initial steps to address that momentum. We took our foot off the

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accelerator. We are not hitting the brake on the housing market, because

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transactions are about three-quarters of what they were

:18:17.:18:19.

before the crisis, the long-term average. Mortgage approvals are

:18:20.:18:24.

about the same level, prices have bounced off recent lows, there is

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much more to the housing market, as you are well aware, than just what

:18:28.:18:30.

is happening in London and the south-east, we have to make national

:18:31.:18:34.

policy. Can I raise very briefly three other points with you. Have

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you spoken to Ed Miliband since you dissed his banking policy? Well,

:18:39.:18:43.

since the second part of that question isn't true. You did! It

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would be impossible for me. You said capping bankers' bonuses in the way

:18:52.:18:55.

he was proposing wasn't helpful. You further had queries about his ideas

:18:56.:18:59.

of cutting banks down to market share? Two things, we have

:19:00.:19:03.

responsibility for financial stability at the Bank of England.

:19:04.:19:07.

When we look at the banker bonus issue we look at it from the

:19:08.:19:09.

perspective of financial stability. It is worse for financial stability

:19:10.:19:14.

to pay a banker all in cash today than to hold a bunch of that money

:19:15.:19:18.

back and put it in shares and other things and have the ability, and for

:19:19.:19:23.

that money only to show up well down the road, when the risk that banker

:19:24.:19:27.

has taken shows up, or the misconduct he has performed shows

:19:28.:19:30.

up, and have the ability to claw that back. Could Ed Miliband's

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banking policy possibly work? Well, there is range of objectives, I

:19:36.:19:40.

think what the leader of the opposition said, subsequent loo nigh

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comments about different aspects of the issues that he subsequently said

:19:45.:19:48.

in his speech, was that he was going to refer to the relevant

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authorities. Which are not the Bank of England, it is the competition

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market authority. So they would make that decision if it were to come to

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that. Let me invite you to stick your hand into another hornet's

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nest. Could the independent Scotland retain the pound? There are issues

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with respect to currency unions. We have seen them in Europe. It is one

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of the factors that affects the outlook for the UK economy, it has

:20:13.:20:16.

affected over the last five years and affects us going forward. The

:20:17.:20:20.

challenges of having a currency union without certain institutional

:20:21.:20:26.

structures. I'm actually going to speak this issue in Scotland next

:20:27.:20:32.

week and I'm certainly going to meet with the First Minister prior to

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doing so. Would you look forward to managing a currency of which

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Scotland was a part? I'm a public servant and I and my colleagues

:20:41.:20:43.

would implement whatever remit we were given. One other question, I

:20:44.:20:51.

wonder when you look at the called krypto-currencies, like Bitcoin and

:20:52.:20:56.

the like. Do you ever think that the life expectancy of someone in your

:20:57.:21:00.

position, not you obviously personally, but the life of national

:21:01.:21:05.

bank governors is distinctly limited? No, I don't actually for

:21:06.:21:09.

this reason, certainly it is interesting what is happening in

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this regard. But the experience of what I would call free banking, the

:21:15.:21:18.

experience in the 19th century in the US and Canada, where banks

:21:19.:21:21.

themselves could issue their own notes was that you had much higher

:21:22.:21:26.

rates of failure, because almost inevitably, not in every case, the

:21:27.:21:31.

incentive to issue more notes in order to keep things going is there.

:21:32.:21:34.

Whether those notes are electronic or physical, there is a need to have

:21:35.:21:39.

an independent eptity, this is what we have learned over centuries, an

:21:40.:21:42.

independent eptity with a clear remit, a clear objective, like a 2%

:21:43.:21:46.

inflation target, as the Bank of England does, that is accountable to

:21:47.:21:51.

people and part of that accountability is meeting you. Do

:21:52.:21:58.

you have any Bitcoins yourself? I do not. Would you like some! I can't

:21:59.:22:07.

invest any money so...! Investing in my children, Jeremy! Well now, what

:22:08.:22:14.

do you reckon we should make of the unemployment target and the

:22:15.:22:18.

inflation, and the interest rate level? I you gave Mark Carney a hard

:22:19.:22:28.

time there. I think the coming down of the and the UK doesn't need a

:22:29.:22:35.

rate hike any time soon. But laying out a threshold not a trigger is

:22:36.:22:39.

going to be problematic now we are close to it. It is true that it is

:22:40.:22:44.

one figure that was a sort of proxy for broader slack, as economists say

:22:45.:22:48.

in the labour market, now they have the problem of how are they going to

:22:49.:22:52.

convince you that they won't raise rates very fast, when we are close

:22:53.:22:55.

to the rate now. It is interesting because the same kind of thing is

:22:56.:22:58.

happening in the US, for different reasons but the same kind of thing

:22:59.:23:01.

is happening. There was a threshold set, we are getting very close to

:23:02.:23:05.

it, the Central Bank don't want to raise rights wraiths any time soon.

:23:06.:23:09.

They shouldn't. But giving clarity in that environment, and maintaining

:23:10.:23:13.

credibility is going to be tricky, and you saw Mark Carney squirm a

:23:14.:23:18.

little bit. There has been very little discussion about tapering or

:23:19.:23:21.

the impact of tapering, a bit but not a lot. I think we saw the

:23:22.:23:26.

markets get very nervous when tapering was even mentioned. They

:23:27.:23:30.

got nervous last year and there was a lot of discussion and when they

:23:31.:23:34.

did it it was no long sore sure. We priced in, we had the taper tantrum

:23:35.:23:39.

last year, it is over and done with, we have screamed and cried like the

:23:40.:23:45.

red Queen in Alice in Wonderland. It will come again, one of the things

:23:46.:23:48.

we are all focussed on is unemployment and youth unemployment.

:23:49.:23:54.

We talk about 6. 5-7% and youth unemployment employment is double

:23:55.:23:57.

that rate, 12-14%. What is interesting is the foreguide yarns

:23:58.:24:06.

you start to -- foreguidance, you start to look at it, years earlier

:24:07.:24:11.

we were all focussed on full employment and the inflation was the

:24:12.:24:16.

threat. The inflation rate is back to target, and the economy is just

:24:17.:24:18.

getting up to where it was before the crisis. There is not any sign of

:24:19.:24:23.

overheating in the vaguest sense in the economy, there is no wage

:24:24.:24:27.

pressure. So the risk I think is still that central banks act too

:24:28.:24:32.

fast and too quickly and do too much. This recovery is not secure? I

:24:33.:24:40.

don't think it is secure. It is a gentle recovery. Everything that was

:24:41.:24:44.

said in the interview about there being too much debt, too much debt.

:24:45.:24:49.

Nobody is advocating massive rate heights because we hit some arbitary

:24:50.:24:53.

target. Look at what the recovery in the UK is based on, it is consumer

:24:54.:24:58.

spending from rising house prices and the housing bubble we can talk

:24:59.:25:03.

about. Investment is flat on its back. Investment is on flat rate

:25:04.:25:10.

across the board, corporated sitting on trillions, they are not making

:25:11.:25:13.

investments banks. The biggest risk for our business this year is

:25:14.:25:18.

failure by business to invest in brand or capital investment. Do you

:25:19.:25:23.

feel confident in your business? Do I feel confident in it. Not in your

:25:24.:25:27.

particular business, does your business, as a whole, feel secure in

:25:28.:25:33.

the state of the, the pace of recovery? I think there was a

:25:34.:25:38.

quantum shift in corporate opinion and behaviour post Lehmans, post

:25:39.:25:49.

September 2008, people talked about people but it was corporate. Our

:25:50.:25:56.

sweet spot has become less powerful, I think that is the problem. In

:25:57.:25:59.

order to get to numbers they cut costs, they then invest in top line

:26:00.:26:04.

growth and part of the reason is GDP growth is still below trend. The

:26:05.:26:09.

sort of GDP growth we see on a worldwide basis is less than

:26:10.:26:15.

pre-2008, it is like Mark Carney saying the UK economy is just

:26:16.:26:18.

getting back. People are very cautious. What I worried about is

:26:19.:26:26.

not focussing on the top line. You mentioned one of the things talked

:26:27.:26:29.

about here, youth unemployment, which has the capacity to throw all

:26:30.:26:33.

calculation off at some point. This is a phenomenon right across the

:26:34.:26:38.

world. Are there other things that could really throw off any kind of

:26:39.:26:41.

calculation or assumptions made about the future? Technology. All

:26:42.:26:48.

the improvements, most of the improvements in technology are

:26:49.:26:55.

capital intense, if not labour-intensive. 3 -D printing, and

:26:56.:27:03.

the management processes and lack of need there of. This will have a very

:27:04.:27:07.

significant impact on unemployment, and youth unemployment, it is

:27:08.:27:10.

something I think that is the critical issue, the critical

:27:11.:27:15.

long-term issue. Inequality stems from that. Young people f they miss

:27:16.:27:18.

out on a job for the first five years of their career, their

:27:19.:27:23.

lifetime earnings are drastically reduced. I think we radically

:27:24.:27:29.

oversimplified, if you look back over the last 30 year, we had a

:27:30.:27:33.

digital revolution, on going and gathering pace. The consequence is a

:27:34.:27:38.

big shift way from workers towards capital, strength of capital,

:27:39.:27:40.

strength of profit and firms. You have seen a big rise in income and

:27:41.:27:44.

equality within workers, you have seen the returns going

:27:45.:27:48.

overwhelmingly to people who are skilled. Then you had the financial

:27:49.:27:51.

crisis on top of. That you had the huge recession and huge downturn, we

:27:52.:27:55.

are recovering from that. But the big secular trend is still there and

:27:56.:28:01.

intensified. We had the problem of the Chinese labour force entering

:28:02.:28:04.

the global market, flooding the world with cheap labour, now the

:28:05.:28:08.

Chinese labour force is being replaced with robots which means all

:28:09.:28:13.

of those Chinese workers will want higher-skilled jobs. If they

:28:14.:28:16.

compete, which they will in a global world with our youth, our youth is

:28:17.:28:21.

going to find it really, really hard. We haven't even touched upon

:28:22.:28:26.

the political anxieties. Go on? What is really interesting about the

:28:27.:28:29.

debate you had with the governor is what does it mean politically. It

:28:30.:28:33.

looks to me as though the Conservatives are, as we go into

:28:34.:28:37.

2015 going to be in a stronger position than others thought. And

:28:38.:28:40.

the coaliti will be in a stronger position. You have Ed Miliband

:28:41.:28:43.

taking the party to the left, chastising business, you saw stuff

:28:44.:28:46.

in the papers this morning about the reaction from business to that. I

:28:47.:28:49.

think it is really interesting politically. The other factor, of

:28:50.:28:54.

course, is the referendum, if Cameron winds, well coalition wins

:28:55.:28:57.

we will have a referendum. If Ed Miliband wins we won't. It is the

:28:58.:29:01.

devil and the deep blue sea. This is as nothing compared to some of the

:29:02.:29:04.

international political problems that could upset all calculation?

:29:05.:29:09.

The big one being Syria, or China-Japan. There is any number of

:29:10.:29:15.

potential massive war configuration that is could happen overnight. And

:29:16.:29:20.

Davos has not been a good predictor of the black spots! As I mentioned

:29:21.:29:25.

earlier, the World Economic Forum isn't modest in its scope, but then

:29:26.:29:29.

there is no shortage of things to worry about.

:29:30.:31:39.

Now this gathering is supposed to be about dealing with global issues, so

:31:40.:31:45.

here in defiance of the institutional prejudice against

:31:46.:31:51.

those who don't have the Y-sex chromosome, we have the Ugandan

:31:52.:31:59.

Finance Minister. The lady who worked her way up from a sweatshop

:32:00.:32:04.

to become one of the richest women in China, and Ella, my Turkish is

:32:05.:32:11.

pretty bad, she's the most read female author in Turkey. Do you

:32:12.:32:17.

feel, let me start with you, it is striking how few women there are

:32:18.:32:22.

represented at a senior level here isn't it? In the forum. Yes, I have

:32:23.:32:28.

noticed that. Why? That is what I was going to ask you what is the

:32:29.:32:35.

answer? It is puzzling because taking Uganda for instance, there is

:32:36.:32:42.

no legal barriers for women coming up in business or in Government. For

:32:43.:32:48.

instance we have a requirement that in every constituency has a woman

:32:49.:32:53.

MP. That is a third of the MPs in parliament are women to begin with.

:32:54.:33:00.

I don't know. What's your view? You know I would say just the opposite,

:33:01.:33:05.

I have been coming here for the last almost ten years, I have noticed

:33:06.:33:10.

this recent two years that women's participation has hugely increased.

:33:11.:33:14.

Is that your impression too, you have been before haven't you? That

:33:15.:33:18.

is not my impression, of course it is true in the sense that in the

:33:19.:33:23.

audience, among the listeners there are many women and there are

:33:24.:33:27.

beautiful conversations, but when we look at the numbers and statistics,

:33:28.:33:32.

85% of the participants at Davos are male, 15% are female. There is a

:33:33.:33:37.

big, big gap. Unfortunately this year it has even fallen under the

:33:38.:33:42.

statistics of two years ago. Now you weren't able to see all that some of

:33:43.:33:46.

those amazing statistics that were just running through, but one of the

:33:47.:33:50.

most striking things is that the difference in what's changed in

:33:51.:33:55.

Africa compared to the difference to what has changed in China, now why

:33:56.:34:01.

is this? Why has China forged ahead so much and Africa not forged ahead

:34:02.:34:06.

in anything like the same level in the last ten years. What's your view

:34:07.:34:11.

of that? I think in Africa our Governments went through about two

:34:12.:34:16.

decades of finding their feet, so to speak. We went through coups,

:34:17.:34:22.

military dictatorships, but in the 1990s we got our act together,

:34:23.:34:27.

governance, fiscal discipline, focussing on the priorities. And it

:34:28.:34:31.

has happened to coincide with a time when China was coming up. I think

:34:32.:34:40.

what's now, our natural resource bases offer a lot of interest to

:34:41.:34:44.

many people. Africa is now on the cusp. But we have a big deficit and

:34:45.:34:48.

we need to keep concentrated. We have an infrastructure deficit. We

:34:49.:34:52.

have a human productivity deficit, we need to take our advantages and

:34:53.:35:01.

define them. Is there something about Chinese society that makes it

:35:02.:35:04.

naturally able to progress faster? Well you have a relatively simple

:35:05.:35:12.

and one-party ruling politics which makes decisions easy. You also have,

:35:13.:35:18.

in China, previous to the recent 30 years of reforms a very suppressed

:35:19.:35:27.

social system. So that the recent reforms have unleashed all the

:35:28.:35:31.

energy. And plus the huge population, very disciplined, hard

:35:32.:35:35.

working work force. Now when you get a successful

:35:36.:35:40.

transformation taking place, as is happening, to some degree in Turkey,

:35:41.:35:45.

it sets off all sorts of social tensions doesn't it? Turkey is a

:35:46.:35:49.

very interesting case, and a very complicated case, if I may say so.

:35:50.:35:53.

It is not like any other country in the Middle East. It is not a

:35:54.:36:03.

typically authoritarian country or democracy either, it is somewhere

:36:04.:36:05.

inbetween. It is difficult to analyse the country. We have had a

:36:06.:36:10.

strong economy, especially in the last decade, but afterwards, what

:36:11.:36:17.

followed was especially along with political unrest, because I think

:36:18.:36:20.

politics affects everything. I don't think there is enough emphasis on

:36:21.:36:24.

these things. We're always talking about emerging markets, how you know

:36:25.:36:31.

Mexico, Nigeria, Turkey, independent nearings are the new e-- Indonesian,

:36:32.:36:38.

are the new emerging markets but we don't focus on the political

:36:39.:36:41.

circumstances. It seems to be accepted here that inequality in the

:36:42.:36:48.

world is a danger. Do you see it that way, if so how is it a danger.

:36:49.:36:54.

Surely it has always existed? Inequality has always existed but

:36:55.:36:58.

now with the pace of progress and globalisation and technology, you

:36:59.:37:04.

know in the global media. People now see and here things they never used

:37:05.:37:08.

to see or hear about. In the most remote villages they can see big

:37:09.:37:14.

cars, leather jackets, people going on space shuttles to the moon, and

:37:15.:37:21.

they say why can't I have that. The aspirational aspects of life I think

:37:22.:37:25.

are now much more immediate in our children's generation and in the one

:37:26.:37:31.

after them. But I'm not sure I think that we should concentrate now on

:37:32.:37:37.

the inequality and forget about forging ahead. Because you need to

:37:38.:37:41.

grow the pie before you can share it out. It is this place that's talking

:37:42.:37:47.

about the dangers of inequality. Yeah. It is, and looking at it from

:37:48.:37:56.

my perspective, from in the African perspective, I say that growth, for

:37:57.:38:02.

instance, in Uganda, we have got an index whereby our poverty level has

:38:03.:38:10.

dropped from 24% to 20%, but there was an inequality. You can't say you

:38:11.:38:15.

are going to hold everybody back in order to make sure that there is no

:38:16.:38:21.

inequality. You have to let people go ahead and get the people able to

:38:22.:38:26.

go ahead to go ahead and come back and pick up the others. I will

:38:27.:38:32.

explore it a few moments from now. Earlier I caught up with Bill Gates,

:38:33.:38:36.

the founder of Microsoft, he made money beyond the dreams of of a var

:38:37.:38:44.

Ritz, and decided a -- avarice and decided to spend the money helping

:38:45.:38:48.

others. I wanted to know what he thought about foreign aid and the

:38:49.:38:51.

gap between rich and poor. When you hear the statistic from

:38:52.:38:55.

Oxfam that the poorest half of the world's population own about as much

:38:56.:39:00.

as the 85 richest people in the world, including you, does that make

:39:01.:39:06.

you feel uncomfortable? What makes me uncomfortable is that children

:39:07.:39:09.

die, that people don't get a good education, they don't get enough

:39:10.:39:12.

nutrition. That is what I have devoted my life to working on. So

:39:13.:39:17.

all of that money that's in my hands is actually going against those

:39:18.:39:21.

problems. But you don't deny the gap between rich and poor seems to have

:39:22.:39:26.

got worse? No, the gap between rich and poor is not worse, thank

:39:27.:39:31.

goodness. Less children are dying, people a living longer, people are

:39:32.:39:38.

more literate. If you geoback far enough everybody was poor. You just

:39:39.:39:46.

want everybody to be the same, 200 years ago life was very short. A

:39:47.:39:49.

third of all children died before the age of five. That was an age of

:39:50.:39:56.

strong equality. Do you think enough is being spent on international aid?

:39:57.:40:01.

I would like to see that increased. Particularly the programmes where

:40:02.:40:06.

you are buying Malaria bed nets and preventing deaths there. You are

:40:07.:40:11.

buying vitamin A, you are buying AIDS drugs, you are inventing n

:40:12.:40:17.

seeds, giving them out, educating farmers how to use those things. We

:40:18.:40:21.

have seen phenomenal benefits in the aid programmes we are partnered in.

:40:22.:40:32.

You are a notable philanthropist, why is it British tax-payers or

:40:33.:40:38.

anywhere else in Europe and the world should they spend money on

:40:39.:40:42.

poorer people in poor countries? You have to decide do the lives in

:40:43.:40:48.

Africa have any value or not? Do we as we see them starving, not having

:40:49.:40:55.

enough nutrition, not having access to vaccines, having diseases that

:40:56.:41:00.

more money is spent on solving baldness than spend on a disease

:41:01.:41:03.

that kills a million children. Does that bother us or not. Are we

:41:04.:41:07.

willing to take, in the case of the UK, less than 2% of all Government

:41:08.:41:13.

spending and have it go towards the very poorest, which in fact is very

:41:14.:41:17.

generous. You could completely alter the picture of the world if you went

:41:18.:41:24.

for a genuine redisputive method in taxation? You mean like North Korea?

:41:25.:41:29.

No, by democratic consent? Well yeah. You could do that? You could,

:41:30.:41:33.

we have many democracies they have all have different taxation

:41:34.:41:40.

policies, the Nordic countries have certain taxation policies and the UK

:41:41.:41:48.

has different ones, I'm nott an expert on any -- I'm not an expert,

:41:49.:41:55.

except in the US. Would you want the levels to change? I have been a big

:41:56.:42:00.

opponent of the estate tax. I believe that income on capital we

:42:01.:42:04.

could tax that a bit higher. When you saw the results of the Senate

:42:05.:42:09.

investigation into Microsoft's tax affairs, and the allegation that

:42:10.:42:15.

about $4 million of taxes a day wasn't being paid because of the way

:42:16.:42:19.

that Microsoft managed their fares, what did you think? I think that's

:42:20.:42:23.

about as incorrect a characterisation of anything I have

:42:24.:42:25.

ever heard. It was the allegation that was made? No, no, it is simply

:42:26.:42:31.

hog wash. Which aspect is hog wash? The idea that Microsoft didn't pay

:42:32.:42:36.

its taxes. It is not that Microsoft didn't pay taxes, it is that they

:42:37.:42:41.

could have paid more taxes? Voluntarily? Yes, by choosing to

:42:42.:42:45.

organise their affairs differently rather than running them through

:42:46.:42:50.

Puerto Rico? Your numbers are completely wrong. Let me put it

:42:51.:42:54.

another way, as statement of principle are you in favour of

:42:55.:42:59.

people saying as much tax as possible? I think that if your

:43:00.:43:05.

Government should pass the tax laws that they need in order to collect

:43:06.:43:10.

the revenue they want to collect, I don't think you know saying that

:43:11.:43:14.

people should volunteer to pay taxes is likely to raise that much. It can

:43:15.:43:20.

be tried. But you know, the rules are set, I paid more taxes than any

:43:21.:43:25.

individual ever and gladly, so I should pay more. I have paid over $6

:43:26.:43:30.

billion in taxes. How do you persuade people it is their

:43:31.:43:34.

political or moral duty to pay tax, in order that there can be some sort

:43:35.:43:38.

of redistribution? You make sure that they follow the law and pay

:43:39.:43:42.

their tax, if you don't you put them in jail. It seems to work! Bill

:43:43.:43:48.

Gates thank you very much. What do you make of his approach? I don't

:43:49.:43:55.

know, I mean it is very interesting to say that, in China we are on the

:43:56.:44:00.

different side of it, because you know we're in an economy that's

:44:01.:44:05.

trying to boost consumption versus just boosting investment. Part of it

:44:06.:44:10.

is how do you get people to spend money. They need to have more cash

:44:11.:44:14.

in their hands. By doing so the Government needs to lower the income

:44:15.:44:18.

tax, not raise the income tax. This question though of aid, Bill Gates

:44:19.:44:23.

has been a generous man, particularly to countries in Africa.

:44:24.:44:28.

And yet you get to this point that gets to there where he refuses to

:44:29.:44:33.

take a moral position about whether people should pay more tax in order

:44:34.:44:41.

to give more in aid. He sees it as a political decision or personal

:44:42.:44:46.

decision. What do you think? Looking at it from the point of view of an

:44:47.:44:50.

African Finance Minister, yes the Government has a duty to tax and as

:44:51.:44:56.

a redistribution of wealth. But we must make sure that since the taxes

:44:57.:45:01.

in our countries are so precious, we must make sure they go into

:45:02.:45:05.

sustainability, they go into the areas where the private sector can't

:45:06.:45:11.

do. For instance in Uganda we are concentrating on narrowing the

:45:12.:45:15.

infrastructure gap, roads and power, we are concentrating on the human

:45:16.:45:22.

productivity, health and education. For the rest, making sure that the

:45:23.:45:28.

macro environment is such that the private sector can forge ahead. And

:45:29.:45:32.

trying to spend the tax revenues with governance and accountability.

:45:33.:45:36.

You see if you give accountability, if people can see where their tax

:45:37.:45:40.

money is going and what it is doing, they are not, they are not adverse

:45:41.:45:46.

to paying taxes. What's your take on this, on the question of how you

:45:47.:45:50.

persuade people it's worth paying taxes to narrow the gap between rich

:45:51.:45:54.

and poor? Find it very important that this year in Davos the main

:45:55.:46:00.

subject is inequality. There is so much inequality all over the world.

:46:01.:46:03.

It is such a pressing matter, you know. Not only among countries when

:46:04.:46:08.

you look at the list of countries and their level, within every

:46:09.:46:12.

country as well. We see big huge regional differences and this has

:46:13.:46:18.

big social implications and political implications. And I think

:46:19.:46:20.

more and more people are recognising that all the rest adds up and comes

:46:21.:46:25.

back to the economy again. It is a circle, you cannot separate these

:46:26.:46:29.

facts from one another any more. What is happening in the political

:46:30.:46:32.

world is affecting what is happening in the economic world. What is

:46:33.:46:35.

happening in the social, the class gap is affecting the financial

:46:36.:46:39.

situation. Everything is interconnected. I don't want to be

:46:40.:46:45.

apot hintic, we are sitting -- apocalyptic, we are sitting here in

:46:46.:46:51.

2014, and with a world war or catastrophe that nobody saw coming.

:46:52.:46:56.

Are we talking about these stakes when it comes to inequality and

:46:57.:47:00.

chnology change and the rest? There is a lot of hope and there is a lot

:47:01.:47:05.

of reasons to be pessimistic as well. They are two completely

:47:06.:47:10.

opposite trends working at full forced to. On the one hand the world

:47:11.:47:19.

is more globalised, people are more and more seeing themselves as world

:47:20.:47:23.

citizens and feel themselves connected and are looking for moral

:47:24.:47:27.

values that bind us together. But on the other hand, I think there is

:47:28.:47:35.

enough of the extremist ideology, ultra nationalism, these are also on

:47:36.:47:38.

the rise. We have to recognise these two opposite forces working at the

:47:39.:47:43.

same time today. I grew up in socialist China, I

:47:44.:47:47.

remember the days when we used to wear the same clothes. Allocated the

:47:48.:47:54.

same housing, nobody paid tax, everyone is being given exactly the

:47:55.:48:01.

same salary. That is one extreme scenario. Where China is so much of

:48:02.:48:07.

it is unleashing the energy and allowing the ditcheses between human

:48:08.:48:12.

beings, now if you take back extremism, I'm interested to hear

:48:13.:48:20.

when you said "you mean North Korea", that is pretty much back to

:48:21.:48:23.

where China was in the 1970s. Thank you very much, that is it from

:48:24.:48:26.

Davos, back in London tomorrow, good night. Hello there, a real west/east

:48:27.:49:03.

split to start the day on Friday. Clearer skies but dry fog in East

:49:04.:49:07.

Anglia. Wet and windy weather pushing in from the west. As it

:49:08.:49:12.

bumps into the warm air on Scotland snow and freezing

:49:13.:49:13.