"Renaissance Thinking About the Issues of Our Day"
MODERATOR: Kemal Dervis will have the last question. He’s the director of our Global Economy and Development Program.
QUESTION: Madam Secretary, in the spirit of the synthetic strategic approach you presented to us today, I’m going to come back to the deficit and the economic issue a little bit. But one of the things I think around the world people expected and are expecting and were so enthusiastic about with the election of President Obama and of your Administration is more stress on the average family, on the medium income unemployment, and on fighting poverty. And in this balance – and I’m an ex-secretary of the treasury in my own country – but in the balance between fiscal austerity but also attention to employment, to poverty reduction, in the U.S. itself the unemployment rate remains close to 10 percent. In southern Europe now, there’s a major new social problem emerging. In the U.S. in the first eight years of this century, two-thirds of the income gains accrued to one percent of the population.
So in terms of this synthetic approach, both for the U.S. being strong at home but also worldwide, how do you see the balance? Or how do you think we can manage the balance between fiscal responsibility, which is, of course, very necessary, but also attention to the most vulnerable, the poorest segments of both American population and worldwide population, and the need still to strengthen this recovery, to strengthen employment, which remains a key issue?
SECRETARY CLINTON: Well, that’s a very important and complex question. And I’ll answer it in this way because I think you have posed a very stark choice. It’s the choice that President Obama and other leaders have had to be making every day. How much stimulus, how much restraint, how much to stimulate employment directly, how much to try to invest in larger kinds of job creation entities such as the stimulus in high-speed rail or whatever it might be. It’s a – getting it right is not easy. And the fact that Ben Bernanke, the chairman of the Federal Reserve, specialized in the Depression came in very handy because you can understand how you can get the balance wrong even with the best of intentions.
So I’ll just make a few comments. One, I think it is really important for countries to be focused on stimulating long-term sustainable employment. And in the Recovery Act which was passed last year, there are some very big investments in clean energy technology, high-speed rail, and the like, that will not bear fruit for a long time, probably, but are absolutely necessary to be made. If the United States does not once again become the leading innovation nation, it’s hard to know where we’re going to find the jobs that we have to produce for people. And yet if we do it wrong, or we do it artificially as in some countries are in my view doing, that will lead to protectionism.
We had a very frank conversation, led by Secretary Geithner, with our Chinese friends in Beijing. They see a very stark problem. They have tens of millions of people they’re still trying to get out of absolute poverty, so they want to have an innovation agenda that would in effect capture companies’ intellectual property and require companies to operate inside China in a way that could undermine the long-term success of those companies. So we say no, that’s not a good way to do it. But the debate about how to do this is going to be front and center of international economic dialogue.
I also believe you put your finger on one of the biggest international problems we have. And I’ll just – this is my opinion; I’m not speaking for the Administration so I will preface that with a very clear caveat. The rich are not paying their fair share in any nation that is facing the kind of employment issues, whether it’s individuals, corporate, whatever the taxation forms are. And I go back to the question about Brazil. Brazil has the highest tax-to-GDP rate in the Western Hemisphere. And guess what? It’s growing like crazy. And the rich are getting richer, but they’re pulling people out of poverty. There is a certain formula there that used to work for us until we abandoned it – to our regret, in my opinion.
So my view is that you have to get many countries to increase their public revenue collections in order to make investments that will make them richer over the long run. You have to work hard on the innovation new technology agenda to try to create new forms of jobs. You have to strike the right balance, which is not easy, and different countries probably require different approaches between stimulus and restraint. I think you have to, even during crisis periods, look at big works projects in order to employ people. But it’s difficult to do that in some of the advanced countries because the kinds of jobs that those work projects produce are not always the jobs that people are willing to take.
And one of the things that benefited the United States dramatically in the ‘90s and the first decade of this century was immigration. I mean, we filled a lot of jobs that really fueled the economy as a lot of our population aged. And so immigration has to be somehow in the mix, but it is becoming an increasingly volatile subject, not just here but everywhere. So there is no, like, one perfect formula. But we know the elements that are necessary. And trying to get that right balance is very challenging.
And I think that we have to also work on changing attitudes, and that requires leadership. We need a robust market economy that is truly as free as possible everywhere but with appropriate and effective regulation everywhere. And we need rich people everywhere to understand that many of them benefited greatly by the investments of prior generations in their own families or their own countries and that they have to be part of helping to keep that growth rate and that economic progress going for future generations.
And we have to change attitudes among individuals. Nick Kristof wrote a column last week sometime talking about how a lot of really poor people around the world have money but they don’t choose to spend it on educating their children. And he talked about one family in a poor African village that had enough money to pay the $10-a-month cell phone bill for the husband and the wife but not enough money to keep their son in school. So we have to have leaders in countries and companies and religions who focus on the needs of children, the next generation, because educating kids, keeping them healthy, family planning, these are all part of dealing with the long-term economic imbalance in the world.
And then obviously, there are specific issues on currency and the like. But on a sort of broad stroke, I think leaders are trying to balance all of these competing considerations and I think that our country is pulling out but we’re still going to face a large unemployment figure for a long time. And what we’re doing now has to help whittle that down for the future.