Done in a generation before. He was very much a standard bearer for a Younger Generation of, you know, sort of armchair fire brands and he was the real thing and i think they admired him for it and sort of worshipped him. I think he was very, very stoic and he never really complained. He must have been in excruciating pain after the proton radiation, which actually worked. Because he would try to swallow or eat something and he would kind of cry out. And that tells me he was really in agony. But actually, eventually, that cleared and we had a wonderful 20 course meal at the waiverly inn with martin. Rose editors from the economist, Graydon Carter and carol blue when we continue. Captioning sponsored by Rose Communications from our studios in new york city, this is charlie rose. 6. Rose tonight we continue our conversation about the Global Economy with a panel of distinguished guests from the economist magazine. Here are some of the factors we will be looking at the world looked to europe today as talks continued over the euro zone financial crisis. European Central Bank President defended his bondbuying program in front of the bandenstag this afternoon. These actions are fully and foremost in compliance with our mandate of delivering price stability for the whole of the euro area in the medium term. Rose as germany demanded tight control over greek budgets some called austerity measures undemocrat. In the United States a debate at the fiscal responsibility is at the heart of the president ial election. If somebody game to you, governor, with a plan that said, here, i want to spend seven or eight trillion dollars and were going to pay for it but we cant tell you until maybe after the election how were going to do it, you wouldnt have taken such a sketchy deal. Weve gone from 10 trillion of National Debt to 16 trillion in National Debt. If the president were reelected wed go to almost 20 trillion of National Debt. This puts us on a road to greece. Rose joining me now, distinguished editors from the economist magazine, John Micklethwait is the editorinchief. Zanny Minton Beddoes is economics editor and Vijay Vaitheeswaran is the China Business editor. I am pleased to have all of them on this program. Theyre here in new york and washington talking about big Economic Issues with leading people in the economic arena. How did i do on the pronunciation . Weve assembled possibly the three most difficult names even by the sounds of the economist. Micklethwait is by far the easiest. Rose vijay, did i do okay . You did very well. Rose you were easy, zanny. So you asked me what do you want to talk about and i said to you what in the world is going on in the world . Give me an insight. I think a moment in a sense youve got all the three big economies of the world going through something. Youve got the america weve got the American Election, weve got the approaching fiscal cliff youve got china where its worth remembering there is a fullflooded transition going on now, xi jinping is about to take over. Hes taking over a country where i think the economy is slowing down but where most of the issues are really on the social and political side. I dont think china can stay in the same group that its in. Rose and its less to who will make up the leadership in this country. Exactly. And then you have europe where europe is heading in one of two directions. It seems to be heading i would still bet in one towards a sort of more federal structure and one where Angela Merkel becomes an ever more powerful figure. And this is thats a complicated world for whoever becomes the next american president. But the more immediate problems in europe are to do with the euro zone. Rose you would add to that . I would simply add that i think you have all of that against the backdrop of a slowing Global Economy. You have to Global Economy growing at the slowest pace since the Great Recession of 2009. Youve had disappointing economic outcomes here and in europe, particularly and in china and, frankly, in the rest of the emerging world, too. Rose brazil or anywhere else. Absolutely, brazil, india. And the big question, john is absolutely right, is the Political Uncertainty. Huge Political Uncertainty here. What happens with the fiscal cliff could be a catastrophe if we go over it and stay over it. What happens in europe . Were actually slightly less is there political will . There we can get to this but im less pessimistic than ive been for a long time and china and what happens once this leadership transition is over. Does the new chinese constellation have the capacity to put through the reforms that the next generation of reforms that that country needs . And i think these are real political uncertainties that have people in the market kind of saying you have to wait and see and thats hanging over the World Economy now. Rose i want to say one thing before i come to china and you you see it. This is where the economy is now cry the beloved country, south africas sad decline. Next week it will be china, the week after that am i giving away secrets here . We will endorse somebody in the American Election. Rose all right. China today. Where is it going and how will it change in the political leadership, change the economic outlook, if at all . I think thats as clear as it is america n america. One thing we know which is not at all. To be fair, we know who the leaders will be at the very top, but the composition of the bodies beneath them and also rose even the Standing Committee. The Standing Committee is not yet known and theres lastminute infighting going on. Theres a million rumors, of course. But the broad direction of china is not going to change. And the real question is, as zanny eluded to a moment ago, will there be the strength and the vigor in a new leadership to pursue the reforms that are need to take china through what will be a difficult few years. Rose what are those reforms . For example, china has gone through spectacular growth. We all know. Of an investmentled model of growth thats served its well, an exportled model. The leadership acknowledges that it has to make a transition to a different model of growth. Weve already seen growth slowing down in china, something that is great by american standards but nevertheless a slowdown can they make a transition to a consumption model of growth. Can they take on, for example, Stateowned Enterprises which often have monopoly positions, special peshgs, misdirecting capital so they can unleash the dynamism of their own private sector entrepreneurs . This is a huge challenge for china. It must be done but will the new leadership have the strength to do this . Rose at least they know it must be done. But there are many, many forces that fight against it because many of these things are done behind closed doors and we did see very ugly infighting before and great scandal that made the news, one of the potential leaders, bo xilai fell in a Corruption Scandal involving murder and intrigue. Rose is that story over . I hear stories about people rumbling about how to nothing is ever over in china. The implications of that is i think the leadership might well be cautious. I think were likely to see certainly in the short term were unlikely to see an aggressive embrace of reform would be i think the smart money. But how long can you last with an unsustainable growth model . It also makes a difference to us because if romney comes in and declares china a currency manipulator on day one rose trade war . I think thats dangerous. I thinks an assumption particularly amongst republicans that china is the same old china that china is used to being a xwashed on the president ial trail and it will go through it and just it is there and think its another president coming in whos bashed us, well just take time and come back. I think china has fundamentally changed. I think china now sees itself much more as in the has read this stuff about being a g2 world, and its less if the mood to take ultimatums. So you can end up with two very practical people. I think romney is quite practical but you can see an element whereby if they give an ultimatum to the sort of people who vijay just described that could be very dangerous. Rose and it could spill over not just in terms of trade but in terms of the essence of the relationship and all the potential for working together on big problems. Its all a lot of these nationalistic questions like the islands, like the disputes with japan, on all these issues the leadership in some ways is more reticent than the people who are very angry about these things. You can see it on the internet and a lot of things. From those perspectives, if you were the new chinese leader and immediately you have an american slightly in your face then actually youll be much less likely part of just the beginning of any new leadership and even more so in that kind of a system you have to stand tough. So i think johns right. Thats a huge potential danger. Something that would be seen as a sort of outright provocation by the United States with china could quickly spiral. I think thats something thats not really sufficiently taken into account in the discussion here about china. Its clearly romney whos pushed that, but actually Obama Administration in trying to get votes in ohio everyones trying to be outtough the other on china. I think theres also a general sense that i think america is in a different state with regard to china. You get asked much, much more about china here than you do in europe and theres a reason why. America is the top dog and suddenly you feel the dragons breath on your shoulder in a way that america really hasnt for a very long time. So it touches not just Economic Issues, not just jobs and competition in the same way as japan did a long time ago but it touches things to do with national security, it touches things to do with the environment, it touches a whole variety of different issues. Rose interestingly about the president , he has consistently said were interested in chinas growth because we believe thats a positive thing yet when you go to china and you talk to people and some influential people they are not quite convinced that america does not want to somehow contain them. I think thats right. I was actually just in china, vijay and i live there, i was there about a month ago and had exactly that feeling. And i had also a sense of an amazing engagement in the American Election campaign and a real sense of, you know, concern about what romney was saying. Very, very kind of visceral reaction to that. Dont these americans get it . Why are they doing is this this . I think that put that in the context of a new leadership in china and you have something really quite tricky. I think separate to that you also have an uncertainty that comes few from where the chinese economy is going to go and, you know, its slowed and i think probably my best guess and i would suspect vijays best guess is that the chinese are capable of having a 7 growth, maybe a little bit more. But were not going back to the days of yore with double digit. And i worry about their capacity to do the reforms necessary to sustain this transition for the simple reason that they will require attacking powerful vested interests within china. I mean, two free up the domestic capital market, which is what they need to do over time to get a serious price of capital that doesnt mean that Stateowned Enterprises hoover up all the capital at cheap rates. That requires taking on powerful interests, breaking up monopolies, taking on very powerful interests that have become even more powerful that are hoovering up large chunks of chinese wealth and i think its a its a very interesting parallel between what went on there and frankly what went on here 100 years ago. You had the same kind of its robber barrens of a different sort but you have to take them on and if theyre not taken on i think its very hard to see how the chinese economy gets to the next stage where it needs to go. Rose do you see to your own knowledge people who have made achieved considerable wealth looking to take that wealth somewhere else . Looking to get out of the country . Absolutely. Absolutely. Its very difficult to trace the amounts of money but theres no doubt. There are passports in foreign countries, australia, canada, the u. S. Or u. K. , families that are set up in these places, residences, money to hong kong and elsewhere. So these are the ways in which people prepare for a crackdown of some sort. Part of the problem with the nature of state capitalism in china is because people dont know when the crackdown will come if, for example, the friends they think they have in government turn on them, they have every incentive to be very shorttermist. Its really a corrosive influence, not just on just because of corruption or taking the money out of the country but in how you dont invest for the long term in your businesses, for example. So its really a perverse kind of capitalism that we see, even in the private sector. You can look at anecdotal evidence that seems to suggest that whereas at the beginning it was the big cheeses getting their money out, now its really prosperous welltodo little trying to get some money into handicap. Hong kong is usually the way out. Rose before we turn to europe. How much are these economies dependent on each other . Chinese economy has clearly needed the demand for europe to fuel its exports. And at the same time, that demand has with the european debt crisis has been reduced. Its one of those argument which is tends to go both ways in very savage amounts. One moment everybody thinks everything has to do with the International Picture and the next moment its entirely domestic and the answer is its a mixture of both. Every chinese economy seems to have some push towards the outside world. It is a very exportled economy and as vijay said, thats one of those problems. But it goes the other way that eople trying to make money in china at the moment are looking at the domestic market. You have a lot of consumers who are beginning to last time i was there i met somebody who was running a small web site quite a big web site aimed at selling cheap clothes to Young Chinese girls getting their jobs. I think it was five items with the average amount people bought each wall street for 20 total and these were cheap clothes but theyre people that are spending a large amount of disposable income on getting this. The domestic market is enormous, charlie. Think ally ban baah be online trading site. They predicts it will have more trading revenue than ebay and amazon combined. Another company has a higher valuation in revenues than facebook. Just a couple small examples. Theres huge dynamism and potential at home so the question is can the way that lets say u. S. Policy made a pivot to china, can Chinese Companies themselves make a pivot to their own domestic markets . Rose to their own markets. Domestic consumption has been growing very rapidly in china. The interesting linkage to me that john mentioned is the lingage with europe but the interesting linkage between china and the rest of the world, a lot of supercharged Economic Growth in the emerging world over the last few years has been driven by demand for commodities from china, soaring Commodity Prices and commodity exporting countries, brazil, many others have seen the gains from that. And as the chinese economy shifts over time the different kinds of emerging economies are interesting and as it moves up the supply chain, the skill chain, the wage chain, what happens to the ones that are behind the vietnam, the cambodias and what happens to countries like mexico which have a huge geographic advantage here. Those are linkages that are worth following. Rose Hillary Clinton famously today somebody overheard on an open mic, how do you admonish your bankers . Speaking of something she wanted to say to the chinese over there. Does that banker creditor relationship have an impact on this relationship. I would counter the secretarys insight with perhaps the other one which is when you owe the bank a Million Dollars its your problem, when you owe them a trillion its their problem. I think this is a very interactive, locked together there are questions about the u. S. Fiscal outlook and china is a sort of separate part of that. I dont think thats part of the rose youre optimistic about sglurp well, im less pessimistic. When weve spoken in the past ive always been the most pessimistic person in the room and i went into earlier this summer i was deeply, deeply pessimistic because i thought that and ive never thought the pessimism optimism should be about economics, its always about the politics in europe and i was very pessimist that i can germany in particular but others in europe really had the political will to keep this thing gichblgt over the summer i think two profound things have happened. One is that in a clear decision in germany that they dont want to kick greece out, that they do want to keep this show on the road and they absolutely dont want the euro or anything to do with the euro to be an issue in their election next year so they want peace and quiet for the next year and i think youve seen that in the support at the e. C. B. And his bold action. Youve seen in the a changing stance on greece and i think the driving force within germany now is we want to have president ial campaign, we want to have our elections, were going to deal with Big Decisions after that and we just want to hold things tog