David Rubenstein,
Co-Founder and Managing Director, The Carlyle Group
Moderator:
Paul Gigot, Editorial Page Editor, The Wall Street Journal
"What happens outside the U.S. is just as important as what happens inside," says David Rubenstein, right, during the Tuesday luncheon panel. At left is Czech Republic President Vaclav Klaus.
Paul Gigot of the Wall Street Journal kicked off the plenary session with an overview of the global economy, first highlighting the outstanding growth of the United States, China, India and Russia during the past few years, despite increasing interest rates, oil prices and terrorist threats. In contrast, Germany, France and Italy have displayed anemic growth, he said as he introduced the three panelists, who each gave a short speech on their view of current and future states of the global economy.
President Vaclav Klaus of the Czech Republic stated that "we live in a tightly interconnected world" and that globalization has had a net positive effect. Stressing the importance of freedom and openness rather than protectionism, he said, "Communism has gone, but liberty and openness have not become our guiding principles." In particular, he said, Europe has shown a renewal in protectionist policies, with the EU prime minister proposing a fund for the "victims of globalization" in Europe.
David Rubenstein of The Carlyle Group stated that during this decade, "what happens outside the U.S. is just as important as what happens inside." He asserted that the United States would have to change in order to remain one of the world's great global powers, and that one of the fundamental changes would be to invest more heavily in foreign markets, as well as to allow more foreign direct investment. If not, he warned, the country would most certainly "run the risk of not being the economic power we have been for the last 50 years."
Gary Becker outlined the major engines of growth in the past year. He stressed the importance of the great productivity growth that the United States has seen in the past decade, as well as the explosion of growth in developing countries, and in China and India, in particular. One of the main drivers of future growth would be to give private-sector ample opportunities. He also stressed that the real risks lay in too much intervention by the government. For the long term, he noted, the most important thing for growth in the United States would be to keep the government from "messing up too much."
"Are we seeing an incipient re-inflation?" Gigot asked the panelists, and Becker stated that what we are seeing is a rise in relative prices rather than inflation. The other panelists concurred, with Rubenstein adding that there were far bigger problems than inflation today.
Panelists were asked if they were in support of the flat tax and whether such taxes drove the new policy changes in "Old Europe." Klaus was in favor of it but warned against thinking of it as a solution for other problems. Becker agreed, stating that they should "not think it as an 'open sesame' to a global economy." He also cited other problems that came along with the flat tax, such as how to tax the corporate sectors and other special groups. Rubenstein added that the United States has in effect a "back-door flat tax," and Becker concluded by saying more important than a flat tax to economic stimulation was having low taxes. Rubenstein stressed that there is a direct link between tax rates and the stock market.
Gigot then moved the topic to the risks of protectionism, asking the panelists, "Are we seeing a backlash of protectionism?" Klaus responded that he saw resurgence in protectionism, particularly in Europe and United States. Panelists suggested that strong presidential leadership could drive trade liberalization and that the current administration′s low approval ratings might be harmful to the U.S. trade policies. Klaus added on that the U.S. and other Western European countries had the additional burden of non-tariff barriers. Other barriers were external, with the rest of world viewing globalization as the spread of Americanism.
The panel concluded with a short discussion of China, which Rubenstein described as a "huge growth market." He said that despite the risks of Chinese negotiations, investors in China should be prepared to go there for long durations and work with local partners in order to take advantage of the opportunities for profit, concluding that China′s main focus is not to make the United States richer.
Global Conference 2013
Former Prime Minister Tony Blair, philanthropist Bill Gates and Strive Masiyiwa of Econet Wireless discuss advancing prosperity in Africa.
