OECD Forum 2014 - Economic Outlook Debate

[00:00:00] Speaker 1: Right, just want to remind you this is an incredibly interactive session in all kinds of ways. I'm sure you've all heard of WizEmbly. I won't get a show of hands. This is WizEmbly and there's a slides going to go up and tell you how to use it. There's two things I want you to do. One is take part in a vote and you heard there from Mr. Tamaki, Mr. Guri, about some of the risks. We're asking you to see what you think the biggest risk is. You can do this via iPads, smartphones, iPhones, you name it. What do you see as the most serious risk of the global economic outlook? You've got six choices, five choices. Slowdown in emerging economies, weak growth and deflation in Europe, recovery weaker than projected, fallout from geopolitical tensions, financial market turmoil. So you can vote on that and what I'll do is I'll just give the result at the end of this. So that's the easy bit. The other thing is if you want to put in messages for the panel, questions for the panel as well. I will take the traditional way of someone putting their hand up and getting a question in but as well. But I've got a button on my WizEmbly which says, "Message Favourite," which is my favourites. So I will be very selective there as well. So you can do two things. One, make comments, ask the panel stuff and two, get involved in that question as well. I've got a question as well. I don't know if Mr. Guri or Mr. Tamaki wants to take this one to start off with. You mentioned a lot about accommodation and I didn't think you were negative about accommodation. I thought you were saying, "Great, it's helped support us during this crisis." And then you mentioned a lot about structural reforms as well and how there was a real impetus and need for structural reforms. But while we've got accommodation, where's the impetus for structural reforms when they're getting away with it? When you've got central banks which are pumping so much liquidity into the system, you've got sovereigns who aren't carrying out necessarily the action they may well need to do so because of that accommodation. I don't know if Mr. Guri or Mr. Tamaki wants to pick that one up, but I'm unsure of how good accommodation is now. I didn't see in the economic outlook the catalyst for that to change this year. [00:01:59] Speaker 2: Well, the question is we've been accommodating for a long time now. I actually have debt of gratitude to central bankers because they allowed us not to have such a deep trough in the recession. But as we see, those kinds of tools are having now diminishing returns. And we should go back to normality. In fact, the reduction, as Mr. Tamaki suggested, the tapering in the Fed is good news because it suggests we're going to normality. The only problem is we got used to the steroids. You know, we got used to the cortisone. And now they want to take it away. The doctor says in one year's time, you will not be on steroids. You will not be on cortisone. And we start complaining instead of saying how wonderful, you know. So the thing is, we can't continue to double the Federal Reserve Bank's balance sheet, you know, every two years. Or for that matter, even the Bank of Japan, which is doubling the money supply in two years' time to 270 trillion. We can't do that. We can do it in a time when you're trying to kick it off, kick start. And then, because you run out of room there, you also have run out of room on the fiscal policy, meaning we can't spend our way out of this morass because we already did that. Okay? So what do we have? We have structural reform. Okay. And therefore, what we're saying is the, what used to be the medium and long-term issues, now seem the best short-term issues. Because if you sell them well, if you explain to people what you're doing, it'll create the promise of a better future. All right. Well, let me just come back to you [00:03:52] Speaker 1: finally on this point. You talked about return to normality. Is normality 150% debt to GDP, double-digit unemployment in Europe, a worse growth rate than we had in 2007? That doesn't sound like, that sounds like we're worse than 2007. Not about, not normal. This is why Tamaki-san warned about [00:04:11] Speaker 2: complacency. And that is because we just came out of the worst economic crisis in our lifetimes. It's no sense comparing it to the 1930s, frankly, because it's, and there's, the scars are still open. We still have the legacies weighing on our shoulders. We still have low growth. We still have high unemployment. We still have growing inequalities. We still have the destruction of trust all over the place. And on top of that, credit, flat to negative, still in 2013. Slowly, investment and trade picking up. That's promising. But the traditional engines of growth, growth, which were the emerging and the, you know, large emerging developing economies have lost some of their dynamism. So they're slowing down a little bit. So the, the context is rather complex. The, the new normal cannot be what we have today. We have to get to a better situation, but what we can't continue to do it is through the steroids or the cortisone. We really need to go on what will keep the recovery going for the short, for the, for the medium and the long term. And that is, that, that's structural change. That's, that's education, innovation, competition, flexibility in the labor markets [00:05:34] Speaker 1: and the product markets, et cetera. Okay. Mr. Tamaki, I spoke to Andrew Robb today, the trade minister for Australia. He said it was a smaller state. I think we're agreed that the state pulling back, less accommodation, more private sector. That's kind of the way forward. It's part of the, that the headline comment from this forum, it's inclusive growth. Okay. So why aren't the corporate spending? The corporate in Germany and United States, even in Japan are, are reluctant to spend now. And they're reluctant. And I'll open this up to the panel in a few moments time after I've introduced them. They're reluctant to create jobs. They've had all this thrown at them. And yet they're still not creating jobs and they're still not investing. They're paying back their shareholders. They're increasing the dividends. They're paying their star employees a lot more money, as indeed the OECD report said last week. So why? Where's the catalyst in 2014 for that inclusive growth? [00:06:25] Speaker 3: And this is, it is true that say corporate sector still say retain some, it's their profits not to allocate to the shareholders, not to allocate say, not to increase its wages. It is typical example is in Japan where the corporate sector piles up cash liquidity, but our wages, nominal wages remain almost the same, of course. And I say we are, we are seeing now the, say, initiation of wage increase, say this month or last month. But this is still the, the corporate sector is a bit defensive in taking risks. We need to continue the policy framework more accommodative. We suggested the, for the euro area to take on our new actions by the ECB. This is in line with our, say, a suggestion to maintain the accommodative policy framework to encourage private sector to take more risks. [00:07:30] Speaker 1: Okay. Look, you two gentlemen can stay. You can go. I'm very happy for you to stay. I don't know. Well, will you just stay there and see what you think? Anyway, look, I'll tell you who the rest of the panel are. It's a great panel. It's Richard Trump, who is the president of the TUAC, president of AFL-CIO. You've got a few ideas on jobs as well. I'm delighted to welcome Ali Babacan as the deputy prime minister for economic and financial affairs, Turkey. To my left here, we have Akira Amari, the minister in charge of economic revitalization, minister of state for economic fiscal policy, Japan. And at the end, we have Phil O'Reilly, CEO of business, New Zealand chair of BIAC. He's got one or two comments about the corporates and their spending as well. Do you know, Mr Babacan, I was going to ask you the first question, but I think the right way to come in now is actually ask Mr. Amari the question as well. And it's not the question I told him I was going to ask. So I hope Mr. Amari, if I may, the corporates have been given a huge boost in the first two arrows of Arbonomics. You're waiting, the world is waiting for them to spend their money and to create growth as well. Are you concerned at the moment that they don't seem to be driving an investment drive, or you're happy with what the corporates are doing? [00:08:44] Speaker 4: It's a great pleasure for me to participate in this session. It's a minister in charge of Arbonomics. But my English ability is not enough to explain such a complicated issue like this. So from my arm, please allow me to speak in Japanese. Are you ready? Are you ready? Can I start? [00:09:31] Speaker 5: Well, the third arrow of the Arbonomics, trying to encourage the private sector investment, the growth strategy to encourage that has just been started in Japan. It is not that we have yet to see the active investment because the program has just been started. Now, in the preliminary stage, whereas we had several growth strategies to be implemented in the past, but they were not that effective, only on a transitory or temporary basis, because in the background of the deflation, the economic policy was being implemented. Because in the deflationary situation, not to spend money was more advantageous. So you needed to create an environment where it would be better to spend money. So now the background has already been developed and ready. So how to induce more money into investments. First of all, a more favorable tax environment for investment, the tax incentives for investment. And where the Japanese economy will be growing. We need to create new frontiers. And how to create such new frontiers to to try to convert negative into positive. Let me explain. The social challenges, the societal challenges faced by Japan, more specifically, the aging of the society and the declining birth rates, the vitality of the society is waning. But then we would like to create a new frontier out of that situation. We would like to create all hands on society and to create a conducive climate for women to be able to participate in the labor market, and also the younger people also to be able to participate more in the labor market. And I think on the retired generation, whenever they are still fit and ready to work, they need to work to try to take on the challenge to increase the number of healthy senior citizens to be willing to work. So we need to have a more innovative research and development in the area of the healthcare and the medicine. And as an experimental stage, we have designated national strategic zones, national strategic special zones, and we will have very bold reforms, regulatory reforms to be implemented. For instance, agriculture will be turned from more defensive into more offensive industry, utilizing the national economic strategic special zone. What is being thought to be negative as a factor, such as aging and demographics, will be changed into more positive trigger. And Japan is leading the way as a forerunner, but the demographic change will come in the EU as well as the United States and Asia and elsewhere. Japan will be the forerunner in tackling all these challenges. And the infrastructure everywhere Japan will be aging. And the fiscal structure will be declining. We need to mobilize private sector funding to try to develop the infrastructure and try to sustain the infrastructure to make it a more long living and try to make the necessary repairs. What were thought to be negative factors should be turned into positive factors to open up frontiers? And we would have deregulation in all these areas. And we have just started and we have experimental zones, six of those special zones being designated. [00:13:20] Speaker 1: The Pressure of the timeline in a few moments time. Mr. Babacan, one of the risks that was pointed out in the report, I got to the page, was U.S. monetary policy, which was a risk which could tilt Turkey to the downside as well. We are talking about accommodation. Turkey is a metaphor for the broader oscillation and volatility we have seen as the U.S. has embarked on the withdrawal of quantitative easing as well. Do you agree? Is that one of the key risks? [00:13:43] Speaker 6: Well, first of all, I think it is important to understand that for the global economy, for the first time since 2007-2008, we are able to say probably the worst is behind us. So there is a recovery in especially the advanced economies. Many countries were desperate for growth and that growth is finally happening. We don't know how sustainable this is yet. And there are probably many, many important areas to look at. The financial sustainability of growth, the social sustainability of growth, the structural sustainability or the environmental sustainability of growth is going to be very important to follow and take the necessary steps for future. But for the developing countries, since the Federal Reserve's tapering process started since last year, there has been a lot of negative assessments. And I think it is true that for the next 10 years, the developing countries will have lower growth rates compared to the last 10 years. And as we have seen in the analysis of the OECD, the potential growth rates of some large developing countries have actually dropped compared to pre-crisis levels. But on the other hand, the average growth rates of the developing countries will still be much higher than the growth rates of developed countries. So the dynamism or the majority of the global economic growth will still continue to come from the developing world. And I think that's an important overall assessment to be made. And then again, since last May, there has been a lot of negative assessments about developing countries and comparisons with 1990s, the aging crisis and so forth. But compared to the 1990s, the developing countries right now have much lower public debt and they have much stronger, much more resilient banking systems. They have most of them have now much more flexible exchange rate regimes and much higher reserves. And also, I think the ability to cope with crisis and the fresh experiences is also, I think, quite well in many developing countries. [00:15:56] Speaker 1: But again, sir, I'm going to jump in because this accommodation has meant that countries can get away with higher current account deficits and then suddenly we had a burst of volatility in 2013. You say we're much better than 1997. We still suffered those enormous wobbles throughout the emerging markets because there wasn't the structural reform. There was the problem still with current account deficits. Turkey, if I may say so, is a case in point as well, sir. [00:16:21] Speaker 6: Well, there are actually developing countries which have high current account deficits. And since last May, the volatility in the markets of those developing countries were higher on average than the volatility of the other developing countries. And Turkey is one of the countries which has high current accounts deficit. And current accounts deficit means that there is a requirement for financing. And the external financing, since the Federal Reserve started the tapering, is now less scarce and more expensive. But I think many countries, including Turkey and probably also India, Brazil, Indonesia, have taken the right steps in the right direction to adjust their policies for the new circumstances. I think at the end of the day, the U.S. economy recovering is good. The Eurozone was considered to be the epicenter of the crisis, and now we no longer talk about it. So overall, the global economy is heading in the right direction. [00:17:21] Speaker 1: Do you think we should be talking about the Eurozone again? Look at some of those numbers. They terrify me. [00:17:27] Speaker 6: Am I the only one? Well, I think what's needed for the Eurozone is probably concentrating on the structural reforms, as the OECD report still highlights. And I think the ultra-accommodative policy of the ECB has made the lives of many Eurozone members too easy, and the borrowing rates are now too low, and the pressure for reforms probably has diminished to a certain extent. But I think many countries should use the opportunity windows to do the necessary reforms in time, if possible. [00:17:57] Speaker 1: Angel, help me out here. We talked about this a couple of days ago. Structural reforms in Southern Europe isn't the problem. It's the ones that didn't have a market event that's got a problem, isn't it? Do you want to name names? [00:18:06] Speaker 2: Well, very simply, our research shows that the ones who were under market pressure did a lot of homework, still are doing, and the ones that have not been under market pressure maybe have been complacent, and maybe because the market is not giving them signals clear enough that there is a need for transformation. But transform they should, absolutely, because in the post-crisis situation, it's going to be a cut-throat competition to recover. Did you want to name names? Sorry? Did you want to name names? Sorry? [00:18:42] Speaker 1: Which countries? Sorry? Anything pretty close to here? [00:18:49] Speaker 2: All right. Let me just say that even the largest economies in the Eurozone, the ones that were not under market pressure, really should seriously undertake reforms, because that really is the only way in which we're going to catch up with the lost time and catch up with those that are very aggressively pursuing reforms and basically eating their cheese. [00:19:12] Speaker 1: Okay. I'm painfully aware I haven't brought Rich or Phil in yet, but I just want to ask Mr. Omari a question about, does he feel under pressure in terms of time, the time you've got to make this work, to make the first, second, and of course, the key third arrow work? Because we've talked about the pressures, they're still there, 230% debt to GDP, the demographic issues as well, and the current account deficit. Do you feel under a time pressure to make this work in a year, in two years? [00:19:47] Speaker 4: I think it would be better to keep wearing a while I'm sitting. [00:20:05] Speaker 5: The cumulative deficit for Japan is about double the GDP. The pressure is very strong, I must say. So what we are trying to do, therefore, is if we are to be engaged in just fiscal tightening, then we will go down the negative spiral once again. I wouldn't name the name of the country, but when the public finance goal busts. And as the fiscal tightening continues, then they would deeply be in the midstream because they did not combine at well the fiscal policies and the economic growth strategy. So we will have fiscal consolidation as well as economic growth to be combined, not just slashing the expenditure, but what we will do is to increase the revenue. But in terms of cutting down on the expenditures, 25 years ago and right now, the general expenditure amount have not changed. What has increased is the payment of the interest for the JGB as well as social security expenditures. What we can do is to enhance the trust and confidence of our government bonds that try to bring down the level of interest. Interest level is the lowest in the world for Japan. And the social reform, not just cutting down on social security expenditures, but what we would like to do is to introduce the ICT to visualize the healthcare systems. The double the hospitals who are actually dispensing double the amount of the medicines that should be reduced. And we would try to prevent any wasteful expenditures, not to force the cuts, but we will try to make it more reasonable and rational. [00:22:26] Speaker 1: The Press: Do you feel under pressure on the timeline? Is it going to happen quickly? [00:22:33] Speaker 4: The Press: More specifically, we have come up with the fiscal consolidation plan, [00:22:43] Speaker 5: and I am also the minister in charge of fiscal consolidation for the fiscal year 2015. By the next fiscal year, the fiscal deficits to the GDP should be halved. And this plan, I believe, we will be able to achieve. But the problem is, in 2020, we need to bring the primary fiscal balance to the surplus, and we would do our best to make this happen. [00:23:14] Speaker 1: The Press: 2020, that gives you six years. Okay. We need better, we need more jobs, we need better jobs without increasing equality. What kind of reforms are proposed by the ECD to achieve that? I'm actually going to change that round a little bit. I wanted to bring on the job side of things as well. It's a question for Rich and Phil. But Phil, when are the corporates going to start doing their bit? I mean, it's been lame, hasn't it? I mean, I look at countries like Germany that in the 1990s had 25% of capital was spent on reinvested, 17% now. We don't see it in the United States, we don't see it. We're not seeing it anywhere. When are they going to start filling the gap from the public sector? It's not the public sector's [00:23:50] Speaker 7: problem anymore, is it? This is a growth story? Well, the point is that companies don't tend to invest because governments print money. It's nice to know that they're printing money, but they'll actually invest because they've got the capacity to invest in something. They'll see a market, they'll see a new product, they'll see a competitor eating their lunch, and that's why they'll invest, rather than just fiscal easing. And that goes to the point that's being raised by the OECD here about the importance of structural reform. You know, we did a BX survey of this, just had the results out yesterday. Number one thing for business, regulatory reform, structural reform, removing that regulatory burden on business. You know, two years ago, same survey, same result. And this goes to the point about urgency from government. Let me give an example of that. OECD work tells us that the largest number of jobs comes from startup businesses. How are we traveling on regulatory reform about making it easier to start a business and to grow a business? And that also goes to ICT, to employable skills. It goes to financial reform to make sure that banks give startups money. That's really what business is waiting for. And you're starting to see businesses take the lead, but they're under potential here. In order to grow to their potential, they need more of that kind of structural reform from government. We absolutely agree with the OECD in [00:25:05] Speaker 1: saying that. That's painting a lovely picture, isn't it? The corporates are blackmailing governments to offer them lower tax jurisdictions left, right and center. Again, the work the OECD has been doing as well. The corporate taxes are a fraction of what they were in decades past as well. And we look at companies and say, we won't invest domestically because we don't want to pay our IRS bill. We don't want to bring money home and create jobs. We prefer to give it to shareholders or buy companies overseas. So we don't have to pay any taxes more. So we can reincorporate a company like Pfizer, which wants to reincorporate potentially in United Kingdom, so it can get a 7% discount on its tax rate as well. Corporates are blackmailing governments to say, well, if you don't offer us lower tax regimes, we won't invest, we won't bring the money home. [00:25:47] Speaker 7: Companies will obviously look at different tax regimes and different regulatory regimes and move the investment where they feel that's best for them. But what you've got to understand is that the number one thing that companies will do is they will lead growth, they will lead job creation, they will lead capital formation. They'll do that in the markets that best enable them to do that, which goes to the point that the Secretary General is making. Structural reform is not something you do by next Tuesday. We're never going to have a cocktail party and say, hey, we finished that in each individual country. We need to carry on with it. We need to get it right. And we need to continue on with it, because competitor nations, to your very point, are getting on with it as well. [00:26:26] Speaker 1: Ali Babacan, do you find that that's the case, that the corporates are just looking at the lovely features of the economy, or do they really want the competitive tax rate? They say, we'll come to Turkey, we'll invest, we'll build our infrastructure in Turkey. Show us the money on the tax front. [00:26:40] Speaker 6: Show us the money on the tax rate. We'll be honest, we'll be candid. Before I was a member of Turkish cabinet, I was a 100% businessman. So I can read the other side of the table to a certain extent. So you want the other side of the table to a certain extent. Now, I think what is important for business is actually predictability, confidence. And it is very, very important for the companies to see the medium to long term perspectives of the economic outlook of the country that they are operating in. And especially nowadays, I think it's a great chance for the governments to prepare medium term programs, even longer term programs to give more predictability. OK, the worst is probably behind us, but what to expect now? So declare clear programs and also make some down payments, down payment making that declare 20 items of reforms and maybe do two or three immediately within the next one month, two months, just to build credibility. I think there is now a big credibility deficit, which is there for many, many countries. And for the corporations, that is, in my view, the most important issue. Whatever the corporate tax rate is, it is 30 percent, 33 percent. I don't think it matters that much given the big, big impact and the influence of the concept of confidence. [00:28:05] Speaker 1: Rich, you've heard about the poor old corporates. They want confidence in the underlying economy. But, I mean, you think something more structural needs to change in the global economy to get these jobs back on the table, don't you? [00:28:18] Speaker 8: Absolutely. And before I answer that, if you want to indulge me a second, I really want to get back to comment about the OECD's outlook. Because, you know, every time I come to the OECD, it's sort of interesting for me to discover which OECD I'm talking to. Whether it's the Monday forum OECD that's getting serious about income inequality and going social, or the Tuesday OECD that's making excuses for mass unemployment and stagnant wages, that is really the reality in most of the country. And the answer to all three of the previous gentlemen is, look, you want to measure recovery? Recovery is majored in the growth of real wages. And whenever they talk about structural reform and structural, a lot of structural reform, that's code. That's code for labor market flexibility. Now, you want to create jobs, you need consumers that can buy. Consumers that can buy, you need wages that are raised. In our country, the president is fighting very, very hard to try to get an increase in the minimum wage, so that people at the bottom can have more buying power, more consumption. Yet, we're talking here, everything we hear at this forum so far, and that the forum is about suppression of those wages. [00:29:52] Speaker 1: Rich, you're not going to deny that creating better paid jobs in the States is going to cost some jobs, are you? No, it's not going to cost jobs. Look, the more... But that's the Walmart argument, isn't it? When they're going back at GAAP, isn't it? They'll say, well, you know, you create these extra pay per hour parameters, and the federal government does the same as well, you're going to lose jobs. [00:30:13] Speaker 8: Well, here's what undermines that argument. Costco, which is a competitor of Walmart, increased its wages. And because they pay higher wages and better benefits, the cost, the profit per square foot at Costco is much higher than it is at Walmart. So it undermines that notion that the largest employer in the United States, Walmart, can increase wages. Look, our economy is 72% driven by consumer spending. Take 72% out of the equation because you have stagnant or falling wages, and you're not going to grow the economy or create jobs. What Phil was saying, they need markets. How do you create markets? You've got to have consumers. If consumers don't have the ability to consume, you don't create markets. [00:31:03] Speaker 1: Mr. Tamaki, do you want to come back at that? Or, Angel, I knew you would. It's Tuesday's OECD. [00:31:09] Speaker 2: Yeah, it's Tuesday, and it's a classic here with Rich. Let me tell you, this is the wrong discussion, whether it is about lower wages or higher wages. Because in Europe, we already know what the story is. For 15 years, some European countries were increasing their wages higher than their productivity. What happened? They went against the wall, and then the countries that were increasing their wages lower than productivity. They are doing well, thank you very much. They did not lose the jobs, and they have lower unemployment rates than before the crisis. So, what is the real discussion? How to get productivity up? And that will allow us to pay better wages, not lower wages, but better wages, higher wages, and produce greater demand. But the conditioned precedent to that is to get productivity up, and productivity will be increased by structural change. [00:32:10] Speaker 8: You know, Angel, that's interesting. Productivity in the United States has continued up since 1973, and wages have been flat. It doesn't matter whether they produce more. If it goes to the top 1%, the economy hurts, and the economy doesn't work for 99% of the people in the economy. So, you have to get that increased productivity out into the hands of the people that produce that, and that's the workers that are out there. Every time you talk about labor market flexibility, doing away with overtime, doing away with benefits that we have and we've earned. All you do is lower that expectation, and lower the wages, and lower the ability of those people, workers, to consume. And in the United States, as I said, take 72% out of the equation, and you don't create jobs. We still are not creating jobs at the level that we should. We still have an economy where wages are stagnant because our economy, the economic recovery, if you will, hasn't been strong enough to increase those wages. [00:33:26] Speaker 6: Well, just maybe a different perspective, which I would like to add. The income, the salary of the workers is not just actually zero-sum game between the employer and the employee. There is also the government factor. And from our experience in Turkey, last five years, since 2009, the total employment increased by 5 million people. Even last year, when our growth rate dropped to 4%, still we were able to generate 760,000 additional jobs. And, of course, confidence and growth helps, but also targeted active labor market policies play a key role as well. And just a few examples. What we have done, for example, was if a person has been unemployed for the last six months, then when they were about to get a job, we covered the social security premium as the government for the next six months of him or her when he or she is employed. Or for women, who are going to enter the workforce for the first time in their entire lives, we promised to pay the social security premium two to four years in order to decrease the cost of entry for the women to the job market. Same policy we implemented for young people, aged below 29. When they get a job, then two to four years, we covered the social security premium. And women's participation rate to the workforce last three years increased tremendously. It used to be 30%. For the new entrance, now it is 45%. And it happened in just three years. So I think this is probably one of the good ways that the government money can be spent for the job market to lower the entry costs for people to get back jobs or to get into the labor market for the first time. [00:35:14] Speaker 7: Let's have a think about the evidence, because I like the evidence. That's why I like turning up to the OECD. The OECD does evidence really well. There was a report that the Monday OECD put out. It was called Growing Unequal. And the OECD's own evidence was the number one way to reduce inequality was to create jobs. A person in a job moving towards a more highly skilled job, hopefully, was actually the number one way of increasing equality and increasing equity. How are we travelling on that? What we're seeing far too much of is governments that spend an awful lot of money training workers who aren't employable. And there's some outstanding work in the OECD skills strategy, which says, you know, what you want to do is not just create skills, but employable skills. And what we're seeing then is competition will mean that those skills will become much more needed. The next piece of evidence from the OECD, an interesting piece of evidence, global value chains. Global trade increases national prosperity. How are we travelling on structural reforms around trying to increase free trade? So pleased about what Prime Minister Abe said this morning about the importance of TPP. Very important to my country and the TPP-12 as well. How are we travelling on governments getting much more aggressive about open and free and fair trade? Because GVC evidence suggests that actually creates jobs, it creates equity, it creates income. That is the kind of debate that we need to have about improving equity and improving resilience in our economies. Thanks, Phil. [00:36:46] Speaker 1: Mr Mori, you're going to come in as well, but I just want to reference the labour market deregulation as part of the third era in Japan. I spoke to Nobuaki Koga yesterday, who's the president of the Japanese Trade Union Confederation. From his language, I think you've got a fight on your hands for labour market deregulation. [00:37:12] Speaker 5: First of all, in October last year, the Abe government has actually come up with tripartite. We have launched a conference of the government, the labour, and the companies. For those companies where the corporate earnings have improved should raise the wage levels. And when wage goes up, consumption will increase. Then they will spend more, meaning that the corporate earnings will go up. We will be able to create a benign, favorable, positive cycle. And government has come up with conducive policies in order to make this happen. And for the companies, what the government told them is we have made all the necessary preparation. So you should raise wages. And the general wage base have gone up by 2 percent, which is the highest ever in the past decades. And Prime Minister Abe, after he steps down as a prime minister, he may become the supreme councillor to the labour union. Of course, I'm joking, but he may be hired by the labour union. Now, government have tried even something that government should never do. Because by creating positive cycle, when the corporate earnings goes up, then the companies must spend more for wages as well as for the supplier's income. Then that would reflect positively to the corporate earnings. And the government has made the push forward for this to happen. Now, what should be done for the wage hike? What the Secretary General said earlier is quite relevant and important. Try to improve and enhance productivity and try to create more value added with such corporate activities. And the fruits of such activities must be distributed. The wage increase is the way to do so. But when wage is forced to be increased, when the corporate earnings are not increasing, it would negatively reflect on the company's competitiveness. So what we need to do is to have companies go for more higher value added to become more competitive. And the fruits of such corporate earnings and profits should be distributed. So what the government has done has to try to create conducive climate for competition. We have made tax credits, bold tax credits, and also bold credits for R&D expenditures. And we are now in the big data at the age. The data of the government will be opened up to the private sector. And the data as possessed by the government should be utilized by the companies in order to enhance competitiveness. And from basic research of the universities may lead to seeds for innovation in the future. And the government is now trying to come up with a proposal to make this happen. Japan would like to become a country where innovation will continuously happen. And the fruits of such innovation should be distributed to the workers through wage hike. So Abenomics is for the positive cycle to be created. So Abenomics is for the positive cycle to be created. [00:40:39] Speaker 8: Steve, I'd just like to comment on that because, first of all, my counterpart, Rengo, in Japan, doesn't oppose all kinds of structural reforms, does not. But it is strongly against the deregulation of the labor market. Because some of the deregulation that he's talking about flies in the face of the minister's desired attempt to raise wages. The revision downwards of a worker dispatch law, there are several others. And I would say that the challenge in Japan is that about 30% of the jobs are precarious. And while there was an increase, a 2% increase in the big employers, it was 2% to the big employers, it hasn't made its way down to the SMEs or the precarious workers. And so the challenge is to raise the minimum wages and ensure equal treatment for non-regular workers there. Because that's 30% of the workforce, which is very, very large indeed, and can have a significant impact and actually help in the success that the administration is trying to do there. [00:41:54] Speaker 1: Okay, I want to move on a little bit, if I may, and talk about trade in 2014. We could potentially have two of the largest trade deals post-war with the Trans-Pacific trade deal and, of course, the Trans-Atlantic trade deal as well. The benefits of these for the global economy in 2014, if indeed we get these, well, we're told it's multi-trillion dollars for the global economy. But then when I read a comment such as, well, the corporates would write the regulation for these, they'd be very happy to underwrite the cost of these deals. I think to myself, are the benefits for individuals, for the countries, or is it for individual corporations as well? One of the major events of 2014 could be trade deals, and you mentioned this, Phil, maybe you want to kick off on this one as well. Who's going to get the benefits from big trade deals in 2014 if they happen? [00:42:47] Speaker 7: The communities of the countries in which those trade deals are done, fundamentally. The wonderful work that Ken Ash and his team does here around global value chains and trade and value added suggests that the benefits of trade don't just hit the corporations actually doing the trade. They hit the guy driving the truck to take that car to a market in an offshore environment. They hit the schools that are teaching the kids whose parents are doing better because of that trade deal. But what we're finding about the new environment of trade is it's not just about tariffs at the border and it's not just about goods. The new glue of trade is more likely investment as a matter of fact. That's why we need to make sure that investment flows just as freely as goods and services do. And the other thing that we're finding is that you can't just do trade by doing things at the border. You need to go behind the border because there's a lot of disguised trade protection that masquerades as occupational qualifications or whatever it might be. So really what business is saying is if we're serious about trade, we need to think beyond the border. And that's really what these new age trade deals are about. Actually, they're very, very exciting. We're not suggesting that governments don't continue to regulate markets. Of course they should. But they should regulate them in a way, hopefully, that international trade can play out for benefits for those economies that take part in it most effectively. And that's about TPP and TTIP. Very, very exciting developments, I think, for the world. [00:44:12] Speaker 1: So there's no negative ramifications for all those employees we were talking about who are in the bottom 99%, say, or even a lower demographic than that, from opening up the markets and facing international competition. They're not going to face any downside. [00:44:25] Speaker 7: Of course, change means change. And there are some short-term winners and some short-term losers from any change process, including, by the way, domestic reform that's got nothing to do with trade. But the OECD's own research on this suggests that, over time, economies overall do much better if they're open to the world than if they're not. My own country is a simple example. Four million people live in New Zealand. If we didn't trade, we'd be very poor indeed. And every New Zealander knows that. And I think it's about going out. I think we need to be advocates for trade to say, actually, yes, there are some short-term pain and some short-term gain to be had, just as there is any change mechanism over the longer term, if we have the right active labour market policies, if we have the right skills policies, if we have the right competitiveness in our economy, and that's about the domestic economic reform agenda, then we will all be winners from trade. [00:45:16] Speaker 1: Richard Denanga. [00:45:20] Speaker 8: Yeah, I think that's one of the pitfalls we fall into by saying, either trade deals are all good, all trade deals are good or all trade deals are bad. Look, trade deals depend on the terms of the trade deal. If it's advantageous to one country and disadvantageous to another, it won't long endure. If an agreement between the US and the European zone results in a lower social safety net, lower protection for workers, did that benefit anybody? Was that good? Was that a good deal? Of course not. It should be used, the trade deals should be used to rise up the level of economic standards in both countries. And, you know, when you have a behemoth economy and you have a small country, chances are they may get some additional benefits, and they should, quite frankly, because we took some on the way to getting to where we are, so they should get some. But when you're dealing with people of equal size, the European zone and the US, that should actually benefit both sides and the workers. And if it doesn't benefit the workers and protect the social safety net, then it's a bad deal for everybody. [00:46:41] Speaker 2: Let me just say that one of the things that would benefit everybody, as Phil suggested, is that it would be an injection of trust and confidence in the future. We've been so incapable of putting these deals together of practically any kind of cooperative nature. This would be a very strong message, a loud signal, a whole language about saying, yes, it is possible. Yes, we can. Yes, we want. And yes, we will. We will. And then you sign these things. And then, of course, yes, as Rich suggests, each sector will have its own logic. I don't know of a single, you know, free trade agreement that says that the object of that is to lower wages. I think, however, I think, however, that the logic of the challenge of opening is very simple. And that is, we know now, because we have decoded the trade genome, okay, with the global value chains, and the trade and value added, and the question now of services, which we will launch tomorrow. We know what the animal is about. And we know that the way to deal with it is skills, skills, skills. And therefore, if you upskill, if you reskill, if you upgrade the skills of the population, what you will have is a more competitive population, a more competitive labor force. And because they will be more competitive, more productive, you will be able to pay more for the wages. [00:48:18] Speaker 8: And I just have one thing to ask you. If it's just skills, skills, skills, tell me why in the United States the college graduate salaries are falling. They have all the skills in the world, and their salaries are falling. Their salaries are falling because of bad economic policy. The bums rush towards austerity and the effects of mass unemployment, and we have to face that. And trade can either feed that or it can subside from it. And we both, all of us, should strive for agreements that actually ends mass unemployment and helps increase the standard of living for people on both sides of that border. Anything less is a failure of that trade deal. [00:49:01] Speaker 2: Let me tell you, Rich, that we're not talking intuitive here. We're talking facts. And what are the facts in terms of the skills in the United States in particular? What are the facts about the skills in the UK in particular? And that is that the usefulness, the match of the skills of one generation ago to today's in both the UK and the US have not considerably improved vis-a-vis what the markets were demanding. And a number of other countries who had the worst skills a generation ago today have the best skills. And they are the ones who are taking the cheese. They are the ones who are taking the market share. They are the ones who are exporting more and more because their labor force is better adapted. So, Rich, it's not that they don't have the diplomas. It is whether they have the diplomas on the right things, on the right disciplines, on the right skills that will increase the productivity and increase the competitiveness of the economy. [00:50:02] Speaker 8: You mean like engineers? [00:50:04] Speaker 2: I think there is a... [00:50:05] Speaker 8: Because engineers' salaries are falling too. [00:50:08] Speaker 2: There is a lack. And then the question is today you say engineers and that's like motherhood and apple pie. What kind of engineers? Where and which disciplines? Good engineers. That helps. That helps. That helps. That helps. I would agree. They are good. [00:50:22] Speaker 1: That helps. Did anyone else see what Richard did there? Moved on to trade and he got back to jobs? Is that my fault? Anyway, when we are doing trade deals, is it uneven between developed and emerging? The emerging likes to paint itself as the junior partner in this and that we are being bullied into these big deals as well. But I mean, does emerging miss out on these international trade deals, having to open up their markets, having to get more competitive in closed economic industrial areas? [00:50:50] Speaker 6: Well, actually, the more free the trade becomes, the more win-win outcomes we see both the developing and the developed world. And that's, I think, evident by empirical data. But we should also be careful about the short-term effects and how to adapt to the new conditions, especially for developing countries and especially for some industries. Now, actually, TTIP and TPP, these are historical deals that are going on. And TTIP does also include investments because it's a trade and investment partnership. But what is about TTIP is mostly Europe and the U.S. merging the markets. But actually, the largest custom duty, as far as I know, is about 3% between Europe and the U.S. So it is not going to be actually too much about the costs, but it's going to be more about the alignment of the standards, the product codes, and so forth. And also services is going to be an important part of this deal as well. So merging two huge markets at the end of the day will help the consumers, the citizens, in both the U.S. and also in the EU. So long-term benefits, I think, is very evident. But then in the short term, of course, necessary adjustment times has to be given, industry by industry, sector by sector, to prevent any tragedies happening in any certain area. We actually, as Turkey, experienced this. We joined the customs union with the EU in 1995. There was huge noises and protests and so forth. Our car industry, for example, was the most negative industry about customs union because they were afraid that we were going to be wiped out and so forth. But right now, automotive industry is our number one export industry. Maybe short-term adjustment costs, but long-term huge benefits. [00:52:40] Speaker 1: Mr. Mari, come in. If any nation is going to benefit from TPP, I guess Japan is up there. [00:52:46] Speaker 5: Now, whether liberalizing trade is good or bad, I believe history has already given the conclusion of this. I don't think any country here have been able to grow by just isolating itself. If you open up and liberalize, you will be able to reap the benefits out of that. But, of course, each country has its sensitivities. So how to give due consideration for these sensitivities? We need to narrow down the sensitivities, but how to cope with those areas where we cannot open up fully. I am also minister in charge of TPP. We are in the process of very tough negotiation with the United States right now. The TPP, as compared to the older, former trade agreements, it is not just about tariffs. What to do with rules and market access and investment rules. You need to have predictability in making investments. When tax rate is lower to start with, but then all of a sudden it is increased to a much higher level. That will not do for investors. So you need predictability. The same goes for intellectual property rights. When copyrights or intellectual properties are not protected, nobody will invest. So you need to create a conducive environment and rules and such. We need to have transparent rules to have more predictability for investments. And that is very important. And TPP is different from the other agreements. We are trying to create something totally new, liberalizing trade, and also to deal with any other problems and barriers in other areas. And I believe will be positive for any country. [00:54:52] Speaker 1: Sir, thank you very much indeed. Right. Okay, let's open this up a little bit more. I've got a couple more questions myself. But I understand we've got a couple of questions already registered. One is from Marco Butti. Is he around? Great. Can we get a mic to Mr. Butti? So Marco Butti is the DG of Economic and Financial Affairs over at the European Commission. Is that right, sir? That's right. [00:55:14] Speaker ?: Yes. Turn it on. Should work? Okay. That it does. [00:55:19] Speaker 9: Yes. Thank you very much. I have to say, I have prepared something else to say, but I cannot resist to react to the discussion on the issues of flexibility and market functioning. I have to say that this discussion between employers and trade unions looks to me very old-fashioned. We are at the OECD, so let's use the OECD indicators which are a common good. Product market regulation indicator, labor market regulation indicator produced by the OECD and supply to the global community. What are the countries in Europe which are on the right-hand side? Namely, having good functioning markets in terms of labor markets and in terms of product markets. And what are the countries with the higher wages? Just to take the point. Now, those with the better functioning markets in Europe are the Nordic countries. So they are the Nordic countries which are the countries which have already implemented what we call the flex-security. So they have very well-functioning markets. They have excellent education system. They can move from workers from one sector to another, from a declining sector to a growing sector, and so on and so forth. I think this is the model for the future. So the idea that you need to have highly regulated markets in order to pay higher wages, I think is simply wrong and it is against the tide of history. I just say one final word. We published yesterday our forecast, our spring forecast. They look almost exactly like those of the OECD. So let's hope that at least on the recovery we are both on the right side of the argument. Thank you. [00:57:22] Speaker 1: Thanks, Marco. Phil, you want to pick up on that, yeah? [00:57:24] Speaker 7: Well, I did. And I hope our conversation wasn't too old-fashioned, sir. But I only feel young. I would say, we study the Nordics a lot as well. As a small country, there's an awful lot that we can learn from the Nordics. But one thing that we know about them is that their labour market regulation and their active labour market policies and their innovation policies and everything else that contributes to the kind of outcomes that you're talking about are very much based on their history and on their particular structures and populations and so on. So what I'm always cautious about when I look at any individual country is to say, we should just copy them and it will all be okay. What I often say in my own country is I want a world-class outcome for New Zealand, not a world-class outcome for Denmark and New Zealand. So my sense is we can definitely learn from that. And I think the idea of saying that you can actually have a high-skill, high-wage outcome is in fact what most companies are striving for. As a matter of fact, they want to pay properly for the right kinds of skills and they want to have a competitive advantage around that. And so what I'm interested in doing is making sure that we look at the evidence of individual countries and then say, how relevant is that to the particularities of our country and what can we learn from that? And in that context, I think the Nordics have an awful lot to teach us. [00:58:39] Speaker 1: Does anyone else want to pick up on this one? [00:58:41] Speaker 8: I just want to say I'm all for policies that raise the standard of living up to the Nordic levels. I think we should have them everywhere. Africa, America, everywhere else. And I would support those policies. [00:58:54] Speaker 1: And that works, yeah? That would work? I presume there would be an inflation impact then. Something we don't talk about anymore because it's non-existent certainly in the Eurozone. [00:59:02] Speaker 8: Well, deflation is a problem now. [00:59:04] Speaker 1: Do we start talking about inflation this year? Is that going to be the year that we start talking about it rather than just the markets? I don't think so. [00:59:10] Speaker ?: No? [00:59:10] Speaker 8: I mean, there's nowhere, not even a smell of it around. [00:59:15] Speaker 1: Does anyone? Well, there is. Turkey. You have an inflation problem, don't you, sir? [00:59:21] Speaker ?: Yes, but it is a temporary problem. [00:59:22] Speaker 6: The most important reason is our currency depreciated compared to what we have seen as exchange rates last May, let's say. And there's a pass-through effect. And that pass-through effect has like a 12-month duration. And then it's going to be no longer in place after June or so. And then we are expecting lower inflation rates as we go down the half of the year. And at the end of the day, inflation is, of course, an important problem if it is too high. But then if it is predictable, then low single-digit predictable inflation rates actually help. Okay. [01:00:06] Speaker 1: Just on inflation, briefly, if I may. Someone said to me they're worried about Chinese inflation overshooting. I mean, I beg your pardon. I beg your pardon. Japanese inflation overshooting. I mean, we're getting nearer to the 2% level now. Is there a chance of going over that in the short to medium term? [01:00:25] Speaker 5: For Japan, deflation has persisted for two decades. Whatever we do, no inflation happened. So we have implemented bold monetary measures and we have put forward the target of 2% inflation rate. But when it goes up to 2%, we will start to take measures to try to decrease the inflation rate. I believe we are at about 1% right now. And temporarily, of course, there has been an effect from the tax hike for the consumption tax. But that being excluded, I don't think we have come totally out of the deflation. So I don't think you need to worry about inflation right now. [01:01:15] Speaker 1: Okay. Well, I won't worry about that then. We've got a question from Matthew Hancock. Is Matthew Hancock around? Matthew is Minister of State of Skills and Enterprises in the UK Government. [01:01:24] Speaker 10: Thank you very much. Thank you very much. And it's been a great pleasure from the UK Government's point of view to co-chair. And I pay tribute to the work of the chair and the Japanese. We're delighted in the UK that the outlook produced today shows the sharpest revision upwards for the UK. It's very interesting listening to the debate, having gone through four years of quite painful structural reform, both in terms of on the fiscal side and also in terms of improving our environment for enterprise and business growth. While I may say at the same time increasing our minimum wage, not just because that's good for consumption, and I recognize that argument, but also because the ultimate goal of all of this is not technocratic, but is to improve the prosperity of the people who we represent. But what I'd be very interested in is the view from the panel on getting that political support to continue for necessary structural change, because we have found the OECD to be a hugely helpful domestic voice in the policy debate. Whilst the going was tough, and especially when the economy was continuing to struggle before its recent turnaround, and linking – this is not just an economic policy job, it is a job of political economy. And it would be interesting to hear from other ministers the support that they would welcome in trying to drive this sort of reform through in a way that ultimately supports both jobs and wages, because that's what we're all about. [01:03:18] Speaker 1: Who wants to pick up on that one? Phil? [01:03:21] Speaker 7: Well, can I just bring back your own example of the UK? My unscientific reading of UK business, certainly the businesses I talk to, and I talk to quite a few, is you're absolutely right. Three to five years ago, business lacked a lot of confidence that government was going to do what was necessary. And now they're having a conversation with me about what government should do that remains, and the carrying on piece. So in other words, what you've already done is create a confidence in business that you'll do some more. And so the biggest insight I'd give you from a business perspective is two things. First, that reform is something that you do every day. There's not a committee on reform that then kind of disbands at Christmas time and it all goes away. And business needs to hear that, because the economy that they're dealing in, their reality, is a dynamic reality. And so if you can point out to them that you'll be reforming every single day, whether they might agree with it or not, is going to be quite important. It's that consistency of message. The second point I'd make is making sure that they're engaged in the debate so that they hear your language and you hear theirs. So that there's a clear understanding of what you're going to do from the business community. And so when you do it, even if they disagree with it, as I say, they know you're going to do it and they can make investment decisions accordingly. So it's about consistency and then it's about language. In terms of my own country, one of the big advantages that we've had is that the doors are always open to government, but we know it's going to be consistent. That's definitely helped business confidence. [01:04:48] Speaker 2: Thanks, Phil. Just a comment about the UK in particular, but I think it's illustrative. All the time we were saying to the British, "Stay the course. Stay the course." And there were millions of voices rising in the UK saying, "Change the course." And in the end, the British were proven right. The British government was proven right. We were happy to have accompanied that effort, at least because every time we put out a UK economic survey, every time we put out our economic outlook, we'd say, "And the UK should stay the course." And they did, and they delivered, and it's now the fastest growing, the one that suffered or enjoyed the biggest change in terms of the projections. And also, they're creating jobs. So, the two things are happening, but there's been massive structural change in the process. It hasn't been either free or easy or painless, but the political capital has been spent, and now there's a time of reward. How long did it take? Three, four, five years. This is the horizon. These are the time spans, but it needs determined leadership, and it needs staying with it. [01:06:08] Speaker 1: It's nice that the OECD was with the UK throughout this. There was another international organization, I think the one based in Washington, that was slightly more contradictory. And we'll leave that one there. Thanks, Matthew. Mr. Amari, you've got a comment to make. [01:06:24] Speaker 5: Earlier, for the companies to try to go ahead with their R&D expenditures and to make fixed investments, I have mentioned that we will come up with bold measures by the government. And we have designated six national strategy special zones as we see industry clusters to be built for the research and development, as well as going into new areas. When companies try to move into new areas, there are many regulations hindering such new entries. And we need to listen to the voice of the companies from the ground to give priority to their needs and demands to bring in reform, regulatory reform. And deregulation, which have been successful in the six special zones, should be expanded to the other districts and regions of the country. And it is not just for the national strategic special zones, but on the entirety of Japan, for the companies to be able to go into new areas to take on new challenges. When there are regulations to do with safety, something alternative should be proposed by the company itself. And when the proposal is being recognized and allowed by the government, the special measures will be taken to allow the company to go into those areas. And the new product development is already happening because of these measures. [01:08:11] Speaker 1: Thank you, sir. Any other questions? We can take one or two more quick questions. Sir. [01:08:16] Speaker ?: Thank you very much. [01:08:17] Speaker 11: Stefan Kapfer, Secretary of State from the Ministry of Economic Affairs and Energy in Germany. I was surprised about the rumor and the concerns about lowering standards when we talk about TTIP and TPP, for example, because trade is a reality in our globalized economy. We buy t-shirts from regions where the working conditions are much worse than in the US and Europe. We are buying fruits from countries where the environment protection is much worse than in Europe and the United States of America. And we are looking for fossil energy in countries where the democratic standards are lower than in our region. That's the reason why I'm sure that the real story is that TTIP is an opportunity to improve the situation for trade, not only between the United States and the European Union, also for other member states, for countries, for example, in the OECD, that trade will improve the situation for the population in our countries. [01:09:26] Speaker 8: It very well could, but it doesn't necessarily have to, particularly in the European countries. If you draft a bad agreement, we could end up sucking jobs out of Europe. Would that be great for you? Probably you wouldn't think so. It all depends on the rules. It all depends on what we say to each other. We should be striving. If ever there was an agreement that should work, it is a trade agreement between the US and the Eurozone. But it has to be drawn to protect the standards of living in both countries. And if it threatens those standards, then I think you'll see opposition from both sides of the ocean. And that shouldn't happen, and we can draft an agreement where it doesn't have to happen. [01:10:15] Speaker 7: Phil, do you want to comment on this one briefly? Well, just rather than talk about TTIP, let me talk about TPP as an additional example, because I think you made a really good point that, of course, we all trade with countries that have different standards to our own. And that just doesn't mean they're lower. I mean, it means they're different. The labour standards in Germany are different to those in the UK. I don't think anybody would suggest they're not high. They're high in both countries. One of the interesting things about TPP is that the majority of the members of TPP are actually developing countries. And this is why the OECD's Southeast Asia strategy is so exciting, because those countries, of course, are starting to hit the middle income trap. Take a country like Malaysia, a real danger that they might not be able to move out of the middle income trap. And many of the things that you're talking about, good regulatory reform, moving up the scale on environmental protection, making sure that the air is clean to breathe, making sure that there's social protection, all of those things are big challenges for them. And I think having a solid trade relationship that's more complex than simply knocking on the door and trying to sell a bag of apples is quite a useful way of engaging them in discussions about moving out of that middle income trap. So I see trade as being a way through some of those debates rather than something that gets in the way. [01:11:31] Speaker 1: Thanks, Phil. This gentleman over here. Good. [01:11:35] Speaker 12: I don't know whether it's afternoon. I haven't looked at my watch, but good afternoon, everybody. My name is Chris Coles, the Capital Spillway Trust. The OECD very kindly invited me to attend, knowing that I have a plan to create 30 million jobs throughout Europe. And I already have the notion of support of Martin Schulz, the President of the European Parliament. Your core problem isn't being debated. What has happened inadvertently is you disconnected your savings institutions with the process of actually investing out. equity capital, particularly on free enterprise terms, right down into the grassroots of your economies. And as such, because of that, you have not actually been creating any new businesses which create jobs for some decades. And this process has been ongoing and just like a slow landslide coming straight at you. And you haven't really noticed why. You have made it totally illegal for a savings institution, a pension fund, to invest in jobs at the grassroots. They're not allowed to. I was invited here by the now late chief economist of the OECD last December to a pension fund meeting where the man beside me very proudly claimed he managed 500 billion euros and invested only in A- and above companies. And when I pointed out to them that in Adam Smith's introduction to the wealth of nations he says it will herein after appear all jobs are created in proportion to the amount of capital stock invested. And you've got tens of millions of people without jobs, their faces all fell. So may I suggest that the panel address the problem of reconfiguring the legal framework around job creation. Thank you. [01:13:29] Speaker 1: Thank you very much indeed. Who wants to pick that one up? The role of the private sector, the role of pension funds, and the illegality of those pension funds to invest directly in jobs. [01:13:39] Speaker 8: In the United States that's not accurate. I mean we are using pension fund money right now to create jobs. We just committed 10 billion dollars collectively from our pension funds to the Clinton Global Initiative. We're using it every day. We have a fund at the AFL-CIO called the Building Investment Trust Fund where we invest pension funds to create work for our members and create infrastructure. [01:14:04] Speaker 1: What about in Turkey? Is it an issue for you? I mean you want to attract that private money, don't you? [01:14:08] Speaker 6: Well, for us SMEs are already creating huge amount of jobs and pension funds are still a very new concept. So I think we are a little bit out of the context for this question. But the huge job creation and even 60% of the exports come from SMEs which are the real job creators for us. [01:14:26] Speaker 1: Okay, great. Look, I think we're rounding off here, getting quite close to the end. And I can tell you actually the results on where you see the most serious risk of the global economic outlook in last place was the slowdown in emerging economies of 8%. Then we had financial market turmoil in 13%. 23% was recovery weakened and projected. 24% weaker growth in deflation in Europe. And the biggest concern was the fallout from geopolitical tensions. I think on that front, I think we're going to leave it there. Well, I think we'll leave it there, Richard. But thank you very much indeed for your attention over the last hour. It's been a fantastic debate. And thank you, Angel and Rintaro for getting involved as well. I'll just go through the panel. Phil O'Reilly, thank you. Richard Trumka, thanks for your contributions. Alibaba-chan, thank you. And Minister Akira Amari as well. It's been a pleasure speaking to you as well. Thank you very much indeed, everybody. [01:15:34] Speaker ?: We'll be right back.