Chrystia Freeland

Cornell University economist Robert H. Frank sat down with Chrystia at the Aspen Ideas Festival to chat about the earnings potential of superstar dentists and world-class sopranos, the unlikelihood of an Atlas Shrugged-esque strike of the elites and Charles Darwin’s contributions to economic thought. Here’s a transcript of some of the highlights of their conversation.

On the upsides and downsides of the winner-take-all phenomenon

CHRYSTIA FREELAND: If the super-talented are getting super rewards, maybe in the past they were not getting the appropriate rewards. I mean, maybe this is really American capitalism working the way most Americans want it to work.

ROBERT H. FRANK: Well there are two things in your question. One is the upside of the whole phenomenon is that we now get to listen to the best soprano rather than the hundredth best.  In 1890 there were 1,300 opera houses in the state of Iowa alone. You had to listen to music live and in-person. You couldn’t hear the best soprano because she couldn’t be everywhere at once. Now there’s a contest to see who the best soprano is.  That winner then records the master disc and get’s stamped out onto CD’s at virtually no cost so we could all listen to the best soprano.

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That’s the upside.  The downside is that there’s been a huge concentration of wealth and income that’s occurred because of this.  If you thought you needed those concentrated rewards to get people to put forth effort in these domains, that would be one thing.  But there’s absolutely no evidence of that. People just want to be the best performer whether or not–

CHRYSTIA FREELAND: People don’t work for money?

ROBERT H. FRANK: They do work for money.  So if you didn’t give them any money, they — but there’s this odd vision that if the forty vice presidents of a big corporation who want to be CEO faced a slightly higher tax rate, they’d all knock off on Friday and play golf in the afternoon.  There are lots of reasons to want to be the CEO of a big company.  After-tax pay is not the primary one among them.

What does the Tea Party want? As the debt ceiling debate rages in Washington, that should be the central question in U.S. political discourse. After all, it is the rise of the Tea Party that revitalized the Republican Party in 2009 and gave it the muscle to deliver a “shellacking” to the Democrats in the 2010 midterm elections. And it is the radicalism of the Tea Party and the freshman legislators it elected that is often blamed for the uncompromising stance of the Republicans in the current budget negotiations.

That’s why “The Tea Party and the Remaking of Republican Conservatism,” a recent study of the Tea Party by Theda Skocpol, a Harvard political scientist, and Vanessa Williamson and John Coggin, two graduate students, is so important. An expanded version of the paper, which appeared this spring in the journal Perspectives on Politics, will be published as a book by the Oxford University Press later this year.

Ms. Skocpol is an unashamed progressive, but what is striking about her team’s work is its respect for the Tea Party and its members. “Commentators have sometimes noted the irony that these same Tea Partiers who oppose ‘government spending’ are themselves recipients of Social Security,” the paper notes. “Don’t they know these are ‘big government’ programs?”

At the Aspen Ideas Festival last week, Chrystia’s discussion of war, economics and America’s role in the world featured a who’s who of leading voices: Robert Hormats, the Undersecretary of State for Economic, Business, and Agricultural Affairs; Joseph Nye, a professor at Harvard’s Kennedy School of Government; and Liaquat Ahamed, the Pulitzer-prize winning author of Lords of Finance: The Bankers Who Broke the World. Here’s a transcript of some of the highlights of their conversation.

How the deficit debate affects U.S. diplomacy:

JOSEPH NYE: In congressional discussions we get the short-, the medium-, and long-term mixed up. Here we have a problem often estimated as a $2 trillion problem about getting the debt under control, or the deficit under control, related to the debt. And what did Congress do in April when they were trying to balance the budget? They cut $8 billion out of the State Department budget and thought that that was doing something about the deficit. That is absolute nonsense. It’s like a drop in the wind that’s gone immediately. But from the point of view of the State Department where you have a $50 billion budget, that’s a huge hit.

CHRYSTIA FREELAND: Did Bob take you out to supper last night to ask you to say that?

Steve Clemons, Washington editor at large for The Atlantic, chatted with Chrystia at the Aspen Ideas Festival about the politics of the deficit debate, the 2012 presidential race, and whether the U.S. is in a trap in Afghanistan. Here’s a transcript of some of the highlights of their conversation:

STEVE CLEMONS: When you’re in a country whose GDP is $14 billion, and we are in this next fiscal year spending $119 billion in Afghanistan — that’s only our dollars; that’s not our allies; that’s not non-military aid.  This is the military expenditure for what we’re doing. You can buy and sell Afghanistan eight times over for what we’re spending. So I’ve been, with Afghanistan Study Group which I helped create, putting on the table that there are better ways to chase al-Qaeda and to keep it from becoming a safe haven–

CHRYSTIA FREELAND: Well, hasn’t the hunt for al-Qaeda worked? Osama bin Laden has been killed, so there you go.

David Rohde, the two-time Pulitzer-Prize winning foreign correspondent, is the newest member of the Reuters digital family.  He and his wife Kristen Mulvihill sat down with Chrystia at the Aspen Ideas Festival to discuss A Rope and a Prayer: A Kidnapping from Two Sides, their book about the seven months David spent in captivity Afghanistan and Pakistan.  Here’s a transcript of some of the highlights of their conversation:

On the interview he did with a Taliban commander that led to his kidnapping:

DAVID ROHDE: This young commander, he had done two interviews with other journalists. They were Europeans; he didn’t kidnap them.  In hindsight–

CHRYSTIA FREELAND: So an American guy is better?

DAVID ROHDE: Yes. I think he was gaining the trust, a good reputation among journalists that he didn’t kidnap journalists.  And then I came along and he grabbed me.  I did the interview just outside of Kabul, the Afghan capital.  I thought it would be safer there.  Again, I thought there was a safe track record.  I met with a journalist who had done two interviews with him the night before I went to my interview. She said, “You’re in more danger as an American, but I don’t think he’ll kidnap you.”  And what this young guy did was grab me and take me over the border to Pakistan to this very powerful group, the Haqqani network.  And he wanted to get money but also wanted to boost his reputation among other Taliban.

NYU economist Paul Romer is what Chrystia calls an “ideas entrepreneur.” He revolutionized the study of economic growth with his research on the power of ideas. He shook up the field of higher education with his company that offered online homework problems that were graded by computer. Now Romer has set out to alleviate world poverty. For his new project, Romer set up a nonprofit organization dedicated to convincing governments across the developing world that they should cede a portion of their territory to an external authority in order to create a “charter city” in which new rules would make it attractive for skilled immigrants, unskilled migrants and businesses to come and settle.

This radical idea is slowly catching on. Honduras is poised to be the first country in the world to host a charter city after its Congress approved a constitutional amendment enabling such a plan in January.

He talked with Chrystia at the Aspen Ideas Festival about the Charter Cities project. Here’s a transcript of some of the highlights of their conversation.

ASPEN, COLORADO — Once upon a time, the car was the key to understanding the U.S. economy. Then it was the family home. Nowadays, it is any device created by Steven P. Jobs. Call it the Apple economy, and if you can figure out how it works, you will have a good handle on how technology and globalization are redistributing money and jobs around the world.

That was the epiphany of Greg Linden, Jason Dedrick and Kenneth L. Kraemer, a troika of scholars who have made a careful study in a pair of recent papers of how the iPod has created jobs and profits around the world. The latest paper, “Innovation and Job Creation in a Global Economy: The Case of Apple’s iPod,” was published last month in The Journal of International Commerce and Economics.

One of their findings is that in 2006 the iPod employed nearly twice as many people outside the United States as it did in the country where it was invented — 13,920 in the United States, and 27,250 abroad.

Keith Banks is the president of U.S. Trust, the private wealth management arm of Bank of America. He stopped by the Reuters studio in Aspen to chat with Chrystia about the resurgent risk appetite among the world’s super-wealthy investors, his tripartite outlook for the global economy and the alternative asset classes that are currently in vogue. Here is a transcript of some of the highlights of their discussion:

The super-wealthy have gotten their groove back:

KEITH BANKS: The thing that was very interesting to me was even the super wealthy, people with hundreds of millions of dollars, how impacted they were psychologically by the crisis. So even though arguably their standard of living didn’t change, yeah their net worth was down, but it was not down to a point where they had to change their lifestyle. But psychologically, they were very impacted by it. If they happened to be business owners on top of that, they were really feeling pretty beaten up, because not only were they dealing with the personal aspects of that, but they were running businesses that were looking at higher taxes, more regulation, higher health care costs, and a lot of uncertainty and generals. They were getting kind of a double whammy. So I would say our clients came out of the crisis really hunkered down, were really impacted psychologically. And what it really changed was their thinking about what they wanted to do from an investment standpoint… I’d say about six, nine months ago, we slowly began to see that shift where clients began to engage. We’re able to engage clients more in a discussion about areas they should be thinking about moving their assets into to get somewhat higher returns, still managing the risk. So I think the psyche has improved. They’re doing more and they’re more willing to move money around, whereas 12 months ago, not interested.

A tale of three cities in the global economy:

There’s a tale of three cities going on.  Number one is the U.S.  And the U.S. — think about right now is a two to three percent grower, okay.  Not what we want to see, but certainly not the worst-case scenario.  The– the second city is Europe, Eurozone.  Now it’s going to be a one to two percent growth, right, even more anemic, with a very wide range of outcomes by country.  But again pretty anemic stuff.  And then the stars of the show continue to be the emerging markets. In general, China and Asia in particular.  But when you blend that all together, we’re still looking at growth north of four percent globally.  That’s a fantastic number.  And a lot of our– our multinational firms, the S&P 500 types of companies get as much of 50 percent or more of sales [abroad]… So if you’re a company that has a global market place that you’re serving, you’re probably looking out there saying this is pretty good, right.  I’m seeing good growth, I’m seeing good sales, I’m seeing good profits because I have the streamlined core structure.  So those companies and those executives are feeling good about things.  If you’re a smaller company that’s pretty much a U.S. domiciled, U.S.-centric company in terms of who your customers are, you’re probably not feeling nearly as buoyant, [or] nearly as robust because you’re feeling more the effects of that two percent, two and a half percent growth dynamic that we’re seeing just here in the U.S.  And obviously, if you’re U.S. and Europe, then you’re really not too pumped up because then you’re too mired in two of the areas that again are seeing the least robust growth.  So it really depends on what your market is, who you’re serving, where your sales come from.

At the Aspen Ideas Festival yesterday, Chrystia interviewed the iconoclastic and polymathic economist Justin Wolfers of the University of Pennsylvania’s Wharton School of Business. Here is a transcript of some of the highlights of their discussion:

On the U.S. economy’s lost half decade:

JUSTIN WOLFERS: If you go back, you look at how bad the economy’s been for so long.  So the NBER says the recession started in 2007.  Actually it may have started as early as 2006… One of the difficulties is we keep revising what happened to history. And if you look at the latest revisions of history, our current understanding is the economy actually peaked in late 2006. This I’m sure is something you’re going to hear a lot about during election season, ’cause they’re going to call this again, you know, the Bush recession. They’re going to be very keen to get that story out. But, you know, the first part of 2011 looks like it’s pretty grim. It’s very hard to see– a lot of strong growth.  And certainly, you know, things are well below potential now. You know, people talk about a lost decade, and if you think about 2006 to the present, we’re halfway there. And if you want to be the real pessimist — and I’m not — I’m not this pessimistic. But, you know, if you look at things like median family income, it actually fell during the Bush years.  Which actually means if you’re the median family– we’re well past a lost decade.

On the Fed’s need for a new marketing campaign:

JUSTIN WOLFERS: See this is where we’ve got the branding all wrong.  So QE1 and QE2, they sound complicated.  What are they, they’re the government buying bonds to reduce interest rates.  What’s monetary policy, standard run-of-the-mill monetary policy?  The government buying bonds to affect interest rates.  We’re just changing different interest rates.  So let’s change all of ‘em and let’s keep changing ‘em.  There’s nothing–

“Jobs! Jobs! Jobs! What can we do?” was the title of a panel Chrystia moderated at the New York Forum last week with members of President Obama’s Council on Jobs and Competitiveness.  The Council has been tasked with jump-starting the U.S. labor market and recommending changes to the nation’s education and training initiatives, and each of the panelists touched on a different aspect of the Council’s findings.

Laura Tyson, a former chief economic adviser to President Clinton and an economist at the University of California, Berkeley, stressed that infrastructure projects were the low-hanging fruit of job creation.  She argued that $1 billion in infrastructure investment could create between 11,000 and 30,000 jobs.  Many infrastructure projects have been approved and are shovel-ready — the only thing that’s holding them up is the Department of Transportation’s lengthy permitting process, Tyson noted.

Valerie Jarrett, a Senior Advisor to President Obama, added that in order to offset the rise in structural unemployment, investments in education and worker placement must be made sooner rather than later: