JIM LEHRER: And still to come on the NewsHour tonight: state secrets and national security; and trimming overcharge fees.
That follows economics correspondent Paul Solman’s preview of the economic summit convening in Pittsburgh tomorrow. He starts off in a very unlikely place.
PAUL SOLMAN: Last week’s health and beauty show at New York’s Javits Center, a gathering less exclusive than the G-20, perhaps, but colorful enough and every bit as focused on global prosperity.
From a Canadian cosmetics firm…
JOE SCHWARCZ: Being a chemist…
PAUL SOLMAN: … trying to conjure up business with a chemistry sideshow to the Tahiti booth, native oils their specialty…
PAUL SOLMAN: … to an Arkansas beauty queen, sporting a 10-pound dress of fragrant rubber bands.
Excuse me. I don’t mean to intrude, but, yes, what smell is that?
WOMAN: Sweet pea.
PAUL SOLMAN: So, on the cusp of the G-20 meeting, and just one year after global collapse, how’s the world economy doing?
MARTA WITKOWSKA, BELL PPHU, Poland: After a few months, everything got better.
PAUL SOLMAN: France?
ANTOINE DAUBY, Naturex, France: It seems like people are gaining more confidence, and it starts slowly again.
PAUL SOLMAN: Canada’s OK, too.
JOE SCHWARCZ: We are coming back.
PAUL SOLMAN: And South Korea, whose economy was shrinking dramatically just a few months ago, is again rising.
Is it getting better, yes?
JAMES LEE, Taptech Massager, South Korea: Yes, it’s a little bit getting better.
PAUL SOLMAN: James Lee makes the super-pounding massager.
It’s like pounding on my back now, ba-doom, ba-doom.
It debuted at an unpropitious moment, last October.
Did you have any sales at all in October? No. No?
JAMES LEE: No.
PAUL SOLMAN: No sales? When did you start to have sales?
JAMES LEE: Actually, just from the March.
World economy starting to relax
PAUL SOLMAN: Pretty much everyone here from the developed G-20 countries said the world economy is becoming more relaxed. And for the less developed economies, that's critical, said Chris Kilham, who scours the Earth for natural botanicals to use in health and beauty products.
CHRIS KILHAM, The Medicine Hunter, Inc.: In other parts of the world where I go, people are worried about, "Jeez, you know, I really wanted to buy my kids shoes this year." For them it's not, "Darn, I wanted to get that extra suit at Brooks Brothers." It's, "Darn, I wanted to be able to eat at least two meals today."
PAUL SOLMAN: For the poor, a wilting world economy can be a matter of life and death, so, too, for many small businesses.
GEORG KHAZAKA, Courage + Khazaka, Germany: So your moisture is quite good?
PAUL SOLMAN: Yes, I'm always a little oily, actually. I have to put powder on for that reason.
To Georg Khazaka, who makes skin-testing equipment in Germany, the ongoing credit crunch there means getting a bank loan can still be pretty hairy.
GEORG KHAZAKA: We're discriminated. We are a really wealthy company, but we are small, so they're not interested in us. The risk is too high. They are not looking at the company. They're just looking at the last two years and say, "OK, that's it."
PAUL SOLMAN: Of course, every businessperson can find something to complain about. But, look, says MIT's Roberto Rigobon, in general, the economies convening in Pittsburgh have done a bang-up job.
ROBERTO RIGOBON: I think the response of central bankers in the world was absolutely, you know, A-rated. I mean, it's absolutely fantastic. There was no panic in the United States after three months.
PAUL SOLMAN: Moreover, says IMF Chief Dominique Strauss-Kahn, the G-20's key members cooperated as never before in history.
DOMINIQUE STRAUSS-KAHN: This cooperation took place because everybody was scared and understood that it was not time to fight one against the other one, but to work together. Will it last beyond the crisis? That's the big question. It has to.
Global stimulus plans
PAUL SOLMAN: Strauss-Kahn is talking in part about cooperation in bailing out the global financial system. But the big G-20 economies also spent money, and none more than China, again growing strong these days.
Professor Yasheng Huang.
YASHENG HUANG, MIT Sloan School of Management: The plan was 25 percent of the GDP being spread over two years. Now we are talking about 30 percent, 35 percent of GDP now by the end of the summer.
PAUL SOLMAN: So $400 billion to $500 billion in not even a full year in China, that would be a multi-trillion-dollar stimulus package in the United States this year.
YASHENG HUANG: It's massively larger as compared with the U.S. stimulus program.
WOMAN: We just so-so, like this, as before, same as before.
PAUL SOLMAN: On the showroom floor, Jane Wang says the Chinese government protected her reusable bag firm from the crash. In exchange for a tax break, the firm agreed to no layoffs.
So the government lowers your taxes to make your products cheaper?
WOMAN: Yes, correct. The government support us to do export.
PAUL SOLMAN: Exports and trade, that's one issue facing the G-20. But the major issue is financial regulation. And at the beauty show, there was a sense that the more regulation a nation had before the crisis, the better its economy fared.
In India, where the economy is still growing, these packaging manufacturers pointed out that the banks are controlled by the government.
AMIT KUMAR: It's not like they're on their own and they can give any loan without asking the Reserve Bank of India. So it's not like you're getting 100 percent finance.
PAUL SOLMAN: More like 75 percent to 85 percent, tops. And as in India, in Canada, too, banks didn't bet on magic.
JOE SCHWARCZ, McGill University: There's our genie coming out of the bottle.
PAUL SOLMAN: Didn't grant loans, that is, to borrowers who couldn't possibly afford them.
JOE SCHWARCZ: We didn't have people buying $300,000 houses on $50,000 income.
PAUL SOLMAN: Your banks are highly regulated.
JOE SCHWARCZ: We've not had any bank issues, bank problems at all.
PAUL SOLMAN: So then won't the G-20, dominated by the U.S. and Europe, agree to more bank regulation and especially to fixing the perverse incentive pay of bank executives?
ROBERTO RIGOBON: Nothing's going to happen.
PAUL SOLMAN: No, says MIT's Roberto Rigobon.
ROBERTO RIGOBON: It might be good to have a discussion of how we should remunerate CEOs in general, and I think that's a valid discussion. And when you look at the academic literature, it's not very clear that the way we are paying the incentives in the financial center is good. Probably it's bad.
But I think the discussion that is happening right now is happening in a world that has full of rage. We're not thinking a lot. We're acting a lot, but we're not thinking a lot.
PAUL SOLMAN: So Rigobon is glad the G-20 won't do much.
Nobel laureate economist Joe Stiglitz, who'd come to the beauty show from Columbia University, wasn't.
'Bonus culture' bad for society
JOSEPH STIGLITZ, Columbia University: France and a number of other European countries have said we have to stop this bonus culture. It's bad for our society. The system of bonuses encourages short-sighted behavior. Excessive risk-taking clearly played a role. The United States seems to be reluctant to do anything.
PAUL SOLMAN: In fact, the Obama administration does back removing financial incentives for risky behavior, but it opposes French President Nicolas Sarkozy's push for bonus caps. Stiglitz, worried about a global relapse, thinks the G-20 should be doing a lot this week.
JOSEPH STIGLITZ: What they should do is resolve to continue the stimulus packages until it's clear that we're into a robust recovery.
Second thing, we really need to fix our financial system. Here in the United States, I think that our financial system in many ways -- the problems are worse, because we allowed the too-big-to-fail banks to get even bigger. We let the moral hazard problems to get worse, because we've announced, in effect, that we will bail out shareholders, bondholders if you're too big. We haven't done anything about the compensation problem. We haven't done anything about the problems of the derivatives.
PAUL SOLMAN: But Stiglitz, too, thinks the G-20 won't do much, and that's fine by Yasheng Huang, who says a call for strong regulation could send the wrong message to China.
YASHENG HUANG: More state controls of the finance in developing countries, more state ownership of the banks, rather than less, because look at the United States. This is a capitalist economy. I mean, look at the troubles they have.
PAUL SOLMAN: MIT finance professor Antoinette Schoar says resistance to free-market reforms is already regaining strength in India.
ANTOINETTE SCHOAR: You see it very practically, when we talk to older bankers in the Indian banking system who will use this argument to block reforms. And they will say that, you know, everything that comes from the West now is suspect and we should -- I mean, Indians should reject it. And I feel, you know, that definitely sets back a lot of very important and needed structural reforms.
PAUL SOLMAN: Meanwhile, back to the beauty show one last time...
Let me try them on, if I can. Oh, great.
... where Benny Naghi was taking customers to new heights in a pair of Orthotebb health shoes.
You're much smaller than you used to be just a few moments ago.
Not unlike the health shoes, the G-20 has pledged a boost.
MAN: You walk on the front of it, like a high-heeled shoes.
PAUL SOLMAN: ... to the global recovery. But agreeing how to do it in Pittsburgh this week won't be any walk in the park.
JIM LEHRER: That report by Paul is part of his ongoing series on "Making Sense of Financial News." Online, you can watch more of his interview with Professor Stiglitz on our Web site, newshour.pbs.org.