Global Growth Not Deflation is Biggest Risk: David Rubenstein


NDTV's Prashant Nair spoke to one of the biggest names in international finance, David M. Rubenstein, the co-founder and Co-CEO of the Carlyle Group, which is one of the world's largest private equity firms. He said that though deflation is a risk for Europe, growth represents the biggest threat to the global economy.

Here is an edited transcript of the interview.

Question: In Davos, India is back in flavour. So the big question is can India do well in otherwise slowing world economy? Is global deflation the biggest risk now as we start 2015?

Answer: No, I won't say it's the biggest risk. It's a risk particularly in Europe. Deflation has been a problem in Japan, of course. I won't say it's the biggest global problem. I think the biggest global problem is growth. Growth really can solve lot of problems and without better growth around I think we will have some economic concerns.

I think India has done pretty well in the recent years say 4.5 per cent or so last year which actually grew to about 5.5 per cent this year. That's pretty good. China is probably slowing down a bit, probably growing maybe about 6.5 per cent to 7 per cent but down from 10 per cent. United States is actually picking up. It's going around 3.5 per cent and that is pretty good for an economy of that size. European growth really been well below 1 per cent.

Question: Is the US, for example, is really growing as strong as the numbers suggest. I mean for example wage growth has been an issue although the overall jobs number seems to be getting better and better.

Answer: There are several issues. The US economy is doing well but the people who are doing well tend to be the wealthier people and they are upper income people. So wage growth has not really been very good in United States and we do have a greater income inequality than we have had since probably 1929-1930. So corporate profits are high, stock market is high, investments are also doing pretty well but those in the bottom part of the economy are not doing as well.

Question: So what is the takeaway for the global economy.

David: We measure the success of the economies by growth rate and unemployment rates. We have to learn how to measure not just growth rates and unemployment rates but how people at the bottom of the society are doing and particularly income inequality and social mobility numbers. So at least when we measure how economy is doing we can't just measure GDP growth or unemployment or inflation. We have to measure other things because that's much more important in the future as we go forward.

Question: And that's actually getting worse as you were pointing out.

Answer: Well, in the United States, income inequality has been growing since 1929-1930. The wealthy are getting wealthier and the poor are not really advancing. So that's a problem but it's true in also in other markets like Europe.

Question: What do you think the Fed is going to do? The consensus is that they will start increasing interest rates sometime in 2015.

Answer: I think the Fed is very concerned about not only unemployment being at a low level before the increase interest rates but also to make sure that the impact on the currency is not too severe because the dollar is getting very strong and we don't want to have too strong a dollar related to the other currencies.

Question: So you are saying there is a chance they might not increase rates?

Answer: Well, I don't want to speak for the Fed but I would say that they are going to look at lots of factors. Nothing is pre-determined and nothing is pre-cooked. They will look at the factors every month and make a decision as the facts and the numbers come in.