On education, one of the big ideas. How can that have much, if any, impact on the condition of middle-income wage earners and what's been happening to them in the context of Alan Blinder's Foreign Affairs article, where he's saying there are going to be "tens of millions" of well-educated workers and employees in the United States--skillful people, engineers, accountants, etc.--who are going to get rolled up in the years ahead by these forces?

Because I think, in the first place, there are no perfect answers to these problems and I think we are in a very unusual circumstance right now. But to your specific question, as growth goes on in China and India and the rest, wages will go up and, if the exchange rate adjusts as it certainly should, then their cost advantage is going to shrink. So the question is: How productive will our people be? And the more productive our people are, our engineers, our software people and every other kind of people, the larger piece of that pie we talked about before, we'll be able to get.

So I actually think education is key. I'm granting, I think your point is right--in other words, the cost gap. But to some extent the cost gap, well, over time actually, will probably get partially solved by their increasing wages, hopefully as little as possible our wages coming down. Maybe they won't come down at all, who knows. Let's leave that aside just for the moment. The more productive we are, the better we can compete with them, the better piece of that pie we should be able to get.

How dangerous is the potential political climate if something doesn't change in globalization?

As President Clinton used to say, and I think he was right, if you believe in market-based economics, believe in trade liberalization, you should powerfully support a domestic agenda that grows productivity and helps people who get dislocated in the domestic economy because, if the preponderance of people don't benefit from those kinds of policies, that greatly reduces the chances they are going to support them. If they don't support them, that greatly reduces the chance we are going to have political support for them....

How about the Democratic Party? I know this is not a partisan operation per se, but you will certainly have your strongest influence there. Yet you are proposing to reform teacher tenure, tort reform, entitlement reform.

[Rubin laughs.] Well, nobody said life was easy. Look, I don't have a good answer for that. These are all very difficult issues, they're difficult substantively and difficult politically. There's no question about that. But I think we need to address them.

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