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FAREED ZAKARIA GPS

Global Lessons, Putting America to Work

Aired September 29, 2012 - 20:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


FAREED ZAKARIA, HOST: Welcome to a GPS special, "Global Lessons, Putting America to Work." I'm Fareed Zakaria.

This year's election will hinge on one question. Whom do you trust to be your job creator-in-chief?

Unemployment stubbornly remains above 8 percent. If you add those who stopped looking for a job or can only find part-time work, we are near 15 percent. Bad news for President Obama. But here's a hard truth. Over the past two decades, U.S. recoveries have been increasingly jobless, no matter who's been in charge.

The consultants at McKinsey point out that after every recession from World War II through the 1980s it took us around six months to recover lost jobs, but after the 1990 recession, it took us 15 months to recover those jobs. After the 2001 recession, it took 39 months. And after the 2008 downturn, McKinsey says, it will take 60 months, five whole years, to get back to where we were.

Why has this problem grown over the last 20 years? The most plausible explanation is that the revolutions of information technology and globalization make it much easier for work to be done by machines or cheap labor overseas. That may be great for companies and for capital, but it places tough pressures on the American worker.

So what can be done? In this hour, we are going to offer you a global perspective on jobs, taking you around the world to look for solutions to our unemployment crisis. We will visit Europe, Asia and the Middle East. We will also visit Chicago, where I spoke to President Obama's former chief of staff, now mayor, Rahm Emanuel. He is trying a bold, local experiment that Washington refuses to try.

But first, let's look at how to solve one of the most crucial aspects of the jobs crisis, what to do about youth unemployment, which often turns into enduring adult unemployment. Over 16 percent of Americans under 25 are jobless. One country in Europe may have a solution. Let's get started.

(BEGIN VIDEOTAPE)

ZAKARIA (voice-over): Meet Florian Vols (ph). He's 23, just a few years out of high school. In the U.S., he'd have a one in six chance of being unemployed as a young adult. But Vols lives in Germany, where the youth unemployment rate is less than half of ours. One of the reasons for that Germany's apprentice system. Vols has an apprenticeship Siemens, the high-tech manufacturing giant. The company gives him over three years of paid training, a guaranteed job offer, plus he attends a vocational school.

FLORIAN VOLS, YOUNG WORKER: We know that we can work afterwards here and have a job and a fixed job.

ZAKARIA: Siemens isn't the only German company offering this sweet deal. Businesses in almost every industry offer paid training, and in most cases, a full-time job, while the government provides a free vocational education. Almost two-thirds of Germany's young people take part in apprenticeships.

PETER SOLMON, SIEMENS: It ranges from hair dresser training to, you know, running a nuclear power plant.

ZAKARIA: Siemens' Peter Solmon says his company is training around 10,000 apprentices in Germany. There is a hefty price tag for each training, over $120,000.

(on camera): That's major investment.

SOLMON: It is.

ZAKARIA: And you think you get a return on it?

SOLMON: We know we do.

ZAKARIA: And other companies in Germany do similar things?

SOLMON: This is not forced upon us. We believe it's a good business model. And I think that Germany's success as an exporting company is based on this skill.

ZAKARIA (voice-over): Germany's success has been nothing short of remarkable. Once known as the sick man of Europe, the country enacted reforms, cut costs and went through a painful period of restructuring. In 2005, unemployment peaked at over 11 percent, much higher than the Eurozone and the United States. But the changes had made Germany much more competitive.

Manufacturing exports started soaring and during the global recession, unemployment actually went down in Germany while everyone else's went up.

Germany's apprentice system, providing a wealth of high-skilled workers, had a lot to do with that success. Apprentices at Siemens get a crash course in cutting-edge manufacturing. And also work on their own projects. They can even get a bachelor's degree.

SOLMON: I think there's a sense in the United States that this apprenticeship training is somehow a lid on a kid's career and it's quite the opposite.

UNIDENTIFIED MALE: I already got my prototype working.

ZAKARIA: When apprentices complete their training, they get a certificate that's accepted throughout their industry so they can even work for another company if they want. But at Siemens, over 85 percent end up staying after all of that free training.

SOLMON: That kind of investment, that kind of participation with the employee, ends up in creating loyalty.

ZAKARIA: The linchpin of Germany's apprentice system is collaboration. The companies, the vocational schools, the government and the trade unions all work together to make sure that industry and its future workforce are compatible.

(on camera): So it is almost like a triangle between government, private business and educational institutions?

SOLMON: Exactly. And that's what makes it difficult to export to other countries.

ZAKARIA (voice-over): In the U.S., our patchwork system of job training programs is one of the reasons why we have 3.5 million job openings left unfilled. But near Siemens' plant in Charlotte, North Carolina, the company has found a worthy partner.

Central Piedmont Community College has been running a program where students earn a degree and get trained by local manufacturers, just like in Germany.

PAM HOUSE, SIEMENS U.S.: It's not rocket science. The Germans have been doing this forever.

ZAKARIA: Siemens' Pam House says their first apprentices will fill vacant positions at the plant as veteran workers retire.

HOUSE: I can live with the 93rd.

ZAKARIA: But House faces a big challenge, convincing students that a four-year college degree isn't the only route to success.

HOPE JOHNSON, SIEMENS EMPLOYEE: It was never a plan for me to be working in any type of industrial factory.

So we need to loosen these.

ZAKARIA: Hope Johnson was an honor student in high school.

JOHNSON: That's good.

ZAKARIA: And says her parents really wanted her to attend a university. But as a math and science enthusiast, Hope loved Siemens' high-tech facility and her parents loved the free tuition.

JOHNSON: You just focused on your grades and you focus on what you're learning in the factory because they are paying for everything.

ZAKARIA: Now, Johnson is learning how to operate the machines that build Siemens' massive generators.

JOHNSON: I talked to my friends, they're working at fast food restaurants. They're working at grocery stores, and then I work in a giant factory making stuff for power plant, and so you can't beat that.

ZAKARIA: But the big question is whether or not apprenticeship programs like Siemens' can be scaled up and offered all over the country. More companies will need to invest in training and attitudes toward blue-collar work will need to change.

SOLMON: In Germany, they're called the bluemener, the blue men, because they wear blue overalls. And they're very proud of being bluemenner. They're very proud.

ZAKARIA (on camera): But how do we achieve that cultural shift? Because in America, that wouldn't quite be true.

SOLMON: I think it was true. I think it was true. And I think, you know, these words apprentice, and journeyman and master were in the English language for a long time. Benjamin Franklin worked from Boston to Philadelphia to be an apprentice. This is something that we have in our history. We just have to bring it back.

(END VIDEOTAPE)

ZAKARIA: If Germany reminds us to return to our roots to help the next generation find jobs, another country has a way to help the current workforce. Its unemployment rate is only 5 percent. How do they do it? Stay with us.

(COMMERCIAL BREAK)

ZAKARIA: So, Germany shows us how to get young people into an employment pipeline. But what about people who are already employed? How do we make sure they stay employed through the peaks and troughs of the national economy, through the highs and lows of their industry?

For that we traveled to the Netherlands, which has one of the lowest unemployment rates in Europe. What's their secret? It's something called Flexicurity. Come with me and I will explain.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: I started as a mechanic. Then became testers and then trouble shooter.

ZAKARIA (voice-over): Patricia Vander Vain works at Royal Philips Electronics. You probably it simply as Philips. They make everything from simple light bulbs to high-tech medical equipment. She never went to college but Philips has trained her to do three different jobs. Her stint as a mechanic was on the assembly line. She was a coil tester. And now she is a troubleshooter for the MRI machines that help scan patients' bodies in hospitals around the world.

Why? In the Netherlands, it is all about making sure people can stay employed despite of any economic curve balls.

TON WILTHAGEN, TILBURG UNIVERSITY PROFESSOR: It's not about the same job the lifetime employment but it's about keeping people employable. ZAKARIA: Tilburg University professor Ton Wilthagen advised the European commission to help EU countries create more and better jobs. That earned him a unique nickname.

WILTHAGEN: People started to call me Mr. Flexicurity. Whether this is a good name or a bad name depends because it's still a real debate, you know?

ZAKARIA: Flexicurity is a fiercely debated concept that was first coined in Denmark. It combines ideas from both sides of the Atlantic. On the one hand, American American-style flexibility, the ability for employers to hire and fire with relative ease. On the other, a traditional Europe-style security net, making sure the employee is taken care of if they are fired or laid off.

But in the wake of austerity with unemployment soaring, some argue that the Danish fairy tale lost its plot. So the Netherlands does flexibility a little differently. A centerpiece of the Dutch system is something call a mobility center, a partnership among companies that helps people find their next job instead of being let go.

Frans van Houten is the CEO of Philips, one of the largest employers in the Netherlands.

FRANS VAN HOUTEN, PHILIPS CEO: We also invest in their re- employability, so that the skills that maybe Philips may no longer need but could be very useful in other companies will be made available.

(END VIDEOTAPE)

ZAKARIA: In America an employer facing a downturn would simply lay off employees. In the Netherlands, they are sent to the mobility center where a great effort is made to find them work with one of the other partner companies. It helps companies share risks in bad times while still actively maintaining a trained workforce that they can tap into in good times.

(BEGIN VIDEOTAPE)

WILTHAGEN: Everybody needs workers because it's an aging society so they need to -- the support of other companies. So it's like a joint interest.

ZAKARIA (voice-over): It also helps the bottom line, adds Professor Ton Wilthagen. Companies have a huge incentive to place the worker elsewhere. If they don't, they have to pay the employee's unemployment benefits for up to 38 months.

VON HOUTEN: By working together with other companies in the mobility center, it is something that we do not have to carry on our own, but rather, it becomes a job market and the attractiveness of a job market is that it facilitates people, make a demand and supply meet and that's what we all want.

ZAKARIA: Philips CEO Frans van Houten is leading an industry that is undergoing a major revolution.

VON HOUTEN: At this moment in lighting, we see a major shift from traditional lamps to LED lighting, but it has, as an unintended consequence, that some of the older technologies become obsolete.

ZAKARIA: As technologies evolve, oftentimes jobs become redundant, too. And instead of laying off the incandescent worker, Philips might try to move them to other jobs within the company.

Remember Patricia whom you met earlier who's trained at three different jobs? If one goes away, she has skills for another.

UNIDENTIFIED FEMALE: I think I'm in a better position in the job market now than a couple of years ago.

ZAKARIA: And if that doesn't work, there's the mobility center.

VON HOUTEN: If she want to lay off somebody it will actually cost money and that money usually goes to the employee. In the mobility center, we invest some of the money that may actually go for compensating the layoff in actually helping the employee find another position.

ZAKARIA: It's a win-win for the company and for its employees. In some cases, companies like Philips even temporarily pay the difference in people's salaries if they have to take lower-paying jobs. It is work, transition and training programs like these that have helped the Netherlands' unemployment rate drop 60 percent since the 1980s.

But the Dutch have also taken the flexibility part of Flexicurity to the next dimension. Half of the population, 77 percent of women and 25 percent of men, work part time. So there are simply more jobs to go around. And people largely like the balance, says Professor Wilthagen.

WILTHAGEN: Those people, most of them do not want a full-time job, that is part of the Dutch model.

ZAKARIA: Of course, these protections are so expensive that companies are also starting to rely more and more on temporary agency workers who enjoy most of the same rights as regular workers but can be dismissed more easily. And that, says Wilthagen, could lead to greater inequality. But overall, he adds, there's a reason the Netherlands has one of the best trained and most productive labor forces in the world.

WILTHAGEN: It's not only corporate social responsibility but it's also self-interest. It is a small country. We want to be competitive, so let's not waste the human capital, the talent that's here. Let's try to keep it in our region.

(END VIDEOTAPE)

ZAKARIA: The key lesson America can take from Holland and Germany is that companies are giving incentives to invest in their workers so that even when they do let them go, those workers retain skills and can be reemployed.

Up next, should government be in the business of backing whole industries in order to create jobs?

(COMMERCIAL BREAK)

ZAKARIA: We've seen how Germany gets young people into the workforce and how the Netherlands keeps people there. But what about government supporting specific industries in order to help create jobs?

Yes, I'm talking about industrial policy, a taboo subject in America. But government support for industry is worth examining, because it has created a lot of jobs for some of the world's fastest-growing economies.

(BEGIN VIDEOTAPE)

ZAKARIA (voice-over): It's a busy day Hyundai Heavy Industries ship building plant in Ulsan, South Korea. Over 10,000 workers at Hyundai Heavy churn out a massive new ship every three days. Forty years ago, this shipyard didn't even exist and South Korea's ship building industry was tiny. But today, this midsized nation of 50 million people is the number one ship builder in the world. With an industry that supports a huge number of jobs.

MICHAEL LIND, CO-FOUNDER, NEW AMERICA FOUNDATION: Today almost half the world's commercial ships are made in South Korea.

ZAKARIA: Michael Lind, co-founder of the New America Foundation, runs the think-tanks program on economic growth. He points out that South Korea's dictator in the 1960s and '70s, Pack Chung He, gave subsidies to develop heavy industries like steel, ship building and cars.

The companies that were backed, Hyundai, LG and Samsung, are now household names. Other Asian countries, like China and Japan, funded industry too often within impressive results.

LIND: Together, they had 8 percent of global ship building in 1975. This year, they have more than 90 percent. It is entirely a product of industrial policy and in particular subsidies by governments.

ZAKARIA: U.S. ship building once thrived, says Lind, thanks in part to subsidies but in the 1980s, President Reagan eliminated many of those subsidies. How is the industry doing today?

LIND: The United States has 0.5 percent of commercial sea going, ship building right now.

ZAKARIA: Of course, industrial policy can be a losing strategy, too.

(on camera): The government is spending all this money favoring one industry over the other. And it's going to make lots of mistakes.

LIND: That's right in the sense that you get a -- sometimes a massive misallocation of resources. ZAKARIA (voice-over): Just look at the solar company Solyndra. It got a big loan from President Obama's Department of Energy and promptly went bankrupt, costing taxpayers half a billion dollars.

The federal government might be wary after the Solyndra disaster but one state is getting into the game in a different way. An initiative in Albany has made New York a leader in a cutting-edge industry, nanotechnology.

DR. ALAIN KALOYEROS, UNIVERSITY OF ALBANY-SUNY: It's innovation that's going to have significant implications for society.

ZAKARIA: Dr. Alain Kaloyeros, physicist, inventor and fully licensed nano-geek, heads the College of Nanoscale Science and Engineering, which is part of the State University of New York.

(on camera): What is nanotechnology anyway?

KALOYEROS: The core of it is the know-how of how to manage individual atoms and molecules.

ZAKARIA (voice-over): Nanotechnology shows up everywhere in our lives from medicine to computer chips. Kaloyeros and state officials convinced over 300 nanotech companies to come to Albany, creating 15,000 jobs across New York.

KALOYEROS: The average wage for one of those jobs is $92,000. We are talking about $1.3, $1.4 billion in wages alone going into the state's economy.

ZAKARIA: How did they do it? Using an industrial policy of sorts. But with a caveat.

KALOYEROS: Not a single dollar goes to the companies.

ZAKARIA: In the mid-1990s then Governor Mario Cuomo approved a $1 million grant to the State University of New York to create a nanotech research hub that companies could use. Companies started giving money, too, because the cost of having their own research facilities was a huge expense.

KALOYEROS: They can't afford doing it on their own. So they love to partner with us.

ZAKARIA: Big names like IBM, Intel and Samsung all got into the mix, creating a massive center of innovation. New York State has given $1 billion to the college. But companies have given over $13 billion.

KALOYEROS: We are not picking winners and losers.

ZAKARIA (on camera): So you're not picking specific companies or specific adaptations of technology. You are creating a kind of open infrastructure which anybody can use?

KALOYEROS: Absolutely.

ZAKARIA (voice-over): The college has lifted Albany's economy, giving many workers a second chance.

John Keefe was laid off from a paper manufacturer after working there for almost 23 years. He and some of his former co-workers were retrained by the college to work in the ultrasterile clean room where computer chips are made. Putting on the required bunny suit felt odd at first but Keefe has gotten used to t.

JOHN KEEFE, WORKER: I'm very happy here, they take very good care of me, I'm hoping to retire from here.

ZAKARIA: The next step is to apply the nanotech research hub model to other industries. The college received over $57 million from the Department of Energy to form a hub for America's solar companies.

(on camera): You think this is a much better model than the Solyndra model of giving money to an individual company?

KALOYEROS: Absolutely. The White House, the federal government, have to look at how New York does things. You don't pick winners and losers, you focus on what the scientists are telling you is the science of the 21st century.

(END VIDEOTAPE)

ZAKARIA: When we come back, we will show you another lesson on job creation in a very unlikely place, a desert oasis in the Middle East. Stay with us.

(COMMERCIAL BREAK)

ZAKARIA: Government funding for specific industries to help create jobs can be a hit-or- miss proposition. But there's one industry in America with tremendous potential for job growth and it needs fewer regulations, not government money. The tourism industry. And few places do tourism better than Dubai, one of the United Arab Emirates on the Persian Gulf.

(BEGIN VIDEOTAPE)

ZAKARIA (voice-over): The world's tallest building, over half a mile high, man-made islands shaped like a palm tree, sprouting with luxury hotels. There's even an indoor ski slope in this desert oasis, conveniently located in a shopping mall. Dubai stops at nothing to woo tourists and when tourists come and spend their money, they are like walking job stimulus program.

FRITZ VAN PAASSCHEN, CEO OF STARWOOD HOTELS AND RESORTS: They will create about a million jobs by the end of this decade just from travel and tourism.

ZAKARIA: Fritz van Paasschen is passion is the CEO of Starwood Hotels and Resorts, the company that owns the Sheraton, Westin and W Hotel brands. Starwood has 15 hotels in Dubai. More than any other city in the world except New York.

That's remarkable, considering Dubai's small size, a little over two million people.

VAN PAASSCHEN: Twenty or 30 years ago, people didn't think of going there. Now if you're in Europe, or especially if you're in Russia, it's a place where people go.

ZAKARIA: By 2020, hotel guests are predicted to triple and Dubai aims to create 950,000 jobs, fuelled by tourism and related sectors.

VAN PAASSCHEN: This idea that a small city-state could create a million jobs in a decade that's an enormous amount of growth.

ZAKARIA: Dubai's success in tourism comes at the perfect time because the industry is booming across the world. Companies like China, Brazil and India have rapidly growing middle classes that are keen to see the world. Almost 18 million Chinese are expected to travel outside their country this year, according to the Chinese government. That number is expected to be over 100 million in 2015.

VAN PAASSCHEN: The opportunity in travel and tourism today is bigger than it ever was.

ZAKARIA: But the U.S. has been missing out on that opportunity in a big way. After 9/11, America tightened its visa policies to improve security. Partly as a result, the travel industry says we have lost around one-third of our share of the international travel market. The good news is we can turn things around.

(on camera): How big could America's tourism industry be if we got all these things right? Because this is the country everyone wants to come to.

VAN PAASSCHEN: If the U.S. could just get back to its own share of international travel that it's lost in the last decade, that would amount to about 1.3 million jobs, which is roughly 20 percent of the total number of jobs that were lost in the entire crisis. That's big number.

ZAKARIA (voice-over): So what can learn from Dubai to boost tourism at home? Lesson number one, make those visas easier to come by. Dubai hands out visas to many foreign nationals right at the airport. We can't do that for every tourist but we could at least make it easier for people to apply for visas.

ZAKARIA (voice-over): We have five places you can get a visa in China and that's in a country with 170 cities of over a million people. So, in fact, so many people have to take a trip before they even make the trip.

ZAKARIA: The cost of more visa processing, says Van Paasschen, would easily be paid for by the increase in tourism business.

Lesson number two, promote your tourist destination. Promote it like there's no tomorrow. Dubai has its own Department of Tourism and the United Arab Emirates' marketing efforts have been ranked first by the World Economic Forum. Washington has historically had little involvement in wooing tourists. Things are changing, slightly. The President and Congress created Brand USA, a public-private entity that will promote America abroad and the State Department has improved visa processing and says that wait times are dropping. But with greater ambition and the courage to do away with bureaucratic obstacles, this industry could grow mightily.

VAN PAASSCHEN: The way I would describe it as a business person is it's a good start, it's not mission accomplished.

ZAKARIA: And there's one area where we are still way behind.

Lesson number three from Dubai. Infrastructure. Right now the airport for this tiny city-state is one of the world's busiest. But apparently that wasn't enough, because they are building a new airport that would be the busiest, by far, in the world, handling 120 million passengers a year. Not bad for a place that was only a small fishing village a few decades ago.

VAN PAASSCHEN: This is a lesson that the U.S. has taught the rest of the world. There probably wasn't a very good reason to go to Los Vegas a couple of decades ago. You could make the same argument about Orlando. But U.S. business created those areas as a destination. Created jobs, created an industry that the rest of the world took notice of and has done a wonderful job of copying in some areas.

(END VIDEOTAPE)

ZAKARIA: When we come back, we'll return to the United States and show you an experiment in infrastructure that's turning heads and will create jobs in the Windy City of Chicago.

Stay with us.

(COMMERCIAL BREAK)

DON LEMON, CNN ANCHOR: I'm Don Lemon. Here are your headlines to hour.

A wall of snow has killed at least 11 people on one of the world's highest mountains. More than a dozen climbers are still missing on Nepal's Mount Manaslu after an avalanche swept through their camp sites. These pictures show rescuers evacuating the injured. More than 200 people were attempting to climb the mountain, which is considered one of the world's most dangerous to navigate.

A schizophrenic double-amputee in a wheelchair shot to death by a Houston police officer. Brian Claunch allegedly had threatened people at a home for the mentally ill and then tried to stab the police officer's partner with what turned out to be a pen.

(BEGIN VIDEO CLIP)

JODI SILVA, SPOKESWOMAN, HOUSTON POLICE DEPARTMENT: The other officer, Officer Marin, in fear of the safety of his partner and the safety of himself, discharged his duty weapon, striking the suspect.

(END VIDEO CLIP)

LEMON: The man initially got upset when he was denied a cigarette and a soda. The officer is on administrative leave.

Tiger who? Rory who? Most of the attention was on the names like Woods, McIlroy heading into golf's PGA Tour championship in Atlanta but today, the spotlight is on the tournament and FedEx Cup champion, Brant Snedeker, who takes home more than $11 million. Not a bad day's pay for a round of golf.

Those are your headlines this hour. I'm Don Lemon, keeping you informed. CNN, the most trusted name in news.

ZAKARIA: In 2002, the World Economic Forum ranked U.S. infrastructure fifth in the world. In its latest report, we're 25th. Why? Well, these days, the rest of the developed world spends substantially more on infrastructure than we do. Many emerging markets do even more. China spends 9 percent of its GDP on infrastructure to our 2.4 percent.

Our bridges are falling down, our power grid is antique, our water mains are bursting and where are the great projects of the future? With borrowing costs lower than ever before in history, why can't we invest more and start putting people to work doing it?

One man is on a mission to do just that. At least in his Windy City.

(BEGIN VIDEOTAPE)

MAYOR RAHM EMANUEL, CHICAGO: You can't have a 21st century economy sitting at 20th century foundation.

ZAKARIA (voice-over): Chicago Mayor Rahm Emanuel, the notoriously sharp-witted.

EMANUEL: How dare you?

ZAKARIA: And sharp-tongued former chief of staff for President Obama, has a bold plan to rebuild his city.

BILL CLINTON, FORMER U.S. PRESIDENT: When I secured these agreements to come to work for my presidential campaign, neither one of us had gray hair.

(LAUGHTER)

ZAKARIA: And he's getting help from an old friend.

CLINTON: What you are doing here is the first, in effect, infrastructure bank using private capital that any city in the United States has established. This is a huge deal.

ZAKARIA: The Chicago Infrastructure Trust is Mayor Emanuel's plan to tap private investors to pay for big infrastructure projects that the government can no longer afford. The private investors would expect returns from project revenues, savings or fees. It's a model that's been successful all over the world, from the expansion of Europe's largest port in Rotterdam to the creation of the world's largest eco- city in Tianjin, China.

CLINTON: This is a classic example of what works in the modern world.

ZAKARIA (on camera): Everywhere that is, except in America. Until now.

(voice-over): The Chicago Nonprofit Trust intends to pour $7.2 billion into adding runway to O'Hare, rebuilding crumbling roads, fixing aging schools, repairing dilapidated rail lines, and much more.

EMANUEL: In the next three years, we're going to create 30,000 jobs in the building trades area. Engineers, electrical workers, carpenters, all going to work.

ZAKARIA: Five investment firms have expressed interests in being part of Chicago's public-private trust. Citigroup, a sponsor of this program, is among those who have expressed such interest. But no proposals have yet been put forth and no money has yet been invested. By any of the potential private partners.

America used to have the world's best infrastructure. In the 1950s, American highways, parks, state universities and airports were the envy of the world.

EMANUEL: When this country invested 4 percent of its economic GDP in infrastructure, our economy grew at 4 percent. Not exactly 88 (ph) but close. And when we scaled back our investments as a country to 2 percent, our economy grew at that level.

ZAKARIA: And with the government investing less, Emanuel is taking matters into his own hands. His first project, an energy retrofit of several public buildings, including the Chicago Cultural Center, one of the city's largest energy consumers.

EMANUEL: This is the one we call in the boiler world, AARP, it's the senior citizen?

UNIDENTIFIED MALE: Yes, exactly. Right. Right.

EMANUEL: All right.

ZAKARIA: The retrofit would shave the city's energy bill by 25 percent over the next three years.

UNIDENTIFIED MALE: These were put in 1974.

ZAKARIA: The city plans to take those utility bills' savings -- an estimated $20 million a year -- and use that to pay back potential investors for the $225 million retrofit.

In addition to increasing efficiency, Emanuel says, he has to make up for a century of neglect. EMANUEL: So this 1885?

UNIDENTIFIED MALE: Yes.

ZAKARIA: Just look at the water system. More than 3,800 water pipes broke in Chicago in the last year alone, costing the city tens of millions of dollars. So he is repairing or replacing 900 miles of water pipe over the next decade.

The city council voted overwhelmingly to pass the trust and will get approval on all projects. But critics question whether it's a smart move. They point to the bungled 75-year lease of the city's parking meters by the previous mayor in return for quick cash to cover the city's budget shortfall in 2008.

EMANUEL: There's a role for public/private partnerships, selling an asset is the private taking over a public entity. That's the wrong way to go, in my view.

ZAKARIA: Whatever happens with Emanuel's experiment, this is not just a Chicago story, according to Brooking senior fellow, Robert Fuentes.

ROBERT FUENTES, BROOKINGS INSTITUTIONS: There's a lot of questions. I think the folks are very eager to understand how this is going to work. Whatever happens, positive or negative, the Chicago lessons will absolutely have a ripple effect across the country.

ZAKARIA: The Chicago Infrastructure Trust is perhaps a local version of the National Infrastructure Bank, an idea not even Rahm Emanuel could push through during his time at the White House.

(on camera): Why did the National Infrastructure Bank idea not take off?

EMANUEL: Because it's got caught up in the -- both the politics of not making sure that the President doesn't have a win and also in the politics of ideology.

ZAKARIA: For his part, Emanuel says we need jobs now and need modern infrastructure for the long term and he is done waiting for the gridlock to clear in Washington or at the state capital.

EMANUEL: The Infrastructure Trust allows us to actually start to unlock our future, take control of our destiny and not leave it beholden to either the problem, the challenges or the dysfunction of either Washington or Springfield.

(END VIDEOTAPE)

ZAKARIA: Infrastructure spending is the fastest way to create jobs, especially in the construction sector. The hardest hit by the recession. An investment here lays the foundation for our economy to remain competitive for decades to come.

Up next, my thoughts on putting America to work.

(COMMERCIAL BREAK)

ZAKARIA: We've watched how countries around the world have created jobs, with lessons for how we might do some of the same, but before we talk about the technicalities of training programs, boosting tourism and funding technology, there is a larger question that many Americans wonder about. Should the government do anything at all? Should it just get out of the way?

This debate is on display in the American presidential campaign. On the one hand, President Obama has been making the case that the economy needs investments in infrastructure, education, training, science and technology. Those investments and the President's telling, are the key drivers of American growth, jobs and industries.

As we saw that is certainly how the German and South Korean governments have approached growth.

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MITT ROMNEY, (R) PRESIDENTIAL NOMINEE: It's wonderful to be with you. Thank you.

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ZAKARIA: Governor Romney, on the other hand, argues that America needs tax and regulatory relief. The country is overburdened by mandates, taxes and rules that make it difficult for businesses to function, grow and prosper, he says. He wants to cut taxes, reduce regulations and streamline government.

And looking at places from Switzerland to Singapore to Dubai, you can see that being friendly to business and to tourists can produce an economic bonanza. In some areas, like infrastructure, most agree that the government must act and the need is urgent.

If you defer maintenance on your house, the house deteriorates and eventually, you actually have to pay more. That is what we are doing with our infrastructure. Rather than fix it now when borrowing costs are at historic lows, we are passing a much bigger bill to our children.

As I mentioned earlier, the World Economic Forum ranks us 25th in the world in infrastructure, down from fifth only a decade ago.

Education may be more complex. Just spending money isn't the answer, but the problem is clear. In the 1970s, America led the world in the number of college graduates. As of 2009, we are 14th among rich countries. And the jobs of the future will all require more education than in the past.

Or take federal funding for research and development, which is at half the share of GDP than it was in 1960, according to the National Science Foundation. Industrial policy is more controversial, though historically there is simply no question that the U.S. government has provided massive support for industries like aircraft, semiconductors and the Internet. Fracking, by the way, was a technique pioneered with funding and help from the Department of Energy.

Let's be clear, though, Governor Romney has a strong case to make as well. That same World Economic Forum study that gave us four marks for infrastructure gives us terrible marks on taxes and regulation.

On the burden of government regulation category the United States ranks 76th, with a score of 3.3 on a total scale of from zero to seven. On the extent and effect of taxation the United States ranks 69th out of 144 countries. On total tax rate, percentage of profits, the United States came in 103rd out of 144.

Now the truth is that overall the U.S. economy remains highly competitive. The World Economic Forums' report ranks the U.S. overall as the seventh most competitive in the world. That's why a few months ago, "The Economist" magazine predicted an American economic renaissance.

Where we have slipped badly of late is in our investments, in people, science and infrastructure. So President Obama's message is urgent and relevant.

But why do we have to choose between these two views? We need tax and regulatory reform to make ourselves competitive. America has to make itself attractive for investors, consumers and tourists alike, but we should also make the crucial investments we need for a 21st century economy.

These two views look at the same challenge from different perspectives. Governor Romney is right to look at the world that companies operate in with its challenges and opportunities. Over the last 20 years shall, as communism collapsed and socialism has been discredited, countries around the world have become more business friendly, lowering taxes and streamlining regulations. The U.S. has to stay competitive or over the long run, investment, industry and jobs will move to other lands.

President Obama's view looks at the world from the perspective of an American worker. As more countries have joined the open global economy, these workers face intense competition from much cheaper labor.

McKinsey estimates that between 1980 and 2010, the pool of workers in the world expanded by 1.2 billion as Chinese, Indian, Indonesian and Africans moved from rural villages to cities and started to work in factories and offices. Add to that the powerful effects of technology, which make it easier to get work done with fewer workers.

We live in exciting times of globalization and amazing technological revolutions. Some, those at the top, large companies, will be able to ride through an exciting and expanding new landscape. But many Americans will need help to better prepare themselves to compete in this brave new world.

Don't forget, you can catch my regular show, GPS on Sundays at 10 a.m. Eastern and Pacific in North America. Thanks to all of you for tuning in.