[Max Foster, Host, Quest Means Business:] Comrade Cable, the British business secretary sparks a heated debate on the perils of capitalism. No more debt crisis, says Spain's prime minister, but strikes across Europe tell a separate story. And the race for hidden treasure: Why the economic heat is on in the Arctic. I'm Max Foster in for Richard Quest. This is QUEST MEANS BUSINESS. Hello to you. We are moving beyond the debate on cuts versus spending, it seems, to a modern-day crisis of capitalism. Tonight, the U.K. business secretary tells me parts of the capitalist system are actually failing. We'll ask if it is time to give up on that free market dream. And reviving capitalism in a country that threw it out decades ago; that is, Cuba. And later in the show an investment with returns, the new way of seeing international aide by the president of the World Bank. Now it sounded like a rallying cry against capitalism and it came from a government minister in charge of business here in Britain. Vince Cable was speaking to grassroots members of his own moderate Liberal Democrat Party. He said he made no apology for attacking what he calls the "spivs and the gamblers" who harm the British economy, by which he meant the bankers. Well, some of them at least. He continued, "the government's agenda is not one of laissez-faire, markets are often irrational," he said, "or rigged. So I am shining a harsh light onto the murky world of corporate behavior." "Capitalism takes no prisoners and it kills competition when it can," he said. And when I spoke to him, after the speech, Vince Cable told me, things have to change.
[Vince Cable, Business Secretary, Great Britain:] There are parts of the system, the capitalist system if you like, which failed, notably the banking system. There is a need for fundamental reform. That is why the chancellor of the exchequer and I, in the U.K., set up this banking commission to look at the whole issue of bank structure, banks that are too big to fail, banks in the U.K. case that had balance sheets bigger than the richest economy. That is one central issue. Another issue is the incentive structure. We have the bonus system which encouraged people to take excessive risks, to be greedy. And that has to be reformed, too. And now we are struggling with this problem, we- the private sector recovery is beginning to happen. But it is very difficult for small and medium size companies to get credit from the banking system. And that, again, requires action.
[Foster:] You say you want to work within the capitalist system. You are not anti-capitalist, but a quote from your speech today was, "The government's agenda is not one of laissez-faire. But that means you not one of open market economy?
[Cable:] No, it is-I believe in a market economy, but it is not a question of just standing back and letting it happen. The government has a role. Of course, the central role is providing financial stability and there is also deregulation, getting bits of government out of the way, and free trade. That is a very important part of it. But the government also has a major role to play in my field, as business secretary, in supporting training, for example, and showing that we have adequate manpower, assuming that there is support for science innovation and research and development. The government has a very important role.
[Foster:] And when you talk about perhaps the moral behavior of some of the bankers, in particular, you've been talking about the murky world of corporate behavior. I think you called bankers spivs today. It is quite personal. Is it all bankers?
[Cable:] Not all the bankers. So-well, some of them are. Some of them were. Many bankers are perfectly honorable. Many of them run their banks very well. You know, if you look at the big global banks, some of them were prudently run. Some of the mortgage lenders were prudently run. Some of them were the opposite. And although this is a couple of years ago, the fact is our economy is now-is still dominated by the damage that has been done by that episode. And people are not going to forget that. And we need to draw the necessary lessons from it.
[Foster:] How do you clamp down on one part of the banking system without tarring the whole banking system, the whole economic system, effectively, with the same brush? Because you are saying the system doesn't work. It is a fundamental problem, isn't it? You are not just talking about bonuses?
[Cable:] Well, again, I'm not just expressing a personal view, as I said, during my speech. You know I agree with Mervyn. The governor of the central bank, who made it very clear in his speech two weeks ago, and indeed, repeatedly warns that we still have a basic structural problem in the banking system. Banks that are too big to fail and they are dangerous because if they go down, as they did two years ago, in several cases, then it is the British taxpayer who underwrites them. And we're talking about enormous underwriting here. So, it may be that there are people in the banking community would like to just pretend that all of this never happened. Or thinks it is all behind them. But the issues are still there. And this government is responsible and we're taking responsibility. We are trying to sort these problems out.
[Foster:] The concern is, and some of the criticism since the speech is that you are not actually offering an alternative, though. All you are doing is bashing away at the system. You are not offering a clear alternative to something better.
[Cable:] Well, we are offering alternatives. The chancellor of the exchequer and I set up a banking commission to explore the various alternatives in relation to structure, in competition, also.
[Foster:] But you are not anti-capitalist?
[Cable:] Absolutely not. Indeed if you heard my speech today you would have not asked that question. I mean, it is very clear that we are part of a capitalist system, we are part of free enterprise. I said over and over again, I want private enterprise to succeed.
[Foster:] Well the director of the Margaret Thatcher Center for Freedom is part of the Heritage Foundation, a U.S. think tank, that is regarded as being on the right. We're going to speak to Nile Gardiner from there right now. He joins me from Washington. Nile, I know you took an interest in this speech because it seems that politicians are grappling somewhat in how to respond to capitalism, post financial crisis. How did you interpret what you heard from Vince Cable there?
[Nile Gardiner, Heritage Foundation:] Well, I thought it was an appalling speech by Vince Cable. Mr. Cable is the business secretary of the United Kingdom. He is not the representative of some failing state like Venezuela, for example. And I would expect the business secretary to be representing British interests on the world stage. Instead, he's driving away foreign investment. He is basically doing in his own investment bankers. He's launching some-I think, some scandalous remarks against the banking community in the United Kingdom. After all, the City of London is the world's biggest financial center. And what you don't need is your own business secretary launching attacks upon your own business. It was an extremely bizarre speech. Probably the most left-wing speech by a British cabinet minister, certainly, since the 1970s. And quite frankly a real embarrassment for the coalition.
[Foster:] Certainly some business leaders in the U.K. agreeing with that. And some frustration that he is meant to be representing them and he's actually working against them. He says he is representing his humors, as well. But what do you make of the broader philosophical argument here? The way he says he's not anti-capitalist, but the government isn't laissez-faire, what does that actually mean? I thought it was the same thing? I was taught that at college, at least.
[Gardiner:] Well, I thought he made some very confusing statements in his interview with you earlier. And it is very clear that Vince Cable has extremely anti-capitalist views. That he is not a believer in free markets. He is against laissez-faire. The success of the United Kingdom in this century, and over the past several centuries, has rested upon a firm belief in the laissez-faire capitalist system. That is why Britain is one of the most successful economies in the world. And for the business secretary to be launching an attack upon the virtues of the free market, I think it is highly destructive. This sends completely the wrong signal at a time when the U.K. is trying to lead itself and Europe outside of the deepest recession in many decades. And I do think it sends an extremely negative message across the world. And I would do hope the prime minister and the chancellor will respond very aggressively, rejecting Mr. Cable's remarks.
[Foster:] OK, Nile Gardiner, thank you very much indeed for joining us from Washington.
[Gardiner:] Thank you.
[Foster:] Certainly within the coalition there are different views on this. Now, just as capitalism is called into question, it is back in fashion in one of the most likely places on the planet. And that is the Communist island of Cuba. It is all part of President Raoul Castro's radical plan to restructure the economy there. Shasta Darlington reports the workers making their way in the brave new world of private enterprise.
[Shasta Darlington, Cnn Int'l. Correspondent:] A tall order in Communist Cuba, finding jobs for half a million laid off workers in the private sector. Here in Old Havana not everyone is celebrating this capitalist notion. Like it or not, employees in this barber shop around the corner are being pushed off the state payroll and handed the shop. They will be able to set prices and keep earnings. But they'll now have to pay taxes and rent. And there is no longer the guarantee of a fixed income. "I've been working for the state for years now, and I'm not interested in going private," says Geraldo. "I want to keep working for the state." Cuba plans to shed 10 percent of public sector jobs over the next six months, and allow more private enterprise to absorb the unemployed. A dramatic attempt by President Raoul Castro to reshape the sputtering economy. He says the state simply can't afford a bloated and unproductive workforce. But don't expect American-style big business. Cuba's new entrepreneurs will be encouraged to start small operations, maybe driving taxis, laying bricks, or perhaps repairing toys. [On Camera] Now to get an idea of what is in store for them, we're talking to some of the people already working in the country's miniscule private sector. [voice over]: Emilio Mendoza was laid off during Cuba's last major economic crisis in the `90s. He bought a government license and set up a cobbler's shop in his driveway. He says Cubans should see this as an opportunity. "I'm happier now than when I was a steel worker," he says. "I pay the state their money. I charge my fees and I don't have to worry." Esedro, a taxi driver, says it depends on how much the state charges its new entrepreneurs in taxes and licensing fees. "I don't recommend being a taxi driver, because the fees are very high," he says. They all agree the days of getting paid by the government, whether you work or lounge about, are over. Still the state controls about 90 percent of the economy. These modest proposals aren't likely to radically shift that balance. But they will give life to a new class of small businesses that could change the face of Cuba. Shasta Darlington, CNN, Havana.
[Foster:] Well, when we return we'll be speaking to one half of the world's richest private foundations. Melinda Gates tells us what role she thinks rich people should play in the fight against global poverty and of disease.