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FAREED ZAKARIA GPS

Interview With Gamal Mubarak

Aired March 8, 2009 - 13:00   ET

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


FAREED ZAKARIA, HOST, GLOBAL PUBLIC SQUARE: This is GPS, the GLOBAL PUBLIC SQUARE. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria.

Today, I'm doing an important interview with a man who has rarely been seen on American television. His name is Gamal Mubarak. He's an Egyptian politician -- the son of the 80-year-old president of Egypt, Hosni Mubarak. Many in the Arab world expect Gamal will succeed his father as the next president of Egypt.

If you were to ask what one country should I watch to see if there is hope that the Arab world is going to become more open and prosperous and less prone to terror, my answer would be Egypt.

Egypt has been historically the heart of the Arab world. It has produced most of the trends that have enveloped that world. In the 1950s, for example, it was Egypt's president, Gamal Abdel Nasser, who became the idol of the Arab world and defined the idea of pan-Arabism that swept the popular consciousness of the region.

At the same time, it was in Egypt that Islamic radicalism flourished. Its tenets were articulated by Egyptian intellectuals and clerics.

Look at the attacks of 9/11. There were 19 men, but the four leaders were Egyptian. The others, the grunts, were from Saudi Arabia.

Al Qaeda itself is an offshoot of an Egyptian organization, and its key theorist is the Egyptian, Ayman al-Zawahiri.

Now, Egypt is a dictatorship. Until recently, it held single- party elections in which a voter's only choice for president was Hosni Mubarak. A move toward democratizing the last elections was stained by some allegations of vote-rigging.

Still, Mubarak's regime has made some extremely promising moves in the last few years. The key ministries in Egypt are now headed by dedicated young reformers, who have opened up Egypt's economy, which was a socialist morass, and they are now reforming its constitution, laws and regulations. As a result, economic growth in the last five years has been better than in the previous 25.

With Mubarak at 80 -- and a very healthy 80, one has to say -- the question of who will succeed him is quietly whispered all over the Arab world. Well, you will meet the person everyone is talking about in a moment.

(BREAK)

ZAKARIA: Gamal Mubarak is currently the assistant secretary general of Egypt's ruling party. He is a graduate of the American University in Cairo, and was an investment banker in London.

Gamal Mubarak, thank you for being on the show.

GAMAL MUBARAK, ASSISTANT SECRETARY GENERAL, EGYPT'S RULING PARTY: Thank you for having me, Fareed.

ZAKARIA: The first time I was in Egypt was in the early 1970s. And when I go back now, in recent years, I'm struck by the fact that Islam seems to occupy a larger space, that more women are veiled. In fact, many, many more women are veiled today than they were then.

There are many more outward signs of religiosity and adherence to what some would regard as a kind of more puritanical version of Islam.

Why do you think this -- and this is happening throughout the Muslim world, but particularly in the Arab world. Why do you think it's happening?

MUBARAK: Over the past eight years, the tension between the West and the Islamic world, the tension between the West and Muslims, I think has peaked. There's no point pointing blame, and so on. But, I mean, there is blame to be shared among all of us, actually, even us within the Muslim world.

What I think, we have to speak out more and not allow our religion to be hijacked by elements on the fringes that pretend to speak on behalf of Islam. And I think Islam doesn't stand for any of the tenets that they preach, of violence, of confrontation and so on.

But at the same time, the West has not really helped that much. Whether in all the tension that came out of the sort of so-called war on terror, or because of some of the very difficult, interconnected issues in the region -- and now, the Palestinian issue is one of them -- that sort of breeds hatred, breeds desperation, breeds frustration, breeds a sense of humiliation.

And when you have a combination of those issues, some of those forces that hold some of those radical ideas find it opportune to try and fill gaps in society, to try and be sort of more aggressive in convincing Islamic societies that they speak on their behalf, that they sort of understand their frustration -- and they, and they alone, have answers for their problems. And those answers, in many cases, is confrontation and is violence.

And don't forget, Egypt is a proud, cultured country that goes back thousands of years ago. Egypt has always been a beacon in the world and in our region -- for culture, for civilization, for cooperation and for coexistence. And I think Egypt will remain to be that kind of force. But again, we can't do it alone. Within the wider Muslim world, we have to work together to face some of those extreme movements and extreme views.

But globally, with our partners in the U.S. and the West at large, we also have to work very closely to try and deal with some of the very difficult problems in the region that are giving fuel to groups that preach violence and preach extremism, and want to drag us back centuries ago.

ZAKARIA: What was your reaction to President Obama's election and his first interview, which was given to Al Arabiya, an Arab network?

MUBARAK: I think it's a historic election. I mean, I know even the U.S. views it this way. But I tell you, the world views it that way, too. And I think the Arab and the Muslim world at large views it in those manners, too.

With regards to his interview with Al Arabiya, I think -- I was surprised a bit by some of the comments I heard over here, people saying that the fact that he chose Al Arabiya, the fact that he chose to address the Arab and Muslim world, the fact that he tried to show respect, could be a sign of weakness. And I totally disagree with that.

I really think what he did, the way he did it, the message, the tone, he has his pulse -- he has his hands on the pulse in the region.

If you want to re-engage, you've got to show, you know, that you really respect the other side, even if you have differences with them. And for good or for bad, whether we like it or not, the past eight years has heightened the tension and the defensive nature, and maybe the feeling of disrespect, of humiliation on the Muslim side.

So, I think it was a very important step.

ZAKARIA: What about Hillary Clinton? There are many people who have said to me, from the Arab world, she's very pro-Israeli, this is not going to work, she's not evenhanded in her approach.

Would you agree with that criticism?

MUBARAK: Her first trip to the region -- she was Sharm el-Sheikh a few days ago for the Gaza reconstruction. And I sort of read -- I was over here in the States -- I read briefs of what she said in her speech. She could have easily gone away, and even appreciated, by focusing on the desperate situation in Gaza, of the U.S.'s commitment for reconstruction, pledges and so on, because this was an event for Gaza. She could have been appreciated for that.

But her words, I think, also hit the mark in the right way. She was quite broad in her speech. She said, we're here for Gaza, but let's not forget there is a broader issue out there that we are very deeply concerned about, which is the peace process, which is the two- state solution, which is reengaging again on the road for peace. To me, at least -- these are early days. But to me, first of all, the fact that the president, from the very first days in his office -- and by the way, this is unprecedented, at least in the past 15, 20 years. Rarely does a new administration, a new president come in, and specifically now with the challenges you're facing domestically, and engages internationally and appoints a special envoy to the region, and gets on the phone with leaders in the region, and sends his secretary of state at a very early stage.

I think the president is committed. And he has a good sense of the challenges down there.

But judging from the secretary's statement in Sharm el-Sheikh, I believe she sort of understands we've got to look at this comprehensively. And I think enough is enough -- gradual approaches, actions here and there to deflect attention from the real issues.

My message to the Israelis -- a lot of our friends on (ph) Capitol Hill (ph), and I met some of them over the past few days, staunch supporters of Israel -- the window for a two-state solution -- which is the only viable option for peace, reconciliation and coexistence in the region, the only viable option for a secure Israel living within its boundaries, and a secure Palestinian state living within its boundaries -- that window is closing upon us, and quickly.

ZAKARIA: You said something about the last eight years. Do you regard the presidency of George Bush as having been a failure from the point of view of the Arab world's concerns and demands?

MUBARAK: See, I think -- I think the Bush administration, after September 11 -- and by the way, if we go back, in the first few months after September 11, there was tremendous sympathy, understanding, you know, to the pain that the U.S. went through, I mean, to the sort of terrible attack that happened in that city, here in New York. And people, you know, were willing to support the U.S. to try and fight that scourge (ph).

But as events evolved, you know, the war on terror -- we can go into details, but the end result is more friction, more tension, more confrontation. And then, the priorities and the focus shifted from the core issues for confrontation and hatred and desperation in the region, to issues which we and many others thought were missing the boat.

I mean, you remember the very famous phrase, saying the road to Jerusalem is through Baghdad. I mean, when I heard this seven years (UNINTELLIGIBLE) -- I mean, he's got to be kidding.

They kept telling us -- many people in the U.S. -- kept telling us that you're using the Palestinian problem just as an excuse to delay internal reforms. I mean, you're hijacking that issue just to try and deflect attention and focus on domestic issues.

And I kept saying, let's just read history. This is the core issue in the region. If anybody is under the illusion that the road to Jerusalem is through Baghdad, he'll be proven bitterly wrong. And I think this has proven to be the case.

So, I think the priorities were not -- from my point of view at least -- were not the right priorities. I think that war on terror sort of, you know, clouded everything else. Once you launched the war in Iraq, obviously, it sucked a lot of power, a lot of attention, a lot of resources, and it became a self-fulfilling prophecy in a sense.

Then you created the kind of tension, the kind of hatred. Muslims started to feel that they're out there trying to defend themselves, defend their religion, defend their identity, because they can see that that's a threat to them. And then you had the core issue, let's be honest, totally neglected.

Only in the last year that, you know, there was the attempt to reengage again, Annapolis, and so on. But I think it was too late. And the whole problem became too complicated.

But I hope with that fresh start now, we can start moving again.

ZAKARIA: You say that Egypt is a force for peace, and you have relations with Israel. But a number of people say, you know, this is a very thin official relationship, that you have not educated the Egyptian people, that there is still widespread anti-Semitism, that there are still people -- clerics, people in government-controlled newspapers, even officials -- who will casually say things that are very destructive to amicable relations between the two countries.

Is that true?

MUBARAK: Fareed, listen. I think some of these things do happen. I'm not going to deny that.

But let's be balanced here. Much more and much worse happens also on the Israeli side.

If you just look at the political spectrum, look at the campaign rhetoric, if you just want to point back to the past two months in Israeli elections, you will find again statements, not from journalists, not from, you know, op-eds, not from news anchormen, but from politicians, who have a lot to say about Egypt, about the future of the relation between Egypt and Israel, between Israel and the rest of the world, which I believe totally defies the tenets and the principles that we're talking about.

It is impossible to ask of the leadership, opinion-makers, even party leaders on our side, who believe in that course, to convince people that what's happening with the Palestinian issue, to take it as a case in point, what happened in Gaza, the fact that we have no progress, the Palestinians are living in a desperate situation, Gaza's enclosed, you have people being killed.

There is no, even, horizon for a settlement. There is no way that you can have a convincing message, well, let's have absolutely normal relations on all levels, when that kind of problem simmers.

So, this is why a key component of taking that step and leap forward -- not only among governments or among officials, but among people in the region -- is to try and establish that track and that future of hope to people on both sides. This is missing now.

And we can talk as much as we want, I can preach as much as I want out of conviction, but I can never have a convincing while the facts on the ground tells everybody otherwise.

ZAKARIA: And we will be back with Gamal Mubarak in a moment.

(BEGIN VIDEO CLIP)

MUBARAK: Why have we reached the point we're in today? Why are we in such a deep hole?

(END VIDEO CLIP)

(COMMERCIAL BREAK)

ZAKARIA: And we are back with Gamal Mubarak.

Gamal, you were talking about some of the problems in the Middle East that fuel Islamic radicalism, Islamic fundamentalism.

Do you believe that the Palestinian problem is solvable today? You have a divided Palestinian authority between, on the one side, the Palestinian Authority with Fatah, and Hamas.

How do you make progress when you have, in effect, two Palestinian voices?

MUBARAK: I guess, to answer that question, we also have to ask another question. Why have we reached the point we're in today?

Why are we in such a deep hole when it comes not only to that problem, but to the many interconnected and interrelated problems within the region?

I think, never before -- at least in my recent memory, in my lifetime -- has this region witnessed such interconnected and complicated and complex issues, that unless they are looked at in a comprehensive manner -- it is true, we have to deal with each and every track on its own. But unless you have a much broader view to deal with those issues, your job and your task is extremely difficult.

The Palestinian issue -- now, let's face it. For the past eight years, we've had no process, no progress of any kind or any sort. We've had some failed attempts. We have some last ditch, eleventh hour attempts, but I think nothing sort of with the seriousness and the commitment that this problem deserves.

I think, with the new U.S. administration there are signs. And obviously, we have to wait and see how the policy is formulated. ZAKARIA: You've been talking to Hamas. Egypt has been negotiating with Hamas. And my understanding is, those negotiations have been crucial.

Do you think they're moving forward?

MUBARAK: I don't want to jump to any conclusions. All that I can say, the first round, which convened about 10 days ago in Cairo, all the Palestinian factions were there. This in itself is a good step, because if you remember, those negotiations were planned to have been convened back in November.

And at the eleventh hour, you know, Hamas pulled away. Now, we can go into the reasons for that. This was even before the bloody Gaza offensive.

Now, we're obviously engaged in the first round. It seems, at least listening to some of the speakers of the different factions after the meeting, it sort of came off to a good start.

ZAKARIA: Gamal, people, when they think about Egypt in this country, the one thing they're struck by is that much of the leadership from al Qaeda comes out of Egypt. Some of the great theorists, who apparently have inspired al Qaeda -- Sayyid Qutb, Zawahiri, the brains of al Qaeda -- people say come from Egypt.

What do you -- why do you think that is?

MUBARAK: As you well know, we faced, before the U.S. did, before the world did, you know, our own fight on terror. I remember clearly, when President Mubarak used to come to the U.S., in the midst of our struggle with terror, and used to give a warning message that this is terrorism that is obviously threatening us, but we will confront us, but will also in time threaten the entire world, if we don't deal with it collectively.

And that talk was sort of underestimated, and was flipped back to, I mean, this internal opposition. They are only using excuses, because they want to face some of their political opponents.

Now, I think the president, President Mubarak, has been proven right.

And I guess those groups and forces that resorted to violence in the '90s were betting that Egyptians will stand behind them. And I think in that respect, they failed.

ZAKARIA: When you look at Iran, how concerned is Egypt that Iran is going to have nuclear weapons, and that this changes the strategic -- this changes the basic geopolitics of the region?

MUBARAK: We have some deep differences in our view and vision for the region with Iran. We have deep differences in the way forward for the peace process. We have some differences in how we see the region moving into peace and reconciliation. We also have differences in how we think we want to get to that point. And that's something which is not discussed privately, it's sort of publicly on the record.

It seems we're miles apart, at least judging from the declared positions on the Iranian side, and the well-established positions of the government and for the platform of the party I represent.

ZAKARIA: In the sense they're quite radical, they don't seem to accept a two-state solution, and things like that.

MUBARAK: The Arab world, for the first time -- you know, remember. President Sadat took the historic step in the '70s, and he paid his price for it.

ZAKARIA: He went to Israel and normalized relations between Israel and Egypt.

MUBARAK: Not only that, but his vision was, the only way forward for that region is peace and reconciliation. The only way forward for that region in those days was the two-state solution we're talking about right now. He paid his price for it, but he was right.

And President Mubarak, when he took the helm, he stayed the course. And he faced difficult times and difficult challenges, year after year after year. He stayed the course, because we truly believe this is the way moving forward.

ZAKARIA: If there were a circumstance where the United States decided it was necessary to strike Iran militarily, to get rid of its nuclear sites, would Egypt support it, do you think?

MUBARAK: Listen, Fareed. I think the experience for the past seven, eight years with Iraq, with all the warnings that we and others said, I don't think the region, I don't think the world, I don't think the U.S. has the stomach for rushing to rash conclusions and rash judgments of yet another military conflict in the region.

Now, I believe there is a lot to be achieved through diplomacy. I believe the U.S. is starting on the right track to start to engage. I mean, let's learn from our mistakes. Let's learn from a very recent experience.

Iraq was tough. We can have differences in opinions about it, but, I mean, Iraq -- it's not yet over in Iraq. I know things are improving. But even, you know, look beyond Iraq, what has the war in Iraq done in the region at large. How it has radicalized opinion in the region at large, and how it had -- the core issue further complicated the way we've been talking about it right now.

So, I mean, I don't want to think in that direction. I hope people are not thinking in that direction.

Fine, I know the U.S. administration is saying, we're not leaving any options off the table, and so on. Fine. That's a standard political position. But let's engage. Let's try and get, you know, for a change, a resolution to some of those difficult issues through diplomacy and through negotiations.

ZAKARIA: So, you want the U.S. to negotiate with Iran.

MUBARAK: I guess they have already declared -- it depends how you define negotiations -- they have declared that they want to engage. Now, engage could mean many things.

I believe that the policy for dealing with Iran is still under formulation. At least that's what I'm hearing.

I guess very soon, once you start to engage, you start to specify very clearly what your vision is, what so you expect. And then you have to see where the process takes you.

ZAKARIA: And we will be back with Gamal Mubarak in a moment.

(COMMERCIAL BREAK)

ZAKARIA: You're watching this administration, and it's making you very hopeful, it sounds like. Are you optimistic that this Israeli-Palestinian problem, almost 60 years old, is finally going to be solved?

MUBARAK: Listen, Fareed. In politics you should never lose hope. I mean, I know people can lose hope. An average citizen can lose hope, can be frustrated.

But if that sort of disillusionment on the part of the people makes its way through to leadership, and then you just -- you know, an element of reflecting that hopelessness, then, you know, you're not actually leading or sort of serving any progressive purpose.

Now, having said that, I am not under any illusion that even with that positive beginning, that the road ahead is easy. I mean, again, we're starting from a much difficult position than we were eight years ago, in a very difficult problem to start with. So, there are no illusions about the difficulties and the problems lying ahead.

But if you want to lead, if you want to sort of try and get that vision of security and peace and coexistence, you've got to be hopeful, and you've got to try and deal with every block, every stumbling block that you face, try to find an opportunity out of it to move forward.

And I think, as the U.S. moves in that direction, it will find leading countries in the region -- Egypt among them -- joining hands and working tirelessly to try and get over that impasse we're in, and try and give hope to the people within the region of a peaceful future, and a future of coexistence.

ZAKARIA: Gamal Mubarak, thank you very much.

MUBARAK: Thank you very much for having me. ZAKARIA: And we will be back.

(BEGIN VIDEO CLIP)

NIALL FERGUSON: If you think this crisis is anywhere near the halfway stage...

(END VIDEO CLIP)

(COMMERCIAL BREAK)

ZAKARIA: OK, on to the economic crisis, which never ends, so our discussion of it never ends. And we're also going to talk about where economics meets politics, both at home and abroad.

David Frum was a speechwriter for President George W. Bush, and wrote that memorable phrase, "the Axis of Evil" -- actually, the "axis of hatred" as you wrote it. He is now on a crusade to get the Republican Party to move to the center.

Barbara Ehrenreich has worked as an associate at Wal-Mart, a waitress, a hotel maid and a nursing home assistant -- not the usual resume of one of my guests, but she did it all for a book.

Ian Bremmer is one of the great doom-and-gloomers of the economy these days. He says, brace yourself, 2009 is going to be worse than many people anticipate.

And Niall Ferguson thinks historians will look back on the early 21st century and say that the country at the heart of the global economy during that time was Chimerica. Never heard of it? Well, that's because Niall made it up. It's his concept of a symbiotic relationship between China and the United States.

Thank you all.

Niall, when you look at things, you have been also a doom-and- gloomer. You've been predicting that this is going to get worse and worse. So, have we reached bottom yet?

NIALL FERGUSON, AUTHOR, "THE ASCENT OF MONEY": Oh, no, I'm afraid not.

It seems to me, we won't go down as far as we did in the early 1930s, but we're going to go down a good deal further still, whether you look at the stock market, or, indeed, more importantly, global trade, because it seems to me that what's happened since we last talked about this, is that a financial crisis has turned into a crisis of globalization.

And the thing that really scares me is the collapse of exports from some of the world's leading export economies, particularly in East Asia -- starting with Japan. But look also at Taiwan. Look at South Korea.

So, we're now in a crisis of globalization. And in some ways, that crisis is affecting other countries much more than it's affecting the United States.

ZAKARIA: What does it mean to say that it's a crisis of globalization -- which means, you know, as you said, the exports are down 30, 40 percent in these countries. What's the danger?

FERGUSON: Well, those economies that are heavily reliant on exports have a commensurate decline in output and a surge in unemployment that's going to be very destabilizing for them.

The other thing that's shifting is that the great capital flows that accompanied the boom in trade are also shrinking. So countries that got hooked on foreign capital are getting killed, particularly in Eastern Europe, where there's a massive financial crisis in its early stages -- a crisis that could drag down the entire West European banking system with it.

So, if you think this crisis is anywhere near the halfway stage, you're in for some very nasty surprises.

ZAKARIA: And you think that this means social turmoil, political upheaval?

IAN BREMMER, AUTHOR, THE FAT TAIL: You have a situation where the social instability that comes from this significant economic downturn that we are, as Niall mentioned, just moving through. We're not near the end at this point. That usually takes 12, 18 months to start to play into a lot of these emerging markets, these developing countries.

So, we haven't really started to see the beginning of that social instability. The global markets aren't yet paying attention to this. They're not yet pricing it in.

ZAKARIA: Barbara, do you think there's social instability that you can see in the United States as a result of this downturn yet?

BARBARA EHRENREICH, AUTHOR, "NICKEL AND DIMED: One advantage the United States may have compared to some of the Eastern European countries is that we have this huge infrastructure of neighborhood groups, community organizations. You know, we have a civil society -- trade unions, workers' rights centers. And I think those are going to be the nuclei for people to figure out, what do we do.

It's the job loss now. It's the huge waves of unemployment, and with almost no safety net.

ZAKARIA: David, what happens here if this continues for months and months and months?

DAVID FRUM, AUTHOR, "COMEBACK: CONSERVATISM THAT CAN WIN AGAIN": President Obama actually has a great safety net behind him, which is that the country -- the timing of this lined up so that he can blame everything on his predecessor, certainly through one congressional election cycle, and maybe for a little bit longer than that. And he has struck a tone that is very powerful. And he's got the advantage also of political opponents who seem to be volunteering for the lemming role of throwing themselves off the cliff in order to help, that as...

ZAKARIA: Explain that. Why do you think the Republican -- you have a big essay in Newsweek. What do you mean by this?

FRUM: There's a new poll out that shows that Rush Limbaugh is less popular than Reverend Jeremiah Wright, which is an achievement. Eleven percent of Americans under 40 have a positive impression of Rush Limbaugh. And this is a man who is not only claiming, but is being accepted, as the figurehead of the Republican Party.

ZAKARIA: On this program last week, Martin Wolf, a great British columnist for the "Financial Times," said that he thought President Obama's stimulus was all wrong, but mainly because it was much, much too small.

I mean, here he's being attacked in Congress, certainly, for it being too large. Niall, do you think history suggests that we actually need a much larger stimulus?

FERGUSON: Well, I don't think that. Martin Wolf, along with Paul Krugman, is a born-again Keynesian -- one of the many economists thrown into such panic by their subject's collapse, that they've gone back to the general theory that Keynes wrote in 1936, in the hope of salvation. And the mantra is bigger deficits, bigger deficits.

Well, I think a $1.75 trillion deficit, which is what they're looking at -- 12.3 percent of GDP, 44 percent of all the expenditure in this year's budget -- is way big enough.

And I think there's an international dimension to this, which is relevant to our discussion. The more the United States embarks on a huge Keynesian stimulus, the more it sucks capital away from the rest of the world.

It's easy for the United States...

ZAKARIA: Wait. Explain that. Because we are financing this spending binge by borrowing money from the rest of the world. We're selling American Treasury bills to the rest of the world.

FERGUSON: Which is what we've done all along. We financed our housing bubble this way, and now we're going to finance our recovery, our stimulus package this way.

And it's kind of -- it works for the United States. The United States is a safe haven for the political reasons we've just been discussing. It's not a place that's about to produce blood in the streets and a red revolution, which is certainly a scenario you can imagine in some of the emerging markets.

So, for many, many reasons, investors say, OK, if I'm going to hold something, it'll be a U.S. government bond. It may not pay much...

ZAKARIA: So, this is sounding good, then. So, we've...

FERGUSON: For the United States, great. But think of the destabilizing effects this has on the rest of the world.

If the U.S. deficit, if the U.S. stimulus sucks all the available savings in from the rest of the world, how is the rest of the world going to cope? And I think that's the key to understanding this crisis of globalization. It's asymmetric.

ZAKARIA: I can't imagine one congressman being worried about what you...

FERGUSON: Right. Well, this is, of course, the precise mentality that we had in the 1930s, when Americans said, let's focus on our domestic problems, and never mind about the rest of the world. We'll worry about that later.

But if you let the rest of the world plunge into the kind of political disorder that Ian's talking about, there will ultimately be a price to pay. Political risk goes up in the world at a time when the U.S. is fundamentally looking to draw down its overseas commitments.

But you know what's going to happen. I've read this script. I've seen this movie. Five years down the line, the United States finds itself with a very much more dangerous world than when it last looked.

BREMMER: And if you are Beijing making decisions about where you're going to make investments, those decisions are politicized. They're decisions about national security, national interest, political stability -- not just decisions about maximizing profitability.

When governments make decisions about where to allocate capital, as opposed to multinational corporations, they don't make decisions in terms of global markets. They make decisions in terms of national interests.

ZAKARIA: So, what you're saying is that, when Beijing -- when the Chinese government is deciding what to do with its money, they could either use the money to buy American debt, finance our expansion, or they could spend the money in China.

BREMMER: That's right.

ZAKARIA: And that politically, they're much more likely to spend it in China.

BREMMER: As this crisis spirals out, the United States suddenly is going to be on the losing end of all this. You combine that with the political instability, because the United States is not paying attention to the world, they're paying attention to the U.S.; the Chinese are not paying attention to the world, they're paying attention to the Chinese.

Who then takes care of the mounting global crises that exist on things like collective security, climate change, nuclear proliferation? They don't get resolved until there's a sufficiently large shock that we get pushed out of our complacency.

ZAKARIA: Barbara, are you happy with President Obama so far?

EHRENREICH: I think he has spoken with gravity of the situation in a way that resonates for people.

But I think one of the things he's missing, though, in the way he, you know, has been talking about the crisis, is the degree of class anger that there is in America now. You know, it astonishes me, and I'm certainly somebody who has fanned the flames of class warfare from below as much as I can.

But, you know, for so many people it's so clear. Now, the rich, the CEO class, the people who are on top, they betrayed us. It wasn't that they were just greedy. They're supposed to be greedy, right. It's capitalism.

But they were dumb. They were stupid. They didn't know what they were doing. It was a house of cards.

And that is just such a palpable rage that I think Obama is not addressing. And I don't know if he's ever going to really hear it, if he's surrounded by people like Larry Summers.

ZAKARIA: And we will be back in a moment.

(COMMERCIAL BREAK)

ZAKARIA: And we are back with our panel discussing the economy and politics.

Niall, how do you think President Obama has done so far? The stimulus package is tied to a long-term investment plan. Should these have been split up? How would you have approached it?

FERGUSON: Well, he inherited an enormous financial problem. And I suppose in some measure, he couldn't help but add something to it. He had to deliver on at least some of his pledges.

And the thing that puzzled me most about the stimulus package was that he outsourced it to Congress, and let Congress write the detail. And I thought that was a step in the direction of parliamentary government that he probably came to regret.

After all, asking Congress to design a $700 or $800 billion spending package is like asking a bunch of alcoholics to run a bar.

But the thing that most disappointed me when I looked at the small print of the budget, was the extraordinary optimism of the growth forecasts. I mean, this is a budget that envisages a doubling of the federal debt over a period of 10 years, that will take it up to around 100 percent of gross domestic product.

But that's on the assumption that the economy is going to bounce back and start growing at 3, 4, 4.5 percent in the next few years and for the foreseeable future. And that's just not credible.

It's much more likely that the U.S. economy will grow at something more like 1 percent, because the juice is gone. We can't leverage any more. And mortgage equity withdrawal was an absolutely key part of the growth during the Bush years.

So, I think there's an underlying over-optimism there in many of the calculations that have been made. And I think this will create all kinds of problems for the ambitious schemes he has for, say, health care reform.

I'm almost sure that's going to be derailed as the economic bad news mounts, as it becomes clear that we're in for a much more protracted period of slow growth.

ZAKARIA: David, why did he outsource the writing of the stimulus to Congress? I mean, one theory is, it's the only way you could have gotten it through fast.

FRUM: I think there's a lot of truth to that.

Also, there's huge pent-up demand among Democrats. And they've been out of power for a long time. They have projects. They have constituencies.

They won power again in the elections of 2006, but they had a president who, at that point, finally discovered the veto pen. And anyway, they didn't want to give the president any credit for anything positive, even spending, which people sometimes like.

Now, the moment is up. I think the analogy that Henry George used was throwing a banana into a cage of monkeys.

(LAUGHTER)

And I think that's a description of what happened there.

EHRENREICH: I mean, let's remember that one of the reasons for the financial crisis is that this is such an unequal society, that compared to any other industrialized society, we had such a large population of people called the "working poor."

You know, that was the market for the subprime mortgages. You don't have an equivalent population like that in Ireland or, you know, so many other places.

FERGUSON: But we call them the "non-working poor" there.

(LAUGHTER)

They're all (ph) unemployed.

EHRENREICH: But, OK. That's, yes, much better I think.

And with, you know, something -- we have to in some ways, if we're looking for long-term sustainability, address that inequality which had become so noxious. I mean, we were like this huge, top- heavy structure that finally just fell, in a way.

FRUM: The problem when it falls is that federal revenues fall with it. And at the end of the boom, the -- what was it -- I think it was the top 1 percent were getting, what, 22 percent of the income, and paying 40-plus percent of the taxes.

If their share of the income slips a little bit, what is going to happen to federal revenues? Where are those tax collections going to come from?

And they are, the federal government -- I'm with Niall, I think he's right (ph) -- is probably over-exaggerating, exaggerating its revenue projections. And all of these deficit and debt problems are going to be really scary.

FERGUSON: And this is where the international dimension comes in, because I'm going back to a point that Ian said.

If international investors take fright (ph), and when they see that the deficit is actually even bigger than 12 percent, when it turns out actually to be 14 percent, something straight out of World War II, then I think there's going to be a new source of pressure that's currently absent.

If there's a flight from the dollar, if there's a flight from 10- year Treasuries -- which is already detectable, just in its beginning -- then the Obama administration is going to be suddenly hit by an external shock it wasn't expecting.

ZAKARIA: And this is the worst-case scenario, which is that people abroad lose faith in the U.S. dollar, and particularly in buying our debt, which means we have to raise interest rates in order to get people to buy our debt.

FERGUSON: Well, the rates automatically go up, as the bond prices fall, at which point Ben Bernanke at the Fed has no option but to start printing money. He has to start buying Treasuries directly from the Treasury.

(CROSSTALK)

ZAKARIA: So, then you get inflation, high interest rates and slow growth, which is the kind of nightmare combination.

EHRENREICH: The one thing that, you know, should be put into this equation is, we cannot afford the role in the world that the United States has played any more.

I don't know -- you know, I worry very much about this expansion. Obama said -- doesn't want -- desire to expand the war in Afghanistan and expand -- where do we -- where is this coming from? BREMMER: Well, we can't...

EHRENREICH: We can't...

BREMMER: ... afford the role that U.S. has played, but we also can't afford the role the U.S. is about to play, which is very little of a role at all.

I mean, at the end of the day -- you remember, when Obama was elected, but before he was inaugurated, there were issues around Gaza. And he was asked, you know, sort of what do you think. And his response was, well, you know, there aren't two presidents at the same time, only one president. Well, he didn't say that when he was asked about the GM bailout, and the bailout for the automotive companies.

You know, Trotsky, right, said that you don't want war, but war wants you. Well, Obama does not want foreign policy, but foreign policy wants him.

And you cannot have Davos go on, and have 41 heads of state -- 41-and-a-half, if you count Putin -- and have Obama send absolutely no one, because they don't want to focus. And..

EHRENREICH: Oh, no. No, I'm not saying retreat into isolationism. I'm saying you can't have that kind of aggressive, enormously expensive military involvement in the world.

FERGUSON: Well, wait a second. Wait a second. We just walk away from Afghanistan...

EHRENREICH: If we're talking about the federal government...

FERGUSON: ... and give it back to the Taliban?

I mean, that's extraordinary. This is a typical example of how our focus shifts. We've kind of forgotten 9/11 ever happened. We've forgotten what terrorist organizations did.

If we walk away from Afghanistan, we're essentially saying to the Taliban, carry on where you left off. And indeed, have Pakistan, too, while you're at it.

(CROSSTALK)

EHRENREICH: I would volunteer to fight the Taliban, personally, as a woman. But I think that maybe we have to be thinking smarter. You know, we can't just have a discussion about deficits, and can we really afford social spending like SCHIP, without somehow putting on the table the fact that the United States spends more than any other nation on earth.

BREMMER: Barbara, I won't volunteer to send you to fight the Taliban.

FRUM: I completely disagree with what Barbara was saying before. His job is, if there are social tensions, to soothe them, to be reassuring. That's his great strength, is that he is such a mellifluous, soothing presence.

And that's what he's going to have to do, persuade people that he has a plan, but not to tell them, not to make any promises about how it's going to be, because those promises may be falsified. And if they are, once they are, you never recover, as George Bush found when he was optimistic about Iraq. He was optimistic about Iraq. And he was eventually right, but he wasn't right in time, and he never recovered.

ZAKARIA: Niall, last word. What is the thing -- what's the next shoe that's going to drop? What do you think?

You know, we're in a situation where every prediction has been -- every dark prediction has been borne out. Things have turned out to be worse than expected.

So, what happens going forward? Three months from now, where will we be?

FERGUSON: Well, we're going to have a very interesting G-20 summit in London early next month. And I think the topic of conversation at the top of the agenda will be the collapse of Eastern Europe.

And I want to know how the Obama administration will react when Ukraine begins to disintegrate, egged on by Mr. Putin, who sees wonderful opportunities opening up for him in what he calls the "near abroad." That's code for the former Soviet Union.

He wants it back. Watch this space.

ZAKARIA: Watch this space indeed, and we will be back. Thank you. Thank you all.

(COMMERCIAL BREAK)

ZAKARIA: Now to the question of the week.

Last week I asked you, if, as it appears, we are never going to defeat the insurgency in Afghanistan, then what is the United States doing there, and what should it do?

I promised to read the best answer, which is not easy, because many were good.

A lot you said we must stay and defeat the Taliban. Some said we should stay and win by talking to the Taliban.

But the majority of you said we should just get out, so I'll give you the best quote from the get-out camp.

A viewer named David Heil wrote to say, "America cannot save the world, nor should we try. America has more pressing problems at home, and we need to focus all our attention on saving ourselves this time." The life of the world depends on it.

Powerful stuff.

Now, my question for this week.

The economy remains so grim, that I wanted to look for some bright spot to focus on. So, I'm asking you, what do you think is the single most undervalued stock on the American market today?

Many companies, as you know, have sunk to depths that just do not reflect their actual value, so I want your pick for the one we all ought to run out and buy.

Also, I'd like to recommend a book. I thought of it while talking to Gamal Mubarak earlier. It's called "The Looming Tower," by Lawrence Wright. It's essentially a history of Islamic radicalism, tracing its roots -- many of them in Egypt -- all the way through to 9/11. It's fascinating and has won many prizes. I know you'll like it.

As always, don't forget to check out our Web site, cnn.com/gps, for highlights from this program, and our weekly podcast. And you can also e-mail me at fareedzakariagps@cnn.com.

Thank you for watching, and have a great week.

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