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FAREED ZAKARIA GPS

Mass Protests Against Egyptian President Morsi; China's New Leaders; Fighting in the DRC; Interview with Nicholas Taleb

Aired December 2, 2012 - 10:00   ET

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


FAREED ZAKARIA, CNN HOST: This is GPS, the Global Public Square. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria.

We will take you around the world today starting with Egypt. The nation has erupted. We'll explain what the power struggle between the president and the courts means for the rest of the Arab world and the world at large.

Then, China's new leaders, we know their names, but just who are they and what can we expect from them. Is Xi Jinping China's Gorbachev or will he take a hard line?

Finally, the Black Swan; it was a best-seller that some say predicted the economic crisis. Its author, Nassim Nicholas Taleb, on his fascinating new book.

Also, the next phase of Europe's crisis, which nations might find themselves split apart? I'll explain.

But, first, here's my take. Yasser Arafat's body has been exhumed for investigation, bringing back memories of the unpredictable Palestinian leader and the Middle East in which he operated.

The news broke at a time when a conventional wisdom began to take hold that the Middle East today is much more dangerous, unstable, violent and anti-American than before. So let's take a look at the facts.

In the 1980s, the newly empowered, radical Islamic Republic of Iran unsettled the region with its promise to spread its revolution elsewhere. Lebanon was in the midst of a bloody civil war that engulfed not only itself but also the Palestinians and Israel.

Iran and Iraq fought a gruesome war with over 1 million casualties. Hezbollah attacked U.S. armed forces directly, forcing a humiliating withdrawal from Lebanon. A CIA station chief was tortured and killed, and U.S. secrets and interests compromised. And that was just in one decade.

Or consider those days from Israel's point of view. During the 1980s, Jerusalem faced well-armed regimes in Iraq and Syria, leading members of the so-called rejectionist camp that urged permanent hostilities against Israel. No Arab regime other than Egypt would dare speak openly of peace with Israel. The official charter of the Palestine Liberation Organization called for the destruction of Israel and its replacement with a Palestinian state. Arafat's chief tactic was terrorism against Israelis, Europeans and Americans.

Today the Soviet Union has collapsed, Saddam Hussein is gone, the Syrian regime is tottering. Israel, on the other hand, has grown to become a regional military superpower.

Its defense budget is larger now than that of all its neighbors put together. Its technological advantages put it in another league. The Palestinian Authority affirms Israel's existence and works with it regularly.

Iran remains a real threat, but it is isolated, sanctioned and contained like few other countries in history. It is also roiled by discontent at home and facing the combined opposition of the secular Arab states, Israel and the Western powers.

Amidst the disorder, there is a broader contest for regional power. Israel has by far the most powerful economy and military, but it lacks political power for obvious reasons. Turkey has economic and military power as well, and it also has growing regional clout.

Egypt, meanwhile, is the natural leader of the Arab world, but at the moment is not in a position to dominate. Its economy is a shambles, its military second rate and under pressure from its people, and its democracy still very fragile.

President Mohamed Morsi's recent power grab is worrying, but the public opposition to it has been reassuring.

So the Middle East today is mixed, complex region that is changing fast. Grand generalizations about it are likely to be undone by events. But it is a more vibrant, energetic, open, even democratic place than the Middle East of a generation ago.

For more on this, you can read my column in this weeks' Time Magazine. Let's get started.

It was a week filled with tension and violence in Egypt. There were mass protests after President Morsi issued a decree neutering the judiciary.

But there were also demonstrations in his favor, then a hastily written constitution was drafted. That, too, spurred protest in the street. What to make of it all?

With me, two of my favorite scholars of Egypt, Tarek Masoud from Harvard's Kennedy School of Government and Steven Cook of the Council on Foreign Relations.

Welcome, guys.

So, Tarek, the conventional wisdom is this a power grab by President Morsi. Is that accurate?

TAREK MASOUD, ASSOCIATE PROFESSOR, HARVARD UNIVERSITY'S JOHN F. KENNEDY SCHOOL OF GOVERNMENT: Well, it's certainly accurate that President Morsi's constitutional declaration gave himself some extraordinary powers. Every decision he makes is now free of any possibility of judicial review.

But, really, the game is kind of moved beyond that now. What is motivating people to protest in Egypt is not that constitutional declaration alone. It's now the new constitution that Morsi's allies in the constituent assembly have rushed through.

ZAKARIA: So, Steve, what is the army's role in all of this? That's the piece people don't (inaudible). So you have Morsi and the Muslim Brotherhood and the Islamists who now seem to be behind this new constitution.

You have the liberals, the secularists who are opposing it. Where does the army stand?

STEVEN COOK, HASIB J. SABBAGH SENIOR FELLOW FOR MIDDLE EASTERN STUDIES, COUNCIL ON FOREIGN RELATIONS: The military has essentially removed itself from the political system.

The new military leadership which came into power in mid August as a result of Morsi's declarations have a deal with Morsi. They were relieved of the burden of having to govern Egypt. They've been given immunity and promoted.

In addition, removing themselves from the political system is more in keeping with the history of Egypt's armed forces since the 1967 defeat when they determined being a political army was something that was not good for their organization, their corporate coherence and their ability to fight a war on the battlefield.

ZAKARIA: So, Tarek, when you look at this struggle, is it -- first of all, is it essentially the Islamists versus the secularists? And is it fair to say, as everybody does, well, the Islamists have greater appeal, they're better organized, they're going to win this.

MASOUD: Well, I think it is right now -- there are basically three groups here that are contending for the loyalties of the great Well, I think it is, right now - there are basically three groups here that are contending for the loyalties of the great undifferentiated mass of Egyptian people.

The one group are the Islamists, right? The other group are the revolutionaries, the kinds of, you know, photogenic people that we remember from Tahrir Square a couple of years ago.

And then the third group are the Mubarak loyalists. And during the revolution of 2011, it was really the Islamists and the young revolutionaries against the Mubarak loyalists.

Now, because the Islamists have been so heavy-handed in the way that they've governed the transitions, particularly since Mohamed Morsi's election, it's now really the revolutionaries finding themselves uneasy allies with these Mubarak loyalists.

And their big grievance, Fareed, is this constitution, which they find to be very retrograde. It takes Egypt a significant step more towards an Islamic polity.

So just a really quick example, Article 2 of the constitution has always said in Egypt, since 1971, that the Sharia is the main source of legislation -- since 1980, it said the Sharia is the main source of legislation.

It still says that now, but Article 219 then defines the principles of the Sharia in very specific terms of Sunni jurisprudence which almost means that if you're a member of parliament in the new Egypt, you've got to be an expert in Islamic law if you want to have a prayer to -- of discussing laws.

So -- and there's lots of things like that in this new constitution and that's what's angering lots of these liberals.

ZAAKARIA: Steve, when you look at the battle lines, do you think the Islamists will be able to push this through?

COOK: Well, Egypt, over the course of the last two years, is a country of stunning ironies. They have pushed it through. The question is whether people will accept it.

And I think this was all kicked off by the fact that revolutionaries, liberals, Mubarak era supporters determined that they were not going to allow the Muslim Brotherhood to run the table unchallenged.

It's unclear whether they'll be able to overthrow Morsi, but they certainly want to teach him a lesson by coming out into the streets and saying we will no longer be ruled by decree.

You cannot take away the rights that we fought so hard for during those heady days of January and February 2011.

ZAKARIA: Well, what does this say, Tarek, for democracy in Egypt? Because if you think about this, Egypt is the great experiment and everybody now understands democracy is not just elections.

It's liberal constitutionalism. It's these documents in civil society. And Egypt seems to be going in the direction of not liberal democracy, but illiberal democracy.

MASOUD: Right. There's an article written by somebody ...

(LAUGHTER)

COOK: (inaudible).

MASOUD: Yes, you're right.

So you're absolutely right that people who are worried about Egypt right now absolutely see it going in this illiberal direction. The constitution does guarantee individual rights and it has some very great language about individual rights.

But it makes it all subject the Sharia or the principles or the Sharia. You know in the ...

ZAKARIA: And the state is given charge of public morality ...

MASOUD: Absolutely.

ZAKARIA: Which is a loose, open-ended term.

MASOUD: Absolutely. This is -- exactly and, you know, women's rights for example, which, during the Mubarak period, there had been at least a constitutional article that said the state will work to achieve equality for men and women as long as it doesn't violate the principles of the Sharia.

That was in the constitution, now it's gone. Now, there's a nondiscrimination clause, but it doesn't mention women as a protected class. So it is really a step backwards, I think, in terms of liberties.

And so if you believe that really what we care about when we look at democracy, we don't really just care about the voting. The voting's important. But we care about freedom and liberty for people. Then, you would have to think that Egypt is really not going in the right direction.

ZAKARIA: Do you think that the United States has a role, Steve?

COOK: Well, certainly, it does. President Obama came out during the Egyptian uprising saying that Mubarak had to go. First, there was this talk of an orderly transition, but, clearly, the United States has put itself on the side of people who want to live in freedom and democracy in Egypt.

Until now, the administration has been circumspect on the current situation. But I think it does deserve the White House making a strong statement about the importance of freedom, democracy, accountability, rule of law.

Certainly, as Tarek said, the way the constitution is written, Morsi's decree suggests that Egypt is going in the wrong direction. In the abstract, this kind of contested national dialogue over a constitution is a good thing.

The problem is that no one is moving towards compromise. They're moving towards confrontation. And what that means is that the Brotherhood will seek to impose its will on the rest of the population.

And, as we've seen, over the course of the last two weeks, no one is willing to put up with that.

ZAKARIA: What does this say about Morsi? You know him. You've met him many times. He came across as this broker in the Gaza negotiation. MASOUD: Yes.

ZAKARIA: What -- is he a dictator in sheep's clothing?

MASOUD: Remember when we were on your program over the summer and when Morsi was elected president, and we said, you know, he's a fighting personality. This is exactly the way I think both of us expected him to behave.

I don't think Morsi wants to make himself president for life. Again, remember, this constitutional declaration that he made, which gives him these power, that, by virtue of this new constitution, is almost ...

ZAKARIA: (inaudible). Right.

MASOUD: It's going to be irrelevant soon once the new constitution is passed. So I think for Morsi, he is a faithful, Islamic ideologue and he wants to move Egyptian politics towards this, you know, direction that he cares about and that's what this move is.

Now, remember, we have several steps down the line. Morsi now has to look at the constitution. He'll send it back to the constituent's assembly, perhaps with some amendments to be made, perhaps not.

Then, it goes to the Egyptian people, right? And the Egyptian people have to vote on it. And that's the question now. What will the liberals do?

Will they boycott the referendum process or will they actually get out on the streets and finally compete with the Muslim Brotherhood on the merits of the case?

COOK: Remember, the referendum after the uprising, in March 2011, the liberals didn't do much and they got wiped out. Seventy- seven percent of the people voted for that referendum that the liberals and the revolutionaries opposed.

We would hope that they would learn the lesson by now and get out there and really mobilize against this.

ZAKARIA: Steve Cook, Tarek Masoud, pleasure as always. We'll have you back the next time there's a move in this revolution. Thanks for being with us.

Up next, China, we know who the new leaders are, but what are their policies. I have two very smart experts to explain.

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ZAKARIA: About a week after our election here in America, China announced a new set of leaders. Seven men, and they're all men, who will manage the running of the world's number two economy.

We have paid too little attention to this important changing of the guard. Will the new leaders take on corruption? Will they reform the economy? What will their foreign policy look like?

I have two great guests to shed light on all of that. In New York, Elizabeth Economy is a senior fellow and director for Asia studies at the Council on Foreign Relations. And, from Beijing, Evan Osnos is The New Yorker's China correspondent.

Welcome.

Liz, you have a very tough blog posting on the excellent Council on Foreign Relations website which you basically say, "China's 18th Party Congress was a heartbreaker."

"It was a triumph of the party's conservative clique." The candidates "with the strongest reform credentials were left high and dry. Those who anchor the hold back change at any cost took their place amount the top seven."

So you see this see this as a real kind of reinstitution of a very tough hard line kind of conservative group.

ELIZABETH ECONOMY, SENIOR FELLOW, DIRECTOR FOR ASIA STUDIES, COUNCIL ON FOREIGN RELATIONS: I do. I think this was really a disappointing outcome from the 18th Party Congress.

I think if you look at this leadership group, they do, of course, bring a wealth of experience to the table. You know, collectively, these seven men have governed roughly half the provinces or large municipalities.

A number of them do have experience at the national level with the economy or sort of the political arena. But, by and large, they are distinguished by their lack of distinction.

None of them has been associated -- I would say, with the exception of Wang Qishan, none has been associated with a particularly innovative program or policy reform either on the economic or the political front.

And I think the fear in Beijing, quite frankly, is that they're in for another five years of what they've had, but perhaps with a slightly more confident leadership.

ZAKARIA: Evan, one of the things I've heard from people in Beijing, mostly privately, occasionally publicly with a guy like Eric Lee, you know, a Chinese businessman who is very pro regime.

They say, look, first of all, this was mainly selected on the basis of seniority. These are the senior most people. And, in order to make the kind of changes that Liz would, I think, like to see, you need people with credentials and seniority and that's what this tells us, no more, no less. Do you buy that?

EVAN OSNOS, CHINA CORRESPONDENT, THE NEW YORKER MAGAZINE: Well, I do think that the group that they ended up with a compromise group. This was not the boldest reformers, as Liz said. These were not the people who had demonstrated a capacity and interest in making changes. But these are people who would satisfy the enormous range of factions and vested interests which now are vying for control.

So if this president and the new premier wanted to be able to get any traction at all, one theory is that they had to satisfy these many constituencies, give them a chance to have their share of power.

In five years, there's going to be a transition. Not the president and not the premier, but the other members of the standing committee are going to change. And that may be an opportunity for some of these younger, some of these more reform-minded figures to come to the top.

ZAKARIA: Liz, explain to us how China runs today because, as China has become more powerful, it seems like it's central leaders have become less powerful.

You went from Mao to Deng Xiaoping to Jiang Zemin to Hu Jintao. Would it be fair to say that this is more a collective leadership, that the president, Xi Jinping, is not going to have a kind of carte blanche to do whatever he wants?

ECONOMY: I think well, certainly, one of the things that have been said about the current leadership is that, you know, Xi Jinping, is the first Chinese leader not to have been touched either by Deng Xiaoping directly or by some revolutionary leader.

So he's lost one pillar of legitimacy for the Chinese leadership. A second pillar of legitimacy would be sort of, you know, continue economic growth and the third would be nationalism.

So I think this is going to be a collective leadership. Xi Jinping doesn't have any sort of revolutionary credentials. So I think it's going to be -- it's going to be tough sledding.

And to move ahead, either in political or economy reform, is going to require this group of seven to come together and, frankly speaking, I don't see that happening very easily.

ZAKARIA: So, Evan, what is in China seen as the kind of pressing problems that these guys have to do because we in the United States and the West I would say, we have our list, you know.

And it tends to be the kid of Western reform model, which is they need to shift from an export-oriented economy to a consumption economy, they need to free up some sectors, they need to stop subsidizing a lot of state-owned banks and a national champions, they need to do political reform.

But what do they think they need to do?

OSNOS: You know if you talk to people on the street in Beijing these days, which is where I live, what you hear from people over and over again is fundamentally the same thing. They want their expectations of this government to be fulfilled. They want to know fundamentally that this government has the best interests of the people at heart.

Over the last ten years, what they've seen is that their own income, family income for instance, has not kept up with the enormous pace of the growth of the economy.

They feel that, ultimately, they're not winning out. And so what the government has to figure out a way to reassure people that they are, in fact, the number one priority.

And you hear this over and over again in the first language from this new president, Xi Jinping. When he gave his first speech, he put aside some of the old language about socialism with Chinese characteristics and about a harmonious society and it's not because he's abandoning those ideas.

Those are still very much the core of the party platform. But what said over and over was we are not complacent. We recognize that we have respond to the people's demands. And so I think that puts -- that gives us an idea that he understands that, fundamentally, people are losing patience with the party.

And the party has to do things to help the regular people on the street feel that they're participating as much in China's boom as it looks like they are from the outside.

ZAKARIA: Liz, you talk, in that same blog post, about something that I was very struck by, which is you said, "Peaceful rise is passe." That the idea that the Chinese are trying to present their rise as very peaceful, you know, within the international system is not something they're trying to do particularly.

There are a lot of people who felt, you know, the Chinese side some saber-rattling with Japan, with the Philippines, in Southeast Asia, and that that had backfired.

And that the Chinese had realized that and learned the lesson that they shouldn't try to be provocative. But you are suggesting no. This is a new, more assertive China.

ECONOMY: My sense, frankly, just in the past few weeks, is that we're going to see this new leadership continue with this more assertive foreign policy.

I think they've, you know, now developed a new passport that shows China as possessing all of the South China Sea and has caused quite a ruckus and -- with Vietnam and the Philippines and Taiwan, even India is upset.

Hainan Island has now said that their military is going -- their police are going to be able to board any ships that come into the territorial waters, which they define as the South China Sea.

So I don't see China right now learning a lesson and taking a step back. I see what they're trying to do as sort of changing the facts on the ground, right, and thinking that this is a long-term policy.

And that given their economy rise and their growing military strength, that they're going to win out in the end.

ZAKARIA: Fascinating. Elizabeth Economy, Evan Osnos, thank you so much.

Up next, What in the World. Is Europe going to get a new independent country soon? I'll explain.

(COMMERCIAL BREAK)

ZAKARIA: Now for our What in the World segment. A curious think happened in the days following Barack Obama's reelection. A group of Texans filed a petition on a White House website. They wanted Texas to secede from the not so United States of America.

Within a few days, there were tens of thousands of signatures. The movement spread further encompassing each of the 50 states in the union. It's a ridiculous exercise, of course, that will go nowhere.

But there are some real secessionist impulses across the Atlantic. Europe might soon have a new, independent state. Look at Catalonia, a region in the northeast corner of Spain that includes the City of Barcelona.

Last Sunday, Catalans held parliamentary elections. A majority of the winners had campaigned on a platform of secession. The vote follows an unprecedented demonstration in September when about 1 million Catalans marched the streets of Barcelona demanding statehood.

To put this in perspective, the entire population of Catalonia is only about 7.5 million. The next step could be a public referendum on breaking away.

Or consider Scotland which has already reached that point. In October, British Prime Minister David Cameron agreed to a deal agreed to a deal allowing Scots to vote in 2014 as to whether they want to secede.

And, then, there's the strange case of Belgium. In the northern region of Flanders, the people speak Dutch, but in the southern region of Wallonia, they speak French, the north is more prosperous than the south, so in October the people of Flanders elected a set of local leaders who want to break away from Belgium. Across Europe, why are break away parties gaining so much momentum? But as with all things, it is the economy at heart.

According to Catalonia's "Leading Daily" "Lavan Guardia", only 57 percent of national taxes paid by Catalons is returned to Catalonia. The lest is filtered to Spain's poorer regions. Scotts also have an eye on economics, even though Scotland is much poorer than England. The Scotts believe that breaking away now would rid them of London's austerity plans. Plus, they would also get to drill for oil in the North Sea. But they are careful to calculate the costs and benefits. Last year Scotts were polled on how they viewed independence. When it was put to them that separation would make them richer by 500 pounds a year, 65 percent said they would vote for independence, 24 percent against. But if independence made them worse off by the same amount, the results flipped. 66 percent against independence, only 21 percent for. Remember 500 pounds is only about 800 U.S. dollars. Adam Smith, a Scott, would be proud. Europe's economic problems are straining inch in fault lines. Richer regions like Catalonia, Flanders, also northern Italy resent having ineffective bailout their neighbors. But there's an irony: if you apply that argument across the continent, the Euro zone itself would fall apart, perhaps starting with the departure of Germany. And by the way, if we apply that logic in America, states like New York, California and Connecticut could point out that they in effect subsidize states like Alabama, Mississippi and Montana, states that are ironically the most fervent advocates of states' rights and smaller government. Up next, we'll take you into the heart of darkness: one of Africa's most troubled nations has taken a turn for the worse. Back in a moment.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CANDY CROWLEY, CNN CORRESPONDENT: I'm Candy Crowley in Washington with a check of the headlines. An attack on a joint U.S. - Afghan military bases left five people dead and the 18 others injured. The suicide car bombings and gun assault occurred this morning near the Jalalabad airfield in eastern Afghanistan. The Taliban has claimed responsibility.

Egypt Supreme Court has suspended its sessions indefinitely because of mass protests. Demonstrations by supporters of Egyptian President Mohamed Morsi forced the court to postpone a ruling on the legitimacy of the body that is writing the country's new constitution. In the statement the court said its judges will not return to work until they can do their jobs without any psychological or physical pressures.

A prominent Republican senator is backing away from a no tax hike pledge. Georgia Senator Saxby Chambliss told a group of Republicans this weekend that he does not want Washington to dictate how he votes and that his commitment is to his constituents. Chambliss is one of 39 senators who signed conservative activist Grover Norquist no tax pledge, but the looming fiscal cliff has caused several lawmakers to walk back from that promise.

And those are your headlines. "Reliable Sources" is at the top of the hour. Now back to "Fareed Zakaria GPS"

ZAKARIA: The Democratic Republic of the Congo is a nation the size of all of Western Europe. And it may be in for a violent regime change as rebels called M-23 have gained ground in recent weeks. Congo was, of course, the setting for Joseph Conrad's "Heart of Darkness" and that darkness hasn't really lifted in 110 years since the story was published. In the last 14 years alone, 5.4 million people have died in Congo as the result of conflict and humanitarian crisis. "The New York Times" terrific East Africa bureau chief, Jeff Gettleman, joins me now from Nairobi. He filed this week from the frontlines of this dramatic story. Jeff, why is it that the -- this crisis seems to be heating up? You point out that the Congo, that the government's army is losing battle after battle, in fact being routed in battle after battle by these rebels.

JEFFREY GETTLEMAN, EAST AFRICA BUREAU CHIEF, THE NEW YORK TIMES: I think this is really an issue of state failure. I've been covering Congo for about six years, and I've seen the country get weaker and weaker since I began. There was a big election in 2006 that created a lot of hope and enthusiasm that things were really turning around. They haven't. Since, then, the government has become more authoritarian, more corrupt. There's been more rebel groups. And what we're seeing in the east is a symptom. It's both a symptom and a cause. It's a symptom of this very weak state that can't control its own territory. That just watch these couple of hundred rebels march into one of the biggest countries in the -- biggest cities in the country and they didn't do much about it. But that's also a cause. Now that the rebels have taken Goma, a lot of other opposition groups are starting to think, hey, wait, maybe, you know, now is the time to really take on the government. And people are smelling blood in the water. And that's the worry that these rebels in eastern Congo do not have the capacity or the support to march all the way to Kinshasa. That's pretty clear. But they might form an alliance or they might trigger a chain of events that will bring down the government.

ZAKARIA: And this can get very bloody because the government is now beginning to rely on and move to the worst kind of militias. That in the past the Congo have really been the -- you know, the groups that engaged in rape, murder, recruited child soldiers. So this could get very ugly.

GETTLEMAN: Well, that's a really good point. I mean both sides have horrendous human rights records. The government is now teaming up with this group called the FDLR, which is the remnants of the -- the Hutu army that committed the genocide in Rwanda in 1994. These guys are blamed for, you know, sweeping into villages and raping hundreds of women, chopping apart children, massacring people. And that's who the government is teaming up with. On the other side, the rebels have been accused of executing civilians, of going into villages and pulling people out of their huts in the middle of the night and shooting them in the head. So, Congo is really this -- you know, it's like this caldron of abuses on a scale that's unlike just about anywhere else in the world. I cover a number of these conflicts in Africa. I cover Somalia, I cover Darfur. But, you know, just about everywhere else things are changing or getting a little bit better in some cases. Congo has basically stayed the same for almost ten years and that same is a very disturbing state of anarchy.

ZAKARIA: And ironically, Congo has enormous national resources. It's a beautiful lush country, right?

GETTLEMAN: Yeah, it's spectacular. I mean it's really one of the most beautiful places I've ever been in my life anywhere. You enter Goma, and there is -- you know, just last week there was a huge volcano with streams of smoke shooting out of it. It's very lush. It's very fertile. The lakes are beautiful. The environment is clean. It's blessed with mineral riches, gold, timber, diamonds, coltan, copper. I mean just about everything. So that's part of the reason why we're seeing this fight. And the U.S. government has tried to get their hands around this by recently passing this, you know, this conflict -- resource conflict legislation that tries to get their arms around steering -- it tries to get their arms around better regulating the minerals that come out of Congo. But that hasn't really worked. And it's not purely a mineral issue. It's a lot about power and control and ethnic politics. And that's why this is so complicated and keeps going on and on.

ZAKARIA: Jeff Gettleman, as always, great pleasure. Thank you. Up next, the author of the "New York Times" bestseller, "The Black Swan." He joins me. He has a new book out that is as provocative and interesting as the last one. Right back.

(COMMERCIAL BREAK)

ZAKARIA: Is there's an upside to the Euro crisis? Has the road to the fiscal cliff been a good thing for America? Yes, and yes, says my next guest Nassim Nicholas Taleb who takes a counterintuitive approach to almost everything . And he's been financially very successful as a result. His most famous book, "The Black Swan" was a "New York Times" bestseller. It was about the dangers of extrapolating transform events that are essentially outliers, "black swans." Some credit that book with predicting the 2008 economic crisis. Taleb has a new book out called "Antifragile." And he joins me now. So, Nassim, let's start with a couple of examples so people understand what you mean. You are saying, some systems, you apply this in an amazingly comprehensive way to all of life, but some political systems are fragile and some are antifragile. For example, you say Switzerland is anti-fragile.

NASSIM NICHOLAS TALEB, AUTHOR, "ANTIFRAGILE" & "THE BLACK SWAN": Exactly.

ZAKARIA: Why?

TALEB: Let me -- first define what fragile is and well, that's fragile is. Fragile is something that doesn't like disorder. It doesn't like volatility, it doesn't like variability. If something happens, it breaks. So probably a very fragile place, needless to say, would be Saudi Arabia or as an example I gave, before the Arab Spring, was Egypt. OK? It has the same regime for 40 years. Something robust doesn't break, doesn't care. And something antifragile never wastes -- has a lot of political volatility. It never wastes an error. Improves -- error -- from error to error.

ZAKARIA: So, that's important. So there's -- there's fragile systems, as you say, that are kind of rigid, brittle.

TALEB: Exactly.

ZAKARIA: Like Saudi Arabia, Egypt before the crisis. Then those robust systems ...

TALEB: Exactly.

ZAKARIA: ... which are better than fragile, but anti-fragile for you are those that actually view change and volatility as an opportunity.

TALEB: As fuel. Use disorder as fuel. Exactly. So, it's sort of like hydra is the antifragile, symbol of antifragility. Hydra -- you cut one head, two grow back. So, the last thing it needs is for you to harm it. So, we have these three, you know, three categories, visibly.

ZAKARIA: Right.

TALEB: And we know what fragilizes. Top down, Soviet style fragilizes. Bottom up, like Switzerland, guess you are close towards antifragile.

ZAKARIA: So, Switzerland is good because it's this commune- based, decentralized political system ...

TALEB: Yes.

ZAKARIA: Where there's a lot of experimentation?

TALEB: Exactly. A lot of things -- people don't make the same mistake all the time, that's central. And then when something (inaudible) and something works, they all adopt it, sort of -- if it all, if they are really certain, and they are conservative about it. But there is something quite central. A mouse is vastly more robust than an elephant. If you throw an elephant -- I mean, an elephant breaks a leg very quickly, whereas a mouse, you can -- let's not experiment.

ZAKARIA: Yes.

TALEB: It helps that some people -- but if you throw a mouse out of the window, it won't be, you know ...

ZAKARIA: It won't die.

TALEB: It won't die. So, as you get bigger, it looks more efficient, but becomes a lot more fragile. So, a lot of small animals, you know, as an ecosystem, is vastly more robust than having large animals. And unfortunately, people don't quite understand that in the political life that size is not a good thing.

ZAKARIA: What about the United States?

TALEB: The origin of the United States is a bottom up system. The origin -- but unfortunately, the share of federal government has been growing. And then we started having large corporations. Larger and larger corporations dominating the scene. And it -- we have -- we saw a mutation. The only sector in the United -- there are two sectors in the United States today that resemble the model, right, the ...

ZAKARIA: The anti-fragile model.

TALEB: The anti-fragile model.

One is the restaurant business, and the other one is Silicon Valley. Silicon Valley, you know, thrives on disorder. They try to experiment, they have a lot of failures, and they use failure as fuel. And the same with the restaurant business. You see, the United States, unfortunately, is moving away from what I call a good system, antifragile system. And let me give you the example what an antifragile system is overall -- ideal airlines, I mean air transportation. Every plane crash leads to an improvement in safety. So, you know, what there is a probability -- whatever probability of a crash you have, the next one will be lower. Now, with the banking system today in the United States, if one crashes, you know the probability of the next bank crashing is higher. So, we're not living in a healthy system.

ZAKARIA: So, let's take this idea to individuals. Because in a very interesting part of the book you say even individual careers can be fragile ...

TALEB: Exactly.

ZAKARIA: And de-fragile. Give us examples.

TALEB: Like -- like someone told me -- asked me yesterday on TV, is this fiscal cliff a good thing or not? I said any variability, OK, short term variability in price prevents large collapses. And I compare in my book the life of a cab driver in London with that of his brother, a functionary, OK. He has a steady job, they are both of the same age, in 50s. So a cab driver will never go fully unemployed because he can adapt, change his pattern. He can figure out what's happening. He has -- seems to have a volatile income, but the volatility of the income gives him information where to go, what -- how to adjust, how to adapt, and, of course, you know, his brother, very stable income. If he's laid off, he's gone. Age 53 you're laid off in London, say good-bye.

ZAKARIA: So if you have a job in a big company, that is the danger there ...

TALEB: Exactly.

ZAKARIA: ... only the company internally knows why you're valuable.

TALEB: Exactly.

ZAKARIA: If you're a kind of little entrepreneur you've been hustling around, you have different sources of information, you have different skills. You've been adapted.

TALEB: Exactly. But this is very general. Let's take the economy in general. Greenspan wanted to eliminate boom and bust. So, by eliminating, you know, economic fluctuation, you eliminate information. So you have all these risks accumulating under the rug. You see, and then, of course, it blew us up when the thing happened. You want the risks to be visible. A good system is one in which the risks are visible. Like the risks in Lebanon are visible. You know all the players, and they are not fighting, because they see each other.

ZAKARIA: The risks in Saudi Arabia or China ...

TALEB: Are actually now invisible. When the risks are invisible, I'm nervous. You see. When I take a pill, all right, that gives me small benefits with invisible risks, you know, I'm incurring -- you know, I'm making a huge mistake, OK?

ZAKARIA: I could talk to you for all (inaudible), Nassim, pleasure to have you on.

TALEB: Thank you very much, thanks a lot.

ZAKARIA: Terrific book.

TALEB: Thank you.

ZAKARIA: And we will be back. Up next, what is so special about this house? It may give us great insight into the world's most populous country. I will explain.

(COMMERCIAL BREAK)

ZAKARIA: On Thursday, at The United Nations the Palestinian Authority was granted nonmember observer state status. And that brings me to my questions of the week: What's the only other entity with non-member observer state status at the U.N.? Is it A, the Vatican, B, Switzerland, C, Taiwan, or D, Bermuda. Stay tuned and we'll tell you the correct answer. Go to CNN.com/fareed for more of the "GPS Challenge", insight an analysis on the issues of the day. You can also follow us on Twitter and Facebook. Also, go to iTunes.com/fareed for our Podcast. You can get the audio version for free or you can buy the video version. This week's book of the week is "Antifragile" by my guest today Nassim Nicholas Taleb. Taleb asks why we have financial crashes or any kind of systemic collapse and he then inverts the idea what would make a system or a country or an individual antifragile. If you go to our conversation in the last segment you can tell this is a fascinating book from a highly inventive mind.

And now, for the last look. Political science professor Bruce Bueno de Mesquita likes to point out that in democratic nations highways are full of twists and turns to accommodate private property and people. While in autocratic nations, highways are straight, because leaders there can bulldoze whatever is in the way to get to a straight line. Well, take a look at this interesting twist on that rule. The builders of this highway in China did indeed build their road in a straight line, but as you can see the road has a house right smack in the middle of it. The homeowner refused to budge so they built around him. Remember in the run up to the Beijing Olympics the authorities tore down houses with abandon. Perhaps times are changing in China. On the other hand it could be just a fluke. My only remaining question, where is the family's mailbox. The correct answer to our "GPS Challenge" question was A, the Vatican has been a permanent observer state at the U.N. since 1964. The holy city has almost full rights in the international body, its representative can make speeches, take part in debates, cosponsor resolutions. He can do anything except vote.

Thanks to all of you for being part of my program this week. I'll see you next week. Stay tuned for "Reliable Sources."