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Interview With Larry Summers; Interview With Manouchehr Mottaki

Aired January 31, 2010 - 13:00   ET


FAREED ZAKARIA, HOST: This is GPS, the GLOBAL PUBLIC SQUARE. I'm Fareed Zakaria, coming to you this week from Davos, Switzerland, the site of the annual World Economic Forum, the mother of all conferences.

You know, Davos is often caricatured, but I find it incredibly useful. Where else could you meet leaders in their fields from all over the world in an informal setting over four days?

And that's been the case for the two extraordinary interviews I have for you this week. The first is with Larry Summers, the head of the National Economic Council at the White House. The second is with one of the most powerful men in Iran, Foreign Minister Manouchehr Mottaki.

I remember back a year ago in Davos, when the entire financial world was in a state of shock. The global financial system had been crippled. The global economy was in its most significant contraction in 50 years. Gloom was pervasive.

This year, the financial system has stabilized. Almost every major economy in the world is beginning to grow again. And there have been few political and social upheavals as a consequence of the crash of 2008.

So, that should be reason enough to cheer loudly. Right?

But the mood at Davos is unease. There's a general perception that we're entering a new world. The advanced industrial world has staved off catastrophe, but at great cost -- debt, deficits.

The old certainties about free markets and free trade are under assault. Power is moving from West to East.

Some of that unease is expressing itself in concerns about President Obama's leadership -- is he becoming a populist -- and broader concerns about America's decline.

So, who better to talk to about all this than Larry Summers, one of the most brilliant economists in the world, a former Treasury secretary, now advising President Obama in the White House.

After that, an extraordinary, candid, open -- even angry -- conversation with the Iranian foreign minister, Manouchehr Mottaki. Perhaps the most unusual part, the majority of it was in English. Now, many Iranian dignitaries speak English. But they normally will not do so in interviews. It's a point of national pride, perhaps a kind of refusal to bow to Western norms.

Anyway, I started speaking with the foreign minister about Iran's nuclear program, and he spoke for several minutes and answered in Persian. But when I asked him about Iran's disputed elections and the resulting protests, Mr. Mottaki took off his earpiece and asked if he could continue in English.


MANOUCHEHR MOTTAKI: For those who have come into the streets, firing, killing, shooting by the guns, and other things...

ZAKARIA: There are no reports...

MOTTAKI: ... and making problems...

ZAKARIA: There are no reports that the protesters were shooting, firing. There are reports that the Basij and the Revolutionary Guard were doing that.

MOTTAKI: You do not agree there was violence there?

ZAKARIA: There was violence...

MOTTAKI: But yes.

ZAKARIA: ... but from the Basij against the protesters.

Now let me ask you this...


ZAKARIA: I think you'll find it as riveting as I did.

Anyway, first, Larry Summers, and then the Iranian foreign minister. You will not want to miss any of this. Let's get started.


ZAKARIA: Larry Summers, thank you so much for joining me.


ZAKARIA: So, let me ask you. The criticisms from the left and the criticisms from the right...


ZAKARIA: ... because you have plenty of both.

On the left you have people like Paul Krugman saying, you've done too little, too late. The stimulus was way too small, you were too soft on the banks. You're only now, belatedly, coming to do some of the financial reform you should, and that you're going to need a second stimulus. Otherwise, demand is going to disappear in the U.S. economy.

SUMMERS: Look. You can argue about what the right size of fiscal stimulus is. Here are some things that are true.

The fiscal stimulus that President Obama passed through the Economic Recovery Act is the largest peacetime fiscal stimulus in global history. Second, it was as large a fiscal stimulus as the Congress was prepared to accept at that point. And indeed, the proposal was, as it went to conference committee, reduced in the Congress. Third, we always recognized that there was going to be a need for further follow-on actions.

With respect to the financial system, you have to look, it seems to me, at what's happened. Major financial institutions able to issue equity on a substantial scale, credit spreads down, back to basically -- not the bubble levels we had before this crisis -- but basically back to historically normal levels.

And I think Secretary Geithner deserves enormous credit for directing a strategy that was about private sector capital raising, that was about stress testing for transparency to build confidence.

You know, if you think about it, Fareed, it is actually a rather remarkable things.

If you look at the current projections -- don't take anything the administration says, take the judgments that the Congressional Budget Office is reaching -- the cost of resolving this banking crisis, the most serious in 70 years, because of the way it's being managed, looks like they're going to be much less relative to the economy than the cost of the S&L crisis, or the cost of crises in other countries.

So, I think you have to regard the approach as a very considerable success.

ZAKARIA: Let's take the criticism from the right: the fiscal stimulus was pork-laden; not enough of it was directed towards job growth; you're endangering the future of the dollar; you're endangering the future of the American economy. We have deficits higher than at any point since World War II.

The health care bill, similarly, enormous amount of special interest lobbying goes into it, that what you're seeing is an intrusion of government into the economy on an unprecedented scale.

SUMMERS: The president spoke, I thought, very powerfully to the deficit issue in the State of the Union. He made the point that the largest share of the debt that we have was the result of the decision during the early part of this decade to launch major tax cuts, to launch two wars, to launch a major new medical prescription benefit -- with no effort to pay for it. That's the largest share of the debt. The next largest share of the debt is the consequence of the fact that we had an enormous economic crisis. That's where our debt comes from.

When I left office serving as President Clinton's secretary of the Treasury, the budget surplus -- surplus -- was $200 billion a year. And people were projecting that we would pay down trillions of dollars of debt during this decade.

None of that happened, because of the policies that were pursued by the president and by the then-congressional majority in both parties. That's why we have a big debt problem that we have to address. And we are addressing that problem.

We were facing a depression. We took emergency actions, and no one -- few people think that we are facing a depression today.

And I have to say that, when I hear some people talk about increasing students loans for kids from families where the dad or mom are unemployed as pork, when I hear people talk about fixing highways that for too long were the object of deferred maintenance as pork, when I hear people suggest that providing a child care credit to middle class American families is somehow pork -- if you look at the components of this program, we are being much more transparent and accountable than any government has ever been before.

You can follow the progress of every project on the Internet, and see what's happening with it, see what progress is being made. And we're very proud of the number of people who've been put to work.

There is a great deal in this recovery program that, in addition to creating employment benefits, is making this country a better place to live.

ZAKARIA: With health care, would it make sense for the president to take a look at the last 10, 15 polls on health care, the Massachusetts election, and recognize that, broadly speaking, a majority of the public do not like the health care bill that is currently being proposed, the House or the Senate version; and take a pause, perhaps try and start again, do something that in some way is more resonant with the public mood?

SUMMERS: I thought the president spoke powerfully to that in the State of the Union, Fareed. And he, I think, took the opportunity to re-explain a great deal of what is contained in the health care bill. He's made clear that he's open to every good idea at this stage, wants to work with anybody in Congress who is prepared to work with him in good faith.

But there are some things that are very important to the president. People should not lose their insurance because they get sick. The point of their insurance is to protect them from being sick.

People -- everyone should have access to a reasonable insurance policy. Companies should not be able to gain unfair advantages against their competitors by dropping health insurance.

ZAKARIA: But what is it, somebody (ph) said...

SUMMERS: The president is open to look to the -- is open to different approaches. But he is very committed to the principle that we are on the brink of achieving that 30 million -- more than 30 million people without health insurance...

ZAKARIA: Do you think we're on the brink...

SUMMERS: ... will have access...

ZAKARIA: Do you think we're on the brink of achieving it?

SUMMERS: ... to health insurance.

Legislation has, for the first time in history, passed both houses of Congress. And we are very close to working it through.

Obviously, the political situation right now is very different, because of what happened in Massachusetts. But as the president said in the State of the Union address, having come this far, we need to find the best way forward, not debate whether we're going to go forward.

Speaking as an economic adviser to the president, no one could responsibly be satisfied with the status quo and the trends contained in the status quo. And that's why the president has rightly made health care such a priority.


ZAKARIA: And we will be back with more of my interview with Larry Summers, right after this.


SUMMERS: We are witnessing an incredible and profound change in China, in India, in many other emerging countries. We're seeing living standards grow for more people, more quickly, than at any point in global history.



ZAKARIA: And we are back in Davos, Switzerland. More of my conversation with Larry Summers, one of the president's chief economic advisers.


ZAKARIA: You used to come to Davos when you were an adviser to President Clinton. Those were -- many people now look at a kind of halcyon days of American power. America was dominating the world. You would go around as deputy secretary of the Treasury, dispensing advice to countries all over the world.

You come here now, and I can tell you, the mood here -- there is an enormous amount of unease. You see a situation where China is growing 9 percent a year, India is growing 7.5 percent a year. The United States remains, you know, slowly crawling out of a recession. There is a sense that we are saddled with debt; they are booming.

Are we witnessing some kind of power transition?

SUMMERS: You know, I think phrasing it in terms of a power transition, Fareed, makes what's always a mistake in the economic area, which is to think in terms of zero-sum games.

We are witnessing an incredible and profound change in China, in India, in many other emerging countries. We're seeing living standards grow for more people, more quickly, than at any point in global history. That is a hugely positive thing, and it is a very fundamental thing.

But that success is not, if we pursue the right policies, a threat to the United States. It is an enormous opportunity. It is more potential for us to grow our capacity to export than there ever has been before. That's why the president set a goal of doubling our exports over the next five years in the State of the Union, and creating two million jobs in the process.

It is more potential for the United States to benefit from lower- priced products that enable people's incomes to go further than ever before. It creates more potential for cooperation on a whole range of issues -- security issues, environmental issues -- than before.

So, we are moving into a new epoch, because of the profound changes in the developing world. It will force very different ways of thinking on the United States, and very different ways of ordering the world system.

President Obama took a hugely important step -- I think it's one of the things that got some attention at the time, but I suspect, when history books are written, will get much, much more -- by ushering in a transition from the traditional G-7 to a G-20 as the principal grouping of countries for decision-making, for political decision- making in the economic sphere.

But I don't think this represents a threat. In many ways, if we have the wisdom, if we have the confidence to embrace these changes, they represent a staggering opportunity. The world my children inherit can be a safer, prosperous, more secure, better world than the one we've been living in.

And nothing in these trends reduces the responsibility of all of us as Americans to do everything we can to create that world.

ZAKARIA: Larry Summers, thank you very much.

SUMMERS: Thank you.



MANOUCHEHR MOTTAKI: For those who have come into the street, firing, killing, shooting, by the bombs, and other things...

ZAKARIA: There are no reports...

MOTTAKI: ... and making problems...

ZAKARIA: There are no reports that the protesters were shooting, firing. There are reports that the Basij and the Revolutionary Guard were doing that. But that's...

MOTTAKI: You do not agree there was violence there?

ZAKARIA: There was violence...

MOTTAKI: But yes.

ZAKARIA: ... but from the Basij against the protesters.

Now, let me ask you this.



ZAKARIA: And now, we get a rare perspective from Iran -- answers to the questions many Western powers opposed -- from the foreign minister of Iran, Manouchehr Mottaki.


ZAKARIA: Mr. Foreign Minister, it is a pleasure to have you on the program.


ZAKARIA: You know that millions of Iranians did not believe the election was fair, and that people took to the streets, and there were protests. This is not my opinion. These are the opinions of patriotic Iranians, who felt that the vote was a fraud.

MOTTAKI: May we continue in English?

ZAKARIA: Sure. Yes, absolutely.

MOTTAKI: When the result of the election was announced, most of the people, near to all the people who were protesting to the result of the election, went to their home. And some few parts, they continue violence from now.

ZAKARIA: Well, the people went to their homes...

MOTTAKI: Because... ZAKARIA: ... because the Basij was firing on them.

MOTTAKI: No. No. The people who accepted the results, because they saw they had some miscalculation.

ZAKARIA: But this is not, you know, Western press' view that the election was fraudulent. This is the view of the former president of Iran, Mohammad Khatami. This is the view of former Prime Minister Rafsanjani, who was the head of the Guardian Council. This is the view of many distinguished members of the Iranian government at one point, founders of the revolution.

They understand the Iranian system. Surely, they are not all fools.

MOTTAKI: You cannot separate the dignitaries or the elite of the society from the people themselves. You should consider all. For the people, for the politicians, I mean, you have to deal with them based on rules and regulations. Ruling of law is the main base for any solution, any compromise, any correct understanding. For the people, they will explain their views.

We had the election of the United States for the second term of Mr. Bush. There was some protesting to the result of the election. How have they solved? The head of the judiciary system, who was nominated by Mr. Bush, judged for the result of the election.

But here, they went to recount the votes, at least 10 percent. And according to the instruction of the leader, there was possibility, if they were questioning, for all the votes to be recounted. Everything was clear and transparent.

ZAKARIA: But one way you have dealt with these protests is by a very fierce crackdown.

I mean, just this week, your court -- I'm reading -- the Revolutionary Court sentenced 11 people to death -- to death -- for protesting an election. And there are very few democracies in the world where you would find the way in which you deal with, you know, a peaceful protest is by sentencing people to death.

MOTTAKI: I recommend you to read what was the crime which they have done. And also, at the first phase of the court, the result can be reconsidered based on their wish, their request, in the second scale of the courts.

The people who protest, who have objection to the result, they should receive their answer. And the answer should be given based on rules and regulations through the law, and it is given.

For example, 90 to 95 percent were not -- maybe were not satisfied with the result in their heart. But through the rules and regulations, they have received their answer.


MOTTAKI: Who remained in the street? The violators.

In which country, in the United States, do they -- are flexible for those who are coming to the streets, firing, killing, shooting by the guns, and other things...

ZAKARIA: There are no reports...

MOTTAKI: ... and making problems...

ZAKARIA: There are no reports that the protesters were shooting, firing. There are reports that the Basij and the Revolutionary Guard were doing that.

And in no -- in the United States and in no Western democracy are people sentenced to death...

MOTTAKI: You do not agree there was violence there?

ZAKARIA: There was violence...

MOTTAKI: But yes.

ZAKARIA: ... but from the Basij against the protesters.

Now, let me ask you this.

MOTTAKI: You mean the Basij was firing...

ZAKARIA: On innocent people.

MOTTAKI: ... the banks, the mosque, the buildings, and destroying everything in the street? That was the Basij? You mean the ordinary people?

ZAKARIA: Let me ask you this. At the very least you would agree, Foreign Minister, you are now in a very divided society. You are -- by your own admission, there are members of the elite, key members of the establishment...

MOTTAKI: We are not divided.

ZAKARIA: There are people -- you are divided. You have...


ZAKARIA: You have a green revolution...


ZAKARIA: ... within your country.

MOTTAKI: No. You could see 21 days ago -- we call it 9th of the month of day (ph) -- when the people came to the street to show their protest against those who (ph) violated (ph) in the (UNINTELLIGIBLE), in Tehran. If you count that population -- I was with the people on the street in that day -- Tehran has not seen such a crowd of people who came to the street since last 30 years.

ZAKARIA: But this is all...

MOTTAKI: Not only in Tehran, in all the cities in Iran.

At the same night, I had interview. I said, it is divided. One side is 45 millions of people, who have one voice, and the other side, we had a few thousand people who came in Tehran's street. And from abroad, who are monitoring this situation, they can decide.

ZAKARIA: Look. If you had nothing to fear, Mr. Foreign Minister, why did you have -- why not open everything up? You jailed hundreds of people. You jailed one of my colleagues from Newsweek for -- on completely baseless charges. This is the activities of a police state...

MOTTAKI: Everybody is...

ZAKARIA: ... not a democracy.

MOTTAKI: Everybody is equal in front of law.

ZAKARIA: Yes, but that doesn't mean innocent people can be herded off to jail.

MOTTAKI: No. If anybody is innocent, definitely, as the court has shown...

ZAKARIA: There was no court proceeding. There were no charges.

MOTTAKI: ... they can do (ph) this (ph). No. They...

ZAKARIA: The Revolutionary Guard picked him up.

MOTTAKI: They should be released (ph).

ZAKARIA: He was not even -- he was not even handled by the Interior Ministry.

MOTTAKI: Definitely...

ZAKARIA: The IRG had taken over. There's something going on in your country where the Revolutionary Guard is taking over...

MOTTAKI: In the first day...

ZAKARIA: ... the functions that were being done by the old clerical establishment.

MOTTAKI: In the first day of...

ZAKARIA: And you know this.

MOTTAKI: ... the Copenhagen climate change, 1,000 people were arrested.

ZAKARIA: Arrested, not sentenced to death.

MOTTAKI: OK. Arrested, for the light violence.

But if they were going to kill some people, or to burn everywhere, to damage so many things, definitely, that proved (ph) was more stronger.

What you could see in the street of Paris, or some other places -- democracy is good somewhere, and bad somewhere else?

If we are committed to democracy, we should be committed to democracy everywhere. And here, we should not have a judgment based on double standard.


ZAKARIA: And we will be right back with Manouchehr Mottaki, Iran's foreign minister.


ZAKARIA: You say you were doing everything legally and transparently. But, of course, you had to reveal a new facility in Qom, because it was about to be revealed.

MOTTAKI (voice of interpreter): But we had already announced that at that time. Therefore, we have fulfilled our obligations.

ZAKARIA: You're playing games with me, Mr. Foreign Minister.




ZAKARIA: In his State of the Union speech, President Obama said, Iran must halt its activity on the nuclear front, or face sanctions for their action.

What is your response to President Obama?

MOTTAKI (voice of interpreter): We have clear nuclear activities in the country. Of course, he has the right to continue these efforts to understand our nuclear program.

And for his information, we say that Iran is doing everything based on the law, and that is our right. And we continue our peaceful nuclear activities within the framework of the international law and rules.

So, for our legal activities and for the legal activities of all countries, nobody has the right to threaten them. ZAKARIA: But you say you are doing everything legally and transparently. But, of course, you had to reveal a new facility in Qom, because it was about to be revealed.

Surely, this is exactly the kind of behavior that gives the international community the suspicion that Iran is actually not abiding by the letter or spirit of its agreements with the IAEA.

MOTTAKI (voice of interpreter): In Pittsburgh, they announced that Iran had not informed the IAEA about its activities in Fordu. But we had already announced that at that time. Therefore, we have fulfilled our obligations.

ZAKARIA: You're playing games with me, Mr. Foreign Minister. You announced it a few days earlier to simply preempt their announcement.

MOTTAKI (voice of interpreter): According to the legal framework. And we should have done it 18 months before the injection of uranium, and we did it.

ZAKARIA: All right. Let me ask you where Iran stands now. Because at times it has seemed that Iran wanted to find some kind of agreement it could come to with the IAEA, with the international community. And then, at times, there has been a sense of defiance.

Earlier, maybe six months ago, there was a sense among many people that Iran was putting forward a serious offer to negotiate. Then it was withdrawn.

Why this lack of clarity? Do you want to find some way to come to a resolution with the international community on the nuclear program in a way that the International Atomic Energy Agency will certify that you are abiding by your agreements?

MOTTAKI (voice of interpreter): We have -- we continue our contacts, legal contacts, with the IAEA, and we continue our activities under the inspection of the agency. And at the same time, we will continue our activities according to the law. And I think you know about the latest development about this.

For the next year, we need uranium, high-grade uranium, and for medical isotopes in the Tehran reactor. And we have already announced to the agency about our requirements. And those countries that have the fuel available, they should meet our requirement, based on the rules and regulations.

The Tehran reactor was constructed by the Americans before the revolution, and the Americans provided the fuel before the revolution. But after the revolution, we have tried to meet our requirement through other sources.

And there has been a proposal to exchange the uranium. We accepted that in principle, in order to give uranium of 3.5, and take or return uranium of 20 percent, according to our needs. The proposal is on the table. And that can be finalized and be carried out within the framework of our agreement.

And we think that, if we want to carry it out, or if you want to implement the formula, it will be in the interest of all parties. And on the other hand, it can help to build confidence for us.

ZAKARIA: So, what do you do, given the history, to assure the international community that Iran is not pursuing a nuclear weapon?

MOTTAKI (voice of interpreter): Our nuclear activities are transparent. And in the past years, over the past years, the agency has inspected our sites, and they have -- and they saw that Iran had no diversion. They can continue their inspections. This is about the main theme (ph) of our nuclear activity in (ph) Iran (ph).

Nobody should ask us to ignore the rights of the Iranian people. Like other members of the Non-Proliferation Treaty, and a member for 40 years in the IAEA, has the right to enjoy its rights.

ZAKARIA: Do you still believe that the Obama administration is willing to try and make some kind of an agreement with Iran to resolve the nuclear issue?

MOTTAKI (voice of interpreter): It is in the interests of all parties to follow the rules and the internationally accepted laws. Therefore, we think, if President Obama wants to make his promises, to make his promises, he should accept and pay attention to certain principles. And then he should enter into a practical process.

And with this approach, we can be optimistic. And we hope that we will have some conditions to help him.

ZAKARIA: Meaning what? What conditions?

MOTTAKI (voice of interpreter): There should be a willingness or the political will in order to realize what he says.

ZAKARIA: On that note, Mr. Foreign Minister, a fascinating conversation. A pleasure to have you on.

MOTTAKI: Thank you.



ZAKARIA: Now, for our "What in the World?" segment.

What got my attention this week was the Senate vote to keep Ben Bernanke, the chairman of the U.S. Federal Reserve Bank, in his job for another four years. It was a strange controversy that mercifully ended the right way.

Let's remember again, one year ago, the financial system was on the brink of collapse. Credit had frozen. No one -- not companies, not individuals -- could get loans. And that was playing havoc with the global economy. It was not easy to figure out how to stop the downward spiral in confidence. Ben Bernanke did that, using imagination, energy and courage. He made some huge moves into the economy.

Most of them worked. So much so, that we are now in a situation that banks have been stabilized and are making pots of money.

Martin Wolf, the "Financial Times'" economic columnist, points out that it is typical after a crisis to have banks recover faster than the economy as a whole. So, of course, while they should lend more and be careful about compensation, let's not forget, it is fundamentally a good sign for the economy that we have healthy banks and credit back and running.

And by the way, this financial rebound is proving good for the Fed, as well. I think many people missed a tidbit of financial news earlier this month. The Federal Reserve announced that it had returned a profit for 2009 of more than $46 billion. That tops the largest yearly corporate profit ever made -- a record held by ExxonMobil.

And 2009, you may recall, was not a banner year for many banks. It was the Fed that went out and bought the things other institutions didn't want to buy, like toxic assets. Most of the bets -- even many of the risky ones -- paid off.

And all that money that Bernanke made for the Fed, after expenses, was returned to the U.S. taxpayers.

While most of the CEOs of the big banks and untold numbers of their underlings, got big salaries and bigger bonuses this year, Bernanke was not quite so fortunate. The chairman's salary is $196,700. And his bonus? Nothing.

In the private sector, the kind of investment returns that Ben Bernanke got would probably earn him, oh, $1 billion. In Washington, they got him a lot of abuse, and then reluctantly, with many insults, the Senate allowed him to keep his job.

We will be right back.


ZAKARIA: Now for our "Question of the Week."

Last Sunday I asked about the so-called "Massachusetts message," the election of the Republican Scott Brown to the seat Ted Kennedy held for decades.

I wanted to know how you felt President Obama should react to it. Should he move to the left, right or center?

Most of you chose the last option, the center, saying that's where he campaigned from, and that's where he needs to return.

An interesting note on perceptions. Some thought he would need to go right to get to the center, while others thought he would have to jibe left to get there.

Meanwhile, others like Harry Letaw of Severn Park, Maryland, thought that left, right or center wasn't the issue at all. "He should not move anywhere. He should take charge."

For this week's question, I want to know who you think has had the greatest effect on the American economy out of the troika of key U.S. financial leaders -- Ben Bernanke, Tim Geithner and Larry Summers. Which of those three has done the most in a positive or negative way to impact the American dollar, workforce, Treasury, et cetera?

Let me know what you think.

Also, as always, I'd like to recommend a book. It's called "Capitalism and the Jews" by Jerry Muller. Muller is a noted historian. He takes a fascinating look at how Jews have shaped capitalism and vice-versa, from medieval times to today -- one of the most fascinating relationships in history.

What the book does is, it looks at how it all began, with usury laws in the Middle Ages that prohibited Christians from loaning money and making interest on it. Jews were not prohibited, and so Christians encouraged Jews to do it, since everybody realized they needed the system of interest and loans. But it brought upon Jews much suspicion and scorn.

The whole thing is a fascinating read.

Now, please, we'd love to hear from you. You can always e-mail us at Be sure to tell us your name and where you live. We like to know who's out there watching us.

And if you haven't done so recently, take a look at our Web site at It's updated often with fresh content.

Thanks to all of you for being part of my program this week. I will see you next week back in New York.