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Fareed Zakaria GPS

Middle East Revolution Report; Is Inflation Really a Risk?

Aired May 01, 2011 - 10:00   ET

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

FAREED ZAKARIA, 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've got an important show for you today. Slaughter in Syria, brutality in Bahrain and progress of a kind in the Palestinian territories. We will talk about all this and more with a panel of experts on the Middle East.

Then, Malcolm Gladwell will explain why some people make so much money. The origins of the inequality problem in America, and also, the scandal of college rankings.

Finally, Keynes and Hayek -- and I don't mean Selma Hayek -- in a rap video. Really.

But first, here's my take. This week's big news is that Leon Panetta and David Petraeus will move into new jobs, running the Pentagon and the CIA respectively. They're excellent appointments, but I hope that they will use the occasion to have a major rethink about the way we handle international crises. The vast American national security bureaucracy has become a world unto itself, massively funded, geared to its own strange internal dynamics, and rarely subjected to external tests.

Consider the intelligence community. We spend about $80 billion on intelligence every year, more than the rest of the world put together. And yet, we seem perpetually unprepared for global events. The CIA did not imagine the fall of the Soviet Union, the revolutions of Eastern Europe, the break-up of Yugoslavia, September 11th, Saddam Hussein's nonexistent arsenal of weapons of mass destruction, the global financial crisis, and, most recently, the Arab spring.

Now, I'm not suggesting that it was possible to predict these events. Very few people or organizations foresaw them, certainly not in a timely manner, and those who did might simply have been lucky. International crises happen when they happen, for a variety of complex reasons that are always easier to see in hindsight.

But surely we can be better prepared. Government agencies should be preparing policymakers and bureaucrats for sharp changes in international, regional and national patterns. They should be imaginative about the possibilities of sudden shifts and new circumstances and force policymakers to confront the scenarios in advance. That is what has distinguished the most successful private sector firms in managing crises. Contrary to the mythology rampant in Washington and across the country, banks such as JPMorgan and Goldman Sachs did not know that the housing market would collapse in 2007. They could have made that prediction just as easily in '05 or '06 and bet on it and lost lots of money, as many firms did.

What JPMorgan, Goldman Sachs and others that weathered the financial crisis did was to carefully manage their risk, preparing themselves for sharp shifts in the market. So I hope that at the highest levels of the U.S. government, they are playing out crisis scenarios in Saudi Arabia right now.

Of all the possible events in the Middle East, the most complex, by far, would be Syria's protests in Saudi Arabia. If you think gas prices are high now, imagine oil at $200 a barrel.

The other way to be prepared for these kind of crises is to have some surplus power so that you have the firepower to deal with the crisis when it happens. Again, the analogy with the private sector, the banks that did well had some comfortable cushion of cash reserves so that they could ride out the crisis.

Right now, the United States is overextended, struggling with debt and deficits, fighting military actions in multiple places across the globe, and beginning to be hit by a demographic and economic time bomb. We might be able to navigate through all this as long as we don't hit another big crisis.

We will never be able to predict the next geopolitical, economic or natural disaster, but we can position ourselves to be prepared and probably to have a little more cash in the bank than we do now.

Let's get started.

(BEGIN VIDEOTAPE)

ZAKARIA: From Libya to Syria, Bahrain and onwards, the rolling revolutions in the Arab world continue, and we have a panel excellently equipped to make sense of all it.

Joining me here in New York, Martin Indyk was U.S. ambassador to Israel twice and ran the Clinton administration's Near Eastern Affairs at the State Department. Elliott Abrams held similar top foreign policy positions for two republican Presidents. Ayman Mohyeldin is based in Cairo for Al Jazeera English. Ayman was named to the "Time 100" for his vivid coverage of events in Egypt.

And, in London, Fawaz Gerges. He is the director of the London School of Economics' Middle East Center.

Welcome, all of you.

Martin, the man at the center of the drama right now is President Assad. You've met with him. Do you think that he is ruthless enough, and is the Syrian state apparatus of repression ruthless enough to be able to make these protests go away?

MARTIN INDYK, BROOKINGS INSTITUTION: Well, I think he's panicked at the moment because the nature of the protests are such that he can't exactly predict where they are going to come from next.

This is a kind of opposite of the Tahrir Square Revolution that you reported on, where because they can't move into Damascus, it's sort of controlled so effectively by the security forces, and because the Sunni elites there are still with the regime. They're popping up all over the place, in every part of the country and in an unpredictable way. It's a very sophisticated, alternative approach.

And I think Assad has decided now that he's just going to use force to try to crack down, but he's stuck in that dictator's dilemma. He -- he offers concessions, and they see it as a sign of weakness. He -- he cracks down, and -- and it outrages the demonstrators even more.

Can he succeed in the short term using his tanks and his security forces to kill a lot of people and suppress it? Yes. But I don't think it will hold for long. I really think that, just as we've seen in other places, it may be bloodier, it may take more time, but he, too, is history.

ZAKARIA: Fawaz, when you look at the Syrian situation, what does it tell us about the Arab awakening, about this Arab spring, that it has now reached Syria?

FAWAZ GERGES, LONDON SCHOOL OF ECONOMICS: Really, Fareed, what it tells us, that the democracy virus has basically infected most of the Arab states, including Syria. But is -- the immunity system of the autocratic Arab state system is very weakened now.

A rupture has taken place in the Arab world, Fareed. Really, this is the first time in the last 600 years -- in the last 600 years, since the Ottoman rule, that the Arabs struggle now to determine their own future.

This is a moment of self-determination. And, really, you cannot understand what's happening from Tunisia to Cairo to Tripoli to Sanaa to Damascus without understanding the changed psychology and mood of the Arab citizen. I think Arab citizens, for the first time, feel empowered, emboldened, because I think there is no return. Even if some regimes survive this particular powerful storm, I think this will be a very short victory indeed.

ZAKARIA: Fawaz, quickly tell us, though, do you buy the idea that people have often made that the monarchies are more stable than the republics, that -- particularly places like Saudi Arabia, which is, of course, the central -- you know, the -- the puzzle we all wonder about, because of its enormous impact economically on the world, that Saudi Arabia is stable?

GERGES: Well, Fareed, I don't think the expectations of young Saudis differ very much from the expectations of young Egyptians and young Yemenis and young Syrians. I think you have really now a changed psychology, rising expectations.

It's not just about being on welfare, having a check at the end of the month. Now, young men and women, old men and women in the Arab world, including in Saudi, in Bahrain, in other places, I think they would like to be proud citizens of their state. They would like to have a say in how their governments are run.

The reality is I think even the monarchies have to change, if not in the short term, I would say in the medium term and the long term, to survive this particular new changed psychology and mood in the Arab world.

ZAKARIA: Elliott, when you look at Bahrain, this is a -- a monarchy that seemed somewhat reformist, but then when the protests came up, shut them down. Will that kind of shutting down work?

ELLIOTT ABRAMS, COUNCIL ON FOREIGN RELATIONS: No. I think Bahrain is a disaster. I think the king could have responded and should have responded with concessions, with reforms, to move toward a constitutional monarchy. There is a parliament in Kuwait. They could have a parliament in Bahrain.

What he's done now, I think, is virtually to guarantee the end of the royal family. They now live under Saudi domination, and they will, one of these days, live in London.

I just don't see how they survive this, because what they have done is to turn this from a constitutional issue or a freedom issue where you can compromise, into a -- an issue between Sunni and Shia. And they are arresting and they are jailing not the -- the kids from the street, doctors, lawyers, engineers -- the middle-class leadership of the Shia community in Bahrain.

Where can this possibly lead except to disaster?

ZAKARIA: Ayman, you were reporting on the events in Egypt. You -- it was amazing coverage. This is why you're in -- now a "Time 100" honoree.

When you were there, one of the things I hear over and over again, people ask, how strong was the Muslim Brotherhood? Is this an Islamic revolution? Is it going to be taken over by the Islamists? What -- what's your perspective on that?

AYMAN MOHYELDIN, AL JAZEERA ENGLISH: Well, I can tell you from having been in Tahrir Square for almost every one of those days, even before I got arrested and kicked out, that never once did I ever see the flag of the Muslim Brotherhood in the square. The Muslim Brotherhood was not a -- a force behind the revolution coming into the light. They certainly played a role throughout the revolution and now afterwards.

This is not an Islamic revolution. It's not a Muslim Brotherhood revolution. We never heard the slogans of the Muslim Brotherhood. There is no doubt that the Muslim Brotherhood, as a party and as an organization, is part of the social, cultural, religious fabric of Egypt, now trying to become part of the political fabric.

But what is important here is that -- and this is what ordinary Egyptians want -- is that the institutions of the state allow for the political participation of all parties, including the Muslim Brotherhood.

ZAKARIA: Do you worry about the Muslim Brotherhood?

ABRAMS: Sure --

ZAKARIA: A lot of people in, you know -- Republicans, if I can put it simply, worry a lot about this.

ABRAMS: I think a lot of people do. I think a lot of Christians do. In Egypt, the cops certainly do. A lot of people in the Brotherhood are saying only a Muslim can be president in Egypt and so forth.

I think it's the right debate for Egyptians -- and Tunisians, for that matter -- to have. What is the role of Islam? What is the role of Sharia? And that debate, I think, hurts the extremists, and it hurts, for that matter, al Qaeda, because now all these things are on the table to be decided democratically.

But one does have to worry, particularly if you're a cop in Egypt. Maybe it will be decided in a way that is disadvantageous to you and your community.

ZAKARIA: Well, how does the United States handle this, from your point of view, Martin?

INDYK: Well, overall, I'd say fairly well. There's been a clumsiness in the way that they handled Mubarak, the president's statements about that, which had a negative roll-on effect for our other allies in the region, particularly the Saudis, the Emirates felt that he'd humiliated an -- and ally and that they could no longer rely on us.

But, essentially, the president got on the right side of history, supported the demands for freedom from Egypt, and -- and that was very important. And we've come in now with economic support and -- and organizational support for the sake of the political parties. I mean, I think, basically, we're doing what's needed there.

In the case of Libya, I think he also has basically done the right thing, letting others who have a vital interest, since we do not, in Libya take the lead -- Britain, France, Italy -- but supporting that effort as a humanitarian intervention. Where I think he's made a mistake is that by making the objective the removal of Gadhafi, he's opened up a gap between the objective and the resources we're prepared to commit to it.

As Fawaz Gerges says, this is about the Arab people redeeming their dignity. It's not about us, for once. So we can get behind them, support them, help to hold up a standard, shine a light on what the -- what the dictators are doing. But, ultimately, we can't determine what happens there. And we shouldn't be the ones who say you have to go and you have to stay, but it's up to the people there, and we're going to support their demands.

ZAKARIA: Elliott, quickly, I'm guessing you are somewhat less happy with the way the administration has handled things?

ABRAMS: Yes. I agree that there's a gap between what we said and what we're doing, but I do think what -- this is a NATO problem now.

ZAKARIA: We're talking now about Libya?

ABRAMS: About Libya. We have hurt NATO unity by refusing to lead. Leading from behind is the new slogan. It's not going to work.

And I think we've been very slow on Syria. I think we should be, at least morally and politically, supporting the opposition in Syria because, as I talked to people and -- from Lebanon and Syria, what they say to me is, we don't know where the Americans stand. It seems as if you're not so sure you want Assad to go. You said Mubarak must go, you haven't said that about your enemy, Assad. Why not?

So I think the administration needs to be clearer in the coming weeks about Syria.

ZAKARIA: We'll talk about all this and more when we come back, right after this.

(END VIDEOTAPE)

(BEGIN VIDEO CLIP)

ABRAMS: You cannot make peace with someone who is simultaneously in -- undertaking terrorist acts and also saying that we want to destroy your state.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ZAKARIA: And we are back with Martin Indyk, Elliott Abrams, Ayman Mohyeldin and Fawaz Gerges, talking about the Middle East.

Hamas and the Palestinian Authority have made a deal. The deal is meant to provide some kind of unity to the Palestinian leadership, which means they would be able to cooperate, negotiate together, present a united front to the world. But the main party with whom they have to negotiate, Israel, is horrified by this because they say that Hamas does not recognize Israel. Is it a good sign or a bad sign?

INDYK: Well, it's not the Israelis who say it, it's Hamas who says it.

ZAKARIA: Right.

INDYK: Hamas says that they wouldn't negotiate with Israel. They wouldn't make peace with Israel. They promise to destroy Israel. So -- so they don't want a two-state solution, they want a one-state solution.

But Hamas is under a lot of pressure because the people, the Palestinian people in the streets of Gaza, were demanding unity, and their popularity in Gaza is -- is at rock bottom. And now, they figure, well, we'd better -- we'd better make deal here.

So this may look like a disaster for Israel and for the peace process, but we may actually see other (ph) time that Hamas is -- is, in responding to the demands of the Palestinian people, may actually find itself having to get on board with the two-state solution. But I don't see that happening at the moment.

ZAKARIA: Do you -- do you think that this is a sign of a weaker Hamas?

MOHYELDIN: No. I think, actually, it is a sign that Hamas is in a position via Fatah to actually respond to the will of the Palestinian people. In this particular case, they are responding to the will of Palestinians who have made very clear that they want national unification in order to advance their own national interests.

I think what we're also seeing is the Arab spring, if you will, having an effect on Palestinians in the sense that many are calling for so many of the similar values that we're seeing in the Arab spring to take root in the Palestinian territories.

This is a cause of self-determination in the eyes of Palestinians. They're seeing Arabs rise up and demand their self -- their rights. And they don't think this is beyond them to do the same, and that is why the first step in Palestinian self-determination begins with national unity and then, ultimately, the next step, to take it forward with Israel.

ZAKARIA: Israel has been the most -- perhaps the country that has been -- been most unenthusiastic about this Arab spring.

ABRAMS: That's true.

ZAKARIA: On this program, Paul Wolfowitz that said, frankly, they'd been crazy. Do you -- do you -- how do you view it?

ABRAMS: I think they've been wrong. I wouldn't say crazy.

You know, I said to Israelis, when I was there a few weeks ago, you should be more optimistic and hopeful. And they said, you live 5,000 miles from here. We live here. It's dangerous. Jordan, Syria, Lebanon, Egypt. One has to, I think, sympathize with -- with those worries. I do think they have been emphasizing and exaggerating the dangers.

But the Hamas-Fatah agreement seemed to me to be a danger. I don't see how a government that consists of the two of them or a PLO that consists of Hamas as well as Fatah can be a peace partner for Israel. You cannot make peace with someone who is simultaneously in -- undertaking terrorist acts and also saying that we want to destroy your state.

ZAKARIA: But didn't the IRA do that with Britain?

ABRAMS: In the case of Britain, the successful negotiations came after they had militarily crushed the IRA. That has not happened in the case of Hamas. This is not a defeated Hamas. That was a defeated IRA.

ZAKARIA: Fawaz, how do you read this?

GERGES: The irony is that the Israeli leadership and the American leadership, in particular the Bush administration, made the case many times is that peace basically can be achieved only with democracies. Remember, the big point of the Bush administration.

And that's why it's very ironic that the Israeli leadership now is terrified, is very anxious about basically the democracy virus mutating in the Arab world. It tells you a great deal about how the idea of democracy was used for public consumption both in Israel and also within the Bush administration. Point one.

Point two, in fact, one of the points that has been mentioned -- has not been mentioned so far is that -- the failure of American diplomacy to deliver on the Arab-Israeli conflict. The reason why there is unification between Hamas and the Palestinian Authority, because the American leadership has failed to deliver a peace settlement.

ZAKARIA: All right. We've got to get out, but I have to ask you all about, as I said, the -- the touchstone here, if this is an ongoing revolution, the touchstone is Saudi Arabia. So I'm going to do something that will seem hokey.

On a scale of zero to 10, what is the likelihood that in the next six months there will be some kind of protests in Saudi Arabia? Martin?

INDYK: Oh, in a six-month timeframe, not very high.

ZAKARIA: So, zero (ph)?

INDYK: But instability is licking on the borders -- all of Saudi Arabia's borders. It is inconceivable that they will not be affected over time by -- by what is happening all over the Arab world.

So, within six years, if -- if the royal family is not on the road to a constitutional monarchy, then they, too, will be history.

ZAKARIA: Would you agree with that?

MOHYELDIN: Absolutely. The borders of -- of the Arab world will not stop the winds of change. No country will be able to stop it. Every country will take a different course, under different internal and external pressures.

ZAKARIA: Including Qatar?

MOHYELDIN: Including every Arab country. There is no Arab country that is immune to the winds of change when people are pursuing self determination and human rights.

ZAKARIA: All right. I say Qatar because of course Al Jazeera is based and owned by --

ABRAMS: I'll -- I'll even take you up on the (ph) six months. I think you'll see demonstrations or protests in the eastern province by Saudi Shia who are very unhappy about what they're seeing the Saudi royals do across in Bahrain.

ZAKARIA: Fawaz, Saudi Arabia?

GERGES: The story is unfolding. It's the beginning as opposed to the end, really, of the Arab awakening, and I would say that there is no regime that's immune in the Middle East at this particular moment in history.

ZAKARIA: All right. I wasn't able to get a zero to 10 scale going, but everybody was very clear and definitive.

I thank you all for a fascinating conversation. We will be right back.

(END VIDEOTAPE)

(BEGIN VIDEO CLIP)

BEN BERNANKE, CHAIRMAN, U.S. FEDERAL RESERVE: Inflation expectations --

Inflation rate --

For inflation --

To maintain inflation and stable inflation --

On the inflation front --

(END VIDEO CLIP)

(COMMERCIAL BREAK)

ZAKARIA: Time now for the segment that makes you say, "What in the world?"

Take a look at this. It's a word cloud, a visual depiction of the Fed Chairman Ben Bernanke's historic press conference this week, a collection of all the words he used. And the size of the words reflects how often he used them. It's a picture that tells a story. Ben Bernanke has one word on his mind.

(BEGIN VIDEO CLIP)

BERNANKE: Inflation --

Inflation expectations --

Inflation rate --

For inflation --

To maintain inflation and stable inflation --

On the inflation front --

Zero inflation is the inflation rate overall consumer inflation.

(END VIDEO CLIP)

ZAKARIA: He uttered the word "inflation" 31 times in his main statement, and then many more times during the Q&A that followed.

There's a reason that we should all be looking at Bernanke's words carefully. He is trying to navigate between two somewhat contradictory missions, to keep inflation low and to keep employment high.

Now, a quick reminder, the Fed Chairman is like the driver of the national economic automobile. If the Fed keeps interest rates low, that's like stepping on the accelerator of the economy because people can get cheap loans, and that is good for employment. But if the car goes too fast, that there's too much borrowing and spending, that will tend to drive up prices and wages, causing inflation, which no one wants. So, by raising interest rates, Bernanke would be putting on the brakes.

Higher rates means fewer people take out loans, and that actually slows down economic activity. Less danger of inflation but, of course, less economic activity, which means less employment for Americans as well.

Throughout the financial crisis and until recently, Bernanke has had as his central concern unemployment. He understood that the global economy was in a big slowdown, that the West was in a massive recession, and he put his foot on the accelerator. But he now seems to have gotten word about inflation, and this might mean that the foot is coming off the accelerator and onto the brakes.

It's a tough call, but I think it's premature. The U.S. economy is having its slowest recovery from a recession in five decades. The only reason unemployment numbers are even falling right now is that many people have stopped looking for work, and the way unemployment is calculated, you have to be looking for work and not finding it to be counted as unemployed.

I understand the fears of inflation, but does it look like there is any danger that the American economy is overheating right now? With housing prices falling, the consumers still burdened with debt and all these unemployed or underemployed people?

Plus, I think we can all agree that the U.S. economy doesn't exist in a vacuum. We are part of a global economy. There are millions of workers in China and India, tens of millions, and they're producing goods and services for a fraction of the costs of Western workers.

So, what happens? It is tough for Western workers to get wage hikes with all this global competition. And wage hikes, wage inflation is the main driver of overall inflation in America. Unless you're a banker or a sports star, your wages have not been going up these days.

But remember one thing, Ben Bernanke's speech was historic. No other Fed Chairman in history has given a press conference, period.

One of the things Bernanke promised when he was named Fed chairman was transparency. He's made the Fed more open. In doing so, he's done what very few public officials willingly do, diluted his own power. So he's ahead of the curve on transparency and accountability. But I'm not so sure he's ahead of the curve on the economy. And we will be right back.

(BEGIN VIDEO CLIP)

MALCOLM GLADWELL, AUTHOR: What happens in the '70s, in one of these professions, models, baseball, the corporate suite, the legal profession, Hollywood, in one case after another, people start -- very prominent people start to stand up and demand more money.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

ZAKARIA: And we are now joined by Malcolm Gladwell. Malcolm, pleasure to have you on.

GLADWELL: I'm glad to be back.

ZAKARIA: So Malcolm, inequality in America. This is one of the things everyone agrees is a huge problem. It's widening. And a large part of the emphasis has been that the political system has done this. It's favored tax cuts for the rich. It's done all kinds of things. Now, you've written some stuff, which is not -- doesn't say that that's wrong but points to another reason why this has happened. And it all begins with baseball. Explain.

GLADWELL: Yes. This is an argument that was made by the guy who runs the Business School at the University of Toronto, Roger Martin, a very brilliant thinker. And he wrote this article years ago in "Harvard Business Review" talking about capital versus talent. And his sort of explanation, broader explanation, for the rise of inequality is for many years capital was scarce. And so it had the ability to sort of dictate terms and capital kept talent in place. But what happened in the 1970s is that those two -- the kind of -- the balance of power between capital and talent got reversed. ZAKARIA: And capital being the guys with the money, the bankers.

GLADWELL: The institutions.

ZAKARIA: The people who were already rich.

GLADWELL: And what happened was that all of a sudden people who were at the top of their profession were in a position to start to dictate terms to their employers. So you see this -- and Roger's point is that you see this in the mid-1970s in virtually every profession you look at, there is a reversal of field.

So you see we've forgotten, for instance, that in the '50s and '60s, corporate lawyers didn't make any money. When I say "didn't make any money," I mean, no money. CEO's, this is great stuff, a great article I found from the '50s, this interview with a top fortune 500 CEO where he talks about he's had to accept the fact that he's never going to be a millionaire. They just didn't make any money.

What happens in the '70s, in one of these professions, modeling, baseball, the corporate suite, the legal profession, Hollywood, in one case after another, people start to -- very prominent people start to stand up and demand more money and capital is no longer in a position to say no.

ZAKARIA: Because there's lots of capital. 30 years of economic growth means capital is abundant and the talent now --

GLADWELL: Talent is what's scarce. If I can prove to you -- if I can say I am -- you know, Lauren Hutton does this in the modeling world. She's the number one model in the world and she's still making some pathetic day rate. Finally in 1975 she stands up and says to Revlon, look, I need more money. You know, overnight she goes from making peanuts to making millions of dollars. Because they finally realize actually, you are the top model. We need you. We need you more than you need us. Right?

Same thing happens in baseball. Baseball players until Marvin Miller organizes them into a powerful union in the late '60s, early '70s, they make no money. I mean, a baseball player, the top names in the game used to have winter jobs. The Yankees, from those great Yankees games of the '50s, a couple of them used to sell men's clothing in Newark in the off-season, right? These are guys who today would make $30 million a year. All of a sudden, they organize. They win that -- Marvin Miller wins the great battle for free agency in 1976. And they go from making a pittance to becoming these multimillionaires.

Like I said, and you see this pattern in absolutely every profession you look at. And that's not the only driver of economic inequality, but it's an enormously important fact. You know, what happens in the -- if you look at the gross economic statistics in that same period, it's what you see. You see that what's driving income inequality is this sudden massive increase in the amount of money being paid to the 99th percentile.

ZAKARIA: So is it good or bad?

GLADWELL: Well, you could make a -- and people who -- the kind of person who pays the CEO $20 million a year, or if we had the President -- we had Hank Steinbrenner in here. We asked him, why are you paying Alex Rodriguez so much money? He'd say because he's worth it, right? Alex Rodriguez's predecessor, in 1955, was radically underpaid, radically.

But you have to also consider, though, the broader social dimension, that is that when you have a society which has the level of economic inequality we have now, and we're basically up there with Venezuela and Mexico, right, we're turning this country into -- it has other very negative consequences.

ZAKARIA: But how do you undo it? You see, because if you're right, it's happened because of this very broad structural force that is about kind of a meritocracy on steroids. You can't put the genie back in the bottle.

GLADWELL: All you can do is to do what this country did in the '40s and '50s which is in a kind of delayed response to the excesses of the '20s and before that the gilded age which is to raise tax rates. Politically, of course, that's not happening. But, I mean, that's your -- at this point it's one of the few options available to you. The other thing -- I mean, the other thing, and actually, Roger Martin talks about this -- in the corporate realm, he says, what's happened -- the reason that -- one of the reasons CEO's were able to negotiate such extraordinary paychecks is that capital, the institutional players rolled over and played dead. They just didn't fight back.

And he says, look, you know, you've got these major pension funds, for example. Institutional investors who own enormous blocks of stock, who have an incredible amount of power, bargaining power. If they were to step up and say, we're no longer going to pay CEO's $25 million, like many publicly held companies, those guys would no longer make $25 million.

He argues that a more activist role by capital, by institutional players, could have the effect of bringing some of these more excessive salaries, but I think he's right.

ZAKARIA: We'll be right back. When we come back, college rankings. What's wrong with them.

(BEGIN VIDEO CLIP)

GLADWELL: They're absurd. You know, all of us know in our heart of hearts they're absurd. But they're probably even more absurd than we kind of own up to.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

CANDY CROWLEY, CNN ANCHOR: I'm Candy Crowley, and here are today's top stories. A mandatory evacuation has been ordered for the Southwestern Illinois town of Cairo. The U.S. army core of engineers is considering blowing a hole in a levee holding back the rain-swollen Mississippi River which would flood rural farm communities.

Meanwhile, top Obama Administration officials today are visiting parts of Alabama and Mississippi that were decimated by tornadoes that killed at least 339 people across the Southeastern United States.

The Taliban has launched a spring offensive against foreign troops and Afghan forces. The militant group says it will target military bases, convoys, heads of foreign and local companies and members of the local government.

Meanwhile, the bodies of eight U.S. airmen killed by an Afghan pilot earlier this week arrived at Dover Air Force base early yesterday.

Those are your top stories. Up next, more FAREED ZAKARIA GPS and then RELIABLE SOURCES at the top of the hour.

ZAKARIA: And we are back with Malcolm Gladwell. You don't like college rankings.

GLADWELL: I don't. I mean, partly that's because I'm a Canadian. You know, all Canadians are, by nature, suspicious of the whole absurd hierarchy of American Colleges. But I think that the -- I mean, I wrote this piece for "The New Yorker" on the U.S. news rankings. They're absurd. All of us know in our heart of hearts they're absurd. But they're probably even more absurd than we kind of own up to.

ZAKARIA: Why?

GLADWELL: You can't do -- not all -- not all rankings are crazy. There are times and places and ways in which a ranking is a very legitimate way to understand, to kind of -- to understand differences in quality and kind of help a consumer make a more informed choice. But there are real limitations to rankings. And you cannot simultaneously rank a very heterogeneous group of objects along a comprehensive set of criteria.

I cannot presume to sum up something as complicated as a university which has elements that go into a good university education are, you know, I mean, we could list hundreds of them, right? So we're trying to account for an extraordinarily complicated thing, what makes a great college education. You can't do that and simultaneously presume that you want to rank a bunch of different colleges which are extraordinarily different in their mission. So "U.S. News & World Report," for example, on their ranking, the example I gave was they have, you know, Penn State at -- I've forgotten -- 49th. And Yeshiva University at 50.

Now, so they're presuming that Penn State is one point better than Yeshiva. First of all, that's absurd, right? Are you really saying you can take two universities like that with all of their incredible complexity and say actually Penn State's not that much better? But secondly, Penn State and Yeshiva, they're both college universities, but they have nothing else in common, right? One is an urban, private, highly selective religiously oriented campus that's basically just for, I mean, very few people go there who are not religious Jews.

They have one campus uptown for the men and one for the women because they don't want them on the same campus. And then you have Penn State, which is a massive, public, football-obsessed, highly economically and ethnically and culturally diverse in the middle of a valley in Western Pennsylvania, right? You know, no one sits down and says, am I going to go to Yeshiva or Penn State? It doesn't happen, right? So you can't -- there's no scale that can safely and accurately and usefully rank both those institutions simultaneously.

ZAKARIA: So you went to a website. And you looked at Law School rankings?

GLADWELL: Yes.

ZAKARIA: And there's a way you can reengineer them?

GLADWELL: Yes. So there's this really, really fun website by a guy named -- called The Ranking Game by a guy named Jeffrey Stake who is a Law Professor in Indiana. What he did is he loaded all of the information available about Law Schools onto a spreadsheet. And he allows you to construct your own rankings.

So, you know, there's ten different variables, you know, academic reputation of the faculty, reputation of the school, tuition, number of publications of the faculty. So you can choose which criteria you care about and also how much to weight them. Of course, the dirty little secret of these rankings systems is which criteria you choose and more importantly, how much you choose to rate them makes all the difference in the world in the final ranking.

So if you put in a very simple thing about LSAT scores, reputation and faculty resources, how much money the school spends on a student, what you will get is something that looks like the U.S. news ranking. You'll get Harvard, Yale, Stanford, right? Very familiar with those. The minute you monkey with that list even a little bit, it changes dramatically.

ZAKARIA: You mean, monkey with the weightings?

GLADWELL: Yes. Or add different criteria. If you add, for example, I think, in this day and age when the unemployment levels for graduating Law School students are really high, and when the costs of Law School in many cases has become prohibitive. And kids are graduating from Law School with $250,000 in debt, right? I think that tuition is a reasonable thing to add into the mix. The minute you add tuition into the mix, Brigham Young becomes a top ten Law School. And then that's if you do it a little bit. If you add tuition a lot into the mix, all of a sudden Alabama becomes a top ten Law School.

Now, in discussions of elite law schools, do we ever bring up Brigham Young or Alabama? No. Why not? So if I can construct a rankings system which equally weights their cost effectiveness and the quality of the education I get these two schools that all of a sudden leap into the elite level, schools that never get into the discussion in our society.

Why would we want a rankings system which excludes cost effectiveness, which penalizes a school for providing a quality education at a reasonable price? Particularly at a time when the educational world is sinking under its own weight, right? The one thing we all agree is that higher education in this country is out of control because they can't -- the costs keep going up every year faster than the rate of inflation. People can't afford to go to college. We're in this crisis, cost crisis. And yet we have a rankings system which refuses to acknowledge the importance of cost effectiveness.

ZAKARIA: Before we go, I have to ask you, you went to the University of Toronto, right?

GLADWELL: Yes.

ZAKARIA: How does it do on the rankings?

GLADWELL: I -- we now, in Canada -- the short answer is it does very well, but not nearly as well as your alma mater, Fareed, Yale, which is, I believe, number one year after year.

ZAKARIA: On that note, Malcolm Gladwell, thank you very much. And we will be right back.

(COMMERCIAL BREAK)

ZAKARIA: A question this week from the GPS Challenges, we know that the official name of the U.S. mission in Libya is "Operation Odyssey Dawn." What's the name of the French mission? Is it A, Ellamy, B, Mobile, C, Le Parisien or D, Harmattan? Stay tuned and we'll tell you the correct answer. Make sure you go to cnn.com/gps for ten more questions.

And while you're there, make sure you check out our website, the Global Public Square. You'll find smart interviews and takes by some of our favorite experts, also by me and you will also find all our GPS shows. So if you missed one, click and watch.

I have a hefty book of the week for you, but a very good one. It's called "The Origins of Political Order" by Francis Fukuyama." It's 600 plus pages and it begins with pre-human times and goes all the way up to the French Revolution but it's very relevant. With all the events that are unfolding in the Middle East, it's a timely look at what are the critical components of political order. What makes a political system work, what makes it collapse, and that's what we're trying to figure out in Afghanistan, in Iraq, in Libya and, of course, in lots of other countries.

Now for THE LAST LOOK.

(BEGIN VIDEO CLIP) UNIDENTIFIED SPEAKER: What would you do to help those unemployed, this is the question you seem to avoid. when we're in a mess, would you have us just wait and doing nothing until markets --

(END VIDEO CLIP)

ZAKARIA: Rap videos are not standard fare here at GPS but this one was too perfect to pass up. The names Keynes and Hayek should be familiar to regular viewers. Keynes is for government spending and Hayek for free market austerity. But what's behind those arguments? If you don't want to parse dense economic treatises, these rapping cliff notes are for you.

(BEGIN VIDEO CLIP)

UNIDENTIFIED SPEAKER: Here we are peace out, great recession thanks to me as you see we're not in a depression, recovery destiny if you follow my lesson, Lord Keynes here I come, line up for the procession. We brought out the shovels and we're still in a ditch, don't you think it's time for a switch from the hair of the dog, friend the party is over, the long run is here and time to get sober

(END VIDEO CLIP)

ZAKARIA: There's nine minutes more of this clever rap battle. Find it on our website, cnn.com/gps.

For this week's GPS Challenge question, we asked you for the official name of the French Military mission in Libya.

The correct answer was "D," "Operation Harmattan." French for a dry and dusty West African wind. Ellamy and Mobile, by the way, are the names of the British and Canadian operations respectively. Go to our website for more.

Thanks to all of you for being part of our program this week. I will see you next week. Stay tuned for RELIABLE SOURCES.