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Fareed Zakaria GPS

Getting America Back to Work; Inside Syria

Aired June 19, 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 have a wonderful show for you today. First up, jobs or the lack thereof. To me, this is the crucial issue in the American economy and western economies, and we have a powerhouse debate with Robert Reich and David Stockman.

Then, "What in the World?" How to redo your constitution using Twitter.

Next up, inside Syria. Few outsiders have been in, but the renowned expert Fawaz Gerges has, and he'll tell us what he saw exclusively.

Then Iran. It's been two years since the elections that sparked the Green Movement. There's something very strange going on in that country. We'll talk to Iranian journalist Maziar Bahari.

Now, here's my take.

I've been watching the Republicans on the campaign trail and what strikes me so far is that conservatives in - in America have gone through a strange transformation. It used to be that conservatism was a hard-headed set of ideas rooted in reality. Unlike the abstract theories of Marxism and socialism, it started not from an imagined society, but from the world as it actually exists. This is the way things work, conservatives would patiently explain to wooly-headed liberal professors. Whatever you may want it to look like, this is what it really looks like.

But consider the debates over the economy these days. The Republican prescription is cut taxes, slash government spending, then things will always bounce back.

Now, I would like to see lower tax rates in the context of simplification and reform, but what is the actual evidence that massive tax cuts are the single best path to revive the U.S. economy? Taxes as a percentage of GDP are at their lowest levels since 1950. The U.S. is among the lowest taxed of the big industrial economies.

So the case that America is grinding to a halt because of high taxations is not based on facts, either past or present, but is simply a theoretical assertion. The rich countries have (INAUDIBLE) that are in the best shape right now, with strong growth and low unemployment, are ones like Germany and Denmark and Canada, none characterized by low taxes.

Many Republican businessmen have told me that the Obama administration is the most hostile to business in 50 years. Really? More than that of Richard Nixon, for example, who presided over tax rates that reached 70 percent, regulations that spanned whole industries like airlines and telecommunication, and who actually instituted price and wage controls? In fact, right now, any discussion of any government involvement in the economy, even to build vital infrastructure, is impossible because it is a cardinal tenet of the new conservatism that such involvement is always and forever bad.

That's the theory. Meanwhile, in practice across the globe, the world's fastest growing economy, China, has managed to use government involvement to create growth and jobs for three decades. From Singapore to South Korea to Germany, evidence abounds that some strategic actions by governments can act as capitalists for free market growth.

But conservatives now resemble the old Marxists who refuse to look at actual experience. I know it works in practice, the old saw goes, but does it work in theory?

Republicans often praise businessmen. Well, one of the first steps any business now takes when confronting a problem is to ask how are other companies around the world handling this? Is there a best practice we can learn from? But in any area, from infrastructure to health care to education, that is heresy on the right.

It's a shame. I think we need smart, market-friendly conservative reforms that streamline government, cut costs in health care, empower individuals, but they need to be rooted in reality, drawn from best practices around the world and based on practical measures of what seems to work. What we have instead are policies that are simply recitations of some free market theory taken out of some book based on no actually existing national economy. It turns out conservatives have become the wooly-headed professors after all.

For more on this, you can read my column in this week's "Time" magazine or at Time.com.

Now, let's get started.

(BEGIN VIDEOTAPE)

ZAKARIA: Joining me now to talk about the nation's jobs problem and much more, David Stockman, was Ronald Reagan's budget director; and Robert Reich was Secretary of Labor under President Clinton. They both have many more glittering credentials, but that will do for now.

Welcome back to you both.

Bob, let me start with you. The - the administration is now thinking about further tax cuts, payroll tax cuts and things like that. Wouldn't it be sensible, if the great problem is jobs and the large part of that problem is in the construction industry, wouldn't it be sensible for the government to simply try to employ these people directly? I don't mean the government employing them, but do roads, bridges and highways, which puts private contractors back into the hiring business and effectively create jobs directly rather than hoping that people who get tax cuts will start spending again?

ROBERT REICH, FORMER U.S. SECRETARY OF LABOR: I think that's right, Fareed. I - I think that it is useful, because I think it's possible that the Republicans would agree to exempting, let's say, the first $20,000 of income from the payroll tax for a year. That would put money directly in people's pockets and they would arguably spend at least 50 or maybe 60 percent of that. That would be a direct stimulus.

But, as you point out, I think it is also very useful to extend large public projects or even a WPA, you know, as we had during the depression, works projects administration, to put the long-term unemployed directly back to work. Or a civilian conservation corps to put millions of young people who are jobless directly to work.

We have public parks, for example, that are closed. We have all kinds of needs with regard to teachers' aides, and in hospitals, many things that are - jobs that are not filled because we - nobody can afford them. The public cannot afford them.

Well, better to have people do these jobs directly than to have people sitting home, collecting unemployment insurance.

ZAKARIA: David Stockman, do you think this may - or, you know, can we afford this? Obviously, there is the cost involved. A lot of this would be long-term borrowing. But it would put people back to work and they would start paying taxes. Would that help?

DAVID STOCKMAN, FORMER DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: No. I really disagree with that. That's just more of the same old Keynesian medicine that's failed. We may have public parks that are closed, but we also have a national balance sheet that is totally busted. The federal government and state and local governments are out of money, and so the Keynesian game is over, and there's really literally nothing that Washington can do about the job problem.

Washington has to get back to its business, which is managing the budget and beginning the pay our bills, and unfortunately that is probably going to compound the job problem rather than resolve it. But we have no choice, unless we want to end up where Europe is today and where Greece is.

We simply are rolling the dice if we think we can keep borrowing now that the Fed is out of the market, QE2 is over, and the other central banks are no longer buying the bond. It would be a grave mistake to go back to the failed stimulus policies of the last two or three years or even decade.

ZAKARIA: But David, you - you would accept that the consequence of that kind of tightening, that austerity, would be even more people would be unemployed and their forecast revenues would fall. I mean, in other words, there's a - there's - the scenario you're painting is pretty grim.

STOCKMAN: Yes. That's the dilemma that we're in. We're in a deflationary cycle. We can't afford to borrow more. We can't afford to create artificial demand and artificial employment. And so, therefore, we're likely to have unemployment in the teens for the balance of the teens, that is, for a decade or more.

That's the mess that we have created after 30 years of, you know, tax giveaways and lack of control on entitlements and running this massive $800 billion war budget that we don't need and can't afford. It sounds like very harsh medicine, but it happens to be reality. We cannot borrow our way out of this one, in my judgment. We're now facing the day of reckoning, literally.

REICH: How can David Stockman or any Republicans or even, for that matter, any deficit hawks look at what is happening now in the country, with 9.1 percent unemployment, with 13.5 million people unemployed and millions more, too discouraged even to look for work and say that's not a problem? We just have to eat our medicine. We just can't do anything. Washington can't do anything?

Well, that is Herbert Hoover economics, and that should be rejected outright.

ZAKARIA: David?

STOCKMAN: Well, I don't know if I sound like Herbert Hoover, but I think Professor Reich sounds exactly like Art Laffer. In other words, we don't have to take fiscal medicine, austerity is never needed. What we need to do is imagine we can grow our way out of this problem.

I think it is too late for that. We can't grow our way out of this problem. The economy has failed. It's busted. We haven't created one new job in - net in the last 12 years. So, as a result of that, we have to worry about where the world bond market, the currency market and monetary conditions are going to be.

Two years ago, Greece was borrowing two-year money at 3 percent. This morning, they're borrowing at 30 percent. There reaches a point when the bond market is no longer willing to tolerate the kind of fiscal irresponsibility we have, and I think we're very close to that, and it is very foolish to run a risk of trying to find out how much longer we can go on with this before the reaction sets in.

So, yes, I agree it would be nice if we could afford to spend money to put people to work or put money in people's pockets, although I don't think that's a good public policy. But we can't afford it. Literally, we are broke. Literally, we are at the edge of a financial calamity and we have to get beyond the idea that there is always enough balance sheet left to borrow some more money until we get to economic conditions that are more to our liking. The conditions that we have are the ones that we have to cope with, and that, unfortunately, is the fact of life today.

ZAKARIA: Bob -

REICH: Fareed, if I - if I may. Look, when consumers are scared, that they have a huge debt load, they're worried about their wages, which are falling in real terms, they're worried about their jobs. They're in no position to buy. They are pulling away because their housing prices, in addition, are going down, their major nest - nest egg.

When consumers are pulling away from spending, when businesses are not going to make new investments, they're sitting on $1.9 trillion. It's not a problem of businesses not having access to capital or the money. They're not going to build new facilities or create new jobs without customers.

So you've got the private sector in a kind of paralysis right now. This is when the public sector has got to fill in the gap.

We learned this painfully in the 1930s. We learned it in the 1940s, the Second World War. The debt to GDP ratio got up to 120 percent.

Was that a - was that a terrible thing? Well, actually, it put America back to work and led the way toward an extraordinary spectacular 30 years of prosperity after the Second World War.

ZAKARIA: But - but, Bob -

REICH: So I don't know - I mean, David Stockman is - is not looking at history. We know what we need to do.

ZAKARIA: Gentlemen, we're going to have to take a break. We will be right back with Robert Reich and David Stockman.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ZAKARIA: And we are back with Robert Reich on the left, David Stockman on the right, talking about jobs, the budget and America's economic future.

David Stockman, what would get corporations to start spending their money? As Bob says, $1.9 trillion of cash on corporate balance sheets. What would get them to invest and start hiring workers?

STOCKMAN: Well, the - the fact is that's a bit of an illusion. There's $1.9 trillion of cash, but there's also $11 trillion of debt. In other words, the idea that the business sector is rolling in cash, it isn't suffering from a debt problem is wrong. The household sector still has $13 trillion of debt, almost at the peak level that we achieved in 2007. So people are not spending because they're scared. They're not spending because they're broke. And we can't then deal with the business reality that I just described or with the massive leverage condition that the household sector is still struggling with by having the government borrow money and, therefore, compound the amount of taxes that we're eventually going to need for - to pay for all this.

ZAKARIA: Bob, let me ask you about something else that you have been talking about. You are concerned about the deficit, but you have a different way of dealing with it. You suggest raising marginal tax rates to 70 percent.

You know, Alan Reynolds has written a piece in the "Wall Street Journal" pointing out that you can raise tax rates all you want, the federal government has never been able to collect more than about nine percent of - of GDP. What do you say to people who say if you raise the rates that high, it will discourage investment and it would just lead to an orgy of tax lawyers and accountants finding ways to ferret the money around.

REICH: Well, first of all, to set the record straight for Alan Reynolds, my proposal was raising the marginal tax rates to 70 percent on incomes over $15 million. I didn't say I'm - I'm for of a - you know, just a $250,000 or $500,000.

But, more importantly, before 1980, in fact, during the Great Prosperity from the Second World War, for 30 years really, until 1980, we had a marginal tax rate on the very wealthy that never dropped below 70 percent. Now, it's true, if you include all of the deductions and credits, the effective rate was something under 70 percent. But, nevertheless, it was over 70 percent officially, even under Dwight David Eisenhower, Republican General President Eisenhower in the 1950s. It was 91 percent, the marginal tax rate on the very rich.

What happened? We didn't slow down. In fact, the economy grew dramatically. It allowed us - you see, with that kind of marginal tax rate on the very top, it meant the disposable incomes of people in the middle and at the bottom, given the kinds of public investments that those tax rates at the top allowed; given that we could, as a nation, do so much more than we are doing now to open the gates of opportunity; given that we could actually build the economy from the bottom up, it meant that we grew at an average rate of over 33 percent a year during those very prosperous years.

ZAKARIA: David, what -

REICH: Since then - since then, if you permit me to - just to finish quickly, we've seen marginal tax rates drop dramatically. We've seen actually the economy slow, and we've seen the rich get richer and richer, to the point that they're now claiming over 20 percent of total income.

This doesn't let the middle class purchase. It -it robs the middle class of the purchasing power we need to keep the economy going. ZAKARIA: David?

STOCKMAN: Well, I agree that taxes are at their lowest level, federal taxes, at any time since 1948. And we can't possibly cut enough spending, even if there was a great deal of heroism and courage in Washington to close the gap. So taxes will go up, and I agree that the rich can afford to pay a lot more, and should.

But I would start with the capital gains tax. It's 15 percent in an economy that has very low inflation. That isn't justified. When the capital gains tax was lowered 20 years ago, we had double-digit inflation and there was a case for it. Today it's just a windfall benefit to speculators and to traders and to high-income investors and it should be abolished and we ought to get to tax rates that are the same regardless of how the income is generated.

But I don't think we can say that simply taxing the rich will solve the problem. We're going to have to do all three - raise revenue, dramatically demobilize and reduce our defense establishment and reform the middle class entitlements, Medicare and social security. If we do those things, the economy can gradually heal over a long period of time, but there's no money left in the kitty, there's no room left on the national balance sheet for the kind of tinkering and stimulus that Keynesians of the right, who call it tax cutting, and Keynesians of the left, who call it pump priming, have indulged in over the last couple decades.

We're now out of that business. We're now in the business, I believe, of paying our bills and facing the music of the real mess that we have gotten this economy into.

ZAKARIA: And we are out of time. Gentlemen, a passionate, serious debate, and I would very much hope we'll be able to bring the two of you back together.

Thank you. Thank you Robert Reich. Thank you David Stockman.

REICH: Thanks, Fareed.

STOCKMAN: Thank you.

ZAKARIA: And we will be right back.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

ZAKARIA: And now for our "What in the World?" segment.

We all know how Americans revere the constitution, so I was struck by the news that tiny little Iceland is actually junking its own constitution and starting anew and using an unusual, some would say, innovative mechanism. The nation decided it needed a new constitution and it's soliciting ideas from all of Iceland's 320,000 citizens with the help of Facebook, Twitter and YouTube and this social media method has worked. Ideas have been flowing in. Many have asked for guaranteed good health care. Others want campaign finance systems that make corporate donations illegal. And some just want the country to make shark finning illegal.

There is a Constitutional Council. It incorporates some of these ideas, rejects others, but everything is done in plain sight on the web. As one member of the Constitutional Council said, the document is basically being drafted on the Internet.

Now, why do they need a new constitution anyway? Well, after Iceland was crippled in recent years by the economic crisis, they all wanted a fresh start. And anyway they felt the document was old and outdated, drafted all the way back in 1944.

Now, you might be tempted to say that Iceland doesn't have any reasons to be proud of its political traditions in the manner that the United States does. Well, think again. Iceland is home to the world's oldest parliament still in existence, the Althing, set up in 930 A.D. The rocky ledge on which they gathered represents the beginnings of representative government in the world. So Iceland has reasons to cherish its history, and yet it was willing to revise it.

By contrast, any talk of revising or revisiting the American constitution is, of course, seen as heresy. The United States constitution was, as you know, drafted in a cramped room in Philadelphia in 1787, with shades drawn over the windows. It was signed by 39 people.

America at the time consisted of 13 states. Congress had 26 senators and 65 representatives. The entire population was about one percent of today's number, about four million people.

America was an agricultural society, with no industry, not even cotton gins. The flush toilet had just been invented.

These were the circumstances under which this document was written. And let me be very clear here, the U.S. constitution is an extraordinary work, one of the greatest expressions of liberty and law in human history. One amazing testament to it is the mere fact that it has survived as the law of the land for 222 years.

But our constitution has been revised 27 times, some of these revisions being enormous and important, such as the abolition of slavery. Then there are areas that have evolved. For example, the power of the judiciary, especially the Supreme Court, is barely mentioned in the document. This grew as a fact over history.

But there are surely some issues that still need to be debated and fixed. The electoral college, for example, is highly undemocratic, allowing for the possibility that someone could get elected as president even if he or she had a smaller share of the total national vote than his opponent.

The structure of the Senate is even more undemocratic, with Wisconsin's six million inhabitants getting the same representation in the Senate as California's 36 million people. That's not exactly one man, one vote.

And we are surely the only modern nation that could be paralyzed as we were in 2000 over an election dispute because we lack a simple national electoral system.

So we could use the ideas of social media that were actually invented in this country to suggest a set of amendments to modernize the constitution for the 21st Century. Such a plan is not unheard of in American history. After all, the delegates in Philadelphia in 1787 initially meant not to create the constitution as we now know it, but instead to revise the existing document, the Articles of Confederation. But the delegates saw a disconnect between the document that currently governed them and the needs of the nation, so their solution was to start anew. I'm just suggesting we talk about a few revisions.

Anyway, what do you think? Should we do this? And if we were to revise the U.S. Constitution, what would be the three amendments you would put in?

Write to us and let us know. We'll post the best ones on the website.

And we'll be back.

(BEGIN VIDEO CLIP)

FAWAZ GERGES, PROFESSOR, LONDON SCHOOL OF ECONOMICS: What's really amazing, Fareed, if you drive and you don't see any military presence, even though I understand you have tens of thousands of security personnel, civilians, basically all over the place...

(END VIDEO CLIP)

(COMMERCIAL BREAK)

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: I'm Candy Crowley and here are today's top stories.

The Libyan government says a NATO air strike hit a residential neighborhood in Tripoli today killing nine civilians. NATO says it's investigating the allegations. The incident occurred a day after NATO acknowledged that its aircraft had mistakenly struck Libyan opposition vehicles in the eastern oil town of El Brega.

Greek Prime Minister Papandreou pushed his parliament today for a vote of confidence in his new cabinet. The prime minister is trying to push through an economic reform package of tax hikes and spending cuts to avoid what he calls a catastrophic debt default.

And Texas Congressman Ron Paul has won the latest GOP presidential straw poll in New Orleans, while an absent John Huntsman placed a surprising second. The poll was taken at a Republican Leadership Conference yesterday where Texas Governor Rick Perry delivered a well received speech which fueled speculations he's gearing for a presidential run. Those are your top stories. Now back to FAREED ZAKARIA GPS.

(BEGIN VIDEOTAPE)

ZAKARIA: The Arab Spring has now turned into summer and the avalanche of images and analysis out of Egypt has turned into a slow trickle out of Syria. That's because Syria, vitally important, is all but closed off to outsiders.

My next guest has managed to get deep inside that nation in revolt. Fawaz Gerges is, of course, the Director of the Middle East Center at the London School of Economics. He joins me now from Beirut.

Fawaz, what is the - what was your first reaction being in Syria, what is your sense of the mood?

GERGES: Well, Fareed, the situation is very fluid. It's a very, very confusing situation.

I have spoken to schools of Syrians in Syria and in Lebanon over the last one week or so, and the country seems to be deeply divided. It's divided along class line. There is decadent wealth and abject poverty. It's divided along sectarian lines.

But the big point here to highlight, Fareed, is that the protests in Syria are not as thick and large as some of the protests that we have seen in Tunisia, Egypt and Yemen. The reality is, is that the Assad regime retains a solid social base of support. If you ask me to put a number on this social base of support, I would say the regime has about 40 percent of supporters. And in the last two weeks or so, the regime has mobilized its followers and basically it's flagging national sentiments about the flag and the army as the guardian of the nation.

ZAKARIA: Fawaz, it sounds like what you're describing is a regime that will be able to crush these protests, if it has a base of support that is not insignificant, whether it's 40 percent or even if 30 percent, it has the army. It has the will to use very lethal force. Do you see it being able to ride out this protest movement?

GERGES: I would say the odds are against the protesters. The regime not only has a solid social base of support, but also has the support of the security forces and the army. Despite some reports of minor mutinies, individual officers, there are no credible reports about larger scale mutiny in the army and the security forces.

And also, as you said, the regime itself has the will and in order to really survive and basically fight it out. The fear is that given the polarization in Syria, given the socioeconomic and the sectarian and ideological divide, I would argue that Syria faces very difficult days ahead. We're talking about low-intensity conflict as opposed to regime change along the lines of Tunisia and Egypt. The regime will be able to weather this powerful storm.

My take on it is that it will emerge weaker. And it also will be much more dependent on Iran. One of the major I think results of what has happened in the last few weeks in Syria is that Syria has lost Turkey. The relationship between Turkey and Syria has been and was strategic. President Assad nourish a very close relationship with the Turkish Prime Minister Erdogan. Erdogan, as you all know, has been very critical of Syria. He in fact reprimanded the Syrian regime for the divide, the gap between its rhetoric (ph) and actions publicly.

And this particular loss of Turkey, which has really been the foundation of Assad's geo strategic relationship will make Syria much more dependent on Iran in the next few months and next few years ahead.

ZAKARIA: And what does this - this mean for the United States? The United States government has been careful on Syria while it clearly doesn't like the Assad regime and clearly seems to sympathize with the protest movements, it has not publicly called for the resignation of Assad for a transition to democracy, partly I gather because it feels as though it might not succeed and it will be inciting people to - to revolt and then be crushed.

Is the American strategy in your opinion the right one?

GERGES: I think so. I think the United States, the Obama administration finds itself between a rock and a harder place. I think the administration would like the Syrian regime to open up the closed, authoritarian political space and basically put an end to the one-party rule in Syria.

But the reality is the United States knows very well that Syria is a very complex society, that Syria is a very divided society, that the Assad regime is deeply entrenched and the security forces support the Assad regime. And I think the United States, as I understand, is also very concerned about the sectarian divide in Syria and the potential repercussions into Lebanon in particular.

I can tell you, I live - my family lives, Fareed, about 15 minutes from the Syrian borders. And Lebanon now, if you really want to understand what's happening in Syria, Lebanon is as deeply divided about the Syrian situation. Many Lebanese are deeply concerned that basically Syria plunging into conflict will likely plunge Lebanon into all-out sectarian conflict as well.

ZAKARIA: Fawaz, did you ever feel in danger when you were there?

GERGES: I did not really. I traveled as a local as you know, you know, by the crossing in Northern Lebanon as a local, and, no, I did not because I - I did not travel as a journalist. I have crossed into Syria many times. I don't need a visa.

And what's really amazing, Fareed, if you drive and you don't see any military presence even though I understand you have tens of thousands of security personnel, civilians basically all over the place. The reality is, Fareed, there is trouble in Syria. Syria is divided.

There are protests in Syria, but the protests are not as thick and large as the protests that we have seen in many parts of the Middle East, particularly in Yemen, Tunisia and Egypt. They're isolated. You're talking about thousands of protesters as opposed to tens of thousands or hundreds of thousands. And we can explain why. You have multiple factors, many factors that explain the lack of the huge crowds that we have not seen in Syria today.

ZAKARIA: A fascinating account, Fawaz, of a Syria that perhaps will endure, the regime will endure, but weaken with lower-intensity conflict and, of course, the loss of a very crucial ally in Turkey. Thank you for all of that.

We will be right back.

(END VIDEOTAPE)

(BEGIN VIDEO CLIP)

ZAKARIA: Let me ask this very simply. Who is the good guy in this fight, (INAUDIBLE), the Mullahs or Ahmadinejad?

MAZIAR BAHARI, AUTHOR, "THEN THEY CAME FOR ME": Well, the simple answer is that none of them are the good guys.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ZAKARIA: It's been almost exactly two years since the contested elections in Iran that kept Mahmoud Ahmadenijad in power and led to the green movement.

My next guest was in Tehran to cover those elections for "Newsweek" until the revolutionary guard came knocking at his door one day. Maziar Bahari spent the next 118 days in prison in Evin Prison, much of it in solitary confinement. He's written a new book about Iran and his experiences there, "Then They Came for Me." And he joined me to talk about Iran two years later.

ZAKARIA: Welcome back, Maziar.

BAHARI: Nice to be here.

ZAKARIA: We've all been watching this Arab Spring. It's not happening in Iran. Is that because the regime is different or they are just able to completely brutally repress it?

BAHARI: I think there are two main differences between the situation in Iran and the rest of the Middle East. One is that Iranians experience the sudden change of revolution 32 years ago. So they approach any sudden change with caution. They do not want another revolution. And what happened in 2009 after the election was not a revolution either. It was a movement for change, for reform. The other difference between Iran and Arab countries is that Ayatollah Khomeini, Iranian's supreme leader, Iranian dictator, he's been grooming his image as a clean leader in a sea of corruption. He's very different from Mubarak and Ben Ali, for example. He has forbidden his sons to get involved in financial activities, and his followers, they think that this leader is almost a saint. I mean, if he were a Catholic, I think they would have beatified him by now.

So Khomeini has a court (ph) around him who are willing to die for him and they are willing to kill for him. And in other countries, I don't think that was so.

ZAKARIA: It's a fascinating power struggle taking place in Iran where Ahmadinejad seems to be sensing that this kind of overly Islamic republic or ideology isn't working, so he's been distancing himself from the theocrats. We tend to think Ahmadinejad is the bad guy.

So let me ask this very simply. Like who is the good guy of this fight, the Mullahs or Ahmadinejad?

BAHARI: Well, the simple answer is that none of them are the good guys. And according to people who believe Khomeini, they think that he as the supreme leader is the supreme jurisprudence. He is the person who can interpret the teachings of the Koran and run the country at the same time.

What - but what Ahmadinejad people are saying right now is that we do not need that clerical establishment. We can interpret the teachings of the Koran ourselves. So we can be in touch with the 12th Imam, the Shia Messiah ourselves.

So without attacking Khomeini directly, he is undermining the whole system of belief that puts Khomeini in power.

ZAKARIA: Is Ahmadinejad popular? Because he as mayor of Tehran popular. He was popular for parts of his presidency as this simple, clean guy who was not very - not corrupt as far as people knew. That's why he dresses in this very simple way. Does that image still hold?

BAHARI: No. I don't think so. Ahmadinejad had a lot of support because Khomeini supported him. But now that Khomeini explicitly is not supporting him anymore, Ahmadinejad has lost his base. And that's why he's trying to steer people's nationalist sentiments. And that's why he's trying to have a new support base for himself.

Ahmadinejad has certain people around him who are likely (INAUDIBLE) and they have (INAUDIBLE) beliefs. But at the same time, in their way that they're organized and in the way that they thuggishly behave, they remind one of Cosa Nostra.

ZAKARIA: In this bewildering situation, one of the things you've often said on our show is, you used to say, you know, don't forget this regime has some support. There are (INAUDIBLE) poor people, rural people, some people who are very religiously minded. Do you feel like it's - it's losing support? Is there any indication of that?

BAHARI: I think the regime is losing support every day. Last year, it had more support than now. Because the situation has become really untenable, all the ingredients that led to the demise of Mubarak and Ben Ali in Egypt and Tunisia, they exist in Iran. Higher unemployment rates, inflation, uneducated population who feel they are disenfranchised and their votes don't count.

People used to say that when the monster goes out, the angel arrives, meaning if the Shah goes out, Khomeini arrives. And then, they saw that kind of a monster went out but something even worse replaced him. And now they're not saying that anymore.

ZAKARIA: In this mix, what should the administration do? What should the United States do? Because the Obama administration began its term trying to see if there was some way to establish a dialogue with Iran. And part of what happened was the regime is not really that interested in having a dialogue because they need the anti- Americanism.

And then, of course, the green revolution happened. And I think right now there is no coherent policy toward Iran. Should there be one? How should they handle it?

BAHARI: If, as you say, the situation is really complicated. I think that they should think have - they should think more about the sanctions. They should lift the bad sanctions that hurt ordinary Iranians. They should allow more Iranians travel. I think there was a good development that they're giving visas to students, that the students can have multiple entry visas.

I think what the United States should do is to provide means to communicate for Iranians. The Iranian people know what to do. Iranian people know show to determine their own destinies. But what they need is to - how to communicate with each other. And that means having better communication infrastructure, for example, satellite Internet that cannot be censored. They need more filter-busters. Companies like Google, Yahoo! YouTube should be able to deal with the Iranian people freely without worrying about being reprimanded by the U.S. administration. They have to try to help Iranian people in general as much as possible.

ZAKARIA: In your book you talked about your mother who is how old?

BAHARI: Eighty-four years old.

ZAKARIA: Where is she now?

BAHARI: She's in Tehran.

ZAKARIA: The one part about this new life is you can't - you can't visit her.

BAHARI: I can't visit her. She comes to London every now and then. But it's very sad. ZAKARIA: So they let her out?

BAHARI: They let her out, yes. And -

ZAKARIA: And your father was jailed by the Shah's regime.

BAHARI: My father was jailed by the Shah's regime. My sister was jailed by Khomeini's regime. So - and, again, we - our stories are not unique. We are one of millions of Iranian families, thousands of families who have been jailed by both regimes.

And my mother is a proud Iranian. She said that I was born in this country. I want to live in this country and I want to die in this country. And many people in Iran, they say that.

And that's why I'm very hopeful about the future of Iran, because even though the government is trying to brutalize people, people are not losing hope. People are still fighting for a better future. This fight is with a bit of trepidation, but it is still a fight that will have very good results.

ZAKARIA: Maziar Bahari, pleasure to have you on.

BAHARI: Very nice to be here. Thank you.

ZAKARIA: And we will be back.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ZAKARIA: Our question this week from the "GPS Challenge" is a history question and it might seem like a no-brainer to some of you. But I have a reason for asking it, so bear with me.

During the Korean War, the U.S. and South Korea fought against North Korea and what other nation? Is it, A, the Soviet Union; B, Japan; C, China; or, D, Vietnam?

Stay tuned and we'll tell you the correct answer and tell you why we asked the question. Make sure you go to CNN.com/GPS for 10 more questions. And while you're there, make sure you check out our website, the Global Public Square, where you'll find smart interviews, blogs, takes by some of our favorite experts. And don't forget, you can also follow me on Twitter and Facebook.

This week's "Book of the Week" is by today's guest, Robert Reich. "Aftershock" looks at what Reich says are the underlying causes of the economic crisis and he has solutions for fixing it. Now, if you like what he had to say earlier or if you disagreed with him completely, I still think you'll find the book stimulating in any event. He writes with clarity and passion about big economic problems.

And now for "The Last Look." Thames Town is a typically idyllic British town. You can't miss the red phone booths or telephone boxes as the Brits call them. You can see the odd London taxi or black cab, and then, of course, there is the local Tudor style pub with real ale, lovely for a summer holiday, right?

So how do you get there? Well, don't go to England. Thames Town is not by the River Thames. It is by the Yangtze in China. Thames Town is one of a group of new townships outside Shanghai that are all built on the theme of another country.

Now, we stumbled on the story when we learned that while the Brits might be flattered, the Austrians got quite upset when they heard about plans to copy one of their famous towns. China is reportedly building a replica of the Austrian town of Hallstatt, complete with winding roads and a lake.

What I would love to find in China is a beautiful replica of a traditional Chinese village, but these have become almost impossible to find nowadays.

The correct answer to our "GPS Challenge" question is C. China fought alongside North Korea and against the United States and South Korea in the Korean War.

Did you get it right? If you did, you can be proud, you're smarter than most U.S. high school seniors. Less than a quarter of them got that question right. That's why we need to fix our education system, among other reasons.

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