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FAREED ZAKARIA GPS

Tensions Flare Between U.S. and Iran; Trump Talks and Acts Tough on Trade with China; North Korea Back to Testing Missiles; Interview with Facebook Co-founder Chris Hughes. Aired 10-11a ET

Aired May 12, 2019 - 10:00   ET

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


[10:00:32] FAREED ZAKARIA, CNN HOST: This is GPS, the GLOBAL PUBLIC SQUARE. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria.

(BEGIN VIDEOTAPE)

ZAKARIA: Today on the show, Trump gets tough on China.

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We won't back down until China stops cheating our workers and stealing our jobs.

ZAKARIA: And Iran. Will all this toughness benefit America in the end? I have an all-star foreign policy panel to discuss.

Then to save Facebook and the world we have to strip the social media giant apart. That is the surprising opinion of one of Facebook's co- founders, Chris Hughes. I'll ask him all about it.

And the race to dominate the Arctic. Who is winning and who is lagging far behind? Find out later.

(END VIDEOTAPE)

ZAKARIA: But first, here's "My Take." It's graduation season in America and a good time to be leaving college and looking for a job. Despite this week's stock market tremors, the American economy is on solid footing. Now in its 120th month of expansion, there are few signs of bubbles about to burst. Unemployment is way down, inflation is contained, wages are finally moving up. And perhaps most significantly productivity is up. Some of these trends might prove ephemeral, but there is no denying that economic indicators are firmly positive.

These good numbers, however, are unlikely to change another set of numbers regarding the geography of growth. I was honored to be the commencement speaker at Ohio State University last weekend, and I predicted that graduates looking for a job would get one -- in a city. I cited research by Mark Muro of Brookings who's calculated that over the last decade, the 53 largest American metro areas have accounted for 71 percent of all population growth, two-thirds of all employment growth, and a staggering three quarters of all economic growth.

In fact, half of all job growth in the United States took place in just 20 cities. Meanwhile, small towns and rural America have lost residents and contributed barely anything to economic growth.

This two-track economy has of course produced a two-track culture with urbanites and rural Americans increasingly living in their own distinct worlds of news, entertainment and consumer goods. They live different lives and disagree deeply about politics, a trend that is reflective in Washington. As measured by voting records, Congress is now more polarized than previous historical highs that were in the aftermath of Reconstruction.

So why is this happening? Well, the economic trends are easier to explain having to do with the digital revolution and globalization, basically brain work is more valuable, brawn work less so. The cultural forces have to do with the rise of identity politics and a backlash against a more multi-cultural society and immigration. So we see the forces that are pulling America apart. The question we should be focused on is, what can we do to bring the country together? Surely this has become the question of our times.

One answer that I've been increasingly drawn to is national service. I was heartened to see two Democratic presidential candidates, Pete Buttigieg and John Delaney endorsed it. And there are many ways to design a national service program, a voluntarily system will probably work better with strong incentives like loan forgiveness and tuition support at its core. A 2013 study argued that current programs could feasibly be scaled up to one million volunteers without taking jobs from existing workers, yielding societal benefits worth more than four times the cost of the program.

And the programs that already operate in the space like AmeriCorps do good work and have stunningly high approval ratings from their alumni, 94 percent say they gained a better understanding of differing communities; 80 percent say the program helped their careers.

As Mickey Kaus noted in a prescient 1992 book, John F. Kennedy, the rich graduate of Choate and Harvard, famously served in World War II on a PT boat alongside men who held jobs like mechanic, factory worker, truck driver and fisherman. Imagine if in today's America the sons and daughters of hedge-fund managers, tech millionaires and bankers spent a year with the children of coal miners and farmers, working in public schools or national parks or the armed forces.

[10:05:08] National service will not solve all of America's problems. But it might just help bring us together as a nation. And that is the crucial first step forward.

For more go to CNN.com/fareed and read my "Washington Post" column this week. And let's get started.

There's lots of foreign policy news this week and I have the perfect panel to talk about it, all former top officials at the State Department.

William Burns had a 33-year diplomatic career that culminated in a sting as the deputy secretary of State under President Obama. During his time in that post he led the then secret negotiations with Iran. His new book is "The Back Channel: A Memoir of American Diplomacy and the Case for Its Renewal."

Richard Haass was the State Department's director of policy planning under George W. Bush. Today he is president of the Council on Foreign Relations. Paula Dobriansky also worked under Bush 43. She as undersecretary of State for global affairs. She's a senior fellow at the Future of Diplomacy Project at Harvard's Kennedy School.

Welcome all.

Bill, let me ask you how should we view the Trump administration's new sanctions on Iran, all of which seems really designed to squeeze the country to what end?

WILL BURNS, FORMER DEPUTY SECRETARY OF STATE UNDER PRESIDENT OBAMA: I mean, I think the Trump administration it seems to me is making a very risky bet and that is that you can employ a form of coercive diplomacy which is all about coercion and not at all about diplomacy at least so far. In other words, you can bring maximum pressure to bear on the Iranian regime untethered to realistic games or any active diplomatic channel.

You know, the president himself says that what he's interested in is a better deal but the facts suggest something else, that his administration is aiming at either the implosion or the capitulation of this regime, neither of which, I think, a realistic games that carries with it I think real dangers of escalation where the Trump administration and hardliners in the Iranian regime, of which there's no shortage, become kind of mutual enablers climbing up an escalatory ladder.

ZAKARIA: Paula, it's fair to say, though, that the -- that the sanctions have bitten. I mean, the Iranian economy is reeling.

PAULA DOBRIANSKY, FORMER UNDERSECRETARY OF STATE FOR GLOBAL AFFAIRS: Absolutely. In fact, I think that's what is the underlining success here is that they are showing results, not only the primary sanctions, the secondary sanctions but now the new sanctions that are focused on the metal industry, which is also an important source of revenue for Iran. But you take a look at it, what are the results you have, foreign companies that have left Iran, foreign revenues dropped, oil exports have dropped from 2.5 million barrels a day to under one million.

In terms of also just Iran's own ability to exercise and engage in it terrorist network and support its terrorist network it has also been severely constrained. But I think that these sanctions combined with diplomacy, which is what the administration is seeking to do, I think is what is going to push it in the right direction and achieve that maximum pressure in order to get results.

ZAKARIA: What are the results, Richard, that they are looking for, though?

RICHARD HAASS, PRESIDENT, COUNCIL ON FOREIGN RELATIONS: The only results they're looking for, if you listen to the secretary of State, are such fundamental policy changes that it's tantamount to regime change. So I think Bill is closer to the truth here than Paula. It more coercion than diplomacy. Now it'd be another thing if the administration came out and said, OK, we would be prepared to relieve you on sanctions, to some extent. We'd even be prepared to enter a modified Iran nuclear deal if, for example, or expand it to include missiles, and if, for example, we extended some of the so-called sunset provisions, these limits on Iran that are scheduled to expire.

And if you put together that kind of a diplomatic package, my sense is the Europeans would sign on to it and then you could have something that looks like diplomacy. But at the moment what you simply have is the administration trying to grind Iran down. They are achieving some economic results but this regime isn't going anywhere and this regime we shouldn't forget has any number of ways to push back.

They are already talking about getting out of the nuclear deal. They could get out of the nuclear non-proliferation treaty. They could go after American troops in Iraq. They could escalate in Syria. Iran has a lot of tools -- cyber, terrorism, military, diplomatic. We should not underestimate them.

ZAKARIA: Bill, the thing that I worry about is the use of this American unilateral part, certainly the use of the dollar. No other country has joined in this set of sanctions.

[10:10:04] They are all abiding by the Iran nuclear deal but it turns out it doesn't matter because the dollar is so powerful that -- if all international transactions have to in a sense go through the New York Fed and -- because the Americans have sanctions. But that's leading people in Europe and China and Russia to say, should we have an alternative to the dollar?

BURNS: No, I think there's a lot of collateral damage in this approach to Iran. I mean, part of it is just about a kind of retreat from a series of agreements, not just the Iran nuclear agreement, the Paris climate agreement, a series of others. Part of it is deepening the fisher between us and our closest European allies, in a sense to include in there Putin's work forum. But a third factor is just what you said, Fareed, and that is over time, and this won't happen overnight, eroding the utility of sanctions as an instrument of American diplomacy.

We haven't always used it wisely in the past. But it's sometimes been a very effective tool. We're going to wake up a few years from now and find that not only the Russians and Chinese but our European allies have taken steps to reduce their vulnerability of the American financial system.

ZAKARIA: Paula, last word on this?

DOBRIANSKY: Well, as we know, the deal before had its significant flaws. Ballistic missile deployment, the -- that area was not addressed and then no less, the kind of aggressive behavior that the Iranians have pursued through their proxies. So these kinds of things have to be accounted for but it seems to me the recent steps that are taken by Secretary Pompeo, in particular, he was in Europe, he was meeting with the Brits, he's going to Moscow. I think that there is active diplomacy taking place here and then no

less with the countries of the Middle East who are very gravely concerned about Iran's actions. I think the bottom line here is let's try to go forward with an agreement that really is going to correct some of the egregious actions undertaken by the Iranians. If they're not corrected, they will persist.

ZAKARIA: All right. Don't go away. When we come back, China. Is there any other option other than a conflict between these two super powers? We'll discuss it when we come back.

(COMMERCIAL BREAK)

[10:15:53] ZAKARIA: And we are back with William Burns, Richard Haass, and Paula Dobriansky.

Richard, China, a lot of people who don't support Donald Trump on many things think he's right to get tough with China. That the Chinese have been cheating on trade. Is this the right approach?

HAASS: I think it's fair to say that he's right to call China out on trade. China was gaming essentially its participation in the World Trade Organization over the last nearly two decades. What I think is questionable are some of our specific goals, some of them are overly ambitious, there's zero chance we're going to get China to remake it's economic model, for example to stop state subsidies of these large state-owned enterprises. That's not going to happen.

We can get them to probably do more purchases of American exports. We can get them to drop some of the tariff and non-tariff barriers on technology. The biggest problem will be implementation. They will agree not to steal American technology but the fact is at times they will. Either by what they learn through students and investments in this country or the fact that certain things will be carried over the internet and the Chinese will figure ways of getting it out.

So the choice for us, I think, is whether we're willing to take half a loaf here and there is a pattern here, Fareed. We're just talking about Iran. We could talk about North Korea and other things. This administration has to decide whether it is going to demand that other countries capitulate and give us 100 percent of what we want or whether we're prepared to make some compromises. So essentially whether they are willing to embrace diplomacy.

ZAKARIA: Paula, let me ask you as a conservative Republican, I thought that the Republican Party was in favor of free trade, that it believed tariffs are another form of taxes, that consumers have to pay mightily for these and if you look at the numbers, it's absolutely clear there are huge prices to pay for this. Is it worth it?

DOBRIANSKY: You were quite right in saying that in terms of tariffs, I think that traditionally Republicans have favored, of course, you know, not imposing a tariff. So here I think the issue is this was used and I think the administration was right to use this as a tool to get the negotiators back to the table to have a corrected course and I also think what's being used here is to try to get Chinese compliance. As we know from administration to administration, it's been very frustrating and there is strong bipartisan support as you suggested to correct this course once and for all.

So actually, by having tariffs in place, you can make the case that it can provide some strong compliance by the Chinese side and an incentive for them to comply. But finally, I'll just say that for the longer term, no, tariffs I would think that one would not -- would want to not have tariffs in place. That's -- they should be reduced if not eliminated but they are a tool that are being used for negotiation at this time.

ZAKARIA: Well, let me ask you, because I don't -- I want to make sure we get to this, North Korea. North Korea is now testing missiles again. Have the negotiations with North Korea fail? Were they doomed to fail now that the Russians and North Koreans seem to be talking?

BURNS: I think Kim Jong-un has now made clear that he has no intention in the foreseeable future of fully denuclearizing. So the practical question is, what can we do to reduce the dangers while preserving the aspirational goal of full denuclearization. And here, if you can set aside the rich irony of what I'm about to say, it's worth taking a look at our experience in the Iran nuclear negotiations.

You know, after the secret talks through all of 2013 with our international partners, we reached an interim agreement which froze the Iranian nuclear program, rolled it back in some significant respects, imposed some quite tight verification and monitoring procedures, all in return for very limited sanctions relief, preserving the bulk of that leverage for the later comprehensive talks. The two situations are obviously not perfectly analogous.

[10:20:02] The Iran didn't end, doesn't today with nuclear weapons, the North Koreans have dozens and are expanding their capacity to make more. But I think that logic of trying to make a tangible achievement through diplomacy backed up by real economic leverage is a practical goal. But that would mean setting aside first, you know, love letters and an almost exclusive focus on summitry, kind of diplomacy is an exercise in narcissism, and enabling your negotiators as well.

ZAKARIA: Richard, it is fair, isn't it, that this was a kind of exercise in narcissism? Trump decided this was his path, the Noble Peace Prize. This is why he first hyped up the threat. We were on the verge of war which we were not, and then hoped to say and I alone was able to bring us back from the brink. None of that has panned out.

HAASS: There is a pattern here. In every one of these cases we're talking about as well as in several others, the president articulates incredibly expansive goals to get rid of this government, to get rid of nuclear weapons all together, to change an economic model. The means are almost always the same. Rhetoric and sanctions. Some version of tariffs or sanctions. We put economic pressure.

Interestingly enough what's missing from some of these situations is any real desire to use military force. I'm not advocating it. But we're asking way too much of economic instruments and we're aiming for things that are simply too ambitious. What's missing is a serious use of diplomacy, essentially we'll give something in order to get something. You don't solve problems that way but you put a cap on them and you manage them, and in many cases, that's preferable to drift.

ZAKARIA: All right. Fascinating conversation. We could go on but we have to leave.

Thank you.

Next on GPS my next guest says Mark Zuckerberg's influence is beyond that of anyone else in the private sector or government, and this guest should know. Chris Hughes co-founded Facebook with Zuckerberg and Hughes says Facebook must be split up.

(COMMERCIAL BREAK)

[10:25:27] ZAKARIA: My next guest says that Facebook is too big. Mark Zuckerberg is too powerful, the company needs to be split up. You might expect such sentiments from, say, Elizabeth Warren who has been railing against the power of tech companies. You probably would not expect such ideas from the co-founder of Facebook, Chris Hughes. But that is what Hughes put forth in a "New York Times" opinion piece entitled, "It's Time to Break Up Facebook." And Chris Hughes, who was Zuckerberg's roommate at Harvard, joins me now.

CHRIS HUGHES, CO-FOUNDER, FACEBOOK: Thanks for having me.

ZAKARIA: That was an explosive piece. Let's get right to the chase. The biggest argument against your position is that Facebook provides services for free to people. And when people choose to use Facebook, WhatsApp, Instagram, they are voluntarily ceding that privacy. They know that Facebook is using it and they are accepting the idea that they get an incredible free service that they like, Facebook, Instagram, WhatsApp, in return for allowing Facebook to use their data. What's wrong with that? That's the free market.

HUGHES: Well, I don't think that's quite right for two reasons. First off, I think that users do pay quite a bit to use Facebook. They don't pay with dollars but they pay with their data and with their attention. You know, the average user is on the site, on Facebook, for an hour a day, on Instagram for 53 minutes, and we are providing immense amounts of data, not just on those apps but as we move around the Web that gets consolidated into our Facebook profile.

So there is a lot of data and attention going into it, and I think it's also not true because the space is so locked down. Facebook has become such a strong monopoly that there's no alternative. It's not like there is a choice that people could go elsewhere and pay to use another social network that doesn't collect as much data on them or doesn't provide them targeted advertising.

Facebook is all of social networking because it owns Facebook.com, Instagram, and WhatsApp. So without any kind of competition, there is no accountability. ZAKARIA: But again, what the defenders will say is, yes, but, you

know, you wouldn't have had WhatsApp, which is free messaging for large parts of the world, without -- you know, Facebook can afford to take, extend the reach of these programs because it has this dominant position. Again, this is the market at work, people are choosing it.

HUGHES: Well, if there are other things to choose from then that would be true. But I don't think there are in the social networking space. I think WhatsApp is a good example of a company that serves I think billions of people now and still has somewhat small staff and, you know, the founder of WhatsApp, too, has left the company and Brian has called to delete Facebook, as well.

The founders of Instagram have also left the company and have not spoken out yet. But I think that there is a sense across the board that Facebook has acquired these companies, is pulling them into the mother ship, and is stifling competition everywhere it can.

ZAKARIA: So in a way your approach to antitrust, the government theory or government that breaks up monopolies, is a little different from the way we've been operating for the last 30 or 40 years. Ever since Robert Bork famously wrote a book in the 1970s, people have said as long as the consumer benefits from a lower priced product, any degree of consolidated power is OK and you're saying no.

HUGHES: Well, the long history of antitrust is that it's a way of holding businesses that have gotten too big and too powerful accountable. So it's built on the same principle of checks and balances that our founders outlined in the Constitution for the different branches of government but for the private sector as well. So starting in the 1890s and really all the way up until the 1970s, antitrust was practiced in this country as a check was a check on the large powerful companies that had effectively frozen markets that were preventing competition from doing its thing.

Now that took a different direction in the 1980s because of the Bork revolution to a more narrow standard. The consumer welfare standard where we focus often really intensely on price gouging and I think that clouds judgment because what we want, if we take a step back is capitalism to work. We want markets to be dynamic, competitive and fair, and sometimes government has to step in when a single company gets too big and too powerful. And I should say America has to step in whether a company is too big and powerful.

And I should say, this is not just a Facebook problem.

[10:30:00]

You know, three quarters of American industries have become more concentrated over the past 20 years. It's rental cars, it's beer, it's pharmaceuticals, it's airlines, we can go through the list. Facebook is one that, you know, just about everybody is familiar with because they use it, but it's not only Facebook.

FAREED ZAKARIA, CNN FAREED ZAKARIA GPS: Your biggest concern you're saying in the piece is the degree to which Mark Zuckerberg has almost total control over what information we all read about access.

HUGHES: Yes. He -- you know, the way that Facebook is structured as a company, Mark is the CEO, there is a board, but because he owns 60 percent of the voting shares, he's not accountable, really, to that board. It works more like a board of advisors than anything else. He's not really accountable to ysers and thus far, he's not been accountable to government.

So one thing I don't spend time on in the piece but I think is really important is that we can approach corporate government differently. There is a lot of folks who call for thinking about making sure that boards have a responsibility not just to the bottom line but customers, to suppliers, to the environment, to kind of global responsibility, which, again, was what it was like in the 50s and 60s before the revolution over the past few years.

So I think that kind of thinking when applied to Facebook would immediately bring accountability to the company, or if the FTC broke up the company or if there were meaningful privacy regulation, that too would bring accountability. But the world that we're in right now is one where I do think Mark Zuckerberg has too much power, near unilateral power.

ZAKARIA: Now, this is not just a professional argument for you, this is personal, in fact, you begin the piece by pointing out that you last saw Zuckerberg, your college roommate in 2017, and what you describe as a meeting among old friends, kind of a reunion. Has he contacted you since the piece was out?

HUGHES: No, I haven't spoken to him.

ZAKARIA: Do you suspect this is the -- do you think this is the end of your friendship?

HUGHES: You know, in thinking about writing the piece, I had to come to terms with the likelihood that it is. I hold no ill will towards him personally as an individual, as I say in the piece. I think he's trying his hardest. He's human. You're human. We're all human. We all have our -- we all make mistakes. But I think that in his case, it is different because there is no accountability for those mistakes.

So in writing the piece, I came to a place where I said, you know, I will probably lose a friend or maybe more over it, but in this case, it's worth it. I think this argument is too important. Facebook is too big and it's something that 2.4 billion people use.

So now, that said, you know, there are some friendships where you can disagree about things, important things and maybe we have one of those. I don't know. Only time will tell.

ZAKARIA: Chris Hughes, pleasure to have you on.

HUGHES: Thanks for having me.

ZAKARIA: Next on GPS, the arctic gold rush. There is oil and gas out there, there are trade routes to open up, so there is a race for the spoils. It will tell you who the winners and losers are when we come back.

(COMMERCIAL BREAK)

[10:35:00]

ZAKARIA: Now, for the What the in the World segment. It was once primarily the domain of polar bears and intrepid researchers. But suddenly, the Arctic, that massive expansive frigid water and ice is attracting a lot more attention because the ice is vanishing.

(BEGIN VIDEO CLIP)

MIKE POMPEO, U.S. SECRETARY OF STATE: Steady reductions in sea ice are opening new passage ways and new opportunities for trade.

(END VIDEO CLIP)

ZAKARIA: That was Mike Pompeo at a meeting this week in Finland of the Arctic Counsel, a body of eight arctic nations. Pompeo is right, of course. He just refused to mention the culprit, climate change.

Several outlets also reported that the Trump administration blocked the group from mentioning climate change in its joint declaration, a charge the State Department denied. Nevertheless, whether the administration acknowledges it or not, global warming is raising temperatures around the Polar north twice as fast as the rest of the earth and that is decimating the icecap.

Arctic ice is melting by an average of nearly 13 percent a decade since 1979. From 1980 to 2018, the size of the icecap shrank by 42 percent. Mike Sfraga, the Head of the Wilson Center's Polar Institute, puts it this way. Climate change is literally opening up a new ocean. Let me be clear here, unlike Secretary Pompeo, global warming is disastrous for our planet.

But since the ice is already melting, it produces opportunities. The great thaw is creating maritime highways, including the Northern Sea root which extends north of Russia from Europe to Asia. According to the Financial Times, that route would be about 40 percent faster than going through the Suez Canal. And as the story notes, this has spurred a new competition as the world's powers race for domination.

The Danish shipping company, Maersk, conducted a maiden trial voyage last summer and Chinese ships have also plied the route. Last year, China published a whitepaper in which it stressed the importance of the, quote, Polar silk road, unquote.

Now, we're still a long way from the Northern Sea route replacing the Suez Canal. But if the sea route did become economically viable, the biggest beneficiary could be the country that controls its waters, and that is Russia.

Of all the Arctic countries, Russia is the one with the most at stake in the region. One-fifth of its land mass lies inside the Arctic Circle. According to the economist, 30 percent of its GDP comes from the Arctic, much of it from the wealth of natural gas there. And for years, Russia has pouring money into its northern waters.

Russia has the largest fleet of Arctic ice breakers in the world, more than 40, including the world's only fleet of nuclear ice breakers. These vessels are essential to navigating the ocean there. And President Putin has vowed to build even more in the coming years. As the FT notes, Russia has built or upgraded seven army bases in the Arctic since 2013.

And how is the United States fairing in this race? Sadly, it has long failed to act on this trend. It has just two ageing ice breakers. Though in February, Congress approved funding to build a new one after years of delay.

[10:40:03]

It will be ready in 2024 and represents a fraction of what the U.S. actually needs. Maybe Pompeo's comments signal that the government is finally looking seriously at the Arctic.

One does wonder whether the refusal to acknowledge global warming has also led to a delay in reacting to opportunities presented by that reality.

Next on GPS, the man that predicted the 2008 financial crisis and predicted what would cause it. When does Raghu Rajan think the next crisis hit?

(COMMERCIAL BREAK)

ZAKARIA: Raghu Rahan has held a series of top jobs in the field of economics. He's been the Governor of the Reserve Bank of India, India's Fed Chair, Chief Economist of the International Monetary Fund. But he's probably best known around the world for a prediction he made while at the IMF.

In 2005, he presented a paper that foretold the coming financial crisis and reasons for it. He said the complexities of the modern financial system created the risk of a catastrophic meltdown. Few on Wall Street or in Washington chose to believe it. Well, we should listen to him now and read the latest book, The Third Pillar, How Markets and the State Leave the Community Behind.

Raghuram Rajan, a pleasure to have you on.

RAGHURAM RAJAN, PROFESSOR OF FINANCE, UNIVERSITY OF CHICAGO: Thanks for having me.

ZAKARIA: So, first, you have to tell us as the man who very famously predicted the crisis of '07 and '08, the global financial crisis, when everyone else was celebrating the stability of the system.

[10:45:00]

Do you worry now it's been a long time, interest rates have been very low, people say there are -- you know, as result, things like stocks have gone up perhaps too much. Do you worry that there is another crisis coming?

RAJAN: Well, there will be a crisis coming. The question is when. Clearly, what's happened after the global financial crisis is we've built up an enormous amount of debt, not in the same places earlier, in different places.

ZAKARIA: This time, it's government. It used to be corporations, now, it's government.

RAJAN: It's now government. But, actually, it also move from households in the U.S. to corporations. Some other countries, for example, China, it's corporations and local government entities. But across the world, we build it up.

Now, when growth slows, there will be a price to pay. Now, is that price going to be as much as we paid the last time? Probably not. But, you know, the jury is out. It's not in the same place so we won't probably have a banking crisis. The banks are much better calculated (ph) today than before, but it could be elsewhere.

ZAKARIA: Your book, which I find fascinating, you talk about a hidden dimension, a forgotten dimension. You talk about the market and the state. And you say the market has been allowed to do a lot of work. The state has been allowed to do a lot of work in society. But one thing got left behind, what is it?

RAJAN: It is the community. That's the third pillar I talk about in my book. What you see over the last 30 years is we've had a tremendous technological revolution. Markets have grown across the world. And, interestingly, the state has gone along with it.

Most people think that governments and markets are opposed, no, they feed on each other. So we have bigger and bigger government to govern the bigger and bigger market and increasingly more and more powers have moved out of the community into the national level and from the national level to the international level.

Now, what that does is it disempowers the community. But that is also particularly problematic at this time because the forces of trade, of technological change are hitting different areas very differently. New York doing fantastically, San Francisco doing very well, because they are servicing a global market. However, steel city Illinois, not doing so well because its main manufacturing firms have gone out of business, there's very little employment. We need to figure out how to get employment there. That's a community issue.

ZAKARIA: So what I love about what you're describing is it really captures that reality that you look at a town in Ohio or Illinois and the jobs that steel mills went away because of the market. It was more efficient to make this stuff in South Korea or in China or because of technology. Government came in and there is -- you know, because of unemployment insurance or because of government workers, so there is -- you know, the only employment often in these communities tends to be hospitals or government employment.

But what went away with the little shops, the Mom and Pops that maybe Amazon got it rid of, in one hand, the steel factories, and so the community has withered.

RAJAN: It has withered, but also the change now. I mean, that's -- change has always been taking place. The big difference now is that people feared not only that they don't have opportunity in this new world but their children don't have opportunity. Because what technological change demands is higher and higher skills from people, which means you need a really good school.

Who provides the school? The community provides a strong school. You need that school in order to get to university. Otherwise, you'll spend many years in remedial education, building up university debt and you end up not actually passing out of -- graduating from the university because you simply are not prepared for it, how to start at the beginning.

ZAKARIA: How do you strengthen a community? It sounds so intuitive but it must be hard. There's a reason these communities have collapsed.

RAJAN: I talked about a community, Pilsen in Chicago, the big problem was crime. The murder rate was higher than the death rate of German soldiers in World War 2. In the 1980s, what they did was they decided we need to fix crime first before we get economic activity. Whenever a crime happened, the residence flood out on the streets, so they crowd out the crime. So, you know, the visibility, the transparency of having people around stopped the criminals.

And then, over time, they started building up more economic activity. Now, it's a place that many people want to move into because it's so flourishing. Their problem now is the rents are going up because a lot of new people are flooding in but it's a better problem to have than -- you know, I don't want to venture out into the streets because I might get shot.

ZAKARIA: A terrific book. A Pleasure to have you on.

RAJAN: Thank you very much.

ZAKARIA: And we will be back.

(COMMERCIAL BREAK)

[10:50:00]

ZAKARIA: Between the birth of the Royal Baby in the U.K., the abdication of Emperor Akihito in Japan and King Rama the 10th's coronation in Bangkok, monarchs have been in the headlines recently. It brings me to my question. Which sitting dynasty reigned the longest? Britain's House of Windsor, the Imperial House of Japan, Thailand's Chakri Dynasty or Bhutan's House of Wangchuck? Stay tuned and we'll tell you the correct answer.

My book of the week is World Without Mind, The Existential Threat of Big Tech by Franklin Foer. The topic is hot in the news today, but this sharply written polemic sounded the alarm a few years ago, sharply written, sharply argued. This book will make you think even when you disagree with it.

And now, for the last look. I began the show today with advice for students about to graduate. Let me close by remembering the students who never will, like Kendrick Castillo, a senior just three days from graduation who was killed this week when he confronted a shooter at a STEM school in Colorado. The school is seven miles from Columbine High School where, 20 years ago, two teen gunmen massacred 13 people. That shooting shook America to its core. But to this day, little has been done about this uniquely American problem.

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A CNN study published last year found that since 2009, the U.S. has experienced 57 times as many school shootings as six other major industrial nations combined. This academic year alone, there have been 23 shootings at least.

Of course, it's not just schools. From churches to night clubs, America has a mass shooting problem. And, sadly, those incidents are just a tiny fraction of U.S. gun deaths. Every day, on average, more than 100 people in America are killed or take their own lives with a gun.

What makes America different? Other countries have mental health problems, they have violent entertainment but only we have absurdly lax gun laws. I've said before that it is a government's first duty to keep it citizens, especially its children, safe. We know how to fulfill this basic mandate and it is well past the time to do just that.

The answer to my GPS challenge this week is B. The Imperial House of Japan has reigned over archipelago uninterrupted for over 1,400 years. The longest reigning individual monarch alive today is Queen Elizabeth the 2nd, who ascended to the throne 67 years ago. She took the record from Rama the 10th's father when he passed after reigning Thailand for seven decades. In fact, his was one of the longest reigns ever recorded in world history. All this makes FDR's 12 years in power look like the blink of an eye.

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

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