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Fareed Zakaria GPS

Crisis in Gaza

Aired January 11, 2009 - 13:00   ET


FAREED ZAKARIA, HOST, GLOBAL PUBLIC SQUARE: 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 great show for you today, but first a few thoughts.

I've been listening to reporters and bloggers wondering why Barack Obama is staying silent about the violence in Gaza, urging him to do something. I think he's doing exactly the right thing.

Imagine if he did get involved. The president would have one policy, then the president-elect would say something, and people in the region and beyond would be trying to figure out if there were differences between the two, whether they should exploit them, whether they should wait Bush out.

Besides -- and more importantly -- Obama is probably focused like a laser beam on the economy.

Congress seems to have moved on from the bank rescue and is now thinking about bailing out other industries like Detroit.

But folks, the original bank bailouts haven't worked yet. Credit conditions remain very tight. Housing prices continue to fall. Banks are still nervous about their toxic assets and are not lending.

Obama and his team are properly spending much of their time on the next steps that they must take to put the economy on a firmer footing. Right now, fixing the American economy is looking about as complex a challenge as bringing peace to the Middle East.

Now, on the show this week, some of the keenest observers of the Israeli-Palestinian conflict. Also, one of the world's foremost experts on al Qaeda. And then, some insights on the economy in an exclusive interview with the chairman and CEO of IBM, Sam Palmisano.

You'll want to stay with us.


ZAKARIA: So, I've gathered together a panel to discuss whether the situation is just a repeat of the same old Israeli-Palestinian story we've covered for years, or if there's anything different here, and where it's all going to end up.

Martin Indyk is the former U.S. ambassador to Israel, and currently the director of the Saban Center for Middle East Policy at Brookings. He has a terrific new book out, "Innocent Abroad."

Stephen Walt is a professor at Harvard, and the co-author of the controversial book, "The Israel Lobby."

Bret Stephens of the "Wall Street Journal" was the editor-in- chief of the "Jerusalem Post."

And Hanan Ashrawi, a member of the Palestinian Legislative Council, joins us from the West Bank.

Hanan Ashrawi, I remember listening to you talk to Peter Jennings when I was in college. And that was 25 years ago. Has anything changed? Is the situation today materially different than it was at that time?

HANAN ASHRAWI, PALESTINIAN POLITICAL ACTIVIST, WEST BANK: Well, the situation certainly is different materially and politically, and in more ways than one, in human terms as well.

I would say my engagement with Palestinian politics and the peace process began in 1967, the year in which the West Bank, including Jerusalem and Gaza, came under Israeli occupation.

And ever since then, the Palestinian question in many ways has become a source of extremism, generating greater anger and probably greater violence, because it remains an open wound in the body politic of the Arab world.

ZAKARIA: There are a lot of people who say, in Israel and the United States, that part of the strategy here that Israel is using is to hit Hamas, so that it can build up the moderates, build up the Fatah in the Palestinian -- in the West Bank, which is where you are.

Do you think that the Israeli incursion in Gaza has strengthened moderates in the West Bank?

ASHRAWI: It has exactly the opposite effect. And I think this is the problem with Israel and with U.S. policy. They have such a simplistic view and a surface view of Palestinian realities and culture, that they always do exactly the opposite of what they proclaim or what they publicly claim that they want to do.

Right now, the attack on Hamas is strengthening Hamas. It is strengthening people who are not just Islamists, but even beyond Hamas, Islamist extremists. It is undermining the voices of moderation and peace, and even regimes in the region, because public opinion is inflamed.

And it is showing in many ways the futility of negotiations and showing that people who have adopted this path have become helpless, and have become complicit in many ways with this type of violence. And Israel is proceeding to destroy the foundations of peace while it is using violence in order to punish a captive civilian population.

So, they see moderation as being helplessness and collusion. And they see the people who are now adopting the armed struggle approach and armed resistance as being the ones who are making a difference and are being listened to, even though it's the ordinary people who are paying a tragic price, a horrific price.

ZAKARIA: Bret Stephens, you've supported this Israeli action. Do you think there's a chance that it is backfiring in this sense, that it is actually strengthening the radicals and weakening the moderates?

BRET STEPHENS, COLUMNIST, "WALL STREET JOURNAL": One of the great differences between the conflict now and the conflict years ago -- well there are two of them.

One is that this conflict has become religious. Hamas is an Islamic fundamentalist movement. The conflict is no longer so much a territorial conflict as it was in the past, but a religious one.

And the other part of the equation is the influence of Iran in this conflict. I think this is something that has to be taken into account.

Like the war in 2006, in Lebanon, this war is largely a war between Israel and Iran's proxies. And making sure that those proxies don't come out victorious, aren't perceived to be victorious, don't gain prestige in the Arab world, I think is absolutely essential, which is why I think that Israel needs to pursue this part of the confrontation to some kind of successful conclusion.

ZAKARIA: Martin Indyk, in your book, you were actually very prescient about the fact that Gaza is very unstable, a highly unstable place. And you, in a sense, had argued for an international force, some kind of peacekeeping force.

How do you look at this situation now?

MARTIN INDYK, FORMER U.S. AMBASSADOR TO ISRAEL: Well, I think it's really important, Fareed, to get a cease-fire in place as quickly as possible.

I agree with both Hanan and Bret that the moderates are being weakened. And if it continues like this, Hamas will come out the winner, regardless of what happens militarily on the ground.

So, in terms of the role of international forces at this stage, I think the key issue is to get a force on the border between Egypt and Gaza that will prevent smuggling of offensive weapons into Gaza that's then used by Hamas in the future to attack Israeli civilians.

ZAKARIA: Martin, talk about one other issue that Bret raised, which is the role of Iran in all this. Is this really a battle between Israel and Iran, and Hamas is simply a proxy?

I mean, I've always thought that Iran's involvement with Hamas was considerably less direct than its sponsorship of Hezbollah. Iran used to actually sponsor Islamic jihad, and only a few years ago kind of turned its attentions to Hamas.

So, how does Iran play into all of this?

INDYK: That is correct. And Hamas, as a Sunni radical Islamist organization, is not an easy bedfellow with Iran, unlike Hezbollah, which is, of course, a Shia organization.

But Hamas has become more and more dependent on Iran over the years. I don't think that Iran triggered this conflict. I think Hamas had its own reasons for doing so.

But Iran, Hezbollah, al Qaeda are the beneficiaries of the anger in the Arab street and the Muslim world that's generated as long as this conflict continues.

Iran can benefit from this at a time when I think they are particularly concerned that Barack Hussein Obama, with his appealing narrative and middle name, could take a lot of the wind out of their sails, as they have tried -- and succeeded, to a large extent -- in promoting their influence in the Arab heartland.

ZAKARIA: Steve Walt, the calls for American engagement and involvement in this continue to rise. What strikes you about U.S. policy at this moment when you look at it?

STEPHEN WALT, AUTHOR, "THE ISRAEL LOBBY": Well, first of all, I think that we're facing a paradox here, in that there's more recognition now than there has perhaps every been, that the only real solution here is ultimately going to be the creation of a viable Palestinian state -- a two-state solution.

Prime Minister Ehud Olmert in Israel realizes that. The Bush administration realizes that. Everyone understands that until you get that, you're going to face a continued conflict, continued outbreaks of violence from time to time.

The paradox, of course, is that, because of the policies that the United States and others have followed, we are perhaps further away from that solution than we've been at any point in the last 20 years or so. So, calling for greater American involvement is right, but it has to be involvement of the right kind.

The second thing that's changed, I think, may be as a result of partly what we've seen over the last two weeks, partly people looking back to the experience in Lebanon, is the recognition that military force by itself is not a solution to this problem. This is a point that Hanan made, as well.

ZAKARIA: Hanan Ashrawi, do you think that a two-state solution is now accepted by all parties? Do you think the Palestinians in Gaza can be brought around to the idea of a two-state solution?

ASHRAWI: The question now is not whether the Palestinians believe in the two-state solution -- because the Palestinians overwhelmingly have opted for the two-state solution, have adopted resolutions. Way back in 1988 was an acceptance of the two-state solution. The problem now is, how do we get there before it's too late? And I would like to say that introducing that (ph) headings (ph) and things that have nothing to do with the Palestinian question, including al Qaeda and even Iran, that these things not only complicate matters, but they are used as justification, as an excuse to batter the Palestinians more, to avoid any kind of agreement that would make it necessary for Israel to relinquish the land that it occupied, to give it back to its rightful owners, and to accept the Palestinians as neighbors rather than as a suppressed, oppressed people under occupation.

STEPHENS: Well, I think that in Mrs. Ashrawi's rehearsal of history, it should be mentioned that Palestinians voted overwhelmingly in January of 2006 for Hamas, which rejects the Oslo Accords, which not only rejects the right of Israel to exist as a state in the region, but it actually calls for the annihilation of Jews. And this is part of the problem.

It is absolutely essential that we get moderates, Palestinian moderates back -- moderates on all sides back -- into the driver's seat. But I don't know how that can be done, if you allow Hamas to remain in charge of Gaza.

What you have now is not a two-state solution. You're looking at a three-state solution. Israel, the P.A. in the West Bank and Hamastan in Gaza. And that's obviously untenable.

And it's also untenable to ask Israelis to move or to work toward a viable, just, two-state solution, if the model they have to look at is what has happened in Gaza.

ZAKARIA: And we have to go to break. We will be right back with all of our guests.


ZAKARIA: And we're back with Martin Indyk, Stephen Walt, Bret Stephens and Hanan Ashrawi from the West Bank.

Martin Indyk, if we were to return to some kind of cease-fire or a status quo, one of the demands of the Palestinians is that the economic blockade of Gaza end.

After Hamas was elected, the Israelis and the United States have supported a very tight economic blockade of Gaza that a lot of people feel has strangled Gaza and produced an enormous amount of misery.

Was that whole policy wrong, to have -- this was a U.S. policy -- to have demanded elections in Gaza? When the elections are held and Hamas wins, we decide we don't like that, and we effectively try to strangle Hamas in the cradle, but in doing so, have been effecting a kind of collective punishment on all the Palestinians in Gaza.

INDYK: Well, there's a lot of blame to go around, Fareed. I think that it was a mistake in the first case for George W. Bush to push elections as the way to promote democracy in the Middle East. In this particular case, elections produced a Hamas victory, which then was not acceptable to much of the international community, because of Hamas' antagonism towards Israel.

But the other sin that took place was that Hamas took control of Gaza by force. That was a military putsch. That was not an election. And it's ruled by force since then.

The question of opening the passages, I agree, will have to be addressed in the cease-fire resolution. But I think it's very important in the process to reintroduce the Palestinian Authority, which is the legitimate authority, into the Gaza Strip again.

ZAKARIA: Martin, how much of this do you think relates to Israeli electoral politics? You have an essay in TIME Magazine about Ehud Barak. We see that Barak is quite popular now, because the military operation seems to have gone well so far.

It's difficult to imagine that in a democracy this kind of electoral politics plays no part in the decision to have engaged in the military action.

INDYK: Well, I think that Barak as defense minister has been very reluctant to go for this kind of operation, and had been the one counseling against it for the last year, despite Hamas' rocket fire and smuggling of weapons into Gaza.

But once the rockets were unleashed again, on the eve of this election which will take place February 20th, I think he decided that, with his own poll numbers descending almost to zero, he needed to take decisive action.

That said, he cannot go into the February 10th elections with the Israeli army dragged back into the quagmire of Gaza, Israeli soldiers taking casualties and rockets still falling on Israeli towns and cities.

So, I think he has a real interest in bringing this to an end as quickly as possible in terms of a sustainable cease-fire. And you begin to see how the Israelis are doing that now -- pausing, not going into the major cities and refugee camps, and also looking to work with the international community, with Egypt, to try to develop a sustainable cease-fire.

ZAKARIA: Steve Walt, I'm struck -- you talked about the right kind of American involvement. But the cease-fire initiative on the table right now is an Egyptian-French one.

Is this a sign of the fact that the United States is in some way losing influence as an arbiter, as a broker?

WALT: Well, certainly, the United States has lost enormous influence over the last seven or eight years, given the policies that we've followed and the rather disastrous results they've achieved for us and for virtually all of our friends in the region.

I think it also reflects the fact that we are dealing with a lame duck president here, who doesn't have a lot of credibility left. And lots of people are, of course, waiting to see what Barack Obama is going to do.

I do think, in terms of the cease-fire, it's going to be a little bit trickier than Martin indicated, although I'm sure he's aware of this. Because, of course, if you try to bring the Palestinian Authority back into Gaza right now, and they are perceived as executing sort of the will of the Israelis, or even the will of the United States, that's not going to help their standing within the Palestinian community.

They can't be seen to be sort of complicit in jailing the Gazans. They have to be seen as being the ones who are providing actual resources back into Gaza, if we're going to try and build them up as a more potent political force.

ZAKARIA: Bret, do you think Israel worries about a status quo in which none of this gets solved? In other words, you continue with the festering problem in Gaza and the West Bank?

Or is there a fear -- you know, the fear that motivated Ariel Sharon, which was the demographic fear, the fear that Israel will end up with a minority Jewish population, with a radicalized Israeli-Arab population and a radicalized Palestinian population, and that that's going to be a spur for action?

Because a lot of people I've talked to say, well, you know, Israel can live with this. They can -- you know, this is not pleasant, but, you know, maybe this can go on for another 25 years.

STEPHENS: I think the real fear now is the question of Hamas' prestige, because Hamas has obviously become a kind of rallying point throughout the Arab and the Muslim world. It is connected to Iran, however recent those connections are.

And I think Israel wants to come out of this immediate conflict having in some way or another demonstrably humiliated Hamas, if not actually outright defeated it, driven it from -- at least driven it from office -- so that it doesn't face another situation, as it did after the 2006 war, when Hezbollah's leader, Hassan Nasrallah, appeared, had his prestige massively boosted, where it seemed like Israel's deterrent, power and reputation had been dramatically weakened.

ZAKARIA: But Bret, isn't the issue not so much the skill of the military campaign, but the ability to politically weaken and delegitimize Hamas? Because Hamas is militarily a rump (ph) organization compared to the Israeli military, which is, you know, one of the world's most impressive militaries.

The question is, will Hamas come out of this with greater support in the Palestinian community, in the Arab community? That's where Hamas' strength lies, not in these tin-can rockets that they build.

STEPHENS: Well, if Hamas is able, at the end of the day, to wave its green flag above whatever the tallest building is left standing in Gaza, it will have scored a huge political or symbolic victory. So, it's not -- you can't disentangle the military aspect from the political one.

There first has to be at least the appearance among Israelis of a successful military outcome before you can start addressing longer range political issues. And that's what's at issue.

It seems to me that it's within Israel's capabilities to defeat Hamas. The question is whether it will be willing to pay the military as well as the international price to achieve it.

ZAKARIA: Hanan Ashrawi, you are a Palestinian moderate by everyone's acknowledgement. So, let met ask you, what do you want from Israel, from the United States right now? What do you think would bolster your power and influence in Palestine and in the region?

ASHRAWI: I think there should be an immediate, immediate cessation of violence. Stop the assault on the Palestinians.

People don't see this as an attack on Hamas, which is, of course, a large movement with a small militia or military wing. And a regular army cannot defeat irregular forces, as you know.

And the casualties and the victims have all been, on the whole, the innocent civilians. This has to stop. Men, women and children are being killed. Whole families are being obliterated.

This is very, very painful. And it is creating a sense of anger, hostility, extremism among the Palestinians, and tremendous pain and suffering.

Let's find quickly, quickly a solution that addresses the real issues, that addresses the real causes. We cannot afford anymore a business-as-usual approach to peacemaking.

ZAKARIA: Hanan Ashrawi, Martin Indyk, Bret Stephens and Stephen Walt, thank you all very much. We will be right back.


ZAKARIA: I recently caught up with one of the world's leading authorities on Islamic extremism, France's Gilles Kepel. I asked him to explain the state of al Qaeda, the organization, the ideology, and also why its deputy leader, Ayman al-Zawahiri, had been issuing rather direct, bitter, personal attacks on President-elect Barack Obama.


ZAKARIA: Gilles, tell me. You've studied al Qaeda and its philosophy and its movement for a long time. What did you make of Ayman al-Zawahiri, the brains of al Qaeda, the number two leader, and his statement on the election of Obama, where he called Obama -- the way it was translated was, was he said he was a kind of Uncle Tom, he was a "house Negro."

What was he trying to say there?

GILLES KEPEL, INSTITUTE OF POLITICAL STUDIES, PARIS: You know, Zawahiri is under criticism, because he is considered by a number of other jihadists as having led the jihadist movement today to failure, the failure in Iraq, because he has spilled Muslim blood.

When they went to Iraq, they killed American soldiers and foreigners. But the vast majority of the people who were killed were other Muslims, were Shiites.

So, he's under severe criticism. And he is -- you know, there are debates ongoing within the movements. He had to publish an e-book recently, a sort of 190-page thing called the -- in Arabic, it's "The Disculpations" -- saying "I'm not guilty for everything that went wrong." He's trying to sort of recapture attention and to get out of this sort of internecine fighting.

And when he attacked President Obama, he was fighting against this feeling that President Obama can sort of rebuild the popularity for the U.S. overseas after the catastrophe in terms of the public image of the Bush administration.

So, he had to use a device to do that. And he called him -- the difference between the Arabic and the English is interesting. Because in English, everybody focused on the fact that he was Malcolm X's categories -- the house Negro versus the field Negro, and Uncle Tom versus, you know, Malcolm Shabazz and the like.

Whereas in Arabic, even though he developed on that, the word he used to call him was "abeed." And abeed means slave, hence black. You know, the root of abeed is the root of being a slave, even a slave to God, even, but a slave in general.

And the abeed, the black slave, is a very derogatory term, which means ...

ZAKARIA: So, it means just a black. I mean, a ...

KEPEL: It means a ...

ZAKARIA: ... a serf almost. Or ...

KEPEL: Yes, well, you know, serf or what we could translate in a derogatory way as "nigger," if you wish.

And it brings to mind that Zawahiri is a scion of the Egyptian aristocracy, who used to have black waiters in waiting at his table. How come those people now are presidents of the United States?

So, it's not how do we -- why do they hate us, but what kind of a contempt do they have for us?

And I'm not sure that this is going to make him extremely popular south of (unintelligible), or south of Khartoum.

And ...

ZAKARIA: You mean among black Muslims in Africa.

KEPEL: Oh, yes. Yes, (unintelligible) -- well, black Muslims -- Muslims who happen to be black, also.

ZAKARIA: That's right. That's right.

KEPEL: And this is -- this is kind of, you know -- we have to understand that this sort of ground narrative that al Qaeda has built in order to mobilize Muslims against the West, against Israel, against whoever, against their own leaders, is now having tremendous difficulties, because they have failed. I mean, they have not really managed to deliver.

They had the 9/11 bombings. They had copycat bombings afterward. Then they thought that Iraq would be their thing. You know, it would duplicate Afghanistan.

You had a clear case of infidels invading the abode of Islam, and they could call to jihad. But it didn't work out.

That way, they lost a lot of their popularity. And the jihad in Iraq was a failure.

ZAKARIA: What would you suggest, if you were giving advice to President Obama, in terms of just dealing generally with this problem of Islamic radicalism, jihad? What should he do to defeat it? How should he not feed it?

KEPEL: Well, I guess that, as far as I can read what American policy in the region is, I mean, something which was done relatively well in Iraq was what we may call the Petraeus policy. That is to say that he sort of bought the Sunni tribes into being allies of the U.S., if you wish. And well, probably with Saudi help and with a sort of deal with the Saudis, so that Iraq would not become a totally Shia, Kurdish-dominated country. Right?

And in Afghanistan, I guess that there are a number of tribes that, if not for sale, at least for rent, and people who have been Talibanized because they had no alternative.

But what I see as the major problem in Afghanistan is opium. And, you know, as long as the opium trade is thriving and is bringing huge revenues, then it's really difficult to intervene.

And, you know, there have been campaigns to irradiate opium. But then, if you give money to the peasants, to the farmers to grow carrots, of course, it's not exactly the same -- or onions -- it's not exactly the same money they make.

So, you have a blend of social, political, economic phenomena which cannot be reduced only through, you know, to de-radicalization. It's -- this is something that has to be rethought.

And probably, this is an interesting issue also, because, you know, we're, as some say, in a post-American world. That is to say, we are not in a unipolar world anymore. And Afghanistan is a case in point.

I mean, how does America -- how can America work with its allies in order to solve a common problem? I mean, how can we put things in common, discuss, and then have unified action, which is not the case? I mean, Afghanistan looks like it's done haphazardly, to a large extent.

ZAKARIA: But you think -- do you think that, when you look at it now, you are more sure than ever that Islamic fundamentalism and jihadism is, at the level of ideas, losing support in the Islamic world almost everywhere?

KEPEL: Well, it has been losing support of late. I mean, but you know, you can never be sure, because those groups rebound. And I guess that Western policy is going to play also quite an important role.

I mean, the reasons why you had neocons in Tehran was that you had neocons in Washington. And that's the sort of ...

ZAKARIA: In other words, our aggressiveness produces a certain amount of aggressiveness on their part, as well.

KEPEL: To an extent. But to be more precise, if we get to the Iranian case, you know, Khatami had made an offer in late 2001. You know, they let U.S. and allied warplanes go over Iran to bomb Afghanistan. They were in the reconciliation conference in Bonn for -- you know, to build up the Afghan regime after the Taliban.

And what they were rewarded with was the January 2002 Axis of Evil, State of the Union statement -- something which totally undermined Khatami's position in the Iranian establishment, and which paved the way for the radicals.

So, an astute offer for negotiations with Iran is probably something, in my view, which will undermine the radicals much more significantly than a strike, which, on the contrary, will band the Iranians together.

I know a number of people in Iran who, you know, who eat a mullah cooked in wine every day for breakfast, and who would go to fight against a strike, because it would recreate some sort of feeling that Iran as a civilization is aggressed and is attacked from the outside.

ZAKARIA: Gilles Kepel, a pleasure as always. Thank you.

KEPEL: Thank you.



ZAKARIA: Sam Palmisano is the chairman and CEO of IBM. He has never before granted a television interview. But as the leader of one of the world's major corporations that does business in 170 countries, with annual revenues of almost $100 billion, his thoughts on the global economic crisis are obviously crucial.

I met with him recently in Istanbul, where we talked about American competitiveness and the tasks ahead for President-elect Obama.


ZAKARIA: Sam, you run one of the largest companies in the world, huge operations everywhere. You look at the U.S. economy. IBM is one of these iconic American companies.

What do you think the challenge for President Obama is when he gets into office?

SAMUEL J. PALMISANO, CHAIRMAN, PRESIDENT AND CEO, IBM CORPORATION: Well, I think it's somewhat straightforward. I mean, he's been given a mandate for change, which as a leader is a wonderful thing.

You know, to have the support of the American people -- that they want change, they're ready for change, the timing's right for change -- is something you don't want to waste.

ZAKARIA: But when you look at the crisis, is this like the 1930s? I mean, how bad is it, and what should we do?

PALMISANO: Well, I think it's different in the sense that the government and business communities as a whole are better prepared to deal with them in today's environment than perhaps they were 80 years ago.

The challenges, though, I think are somewhat similar, because now is the time -- as we did with the New Deal, or as we did after World War II -- is a time to go step up and build an infrastructure that actually improves business competitiveness and the standard of living in the United States.

ZAKARIA: So, you want a big stimulus program.

PALMISANO: Well, I just think it's necessary. I mean, at the end of the day, as it has been historically, there's going to require something beyond just the loosening of credit to get the U.S. economy back on a more growth-oriented course. And of course, all economies need growth.

ZAKARIA: So, when you look at the '30s, you had the huge WPA projects. You look at the '50s, you had the Interstate Highway ...

PALMISANO: Interstate Highway. Yes, exactly.

ZAKARIA: What would you do? What would you invest in now?

PALMISANO: I would think about it. I'd look at some of the major issues that the U.S. has, and then, most of those are systemic and end-to-end -- for example, the health care system. It certainly is hardly a system. It's basically a series of regional cottage industries.

But that is something that is, from a cost perspective, is a burden to the participants in the system. It's burdensome to the government, and then the businesses that have to actually fund a health care system.

And what it cries out for is leadership. And it cries out for someone to take the lead and say, "OK, you guys. I know you all have your various interests, but we're going to put them aside, because we're going to solve this problem. And at the end of the day, we're all better off."

ZAKARIA: What about the issue of a green New Deal? You sometimes hear people say that, you know, what we should be doing to get ourselves out of this situation is massive stimulus spending in the area of alternate energy.

Would that make sense?

PALMISANO: I think all those things make some sense. And I'd like to, just if I could, put them into context.

I mean, at the end of the day, I think what happened in the past within the New Deal, or in the 1950s, was the stimulus package created the infrastructure for a very competitive country called the United States. It was good for business. It obviously expanded the economy. It created a phenomenal standard of living and a great education system.

But it was the infrastructure that did that.

So, I think in today's environment, I would say, let's go to the future. So, what is the future?

Well, clearly, there's road congestion and traffic systems that are inefficient, that have a big impact on productivity, that cause pollution because of the exhaust of the cars. I mean, that's one area.

Another area is alternate forms of energy, to kind of make sure we can balance supply and demand. But I think as we balance demand, I would also talk about smart grids. A lot of the energy in the grids today that's produced is wasted. Forty to 70 percent is actually wasted.

So, like any problem that's end-to-end and systemic, I think you need to attack all the elements of it.

ZAKARIA: When you look forward at the U.S. economy, do you feel that, if we made the right choices now, the American economy is basically dynamic and will rebound pretty soon?

PALMISANO: Well, I have great faith in the U.S. economy, because I have a great faith in the fact that there are a lot of smart people, who, at the end of the day, are creative, entrepreneurial, that come together and solve these issues.

I think, in this particular situation, we need to accelerate an attack. I mean, historically what would have happened is that -- you know, take my industry, the dot-com bubble. It burst. It burst for the same reasons that financial markets have now corrected, for the same reasons -- too much capital chasing things that don't make a lot of sense.

Fundamentally, though, a lot of smart people got together. The tech industry has kind of recreated itself. It's off and running.

I think this one's going to require more to get that thing going.

ZAKARIA: You travel all over the world. You operate all over the world. Do you see the brighter spots now in the emerging markets in terms of your growth?

PALMISANO: Well, I think if you look out over the next couple of years, there is no doubt of the fact that the emerging markets -- and we define that beyond what many people call the BRICs -- Brazil, Russia, India and China. So, we take a broader definition. We look at 20 or 30 countries beyond the basic BRICs.

But if you look at their GDP growth, if you look at the number of people entering the middle class, I mean, certainly there is a tremendous amount of economic opportunity there that is good for their societies, because people are entering the middle class. And it's good for business, because as we invest, obviously, there are those returns associated with that growth.

ZAKARIA: And we will be right back.


ZAKARIA: And we're back with Sam Palmisano, the CEO of IBM.

You've talked a lot about trying to create a smart planet, trying to create -- imbed intelligence into systems.

So, suppose President Obama came to you and said, "How do I create smart government?"

PALMISANO: Oh, my gosh!

ZAKARIA: You've interacted a lot with government. What do you think is the -- what does it need?

PALMISANO: Well, the first thing I think, if you think about creating a smart government, I think one way to think about it, the U.S. government is going to have a huge brain drain occurring. And this might be different than other governments around the world that have a younger work force.

But to -- in the U.S., to President Obama, there's going to be a huge turnover, because people are entering retirement ages. So, there's going to be a great opportunity, therefore, to solve this problem.

I would argue, one of the ways to solve the problem is to kind of create the modern infrastructure associated to support the government. That's an IT infrastructure.

It's an information sharing. It's common data structures, databases, and the sorts of things that could be shared across agency to address some of these issues. So, we could modernize government and make it more effective and more efficient.

ZAKARIA: One of the things I'm struck by when traveling is the way in which you see other countries and other governments becoming pretty good and savvy at adopting best practices, getting smart with it. So, traffic control in Singapore or some waste management system in the ...


ZAKARIA: Do you think we're, in the United States, is falling behind in terms of innovation in that regard?

PALMISANO: Well, I think we have all the capability to compete in that regard. The difference is that, in the United States versus a lot of these other countries, the other countries are leapfrogging.

I mean, they have the benefit -- I mean, let's be fair. It's like when you create a new business, you can learn from all your -- other people's sins and skip that.

Well, it's the same with government. These new governments that are evolving can study the U.K., or study the United States, study Germany or Japan, and skip all that. I mean, they have that benefit of creating it afresh and anew.

To me, that is actually -- it's a competitiveness challenge. It's no different than some young tech startup, you know, coming after IBM.

I mean, it actually should, I mean, in a way, energize everyone in the United States to say, OK, we need to compete. So, therefore, we need to modernize and make ourselves even more competitive to deal with some of the issues we all face.

ZAKARIA: When you look at your reach right now, what are IBM's revenues outside the United States versus in the United States?

PALMISANO: About 65 percent outside the United States. We operate in 170 countries. We have roughly 400,000 employees today. So, it's a small population. And the population is pretty much mixed to the revenue. So, about 65 percent of the revenue is non-U.S., and therefore, about 65 percent of our work force is non-U.S.

ZAKARIA: So, are you an American company?

PALMISANO: I think we try to be a company that contributes to every society where we operate. Our headquarters is in the United States, so, therefore, that's out tax entity. But we pay taxes everywhere in the world. So, we do participate.

But more importantly, from an IBM point of view is that, we really do believe -- and it's been the core of the company's values for many, many years -- that we need to contribute wherever we operate in the world. Now, those societal problems are different. I mean, things -- you know, global climate has a higher priority in some countries than others. Health care is a higher priority, education systems are different. So, all those are different.

So, IBM really doesn't have a common global agenda, but our agenda is to contribute.

ZAKARIA: Can you imagine your interests as a company diverging from those of the American citizen?

In other words, is there a tension here, where you have to try and provide maximum return to your shareholder, which means maybe you outsource to whatever place you need to, versus the interests of the United States? Is there a tension between being a multinational, global corporation and having, you know, an American identity?

PALMISANO: No, I really don't think there is. I mean, again, I look at it and say there's tons that we do every day to contribute to the United States.

Our view of the world is different than the traditional view, which people call outsourcing. We're 100 years old. We've operated in most of these countries, sometimes 90 years.

So, if I'm in a country like Brazil, where we've operated for 90 years, I don't view that I've outsourced because I hired somebody in Brazil.

I mean, we've been in and out of India for 50 years, or China. You know, I mean, so, we've been operating there so long, we don't view it that way. We view it as a great population out there of excellent skills. And why wouldn't we take advantage of those skills?

ZAKARIA: And that makes you a more dynamic company that can ultimately hire more people in the United States.

PALMISANO: If you look at the innovation, if you look at our most innovative products, they're multicultural and multi-gender.

The teams that do the greatest work, from an innovation and breakthrough, tend to come from all over the world. You see it in our laboratories all the time.

So, when you experience this, you realize that is the best way to innovate. You need the diversity. It needs to be multicultural. And quite honestly, the more successful we are, the more we invest.

I mean, the core portion of our research and development happens to be in the United States. Our most advanced manufacturing happens to be in the United States.

So, our ability to generate these profits around the world actually helps the United States -- in fact, more so than many of the other countries. ZAKARIA: If President Obama were to come to you and say, "All right, Sam, can you come and help me reinvent government," what would you say?

PALMISANO: Well, I don't know that I'm a public servant. I mean, I've always been in the private sector for many times. I mean, we all have a sense of obligation.

I think the most important thing we can all do is make President- elect Obama successful. I think he is our president. We need to stand behind him. I think that always hasn't been the case in previous elections or previous transitions.

Hopefully -- and I'm always an optimist -- I'm hopeful that everyone today in the United States says, you know, we need to help this guy be successful, because if he's successful, we're all better off. And let's put the politics behind us.

And if he is successful, if he is a great president, our country's going to be better off.

ZAKARIA: Sam Palmisano, thank you so much.



ZAKARIA: And now, for my question of the week.

With President-elect Obama taking office in nine days, I want to know, what do you think is the first thing he should do to bring some kind of resolution to the conflict between Israel and Hamas? If he does something, what do you think it should be?

Also, I'd like to recommend a book. It's called "The Clash of Civilizations," by Samuel Huntington.

It's a comprehensive analysis of the state of world politics after the fall of communism. And it was written by my former mentor when I was a graduate student, who just died. And so, it's a bit of an homage to him.

And as always, don't forget to check out our Web site,, for highlights from this program, our weekly podcast and some conversations that are exclusive to the Web site. And you can also e-mail me at

Thank you, and have a great week.