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Fareed Zakaria GPS

Interview with Pakistani Politician Imran Khan; How Bad Will the U.S. Economic Slump Get?

Aired February 22, 2009 - 13:00   ET


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.

It's been a week full of news -- the housing bailout, more troops for Afghanistan -- and we'll get to all of it.

But I noticed something I thought was significant. On her trip through Asia, Hillary Clinton acknowledged that our policy of economic sanctions against Burma -- Myanmar -- has not worked.

The reason I think this is significant is that I'm hoping it is the beginning of a rethinking. There's a standard U.S. policy toward any regime that we don't like. There's not much we can do about it, and we can't change the regime's policies. But we decide we can't just sit there, so we slap sanctions on the country.

Now, look at the effects. In Cuba, 50 years of sanctions have allowed Fidel Castro and his brother to wrap themselves in the mantle of Cuban nationalism and stay in power.

In Iraq, sanctions destroyed the middle class, leaving a civil society composed of criminals and religious zealots.

In Pakistan, which we sanctioned for their nuclear tests in 1990, two generations of army officers were deprived of any contact with the U.S. and grew to be anti-American -- and in many cases, pro-Taliban.

In Iran today, sanctions have allowed the regime to claim that they are heroically battling efforts by Washington to strangle the nation and its aspirations.

So, how much more evidence, in the form of misery for the people and power for the dictators, do we need before we conclude that economic sanctions are a feel-good policy that have had only bad effects on the ground?

Now, on the program today, Pakistan's Imran Khan. You'll want to hear what he has to say. The activist politician from that nuclear- armed nation paints a scary picture of what's happening there.

Then, Secretary Clinton's trip to Asia, critiqued by some of the region's best minds. And America's top economists rethink Obama's economic plans.

Stay with us.


ZAKARIA: Right now, people often say Pakistan may be the most dangerous country in the world. Keep in mind that it is a nuclear power. Its leader, President Asif Ali Zardari, is, by most accounts, not in control of the country's military.

Meanwhile, Pakistanis are furious at the United States for many reasons, chief among them the many civilians who have been killed by bombs dropped from American drones coming across the border from Afghanistan.

And then, this week, a controversial peace deal along that troubled Taliban-infested border in an area called the Swat Valley. The Pakistani government agreed to enforce Sharia law, strict Islamic codes, in exchange for a halt to violent attacks by radical Islamist forces there.

Joining me to talk about all this is the Pakistani politician, Imran Khan. He was once known as perhaps the greatest cricketer in Pakistani history, but nowadays he is a politician, a vocal opponent of the Pakistani government, and a critic of U.S. policy in the region. Imran Khan joins us from his home in Islamabad.



ZAKARIA: Imran, you have been, for the last week, in and out of the Swat Valley, the place where this peace deal, or this truce, has been reached between the Pakistani government and what people here are calling members of the Taliban, jihadi forces, militant Islamists.

What do you think of this peace deal?

KHAN: Well, Fareed, I think that the government had absolutely no choice but to go through with this peace deal. In fact, the elected government of the frontier province, they had recommended this quite a while back, but Asif Zardari, the president, was too scared to endorse it. So that's why it was not being implemented.

But the situation there is such that there was no choice with the frontier government. There's no police left in the Swat Valley. There are no courts functioning. There are 400,000 refugees from the area.

There doesn't seem to be any end to this conflict. So in the end, they had to accept this deal.

ZAKARIA: But is this a capitulation to some very nasty forces in the region? Or is this something that you think can be the beginnings of some kind of political stability there?

KHAN: Well, Fareed, I mean, the whole area is a mess now. The entire border -- actually, the bigger mess is the tribal agencies. From Waziristan right up to Bajaur, we have now basically a tribal uprising against the Pakistan army.

And the worst thing is, there is no end in sight. There is no end to this war. This could just go on and on.

ZAKARIA: So what you are saying is really that the Pakistani military has lost control in the area entirely, and that, at this point, this is a kind of wild west, no man's land, which is a very scary prospect. I mean, does it worry you in terms of the security for Pakistanis in Islamabad, in Karachi, in Lahore?

KHAN: Fareed, my biggest worry is that the Obama administration is going exactly the same way as the mess made by the Bush administration. It's like the line from "Alice in Wonderland." When you don't know where you're going, every road takes you there.

We don't know what's happening. We don't know what's the end of this. We don't even know the objectives of this war.

And all we know is that this insane aerial bombing -- these drone attacks, killing innocent people -- all it's doing is, it's inflaming the whole area. And this insurgency is turning into a sort of freedom struggle now.

It's complicating our lives in Pakistan, because the whole area, the Pashtun belt is getting radicalized, and the space for moderates is shrinking all the time. There has to be a change of strategy. There is no military solution to this.

ZAKARIA: And, Imran, what would you do? What would you do if you were the Pakistani government? And what would you do if you were the U.S. government?

KHAN: If I was the Pakistani government, first of all, I would shed this impression that I'm a stooge of the U.S. administration. Unfortunately, Musharraf was considered a stooge.

And, sadly, when democracy came to Pakistan, with great expectations -- and, remember, after the elections, for three months there was complete peace. There was a cease-fire, because people expected the democratic government to start dialogue. Unlike the military generals who -- who have always used force, they expected political dialogue to settle this issue.

Unfortunately, the current president, Asif Zardari, is looked upon even a bigger stooge than Musharraf. So things have gone from bad to worse, because no on trusts him.

So if I was there, I would immediately -- I would tell the Americans that military is not an option. You only have to ask the Russians. Look at the experience what the Russians went through. They killed a million people in Afghanistan -- still, they lost the war.

So, how many people are going to be killed from this insane aerial bombing, these drone attacks which have proved that -- all it has done is it's made the situation worse. It's even weakened the Pakistan government, with Dianne Feinstein's statement that these drone -- that they're taking off from bases in Pakistan, the drones.

So, I'm afraid the society is just getting more radicalized. And for Pakistanis, the worry is that, with the financial problems, the economic problems in the U.S., maybe a year later they will pack up and leave.

Hell, we are sitting -- we are going to have a Frankenstein on our hands, because this radicalization is just growing in our country.

ZAKARIA: And what should the Americans do? Should they just say, "Well, you know, we have all this intelligence about these al Qaeda groups, and they're planning various attacks. But we just can't use the military, because the political repercussions are too great and we just hope that it'll die down"?

KHAN: You know, unfortunately, the whole way this war was fought -- that is where the whole thing went wrong.

I mean, the Americans should have isolated al Qaeda from Taliban. Taliban had nothing to do with terrorism. Yes, they were fundamentalists, but they weren't terrorists.

And so, actually, by attacking the Taliban and then not moving in and setting up a good governance system, making the lives of the Afghans better, unfortunately, what has now happened is that, in this mess, there's no chance of development.

Even if they now pour in a lot of money for development, you have to have peace to get the money in, to get aid in. How is anyone going to get any aid into the tribal areas now?

So, the same applies to Afghanistan. And, unfortunately, I think, whatever anyone says, the only way forward is dialogue, which is what Hamid Karzai is now finally saying, that you have to start talking to the Taliban.

Bear in mind, Taliban were never the enemy. The real danger was always posed by al Qaeda.

So even now, the Pashtun should be won over through dialogue and not through this bombing. And then they should try and isolate al Qaeda, which I believe can be done, but it's going to be -- it's going to take time. It's not going to be -- you know, it's not a short game anymore.

ZAKARIA: Do you have any faith that Obama will adopt a different strategy? Have you had any communications or messages that give you hope?

KHAN: Well, the hope still lies that he will have the intelligence to understand that this is a failed strategy, that when you are in a hole, you stop digging. So what I'm hoping from Obama is that he will, somewhere along the line, realize, as the British have, that this war is not the option in Afghanistan. They have to understand the psyche of the people, their history. And they're repeating exactly the same mistake as the Soviets were doing.

So what I'm hoping is that Obama will somewhere down the line change the strategy. And mainly, really, this is a country -- Pakistan is -- that faces the biggest catastrophe if this war goes on.

ZAKARIA: We will be right back with more from Imran Khan from Pakistan.


ZAKARIA: And we are back with Imran Khan, the former cricketer, politician and critic of the Pakistani government.

Do you think the Pakistani army is willing to talk to the Taliban in a broader sense? I know they have just done it in Swat. Will some of this depend on whether this deal seems to work? I mean, there's already been one journalist who's killed for having covered the events, the celebrations.

KHAN: Well, you know, frankly, Fareed, it might have a lot of hiccups, because there's not one group operating in Swat.

Remember, this is Sufi Muhammad who the government has done a deal with. His nephew, Fazlullah, is far more radicalized. His demands are far greater. His idea of Sharia is way, way different to what, you know, what this deal is. As being done, it's fairly moderate.

The worry is that, you know, there will be hiccups on the way.

But in my opinion, Fareed, we do not have a choice. This army is -- Pakistan is on the verge of bankruptcy. The IMF has just bailed it out. How long is the army going to sustain this operation?

And the government has been saying now it's costing Pakistan far more than the aid coming from the United States. So, this is unsustainable.

And so, in my opinion, we have no choice but to start talking to people, winning over the people of the tribal area, have peace for a start. Unless there is peace, you can't have dialogue. And so, I think it'll be a slow process, but that is the only option.

And I think the government got scared that, if they did not sign some sort of an agreement right now on Sharia, the whole area was getting further radicalized. Because there are even people much more radical than the man, Sufi Muhammad, with whom they have formed this deal with.

ZAKARIA: But does this mean, Imran, that the Pakistani government is losing control? Does it mean that this kind -- these militants in the Federally Administered Tribal Areas or in Baluchistan, places along the Afghan border, are now similarly going to make such demands, and Pakistan is not going to be able to rein in the al Qaeda forces or the Taliban forces that it worries about, that the Afghan government worries about, that the U.S. government worries about?

KHAN: Tribal area already is run by tribal laws. Only 40 laws of Pakistan apply in the tribal area. And this is since 1948, when tribal areas became part of Pakistan, it was through a treaty. So it doesn't really affect the rest of the tribal area.

The worry is that here is a settled district. But if people go back and understand the history of this area, where, until 1974 they had Sharia law and people had access to justice, they had very good governance, it is actually a failure of governance in Pakistan that started -- that was the cause of uprising in Swat, and where this particular action is going on and where this law has been applied.

So, it's completely different for the tribal agencies. The tribal area has -- they have different sort of laws.

ZAKARIA: From Islamabad, Imran Khan. Thank you so much.

And we will be back.


ZAKARIA: Well, it's been another bad week for the economy. It's almost a cliche now. And it seems that the same ground gets covered with each discussion. How bad is it? Could we have a depression?

But what we have that's new here is, we have all three parts of Obama's package laid out -- the bank bailout, the fiscal stimulus and now, the housing plan.

So my simple question is: Will it work?

We have Joseph Stiglitz, winner of the Nobel Prize in economics; Edmund Phelps, winner of the Nobel Prize in economics; Jeffrey Sachs, who one day will win the Nobel Prize in economics, but 25 years ago became world famous for telling countries how to get out of economic crises.

If you were advising a country, you know, the United States, would you say that the Obama plan is enough?

JEFFREY SACHS, DIRECTOR, EARTH INSTITUTE AT COLUMBIA UNIVERSITY: I think they have, so far, put a patch on what was a collapse. And so, that's good.

But I don't think that we have yet seen the forward-looking steps that are going to be needed for the longer term. And...

ZAKARIA: You don't have a fiscal stimulus has within it the investments... SACHS: It has the seeds of it within it. But it was so weird -- I have to use that word -- how Congress held back anything that looked beyond 2010, said that that was even illegitimate.

Our country has become so short-sighted and so short-term, that we're not thinking about the real way out of this. And the model that the Congress -- especially the Republicans -- seem to have in their mind, is this quick rebound. And that's the wrong model.

And so, that's what's held back so far. We haven't really had a proper discussion yet in the country, except by the president himself. He's the only one seriously, systematically talking about the longer term.


JOSEPH STIGLITZ, NOBEL PRIZE WINNER IN ECONOMICS, 2001: But even in the short run, it was deficient in two respects -- first of all, too much emphasis on tax cuts, which are not likely to give a stimulus.

But secondly, the states are facing an enormous shortfall of revenue, estimated at $150 billion or more per year. Now...

ZAKARIA: California alone has a $40 billion revenue...

STIGLITZ: That's right. So the $150 billion keeps getting larger. It's probably $200 billion.

Now, the states have this balanced budget framework, which means that, if they don't have the revenue, they have to cut back spending.

So, while we are talking about stimulating the economy, the states are engaged in de-stimulating the economy.

The first thing that we should have done is to say, we have to prevent this downturn. It doesn't make any sense to have the states fire teachers when we're -- you know, and say, OK, now we're going to build some roads.

SACHS: That was another strange part about the politics of this, which is the Republican objection was to try to cut the transfers to the states, which was absolutely the first thing to be protected in this downturn.

STIGLITZ: Exactly. That was where they should have begun, because that's preventing things from getting worse. And we didn't do that.

SACHS: Didn't do it adequately.

ZAKARIA: Professor Phelps, would you spend the money the way the fiscal stimulus is...

EDMUND PHELPS, NOBEL PRIZE WINNER IN ECONOMICS, 2006: No. I was shocked by the nature of the stimulus package. I recall Obama's very moving speech after his North Carolina win, in which he was recalling how central work was to his father-in-law.

Candidate Obama used the term "rewarding work," which happens to be a title of a book of mine, advocating low-wage employment subsidies, subsidies to companies in proportion to how many low-wage employees they have on their books.

So I thought, "Oh, this is great."

And so, I was really amazed when the actual package come out, and it seemed like such a collection of mostly shop-worn ideas.

ZAKARIA: So you would rather, in a sense...

PHELPS: I would have rather gone with a surgical instrument, like subsidies to companies for their ongoing employing of low-wage workers.

ZAKARIA: You know there is...

PHELPS: That would have worked. That would have created jobs and pulled up some earnings, too.

ZAKARIA: You know there's a country that's doing this -- Singapore.

PHELPS: Yes. Yes, that's absolutely right.

ZAKARIA: And so, we should be following the Singapore model.

PHELPS: Can I brag a little bit? They mentioned me in the "Singapore Times" as behind that.


SACHS: We forget in our rhetoric -- and it was true throughout the whole campaign -- there is actually a poor part of this country, also. And I noted that in the presidential debates, all three of them and the vice presidential debate, the word "poor," the word "poverty" wasn't mentioned one time.

PHELPS: Always middle class.

SACHS: Always middle class.

PHELPS: The middle class is...

SACHS: Middle class, middle class...

ZAKARIA: Because they're the -- because they're the voters.

SACHS: Well, we understand why. It's politics. But on the other hand, we have an extraordinarily serious problem of poor people in this country. STIGLITZ: And it's certainly getting worse.

SACHS: And it's getting worse.

PHELPS: The working poor.

STIGLITZ: The working poor.

SACHS: Also the working poor. And Ed's idea is a terrific idea.

STIGLITZ: And now we have the unemployed.

SACHS: It really is a terrific idea, and it's been a terrific idea around for a long time, waiting to be picked up.

But we need a balance not only to the middle class, but also to the poor. And I hope that we move beyond a commission for the middle class, which we now have, too -- a commission for people that are in desperate need -- because this country's filled with people in desperate need right now.

ZAKARIA: Let's talk about the home mortgage problem. Is the president's plan the right one?

STIGLITZ: Oh, it's so much better than what we had before. And that's one of the things about all three parts of his program -- so much better than we had before, that I feel hesitant to say -- you know, to complain. But it's not what I would have done.

Many families have houses, the value of their mortgages much greater than the value of the house. They're called "under water." It makes sense to have these mortgages restructured, to write them down.

Bad loans were made. The question is, who's going to pay for it? To me, it's very clear. It should be the banks that bear the bulk of the cost.


ZAKARIA: And your feeling is that the Obama plan shifts it somewhat, but not enough.

STIGLITZ: Exactly.

ZAKARIA: That the homeowner is still on the hook for too much of it, in your view.

STIGLITZ: And what we need is to change the bankruptcy law. I've called for a homeowner's Chapter 11.

We have a bankruptcy bill for corporations. We use it all the time, the airlines, where you restructure the debt. The airline keeps going and -- because you want to preserve jobs.

ZAKARIA: Well, in this case what would happen is, the person would stay in his house, or her house, not walk away. But the debt would be restructured, just as in a bankruptcy, rather than having to walk away from the house, which would lead to a collapse of housing prices in the neighborhood, the houses around it, et cetera.

STIGLITZ: And it destroys the family. It interrupts the education of the children. It's bad for the community.

And what good does it do?

ZAKARIA: Professor Phelps, you, in a Nobel interview that I watched, you said something really interesting.

PHELPS: There is no more official recognition of what used to be the American Dream. The American Dream used to be that you'd go out there, you'd take some risks. You invest in yourself, invest in various ways. You work hard. And with some luck, you'll make it. They'll be various rewards in terms of pride and gratification.

And of course -- and now, the official dogma of the government is homeownership and Social Security. And why don't we have a government that celebrates adventure, exploration, discovery, problem solving? I mean that's -- there's never any talk of that.

STIGLITZ: What bothers me, though, is the asymmetry. It's that we're socializing the losses of some very well-off institutions, people, and privatizing the gains. It's that asymmetry that...

ZAKARIA: In other words, if you make $5 billion -- $1 million a year and make bad loans, your bank gets bailed out. But if you were making $40,000 a year and you took a bad mortgage, you would probably lose your job.

STIGLITZ: Exactly. That asymmetry is really undermining the fabric of our society.

ZAKARIA: Jeff Sachs, the last word on this?

SACHS: Well, I think adventure is fine, but the risks are a little bit high right now, also. And we dismantled the social safety net in this country.

People don't have health care. They can't take care of their children. We've got hunger in this country.

So, there's a hidden face, because we don't really talk about these things that affect tens of millions of people, and the numbers are now rising dramatically.

So, I think we want to be civilized about this. What Joe has said about the egregious transfers to the wealthy has greatly exacerbated this. And the nerve of John Thain and others to take bonuses after they've broken the world economy, that's literally scandal.

We've got to go back and claw back those bonuses, because that's tens of billions of dollars that went on taxpayer bucks -- or from shareholders, in fact, because it wasn't real income. It was taken straight out of the bottom line. And that's a shame for our society when people are desperately trying to make ends meet right now.

ZAKARIA: We have to leave it at that.

Edmund Phelps, Joseph Stiglitz, Jeffrey Sachs, thank you very much.

And we will be right back.


ZAKARIA: The secretary of state, Hillary Clinton, has just wrapped up her first foreign tour to East Asia. Significantly, 1961 was the last time that a secretary of state chose that region for a first visit.

Joining me now, three experts on Asia, two of them from Asia, to talk about what that trip accomplished.

From Singapore, Kishore Mahbubani, the dean of the Lee Kuan Yew School and author of "The New Asian Hemisphere." From New Delhi, Shekhar Gupta, the editor-in-chief of "The Indian Express." And here in New York, the China scholar Minxin Pei of the Carnegie Endowment for Peace.

Welcome, gentlemen.

Kishore, what do you make of the fact that Hillary chose East Asia as her first region?

KISHORE MAHBUBANI, AUTHOR, "THE NEW ASIAN HEMISPHERE": Well, I think it's a clear indication, frankly, of how power is shifting to Asia.

And frankly, at a time when you're facing the greatest financial crisis in several decades, to put Asia on top of the list of priorities is also a clear signal that, if you want to have a solution to this massive financial crisis, you have to work with Asia, because this is where all the reserves are.

Hillary is coming at a time when she is essentially representing -- you know, in the past, secretaries of state represented symbols of power. Now, there is the sense that the United States is a wounded animal, a deeply wounded animal coming to some extent to Asia for assistance.

So I think they're looking for a signal to see, is the United States now ready to deal in a position of equality with the Asian countries and say, can we work together to get out of this mess?

ZAKARIA: Shekhar, the one thing that Indians have worried about the Obama administration is that it is going to be a little -- how shall I put it -- softer on the war on terror, that it might be a little bit more willing to accommodate itself to certain forces, whether they are, you know, militant -- forces of militant Islam. And one of the problems Hillary Clinton will probably face in private conversations in Japan is their concern that both Bush and, now, Obama will be too soft on the North Korean issue.

Is there a fear that the United States is kind of losing its muscle in Asia?

SHEKHAR GUPTA, EDITOR-IN-CHIEF, "THE INDIAN EXPRESS": Well, I think there is a fear that the United States may be distracted. They've got so many problems back home that they may become more inward-looking.

Because we believe that many of the problems we face in our region, particularly that India faces in terms of terrorism, that the U.S. can't walk away from them, because they were largely responsible for creating them -- the creation of the Taliban, before that the mujahedeen. You know, there is no need to go into the entire history.

So you can't create all of that, and then walk away. We've got a nuclear weapons power sitting next door to us.

On the other hand, many of us here believe that Obama, because there was some expectation that he might be soft on terror, he will in fact go out of his way to show that he has focus in that area. And frankly, what we have seen so far from Richard Holbrooke's visit in the region suggests that that is true, that he is focused on the terror issue.

But the other big concern in these parts about the Obama administration, which I think is a more real concern, is this whole protectionism. And I think that, to me, is a bigger concern right now.

ZAKARIA: Kishore, let's pick up on something Shekhar Gupta talked about with regard to protectionism.

We're all in this crisis together, and yet, all the governments of the world are busy protecting all their banks, their inefficient industries. They're raising tariffs everywhere.

The U.S. has this "buy America" provision in the fiscal stimulus. But frankly, so do almost all countries in one way or the other.

Is this the end of the kind of world trade system that Asia grew prosperous in?

MAHBUBANI: I completely agree with Shekhar that we should be very deeply, deeply worried about the rise of protectionism and of us backtracking away from the system of the past.

But I think the big difference in Asia is that the Asians have not lost their faith in globalization.

And what's interesting is that, you know, when you watch -- I was listening to your program earlier on, the American economists talking about the American reaction to this crisis. You know, there's an old expression: never waste a crisis.

And the sense I have is that, if you look at the Chinese, for example, the Chinese government is not wasting this crisis. It is actually using this crisis, using this stimulus plan, to focus on the long-term investment and doing the right things.

And the Chinese, by the way, have become the biggest believers in globalization, because they know that they and India are going to become the biggest beneficiaries of globalization. So there is no intellectual retreat from globalization in the Chinese and Indian elites in the way that you see in Europe or America.

ZAKARIA: Minxin, what do you think the Chinese want from America? What do you think they conveyed to Hillary Clinton privately?

MINXIN PEI, CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE: First of all, keep your rhetoric down, don't raise expectations. Second, I think, on the...

ZAKARIA: On issues like?

PEI: ... on protectionism, of course, they do want Obama -- and, of course, Secretary Clinton -- to take their stand and draw a line in the sand, because the initial noises from Congress are not very reassuring.

But I want to say something. Right now, it's very hard actually to make protectionism work, because of globalization. Half of China's exports are made by American companies and other multinationals. So, half of Chinese exports to the U.S.

If you want to stop Chinese exports, you are actually penalizing American companies. So, not many congressmen actually get this. Once they look deeper into this, they will find that the task is almost impossible for them.

ZAKARIA: Shekhar, what do you think the Japanese have been pressing? Because there is sometimes talk about how the rise of China means that India and Japan are kind of moving closer together, and the U.S. is encouraging this kind of anti-Chinese -- or perhaps not anti- Chinese, but a hedge strategy against China.

Do you think Hillary Clinton's trip has in some ways as a backdrop this idea?

GUPTA: Well, I don't think there is any juice in this idea in India. I don't think there's any section of Indian society, Indian politics, Indian elites, which wants to join any kind of a bulwark against China.

At the same time, India understands that unless it gets its act together, unless it takes the process of reform forward, it's going to get left so far behind China. That's why India is going to be watching both China and America very carefully.

ZAKARIA: And we will be back in a moment.


ZAKARIA: And we are back Kishore Mahbubani from Singapore, Shekhar Gupta from India, of New Delhi, and Minxin Pei of the Carnegie Endowment for International Peace.

Kishore, what is being described, in a sense, is an Asia that is, I wouldn't say optimistic, but seems fairly comfortable, forward- looking, even though this crisis has devastated Asia economies. I mean, the news this week was that Taiwan's economy shrunk by 8 percent. Singapore is in very bad shape.

Why is this not producing massive social turmoil, pessimism, things like that?

MAHBUBANI: Well, I'm glad that you have confirmed the thesis of my book, that Asia is the most optimistic place in the world. And I think it's important to emphasize the difference between short-term and long-term perspectives.

This year will be very bad. Singapore will shrink minus 5 percent, Taiwan is shrinking, Japan is shrinking. But, you know, most Asians actually -- you know, we had just gone through the Asian financial crisis only about 10, 12 years ago -- which was massive, you know.

But we went through it, and came out of it stronger. And the one reason why the Asians are in some ways more relaxed about this crisis, they say, "Hey, we've been through this once before. And we've actually accumulated the reserves that we needed for this crisis. So we are ready for it."

And in some ways, this crisis may create wonderful opportunities for the region.

And one of the points I completely agree with Shekhar about is that the Indians no longer see the world as a zero-sum game, that China's rise is not necessarily bad for India, and nor is India's rise bad for China. In fact, the region actually wants to see both China and India succeed and be the two new engines of economic growth to drive the region up.

So, frankly, when I talk to people in the region, yes, they're worried about the next 12 months or so. But they're absolutely confident that, when this crisis is over, Asia will bounce back faster than any other part of the world.

ZAKARIA: Minxin, a lot of people wonder whether this economic crisis has rattled the Chinese elite, rattled the Communist Party, you know, that they will not actually be that outward-looking, because they're going to face internal protest, turmoil.

What is your sense of the impact of this economic crisis on the Chinese leadership? PEI: Well, indeed, they have been deeply, deeply rattled. Initially they were not prepared for this. They did not understand the depths and the potential risks of this crisis. And now, I think they're caught in a downward spiral, because the deceleration of growth in China has exceeded all the worst forecasts.

And now with unemployment looming in China, and then a leadership succession coming up in three to four years, the Communist Party's leaders are now, of course, much more focused on domestic affairs.

So, this trip may do some very nice door-opening or getting-to- know-you. There are substantive issues I'm not so sure that the Chinese leaders are ready to talk or engage on a really substantive level.

ZAKARIA: Kishore, do you think that the Chinese are in the mood to be very cooperative with the U.S.? Or are they -- is there some feeling that they have been swindled by the Americans, that they have made massive investments in America from Treasury bills to private equity firms, all of these investments are doing badly, and there is a sense that maybe they need to turn away from the United States?

MAHBUBANI: I think it's important to emphasize one thing. You know, when the Chinese look at these things, they always take a long- term perspective and not a short-term perspective. I mean, yes, they may lose some money from U.S. Treasury bills, but there are much larger long-term considerations.

And I was trying to see what I think would be going on in Chinese minds as they receive Hillary Clinton. I see the combination of two or three factors. One, of course, they are very happy that she is coming to send a signal -- hey, Asia matters, China matters. And they welcome that.

And the other point that is also critical in Chinese minds is that they realize that we are all in the same boat. We have to get out of this big crisis. And the only way we get out of this is to work together.

And if that's the attitude of the United States, China will say, yes, we will cooperate with you to fix this.

ZAKARIA: Minxin, finally, Hillary Clinton comes back from Asia. Do you think that this, you know, that her trip will have in some way laid the groundwork for some shift in policy that the Obama people will put in place?

PEI: No, no. This is a symbolic trip, no substance attached to it. Well, if anything that will come out of this trip where China is concerned, I think is climate change, because she brought with her the top person on climate change, Todd Stern.

And if Obama wants to accomplish something in his first term that will be of truly historic proportion, an agreement with China on climate change will be it.

ZAKARIA: And on that note, Minxin Pei, Shekhar Gupta from New Delhi, Kishore Mahbubani from Singapore, thank you very much.

And we will be back.


ZAKARIA: Once again, last week's question garnered a huge response. And the question was: Are there any political heroes left in this country or anywhere else around the world?

One rule we stated at the outset was that you were not allowed to vote for President Obama. The rule upset a few of you, some of you because you thought it was presumptuous of me to assume you would write in Obama, some because you couldn't think of anyone else.

Two members of the U.S. Senate were essentially tied for third place, Democratic Senator Ted Kennedy and Republican Senator Arlen Specter. Both have many years under their belt in the Capitol. Both are seasoned political warriors. And both, coincidentally, are fighting battles against cancer.

Specter was often named by you viewers along with fellow Republicans Olympia Snow and Susan Collins for being the only members of their party to vote for the fiscal stimulus.

In second place, an answer we originally thought might get the gold medal, the answer "no one."

The winner, President Jimmy Carter, edging out all other presidents, congresspeople, Nelson Mandela, Aung San Suu Kyi and lots more.

My guest earlier today, Imran Khan, had a lot of supporters. I bet that after today's interview, he probably has a whole lot more.

Now, for this week's question. Secretary of State Hillary Clinton has returned today from her first trip abroad, to Asia. Where should she go on her second trip, and why?

I'd also like to recommend a book. It's called "Postcards From Tomorrow Square," by the Atlantic Monthly's James Fallows. It is a first-hand chronicle of the political and economic transformation in China over the last couple of years. Fallows lived in China for the last year, and his reports are eye-opening.

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

Thank you for watching. Have a great week.