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Fareed Zakaria GPS

A Fool's Errand Worth Pursuing; Is There New Hope for the Middle East Peace Process?; The New Great Game in the Arctic

Aired July 28, 2013 - 10:00   ET


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.

We've got a great show for you today. First up, is there new hope for peace in the Middle East or is it the same old dance? I've got key voices from both sides, Israel and Palestine, to find out why this time it's different.

Then, Wall Street wizard, Meredith Whitney, explains why Detroit is just the beginning and Dean Baker disagrees entirely.

Also, What in the World, we've located a new economic time bomb, except it's under ice. I'll explain.

And presenting the world's new superhero, it's not even a man. Get ready for feminism in a burka. All that and lots more up ahead.

But, first, here's my take. If you were to ask me what international problem is least likely to be resolved in the next few years, I would probably say the conflict between the Israelis and the Palestinians.

It takes no special insight to be skeptical on this. No one has ever lost money betting against the Middle East peace process. And yet I find myself cheering on Secretary of State John Kerry's efforts to revive talks between the two sides.

Now, the case for skepticism or realism is obvious. The Palestinians are dysfunctional and divided, with Hamas controlling Gaza and still unwilling to make any kind of deal with Israel.

For its part, the Israeli public has largely given up on peace, and new political groups, like those led by Naftali Bennett, flatly oppose a two-state solution.

But there are a number of forces that could push the parties to negotiate seriously. While Israel is thriving, many Israelis are unhappy with the prospect of having to rule over millions of Palestinians in perpetuity.

These concerns are heightened by growing efforts to delegitimize Israel in Europe, on American university campuses and elsewhere. On the Palestinian side, the most serious obstacle to peace remains Hamas, but it is in bad shape.

The group's popularity is declining and it is broke. Hamas' support for the Syrian rebels has damaged its ties to its two main patrons, Iran and Syria, which are, of course, facing their own problems (sanctions, insurgency).

And the new Egyptian government has cracked down with ferocity on smuggling into Gaza. And, remember, none of the thorniest diplomatic problems, the settlements, Jerusalem, actually involve Gaza at all.

So the Israeli government and the Palestinian Authority could come to an agreement and they could then present it to the people on both sides, Israelis and Palestinians, and see if the public at large supports a final deal even though some elements within both societies will, of course oppose it.

I know, I know, the thorny problems are really thorny and they have derailed talks in the past. It's easy to see how negotiations could be undermined by the reemergence of old disagreements and then leave both sides disappointed and bitter.

That's why these negotiations should be conducted out of public view, with no briefings ad keeping expectations very low. Not great for me to say that, but I think that makes sense.

Choosing to take on this issue might seem like a fool's errand, but there are some practical reasons to pursue it.

Unlike with the constant calls for the United States to somehow magically stabilize Egypt or stop the slaughter in Syria, this is actually an issue on which Washington still has enormous leverage, and there is a clear path forward where the Secretary of State's efforts could yield results.

And success, even modest, would clearly change the atmosphere in the region and in the wider Muslim world.

So let's give Kerry credit for using his political capital on one of the oldest, most intractable problems in international relations. I wish him very well.

But if I had to bet, well I guess I still don't like losing money.

Go to for a link to my Time column this week and let's get started.

You've heard my take. Now, let's hear from Israel's Ambassador to Washington Michael Oren, who's joining me. Welcome, Ambassador.

MICHAEL OREN, AMBASSADOR OF ISRAEL TO THE UNITED STATES: Thank you, Fareed, always good to be with you.

ZAKARIA: So, for a lot of people, this seems like a change of heart. There seemed as though there was this almost conflict between Washington and Israel where the Obama administration wanted Bibi Netanyahu's government to take the negotiations seriously, to enter into them. And, after four years of prodding, what changed?

OREN: Well, nothing changed much from our side. We were always ready to enter into negotiations with the Palestinians without pre- conditions.

That was the prime minister's position four years ago. It's his position today. We support a solution based on two states for two peoples, a Jewish state of Israel living side-by-side in peace and security and mutual recognition with the Palestinian state.

It was not the Palestinian position. The Palestinians had a number of pre-conditions. They were not willing to live in a situation of mutual recognition.

We recognize the Palestinians as a people endowed with the right of self-determination. They don't recognize the Jews as a people yet with the right of self-determination. We have to get to that spot.

What has shifted, I believe, is that the Palestinians may be considering dropping their pre-conditions and entering into serious talks on all of the outstanding issues, including borders, security, Jerusalem, and mutual recognition to reach that two-state solution once and for all.

ZAKARIA: That point about recognizing Israel, not simply recognizing Israel, which, of course, the Palestinian Authority has done for a long time, but recognizing it as a Jewish state is a condition that Prime Minister Netanyahu has put in place.

No previous prime minister, to my knowledge did it. Explain why that's so important.

OREN: Well, his position -- and also Tzipi Livni when she was conducting negotiations and Ariel Sharon as well. It goes back quite a way.

But understand that this is not a pre-condition. We understand. We're not asking the Palestinians to do this up front. We know it's not easy for them.

But when we say Jewish state, what does it mean? It means that the Jewish state is permanent and legitimate. We're not interlopers. We're not trespassers. We're not a transient state.

And it also means there'll be an end of claims and end of conflict. When you sign the dotted line, there's a real peace there.

It also means that when we come up to the question of the Palestinian refugees. And today in the Middle East there are about between 6 and 8 million descendants of the refugees form 1948 that those refugees who want to be repatriated, will be repatriated to the Palestinian state and not to Israel, which will remain the Jewish state.

It's predicated on having a Jewish majority. We only have 8 million people. You bring in 8 million Palestinians we don't have that majority anymore.

It's difficult for the Palestinians. We're not asking them to do it up front, but, clearly, at the end of this peace process the only true way to have a durable peace is on the basis of mutual recognition.

The Palestinians are a people. The Jews are a people. Both have the right of self-determination and the only way to make peace is to divide this land that we both claim as our homeland.

ZAKARIA: A lot of Israeli Arabs tell me that to describe Israel as a Jewish state essentially renders them invisible and they are, you know, 20 percent of the population by some counts.

Israeli has a state, Palestinians have a state. Why is it important that it be Jews?

OREN: Well, because the Jews are a people and we have a right to self-determination. There are about 193 states in the world, Fareed. Most of them are nation states; the Bulgarians, the Hungarians, the Germans ...

ZAKARIA: Right, but those are not religious categories. Those are national categories.

OREN: But Jew is also a national category and unlike countries like Denmark that have a national church, unlike Great Britain that has a national church, we don't have an official religion. We are a people and we are a nation state like most of the nation states in the world.

And many of those nation states, if not most of them, have ethnic minorities that are loyal minorities whose rights are respected. Some of them have an ethnic affiliation with another state.

It's very common, certainly in Europe. And there's nothing anomalous, nothing unusual about the arrangement which we're seeking.

ZAKARIA: Let's talk about the two thorny issues. I mean we've talked about one, in a sense, the refugees. But the ones that people often say are the thorniest are Jerusalem and the settlements.

Do you envision a settlement in which parts of Jerusalem are handed over to the Palestinian Authority so that they, too, can have Jerusalem or some part of Jerusalem be their capital in the way that Ehud Barak had presented to them in 2000?

OREN: Well, as you said, Jerusalem is a thorny issue and we're going to keep this according to Secretary Kerry's guidelines. We're not going to talk about the peace process openly.

And as our president, Peres -- Shimon Peres says, "There's two things you must never do in front of a camera. You shouldn't make love and you shouldn't make peace in front of a camera either." Only Shimon Peres could get away with saying things like that. So, Jerusalem is a thorny issue, but what Prime Minister Netanyahu has said, again, in front of Congress. He understands that the Palestinians have the position on Jerusalem.

Our position is that it should remain the undivided capital of Israel, but that with creativity and good will, we can solve the Jerusalem problem as well. So, let's leave it at that.

ZAKARIA: And settlements, are you comfortable with the idea that in a final deal significant Israeli settlements will have to be dismantled?

OREN: Again, I'll go back to what the prime minister said in front of Congress. We have to be realistic. We have to tell the truth to our own people.

And that is in the event of the creation of a Palestinian state, we will have to make painful territorial concessions and there may well be Israeli settlements that lie beyond the sovereign borders of the State of Israel.

We hope that Mahmoud Abbas, the president of the Palestinian Authority, tells the truth to his people that the Palestinian refugees will be resettled in the Palestinian state and that the Palestinian state is going to have to recognizing the legitimacy and permanence of the Israeli Jewish state.

ZAKARIA: Michael Oren, pleasure to have you on. Thank you so much.

Up next, the Palestinian point of view. Stay with us.


ZAKARIA: So, you've heard my take, you've heard from Michael Oren, Israel's Ambassador to Washington. What is the Palestinian side expecting?

We asked their official representative in Washington to join us, but the Palestinians say Secretary of State John Kerry has requested them to keep a low profile so they actually politely declined to come on the show.

So, I am not joined by a very distinguished Palestinian journalist, Daoud Kuttab. He is the columnist for Al Monitor, has written extensively for a number of Arab and Western papers and he joins us now from Amman, Jordan.



ZAKARIA: So, what is it that has made the Palestinian side agree to come back to negotiations?

For a long time, they said, you know, they wanted a settlement freeze. They were unwilling to get back to direct negotiations. What do you think changed?

KUTTAB: Well, I think the persistent of Secretary of State John Kerry, the support that President Obama has given to the idea of a Palestinian state on the '67 borders and the seriousness that the European Union has shown lately by declaring settlements not part of Israel.

These combined with the fact that the Israelis were a bit more willing to release some of the prisoners that were arrested and detained before the Oslo Agreement.

A combination of these things, I think, made it possible for the Palestinians to be willing to at least discuss the issues of the negotiations.

ZAKARIA: So, let me ask you about some of the thorny issues. And I asked Michael Oren about the -- you know, the requirement the Prime Minister Netanyahu has made which is that the Palestinian side recognizes Israel as a Jewish state.

Do you think this poses any obstacle for the Palestinian side/

KUTTAB: Well, the Palestinian side is the PLO and the PLO is seen as a representative of all Palestinians and that includes Palestinians who were left in Palestine when Israel was created.

The Palestinian citizens of Israel are not Jewish and so by declaring Israel a Jewish state, I think it's a slap to fellow Palestinians who are living in Nazareth or in Haifa or in the Negev.

So, it's an emotional issue and actually -- the feeling is that it would add to the discrimination against citizens of Israel who are not Jewish.

ZAKARIA: Do you think that on something like this there is room for some kind of compromise?

KUTTAB: Well, I think the whole issue of the Palestinian-Israeli conflict is one that has to be resolved obviously in private conversations.

If there is serious interest in a settlement that ends this conflict and there is a withdraw of Israel to the '67 borders, I think the Palestinian side is expecting and willing to make needed verbal and other compromises to allow the Israeli's to accept the creation of a two-state solution

We are neighbors with the Israelis. We want to be neighbors with the Israelis. This is not an attempt to create a religious war. We're trying to live in freedom. Forty-six years of occupation is a long time, Fareed, and Palestinians just want to be free in their own country on their own land.

The Jewish people are respected by the Palestinians, by the Islamic faith. There's no problem with the Jewish people. The question is whether the state of Israel is a state for its citizens or a particular religious group and I think this is where the problem is.

ZAKARIA: What about the issue of the right of return? Where will the Palestinian refugees go? Will they go to Israel proper or will they go to the new Palestinian state?

KUTTAB: The right of return, I think, has to be divided into two parts. The recognition that there is a historical and moral right for Palestinians to return and Israel needs to accept responsibility for the creation of the refugee problem.

Then, there is the issue of implementation of this right and I think Palestinians have shown that they are very cooperative and very willing to compromise on the issue of which Palestinians return to the Israel.

Most will not want to return to Israel, but want to return to the Palestinian state or remain where they are in a nearby Arab countries or maybe resettled in a third, you know, region.

So, there is possibilities for compromise on this issue. The big question is the borders. Where will the borders be? And whether the state of Palestine will be a viable, contiguous state that really is independent.

ZAKARIA: What about the question of Hamas? Here you have still Hamas ruling the Gaza Strip. They do not recognize Israel's right to exist.

They would not have -- a representative from Hamas would have said I think none of the things you just said in terms of moderation and spirit of compromise. Isn't that a problem?

KUTTAB: I don't believe the Hamas issue is a problem. Hamas has already agreed with the PLO that the PLO should represent the Palestinians in negotiations.

They've also agreed with the PLO that there should be some kind of a referendum where all Palestinians vote on the package deal that will be agreed upon between Israel and the PLO.

So, on this issue, I don't think it's going to be an obstacle to the talks. I think the big obstacle is the right-wing members of the Israeli government who are against the two-state solution based on the '67 borders.

On the Hamas side, they might say a few things against it, but at the end of the day most Palestinians, by pools, have shown that they are in support of a two-state solution.

ZAKARIA: Daoud Kuttab, thank you for joining us. Fascinating conversation.

Lots more ahead on the show including this, the world's latest superhero, a burka-clad Pakistani.

But, up next, What in the World. The great new frontier of conflict between China, Russia and the United States, it's the new Cold War. Well, maybe it's not a war, but it's very, very cold. I'll explain.


ZAKARIA: Now, for our What in the World segment. For anyone living in the Northern Hemisphere, it's been a sweltering few weeks.

In fact, last month was the fifth hottest June in recorded history, according to government data for 340 consecutive months, more than 28 years, the Earth has been warmer than historic averages.

Take a look at what's happening in one of the coldest parts of the world, way up north in the Arctic. Twenty-eight years ago, the Arctic was covered by ice throughout the year as it had been for centuries. Now, every summer two-thirds of it melts to water.

In 2010, only four commercial ships were allowed to sail the northern sea route which connects Northwestern Europe to Northeaster Asia through the Arctic. In 2011, that number rose to 34 and then 46 the next year.

This year, with five months to go, more than 200 ships have already been given the green light to sail. But is less ice and more water in the Arctic a good thing or a bad thing?

Well, there's little doubt that the melting ice exacerbates climate change. Nature Magazine published an important study this week calculating the impact of changes in the Arctic.

It found that the thawing of the permafrost beneath the East Siberian Sea is leading to the release of large amounts of methane. That means an intensification of the greenhouse gas effect and more extreme weather.

The study's models claim that the cost of all this is $60 trillion, almost the size of the entire global economy. Whether or not that's accurate, this is definitely something we have to deal with.

But the melting Arctic is also an opportunity. Nearly one-third of the world's undiscovered gas lies under the Arctic. There are also vast reserves of metals and minerals.

But how owns these resources? In 2007, Russia planted its flag 4,000 meters below the North Pole to establish its claim. Of course, in modern international relations that is not how you settle territorial claim.

In reality, no one owns the Arctic. Peace has been established by a group founded in 1996, the Arctic Council. It had eight charter members, including the likes of Canada, Denmark, Russia and the United States. Twelve more countries have joined since as observer states.

These new members like China, India and Singapore, have great interests in the region's resources even though they're geographically very far away.

Whether we like it or not, countries are going to be interested in any resources that exist in the Arctic and whether we like it or not, climate impacts are already underway. The important thing is to manage both aspects in a responsible manner.

That is not happening right now. And, meanwhile, the United States has fallen far behind. Russia, China and Canada have advanced systems to deal with navigating and policing these waters. American does not.

There is a treaty that regulates these things to some extent, the U.N.'s Law of the Sea Treaty. But while 164 countries are signatories, the United States is not.

Why? It is a familiar story. Disagreement and gridlock in Washington have made it impossible for the Senate to ratify the treaty despite the fact that it has the support of the last three presidents, Republicans and Democrats.

It is rare in this day and age to have a massive land or water that lies beyond the borders of settled international law. The Arctic waters are such a territory, a gray area of a million square miles and very important.

As it continues to melt, it will get more contentious and present more problems, but the United States will be out of the game unless the Senate can get off its -- well, unless the Senate can ratify this treaty.

Up next, Detroit has declared bankruptcy, but what then? I have a guest who says it's just the start of a wave of municipal bankruptcies and someone who totally disagrees.


MEREDITH WHITNEY, FINANCIAL ANALYST AND MANAGER, MEREDITH WHITNEY ADVISORY GROUP, LLC: Clearly, over the last couple of years, pensioners have been forced to make concessions be it in Rhode Island, be it in California, clearly now in Detroit.

And I think that that's a wave coming forward. There's just not enough money to go around.

DEAN BAKER, CO-FOUNDER, CENTER FOR ECONOMIC AND POLICY RESEARCH: Wave probably isn't the right word. I would say maybe a trickle.


CROWLEY: I'm Candy Crowley in Washington with a check of our headlines. Massive crowds have gathered on Rio de Janeiro's Copacabana Beach this morning to hear Sunday mass by Pope Francis. More than 3 million people are estimated to be on the fame Brazilian beach. This is the final day of the pontiff's trip to Brazil to mark World Youth Day. Francis who became pope in March has received a warm reception during his visit. In Libya, the search is on for nearly 1,200 inmates who escaped from a prison in Benghazi. Libya's prime minister says the prisoners went loose Friday after nearby residents stormed the facility because they don't want a prison in their neighborhood. About 18 inmates have been captured and a few others have surrendered.

A man has been arrested in connection with a New York boat accident that left a bride-to-be dead. 35-year-old Jojo Johns who was the operator of the boat has been charged with vehicular manslaughter and three counts of vehicular assault. An official says Johns was believed to be intoxicated at the time of the accident. The incident Friday on the Hudson River killed bride-to-be Lindsey Stewart. Her fiance's best man, Mark Lennon remains missing. Those are your top stories. "Reliable Sources" is at the top of the hour, but now back to Fareed Zakaria, GPS.

ZAKARIA: Last week, Detroit filed the largest municipal bankruptcy in U.S. history. But is it a one of or are there more such defaults to come? My next guest says we should prepare for more. Meredith Whitney is the famous financial analyst who predicted the banking crisis in 2007. She also predicted a wave of municipal bankruptcies in 2010. That, of course, hasn't happened yet. Her new book is "Fate of the States." Also Dean Baker, he is the co-founder of the Center for Economic and Policy Research. He, too, was the head of the (inaudible) predicting recessions in 2002 and 2007. Welcome. So Meredith, lay out the case as to why you feel that, you know, we're going to see another wave of Detroit-like bankruptcies?

MEREDITH WHITNEY, FINANCIAL ANALYST: OK, so it doesn't have to come in the form of bankruptcy, but it certainly will come in the form of default. So, the way I see it, and the way I saw it back in 2010, and to be clear, not that it would happen all at once, but it would happen over the course of several years. It was that these -- the towns, the local towns and municipalities are being cut off from funding by from just both the federal government as well as the states. That everybody's under fiscal duress. And so, these -- the local municipalities have to fend for themselves. Because there is not enough money, and because the situation has gone on, so that states have run deficits in more years than they have in other last decade. They were -- they are struggling. So, the one area in the Constitution where state and localities can cut from the budget is all of the things that we count on for social services. So, education, public safety, trash pickup, parks, libraries -- all of those things as a taxpayer, you feel adds to the value of your neighborhood and you think is a natural born right of paying taxes and living in this country. But effectively, because pensions and bonds have a constitutional backing that is greater than the social services that you pay taxes for, they have gotten cut first. And my point in all this, as the money runs out, taxpayers will start to say enough is enough, why am I taking serious sacrifices when the pensioner is paying -- being paid a hundred cents on the dollar, when the bond holder is being paid 100 cents on the dollar. So, what the trade showed you was, enough really was enough for Detroit. And everybody would have to make concessions. And I think, you know, clearly over the last couple of years, pensioners have been forced to make concessions, be it in Rhode Island, be in in California, clearly now in Detroit. And I think that's a wave coming forward, there's just not enough money to go around.

ZAKARIA: So, Dean, first let's just deal with this issue of, is this -- is this -- is there going to be a wave? In other words the magnitude of the crisis, isn't Meredith right when she says there's a whole bunch of metropolitan authorities, which are -- whose financial balance sheets look a lot like Detroit, maybe not quite as bad, but bad.

DEAN BAKER, CO-FOUNDER, CENTER FOR ECONOMIC AND POLICY RESEARCH: Well, we've (inaudible) the right word. I would say maybe a trickle. And we've already seen some. I mean there have been other bankruptcies, Jefferson County, we've had River Falls in Rhode Island, in -- there's been a couple in California, some smaller cities. We're going to see more of those, I mean there's no doubt about it, you do have some cities and municipalities that are in very, very bad shape, but I would say to a large extent we're actually through the worst of them in the sense of, you know, I'M not a big, you know, optimist about the economy, but no doubt, it is better today than it had been. And the other side of the equation, the financial markets, the stock market is coming back. So these funds do look better, so it's not to say that they are out of duress, but they have been in the worst.

ZAKARIA: The stock market is better, so these pension funds are going to have better returns so the balance sheets won't look as bad?

BAKER: Yeah, typically, they run 70 percent in equities, in one form or another, and they took a very bad hit like everyone else when the market plunged in 2008-2009. That's coming back, obviously, so that is improving their finances, which doesn't mean they're out of the woods at all, you still have a lot of underfunded pensions, no doubt about it. But things are on the whole looking better, as they come 2013-2014, than they did in 2010, 2011. So my expectation is, you know, I would be surprised that there is another incident. But, you know, I don't think we're going to see a tidal wave. I think, you know, again, some trickles. And again, it's very much, I don't think this is creating -- it's very much a political decision, you are going to have people saying, no, I don't want to pay these people. But on the other hand, obviously, the workers themselves, and also, I think there's a lot of sympathy for the workers. I mean they've worked for this. You know, so that was part of the contracts. So, I'm not convinced there will be a lot people saying that ...

WHITNEY: I don't think it's anyone -- that anyone is disputing that the pensioners are asking for things that they didn't believe that they were promised. Right? It's not the pensioners' faults, right? It was the politicians that promised things that they knew they couldn't deliver and they would be out of office before it actually -- the deliverability was met. So, there's no accountability. It was a classic system of patronage and buying votes. And the consequence is really sad for pensioners that are not going to get 100 cents on the dollar and are not going to have to make adjustments. The consequences bad for everybody, for, you know, the most tragic ...

ZAKARIA: ... about that one point, because I think that this is at the heart of it, it seems to me. If these politicians decided that one of the ways to get votes was to be nice to public sector unions. The unions asked for wage increases. The politicians say no, I don't want to give you a wage increase, that'll show up on my balance sheet, my budget this year will promise you stuff that you're going to get in the out years when I'm happily retired and, you know, on MSNBC, Fox or CNN commenting, that's when you're going to get it, pension increases, health care benefits. Isn't that a kind of corrupt deal that was being made?

BAKER: Well, I think the big issue is transparency, you know, because if you look at the total package, and then the number of studies my center has done some -- a number of others have done it, and public sector workers in general, when you are just for age and education, they are (inaudible) paid, sometimes they are even less paid than same educated, same experience in the private sector. So it's not as the public sector workers were making off like benefits (ph). No, it is true that they tend to get less in wages, more in benefits. And again, I think the issue here is more transparency, as long as that's on the table, that's fine.

WHITNEY: I would -- I would -- yeah, respectfully disagree. There wasn't transparency on pensions until 2009. And we had no idea how states had -- two thirds of their liability, so two thirds of what you're ultimately going to pay as a taxpayer off balance sheets. You had no idea what was at risk when you moved into a state, moved into a neighborhood. And that is only going to get worse next year when the accounting principles for states make things even more apples to apples, so I think things are actually much worse than they seem. And the problem is, yes, the U.S. economy is coming back, but not in the areas that are under the most fiscal duress. So, the U.S. economy coming back certainly didn't help Detroit and the U.S. economy coming up certainly doesn't help Stockton, it doesn't help so many areas that were blighted by the housing bust and blighted by just years of corruptions, sometimes decades of corruption.

ZAKARIA: Let me ask the question about what the effect of all this is, you know, if Detroit does scare people into settlements, whether or not they're fair or not. At the end of the day, does it mean crisis averted? Because we will have a wave of settlements rather than bankruptcies?

WHITNEY: Here is the issue. Crisis can be averted through a number of things I discuss in my book. Which is, we are so grossly behind the rest of the world in terms of public/private infrastructure. So, we as a country, have a lot of stuff to sell. And remember in Europe, in the 1990s when they privatized so much of their infrastructure, and flying into Madrid is a very different experience than flying into La Guardia or in Newark, sorry. But the point being is that there are a lot of options on the table, they require political will, which we are, you know, sadly at a great deficit of.

ZAKARIA: Do you worry about, you know, the kind of macroeconomic effect here? You do think?

BAKER: Well, I don't worry about the macro, it's a negative in the sense that we're in a period right now where we really need demand in the economy. We're likely to continue to see that over the next few years. Which is again, one of the reasons where I find this kind of, you know, really silly, though. We're in a situation where people are suffering, when the best think you could do is throw more money out there. Being a little factitious here. You don't want to just literally throw money out there, but the reason the economy is suffering is we have a lack of demand. So, the fact that we're letting pensioners possibly see large chunks of their retirement income disappear at the time when in principal, there's plenty of money there, is to my mind, really ...

ZAKARIA: It's a good point.

WHITNEY: I just see things very differently. First, the economy that there is great demand. You have banks in Arkansas that have loan demand and they are growing loan balances by in the high teens. And then you have areas where there's no demand because there's high structural unemployment. So it is a really, it's a tale of two very different countries under one umbrella. So, extremely strong growth in states like Texas and up to North Dakota and the central corridor, and really hard times in other parts of the area that have high structural unemployment and the only thing to break that cycle of unemployment or poverty, worst-case scenario, is job creation and there's not enough money to retrain and retool the workforce that's there. But there's plenty of money in the areas where there's low unemployment. And so I think that we're in the process of rebalancing as a country, and things are going to get better in certain areas and worse in other areas.

ZAKARIA: Dean Baker, Meredith Whitney, pleasure to have you both on. Up next, what makes a great president? How much of it is genetic? My next guest is giving this a lot of thought. Harvard's Joseph Nye, stay with us.


ZAKARIA: What is more important in an American president? That he has a great transformative vision or that he be good at getting things done? Or she, by the way. My next guest has given this topic a lot of thought. Joseph Nye is one of the great minds of American foreign policy, he is a political scientist at Harvard University, he has a new book called "Presidential Leadership and the Creation of the American Era." We had a great conversation about it, listen in.


ZAKARIA: Joe Nye, thank you for joining me.

JOSEPH NYE: Nice to be with you.

ZAKARIA: When looking at this book, you focused specifically on presidential leadership and foreign policy. And you point out that when Obama campaigned for office, he had almost no foreign policy experience. One might have thought he was going to be a big transformational president. Why?

JOSEPH NYE, AUTHOR "PRESIDENTIAL LEADERSHIP & THE CREATION OF THE AMERICAN ERA": Well, he certainly talked about big transformations in the campaign in his first speeches, when he was speaking at Cairo, Oslo, Prague, so forth. He has turned out to be far more a transactional and prudent rather than transformational.

ZAKARIA: Make the distinction. What do you mean by a transformational president, on the one side, and transactional presidents, on the other side?

NYE: Well, the categories are a bit extreme, but on the one side, you have people like Woodrow Wilson or Ronald Reagan who make great announcements, want to change the world. And transactional presidents like Eisenhower or George H.W. Bush, basically, are managerial prudent, keep the train from derailing. Those are the two extreme types and many leaders are combinations of the two. But I think in the 21st century, we had a first president, George W. Bush, who was largely transactional in the campaign, became transformational after 9/11.

ZAKARIA: Because after 9/11, he wanted to do big things.

NYE: He was going to change the Middle East, democratize it, and under Obama -- he was much more transformational in his rhetoric and in his first year, but give the realities of the world, he turned out to be much more prudent and managerial. So, in some ways, he was more like the first Bush -- Bush 41, than Bush 43.

ZAKARIA: Which is better? Which is a better president to be?

NYE: Well, I think you'd like to see both. As I have a joke in the book, in which (inaudible) some genetic engineer in the future may be able to combine that managerial skill, with the transformational goal. You know, put a Woodrow Wilson vision into a George H.W. Bush body for management. But at this stage, we know that since the two Bushes shared half of their genes, nature hasn't solved the problem. So we would like to have some of both, but it's a hard combination.

ZAKARIA: But you -- you point out that the surprising thing is that while one is attracted to the rhetoric of the transformational president, when you look at the record carefully, it's often the pragmatic guy, who actually has a pretty good set of accomplishments at the end of his tenure.

NYE: Woodrow Wilson had a wonderful vision, get away from the balance of power, make world safe for democracy. He couldn't implement it and it led to a mess. Isolation (inaudible) the '30s. If you compare that with George H.W. Bush, he used to say I don't do the vision thing.

And yet, in 1989 when the Berlin Wall went down, and people said to him, you should, you know, really, make a lot of political capital about this. He said, no, I'm not going to dance on the wall. I'm not going to isolate Gorbachev. Instead, he met a month later with Gorbachev at Malta, began a process of careful negotiation, which led to an amazing change. Instead of a Germany and Europe divided right down the middle, with three and 400,000 soviet troops heavily armed in the east, what you had by two years later, was a united Germany inside NATO and not a shot being fired. That's real -- that's management.

ZAKARIA: I was struck by Eisenhower in the book, and I've been struck myself by the parallels between Eisenhower and Obama in that they're both very restrained. There were a lot of calls in the 1950 for Eisenhower to get involved in the Suez, in Vietnam, in Taiwan. And he resisted them. And Obama seems to have that same discipline.

NYE: Eisenhower when he was asked to help the French with (inaudible) and the Vietnamese that surrounded the French outpost. He said if I send my troops in there, they'll be swallowed up by the divisions. And even though he had strong views, he was not going to take that kind of risk. He also made another decision, which a year later, in 1955, which I call a non-event, the chairman of the Joints Chief of Staff came to him and said we're going to have to use nuclear weapons against China because we otherwise can't defend the islands of Quemoy and Matsu. And I said, my god, you boys must be crazy, we can't use those awful things against Asians again in ten years. Imagine that he had. What kind of ...


NYE: If he had used nuclear weapons, we'd live in a very different world today and if Douglas MacArthur, another World War II general who also wanted to be president in 1950s, if he had been president, he would have used them, because he had (inaudible) and he used them in Korea.

ZAKARIA: With this -- with this background assess Obama's foreign policy.

NYE: Well, I think you're right, Obama has some of the skills of Eisenhower, which is that he's trying to improve things at home, which was a high priority for Eisenhower, he's trying to be quite careful not to get embroiled in things abroad, which is going to will derail his presidency. When he has acted as he did in Libya, he waited until he had an Arab League resolution in a -- U.N. resolution to make sure he had the legitimacy of soft power to go with a hard power of the no fly zone. And then got the Europeans to help participate and use the hard power. That's combinations is what we call smart power. I think he's done pretty well.

ZAKARIA: Joe, my pleasure to have you on.

NYE: Nice to be with you.

ZAKARIA: Up next, we tend to see the burqa as something that is oppressive. Well, one girl has turned it into an asset. It's her superhero costume. When we come back, I'll introduce you to the burqa avenger.


ZAKARIA: This week Pope Francis made his first trip abroad to the country with the most Catholics in the world, which is Brazil That brings me to my question of the week. The previous pope, Pope Benedict took his first trip abroad as pontiff in 2006. Which country did he visit? A, Mexico, B, Germany, C, the United States or D, Poland. Stay tuned, we'll tell you the correct answer. Go to for more of the GPS challenge and lots of inside analysis. And also, you can follow us on Twitter and Facebook. Remember, you can go to If you ever miss a show or a special. This week's book of the week is "Wealth and Power: China's long march to the 21st century" by Orville Schell and John Delury. I know there are lots of China history books these days, but this one is really well done. It tells the story with lots of interesting historical characters and deep insights into the country. Really worth reading.

Now for the last look, remember Malala Yousafzai, she is the 16- year-old Pakistani who was shot by the Taliban for promoting girls education. But she bravely recovered to continue her fight. Well, she has another ally now. Another supergirl like her. Meet the burqa avenger. A new animated series that debuts on Pakistani TV next month. The hero's a young girl. She wears the burqa not as a sign of oppression, but as a ninja-style costume to keep her identity secret. Each episode has a moral payoff and she uses her karate skills to fight off corrupt politicians and evil magicians, or maybe the Taliban, it looks like. The series has the backing of top Pakistani singers who perform in each episode.

It is said that women are the stealth reformers of Islam. In Pakistan, now they have the help of the Burqa Avenger. The correct answer to our "GPS Challenge" question was B., Germany, Benedict visited his home country first. As with Pope Francis this week, he was marking World Youth Day. I found it interesting, they look at the countries with the most Catholics. Brazil is number one, then Mexico, the Philippines, the United States.

Italy is the first European country, but in fifth place, with 49 million Catholics. Thanks to all of you for being part of my program this week, I will see you next week, stay tuned for "Reliable Sources."