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Fareed Zakaria GPS

The World in 2016; Interview with Former Ambassador Sawnee Hunt; Interview with Author Mariana Mazzucato. Aired 10-11a ET

Aired January 03, 2016 - 10:00   ET



Welcome to all of you in the United States and around the world. Happy new year. I'm Fareed Zakaria coming to you live from New York.

We will spend much of the hour talking about the year ahead and what it might bring. In the battle against ISIS and the struggle to find new homes for refugees. In the American presidential race and its swirling controversies. In the West, chilly relations with Russia. In the United States and the world's economies, China, India, Africa, much more.

Also, do you need a little nudge to pay your taxes? A push to not spend all your money? A little help being honest? Well, the U.S. government is here to help. Is that good news or is it big brother? We will explore.

And women waging peace. Why the way to end much of the fighting, the battles, the skirmishes around the world may be the almost 50 percent of the population that has more interest in peace than war -- women.

But first, here is my take. 2016 will bring with it the usual share of surprises and new trends, but there is a striking piece of social science research unearthed last year that will continue to shape the conversation next year and beyond.

We've had one of its authors on the show recently, the 2015 Nobel Laureate in economics, Angus Deaton, authored a now famous paper with Anne Case. As you know, for decades people in rich countries have been living longer lives, but Deaton and Case found that over the past 15 years, one group, middle-aged whites in the United States, are dying in increasing numbers and things look much worse for those with a high school diploma or less.

The "Washington Post's" Jeff Guo notes that people who make up this cohort are largely responsible for Donald Trump's lead in the race for the Republican nomination for president. Now there are concerns about the calculations, but even a leading critic of the paper has acknowledged that however measured, the change compared to other countries and other groups is huge.

The key question is why. Why is middle America killing itself?

Exploring it provides answers that suggest that the anger shaping American politics will only get worse. The main causes of the increase are as striking as the fact itself, suicide, alcoholism, and overdoses of prescription and illegal drugs.

As Deaton told me here on GPS, people seem to be killing themselves slowly or quickly. These circumstances are usually caused by stress, depression, and despair. The only comparable spike in deaths in an industrialized country took place among Russian males after the collapse of the Soviet Union when rates of alcoholism skyrocketed.

A conventional explanation for this middle-class stress and anxiety is that globalization and technological change have placed increasing pressures on the average worker in industrialized nations, but the trend is absent in any other Western country. It is an exclusively American phenomenon, and the United States is actually relatively insulated from the pressures of globalization having a vast self- contained internal market.

Trade, for example, makes up only 23 percent of the U.S. economy compared with 71 percent in Germany. Part of the answer, Deaton believes, is that in the United States, doctors and drug companies are far too eager to deal with physical and psychological pain by prescribing drugs, including powerful and addictive opioids.

But why don't we see the trend among other American ethnic groups? While mortality rates for middle-aged whites have stayed flat or risen, the rates for Hispanics and blacks have continued to decline significantly. These groups live in the same country and face greater economic pressures than whites. Why are they not in similar despair?

The answer might lie in expectations. Princeton anthropologist Carolyn Rouse suggested in an e-mail exchange that other groups might not expect that their income, standard of living, and social status are destined to steadily improve.

[10:05:10] They don't have the same confidence that if they work hard, they will surely get ahead. In fact, Rouse said that after hundreds of years of slavery, segregation, and racism, blacks have developed ways to cope with disappointment and the unfairness of life through family, art, and protest speech, and above all, religion.

The Hispanic and immigrant experiences in the United States are different, of course, but minorities by definition are on the margins. They do not assume that the system is set up for them.

The United States is going through a great power shift. Working-class whites don't think of themselves as an elite group, but in a sense they have been, compared with blacks, Hispanics, native Americans, and most immigrants. They were central to America's economy, its society, indeed it's very identity. They are the world of the greatest generation, but the world has changed. The economy has changed. America has changed.

Donald Trump is talking to this demographic when he promises that he will take charge and make them win again, but he can't. No one can. And deep down they know it.

For more, go to and read my "Washington Post" column this week, and let's get started.

So how in the world would the wild story of the 2016 presidential campaign end? Will Trump or Clinton be the next leader of the free world or somebody else entirely? Will ISIS be defeated in 2016? The Iraqi P.M. says his forces will do just that in the coming year. Also events in the last few days suggest that tensions between Iran and Saudi Arabia will ratchet up in 2016. Will that cold war become a hot one?

And speaking of cold wars, what of the U.S.-Russian relation? Will they further sour or will they improve over Syria?

Joining me now to discuss all this, Anne-Marie Slaughter is the president and CEO of New America. She and Richard Haass are both former directors of policy planning at the State Department. He is, of course, now the president of the Council on Foreign Relations. And Ian Bremmer is the president of the Eurasia Group, an international risk consultancy.

Richard, let me ask you, the big trend it seems to me, certainly, you know, one of the dominant trends, I would argue maybe ends up being the big trend of 2016 is going to be the continued weakness of oil prices, the collapse of commodity prices, and what this does in the world. I mean, the last time you had such a dramatic decline of oil, the Soviet Union collapsed and the cold war ended.

What's going to happen this time?

RICHARD HAASS, PRESIDENT, COUNCIL ON FOREIGN RELATIONS: Well, first thing to say is it's likely to endure for the year. The one exception, and you mentioned it in the introduction, Fareed, could be major instability involving Saudi Arabia. We'll get back to that later I expect.

Assuming though it does last, it obviously is an uneven effect. It hurts the producers, the Saudis, the Iranians, Venezuelans, the Russians, and so forth. For other countries like India, where you've just been, it's a boon. It actually contributes to the economic growth. For a country like China it should help but it really doesn't because China has its own internal economic problems about adjusting its economic model.

The United States it's a mixed blessing. On one hand, it's probably a bonus of, what, $1,000 a year nearly to every American family, given lower fuel prices at the pump. On the other hand, big parts of the country, which are dependent on oil production and the economic spillovers from that are hurting.

By and large, though, for the world it's a major downer. It's hurting Africa, it's hurting Latin America. All things being equal, it's a major blanket on world economic growth and as a result it probably feeds into political uncertainty.

ZAKARIA: And what, Anne-Marie, is that political uncertainty? What happens, for example? I mean, Brazil could implode with this collapse of commodity prices. Venezuela could implode. And then you have the Middle East where Iran needs high oil prices, Iraq needs high oil prices, Saudi Arabia needs high oil prices.

ANNE-MARIE SLAUGHTER, PRESIDENT AND CEO, NEW AMERICA: Yes. Well, I'll start with the Middle East and actually with an optimistic prediction because I think we are going to see a settlement of the Syrian civil war this year.



SLAUGHTER: I think we got a little -- disagreement, but I really do think that Russia and Europe and the United States and the parties in the region will get a settlement, but I'm going to predict that Turkey is going to be a bigger obstacle to that settlement than Russia because the only way to get a settlement is to have a kind of federated Syria where effectively the Kurds have their region, the Sunnis have their region, and others, and for Turkey that's going to be a huge problem.

[10:10:04] So we're -- we need the Kurds, the United States needs the Kurds and others do, to defeat ISIS, but at the same time if you give the Kurds too much autonomy, that's a huge problem, but I'll start with that.

ZAKARIA: But this is fascinating. So the big problem in settling Syria will not be Iran, our enemy, but Turkey, our ally.

SLAUGHTER: Absolutely. Because the Turks really are caught here. If the Kurds in Syria get as autonomous, essentially a proto state, then they have a proto state in Iraq already and then in Syria and of course Erdogan's relations with the Kurds in Turkey which started out well have now completely nosedived and he's got a huge problem with really the Kurds finally close to having Kurdistan which is what they always wanted.

ZAKARIA: What do you think is going to happen?

IAN BREMMER, PRESIDENT, EURASIA GROUP: Look, there's no question that at the end of 2016 the trajectory of U.S.-Iranian relations will be better than the trajectory of U.S.-Saudi relations. So in that regard, I agree that Iran will not be perceived as the biggest thorn necessarily in the region. But in order to get Syria resolved you need to have both leadership, you need to have people that actually care, and you need to have the ability to coordinate.

We lack in various capacities all three of those things. The Americans still don't care enough, the Europeans are still much more focused on their own individual and national problems, and in the region, as we see very violently right now, the Iranians and the Saudis could not be farther from each other either in Syria or anywhere else in the Middle East.

So while I agree that there's going to be more headway on a political process to talk about what a federated Syria might be, the ability to actually execute and get the powers in the region to come to terms with each other, which would be required, we're going to be much farther away from that in 2016 than we are in 2015.

Your issue on oil prices being under pressure, that puts the Middle Eastern countries, all of these governments, under so much internal pressure, more likely to play nationalism, more likely to focus on their own internal security. None of those things bode well for peace in the region.

ZAKARIA: Richard, you said to me that you thought the most underpriced risk in the world today is Saudi Arabia, meaning I presume that with this weakness of oil prices, worst Saudi Arabia to start having kind of instability, all bets are off.

HAASS: I agree. It's low oil prices. The Saudis are basically doing what I would call their Vietnam in what they're doing in Yemen, a major case of strategic overreach. You've got simmering or worse than simmering rivalries inside the Saudi royal family. You've got the structural problems inside Saudi Arabia. Now the beheading of Sheikh Nimr, a prominent Shia cleric. The reaction -- it's poisoned what already was a terrible relationship with Iran. It's exacerbated the Saudi position in Bahrain. Go on and on and on.

But I got to tell you, Fareed, I almost feel like we're seeing a fuse lit in the Middle East, and I disagree with Anne-Marie about Syria. I wish she was right, I'm afraid she's not. But yes, I keep using the metaphor of the 30 years war. I actually think we're seeing elements of, it and I think we're going to see ISIS possibly rolled back a little bit in Iraq. I don't think they're going to be rolled back in Syria, but they're going to, I believe, see Saudi Arabia as an extremely ripe target.

So my guess is Saudi Arabia could next -- could become the next major battlefield of this larger play, so you could have the Shia-Sunni conflict and the Persian-Saudi conflict coming to a head there. To me it's the biggest question mark over the fate of the world for the next year or two, is what's going to happen in that space.

ZAKARIA: Can I just ask you, you can respond, we've got a minute? Is Russia going to be more likely to do a deal in Syria in your view because oil prices are going to pressure Russia and will that affect Ukraine? Now those -- is Russia going to be playing nice?

SLAUGHTER: I do think Russia is going to be playing nice but not just because of oil prices, but because Russia can't handle casualties. As the casualties rise, Putin really --

ZAKARIA: In Syria. Yes.

SLAUGHTER: -- gets in trouble domestically. First in Ukraine and now he's made a deal and then in Syria. But the other thing is, I've been the one who has been, you know, the Cassandra on Syria for the last three years saying it's going to get worse, it's going to get worse. I've agreed it's like the 30 years war. The two things that are different now are refugees and ISIS.

So Europe, for instance, is now completely focused on getting a settlement because of the refugees, and everybody else is focused on ISIS and knows we have to solve Syria to be able to fight ISIS.

ZAKARIA: All right. On that cheery note we're going to -- we'll come back with this great panel and we're going to talk about the 2016 presidential race.


[10:17:43] ZAKARIA: And we are back with Anne-Marie Slaughter, Richard Haass, and Ian Bremmer for our predictions panel. This one is going to be easy.

Who is the Republican nominee going to be? Who's the Democratic nominee going to be? And who's going to win? Who wants to start? Ian?

BREMMER: Not Trump. I didn't believe it before, I don't believe it now. 2015 was the year of Trump, I don't think we'll say that in 2016. His ability to channel media excitement in a two-year, $10 billion race is unprecedented in American history, but ultimately as you say in your "Washington Post" column, he's going after the losers, and historically in the United States losers don't vote, and there's no question that, you know, that the fact that they're being depressed, the fact that the middle class is eroding makes it more likely that anger is going to rise to the top but not enough to get him the nomination.

Ultimately these people can't just be angry, they can't just do ratings, they have to go to the polls. I don't think that's going to happen. So that means it's either Cruz or Rubio on the Republican side. I'm probably leaning a little bit more Cruz than Rubio but not much. And on the Democratic side I don't see any challenge that's serious to Hillary.

ZAKARIA: And who wins?

BREMMER: You know, I think it's too far away. I mean, for me it's kind of a coin flip. I think there's so many mistakes to be made, so many scandals that we still haven't heard about. Hillary is certainly very competent, more experienced, but also a really horrible candidate, and we don't know who the Republican side is going to be, and so for me it's a coin flip.

ZAKARIA: Anne-Marie, you obviously want Hillary Clinton to. You work for her.

SLAUGHTER: Personally.


SLAUGHTER: As the head of my organization, I'm nonpartisan, but, yes, I mean, I think it's going to be Clinton versus Cruz. I think it will be Clinton winning. I think the worst the world gets, the more people really do want someone who knows the names of all these leaders, who's talked to them, who projects competence even if not always excitement.

But I'll also say something else. I think a Cruz-Clinton election is incredibly good for America's soft power in the world. It's like the "Force Awakens," right. It's the new "Star Wars" versus the old. Suddenly America's election is between a woman and a Hispanic man, and regardless of what you think of their specifics, what the world sees is a new America.

ZAKARIA: What do you think?

[10:20:02] HAASS: Again, on the Democratic side, likely to be Hillary Clinton, but if you look at the most recent fundraising statistics for Bernie Sanders, not just the large amount, but how distributed it is, it suggests to me the Democratic race could be longer and tougher than the conventional wisdom has so I still think Hillary Clinton prevails. But the word might be prevail rather than win easily.

On the Republican side I'm not known for my modesty, Fareed. I have been wrong more often in the last six months than I've ever been. So tough but, obviously, I would say, you know, Cruz, Trump, Rubio are the three most obvious but that leaves out Bush, Christie, and Kasich. I think there's room for one of them. New Hampshire has become the turning point in the Republican race.

ZAKARIA: You mean one non-Trump. Yes. Or you mean --

HAASS: No --

SLAUGHTER: One moderate.

HAASS: One someone who is, quote-unquote, "centrist," establishment, whatever word you want to use. So I think everyone is basically saying Cruz wins Iowa, so that's kind of off the table. But New Hampshire now has become the place where it's all going to be determined, and there's probably two or three other tickets out of New Hampshire to face up against Cruz in South Carolina and the other states. So I think it's probably Rubio. I think it's probably Trump, and I think it's one other, Christie, Bush, or Kasich.

ZAKARIA: And what happens in terms of, you know, looking at growth and America's prosperity? I mean, for all its problems the United States has really dominated the recovery since the Great Depression.

Somebody pointed out to me that the stock market under Barack Obama has compounded at 14 percent a year almost, which is -- it may be the longest, strongest bull market in history. I haven't double-checked it but certainly very, very strong. It can't quite go on. I mean, it's been six, seven years. You normally have a recession. China is in recession. Europe is going nowhere. The emerging markets that are oil producers are off a cliff.

What happens to growth in 2016?

BREMMER: Well, I mean, I think that growth -- the IMF just reduced their 2016 expectations for growth a couple ticks and that's not a surprise given everything we're talking about. And there's going to be a lot of fat tails geopolitically that are going to start have market impact. We've talked about some of them already.

ZAKARIA: Explosions in places like Brazil or Venezuela.

BREMMER: Or Saudi or whatnot. But I think if you look at where economic growth is going to be in 2016, recessions -- you have many Larry Summers and others saying recessions come every six to seven years on average. We're kind of increasingly due. But China is the big mover here. It's the most volatile, it's the most uncertain. It's also the country where the government has by far the most tools to kick the can down the road if they want to, and they do. They really want to forestall that instability.

So what you're going to see coming out of China is much more state intervention if markets start looking softer, which means that globally we should actually expect that that six to seven-year average actually becomes longer but when recessions hit, they get much longer.

ZAKARIA: We'll muddle along. We've got 90 seconds each of you.

Anne-Marie, what do you think on China and the world?

SLAUGHTER: So first thing is I think this is the year the Transpacific Partnership is going to go through. I think the trade pact will go through. And the reason is because, again, it's going to be seen in more of a security context than an economic context. ISIS helps there. China is maneuvering in the South China Sea helps there. So I think we're going to see that go through. I also think the dollar is just going to rise and rise and rise. China instability, the euro, who knows what's going to happen with the eurozone, so strong dollar and trade going through.

ZAKARIA: Thirty seconds.

HAASS: I think that's a better prediction than your Syria prediction. I think we do have a better chance on TTP. I think also that one piece of good news also in the United States is Speaker Ryan and the ability to get a budget through. Actually the year 2015 ended on a positive note both in the substance and in the appearance that the United States can at times function. And I thought that was an important reality as well as an important message to the world.

ZAKARIA: Amazing, at the end of the day the United States always somehow muddles along and kind of looks better than everybody else even though, you know, we beat up on it all the time.

Thank you. Fascinating panel.

Next on GPS, should the U.S. government be in the business of nudging its citizens using psychological tricks to get the American people to do what it wants? Well, believe it or not, it is doing just that. Is big brother -- is it big brother or good government? We will explore.


[10:28:12] ZAKARIA: Now for our "What in the World" segment. Corporate America has spent decades studying human psychology to get an edge in the marketplace, whether it's placing junk food at the grocery store checkout line or placing ads on TV at just the right time of day, but what if government could use similar strategies to improve how it operates? To help more students get into college, improve services for the military, or get more people to sign up for health insurance.

In fact, the Obama administration has a new group that's trying to do just that -- the social and behavioral sciences team, a group of experts that's leveraging psychology to make government work better. It's a variation of Britain's behavioral insights team, the nudge unit, all inspired by new research in behavioral economics.

The team which started in 2014 launched a series of trials over the last year or so to see what tricks of their trade might help Uncle Sam, and their results were released this past fall. Most were successful by the group's count showing smart ways to improve government at little to no cost. For example, as the report points out, around 1 in 5 students in urban areas who are accepted to college don't actually end up going in the fall simply because they don't fill out the necessary paperwork.

So the White House team had specially designed text message reminders sent to students and their parents. The message worked. According to the group's analysis, enrollment among the more low-income students increased by almost 9 percent.

Another way to persuade people to get something done experts say is to show them a concrete set of steps to follow. E-mails using that approach to encourage the military to sign up for a Workplace Savings Program nearly doubled the enrollment rate.

Another effective way to motivate people is to have them agree to a specific time to complete a task. Messages using that strategy spiked enrollments in the federal health insurance marketplace over

[10:30:00] seven times as much as the e-mails that did not include a timeframe. Smart psychology can even improve our government's integrity. A signature box was added near the top of an online payment form that government contractors have to fill out to confirm the accuracy of their sales reports.

That small tweak led to over 1.5 million additional dollars in self- reporting fees collected in a single quarter. These initiatives may be relatively small so far, but applying behavioral sciences to government has enormous potential. Psychology is relevant anytime Americans do business with their government, notes Maya Shankar the White House agency's senior adviser. In September, President Obama signed an executive order encouraging agencies to get closer to the behavioral sciences research community and recruit experts to join their ranks. Some were concerned that such government efforts to manipulate people's minds smack of George Orwell's Big Brother. Richard Taylor, the co-author of the book "Nudge" and an expert on such practices agrees that we should be wary of that possibility, but as long as the nudging is transparent, easy to opt out of, and good for our welfare, he says, we should embrace it.

Using psychology to improve government is a smart and cheap idea, one that should easily get bipartisan support. Now all we need is some psychological mechanism to nudge politicians to be less partisan in Washington.

Next on "GPS," as we learned in the first half of the show, peace is in a short supply around the world these days, so just what can we do to change that? Well, how about bringing more women into the peace process? It works. My next guest will give you the evidence that it works.



ZAKARIA: With all of the conflict going on around the world, people are searching for the path to peace. While my next group of guests say it might be staring us in the face, and the answer is half the world's population, women. Sawnee Hunt was appointed ambassador to Austria by President Clinton in 1993. At the time the nearby Balkans was ablaze. Hunt was a key player in America's diplomatic efforts to find peace there. She hosted two rounds of negotiations at the embassy wondering why the parties were having such problems coming together. Then on a trip to Washington, Ambassador Hunt had a revelation. I'll introduce you to Hunt's colleagues in a moment, but she picks up that story right here.


SWANEE HUNT, FORMER U.S. AMBASSADOR TO AFRICA: We go to the White House, and it's time for the signing, and in comes the presidents Izetbegovic, in comes president Tudman, in comes president Clinton. And I turn around and I look in the auditorium and it is a sea of gray suits. Now, the interesting thing is that I, who care a whole lot about the importance of women, I didn't see it.

ZAKARIA: You didn't notice it until then.

HUNT: This is a failure story. And I thought how on earth -- and it's because I was looking through a lens called security. I wasn't looking through gender, so I completely missed why these negotiations, these peace talks turned out to be really flawed. So I went to the U.N. for a meeting and I asked this U.N. official, why aren't there any women now in the peace talks in these different countries in Africa? And the U.N. official said to me, you know, Master Hunt, the warlords won't agree to have women, and I said, well, why not? And he said because they're worried the women will compromise.

ZAKARIA: Interesting.

HUNT: And a lightbulb went off in my head, and I discovered after gathering 100 women from ten conflict areas that, in fact, they told one story after another, after another, after another of how they were working across lines.

ZAKARIA: In fact, it was true. The women would compromise.

HUNT: That's right. But the problem is we're so used to negotiations where let's bring together the killers and they'll put the guns under the table and you can have the diamonds, you can have the oil, you can have the timber, and that's called a peace agreement put together by people who have no experience or even interest in having peace. So if you add more chairs, you have got to have them around the table, add more chairs, have the women, have others in the community who wouldn't be allowed, and you get a different agreement that lasts.


ZAKARIA: Ambassador Hunt brought to our studios two women who personify what she calls women waging peace. First I want you to meet Alaa Murabit, a Canadian-born woman of Libyan heritage who was being trained as a medical doctor in Libya in 2011. That's when the nation revolted against Muammar Gadhafi's regime and then had to put itself back together. The only problem was women were not at the table, says Murabit.


ALAA MURABIT: We noticed women saying, listen, we've been systematically excluded. We're not being invited to the talks. Our conversations are not being listened to. Our opinions on priorities for the community. We say schools, they say no, it's the oil infrastructure. So, that was very, very clear to us. We then began to lobby on a national scale with our then-government and we started talking about the religious manipulation that was causing a lot of these divisions and a lot of these conflicts and I say manipulation.

ZAKARIA: So, explain that. So you look at the religious violence, the jihadi culture of all these fanatics, and you say this is not -- this is not a natural outgrow. This was being fomented and stoked and encouraged by some people.

MURABIT: Exactly, for their own gain. And I think it's the most interesting thing is when you talk to women, as early as 2011-2012 women in Libya were saying we're having more difficulty driving alone. I'm having difficulty sending my daughter to school. They want to segregate the classes. They want women to dress in a specific way. So, women were recognizing these signs before the rest of the population even was. Before they were weapons with these particular groups. And so, what we found was by talking about that narrative, by saying, listen, this is not religion, this is a manipulation of faith.


ZAKARIA: And the reason you could say this is not religion is that you noticed that the gangs who were pushing this stuff were not particularly religious.

MURABIT: Not at all. Not at all, but they definitely benefited from it, and I compare it -- I always compare it to my medical career. When you're in a hospital and you're telling a family very bad news, you notice immediately people pray. Even a non-praying person finds God in the time of severe need, and the same thing happened in Libya. In the time of the conflict, when you have nothing else to look at, when political apparatuses don't exist, when security is diminished around you, when you don't know if your baby will eat that night, the voice of God, whoever is telling you that's his voice becomes so much stronger and more important to you, and it's a very easy way to manipulate societies.


ZAKARIA: Also joining us was Esther Ibanga, a Nigerian Christian pastor who founded a group there called Women without Walls who tells her story of bringing the women of two religions together to fight one common enemy.


ESTHER IBANGA, NIGERIAN CHRISTIAN PASTOR: I live in the city of Jos (ph), and for the past two decades, Jos has really been embroiled in religious conflict. Five years ago about 530 women were killed by religious fundamentalists in a village that's less than three kilometers from where I live. And as a Christian pastor, I just felt enough was enough. We've got to do something about this. I organized a march of Christian women, about 100,000 came to the streets protesting against the killings and demanding for our government to bring the perpetrators to justice.

And when we did our march, the Muslim women responded and say, hey, our people were killed as well, which was true, so they had the Muslim march, had a Christian march, and the killings continued, and then together we led a march as both Christian and Muslim women demanding for the release of the girls. And since then we formed this coalition and the organization Women Without Walls like you mentioned, and we've been working in all the volatile communities that are prone to violence and talking with the young people to sheath their swords and just refuse to be used by politicians. We want to put as much pressure as we can on the government, we want our voices to be heard, and we want to hit the streets and say, listen, we're still advocating for the release of the girls and for Boko Haram menace to come to an end in Nigeria.

ZAKARIA: Rwanda is a good news story, a story of female empowerment that has made a difference.

HUNT: That's right. That's right. In Rwanda, 64 percent of the parliament is women, half the Supreme Court, half the cabinet, and that's extraordinary. No one has ever seen a country that has leapfrogged as fast in terms of the indicators in education, in health care, et cetera. Absolutely there are problems. No question. There are political problems. There is all kinds of intrigue, but you know what? The corruption hardly exists, and women are considered less corrupt. In fact, huge difference when you have that many women. A country that has just 35 percent women in parliament has almost zero chance of falling back into violent conflict.

ZAKARIA: Thank you very much, all of you.

IBANGA: Thank you very much.

HUNT: Thank you.

ZAKARIA: Next on "GPS," the 2016 Republican candidates don't agree on much, but here is something they are nearly universal on. The government needs to shrink and get out of the economy. But what would happen to the American economy if it did? My next guest, a distinguished economist, says it would be catastrophic. When we come back.



ZAKARIA: I have a confession to make. I'm sure I'm not alone in this. I have an iPhone, I love it. Well, I hate when the auto correct corrects to the wrong word, but otherwise I love it, and if Steve Jobs was still here and if I were run into him, I would thank him for it, but my next guest, Mariana Mazzucato says I should not be thanking Steve Jobs or even Apple for it. She's the author of a book just out in the United States called "The Entrepreneurial State: Debunking the Public versus Private Sector Myths." She's a professor at the University of Sussex. She joins me now.

It's a fascinating book. And what you say is that the technology I was referring to was not invented by Apple.

MARIANA MAZZUCATO, AUTHOR "THE ENTREPRENEURIAL STATE": Well, first of all, it's not that Steve Jobs wasn't a genius or that Apple is not a wonderful company. Of course, Steve Jobs was great. The problem is that the narrative we tell around both himself as an individual and the company completely misses this public intervention. So the story is basically that every technology that actually makes an iPhone smart and not stupid was actually publicly funded. So the Internet, GPS, touch screen display, even Siri, the voice activated system which never works for me, but apparently it's a great thing, were all funded by different types of public sector institutions in the U.S. Where is that story?

ZAKARIA: And you argue that this is actually part of a pattern, that you can go into industry after industry and you'll often find that the basic -- some of the key basic innovations, much more than people realize, were publicly funded.

MAZZUCATO: Absolutely. And what's really interesting is that it wasn't just about the basic science. This intervention which was strategic, courageous, mission-oriented, and direct, not indirect through say tax incentives, occurred both in the basic research, the applied research, and even the early stage financing for companies themselves because, let's be honest, most venture capitalists are very exit driven. They want that exit to happen in three or five years or the Death Valley phase for many of these innovative companies can last 10 to 15 years.

ZAKARIA: And the government has the patience to stay --

MAZZUCATO: Absolutely. This is patient, long-term, committed finance. There's this myth that for example, we have a credit crunch or not enough finance. There's plenty of finance out there, it's just not the right kind of finance for innovation.

ZAKARIA: But you're turning on its head everything that people think about government, which is that government can't pick winners and losers, gets it all wrong.


ZAKARIA: And yet you're saying the historical record shows that the government actually has picked lots of winners.


MAZZUCATO: Yes, absolutely. So, again, all those technologies were picked, the biotechnology sector itself was picked. The National Institutes of Health, since the 1930s have spent something like $900 billion on, you know, the technology that basically formed that industry. And again, private companies, of course, were important, but they basically surfed that wave and we've got plenty of surfers out there, we just don't have that wave, for example, today, in the green tech industry.

ZAKARIA: But what about Solyndra? People are thinking --

MAZZUCATO: Absolutely. So, first of all, and any venture capitalist will tell you this, for every success you have about eight or nine failures. That's fine. But what the private venture capital industry has had, which the public investors have not is an ability to actually reap something from the upside to cover the downside, so Tesla, Tesla S Car actually received a very similar amount of moneys a Solyndra did. So, $465 million guaranteed loan. So, had Tesla not been the success that we know it is, that money would have been bailed out by the taxpayer. As they have to bail out Solyndra. But, you know, the population just doesn't realize that this is what happened and they only see that Solyndra lost. They only hear that story, but also we haven't been wise in terms of actually treating this like a portfolio.

ZAKARIA: That's fascinating. So, you're saying two identical investments, one lost, one has gained massively, but we wrote off the one that lost.


ZAKARIA: We didn't gain anything as taxpayers for the one that succeeded.


ZAKARIA: Israel, however, their government investments, they take a piece of the action, right?

MAZZUCATO: Absolutely. So through their public venture capital fund called Iasmo (ph), they actually retain royalties. So, again, they can get a bit of the upside to cover the inevitable downside as well as the next round. Whereas in this country we think that means socialism. And, you know, first of all, we do have all this government investment and where will the return come from? And economists often think that that will just happen through tax. Now, we know that many of these companies, including Google, whose algorithm, you know, behind Google was funded by the National Science Foundation don't pay much tax. Does Apple pay the tax they actually owe? Does Amazon, et cetera? So, there's not just that though. Tax rates themselves have fallen immensely. So NASA, people will be shocked to hear this, but NASA, you know, the National Space Agency, was founded in a year that the top marginal rate was 93 percent. This was --

ZAKARIA: Under Eisenhower.

MAZZUCATO: Under Eisenhower. He was not a communist. Now, the point is not to go back to that era. That's a by gone era. However, could we get a bit more real in terms of perhaps sometimes retaining equity? Why not? Also --

ZAKARIA: Universities do this. When they fund technology.

MAZZUCATO: Absolutely. But for example, you know, the money that's actually made -- well, you know, NASA for example is not allowed to make any money. They can only get money from the budget appropriations committee. Why? So, just look at the privatization of space today. So you have the Elon Musks of this world through SpaceX or Richard Branson through Galaxy really making use of this publicly funded infrastructure for free. Why? That would be fine, by the way, if NASA didn't have another big project like going to Mars, but where will the money come from for these new missions? So, I always say, you know, if we don't want the state to get involved, fine, step back, but that would mean as you said before, throwing away your iPhone and not having the Teslas of this world, but if we want that kind of strategic intervention, we really have to be asking where will the money come from.

ZAKARIA: Fascinating. Thank you so much.

MAZZUCATO: Thank you.

Next on "GPS," we know literacy can improve lives, but we'll tell about a book that could save lives. It's a real page turner, when we come back.



ZAKARIA: The IMF recently approved China's yuan as one of the world's reserve currencies. It brings me to my question of the week, other than China's, how many currencies have been granted World Reserve currency status? Two? Three? Four? Or five? Stay tuned and we'll tell you the correct answer. This week's book of the week is "Midnight at the Pera Palace: the Birth of Modern Istanbul" by Charles King. This is the terrific story of the slow collapse of the Ottoman Empire and the rise of modern Istanbul. It's a story of politics, war, passion, sex. Or set against the backdrop of one of the world's great cities.

And now for the last look, which is sort of another book recommendation. It's called "The Drinkable Book." At first glance, it looks like an average book with information about sanitation. But let's just say you wouldn't want to buy the Kindle version of this book. You see the pages themselves are water filters containing silver nanoparticles that kill bacteria. To use, simply tear out a filter, place it into a plastic filter box and pour contaminated water through it. The result, according to the book's developers is safe, clean drinking water, something the World Health Organization says 663 million people around the world still do not have access to. In fact, water-borne illnesses kill nearly 1,000 children every single day, according to UNICEF.

The drinkable book is relatively inexpensive to produce and the pages are reusable. A page can filter 26 gallons of water, so an entire book can provide a person with clean water for up to four years. Up until now a small number of books have been made in the kitchen of a church in Pittsburgh, but the book's inventor, Dr. Terry Dankovich and her partners hope to scale up production later this year to distribute books to many communities around the world. They hope to include cartoons and pictograms as well as to teach those who cannot read in the languages available about water safety. Stephen King once wrote, "Books are a uniquely portable magic." Well, this book certainly is. We toast to it and to more ideas like it in 2016. The correct answer to the "GPS" question of the week is C, four. The yuan will join the U.S. Dollar, of course, the euro, the Japanese yen, and the British pound in the basket of special drawing right currencies when its new status goes into effect October of this year. The IMF said this was a, quote, important milestone in the integration of the Chinese economy into the global financial system.

Thanks to all of you for being part of my program this week. I will see you next week, and happy New Year.