Return to Transcripts main page

Fareed Zakaria GPS

U.S. Strikes Iran-Linked Targets Across Middle East; GOP Blocks Ukraine Aid in Dispute Over Border. Aired 10-11a ET

Aired February 04, 2024 - 10:00   ET

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

[10:00:42]

FAREED ZAKARIA, CNN ANCHOR: This is GPS, the GLOBAL PUBLIC SQUARE. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria coming you to live from New York.

(BEGIN VIDEOTAPE)

ZAKARIA: Today on the program. The United States versus Iran. American soldiers killed in Jordan. U.S. ships attacked in the Red Sea. Missiles and drones launched at American bases, and Iran's proxies claim responsibility for it all.

America has begun to respond. Is it the right way? How can an all-out war be avoided? I'll ask an expert panel.

Then, American aid to Ukraine and Israel is being held up until the troubles at America's border with Mexico are fixed. David Frum will explain why he calls this the GOP's great betrayal.

Also, we'll tell you all about the most interesting world leader to break on to the scene in quite a while. Argentina's Javier Milei.

(END VIDEOTAPE)

ZAKARIA: But first here's "My Take."

It's bad fitting that the line that best describes U.S. foreign policy toward the Middle East over the last 15 years comes from "The Godfather." In the third movie, the aging Michael Corleone has been trying to distance himself from his old mafia businesses and ties but inevitably crises flare up that demand his attention. He cries --

(BEGIN VIDEO CLIP)

AL PACINO, ACTOR, "THE GODFATHER": Just when I thought I was out, they pull me back in.

(END VIDEO CLIP)

ZAKARIA: President Biden might be thinking just that as he responded militarily to the recent attack on U.S. forces that claimed the lives of three American soldiers in Jordan. Ever since George W. Bush's second term, American administrations have been seeking to reduce their exposure to the Middle East. The argument makes logical sense. The U.S. imports only a tiny amount of oil from the region. Its efforts at regime change and reform in Iraq backfired spectacularly, the most important challenges to the American-led international order come from Russia in Europe and China in Asia. The Middle East is a side show.

But crises come not at times and places of your choosing. And the withdrawal of American power has itself set in play a series of moves that are now shaping the region. As Washington has lost interest in the Middle East, anti-American militias have been gaining strength and influence, from the Houthis, to Hezbollah to Islamic resistance in Iraq, an umbrella group that is believed to be responsible for the attack that killed the American soldiers in Jordan.

Iran is allied to all these groups which helps it preserve its influence and weight in the region. Israel's war against Hamas in Gaza has provided an ideal opportunity for these forces because they can claim to be protesting Israel's actions and thus assert themselves, demonstrate their might, and gain legitimacy.

Ironically the Biden administration which has been working hard to prevent these militia attacks from turning into something bigger now needs to decide whether its own retaliation might cause an escalation of hostilities. Biden is under pressure at home from Republicans who will accuse him of looking weak. Senators like Lindsey Graham have been urging him to hit Iran to preserve America's credibility.

The Biden response seems to have been careful and measured. A larger attack would be a mistake. These militias thrive on conflict with established armies. The Houthis endured nearly a decade of massive Saudi bombardment and came out largely unscathed. As Henry Kissinger noted in a "Foreign Affairs" essay on Vietnam, mere weeks before becoming Nixon's national security adviser, there is a simple rule. The gorilla wins if he does not lose. The conventional army loses if it does the not win.

The tragedy of American foreign policy is that having seen dilemma so clearly, once Kissinger entered government, he got seduced by the need to preserve the U.S.'s credibility and pressured not to look weak.

[10:05:11]

So he supported massive military action against the North Vietnamese forces which failed. The North won in Vietnam by not losing and America lost by not winning.

Iran's proxies are trying to stir up as much chaos as possible to force the U.S. and Israel into large scale strategic blunders, not to mention to spoil a possible normalization of relations between Israel and Saudi Arabia.

The attacks by Islamic Resistance in Iraq on U.S. forces have a specific goal. Pressure the government of Iraq to expel U.S. forces stationed in that country. The group's militias are the very ones that support the current Shia-dominated government in Baghdad. In a battle between Washington and these militias, the Baghdad government would have to side with those groups that sustain it in power.

That would then complete the takeover of Iraq by Iran. Symbolized by the expulsion of American troops and would further the larger Iranian goal of unraveling the U.S. built security system in the Persian Gulf. The Biden administration had to respond to these attacks on U.S. troops but it shows a limited response and should take care not to get into a tit-for-tat with the militias. The Iranians have signaled in several different ways that they are not looking to escalate either.

The most effective response to this broader Iran-backed push against American interest in the region would be to show not that Washington can escalate militarily, which of course it can do, but that it can de-escalate politically, meaning that it can use the crisis in Gaza to create conditions for longer term stability, and that means working to create conditions for Israeli security and Palestinian aspirations for a state, which would then make it much easier not just for Saudi but broader Arab-Israeli reconciliation.

That kind of political and diplomatic response would not appease the war hawks in Washington, but it would be the most effective counter to America's foes. As Michael Corleone says in the same movie, never hate your enemies. It affects your judgment.

Go to CNN.com/Fareed for a link to my "Washington Post" column this week. And let's get started.

Last Sunday, three U.S. soldiers were killed in Jordan by Iraqi militias backed by Iran. On Friday, the U.S. responded with strikes on military sites in Iraq and Syria used by Iran and its proxies. Over the weekend the U.S. and U.K. struck another Iran backed group, the Houthis of Yemen who have been harassing international ships in the Red Sea.

Is the Middle East spiraling into a broader war?

Vali Nasr was recently in the region. He is a professor at Johns Hopkins. Mina Al-Oraibi is the editor-in-chief of "The National," a state backed newspaper in Abu Dhabi.

Vali, let me start with you with the kind of urgent question of the moment, which is, you've seen these attacks that the United States has done in response to the militia attacks from the Houthis and the others. Do you think that these militias are going to escalate or do you think they viewed this as a fairly limited calculated response by the United States?

VALI NASR, PROFESSOR, JOHNS HOPKINS UNIVERSITY: I think the killing of the three Americans brought a sort of a moment of truth for Tehran, Hezbollah and the Houthis altogether to see whether or not they want to go any further than they have. And I think they do not want to escalate into a full-face confrontation with the United States. They expect the United States to hit back. I think they're happy that the United States has not hit Iran.

That it has hit specific targets that it has associated with particular actions of these militias and I think the Iranians have at least put out in their own newspapers and media that no Iranians were killed, no Iranians were there. The buildings were empty, which means that they're not claiming any casualties that requires escalation. So I would anticipate that the Houthis and the Iraqi militias will have to show some kind of a reaction but it would not be at the level that would escalate this conflict, and that depends on what the United States does next.

ZAKARIA: And Vali, just give us a sense, again, one of the questions, the burning question is, how independently do these militias act?

[10:10:02]

You know, is it likely that Iran planned and pulled the trigger on these attacks that resulted in the death of American soldiers?

NASR: I don't think that either Iran or these groups wanted to kill American soldiers because they knew that that would be a bridge too far and the U.S. would have to react very aggressively. I think the broad strategy here is to attack the United States, attack Israel, consolidate the strategic gains that they made on October 7th and continue to make. Make sure that the guerrillas win and the conventional Israeli army loses as you mentioned in your introduction.

But I don't think that every decision is made in Tehran. And it only takes something big like the killing of the three American soldiers that might lead to essentially that kind of command and control. And there have been 160 attacks made on U.S. targets. More than that as time that we're speaking and I don't think everyone of this is managed out of Tehran. I think Iran has given the broad support that this is the time to put pressure on U.S. and Israel but I don't think they managed them as tightly as we're assuming.

ZAKARIA: Mina, this is something of a quandary for many of the Gulf states. They have no love for Iran. They have no love for these militias that often stir up trouble for the Saudis, the Houthis in Yemen have been a sworn enemy. And yet, I was in the region 10 days ago, they really don't want a wider war, right. So which is -- which is dominated right now, the desire to purge Iran in a sense or the desire to not let this spread into something wider?

MINA AL-ORAIBI, EDITOR-IN-CHIEF, THE NATIONAL: I would say the primary priority at the moment is not to let it spread further. The Gulf requires stability, always wants to see a de-escalate. Absolutely there are huge concerns about these militias. Let's not forget that the Houthis attacked both the UAE and Saudi Arabia before they were attacking ships in the Red Sea. There is a sense that a limit has to be put on these militias.

Jordan and the attack that the three American soldiers were killed in was on Jordan. That was the first time that you have these militias targeting Jordan so directly. And so there is a concern this is going to get out of control. But the key concern in the Gulf at the moment is getting a cease-fire in Gaza which will take away some of the excuses that these groups are using to escalate further.

And the second, to see a serious American strategy on how to deal with these militias. Again these militias have been getting stronger and stronger for at least the last 15 years. And part of it has been because of the U.S. turning a blind eye, seeing that they can live with them as long as their own troops are not targeted and yet we see them escalating year on year.

ZAKARIA: Mina, Vali, stay with us. When we come back, we will get to precisely this question of what to do about the militias and what to do in Gaza, when we come back.

(COMMERCIAL BREAK)

[10:17:53]

ZAKARIA: And we are back with Vali Nasr and Mina Al-Oraibi.

Vali, let me pick up on what Mina was saying just before the break, which was, you know, that Washington let these militias grew, Hezbollah began in the Lebanese war in the '80s but Hamas, then the Houthis, then those militias in Iraq and in Syria. All of them backed and financed by Iran.

What is the best strategy? David Sanger in "The New York Times" today has an analysis piece which I thought was very interesting where he says hitting Iran hard has not proved to deter them. He pointed out that the assassination of Soleimani, the Iranian commander, did not really deter Iran as we can see now. But that sometimes negotiating with them has had some at least temporary effect on pausing Iranian activities.

How do you think the U.S. should be handling this issue of getting these militias to cease and desist?

NASR: I think David is correct in the sense that when the United States killed Soleimani, even Iran reacted with the single largest missile attack that the U.S. forces have ever encountered. And it was very fortunate that at that point that did not lead to a much larger war. And then it's also true that before October 6th, the United States and Iran had somehow arrived at a modus vivendi that let the National Security adviser to think that the Middle East was at its most peaceful moment over a decade.

But we are where we are. And the dilemma that the United States faces is that the Gaza war has become a cause for the escalation in these attacks for reasons that Mina mentioned, that these groups see an advantage or an opportunity in pursuing a much more aggressive behavior, put pressure on Israel and the United States.

[10:20:02]

So the U.S. faces a dilemma. It needs to end this war and arrive at a cease-fire because the last time we had a cease-fire for eight days was the only time that all the guns went silent in the Middle East. But if you have a cease-fire at this moment, in effect Hamas, Iran and Hezbollah has won in the way that Henry Kissinger explained it. On the other hand if you do not have a cease-fire, the United States is running a serious risk of ending up in a direct confrontation with Houthis, Iran and or Shia militias in Iraq or all three of them at the same time.

So I think the United States has to make a choice. Does it want to sort of take the first step, at least get to a cease-fire? Calm down the region, then think about it much longer, broader strategy of what you're going to do about the Houthis and the Shia militias and Iran or is it going to pursue a policy of trying to intimidate them and run a huge risk of ending up in a war. And both sides can miscalculate in a moment like this.

ZAKARIA: Mina, what do you think that the Gulf Arabs, the United Arab Emirates, the Saudis, the Bahrainis would want? Because again, you know, they don't have this dilemma which is they don't like Iran. But the Iranians are not taking advantage of the Palestinian issue and the Gaza war and are seen, I think, as much more of the champions of that cause. The Gulf Arabs are largely silent. There have been some condemnation but it's Houthis who are launching missiles. It's Hezbollah that are throwing missiles. And they claim on behalf of the Palestinian cause.

AL-ORAIBI: Well, I mean, Hezbollah and the Houthis want that -- and the militias in Iraq walk want that to be the narrative. That actually the way you support the Palestinians is by launching missiles here and there. Rather than having a concerted effort to get the recognition of the Palestinian state which is actually what the Arab League, what Saudi Arabia, what the UAE and others are working towards.

So I think it's really important in the framing to think what success is and what we want and ultimately there has to be a Palestinian state that would end a lot of what we're seeing now. The United States, Fareed, you began the program by saying that the United States wants to get out of the Middle East. The reality is that the United States is in the Middle East and gets involved to prolong certain wars or conflicts without ending them or taking a final solution on them.

So we'll give an example. When it comes to Israel and Palestine, without the American veto there would have likely been a call from the U.N. for a cease-fire that would have been binding and yet it's the United States that uses the veto so it is involved. Likewise, when we look at the Houthis, one of the first measures that the Biden administration did was to remove the Houthis from the terrorist designation that they have for the tax cut they had done in the region, and therefore gave this impression that it's OK for them to continue. And the list goes on.

The U.S. is involved enough. Ultimately, to weaken these militias, you need nation states that function. Iraq, Lebanon, Yemen, Syria, their weakness has allowed for Iran to extend its power and its influence. One of key things Iran has wanted to be able to create in the region is to have a land border and control running from Iran all the way to Hezbollah. So cutting through Iraq, cutting through Syria, and into Lebanon.

And so it has worked for years on this and continues to wield influence. What we're seeing on the ground, but also in the last two days, you've seen the militia leaders appear in Baghdad to say we are still here. (INAUDIBLE), who was the brigade that was targeted by the Americans in their strikes on Iraq most recently, was there in public being seen in hospital to say I could walk about without -- with impunity, with full impunity in Iraq.

If you had a strong nation state that holds to account militia leaders then we would be having a different conversation rather than waiting for air strikes that really don't bring a solution on their own. It's hard work that you need stronger states.

ZAKARIA: We will have to leave it at that. Mina, Vali, really thoughtful, insightful comments in an evolving situation. We hope to have you back.

Next on GPS, I will talk to a long-time conservative who says the GOP's blockage of aid to Ukraine is a great betrayal.

(COMMERCIAL BREAK)

[10:28:56]

ZAKARIA: As the war in Ukraine rages on, American aid is drying up. That's because Republicans in Congress continued to block White House efforts to provide new funding insisting that America must first secure its own borders. The senators expected to vote this week on a deal that ties aid for Ukraine and Israel to immigration reform.

Joining me now is David Frum, staff writer at "The Atlantic" who called the delay in aid the GOP's great betrayal.

Welcome, David. Explain what you mean and why you see this as such a betrayal.

DAVID FRUM, STAFF WRITER, THE ATLANTIC: President Biden's request for aid was sent to Congress on October 20th. Last Sunday was the 100th day of Republican blockade on the aid package Israel, Ukraine, plus $14 billion to enforce the border. That came after the month of September when Republicans refused to include aid to Ukraine, the House Republicans, aid to Ukraine in the package to keep the government open.

There is a blockade going on and it's obviously not motivated by the things Republicans say. President Biden on the border has yielded to Republican demands in a way that is just unprecedented. He has proposed, he has accepted a series of measures to harden the border without asking in return for the things Democrats usually want, pathway to citizenship for young people brought to this country illegally at a very -- at an early age, an increase in green cards.

[10:30:05]

He hasn't asked for any of those things. He had said to the Republicans, I will give you what you say you want on the border if you give me what the country and the world needed on Ukraine. And they have said, no. The answer is no to every question.

ZAKARIA: David, do you think that fundamentally there are a lot of Republicans who just don't want to support Ukraine? Is that part of what is going on here, a kind of new strain of isolationism?

FRUM: We can chart the numbers in vote after vote since 2022. And we can see is the number of hardcore anti-Ukraine Republicans is quite small. It's maybe a quarter of the Republican caucus. So, an eighth of the House of Representatives. And there are maybe just three or four hardcore anti-Ukraine Republicans in the Senate.

This is about loyalty to Trump and it's about Trump's connections. And this takes us back to the biggest question about Donald Trump as president. I keep saying with Trump and Russia, there are many secrets but there are no mysteries. It has been obvious that something is really wrong.

And right now, his favorite broadcaster Tucker Carlson is literally in Moscow doing who knows what as we speak here, while the party that takes Trump's orders in the House and Senate is blockading aid to Ukraine.

ZAKARIA: You have been a longtime hawk or hardliner, call it what you -- on immigration. You've often argued for much tougher border enforcement and all that kind of thing. But you think in this case, with the Republican criticism of Biden, that he could just do this by himself without Congress is not valid. Explain why?

FRUM: Well, this gets us to a crucial point, and a kind of technical point. In the 1990s and 2000s, when people crossed the border, they were coming knowingly and intentionally illegally. These were young men typically in their early 20s, typically from Mexico or Central America, and they walked across the border and they tried to avoid contact with law enforcement, and then slip into the job market in ways -- without coming into any contact with any kind of official.

So, enforcement was the answer for illegal immigration. That is not what is happening now. What is happening now is you have the minors, people under 18, or family groups coming, and they are seeking contact with the law because they want to enter the asylum system where the law is on their side. Anyway, the law is on their side. They get to stay in the country pending a hearing which can take years, decades.

So, back in the 1990s and 2000s, you can say, yes, enforce the rules against illegal immigration. But with asylum-seekers, the rules are on the asylum seeker's side. You have to change the rules. And we're talking here about international treaties. We're talking about statutes. But above all, about judicial precedence. If you want to change those, you need acts of Congress.

ZAKARIA: And are the Republicans proposing those kinds of changes to asylum laws?

FRUM: Senator Lankford has. And some of them are in the House bill H.R.2 Probably more draconian than even most Republicans would really want if they thought H.R.2 was a real law. But the deal that is being worked on in the Senate would make important reforms.

It would say things like, you cannot -- that if you want asylum you have to prove that you personally, it is not some -- it's not just the situation is lawless or the country is impoverishes, but that you, personally, are being targeted for some reason you can't help or that you have a right to do. Like your religion or your race.

But people are coming to the United States and saying, back in -- where I'm from there is a lot of violence, there's a lot of crime, there's a lot of domestic abuse, and I've walk through three, four, eight, 10, 12 countries on my way to get to this one.

So, the bills that are being negotiated in the Senate would say, no, those are not good enough reasons. And if you crossed, if you were in danger in country one, and you've crossed countries two, three, four, five and refused refuge in countries two, three, four, five, you can't -- you can't pick and choose where you get your asylum.

ZAKARIA: Finally, and I only -- we only have 30 seconds so a quick thought, David. Why have we had this eruption? I mean, I understand that people are gaming the system and using the asylum laws but still, why millions and millions? What explains this explosion of, you know, traffic on the border?

FRUM: Basically, the rise in global prosperity. It costs some thousands of dollars to make a move from a poor country to a richer country and the number of people who can afford that is on the rise. We're not seeing people on the move because the planet is miserable. We're seeing people on the move in search of opportunity on a planet where more and more people can afford to make the investment to give it a try.

Don't blame them. You would do the same in their situation. I don't blame them at all. They're making rational moves. But in the numbers that we're getting, the rest of the world cannot cope with this number of people all at the same time.

[10:35:02]

ZAKARIA: David Frum, very smart stuff. And if people want to see the range of your writing, you have an amazing, excellent piece on Woodrow Wilson in "The Atlantic" right now. So, maybe one of these days we'll have you back to talk about that. Thank you.

Next on GPS, is China's economic miracle over? I will talk to Martin Wolf of the "Financial Times."

(COMMERCIAL BREAK)

ZAKARIA: Evergrande was once the second largest real estate developer in China.

[10:40:01]

This week a court ordered the bankrupt company to be liquidated. It is one more tale of China's economic woes. Last year, the country's GDP growth came in at a three-decade low, if you exclude the pandemic years.

Has China hit bottom? Will the government be able to revive the world's second largest economy?

Joining me is Martin Wolf, chief economics commentator at the "Financial Times." Welcome, Martin. You are just the man to help us understand. Because this is in many ways the biggest puzzle in the global economy.

You know, is China headed for a decade of Japan-like stagnation, or is it going to be able to revive itself? So, 20 years from now, most likely, what would historians say about China's growth trajectory? You know, what made it boom for 30 years and why has that boom come to an end?

MARTIN WOLF, CHIEF ECONOMICS COMMENTATOR, FINANCIAL TIMES: Well, I think the boom has, as you point out, has come to an end fairly for natural reasons. Growing at 10 percent a year or anything close to it, for more than 40 years would be absolutely extraordinary. It was bound to -- to slow.

Many of the exceptional opportunities they had to catch up technologically. The enormous massive urbanization of the Chinese people, not finish but much of it is done. The colossal investment boom that went with building capital of all kinds for the first, that is all over.

So, what we are really betting on is what does a Chinese state prepared to do to promote greater efficiency, greater dynamism in their economy? If they could do that then, I think, they could still grow at four maybe even more than four percent a year for the next 20 years and that would still be double America's rate. So, it would still be catching up, just never again. It will never again be the sort of economy it was up until now.

ZAKARIA: So, you put it very well it seems to me that there is a big debate taking place among China watchers. Is the government not doing more to reform the economy? Because there is a kind of policy paralysis. Xi, you know, has put in a bunch of new people. The party has become more powerful than the government.

Or is it that Xi Jinping doesn't want a more marketized, more reformed, more, you know, consumer-friendly economy? That he wants a state-driven economy. You know, which do you think it is, looking at -- looking at the data as you can tell?

WOLF: My guess is it is a bit of both. It seems that Xi doesn't look like somebody for whom growth is an overwhelming priority, certainly if it reduces in any way or threatens in any way state control over the economy. But I think it is also true that the changes they would have to make at this stage because the past models, the export led growth model and high investment led model are over, they have to change a lot.

ZAKARIA: Do you think some of it is that Xi is at heart a kind of austerity nut or an austerity person? You know, he seems to not believe in the idea of sort of goosing the economy, helicoptering cash as they used to call it. He often talks about how it is important for Chinese people to endure pain, even young people. He gave a speech saying, you guys have had it too easy. You need to suffer more, it builds character.

WOLF: Yes. I think that seems to be an important part of his attitude to controlling the society. And he might also think, look, we've been, as you put it, goosing the economy at least since the financial crisis and all we've got is these enormous headaches, huge amount of debt.

The debt ratio in China has tripled roughly since then. We can't go on doing that. It is unsustainable and we produced all this ridiculous useless property which nobody wanted. So, I don't like that either.

So, I think, he seems to have moral objections. He disliked the waste, I think. So -- but it doesn't mean that he has got an alternative. And I'm not at all convinced from the people I've talked to that the Chinese people are prepared to accept the low growth or steer economy.

ZAKARIA: So, you've often pointed out, there are only two components fundamentally to growth. One is the number of workers you have. And secondly, how productive they are. And you've been pointing out Chinese productivity has been declining. And Chinese fertility rates, the numbers of workers are declining sharply. Are these such large overhangs that it is very difficult to imagine, you know, fundamental revival of China and that they are going down Japan's path?

[10:45:02]

WOLF: I mean, the rate of growth of the labor force is a given. There is no way it's suddenly going to explode upwards. They can, obviously, employ some of the people. And that young people are now unemployed. But the labor force is likely to shrink at something like a rate of one percent a year.

They're not going to have massive immigration that will change that for China. So, that's a given. So, the questions is, can they raise productivity? And the key point there is they got the potential, because they're still so poor -- that is why they're not Japan. But to exploit the potential, they have to do quite a lot of big stuff that will shift the economy in a more dynamic direction again.

And it is not clear for the reason we've discussed that Xi really wants to do that. And perhaps he's prepared to sit it out and accept three percent growth, the most four, and that's OK.

ZAKARIA: Martin Wolf, thank you for helping us understand this very complicated subject.

Next on GPS, Argentina's newly minted leader is called the madman by his own supporters and some of his ideas are really out there. But could they possibly work? We'll be back with that in a moment.

(COMMERCIAL BREAK)

[10:50:36]

ZAKARIA: More than two months ago, Argentina stunned the world when it elected a new president, Javier Milei, who calls himself an anarcho- capitalist libertarian. Milei wants to abolish the country's central bank. And one of his favorite campaign props was a chainsaw signaling his goal of slashing up the state. It may not be terribly surprising that he's also a big admirer of Donald Trump.

So, can Milei actually fix Argentina's economy or will he bring it further into ruin? With me now is Shannon O'Neil. She's a senior fellow for Latin American studies at the Council on Foreign Relations, and the author of the book, "The Globalization Myth: Why Regions Matter." Shannon, welcome.

SHANNON O'NEIL, VP AND SENIOR FELLOW, COUNCIL ON FOREIGN RELATIONS: Thanks for having me.

ZAKARIA: You know, the interesting thing about Milei, is he's different from -- you know, some people will say, oh, he's sort of like Bolsonaro who is this kind of right-wing populist. And then there are people who say, well, he's a bit like AMLO, the left-wing populist. But he's different. Explain who this guy is.

O'NEIL: Well, what he has in common is he's anti-establishment but he's anti-Argentine establishment which is different than almost to any other countries. So, he is coming in and he's appealing to an audience and to voters, especially young voters who are tired of high, if not hyperinflation of recession, of financial booms and busts, of the difficulties of life in day-to-day in Argentina. So, he has come in --

ZAKARIA: Which have been run by a kind of populist Peronist establishment for decades.

O'NEIL: For decades. Right. They've either been in office or have been waiting to come into office. Controlling the unions, controlling many of the public sector workers, controlling lots of the apparatus, the governors and the like.

And so, Milei came in saying, a pox on all of your houses. I want to get rid of all of the establishment politicians. I'm an economist who got into this because I went on TV talk shows and was entertaining, hence the chainsaw. But he brings in a privatization message, a dollarization message, a cutting down of the state, and a balancing of the budget which is not what the previous -- especially the Peronist party had ever done. So, that is what appeals to people, something different, because the economy isn't working.

ZAKARIA: So, in a way he's kind of like a throwback to a Margaret Thatcher or somebody like that?

O'NEIL: He is in fact -- he idolizes Margaret Thatcher which -- you know, Argentina and Britain have had their difference in the past over the Falkland or what the Argentines call the Malvinas. But, yes, he is very much an accolade of Margaret Thatcher, of others -- what he would say libertarians around the world. And he really is focused on the economy.

He is socially conservative on gender issues, on gun issues, on crime and the like, but he's really focused on economics. That is his big message and what he started to do. ZAKARIA: And fair to say that the Peronist, who I described as sort of broadly left-wing populist, have run the Argentine economy into the ground over the decades.

O'NEIL: They have. They will come in and they'll spend lots of money. They'll hire lots of people to work for the government. They'll give lots of money to unions or to other groups. They're a leftist organization but they really are a patronage organization, right? They have lots of clients here but it has been unsustainable.

The way they spend money for a country that isn't producing enough of money or enough taxes or revenues to support it. So, each time they get in trouble and they end up defaulting on debt, local debt, international debt. And so, Milei is coming in and saying, we're going to stop that whole cycle that repeats itself again and again with the Peronist.

ZAKARIA: And places like Davos, I think, they want him partly because he has got the crazy rhetoric at times but he has also got some very smart adviser.

O'NEIL: He does have smart advisers and he went from the campaign to governing and brought in more mainstream economists. I think he speaks to the Davos crowd, to the international financial community, because he's talking about balancing budgets, and privatizing, and the kinds of market-friendly elements there.

He also has the backing of the IMF. IMF made the biggest bet in has made in its history with Argentina back a couple of presidents ago. Lent them almost $50 billion and now they need to be repaid. And I think the IMF is embracing him because they think he is a president who might actually repay them.

ZAKARIA: And what about the crazy hair and the -- is that -- is that all part of a kind of anti-establishment shtick? Was he always like this?

O'NEIL: I think he's always been a little bit of an idiosyncratic person. It makes good TV. And so, obviously, part of his charm or his attraction is that. He has crazy hair. He's -- doesn't have a family but he does have cloned dogs. That's a big part of his selling point. But right now, it seems, one, he has moved from the more fringe to a much more serious set of policies and approach, and those people around him.

[10:55:02]

And, you know, I think Argentines at least right now are willing to give him the benefit of the doubt. They are willing to accept shock therapy and austerity with the hope that a year from now things will be better for them.

ZAKARIA: Ironically, it all hinges on the weather. Doesn't it?

O'NEIL: It all hinges on the weather because Argentina's biggest source of dollars, it's biggest source of income in the world is agriculture products, particularly soy. So, if it rains, then Argentina and Milei will probably have a good chance. If it doesn't and there is a drought like there was last year, then I'm not sure his government will make it. And his promised policies that everyone at Davos and the world is looking at will actually come true.

ZAKARIA: Look at soy beans. It sounds like something out of trading places. Shannon O'Neil, pleasure to have you on.

O'NEIL: Great to be here.

ZAKARIA: Before we go, I want to let you know that you can now watch my documentaries on "Max." There are 15 of them up on the streaming service on everything from polarization in America, to the rise of Xi Jinping, to the promise and peril of artificial intelligence. It's work I'm very proud of and I hope you will take a look.

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

(COMMERCIAL BREAK)

[11:00:00]