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tv   Book TV After Words  CSPAN  February 14, 2011 12:00am-12:57am EST

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years. i think we can talk about that a little bit over the next hour, and some of your very counter intuitive views, i think about what direction you see the world heading and in particular the u.s. encounters with that world whether it's on israel and the view of its rise or russia. i think you have interesting things to say that are not exactly what you're going to pick up from reading the papers every day, so let's jump right into the conversation. >> guest: please. >> host: the next ten years, what are the three most surprising take aways you're offering people in the book? >> guest: first, the war on tore -- terror has been overdone.
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it's simply unsustainable. the second, i suppose, is given we've been in the argument a long time that china has profound economic problems at this point. it's grown in 0 years. it will continue to grow, but it's going to go through an adjustment. the most important thing to argue is the next 10 years is really about the relationship what i call empire of republic. it's between the vast global power of the united states, the difficulty in managing that and retaining republican forms of government. the military industrial complex, i'm going beyond that. i'm saying the requirements of managing an international system in which we are the only global power with the institutions that we have, you know, the complexity of our intelligence organizations create the
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situation where no one has a clear idea of what everyone is doing aside from creating unnecessary chaos in the world, it creates real challenges for the republic. i need to maintain a democratic society in the face of this both accumulating and nontransparent power. i'd say those three things. >> host: the word balancing i think is a word that appears a lot in the course of the book. what you're talking about in many different areas of the world really is this question of what course is the u.s. going to chart. you know, are we going do adopt a more realist approach to some of these challenges rather than the direct interventions that we've undertaken over the last decade. you pointed out the united states has been in war 100% of the time of the 21st century compared to the 20th century that amounted to 17% of the
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time, so are we going to find a way to back out of these wars? >> guest: we're going to have to find a way of backing out of the wars without backing out of responsibility in the area. i say at one point the balance of power is to run policy with the bill of rights as domestic policy. it is the founding principle of an empire. i'm not going to compare the united states to these, but nazi germany tried to rule by main force. it doesn't work very well. the romans, britishs, the persians ruled subtly and indirectly and managing various players and controlling them and bringing them to the point where they wanted that. >> host: subtlety up until now is not a hallmark of american diplomacy, however. >> guest: well, we're a young country. it's been 20 years since we've been the world's only global power.
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september 21 was the break point in history. first moment in which 500 years there was no european power and the united states quite by surprised, stunned it happened, held on. it takes time to build institutions and build a political culture. history then, we with respect going to have any wars, then 9/11 happened, and it was all about the long war that would never end in the islamic world. the united states is off balance. it didn't expect to be, and this is the unintended empire. they didn't expect to be in this enormously powerful position. it doesn't really know how to manage it. this is a decade, this is the third decade we're in that it must come to terms with the incredible strains not only in the international system, but
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also within other systems. >> host: i'm struck by your argument about the need for a new diplomacy and new institutions to go with it that will be the agents of the rebalancing. there's not really a clear sense we are two decades into a project of building post-cold war institutions. if any, that project has been put on hold or perhaps gone in the wrong direction by the reframing of american foreign policy as a global war on terror over the last few decades. >> indeed. let's remember that british as they started building their empire were devastated by the 17 year counterinsurgency where they were defeated. the germans in 6 ad got their heads handed to them. it's not uncommon for great imperial systems when they immerge to be unaware they're an imperial system, and then to
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suffer serious reverses. we, americans, like others, tepid to be operatic. as soon as we encounter a serious problem, we declare we a failures. this is a process we're going to go through, but the first step of the process is a 12-step process. that's admitting what we are. for the united states admitting weir an empire is extraordinarily difficult. we are the first great antiimperial project, the revolution. we have been in a war that entangled us. we have as recently as world war ii argued that europe is not our business, and there's a large number of people who feel we should disengage. >> host: again, that's something that's not gone away. that's not a historic fact, but a live debate over the next two years. >> guest: it's a debate that's meaningless. you can't disencage. we're 25% of the world's economy. how do you disengage from the
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rest of the world when everything you do unintended or intended has devastating potential or great rewards for some region of the world. i mean, when we put quotas on a product, large numbers of people either celebrate or cry, and this is the problem. our institutions are not really aware of the problems we cause at the decisions we make. the president's office is not always aware of what everyone is doing, and the pick is unaware how independent they are on these relationships for their own well-being, so there is a lack of awareness both in the institutions and political culture of the necessity of these relationships, but we'd like to manage -- imagine that we can have the benefits, but all the nasty responsibilities go away. >> host: that's already the
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dialogue between the u.s. and china for example saying china is running through the end of its course saying we're a developing country, we can't afford to bear the burdens of international leadership that the united states has been paying. the flipside is china wants to be recognized as the second largest economy in the world growing towards being at some point the largest economy in the world, and at some point those conversations are going to meet, and the question of who pays the bill for global leadership and what is required in order to sustain that is going to come up, but i want to back up, december 31st 1991 is the great point in history, the collapse of the soviet union is what happened on that day and the birth of the post-soviet era not only in american foreign policy but in terms of literally changes the map of the world. two decades later we'll mark that an anniversary this year.
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things haven't necessarily turned out as the on theists would have -- optimists would have had them. we do not see freedom rush across central asia and the caucuses and russia itself is contrary. the there's new conflicts breaking out, we've seen templarred expectations when it comes to what kind of political economic and social system is going to be existing across the space of the soviet union. i want to walk through your map of the world two decades after the collapse of the soviet union. you have views that are very controversial making some unexpected predictions that some of our readers won't necessarily know what to make of. russia itself, tell me where you see russia heading in the next decade. >> guest: russia is russia. it's not a copy of the jfk.
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russia for # 00 years -- 200 years had a security system at the center. around this security system, the state grew up, around the state grew up relationships throughout the country that were marketing relationships, primarily state controlled relationships. russia is not the united states and is never going to resemble the united states for geographic and other reasons. the russian empire in the soviet union were not accidental. they balanced regions with a mutual dependence. the vision of the liberals in russia and in the united states was that falling the soviet union was reorienting themselves towards europe and the united states. they failed to understand that these countries could not compete in any reasonable timeframe in europe. the more dependent they were on
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europe, the weaker they became, and also forgot that russia is a geopolitical entity. it experienced some terrible wars in its history, and it's extremely cautious about the expansion of things like nato. they regard nato as a military alliance, and we regard it as a club of nice people. it's a mismatch of what it is, and as the united states moved into the baltics and the revolution of ukraine took off and the united states became influ enissue in asia. if containment won after world war ii, pudin from the kgb saw a second engagement. they stopped trying to do what stalin did to become a great industrial force. they became exporters of
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commodities, not only natural gas, but everything else. >> host: in many ways their economy was based on that in the soviet times. >> guest: rather than continuing -- >> host: they saw the collapse of their industrial base. >> guest: they saw it and pudin said we're not going to hold this up. look at gas problems and wood exports, grain exports, primary commodities is something we can do now that builds dependencies in other countries so they'll chop to buy it, creates political advantages for us, where the strategy was to take these industrial enterprises and continue investing in them. pudin made a fundamental change. two institutions emerged in russia in the first part of the 21st century. the first was the unified fsb,
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and the second was gas. these two institutions played off each other to reassert russian power and also to increase their leverage particularly with the europeans and particularly with the germans. >> host: i was struck by your argument that russia in the long term is weak, but in the short term of the next decade or so may come once again to play a very significant role in terms of obstructing u.s. goals in its dealings with europe. what do you mean by that? what's the contra contradiction there? >> guest: power is relative. within the soviet union, russia is strong to them. europe is, i won't say disarmed, but militarily weak and economically strong with a heavy dependency on natural gas. there's ways the europeans can move beyond that. over the next 10 years, they're going to require russian
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resources. the germans have reached a point within the european union they are asking basic questions to what is the use of this? they need workers, they don't want anymore turkish workers come in. when you can't have the workers come to your factories, you bring factories to the workers. russia has a declining population, but surplus labor. the economy is underemployed, and they welcome technology. so what i think has happened here is russia and germany have increasingly intense economic relationships. they cooperate with certain reasons, and neither of them are particularly happy about the world being run by the united states. it creates a weight that can address. germany has not yet moved to this point.
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they are still sorting through the wreckage of the e.u. trying to learn which way it's going to go. i suspect they have stronger interest with russia at the moment. in the honk -- long run, there's a reason they collapsed. if i look out longer, i see those reasons there. i see another weakness, but in the short run given the state of the e.u., given the state of russia relative to the e.u., getting the situation in forms of the union, especially given the massive preoccupation of the united states with the middle east as opposed to europe or russia, this is an opportunity for russia to stabilize itself and it's done it fairly well. >> host: talking about the middle east. what does the middle east tell us about the forecasting and the dangers of accepting what we think is the conventional wisdom today? >> guest: first define the
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middle east which is a vague term. when i speak about the area the united states is engaged in, i think about the mediterranean to the hindu, israel -- this is different than north africa. >> host: the greater middle east? >> guest: some people have the middle east to include any islamic countries. others for arabs. it's a british term for the british foreign office. it doesn't have a great deal of use. i'm interested in the area where the u.s. is raging war, afghanistan, iraq, pakistan, possibly iran. there's three balances of power in that reason. the israeli, iraqi and pakistani. the area's earlier relationships, borrowing -- barring a change in egypt overtime, israel is so dominant
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it can create new realities on the ground and is indifferent to what the united states says. in afghanistan, the united states is asking pakistan to do things that create instability, that weaken pakistan, that potentially create an independent regional power in india that the united states may not appreciate in the long run. , and iraq has destroyed the balance of power creating what is the most immediate issue that forgetting nuclear weapons, iran is the dominant military force in the region if the united states isn't there. the united states has its policy to withdrawal from iraq, the potential for iran feel filling the -- filling the vacuum is high and that changes the balance of power or at least the political dynamic in the arabian peninsula. there are visitly important
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decisions to be made. the united states must rebalance global policy to deal with issues like russia, china, and so on. at the same time, the united states can't simply withdrawal. it doesn't have the ability to simply exit and doesn't have an a-game in any of these areas, so we have a very powerful nation, much less powerful in other circumstances because it's so off balance and overcommitted to one region. >> host: well, that's where i was surprised in a way to look where you take the consequences of that analysis. take the three you mentioned in india, pakistan, iraq, iran, and israel and palestine. in all three cases, you've gone out and looked at some ways in which we might end up in a decade in a different area than where we are now and whether it's your thought of strategic
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distancing of israel, not a rejection of israel, but a deprioritizing of our efforts in the israel-palestine conflict. india and pakistan, i think that's where i was most surprised. right now there's a lot of talk in washington about the strategic prospects of an invigorated new alliance with india. of course; president obama, just made a big trip there last fall on bush's foreign policy emphasis on building a new and substantively new relationship with india, and really after the enormous disappointments of a long term u.s. strategic partnership with pakistan, this is not a new recommendation. we had a partnership with pakistan, but it failed in some respects. i definitely want to get back to that, and then, of course, your third area you look at which is iran, iraq, the destablization caused by the u.s. invasion of iraq and your recommendation
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that ultimately we're going to have to find a mixing in china moment here where no matter how it seems, we come to some kind of different accommodation where even perhaps a new alliance with iran, so let's take those three with israel and palestine first. >> guest: we are committed to the survival of israel. that's not an issue. if iran were to develop nuclear weapons which the israelis say is 35 years out, that's a different issue. in 1973-74, it was. at that time we gave $3 billion in aide which was 25% of gdp, which today is 1.5% of gdp. the relationship itself changed. the foundation of the relationship guaranteeing israel's right to exist is not the issue. the level of aide that we
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provide is not critical. it's not so much that i want to change the relationship, but the relationship has changedded. the question now is we had one set of relationships prior to to 1967 and gave little aide to israel. there was a second period, call it 67 to recently where the united states and israel were not advocating changing the relationship. israel's view is that it must create a reality on the ground into which settlements, institutions, and so on that control the palestinians can be put in place. in than context -- in that context, a negotiation is possible. the united states has an interest in the stability of the region, not necessarily the israeli solution to that. the idea that the united states must simply track whatever
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israeli governments comes into power raises the question what is the benefit for the united states? there's intelligence sharing with israel. that will continue as israel leads it. the point of redefining relationships is not that somebody at a think-thank publishes a paper and says here's a wonderful idea and that applies to the other regions as well. it's the recognition the relationship changed and terms of endearment are there, but not what they were before and adjusting to policies satisfactorily particularly at a time when the united states is so bogged down elsewhere. >> host: what are the tools in the tool kit for making these adjustments i think is an important one. >> guest: first is recognizing that the relationship changed already, that it's not your tool kit that changed it. the only thing your tool kit can do is adjust your policy to the reality you're facing at this
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moment or potentially facing in the future. >> host: again, that's striking. barak obama spoke in a different matter about the challenges in the middle east and certainly president bush had before him, and i think what's been interesting to observe over the last couple years in the end, obama, up until now, has not managed a major shift. > guest: that's crucial. speeches and papers are nice, but they have nothing to do with making foreign changes. >> host: observations don't translate per se into policy shifts or the rebalancing -- >> guest: which is why i'm in the interested in foreign politic. in other words, obama is a perfect example, a person who really wanted a different foreign policy and was unable to do it. >> host: yep. >> guest: it's equally interesting to look at george w. bush to what extent did he really have the options we'd like to do? we want to view our presidents
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with magical powers that they make decisions in a vacuum and create policies and people who speak to the president are semimagical and so on and so forth. i live in austin, texas. parredden me to -- part of me wants to avoid the demagogues of washington. it's extremely important to understand the little choice obama had. the relationship that george w. bush had the chains lore was -- chancellor was not based on the fact that george w. bush -- it was based on the fact that germany as a nation has interests. they do not fully coincide any longer with nose of the united states. it's impossible to pretend we're in the middle of a cold war and this relationship continues to exist, and if you take that president down and put a different president in, they wind up with the same relationship, and it's not a personal relationship. it's not that they get along or they don't get along or like
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each other, but germany is a nation of many people. the united states is similarly a nation. the president is the end product of that. at times he leads, but he leads best when he's going to the place we're going anyway, and obama is perhaps a clinic in the limits of foreign policy. >> host: yep, that's right, or certainly in rhetoric, there's no question about that. >> guest: you can turn the rhetoric into many, many volumes of policy papers. his essential assumption, i think, at the beginning was that u.s.-german relations could have been what they were 20 years ago had it not been for the unilateralism of george w. bush. the difference was like this. obama's position was i will be a much more pleasant person, and therefore, the germans will do
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much more to help me. the german position was thank god we have a president who would ask us to do things we don't want to do. they had this tremendous love affair, the nobel peace prize, and it was realized, my goodness, barak obama is an american president. >> host: i think you're right, but i want to go back to one of your earlier points which is what does it mean for the united states to grow into accepting its role as a sort of global empire if you will or certainly in a power sense an empire, you you take -- and you make the case that empire requires a more sophisticated policy and you operate in networks of much more sophisticated ways to look at what's gong on around the world than the force of hard power if you will.
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well, you can argue that was what barak obama set out to do in the world. his embrace of multilateralism in their view was an effort to rebalance the world where the simple projection of american force -- >> guest: the rebalancing of the world, the vision of the president as an engineer. prior to that, there has to be a little sophistication of understanding the impersonnel forces. >> host: what are the national interests? >> guest: what are the things others cannot agree to? what are the things they must have? it is essential that a foreign policy be built on the concept of constraints, and it's unking what it is -- understanding what you can't give up, what you must have, and understanding other people. the idea that building alliances takes place in a vacuum, that you simply reach out is the problem. the problem is that within the
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confines of a given reality of foreign policy, it is possible to manage -- it is not possible to abolish that. when the british dominated india, they reengineered it in a way, but by taking advantage of the tensions and balance of power within that area. they didn't simply land troops and try to take it over. similarly, the united states had the option in the middle east to manage the existing relationships, but the first thing you must understand is what are the needs and requirements. i think one of the things that obama had to learn, and we'll see if he's learned it, is good will is insufficient. before you go out, you have to understand the limits, the constraints, and that's what makes forecasting to a certain extent impossible. i certainly can't predict what
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humor barak obama will make in the morning and what initiatives he'll undertake. i can talk about what will fail because the other side can't possibly agree to it, and i can understand those things that tie nations together, so whether pudin is there or not, germany is a need of natural gas. >> host: the shaping of the last two decade with geopolitics neither were predicted by the vast majority of the analysts and experts and the break of the soviet union in the 1991 and the attacks of 9/11. you could have said al-qaeda represented a threat, you know, to carry out dramatic attacks on the u.s. homeland. they did so in 1993, and you would have been out there on a limb, and i'm not suggesting
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anyone could predict that international affairs. same thing for the broke of the soviet union. there were those who accurately diagnosed its internal route just as there are those toad who have been diagnosissing the internal route across the regimes of the arab world for example. >> guest: which is why it's easier to forecast 100 years. >> host: we've been waiting for, you know, the collapse of the castro regime in cue bar for quite some time. >> guest: it's hard to imagine that the british would be defeated by the american insurgents. looking back on british history in, it was not a critical event. over the long run, certain things that are of enormous importance shrink to insignificant. when we look back on the vietnam war, such an enormous event in american history, look back, you know, context to even today, it
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has a lesser significance in terms of what will happen. you began the conversation by, you know, saying going from a more ambitious to a less ambitious goal. >> host: it might be harder to do the 10 year prediction. >> guest: it's easier to look forward 100 years ranking out of unexpected things and looking at the main thrusts. they may be wrong, but that's possible. at the beginning of the 20th century if i had written a book, i wish i could have written about the collapse. british empire, rise of mass warfare, and things of that sort without getting into specifics. others, you know, wrote about all of those things. what i tried to do is understand what matters in the next 100 years. what is now the driving forces? some demographic or political and so on. i wanted to come back into a 10
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year framework because there is a point at which this has to play out. it has to be playing out, and this is a point where policy and history meet each other, not in the neat way of policymakers, but in the more complex way of policy encountering an emerging reality, and that's really what i wanted to do with this book. i wanted to see the hard part where i take a look at a 9/11, and i say, so, what does this decade mean? i'm making the argument that in the end, this was not a pivotal war. i chose baro war from the british politics to the time the war was noisy. in retrospect, it's a fairly passing thing. when i look at what happened in
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9/11, i would put it this way. when the soviet union collapsed, a dividing line in the islamic world shattered, and the region from yugoslavia to the hindu cush took place. the first was yugoslavia, it's one ever a kind and had nothing to do with it, but it was a precursor to a massive destablization. the united states, with moderate forces, 150,000 men, went in and probably made the situation less ideal than it would have been otherwise. nevertheless, the question is so what is the lasting educate on this? -- effect on this? al-qaeda's goal was to trigger rising that created jihaadist
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states. complete failure. the islam goal wanted a series of pro-american regimes, preferably with governments like wisconsin governing in this region. iraq was the case. well, that didn't happen. what is remarkable to me about the region is how unchanged it is. >> host: well, i think that's where over the next decade we're going to see is this really the very, very long end game of the waning of the states of the soviet versus u.s. era, and we don't have a sense yet of what's going to replace that certainly across the broader middle east. we're seeing not the beginning of the next stage, but the very, very long ending of the last stage. >> guest: this question becomes what do we want from india. >> host: funny that you said that. exactly where i was going to go next. i have to say, why are you down
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on the idea of the u.s.-indian alliance when you look at the context of china's rise and the strategic nature of the indian ocean and the genuine repeated failures of the u.s. policy of supporting pakistan? >> guest: well, what is our goal? certainly, we already a long term relationship with india. relations with foreign countries is always enhanced against or in addition to positive things for them. the balance of power means that you do not make a unilateral unconditional commitment to any country. you understand we have defined interests in common and it's always essential as a greater and lesser power to say we have other options. becoming or entering into a relationship with a power that is unconditional goes against the principle of a prudent
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foreign policy. how do you condition our relationship with india? given the geography, it's hard. china is very far away. the american relationship with pakistan is the only lever that's available. do we want a subcontinent under the domination of a single power regardless of what it is? i think it's in the interest of the united states to have a relationship with a country that has an element of insecurity in it. when we talk about a sophisticated foreign policy, it doesn't simply people diplomats that speak the language nice. it means understanding that a relationship with a foreign country is extraordinarily complex. it is not monochromatic. they are our friends and enemies. they consistent of conflicting interests, and when i look at any country, i ask two questions. how can it benefit the united
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states? how can it be made clear there are alternatives so that a dependency doesn't exist? so, the issue here is not shall we have a close relationship with india. we will have a close relationship with india because we share common interests economic, political, and military. the question is how do we shape that relationship. i think one of the problems the united states has thinking in terms of friends and enemies, this is a friend, and i have a friend, i want to be generous and forthcoming. think of it more as a business relationship. i have a business relationship with this person. i may or may not be his friend. that has nothing to do with it, and i'm going to make sure i have options. i think it would be more healthy if we were to place the framework of u.s. relations with countries to depersonalize it. >> host: that's going on in pakistan. we have, in fact, made our
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dependency so clear with them, and actually they have a sense that our strategic calculation in the region is what you just outlined, but we prefer to have a friendly relationship. >> guest: we can screw up relations with india and pakistan at the same time. it's possible. >> host: we have tried this approach, this strategic approach in a way that you suggested, and it's not worked out well. >> guest: look at the period of time we're talking about or since 1948, i'm not too uncomfortable with the way its evolved. certainly our invasion of afghanistan has created a problem for pakistan that threatens its internal stability. when you speak to pakistanis, they speak of the 1990s period as a period when they did what the americans wanted. it was a period of relative stability. they didn't like the government, but that's not our concern. we come back and say yes, but
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al-qaeda developed in afghanistan, and we didn't want that. they come back and say yes, they did, it's unfortunate, but they could have developed anywhere else. it was not an afghan movement, but it just happened to be there. the point we have to ask now is how do we deal with this? the united states is a temporary presence in afghanistan whether it's one or five years, we're not going to be there permanently. pakistan is a permanent interest in afghanistan. it does in not want a hostile afghanistan at its back. therefore, whether it wants to or not has to take responsibility for afghanistan. the american goal is that al-qaeda should not be in afghanistan, but al-qaeda is in yemen, somalia, and cleveland. >> host: exactly. if you look at south asia, do you disagree with those who consider the pakistan to really
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be the most dangerously unstable part of the world right now? >> guest: i would not quote the most dangerously unstable, i think iran is more. it's certainly one, and the question is how do we get it back into shape? destabilizing pakistan to the point it collapses i don't think creates security. making it a responsibility of pakistan, which, you know, maybe it is, is a more interesting outcome, but the problem is that we have to ask more fundament questions. why are we in afghanistan? what was the strategy that president obama had in mind? president bush's strategy was a more modest one of holding key areas of not really trying to dominate the country. president obama argues we're in the wrorng war. we are now in this war. it's not clear we have the forces necessary to bring this to a conclusion.
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therefore, we are struck with a pakistan because if we withdrawal, in this case pakistan, or we een ties pakistan into collaborating within a staged withdrawal so that this comes to the points that it really doesn't matter if what happened in the past. at this moment, if our goal is to somehow exit afghanistan without attempting to occupy it which is not a choice, we must deal with pakistan. i mean, who else can we? >> host: that's right. the question is not dealing with pakistan as much as what is the longer term outcome in terms of are they coming away from wherever we end up with a new status quo in afghanistan recommitted to their campaign of underminding their neighbor next door in india. >> guest: we have a choice. we can avoid that by staying in afghanistan permanently, or live
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with it. here's exactly how i approach a foreign policy issue. pose the question if pakistan comes to be secure in afghanistan, will they attempt to stabilize india? they will. should we stay permanently in afghanistan? how do we prevent that? i come to say, yeah, i think pakistan and india have reasons to disgust each otherment i don't think they are going to go away. i think at various points in history, they attempt to undermind it. how can the united states benefit from that creating a stable balance in which american interests are secured? so those who say, look, pakistan is not to be trusted, i ask the question, okay, so what's your plan? the problem is that we have, nato has 150,000 troops fighting in afghanistan. i regard that as an unpivotal
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position. there's no solution except within the pakistani relationship. therefore, i regard the relation can we trust pakistan or not as a met metaphysical notion. i don't know how to deal with it. this is not a realist or idealist position, but this is simply the way we play the cards that have led us here. can we do this and get pakistan to stop underminding india and india to stop underminding pakistan. that, we don't know how to do. when you make your foreign policy that ambitious -- >> host: the consequences of failure are higher. >> guest: and you leave yourself in afghanistan, and for the moment, i'm more interested in having the 150,000 troops out. i'm not particularly interested,
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i don't think it's in the national interest of the united states government of what's in kabul, and i want to see that the united states will rebalance and be better able to respond to russian invasions of georgia. if they create an unbalanced foreign policy, how do you read -- reap from that? >> guest: one thing -- >> host: one thing we have to talk about is china. when you have a relationship with india and pakistan, the big piece of that that we vice president talked about at all is china. you are of the view that some of the current almost hysteria about the rise of china and what it means in the long term consequencings has been wildly overstated in the u.s.. tell me why you think that. >> guest: well, to begin with using chinese government statistics, there's 1.3 billion people in china. 600 million of them live in
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households earning less than $3 a day. others earn $6 a day. china, 80% of it lives in poverty that's sub se heroin in africa. they have an average income of $20,000 a year, middle class by world standards. it's less than 5% of china. that china cannot sell to china. they are finding ways to do it. you can't sell an ipad to one who earns $3 a day. they are the hostage of the west. every dollar not spent at wal-mart is taken out of the chinese hide. the chinese are desperately
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stabilizing their system by increasing exports. it's 1.7% on chinese exports which i think is high -- >> host: i was going to say chinese officials tell you not to believe their statistics. >> guest: which means they're exporting almost cost in order to prevent the thing they are most afraid of, unemployment. they can't keep up because at this point the wage rates are higher than those in mexico. looking at shirts, you'll find mexico on it, not china. china's lost its competitive edge. like japan in 1990 when we all believed in the massive japanese superstates taking us over, and we saw the rockefeller center -- >> host: you are bruceed on japan. >> guest: japan has come through a 20 year period in which it achieved its economic goals.
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it had a choice between having a crunching recession, unemployment, and violating the social contract that underlies jupe these society -- japanese society. they made the decision and that was we would have low interest rates, keep businesses going, and avoid unemployment. from the standpoint of the western investors, there was the long lost decade because we couldn't invest in japan and make money, and the japanese said, gee, we didn't realize our purpose was to give you opportunities to make money. they achieved what they wanted, and this is one of the important things in talking about sophistication. understand what the japanese were afraid of. unemployment. then you can understand why their policy wasn't stupid. they are now reaching the end of the cycle. their debt level has reached a point that's probably unsustainable. they have to make changes in
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their policy, and that's going to unleash growth and social instability, but that being said, they have one advantage that china doesn't. they don't have 1 billion people living in third world poverty. china does, and the chinese are bitterly aware of that which is why they are increasing security crackdowns everywhere, having crisis in succession like we just saw, and also investing anywhere in the world outside of china. >> host: right. >> guest: i had a joke when japan came up, if the japanese are doing so well, why are they buying pebble beach? if china is doing well, why invest outside of china? the japanese in 1997 east-asia crisis, the event was capital fight, money was moving overseas.
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we're in the middle of chinese capital flight which the media says it's the growing power of china, but the simple point is that they are making rational investment decisions based on their fear of the future of the chinese economy caught between all these various horses. >> host: just to be precise, is it your sense that the projections of continued chinese growth was overstated? do you not believe china will surpass the u.s. as the largest economy in the next decade or so? >> come popping at 10--- compounding at 10% is difficult to believe. remember, china came from a position where the economy was in complete shambles. the first two decades of growth was simply reconstructing an economy with a fine work force and resources and everything else. the last decade was brilliant economic planning, but in the
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same way that you can't invest on the assumption that you'll have the same compounding rates, the chinese have to make a readjustment in their growth rate, and they are doing it, and they are doing with very carefully, and this is why you can ask them to revalue the money, any amount they want, they're not going to do it. it's not between collapse and greatness. like japan, who is in a very similar situation, there is a readjustment of northerly, and normal. they massively exported and so on to a different structural kind driven by financial problems, nonperforming loans, and china's in the situation as well. there's debt driven and equity driven economies and so on, but the point is it's not an insult to china to say you had a great
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30 years. the next 30 probably won't be the same. >> host: even the projections said the rate of growth is going to go under double digits it's been at for certainly the last decade or so and that leads china on a course to become the world's largest economy. >> guest: 8% growth is extraordinary, and i don't think it's at 8% growth right now, and it's possible for a economy to grow at any rate if it's indifferent different to rates of return on capital, and that's what the chinese are now. if i have a company and i'm selling products at low cost, i have fantastic rates of growth just before i go bankrupt. that's what happened to the japanese. they had huge rates of growth in 88, 89, and 90, but at low rates and the chinese have this situation now. they have a fan tis take --
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fantastic rate of growth that's not necessarily healthy. >> host: i think it's an important pact that it's a demographic crisis not because of the sheer scale of the people who live in really difficult third world conditions and poverty, but also because of the one child policy, and you're looking at, you know, the disappearance of this enormous youth generation to power growth in the long term. >> guest: well, as much as that, there's a cliff between that and the rest. as china becomes a more sophisticated economy producing more sophisticated products, the level of education and expertise required to join that blocks out the third world peace and it can't rise. the real question in china is the same question others confronted. the rise in shanghai failed. he marched and raised an army of
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the pes -- peasants who were bitter and they came back and restructured china. they are aware of how they began which is why they are ruthlessly crushing any party outside of the organization. they are not allowing anything to rise. if chinese enter a period of economic dysfunction, which i think they are, then the question really suspect economic. the real question is political on what happens there. i think the chinese are aware of that, and that's why there's numbers in the pla and people in the army are going to be in senior positions now. the chinese are aware and trying to weather it and they may do that well. now they are inward and concerned with managing the current problem. in their view, they are confident they can manage. perhaps they can, but it's not
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easy. >> host: what you would say is that here is the economic analysts and overall ten your has missed the political instability in china. it's not front and center. if you look at not just americans b the european economists it's all jealousy. it's not about the political instability. >> guest: there's an interesting social phenomena in the last year. in 1993 and 1994, japan had already slowed down, there were still people writing articles on the japanese. there's been a three to four year lag between the economic reality in asia and the recognition in the west. we're in a position where china already stopped behaving the way it did a year ago. it's going to take several years
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before it's noticed. there is a process as the chinese economy grows, enthusiasm grows, but it's not universal. there's any number of economists now who are writing about the coming bubble in china, but businesses also have a very, you know, wal-mart and wages respond by beginning to source outside of china because china is too expensive. they are not particularly sentimental and they don't write papers. they are simply changes the sourcing, and this is a real challenge to china, so is the philippines, pakistan, and other countries, but the point that i'm making is it is natural and normal for a country after 30 years after exponential growth to slow down dramatically. it is doing that. the consequences the economy can
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handle it if only it didn't have 1.4 billion people. it can handle it like the japanese did, but china has a problem. >> host: pulling back to the big picture, almost out of time here, when analysts look at the 21st century and talk about this as the pacific decade, the asian decade or even century to come, the waning of europe as a theme i don't see that in your work, but reminding us of the american strategic thinking. >> guest: i'm saying it's the american decade and the american century. look, the collapse of the european imperial system and the soviet union left of the united states standing as a continental power with very deep resources in command of the royal seas with a quarter of the economy,
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with bases in 27 countries and so on. >> host: right. >> guest: there is nothing even close. talk about the brick countries. the brick countries have to grow all together by 75% so all four equal the united states. >> host: ten years is the united states still sending 50% of the world's military spending. >> guest: yes, i think so. here's the point. the united states will go through extreme troubles and instability. it will be constantly reminding itself that it's on the verge of caption, and it won't collapse. if you look at the speeches in the senate just before the empire bursts out, you see absolute predictions of destruction. >> host: ten years, we'll come

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