MALE SPEAKER: Today with
us is George Friedman,
an American political scientist,
author, and entrepreneur.
His newest book is "Flash
Points-- The Emerging Crisis
in Europe."
Mr. Friedman was born in
1949 in Budapest, Hungary.
He has authored several
books, including "The Next 100
Years," "The Next
Decade," "America's
Secret War," "The Intelligence
Edge," "The Coming
War with Japan," and
"The Future of War."
His newest, about which we'll
talk today, "Flash Points,"
talks about the emerging
crisis in Europe,
and was published by Doubleday.
Mr. Freedman's childhood
was shaped directly
by international conflict.
He was born in Hungary
to Jewish parents
who survived the Holocaust.
His family fled Hungary
when he was a child
to escape the communist
regime, settling first
in a camp for displaced
persons in Austria,
and then emigrating
to the United States.
Mr. Friedman received a BA at
the City College of New York,
where he majored in
political science,
and a Ph.D. In government
at Cornell University.
Prior to joining
the private sector,
Mr. Friedman spent almost
20 years in academia,
teaching political science
at Dickinson College.
Mr. Friedman is the founder and
CEO of the Private Geopolitical
Forecasting and Intelligence
Corporation, Stratfor.
Please welcome Mr.
Friedman to Google.
Thank you.
[APPLAUSE]
GEORGE FRIEDMAN: Well, I am
pleased to be here at the one
company that Siemens
is worried about.
Google.
And actually that plays
a role in the story
that I'll tell here.
And you play a part.
So all talks on books should
begin with a justification
for writing yet
another book, where
there's millions
already written.
I had two reasons for wanting
to write this book directly.
The first, I've written a book
called "The Next 100 Years,"
which had forecast the
failure of the European Union.
The events that we see in
Ukraine now, things of that
sort.
These things are of
fundamental importance,
because Europe remains one of
the centers of world culture,
and it remains the single
largest economic region
of the world, larger
than the United States.
What happens in Europe
does not stay in Europe.
And if the European Union
is failing-- as I'm arguing
it does-- this has consequences
that will resonate for decades.
The second reason
I wrote this book
is quite personal, as
was just pointed out.
My life, and the
life of my family,
was bound up with the
geopolitics of Europe.
I have a chapter in there--
the second chapter-- that's
called "A European
Life." and it was
meant to say it was life of my
father, and to a lesser extent,
my mother.
And what I was
saying was that there
was nothing unique in this life.
It was just a European life.
Those Europeans who lived
through the 20th century,
particularly the first
half, were either
uniquely fortunate
to live through it,
or uniquely cunning, or both.
But a European life
collided with European
geopolitics over and over
again to create catastrophe.
My parents were born
just before World War I.
And in that war, their
fathers, brothers
fought on the Turkish
front, mostly,
because they were Hungarians.
And after the war,
the borders shifted,
and the places they were born
became part of other countries.
And they moved to
Budapest where they met,
and they fell in love,
and they married, and had
a daughter-- my older
sister-- and made a living.
They tried to live
an ordinary life.
And then European geopolitics
shifted again in the '30s.
And Germany became the
rising power again.
And suddenly my parents became
national security threats
to the German state.
They were Jews.
My father was forced
into the Hungarian army,
into a Jewish labor battalion.
And he went to just
north of Stalingrad
in 1942, to a city
called Voronezh.
And that was exactly the
point where the Soviets staged
their counterattack against
the German Sixth Army.
My father then walked back
in the winter of '42, '43,
to Budapest.
A distance of a thousand miles
through a bitter cold winter,
poorly clothed.
He survived where almost
everybody else in his unit
died, partly by the fact
that he was a tough man,
and partly by the fact
that he was a smart man,
but overwhelmingly because
he was a lucky man.
Because that's all
that really mattered.
He went back to Budapest.
And then for a year or
so, he was able to live.
The Germans had not
yet occupied Hungary.
And then the
Germans decided they
had to occupy Hungary because
Horthy, the leader of Hungary,
was making a deal
with the Russians.
And they sent my father and my
mother to concentration camps.
My sister at the age of five was
left alone in a Swiss shelter
to survive how she could.
There was nothing
unique about this life.
Everybody, Christian,
Jew, whatever,
suffered through this.
It should not be taken as a
unique story of my family.
It was a unique story of Europe.
And then the communists came.
They survived, they came back.
And the Soviet army
occupied Hungary.
And my uncle, who was a
member of the Communist Party,
and part of the Secret Police,
let my father know shortly
in 1948, that he was on a list.
He had been a member of the
Social Democratic Party.
The Communists hated
the Social Democrats.
And he was on a list.
And this was a time
and a place where
you should not be on any list.
And so my parents face
an existential choice--
stay and perhaps die at the
hands of the Secret Police,
or try to escape.
And so in one night in August,
the family went to a point
on the Czechoslovakian
border, on the Danube,
and we got into a rubber raft
and went across the river.
I'm told that searchlights
were playing on the river,
and machine guns were
in search towers.
And it was just luck that the
searchlights didn't find us.
And I was, of course,
asleep, drugged,
because I was a danger
to the entire operation.
Why did we go to Czechoslovakia?
Because, again of geopolitics.
The British had lost Palestine.
The Israeli State
had been established.
And the Russians
wanted to do anything
to undermine the British.
And they were hoping they could
form an alliance with Israel,
and make Israel
a kind of toehold
for the Communists
on the Mediterranean.
The Israelis needed two things.
One was weapons.
The other were Jews.
The Soviets had both.
And they routed these weapons
through Czechoslovakia.
And they routed these Jews
through Czechoslovakia.
And from there they were
taken to a port, Trieste,
where they were
shipped to Israel.
And my parents sought to hookup
with these Israeli smugglers,
which they did in the
town of [INAUDIBLE].
Now my father had no desire
to go to the United States.
He was a deeply
committed Zionist,
but he wanted nothing
to do with Israel.
The paradox was that he
had spent his life trying
to stay alive in the face
of people who believe deeply
in things.
And he did not want
to go to another place
where people believe
deeply in things,
and might take his
life on either side.
Or as he said, I wasn't going
to go to the Negev Desert
with two hand grenades
and start again.
I had had enough of this.
And so my father
sought to go to a place
that-- he had two requirements.
First, it should be stronger
than all its neighbors.
And secondly, no
one should believe
in anything nearly strongly
enough to kill him.
He had very low standards.
He didn't want to go to
Canada because Canada
was a weak country, and
America was a strong country,
and who knows what would happen.
Reasoning like that.
He wanted to go to
the United States.
To go to the United
States was complex.
But somewhere in this
my father made a deal
where my mother,
my sister, and I
were allowed to go
to the United States
and become citizens
very quickly.
My father stayed behind.
This was a time when the Cold
War was beginning-- or had
actually gotten fairly intense.
And the Americans
who had no idea what
was going on the other
side of the Iron Curtain
were recruiting anyone who
even spoke the language.
My father did speak
Hungarian, and that
was enough to be recruited.
They also recruited
many Soviet agents,
so it was a complete disaster.
The CIA at its best.
And then eventually my father
came to the United States.
In United States we grew
up in the Bronx, which
was a tough neighborhood,
but not as bad as it became.
And then we moved to
Queens to a little house.
And he loved this house.
And my mother loved the house.
And it had a little garden.
And one day my father
heard me playing somebody
called Pete Seeger
on the record player.
And Pete Seeger
was a folk singer
who spoke about little
houses made of ticky tacky
and the corruption
of suburban life.
My father asked me
what he was saying.
And I said, well he
was saying that people
who live in suburban
houses that look alike
are losing their identities.
The house is their identity.
They are the house.
And when everything looks
alike, you have become ants.
There's no difference.
And my father said
to me-- I'll never
forget-- this is what
Americans worry about?
And what he meant
by that was, look,
I'm not worried about
losing my identity.
I'm worried about
losing my life.
If I don't have to worry
about my dying, my wife dying,
my children dying-- I'm happy.
My identity doesn't
depend on the house.
And frankly, I'm not
worried about my identity.
I know who I am.
I explained, look, when
you live in the United
States-- a very rich country,
a very powerful country,
a country that's almost
invulnerable-- you
worry about these things.
When you come from Hungary in
the middle of the 20th century,
you don't have to.
My father said
something else to me.
Every American student
wants to go to Europe.
And I went to Europe.
And I said to my
father, why don't you
come visit Europe with me?
And his answer was, there's
nothing in Europe for me.
I said, don't you want to
see where you were born?
No.
I hate them.
And I said, look.
They've changed.
And he said to me, the
Europeans will never change.
They only will pretend
it didn't happen.
That's what the root cause
for me to write this book.
The European Union
was an attempt
to transform Europe from a
slaughterhouse into a place
that had banished conflict,
that had banished poverty, that
had banished all of
the bad impulses that
were there before.
It was a noble intention.
But I had come to the
conclusion that the European
Union was failing.
And therefore the question
was, what comes next?
If the European
Union doesn't work,
are all of the
monsters and fears that
existed before-- are they gone?
And that really is
what the book is about.
And it begins with
a paradox in Europe.
Europe invented humanity.
And by that I mean this--
before the European Age
of Exploration,
the Mongolians had
no idea there were Congolese.
The Congolese had never
heard of the Aztecs.
The Aztecs had never
heard of the Japanese.
The Japanese have never
heard of the English.
The world consisted of
separate little plants.
There was no sense
of a common humanity.
The idea that there is one
species throughout the world,
and however different
they were, it
wasn't that they knew they
were there and rejected
their humanity.
They hadn't a clue.
For all its brutality, its
bloodshed, European imperialism
achieved at least one thing.
It discovered humanity.
Humanity in the sense that
there is a single species,
that we share things in common.
And however much we
may hate each other,
we hate each other as humans.
This was an advance.
But the Europeans did more.
They transformed humanity's
relationship to nature.
To me, the vision that
I have is the movies
where in pre-World War I
days, a concert is held.
It's a wintry night.
And it's dark.
And inside that room,
might has been banished,
and the winter it shut out.
And elegant men and women come
together to listen to Mozart.
Now from my point of view, any
culture that can create Mozart
is forgiven many things.
You have to accept that.
But it was this
huge transformation
of man's relationship to time.
A train could travel at 40
miles an hour, 50 miles an hour.
A boat could go from London
to New York in a week.
This was even before
the age of aircraft.
The entire shape of the
planet, our understanding
of what was possible, had
been changed by the Europeans.
Europe had conquered
the world, and also it,
in a very real sense,
conquered nature.
Perfectly, no.
But overwhelmingly redefined
how we experience life.
The paradox is that Europe
never conquered itself.
Throughout the 500 years from
1492 to 1992 of European power,
no one was able to convince
the Europeans to unite
in a single entity.
And no one could
conquer them all.
The Spanish tried.
The French tried.
The Germans tried.
The English tried
half-heartedly.
Even the Dutch took a shot.
But the point is that
Europe was unconquerable.
Europe is peninsulas
jutting out from peninsulas,
mountains like the Alps, or the
Pyrenees, that can't be passed,
the Baltic Sea
separating part of it,
and the vast steppes of Russia.
Napoleon came the closest.
Hitler then came close.
Both of them died in the
wastelands of Russia.
Europe could not be united.
So you had this paradox.
This entity that conquered the
world could not conquer itself.
It conquered the
world, yet there
was an ongoing
civil war in Europe.
But the feeling was,
it'll be alright.
There was a man called
Norman Angell, who
wrote a book called
"The Great illusion."
He won the Nobel Prize later.
He was a brilliant man.
And he demonstrated in
1910 that it was impossible
for there to be a war in Europe.
There could not
be a war in Europe
because the financial
system was so leveraged
that it would cause
financial disaster.
International
trade was critical.
Interdependence reigned.
So there could be no war.
What Angell didn't understand
is interdependence leads to war.
Madagascar and Brazil are
not going to fight a war.
They have no issues
between them.
But France and Germany are
interlocked geographically,
industrially,
commercially, financially.
And the advantage of one is
the disadvantage of the other.
And each lives in dread of the
other, not just of its armies.
But that fact that
interdependence
means that if he does this,
this will mean this to me,
makes each one want
to control the other,
each one want to
dread the other.
Wars do not happen
between nations
that are not interconnected.
They happen when
there's interdependence.
And the interdependence
of Europe by 1914
had become profound.
And all European
nations lived in terror
of all other European nations.
This is an important
story, because when
we talk about the
European vision,
that they will create an entity
so interdependent on each other
it will make war
impossible, we really
have to read Norman
Angell-- a brilliant man who
proved with
mathematical precision
that World War I
couldn't happen.
He missed.
He got the math right.
What he missed was human
nature, that you fear the thing
that you depend on the most.
Europe was a glittering
place in 1913.
It stood astride
the entire world.
There was no part of
the world that had not
been either occupied at one
time by them, still occupied
by Europeans, or under
such heavy influence that
may as well have been occupied.
And there was no
reasonable person
who could imagine what
was about to happen,
because what began in 1941
was 100 years-- I'm sorry.
31 years of hell, of
unbelievable slaughter
between 1914--
MALE SPEAKER: You went from
1913 and then you said, 1941.
Did you mean to say 1913?
GEORGE FRIEDMAN: I meant
to say from 1914 to 1945.
Thank you.
As I make these
mistakes, let me know.
In those years
from 1914 to 1945,
about 100 million Europeans
died of political causes.
First World War,
Second World War,
the starvations in Ukraine-- the
planned political starvations,
the Russian Civil
War, the Spanish Civil
War, the Holocaust,
and on and on and on.
This was just in Europe.
Europe was a continent there
was never more than about 500
million people during this time.
The population grew
back to cover it.
But 100 million people died.
That was far more than were
killed by Genghis Khan.
But you expected
Genghis Khan to do that.
That was what Genghis
Khan did for a living.
He slaughtered people.
But the idea that the
continent that had given you
Mozart, and concert halls, and
Kant, and Rousseau-- this gem
of civilization, that
it could turn on itself
and create the hell that I
described my father and mother
living through, and the rest
of Europe lived through,
this was unprecedented.
I know of no example
of any empire that
so rapidly destroyed itself,
not because there were
external forces, but
because internally it
was so unstable
and so disorderly.
At the end of these
31 years, in 1945,
Europe was occupied territory.
It had gone from
ruling the world
to being occupied by the
Americans and the Soviets.
From 1945 until 1992 and the
fall of the Soviet Union,
it remained occupied.
Then different things
to be in the East
and occupied by the Soviets,
than to be in the West.
But the essence of sovereignty
is decisions of war and peace.
And from 1945 to 1992, the
decision of war and peace
was not made in Berlin, or
Rome, or Paris, or London.
It Was made in Moscow
and Washington.
If there was going
to be a war, it
would happen because
they wanted it to.
I should point out
at this point how
incredibly,
meticulously responsible
the Soviets and the Americans
were during this period.
In spite of many issues,
in spite of massive armies
facing each other,
and nuclear weapons,
these two countries
went out of their way
to make certain that
war would not break out.
Imagine nuclear
weapons in the hands
of the European diplomats
of 1914, or 1939.
It's interesting, because
when I go to Europe,
I'm called a cowboy,
which really I'm not,
because I'm European.
But I've never met
a cowboy, either.
They think of Americans
as cowboys-- wild, woolly,
and violent.
But compared to what
the Europeans were,
the Americans are pacifists.
They just talk big.
And this is an important
thing to remember,
that the Europeans, when
left to their own devices,
have historically for millennia,
been extraordinarily violent.
In 1992, two things happened.
The collapse of the Soviet
Union exactly 500 years
after Columbus meant
that for the first time,
no European power
was a global power.
That was an extraordinary
change in human history.
For the first time in
500 years, Europeans
were not a global power.
There was only one global power.
It was the United States, and it
had no idea what it was doing.
It didn't want to
be a global power.
It didn't know it was
the only global power.
And it had the maturity
of a 15-year-old.
If you've ever seen a
15-year-old in the morning,
they are totally self-confident
that they can do anything.
They could fly a
plane if they have to.
In the evening, their
girlfriend breaks up with them,
and they're suicidal.
They're bipolar by nature.
As is the United
States, lost in this.
But still the Europeans had
emerged with this vision
that they had
entered a new truth.
And that truth was
the European Union.
And the European Union
was based on the idea
that the Europeans had
learned their lesson.
They understood
that war was bad.
And they constructed something
that would be better.
It's vital to understand that
the European Union was created
by the United States,
not the Europeans.
Back in the 1940s
and early '50s,
it was the United States that
wanted an integrated Europe.
The Europeans resisted.
The United States wanted
an integrated Europe
not because they
like the Europeans,
but they wanted a
strong economic bulwark
against the Soviet
Union, and they
wanted lines who
could afford armies,
and so they wanted integration.
And when the idea of
integration was put forward,
the French didn't want
to work with the Germans,
the English didn't want
to work with the French,
and nobody wanted to
work with the Italians.
So you had this
fundamental problem.
The first European
leader that accepted
the idea of a European entity,
whatever it was called,
was Charles de Gaulle.
And he accepted it not for
the reason you might think.
He accepted it because if
there was an integrated Europe,
France would be a leading
power, in his mind.
France could steer
this entity into being
a counterweight to
the United States.
And Europe could
return to history.
That was the theory.
Over time, the Europeans
adopted this idea.
They first struggled against it.
Then they adopted it.
And there was two
European Unions.
One was the outer seven.
The other was the inner six.
And it developed
onward until it became,
in 1992-- the same year
the Soviet Union fell,
the Maastricht Treaty
came into force.
And the Maastricht Treaty
created the modern European
Union.
A free trade zone
with some countries
sharing in a common currency
and a regulatory apparatus
in Brussels.
It was, according to it's
official doctrine, based
on peace and prosperity,
not the pursuit
of happiness, which is to say,
not the American principle
that you're promised
nothing except the right
to try to be happy.
The Europeans
promised happiness.
They had to, because
they were terrified
of what would happen otherwise.
So the question
then became, what
happens if you can't
get prosperity?
What happens to peace?
But from 1992 to
2008, it was a period
of extraordinary economic
prosperity in the world.
And all of the flaws, all the
problems, embedded in Europe
were hidden.
You couldn't see them.
Then in 2008, in seven weeks,
the world transformed itself.
Between August 8, 2008,
and September 15, 2008.
On August 8, 2008, the
Russians invaded Georgia.
This did several things.
One, it re-announced,
history may not be over.
The Russians have
returned to history.
Why did the Russians
invade Georgia?
The United States
was busy staging,
the Russians felt, orange
revolutions everywhere.
One of them was in the Ukraine.
And this bears what
is happening today.
And the Russians felt
there's only one reason
to stage a pro-Western
uprising in the Ukraine--
you plan to seize the
Ukraine and attack Russia.
At this time, the
United States was
bogged down in Iraq
and Afghanistan.
And that really
wasn't on their minds.
But it was on the Russian minds.
And the invasion of
Georgia was designed
to deliver this
message-- Georgia
was aligned with
the United States.
This is what an American
guarantee is worth.
And that message was not
for the Georgians alone,
but was especially to the
Ukrainians, to the Kazaks,
to the Azerbaijanis, we're
back and we reframed history.
And suddenly the idea
of perpetual peace--
which had never existed in
Europe because at the same time
that Maastricht was
going on, 100,000 people
died in Yugoslavia-- which
the Europeans explained
as they always
explain the Balkans,
it's not really Europe.
But of course it is.
And 40,000 people
died in the Caucasus
during the war between
Azerbaijan and Armenia.
War was nibbling at
the edges of Europe.
And that war that we
talk about now starts.
There.
But the more critical
thing that happened,
happened seven weeks later.
Lehman Brothers collapsed.
And with the collapse of Lehman
Brothers, a series of events
unfolds that brings
us to today's crisis--
this week's crisis,
Greeks I should say.
For the United States, this
was the fourth crisis--
a financial crisis--
since World War II.
There was a municipal
bond crisis.
There was the third
world debt crisis.
There was the savings
and loan crisis.
And now the subprime crisis.
And the United States
knew how to handle this.
The head of the Federal
Reserve Bank, the secretary
of treasury, and eight
bankers got into a room--
broke every law on
the books, there
was no justification for
these people to be in a room
together-- and made a deal.
And there's a way that
Americans handle this.
First, the financial
community behaves
with absolute irresponsibility.
The federal government
bails them out.
And then the financial community
condemns the federal government
for irresponsibility.
This is an American sport.
And we go through it
over and over again.
The problem with Europe
was that they had never
gone through a financial crisis.
They'd never done it before.
They had no model.
They had no kind
of expectations.
No one was cutting them
slack to get out of it.
But more than
that, the Americans
had had one Fed chairman, one
secretary of the treasury,
and eight banks.
Well, the Europeans
had eight banks.
The Europeans had one ECB.
But they had over 20
finance ministers.
And try to get them together
into a room to settle anything.
The subprime crisis shook
the European banking system.
They bought lousy paper.
And the Europeans
always accuse-- saying,
the Americans started this.
My point is, hey, idiot.
Why'd you buy it?
The point is that the Europeans
will point to everyone else.
But they bought it.
And it shook the
financial system.
And that revealed the
fundamental fault line
of European reality.
Germany is the world's
fourth largest economy.
It exports almost
50% of its GDP.
That is, 50% of its GDP, half
of its GDP, comes from exports.
Half of those exports go to
the European Free Trade Zone.
A little over half.
With that sort of
constant surge of exports,
it is almost impossible
for European countries
om the periphery to develop.
Imagine if the United States
exported 50% of its GDP,
and depended on that.
And half of it would go
to Canada and Mexico.
What would the condition
of Canada and Mexico be?
This is what the Germans do.
Their industrial plan,
their economic plan,
is far greater than it
can consume domestically.
If they don't
export, they're going
to have massive unemployment
and economic instability.
They must export.
And for them, The European
Union was a system
for maintaining their exports.
First, they had access
to all these markets
as if it were their own.
Second, they had the political
power the price the Euro
at exactly the point they
wanted to prevent inflation
but facilitate exports.
Whereas the southern
Europeans had
to have some much lower price.
They couldn't get it.
Finally, they created a
reality through Brussels.
Just as Washington
creates regulations,
Brussels creates regulations.
And the Brussels regulations,
plus the tax structure
of Europe, made entrepreneurial
activity impossible.
Entrepreneurial activity
in the United States
is possible first, because
the tax structure is such
that if you happen to hit a
home run, you're gonna enjoy it.
The tax structure in
Europe is confiscatory
at a certain level, so the
risk/reward ratio isn't there.
Secondly, they developed
rules and regulations
on everything from human
resources to health care.
In the United States, if
you try to be entrepreneur,
it doesn't work, you go
bankrupt, you walk away.
When I started Strafor, I
didn't know what I was doing.
But if I had failed, I
could put it behind me.
In Europe, you
don't hire people.
You adopt them.
They live with you forever.
It takes you a
long time to unwind
entrepreneurial activity.
And so one of the
things that happened
here was that the European
1950s corporation was never
challenged like
the American was.
It never was challenged
because there
was no Google coming up at them.
Siemens was impervious.
And that was no accident.
It was built that way.
And the reason that Europeans
came after both Microsoft
and Google on antitrust
and regulatory issues
was to make it more
and more difficult
for them to operate in Europe.
Because for Germany, Siemens
and the large corporations
were social-- their system
of social nets under them.
You got a job at Siemens.
You got promoted.
You rose in the systems.
You did in 1950s.
It was social stability.
It was inefficient, but
it soaked up excess labor.
What happened in
the other countries?
What happened in countries
like Romania or Italy?
Because it was impossible to
be legally entrepreneurial,
you became illegally
entrepreneurial.
You lived on the margins.
And in living on the
margins in these countries,
the government knew
you were doing it.
They knew you weren't
paying taxes--
not the Romanians,
or the Greeks,
or the Italians who wanted
to pay taxes anyway.
But you're certainly not going
to pay taxes if you're illegal.
But the government wanted you
to do it to maintain employment.
Because the German
pressure was so heavy,
and the Germans are coming
in and buying all assets
that are worth anything, that
you have to be off the books.
As a result you wound up
with a sovereign debt crisis.
That is to say, because the tax
base couldn't support repayment
after the subprime
crisis, the banking system
now faced a second major
crisis, a bigger one.
The bonds that governments
had sold couldn't be redeemed.
And then a question came up,
how do we solve this problem?
And there were two
solutions to this.
One solution was that Germany,
leading northern European
countries, would
underwrite the bad debts.
And the other was that
we would impose austerity
on the southern
European countries.
And the Germans thought
about this for three minutes.
And they said, I think we
should impose austerity.
And the Eurocrats-- that thin
layer of financial people,
journalists, and so
on-- accepted this idea
that we'll force
them to pay it back.
They'll have a bad time.
And then it'll all
straighten out.
What they didn't realize
was the massive consequences
that they would set off.
And the IIMF has now admitted
that they didn't get it.
In Greece, unemployment
is now 26%.
In Spain it is 23%.
In Southern Italy it is 22%.
In central France it is 20%.
In other words-- and I should
add-- unemployment for those
25 years or less is 50% to 60%.
These are the same numbers that
existed in the United States
during the Great Depression.
This is a depression
in southern Europe.
Where Germany has
5% unemployment,
southern Europe
is in depression.
And this is a depression that
it can't easily recover from.
What this has now become
is not a financial problem,
it's a political issue.
When the very poor
become poor, it hurts.
But they understand
the grammar of poverty,
the structure of what
it means to be poor.
The people who were hit
in the government cutbacks
were doctors, engineers, they
were the professional classes,
who in Europe are heavily
employed by the state,
because the state has
a much broader reach.
So, and you have a
national health system,
and you cut everybody's salary
by 50%, you're cutting doctors.
When the middle class, which
has a clear expectation of what
Europe would mean for them,
that they would have if you're
Romanian and you're Italian,
and you come into the EU,
you will have a European life.
And it's defined by Germany,
maybe not as well as Germany,
but still, you'll
have a European life.
And you'll realize over
time that that life is gone.
So if you were 40
years old in 2008,
and you started
to lose your job,
and your salary was being cut
from 3,000 Euros to 800 Euros--
as happened in some
people's case--
if you go down this list,
what happens to you?
You suddenly realize
at a certain point
it's not going to get better.
You suddenly realize
that this is not ending.
This is not a cyclical thing.
That's not temporary.
I've been doing this
for seven years.
And the problem is not that
some Think Tank in Brussels
didn't think up the solution,
it is that the Germans cannot
afford to change their behavior
because of what they would
suffer, and therefore we're
locked into this position.
And that leads to what happens
whenever the middle classes are
devastated.
The rise of radical
parties, particularly
of the right wing,
because you have
to find an explanation
for what's wrong.
And what the answer you find
is that someone caused it.
And we must protect ourselves
from that by nationalism,
by closing our borders,
and the Muslims
are a particular problem.
And by the way, the
Jews are a problem too.
And you come up with a solution
that the middle class comes up
with when they've
lost everything.
And one of things that the
European elite never got
was that as they were
stabilizing their banks,
they were creating a system
of political backlash
that would threaten the entire
system they had created.
They thought they could keep
everybody in their place.
And of course, when
you're devastated
like the Europeans were,
you can't keep everybody
in their place.
And everybody came
out of their place.
And so what we see
now in Europe is
the rise of brand new parties.
In Greece, it was
a left wing party,
which has the same position
as a right wing party,
but they don't dislike Muslims.
That's the difference.
But these are parties
that are basically saying,
we're not going to pay you back.
The Hungarians pioneered this.
They gave mortgages
out-- Austrian banks,
Italian banks-- gave
mortgages denominated in Euro,
in Swiss francs, in
yen, anything you want.
Low cost.
But nobody counted on
the forint collapsing.
The Hungarian government
went to the banks
and said on behalf of
their mortgage holders,
we're gonna pay you
back in forints.
And we're gonna give you
about $0.60 on the dollar.
Or we'll give you nothing.
Give me a call in the morning
and tell me what you want.
In other words, the debtor,
when he owes enough money,
controls the situation,
not the lender.
Old story.
I I owe you $100, you've got me.
If I owe you a billion
dollars, I've got you.
And what the Southern European
countries are realizing is one,
they cannot live with the
situation that's been created.
That default is better
than not default.
And secondly,
Germany can't afford
to let them default, for
all the bluffing going on.
Germany can't afford this.
They need to keep
the free trade zone.
We saw this recently
in quantitative easing,
which is a very nice
term for printing money.
I like it.
Printing money was
printed by the ECB,
but it was administered
by national banks.
Why?
Because the national
banks could only
buy paper from their own
country, which means default
could not affect
Germany or others.
But also, none of the
European countries
trusted the European
Central Bank
to be impartial, to buy
the papers they had to.
We're now back at
the Nation State.
And in Europe, when you're
back at the Nation State,
you're at a dangerous point.
The United States had
a very similar problem.
And the problem the
United States had
was in 1861, a vast dispute
on all sorts of issues
between the South in the North.
And the South said,
we could withdraw
from the American Union.
And the result was a Civil War
in which hundreds of thousands
of Americans on both
sides gave their life,
and the Battle of Gettysburg
fought to save the Union.
Antietam and other places.
Who will die to save
the European Union?
How could Europe create a
grand RB of the Republic?
It has no moral promise
except prosperity and peace.
You can't die for
prosperity and peace.
For life, liberty, and
the pursuit of happiness,
we hold these truths
to be self evident
that all men are created equal.
There is a moral component.
And you've been demonstrated
that moral component.
We fought the Civil War
and saved the Republic.
The Europeans have
no moral component.
They only have a
prudential component.
And the fact that
they fear each other,
dislike each other, for a
very good reasons going back
many years.
My mother never
forgave the Romanians,
and I have no idea what the
Romanians ever did to her.
But it doesn't matter.
If they didn't do
it to her, it was
her great, great grandmother.
These are countries that are
different, do not share faiths,
and have never held together.
And we are now at the beginning
where it's all coming apart.
And already we hear
the guns in Ukraine.
So all of the promises that
were made are in question.
And when Europe goes into
question, the world trembles.
Let me stop there and
ask for questions.
Thank you.
AUDIENCE: So are you
kind of-- your theory
is that if there would be
a large hegemonic power
in the room, similar to like,
the United States, in Europe
still, this issue
wouldn't happen.
So if the Cold War never
ended, and the Berlin Wall
didn't fall, this
wouldn't be an issue.
GEORGE FRIEDMAN: Yeah.
I mean, the reason
that Europe did not
have a World War
III among itself,
is that it was occupied by
the Americans and Soviets,
and they didn't
want to have one.
But it's not simply a
question of somebody
having hegemonic power.
There's a dynamic in
Europe between Germany
and the rest of Europe
that's in play here.
Ever since 1871,
when Germany unified,
Germany has been the most
dynamic economic power
in Europe, and scare the
hell out of everybody.
The German question has always
been unlike the British,
they have no empire
to sell it to.
They are incredibly creative,
incredibly efficient,
and very aggressive.
This time they don't
have an army yet,
which is the good news.
But they're still
behaving in the same way.
Ever since Germany united,
Europe destabilized.
And while the United States
occupied the Western half,
and the Soviets the Eastern
half, it was a moot question.
Now the Europeans have to
work it out themselves.
And they never have easily.
AUDIENCE: What's so special
about the Germans, then?
Why have they succeeded
after World War II, when
the Southern European
countries did not?
GEORGE FRIEDMAN: That's
an extremely good question
to which I don't
have a good answer.
But it's one on which
Max Weber and many people
wrote, "Protestant Ethic and
the Spirit of Capitalism."
It has to do, I think, with
the fact that when it's united,
it unites well.
In other words, unlike Italy
where the northern Italians
still don't get along with
the southern Italians,
the Bavarians and the
rest of the Germans,
you know, Munich and Frankfurt
and Berlin all unite,
they are also
culturally vigorous.
And they're also scared.
One of things about
the Germans is
they remember the
period for hundreds
of years when they
were fragmented
into many small nations.
And their terror is that
it's going to happen again.
And they keep losing war,
so the terror is real.
They therefore
create states that
are very effective in mobilizing
economic activity to build
economic activity.
I think this is an
insufficient answer,
but it's the only answer I have.
But empirically, we know
that Germany does do this.
And while I can't
fully explain it,
I can say it is a
dynamic of Europe that's
empirically clear.
AUDIENCE: How do
you feel a Marshall
Plan might have
played into this?
Has the United States
overdone the effort
of rebuilding Germany
at the expense
of other countries
in the region?
GEORGE FRIEDMAN:
The United States
had to rebuild them, because
the Cold War required first,
that the West be
self-sufficient-- Western
Europe be self-sufficient,
and secondly, that they
have substantial arms.
Once you begin the
process of rebuilding,
it take on a life of its own.
It doesn't end,
and shouldn't end.
That was the entire idea.
There is no way of
limiting prosperity.
Now the countries
that the United States
is most concerned
with is Germany,
because it's right on the
front line in the Cold War.
And of course, France.
And to a lesser extent, Britain.
Britain was very bitter that
it wasn't the forerunner.
And Italy, because both of them
have strong Communist parties.
Greece, Spain, it had
much less to do with.
But it was really the
North European plain
that the Americans
were obsessed with,
because if the Soviets
attacked, that's
where the attack would come.
And that's where they
had to have blockers.
So certainly the Marshall
Plan kicked off this process.
But it wasn't that the
United States could limit it.
Once you put the Germans back
to work, they're back to work.
And they work well.
And so Americans like to
moralize whose fault it is.
This is not anyone's fault.
It's not the Germans' fault.
They're not greedy or vicious.
It's not the Southern
Europeans' fault.
It is the nature
built into Europe.
So I would argue-- and
that's an important point
I want to make-- is there's
no blaming the Germans.
They are in the
position they're in.
And they have to deal with it.
There's no blaming, in
my mind, the Greeks.
There's no blaming the Russians.
We are all playing out the
hand that we have to play out.
And unfortunately, in
the case of Europe,
this hand frequently
winds up in a bad place.
AUDIENCE: Could you
comment on your thoughts
of the influence of
US foreign policy
right now in Europe,
because there
are some lines of thoughts
about US foreign policy
being interested in taking
Europe down a notch,
Europe becoming too strong.
And specifically, US influence
in the Ukraine crisis.
GEORGE FRIEDMAN: I
don't see the US have
the ability of taking
down Europe a notch.
Europeans are doing
what they're doing.
There's very little
that the United States
could do to take it
down, if they want to.
The problem of
Europe is that having
bought into peace
and prosperity,
they essentially-- many of them
dismantle their militaries.
So NATO no longer functions.
It's a military
alliance, but you
can't have one if
there's no military.
So France has a military.
Britain has a military.
But the rest of the
countries really don't.
The United States looks
at Europe and says,
I think, reluctantly,
there is no Europe here.
There is Paris.
There is Berlin.
There's Spain.
And they all have very
different policies.
So we have no one to talk to.
We talk to the British.
We talk to the French.
But now we have a
crisis in the Ukraine.
From the Russian point of
view, as I said before,
they read this as a coup
d'etat by the United States,
taking the elected
president of Ukraine,
changing the Constitution
on Sunday morning,
and impeaching him, and imposing
a pro-Western government.
From the American point of view,
he was corrupt and oppressive.
And people rose against it.
Philosophy aside,
Ukraine is fundamental
to the national
interest of Russia.
This is where the
Wehrmacht was destroyed.
This is where they
perceive themselves.
This is a place that is
70 miles from Stalingrad.
And 300 miles from Moscow.
It has no natural defenses.
They need the Ukraine,
because if Ukraine becomes
part of a Western
defense system,
everything in Russian
history tells them
that whatever they think
now, later they will
do what they want.
Remember, Russia had Germany--
a weak, shattered country
in 1932.
By 1938, it was the most
powerful country in Europe.
So the Russians have that view.
The Americans also
have a 100-year history
of one overriding
geopolitical interest--
not allowing a regional hegemon
to control all of Europe.
I went into the first
World War to stop that.
It went into the Second
World War to stop that.
It went into the Cold
War to stop that.
There are many
crazy things we do.
We invade Panama,
for some reason,
that I could never figure out.
And things of that sort.
But these are trivial things.
The fundamental things
that the Americans do
is control the seas, and
watch the European peninsula
for hegemon.
If Russia takes Ukraine,
whatever the Russian intention
is, the Americans think,
what will they do next?
And so you have two countries.
Now, the American's General
Hodges, a US Army Europe
commander, visited
Kiev, said there
would be traders
coming in officially.
Only unofficial now.
Pin medals on Ukrainian
soldiers who fought well,
which is symbolically stunning.
And then announce that we would
preposition armor, artillery,
and other weapons in the
Baltics, Poland, Romania,
and Bulgaria.
So I mean, that is
quite an announcement
for the United States to
make in the past two weeks.
Then Kerry is announcing
a very aggressive policy.
Biden is saying the same thing.
So if you're the Russians,
you're coming to the conclusion
that the United States
means to seize the Ukraine,
and that means the end of
the Russian Federation,
from their point of view.
They have a window
of opportunity,
because it will take the
Americans six months to a year
to have any meaningful
force in the area.
It is now the rainy season
where the roads are mud.
That will end in
four to six weeks.
And then we will see.
In the meantime, Frau Merkel,
who really doesn't need
this aggravation right now.
It has enough problems
trying to hold the European
Union together.
It really doesn't need
a war in the Ukraine
to make its life miserable.
Is in Moscow today with
French President Hollande.
And they're trying to get
Putin to listen to reason.
But the Western reason
and the Russian reason
are very different.
The Russians, said to me--
I was in Moscow recently--
and the Russians
said to me, look.
We want this much.
We'll give up Crimea, if that's
what is really bothering you.
But we want in Eastern Ukraine.
It could be part of
the Ukraine but it
should be an autonomous zone.
And they use this
like Quebec in Canada.
OK.
It speaks a different
language, so on.
The United States is
absolutely opposed to this.
And the Russian view is,
why would the United States
be opposed to it?
And therefore each side
is reading the other.
And this is how wars start.
Except neither side
wants a war, believe me.
But the Europeans are
irrelevant to this.
Merkel could go to Moscow.
She has no force.
She has no army.
The Europeans are
playing a role that they
played in the Cold War.
They're inert.
And that's what's
so interesting.
This is a war that the
European Union should
be busy not fighting about
putting down or making whatever
arrangement they want.
But they're in no position
to do what the Russians need,
pulling them out of a
recession, depression,
whatever you want to call it.
So what you see here is that
unless the United States goes
in, no one will go in.
If the United States goes
in, then the Russians freak.
If the Russians go in,
the Americans freak.
And the Europeans
are primarily worried
about who pays what bond when.
So you have a total
asymmetry of interests
and the kind of
intellectual chaos.
AUDIENCE: So are we playing
to Putin's advantage?
I mean, sort of pretending
to be aggressive,
or acting aggressive.
I mean, isn't that helping
Putin get stronger?
GEORGE FRIEDMAN:
Well, the alternative
is not to be aggressive, let
the Russians move forward,
and occupy a position
bordering Romania, Hungary,
Poland, and so on.
So think about the run up
to World War II in Japan.
The United States cut off the
sale of oil to the Japanese.
It also went about buying up
oil in the Netherlands, East
Indies-- Indonesia
today-- to keep
the Japanese from buying it.
The United States was
doing that because we
wanted the Japanese to
pull out of Indochina.
The view was that if we
do this, the Japanese
will be under
tremendous pressure.
The Japanese view was, if
we get into this pressure,
there'll be more pressure.
And we're accepting
the fact that we
exist at the sufferings
of the United States.
The result was Pearl Harbor.
Wars don't originate with
some crazed mastermind.
Even Hitler was bluffing
until his bluff was called.
And once his bluff
was called in Poland,
he either went or he didn't go.
If he didn't go, there
would be consequences.
So we went hoping that it
wouldn't mean anything.
Wars begin with bluffing.
And just like in a poker
game, at a certain point,
you have to flip your cards.
We're in the bluffing stage.
And each side is hoping not
have to flip their cards.
Neither the Russians
nor the Americans
have any appetite for war
in the Ukraine, believe me.
But that's not how wars begin.
I don't think there will be one.
I think they'll find
a way to back off.
But actually, when
you play it out,
it's hard to find that
place where they go.
MALE SPEAKER: Please
join me in thanking
George Friedman for
his [INAUDIBLE].
[APPLAUSE]
