>>Cliff: Welcome to another talks at Google.
Today we are very thrilled to talk about a
topic of central importance to the 2012 election,
in particular of that of America's continued
presence on the world stage and the impact
of things such as the looming debt crisis.
Today we're thrilled to host Michael Moran.
He's speaking to us today about his book which
is called THE RECKONING: Debt, Democracy,
and the Future of American Power.
He chronicles how debt and political indecision
coupled with emerging technologies is shifting
the global political landscape.
Now Michael is the Director and Editor-in-Chief
of Renaissance: Insights and he's authored
numerous opinion pieces of foreign policy
analyses for the likes of Slate and MSNBC
and he's written for other foreign press sites
throughout his career.
We'll have a microphone for Q and A in the
back so please make sure to use that during
the last part of our talk.
And without further ado please join me in
welcoming Michael to Google.
Thanks.
[applause]
>>Michael Moran: Thank you Cliff and thanks
everybody for taking time out of a beautiful
day.
I know what it's like; I used to live in Seattle.
I worked for a company up there you may have
heard of, on their campus at least, for msnbc.com
during the launch phase which was just a fascinating
experience for a guy who was essentially a
journalist at that point.
But I know what this weather does to crowds
like this so I don't feel embarrassed about
all the empty chairs so.
I'm honored to be here.
Google is a leading intellectual organization
in the world and I don't confine that to the
tech sector.
I've been pleased to get to know Jared Cohen
a little bit.
I was the head of editorial, digital editorial,
at the Council on Foreign Relations for a
period a couple years back and I got to know
Jared through his work at CFR and he's a great
proselytizing evangelist for the changes that
technology's bringing to the world and particularly
foreign policy.
So I'm very happy to be here.
I thought I'd start today by trying to focus
a bit beyond the political season that we
have here 'cause I think inevitably we're
gonna end up there; it's gonna funnel our
conversation in that direction in part because
American electoral cycle which doesn't ever
seem to end now produces such a small opportunity
for a recently elected President to do anything
farsighted before they have to start running
for office again or at least start help their
party retain the mid-term election advantage.
Obama of course was, that small window was
completely gone in his case.
I think it's fair to say he was handed the
largest pile of steamy dooky any President
ever encountered, including Roosevelt because
after all Roosevelt knew there was a Depression
when he ran for President.
Obama, it seemed to dawn on everybody sometime
between his election and his inauguration
that these were some serious problems.
I had the great pleasure of working for years
with Nouriel Roubini, a guy who had not been
surprised by this and subsequently having
predicted what was going to happen in the
mortgage market here first and then the contagion
that led to what's now being called the Great
Recession.
He was kind of the skunk at the picnic from
roughly the middle of 2005 when he made this
prediction until it actually came true, and
now he's just widely resented and hated for
being right.
But having worked closely with Nouriel I got
to see what he does and how he gauges individual
economies.
I mean his real talent is in macro-assessment
of large economic units, whether they're economies
or sectors or markets.
And he took the same approach for every economy
whether it was Borneo or the United States;
essentially the balance sheet approach.
If your balance sheet is out of whack something's
eventually gonna go wrong.
This was widely considered heresy right up
until 2008 in some quarters and even today
in many quarters, that you would apply the
same standards to a developing economy that
you would to an advanced economy; what I now
call the submerging economies.
I think Nouriel was proven right obviously
in a somewhat infamous way and it started
me thinking about the various tendons and
synapses that connect this macroeconomic thought
to geopolitics.
I started worrying about this primarily because
I think I was so absolutely privileged to
be posted abroad as a U.S. foreign correspondent
during what I think as the apex of U.S. influence.
It was right after the Wall came down, I was
there when Germany reunited, I was in various
Communist countries as the Communist governments
fell in the 90's and thought to myself before
I had children, "My children will grow up
in a better world," and that lasted until
I watched the planes go into the Trade Center.
We always manage to destroy these kind of
moments of Utopia somehow.
But the U.S. was in a position at that point,
before 9/11, where literally a pack of Marlboro
cigarettes and a passport and you could get
to the Presidential palace.
People just wanted to see someone who had
an audience in the United States because the
assessment was that even if the changes were
wrenching, even if the changes were resented
by the old elites and even resisted, somehow
in our kinda big, dumb dog way we had, without
killing millions of people with nuclear weapons,
essentially won the Cold War.
How we did it we'll get different analyses
of that; the Right tends to think it was the
Reagan arms buildup, it usually doesn't mention
how Carter started it; the Left tends to think
that it was soft power, rock and roll, blue
jeans.
I think there's a lot of both in there.
But the fact is we had a great deal of good
will, there was a great swelling of admiration
for what we had accomplished in a relatively
bloodless fashion, relatively, obviously there
were a lot of exceptions to that.
Our reaction to 9/11 began a process of unraveling
of that esteem, that global esteem.
I think most of the world understood why we
went into Afghanistan.
Iraq was a different story and as it turned
out when our primary motivation was unveiled
as false at best and deceptive at worst, I
think that was a real problem for the rest
of the world which was compounded by the fact
that we reelected the guy that did it.
I mean in the eyes of the rest of the world,
and this is something I've spent my life trying
to understand, that was this cardinal sin,
not the war itself, was the reelection of
the President who had misled the country and
our closest allies into that war.
And then to drive the global economy off a
cliff was kind of the coup de grace wasn't
it?
And you can't say that that was a mistake,
I mean we being, we Americans left and right
from Ronald Reagan to Bill Clinton, signed
up for the deregulatory band wagon that ultimately
went off that cliff.
Astoundingly today we still have not come
to terms with how this happened; there's a
surprisingly vigorous debate over whether
government actually caused this.
It's astounding to me, I mean it's like blaming
the Swedes and the Swiss for World War II
because they didn't stop it.
I mean okay you can blame the League of Nations
for not walking in but certainly they didn't
cause it, they were just absent at their post.
This is the argument that seems to have purchase
on a good minority of this country, maybe
40, 45 percent and it's scary.
This goes hand in hand with an impression
we get from looking at the town hall meetings,
etcetera, the moments when the central government
figures from Congressman to Presidents have
interaction with actual human beings instead
of flaks and press.
And I remember one in particular was a Republican
Congressman in South Carolina who was assailed
by one of his constituents because he wanted
to reform Medicare and the guy stood up and
said, you may have seen this some of you,
"Keep your government hands off my Medicare!"
That encapsulates the dysfunction right there.
I mean most of Americans don't understand
what our government is, they don't understand
what their tax money does, and the line between
government benefits and benefits for other
people is very blurry.
Somebody once said, "Big government is the
government that gives money away to other
people.
Small government is the one that gives it
to me."
[laughter]
Right?
[pause]
Let's broaden that out though and talk about
the U.S. place in the world.
So we have a branding problem.
We are now running around in modest recovery
mode economically kind of expecting the world
to welcome us back as the leader.
American leadership is taken for granted because
we are exceptional.
And this takes on various tones of kind of
messianic tones depending on where you are
in the political spectrum, but pretty much
all Americans starting in second grade are
taught that some great power is pushing us
forward to lead the world so that everybody
someday can have a Carvel in their backyard
or least access to the Internet which isn't
a bad thing; there's a lot of good and a lot
of bad in that.
But the exceptionalist myth goes hand in hand
overseas with something that has been the
totem for the foreign policy community in
the U.S. since World War II which is stability.
So think about that word for a minute, stability's
an important thing.
For servers obviously, it's nice to have stable
servers; in your emotional life, I'm still
seeking it.
But stability in foreign policy in economic
terms in the global economy is the lever of
a country that benefits from the status quo.
Status quo powers love stability 'cause things
continue to get better for them but it does
freeze a lot of the rest of the world out
of potential improvements in their lot.
The United States is now devoted as vigorously
as ever if you look at the comments of the
State Department, whether you go back to Bush's
term in office or look at the Hilary Clinton
State Department, to this term stability,
we want stability.
And yet stability is exactly what we don't
have in the modern world; this is a world
profoundly in transition.
So the United States is essentially pursuing
a policy which bakes in brittleness which
will become unsustainable as we continue to
do things we've done since 1945 militarily
essentially attempting to keep the balance
of power in Europe and Asia and in other sub-regions
of the world from getting out of whack.
We do this by suppressing the need for national
governments in those regions to take responsibility
for their own security.
Now during the period post '45 to let's say
1999-2000 we could afford to do that.
As Michael Mandelbaum says, "The cost of doing
these things were essentially rounding errors
in our budget.
We didn't notice, it was the cost of doing
business as the world's Superman."
We can't afford that anymore and it's becoming
clearer and clearer to those who feel repressed
by it.
Minorities within our allies feel they should
start taking more responsibility; some in
Japan, some in Taiwan, South Korea, certainly
Israel is diverging from our vision for them
pretty significantly.
More importantly though you're seeing it in
the American political debate for the first
time; the Libya mission was a very interesting
debate; it ultimately came down to the last
desperate cry of the anti-war movement everywhere
which is the War Powers Act which Republican
or Democrat the President regards as irrelevant
and unconstitutional; it's the first thing
I think they tell them when they win the office,
"By the way that thing doesn't matter."
But before that the argument from left and
right was about money.
It was the first time in my life that I can
remember a proposed American military adventure
being debated in terms of what it would cost
us; the cost benefit analysis to things we
could be doing with that money here versus
there.
An even more profound example of this coming
brittleness was what happened to Georgia in
2008.
Georgia is a country like Israel and Taiwan
and many others which has been, which essentially
had been told quietly without a formal treaty
that, "Don't worry we've got your back.
Don't worry nothin' bad's gonna happen to
you.
You'll be in NATO someday as a matter of fact."
When things hit the fan it turned out that
that was all talk.
In Georgia the cost to the United States was
relatively minimal; it readjusted U.S. views
of Russia a bit, but it was a reality check
that I don't believe filtered far enough into
the brain of the United States.
You gotta wonder at some point what it is
we would sacrifice to defend South Korea and
Taiwan?
And yet we have issued absolute blanket security
guarantees to these countries, both of which
are completely capable of building the types
of military forces and taking the kind of
steps, more importantly diplomatically, to
adjust the security environment in their regions.
Again I think we are sustaining an unsustainable
status quo in all of these regions; in Europe
it's absurd that we have, I mean the number
of bases in Germany is still astounding.
There's a brand new ski lodge completed in
2003 for the hard pressed American troops
and their families to take vacations.
Now I don't begrudge them that, but why not
send them to Shimane?
[laughs] Do we have to build a U.S. military
ski base at Garmisch?
I mean essentially what we did; it's a beautiful
facility, it's a wonderful facility but it
cost something like $67 million to build in
a period, this is 15 years after the Berlin
Wall came down, in Germany which is a country
that can certainly afford to deal with its
own issues.
So a lot of these issues I think have been,
as Michael Mandelbaum said, rounding errors,
they just weren't there they were part of
this netherworld of foreign policy that didn't
really show up on the American radar screen
until there was a war.
Well for the last decade there've been two
of them.
Even that has had some trouble penetrating,
we've done these wars rather small really
in relative terms, there's been no draft,
many of us know someone who's been touched
by these wars, but by and large they have
not been front and center in the political
debate since John Kerry was defeated.
When was the last time we really had a debate
about Iraq in this country?
Alright.
Now we're out I guess it's forgotten.
If you do, however, begin to think about the
cumulative effect of these things, the effect
that this has had on America's global reputation,
on our soft power even which remains very
potent, certainly we're the most important
force in the world in terms of our intellectual
capital, our cultural capital; we're still
the place that immigrants by and large seek
to come to for an education and in many cases
to start their lives as entrepreneurs and
raise families.
That's all great but these things too can
be squandered and they can go away fairly
quickly if we continue down a road that doesn't
recognize that we should be essentially declaring
some form of victory on the 20th century and
welcoming the emerging powers into a world
that we, ecosystem that we created.
We enabled the emergence of these powers in
many ways but we do not have the psychological
capacity to get past the thin skinned, defensive,
declining empire syndrome that we seem to
have fallen into.
And I find this astounding really; it's not
necessary, we don't have to be in this position.
Our problems relative to those of the bricks,
relative to those of rest of the G7 are solvable.
They're political problems they're not demographic
problems, they're not problems of imperial
overreach which is essentially what the European
Union is or monetary constipation you might
call it, there's a bunch of ways you could
describe that, but essentially they've got
this corset they've created for themselves
that they can't get out of.
Our problems are in essence that we're about
two or three backroom deals away from solving
them I think.
And there unfortunately we come to politics.
At the moment my own feeling is that failure
will be a wonderful thing for those who pursue
the wrong policies in the United States because
it seems in this current environment the only
thing we can possibly grasp is failure.
I mean abject failure of our macroeconomic
policies in 2008 brought some realization
that we needed to change a bit.
The downgrading of the debt last year didn't
do anything, but I think a couple more episodes
of that will cause real pain in the United
States and at that point these conversations
will have to be had.
So I'm on the record here if you look Democrat/Republican
right now I'm pretty disappointed in the Obama
Administration primarily because I think they
should have put down a marker early on that
drove home again and again what they had inherited
and lowered the expectations of some kind.
They should have dismissed out of hand the
idea that we were gonna bounce back.
This is a balance sheet recession; historically
this means years and years and years of sluggish
growth and indicators, and macroeconomic indicators
that don't necessarily reflect the real pain
in the economy.
For instance, the unemployment rate doesn't
show seven or eight extra percent who have
been discouraged and they're out of the labor
market.
The Obama Administration took the high road
as is its wont and they're paying for it now
because now the problems have been hung around
its neck.
That's too bad, but that's a self inflicted
wound as far as I'm concerned.
The other thing that I'm disappointed with
is that when the country gets into this situation,
a situation where somebody's got to demand
sacrifice of all across political spectrum,
it helps to have developed a figure of moral
authority in the center.
At various times in the last century I think
Franklin Roosevelt was that person at one
point.
I think even Reagan was that person at one
point regardless of what you think of his
politics.
When he talked after the Challenger blew up,
when he talked about Iran Contra and even
falsely said he knew nothing about it, people
believed him because he was that figure, he
had developed, he had cultivated that figure,
that reputation.
And like it or not we are, we still live in
this bizarrely paternalistic world where our
country looks to the President to have that
moral authority.
And when he doesn't have it they see it and
it makes the Presidency enormously less effective
and it makes every effort by the President
to be effective look like scheming, tactical
pettiness.
And I think because of the gridlock in Congress
you're seeing in the American political system
hyperactivity in the Executive and in the
Supreme Court.
And I don't think there's a particular evil
intent in the Supreme Court, the Supreme Court
has been landed with a number of issues which
should be decided in Congress.
Many of them are political issues that Congress
can't decide and so they punt to the non-elected
branch of government where at least the political
fallout doesn't cost them their jobs.
So they have really nothing to lose to push
the ball forward one way or another.
In some ways you could argue either way would
be better than allowing these debates to go
on and debilitating our, the larger macro
politics.
So I don't wanna get too deeply into electoral
politics but I'd love to take some questions
on it if you have some.
I think the basic conceit of this book though
is I fear that the brittleness that we are
encouraging in American foreign policy will
lead to something akin to a Lehman Brothers
moment in geopolitical terms.
And by that I mean we should be planning the
unraveling of American influence around the
world, we should be figuring out who the responsible
parties are, where are the absent institutions
that need to be developed before U.S. influence
begins to draw back and the shoreline and
all of its little conflicts that are centuries
old bubble up again.
These things should be thought through.
If this happens in an uncontrolled way, once
it begins to fall apart you'll never get back
out in front of it again.
And I don't like the British Empire analogies
but there is one that I do like which is in
the course of about a month in Asia in 1941,
the country that by and large set the agenda
in Asia for 350 years, the British, had lost
a battle cruiser and a cruiser in the day
after Pearl Harbor which were the totem of
their power in the region and then lost Singapore
which was the capital of their power in the
region about a month late2r.
That was it, they never recovered, British
influence in Asia never recovered.
And ultimately what did it lead to?
It led to a desperate defensive clinging on,
a rear guard battle in Malaya, a selling out
of Hong Kong years after it should have happened
when the British would have had some better
bargaining position to defend the rights of
the colony; in essence they threw the colony
to the wolves.
I fear that the United States is doing its
allies no favor by allowing Israel, for instance,
to ignore the geopolitical changes around
it as if nothing's happening, as if it doesn't
affect their security calculations; that's
an absurdity.
Similarly with Taiwan, which at least shows
some signs of making these hedges; Taiwan
is clearly opening up economically to the
mainland.
I fear that that kind of relationship with
both South Korea, Taiwan, to some extent with
Japan, is not helping these countries deal
with the century that's to come where the
American guarantee is not a blanket guarantee
and will be, mathematically speaking, just
a diminishing guarantee.
That's it for now.
I wanted to open it up to questions and I
hope you'll take a deeper look at the book.
[pause]
[applause]
>>male #1: So you say that we're two or three
backroom deals away from solving the problems
and the problems are political.
What has changed?
Why doesn't politics work anymore?
>>Michael Moran: That's a very good question.
Why doesn't politics work anymore?
I think the primary obstacle right now is
that there are more than one Republican parties.
There are two and possibly different dominant,
not dominant, competing forces within that
party which have prevented the leadership
of that party from being able to enforce what's
called the whip on key votes.
So let's give a simple example: last year
during the run up to the absurd circus that
we called the budget ceiling debates, President
Obama actually conceded a historic point to
the Republicans who had been saying since
the New Deal that the promises we were making
to our elderly would ultimately come back
to haunt us in terms of being unsustainable
economically.
They were broadly speaking, macro economically
speaking, correct; we have allowed those promises
to grow beyond our means to fund them.
Now what did the Republicans do?
Boehner who was the chief negotiator, he's
an old golf playing, country club, Chamber
of Commerce guy, he saw that for what it was.
He started making, he started down the road
to having the grand bargain; they started
talking like, it was funny to watch, I covered
the Reagan/Gorbachev talks in Reykjavik in
Iceland in late, I was very young.
But it was nuclear talks and Reagan and Gorbachev
started talking about things like eliminating
nuclear weapons, you could see the faces of
the aides on both sides, "Oh my God, they
might do it."
And they started to try to divide the two
leaders and they ultimately did prevent that
deal from happening.
And one of the more sentient things Reagan
said before he kind of devolved into Alzheimer's
was that he regretted deeply listening to
his aides in that case 'cause he thought they
could have cut nuclear weapons much more deeply.
I had the same feeling when I saw that Obama/Boehner
thing goin' on particularly on the Republican
side though.
It was clear the Republican, the Tea Party
aspect of the Republican side, was not gonna
go for any deal that would ultimately allow
President Obama to claim some kind of victory
or to point back at the moment in his campaign
where he said he was post-partisan.
It was not gonna happen, they weren't gonna
get Clinton-ed.
And that's essentially I think the fear that
the younger, more fiery, nativist, anti-tax
forces on the Republican side feared and it
cost them a historic moment.
I mean I think actually the effect would have
been that the Republicans would have something
to run on this year had they been able to
affect some kind of deal that let's say how
do you do this in the backroom, it's very
difficult, certainly no one party can do this
because it'll never be elected again, but
you have to have a deal that essentially says,
"If you were born after 1965 your benefits
will be this, if you're born after 1975, da,
da, da," and then you means test it for the
rich because the rich are easy to kill.
And basically, politically speaking, and basically
you have the foundation of an economically
viable program that continues into the future
without cutting everybody out and it doesn't
hit a cliff at some point.
But that conversation is not possible and
in some ways this echoes the Israeli/Palestinian
dilemma right now.
The conversation Israel needs to have with
the Palestinians is very difficult right now
too because Hamas and Fatah are a lot like
the Republican party, they hate each other
as much as they hate the Israelis.
So it's a very difficult foundation for a
cogent negotiation.
I think that's part of it.
Deeper problems include the, I would call
it the institutionalization of gerrymandering
in this country where districts that are always
going to be skewed toward one side or another
have become almost impermeable and uncontestable.
Another good example I think is this mid-term
election.
I mean you have to look at the pattern of
mid-term elections here; people just don't
show up at mid-term elections and they're
a disaster.
It's an automatic punt to some radical force
that decides to mobilize during that cycle
and it skews our politics terribly.
Frankly I don't see the argument against doin'
away with 'em and just going to a concerted
system except that would have to win two-thirds
of the states and the Senate etcetera; it'd
be a very difficult thing.
But in logical terms the mid-term election
is a disaster; it causes the permanent campaign.
>>female #1: You talked about the cost of
the myth of American exceptionalism and how
that's a real barrier to political discourse
and that's, I mean that's a problem that we
have in our borders.
How do we solve that problem?
>>Michael Moran: You know since World War
II there've been a lot of studies about educational
progress mostly focusing on developing nations
in Asia, Africa, and Latin America.
And one of the things that over time has become
very clear is that the most cost effective
way to raise what the economists would call
the human capital of a nation is to target
early childhood and early primary school learning.
The test cases are usually taken by macroeconomic
experts to prove this point are the different
ways that post-Colonial Asian countries and
post-Colonial African countries dealt with
this issue.
Post-Colonial Africa which had no universities,
in some cases no professional class at all
because of the depth of Colonialism there,
threw enormous amounts of money into creating
universities and none, virtually none in relative
terms, into primary education and thus had
lost generations.
You find yourself, I mean I teach undergraduates
okay, you find if there's a five year old
who can't begin to, if you fail to teach a
kid to begin to read at five and the kid still
can't read at ten, that kid's lost forever;
that kid's not gonna catch up in high school,
not in American public high school especially.
So you need to make sure that the foundation
for learning is there.
I think that's the beginning and these are
not, some of these problems are not back room
deals, some of these problems are generational
changes in both our psychological self image,
the idea that it's okay to kick around the
continent sized country, we don't have to
be everywhere all the time and poking our
nose into everybody's business; there are
other people with bigger, I thought the lead
from behind in Libya was wonderful; it's not
our backyard, right?
It's an asterisk in the international oil
market forces; let the Europeans do it.
We should, unfortunately we have to supply
all the intelligence, all the heavy transport,
and much of the refueling, etcetera, and all
the, seriously they ran out of I think JDAM
bombs at some point and we had to restock
those too, but that's part of the problem.
So I mean I think that, again to get back
to your original point, the domestic priorities
of the country need to start learning from
history instead of allowing political rhetoric
to drive things.
One more thing I would say about that very
quickly: corporations as you know, probably
Google and Microsoft are at the top of the
list are sitting on gargantuan piles of cash.
As much as the U.S. household sector needs
to be deleveraged, corporate sector needs
to be re-leveraged; tax policy needs to change
to force incentives on corporate America to
spend that money either on job creation or
something else.
I mean it should be, I'm not a fan of punitive
tax levels but I don't think as currently
structured there is a great deal of incentive
for company that worries about the ultimate
stability of the economy after 2008 to spend
down some of these war chests and that would
be very welcome injections of stimulus into
the economy.
Yes.
>>male #2: So back to domestic politics.
>>Michael Moran: Yeah, it's, I hear ya.
>>male #2: So it used to be in the 50's that
there were some Republicans that were more
liberal and some Democrats who were more conservative
than they were, and we don't have that anymore.
You said something about the institutionalization
of gerrymandering but what I think you mean
is that we've reached a point in society where
people can now pretty much live wherever they
want and do whatever they want and so they
tend to move to places where there are other
people like them.
And so the Bay Area becomes known as a liberal
place and so it attracts more liberals and
Boulder, Colorado becomes known as a conservative
place and attracts more conservatives and
this gets reflected in the people that we
elect not because the districts are necessarily
bad, although it might be in some cases, but
because they're just simply more one-sided
to begin with.
And so we wind up electing more polarized
people to Congress and now our Congress is
more polarized than it has been since about
the 1850's when I think a duel once broke
out on the floor of the House of Representatives
between a couple of House members.
And that all ended in a Civil War that killed
two million people and caused death and destruction
all across our country and I can only wonder
if a similar crisis won't occur simply because
we have the same situation and no way to depolarize.
>>Michael Moran: Yeah, I take your point.
I'm not that gloomy I don't think.
I think even though I worked for Dr. Doom
I'm not mini-Doom.
I think my sense of it is that when I said
institutionalized gerrymandering I mean that
it's actually engineered by state legislatures
for very partisan reasons and they have been
allowed to get away with it because the Supreme
Court has essentially given them a pass to
do it.
I also think that atomization of our media,
largely due to new media, has destroyed some
of the few places where we used to go for
consensual opinion making.
For instance, the evening news cast which
now seem absurdly vanilla to us and I'm sure
none of you watch NBC Nightly News or any
of those type of shows.
But they had their value, it was a kind of
central town hall where you could disagree
with the take that was being given but you
would never be spoon fed the same thing every
day on the thought that this would encourage
you to come back next day.
See one of the things I think media has a
lot to answer for is what I call the Al Jazeera,
Roger Ailes theory of media which is, I'm
not sure which one learned from the other,
I think Ailes learned from Al Jazeera, "If
you tell 'em what they wanna hear they're
gonna come back tomorrow."
So in Al Jazeera's case it included telling
the truth because their competitors were these
inert state broadcasters who were basically
propaganda mills.
In Fox News' case Roger Ailes, because he's
a fellow traveler of this segment of the audience,
felt that there's 38 percent of the American
public who can't stand the liberal media;
38 percent's worth it, that's an advertising
budget right there, let's talk to them.
And so they do.
But imposing that, that was a very alien model
on American media when it was first, when
it first arrived from England frankly and
it's not alien in Britain, I mean the finest
papers in Britain are very partisan, The Guardian,
The Telegraph, on the two ends of the spectrum;
they don't make any apologies for it.
But I do believe that that's another part
of what's happened is that we have this echo
chamber that we've created with all the benefits
that I embrace with the Internet and social
media, it's also doing damage to social cohesion
I think.
[pause]
>>male #3: You spoke about domestic policy
and human capital and preschool education,
and my wife works in, she's a professor and
she's seeing money just rain out of college
institutions and simultaneously a tremendous
amount of money going towards the incarceration
of people in the United States.
And I'm wondering if you could speak about
the human capital and debt in human capital
in relationship to incarceration.
>>Michael Moran: Yeah, I mean it gets very
creepily impersonal when we start saying human
capital, but it is true that every human being
that either dies an early death or is encouraged
to or forced to work outside the mainstream
economy in some kind of black market or criminal
enterprise or if they're felons and they lose
the right to vote and the right to access
usually that also goes hand in hand with access
to decent jobs because no one wants to hire
a felon.
These are enormously important factors in
economic growth; you lose a unit of economic
productivity in economic terms for the life
of that person and yet you still have to support
that person at a public hospital, you still
have to educate their children, I mean it's
a real loss to society.
And again I go back to early childhood, I
mean things that existed only five to ten
years ago, Head Start programs, free breakfast
in schools in poor areas for kids, these things
have been eviscerated, they're just not there
anymore.
And to make the kind of priority decisions
we've made are indefensible to me given the
data that exists on the different, and again
I say Africa and Asia, Asia I didn't finish
that thought maybe.
Asia put a lot of its money into primary and
secondary schooling and look what happened
to Asia.
Interestingly, and I'm talkin' the company
line now but I'm doin' it 'cause I drank that
Kool-Aid, I believe this, Africa will grow
faster than any continent in the world over
the next 10 years in part because this has
reversed, this pattern has reversed.
Africa has a tier of about 12 to 13 nations
including some of the largest ones like Nigeria
and Kenya that are growing at seven to eight
percent a year and a lot of improvement; there's
tons of room for improvement too.
But if you look at where Asia was in 1980
and you look at where Africa is today there's
some interesting parallels and it's being
noticed not just by NGO's and the World Bank
and the IMF, but by China and Brazil and India's
sovereign wealth funds and by big Americana
and British and European capitalists who are
pouring money into projects they never would
have looked at before.
So it's a very interesting story.
Yes.
>>male #4: I'm gonna keep you ping ponging
between domestic and international things
–
>>Michael Moran: [chuckles]
>>male #4: I guess.
But --
>>Michael Moran: It's my fault actually so.
>>male #4: on the international front, I walked
in a little late so I don't know if you talked
about this already, but you talked about how
we're overreached and it would be good if
we were thinking about how unwind things in
a controlled manner.
Why do you think we don't do that?
Like is that inertia, is that vested interests
that wanna keep things the way they are?
>>Michael Moran: No this is the psychological
part of the story.
We are exceptional remember; so being exceptionally
in denial is part of that.
>>male #4: Right, so if we're too proud to
retract how do we fix that?
>>Michael Moran: Again I hate to say this
but failure is a wonderful teacher.
And we didn't learn from Georgia 'cause it's
not relevant enough; we didn't learn from
Iraq 'cause everybody just dumps on George
W. Bush now, it's all him.
Interestingly something like 60 percent of
the country was in favor of that war.
If you ask somebody today, at a room full
of Americans, you think 60 percent of the
hands are gonna go up?
There's nothing worse than being duped, people
hate that.
We just haven't had our comeuppance frankly
and I hope we never do, but we will ultimately
if we continue to sleepwalk in the direction
of we're still the hegemon, we're still setting
the agendas, we're able to force results that
are beneficial to us and not beneficial to
others; these things are gonna come unwound.
>>male #4: So just from my understanding of
history, where this has happened in the past
it hasn't really been good for those countries,
like no country has ever failed on a massive
scale and bounced back in any reasonable timeline
or reasonable way that I can think of.
>>Michael Moran: Yeah, I mean well the Russians
claim that they're doing it.
[chuckles]
>>male #4: After 20 or 30 very, very painful
years.
>>Michael Moran: Yeah, and that's the thing
the pain is there --
>>male #4: And China took centuries.
>>Michael Moran: I had a, or you could argue
the Japanese maybe --
>>male #4: Right.
>>Michael Moran: but that's another again,
making these types of analogies they're such
eccentricities of economics and regional,
geographical, and demographic stuff and cultural
issues, it's very difficult.
But I would say I got a question last night,
or two nights ago at Seattle World Affairs
Council along these lines offering the idea
that the British were a good example of how
it's done right and the person had a suspiciously
British accent.
[laughter]
And just to take that example, well the British
first of all for 15 to 20 years after World
War II were still on rations, food rations,
I mean there were some food rations in the
early 60's.
They de-industrialized at an enormous pace
and it still shows up in the relative strength
of British industry which was once obviously
the king and not that long ago in many industries;
manufacturing's about eight percent of British
GDP, that's unbelievably low.
In the United States it's 12 percent.
And 12 percent, and again these are relative
terms, 12 percent in the United States is
about five Great Britain's, so it's a huge
sector compared to what's happened to Britain.
On top of that if you look around the world
at the problems that haunted the 20th century
and now I don't wanna sound like my father's
son, he was born in Ireland and he was no
fan of anything British, but I worked at the
BBC and I rejected that nonsense.
But if you look around the world in the 20th
century at South Africa, at the problems in
Northern Ireland, at Palestine in particular,
Kashmir, a lot of these things were the result
of the unraveling in an uncontrolled manner
of an empire that was arrogant enough to think
they could keep it all together.
They left time bombs everywhere, not even
getting into Africa; absolutely arbitrarily
drawn borders that still haunt those countries.
Nigeria should be on paper a super power and
a brick; it may well get there but it has
really difficult ethnic and cultural problems,
religious divide.
And that is very much a part of the British
creation of that particular colony.
So I think to argue that this is doable in
an uncontrolled way and then it'll all work
out is kinda silly.
[chuckles] And I think the United States just
doesn't look at itself as affected by things
like gravity and things like history.
We are exceptional, we float above these things
because, some part of our electorate thinks
it's because God has ordained us to be so
and others just think that, "Well we are the
ultimate expression of science and knowledge
and democracy and therefore clearly, in evolutionary
terms, we're destined to be that."
So whichever way you get there a great number
of us, and a shocking number of the smart
ones, think this and I just don't feel that.
I feel like that gravity exists.
I'm getting older it reminds me every day.
[laughter]
[pause]
Yes.
>>male #5: This may sound a little flippant
a way of phrasing but is the average IQ of
this country decreasing?
Or put another way, why aren't the smart people
in charge anymore?
Why don't the rest of us listen to smart people
like who write these books?
Do we resent the smart people [inaudible]?
>>Michael Moran: There's a couple of different
currents, I'm gettin' a little out of my depth
here talkin' about smart people, but there
are a few currents at work here.
I think there's a very profound anti-intellectualism
that took hold during the years prior to Ronald
Reagan's election that really kind of got
super charged during the 80's.
Whereas, but it was really prevalent also
in the Democratic party during the 60's where
pointy-headed liberals were dismissed, the
far left, the people who don't like the Viet
Nam War were dismissed by the Johnson wing
and the Humphrey wing, Humphrey that's unfair,
Johnson of the Democratic Party.
I think though that was really, this long
period in the wilderness that the Republican
Party spent after Roosevelt's electoral victory,
their real victory during that long period
up until Richard Nixon's election was Dwight
Eisenhower who was about as non-partisan a
Republican or Democrat as you'll ever see.
I mean he had basically been the man who saved
humanity as far as that generation was concerned;
he was the General who beat Hitler and he
wasn't particularly ideological.
So I think that what you see in the intellectual
impact, the impact of that history has had
on the Republican party is that it has empowered
ignorance in a lot of ways.
And I always used to joke that the eleventh
Bill of Right is the right to be ignorant,
it's the one we exercise the most freely here.
But it is, you're allowed to be completely
stupid here and say things, "It's my right
to say that, isn't it?"
It's very hard to cross a line in this country
anymore.
The other side I think though is you get into
the very scary territory of the bell curve
where some ideological figures will argue
that actually it's immigration that is deteriorating
our intellectual base, or it's an attack on
the what used to be thought of as the cultural
norms in the United States which is the kind
of culture war take on it, or the increasing
self perpetuation of the elite left or right
in the United States to the detriment of the
middle class and below; that I actually do
believe is true.
And I wish I had, I couldn't find the chart
that I saw the other day, I was gonna put
it up here, but it is a relatively uncontroversial
fact that since about 1960 the middle classes
in this country have lost ground versus the
not even the one percent, that's just a slogan,
the one percent of course, I think that would
be true anywhere, but they've lost ground
vis-a-vis those who make over $200,000 a year,
who I don't regard as middle class I'm sorry,
that's a pretty good salary.
Everybody here seems to think they're middle
class in this country which is a great, both
a victory for democracy, but it's an absurdity
too.
I think, the way I describe this I think the
middle class has had its boiling frog moment
in this latest financial crisis because the
bubble economy first of the tech boom and
then of the real estate bubble, it absolutely
shielded from view the extent to which actual,
real income and real disposable income for
hard working two income families had continued
to decline during this period while the top
end had skyrocketed and taxes for those people
came way down.
And this was all supposed to be redistributed
in a magical trickle and that magical trickle
I can imagine, I've seen some fountains like
that in swimming pools, it doesn't happen.
I just don't see it happening and I think
that the middle class is waking up to that
and I think that is what you're seeing in
the Tea Party if you take your question and
then apply that to the anger that it legitimately
engenders, the Tea Party is essentially angry
about that; they're not expressing it intelligently
but neither frankly is Occupy Wall Street.
They're angry at something very similar and
their prescriptions are absurd.
They're wonderful theater and they're great
kids I met a lot of them, but there's no viable
prescription there for fixing any of it.
>>male #6: So I first of all have sort of
a comment on something, the collapse of the
British Empire saying that a lot of places
failed.
I'm not British just in case --
>>Michael Moran: That's alright.
[laughter]
I love the British.
>>male #6: but a number of places I think
kind of pulled out and things are pretty bad
there.
On the other hand, on the other side of the
equation there's not a lot of countries where
they've also pulled out on good terms and
those countries are very stable.
>>Michael Moran: Give me a few examples, I'd
like to, just so we're on the same page.
>>male #6: Australia, New Zealand, Canada.
>>Michael Moran: Yeah.
>>male #6: Um --
>>Michael Moran: But these are plantations.
[laughter]
I mean in the classical sense of the word
the way that Northern Ireland was a Protestant
plantation and we are a, to some extent, a
plantation; the Native population was either
denuded or not there.
>>male #6: Yeah, yeah the Natives are kind
of wiped out so it looks like transplanting
a whole, the whole culture [inaudible] en
masse.
I'm just kind of pointing out that it's just
sort of, it's kind of gone both ways and it
depended on sort of what --
>>Michael Moran: Yeah, I agree with that.
>>male #6: the situation they're left with--
and to me it seems that the differences, not
just the cultures, but also the intent when
they left.
Some places they left sort of like Earl Grey
here we've got nothing more we can strip mine
in the countries and other places, "Well we
wanna leave people who will like us in the
future, people like us."
That's just kind of comment.
The question I had was with Africa you're
saying you think that it's gonna grow there.
Are they improving their primary/secondary
education?
>>Michael Moran: In Africa?
>>male #6: Yeah.
>>Michael Moran: Yes they are actually.
>>male #6: Okay so they're finally making
that switch?
>>Michael Moran: Yes.
And this is a bit of a counter intuitive opinion
on my part but I think one of the reasons
that that has happened is because, well the
research is beginning to dawn on even the
most doctrinaire social engineers at the World
Bank and IMF that there are certain things
that work some places that don't work others.
The other thing though, and more profound
thing I think, is the existence now of alternative
ways for these countries to fund projects;
they don't have to go to the IMF and the World
Bank or expect aid from Europe, the EU, or
the United States to cover things.
There are sovereign wealth funds and that
has been an enormous change, not always for
the good.
And the backlash will, it's gonna be a process
of learning.
China's investments, for instance, in Zambia
were done under terrible terms for Zambia
in terms of negotiating terms 'cause Zambia
was getting rolled essentially.
But China put a lot of money into Zambia,
built a lot of infrastructure, but did it
with Chinese labor.
And ultimately the Zambians elected an anti-Chinese
[chuckles] president recently who has abrogated
some of the terms of those agreements and
so China is feeling the pain of having over
played its hand.
So I think this is gonna be a process that
as these governments mature and their economies
mature, and this is an important fact too,
a lot of this we tend to think of Africa as
an extractive play, these are just commodity
plays, they have either got diamonds or gold
or bauxite or oil.
But an interesting fact is that the Nigerian
economy today is only 18 percent of GDP is
the oil industry and that's a big change from
the 1960's.
They have a very fast growing consumer and
manufacturing sectors, they've got a very
surprisingly cogent and reforming banking
sector even though all of us have gotten "Mrs.
Sanai Ebacha's" email.
That's a branding problem that will be with
Nigeria for a long time just as the genocide
in Rwanda will haunt them for years not only
in the kind of moral sense but in terms of
its ability to go into the world and be branded
something other than the site of a genocide.
This is something I thought I'd bring up here
actually: I was talking to a Rwandan diplomat
in Washington a few weeks ago and he said,
"Michael how do I get somebody to write about
Rwanda when it's not about the genocide?"
And this is a problem that I'm glad Rwanda
finally has, they've moved on and they're
growing and they have a pretty good stable
economy, governance issues but -- And I said,
"Well let me do something," and I looked,
I put my iPhone up and I typed Rwanda and
Google very helpfully suggested, before I
even got to the D, "Rwanda Genocide."
[laughs] Now that's a branding issue.
I don't know whether they need to appeal directly
to you guys, but I thought that was kind of
interesting.
[laughter]
Yes.
>>male #7: If we continue to that gravity
doesn't apply to us and we're arrogant and
sort of missing opportunities to right the
ship if you will, if after the Great Recession
the backroom deal falls apart and we reject
things like Simpson-Bowles that are bipartisan,
your book's called THE RECKONING, are we going
to boil like the frog or is there is scenario
in which you see that could happen to us that
there's change for the good and we get out
of this somehow, we get off the decline?
>>Michael Moran: Well there are, when you
talk about the future you often find in the
future that you were wrong and I hope not
to be that person.
But so let's take the most conservative possible
view of the United States.
Let's say the United States miraculously grows
at Mitt Romney's four percent a year over
the next three decades; we'd be astoundingly
exceptional.
And let's say that China either implodes of
its own internal contradictions, which is
not a completely impossible scenario, or the
demands of labor, environmental distress,
and transportation costs ultimately diminish
the value of putting plants there to the extent
that China just becomes another big manufacturing
power and is not overwhelmingly advantaged
and essentially their currency begins to float
and things -- all of those things can help
balance the world a bit.
I mean I don't think manufacturing in the
United States is dead, I think some of the
factors I just cited will help keep the type
of manufacturing that we're good at, aerospace,
high end environmental technology, technology
at large, that type of manufacturing is going
to be thriving here I think because of all
the factors I just said.
The reckoning essentially though is the moment
when if we have not come to terms with the
structural, unsustainable deficit spending
that we have now, and it's really not the
deficit it's the national debt, before the
rest of the world creates a vehicle for their
sovereign wealth funds to invest in to rival
the Treasury Bill, because that's what's keeping
us alive right now.
The T-Bill is a magical thing because we have
two oceans on either side of us and because
we have a relatively good, we had a perfect
record until last year, a relatively good
record of honoring our debts this is the place
to park enormous amounts of money when you
don't know quite what do with 'em because
if you bring 'em home you'll cause unbelievable
inflation.
So that's how we are able to borrow enormous
sums of money for our deficits.
After last year we were downgraded quite rightfully;
the markets didn't react because they knew
there was no alternative for these countries.
But you gotta know that in Kuala Lumpur and
Beijing and even Berlin and London there are
people figuring out what that alternative
is, it's not clearly the Euro.
But there is a thing called the, I'm spacing
it now, there are other vehicles that could
potentially, without actually raising another
country's currency to that level, there are
other vehicles that could serve as global
reserve currencies.
And I think you're gonna see as these countries
emerge a great appetite because of the way
we've conducted our monetary and fiscal policies
here, a great appetite for doing that and
that's when the reckoning happens.
What does that mean?
If that happens and if T-Bills suddenly cannot
retain their advantage, the cost of our borrowing
begins to rise.
Currently we spend about as much on our interest
as we spend to fund the U.S. Navy every year,
that's the size of the interest payment now.
If it were to go two or three points up you're
getting at the good credit card rate levels
at that point, you've got a problem because
we can't pay that down.
It becomes the size of the Pentagon's budget.
And this gets worse, the global markets tend
to follow the herd.
We could see a situation where we begin as
Greece and Portugal did and as Spain and Italy
may, we being to lose control of our economic
sovereignty and the decisions about whether
to build a bridge or whether to build a new
class of aircraft carriers or whether to invest
in education versus some scientific research
become, there are other people at the table
now making those 'cause they say, "No, no,
no pay the debts first."
And we've been doing that for years to countries
all over the world through our block on the
IMF and World Bank; it could be quite a comeuppance
for us.
And I think that's a very dark and minority
scenario, I don't think we'll allow it to
get there but it's not impossible and it certainly
-- a great example of this historically when
the Israelis, the French, and the British
attacked Suez in 1956 Eisenhower was in office.
He was pissed off for a variety of reasons:
one the Hungarian rising was going on and
he had other things to do and he wasn't told
about it, number two.
And so he immediately called the British and
he said, "We're gonna take all our money out
of Pound Sterling tomorrow."
It's over for the British if they do that
and rather than see that happen, now this
is there are very few written pieces of evidence
to suggest this happened but there are plenty
of historical pieces of evidence that paint
that picture, essentially the British pulled
out the next day, the war was over and Egypt
kept the Canal.
That's essentially what happened there.
And that high type of leverage has been used
in the past against French, against the Germans,
and it will be used against us ultimately
if we're not realistic about this.
And again I don't think these are unsolvable
problem, I think they are but it requires
a mea culpa from both parties and a decision
to take on the political heat together to
fix this.
Interestingly it's happening in Italy right
now.
What do they have?
They have a government, a non-partisan government,
imagine that here, who would you appoint?
I think Sergey Brin would be out because of
his birth but there would be some kind of
panel of elder types who would clean this
mess up.
Felix Rohatyn did it for New York City in
the 70's.
I don't wanna get there, we wanna elect a
government, there's beauty in democracy, but
we need it to work.
>>male #4: I don't know how much more time
we have but one more question I'd like to
ask.
What's your take on the fact that we seem
to have conflicting economic theories and
nobody will admit that they're right or wrong
in this country to the extent of you've got
both the Ron Paulians of the world who seem
to be getting this bigger mass of people who
say, "Oh we should go back on a gold standard."
And there's another class of people that says,
"What are you insane, like this was disproven
80 years ago."
And if we can't even get agreement over this
sorts of things how do we figure out some
of these international economic problems like
this?
>>Michael Moran: Well I think, not to be redundant,
but I think early childhood education would
be a good start.
I think one of the problems is that the average
person has over the years hoped that they're
electing people who have some clue about economics
and are on their behalf making educated decisions
about things like this.
And unfortunately that seems to be less and
less true in part because the world is much
more complicated than it used to be and a
legal education doesn't prepare you for macroeconomic
dilemmas.
And most of our Congressmen and even our Presidents
are Yale trained lawyers.
Let's face it the Presidents tend to be Yale
or Harvard lawyers, the Congressmen tend to
be either small businessmen, which is at least
some brush with reality, or they're lawyers.
And God I love lawyers but it doesn't give
you a rounded world view, you have to go get
that separately.
So I think part of the problem is education.
The other part though I really believe is
that economics is not a science okay?
I came up through journalism; journalism is
not a profession it's a trade, it's like landscaping.
You can learn it best by hangin' around with
people who do it well.
Yes you can go to Columbia J School; I was
a fellow there, it's wonderful, but it's a
luxury, it's a luxury item, it's a networking
club for people who wanna meet important editors
and get jobs after their year at Columbia
J School.
I'm not sure other than the wonderful philosophical
opportunity to discuss it, I'm not sure it
really is teaching you how to be a journalist,
that's a very kind of trade oriented thing.
Similarly I think that theory in economics
is a very malleable thing, it's a debate more
than a profession, more than a science sorry,
a debate more than a science.
And the Right has been tremendously good at
creating a kind of faith based economics that
is laden in inspiring liberty rooted dogma;
that to take on is to challenge some of the
basic narrative of the United States itself.
And that has created a school of American
economics that I think feels as though they
are pursuing and advancing a higher cause
by distorting and by simplifying to the point
what the average person thinks that tax cuts
will ultimately, for the rich, will ultimately
benefit them though they will never get anywhere
near that bracket.
So I really feel that that's true.
On the other side doctrinaire Keynesian economics
is also often akin to a religion and can be
very, very constraining, though I'd say it's
been less wrong than, to pick on somebody,
John Taylor of Stanford.
That's where I would be on that.
[pause]
>>Cliff: That was a great speech.
Thank you for stopping by Michael.
>>Michael Moran: Well thanks everybody.
[applause]
