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Fareed Zakaria GPS

Obama's Syria Contradictions; President Obama's Berlin Speech; U.S. Calling for Nuclear Reductions and Russia's Rejection; Iran's Election; Shinzo Abe's Three Arrows; Interview with Niall Ferguson; How to Make Almost Anything

Aired June 23, 2013 - 10:00   ET

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

FAREED ZAKARIA, CNN HOST: This is GPS, the Global Public Square. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria.

It's been a busy week on the world stage from the Iranian elections to the G8 meeting, talking with the Taliban, President Obama's call for nuclear reductions and Russia's rejection of the idea and much more.

We have an all-star GPS panel; Anne-Marie Slaughter, Richard Haas and Bret Stephens.

Also, a pivotal week in the economy, we will look at Ben Bernanke's announcement and the market reaction with Harvard historian, Niall Ferguson.

Everyone is talking about 3D printing, but that is actually yesterday's news. I'll show you the future of digital fabrication, printing atoms and molecules. That's the next big thing.

But, first, here's my take. In the debate over U.S. intervention in Syria, there is a striking mismatch between ends and means. Proponents of intervention want to defeat a ruthless and powerful regime, rescue a country from civil war and usher in a new democratic political order.

But these people say, at the same time, that they want to achieve all this with the most limited methods. "The worst thing the United States could do right now is put boots on the ground in Syria," says Senator John McCain.

We're often told that the goal of this intervention is to stop the killing, but sending more arms into the mix will actually increase the violence. That's fine, say the interventionists, because the real goal is to oust Assad.

But as we learned in Iraq, ousting the dictator is only the beginning of the task. The actually goal here is the creation of a democratic Syria in which all sects can live in peace.

Now, the United States tried that in Iraq with an almost decade-long invasion and occupation spending over a trillion dollars and it hasn't quite worked. But, now, we're going to achieve a better outcome in Syria and just with a no-fly zone? In the mid-1980s, the scholar Samuel Huntington pondered why the United States, the world's dominant power, which had won two world wars, deterred the Soviet Union, maintained global peace, was so bad at smaller military interventions.

Since World War II, he noted, the U.S. had engaged militarily in a series of conflicts around the world, but, in almost every case, the outcome had been inconclusive, muddled or worse.

Huntington's answer was we rarely entered conflicts actually trying to win. Instead, he reasoned, U.S. military intervention had usually been sparked by a crisis, which then put pressure on Washington to do something, but Americans rarely saw the problem as one that justified getting fully committed.

So, we would join the fight but in incremental ways and hope that these incremental moves would change the outcome. It rarely does. Instances where we have succeeded, 1990 Persian Gulf War, Grenada and Panama, were all ones where we did fight to win, used massive force and achieved a quick, early knockout.

In Syria, the interventionists have lofty ends but no one wants to use the means necessary to achieve them. So we are now giving arms to the opposition and hoping it will bring the regime to the negotiating table.

But, as Huntington observed, "military forces are not primarily instruments of communication to convey signals to an enemy; they are instead instruments of coercion to compel him to alter his behavior."

This reminds one of the strategy of the Johnson administration in Vietnam, use force to pressure the enemy to negotiate. But the enemy is fighting to win not to play a negotiating game.

The chance that our current efforts in Syria will do enough to achieve even our objectives is small. Eventually, the contradictions in U.S. policy will emerge and the Obama administration will face calls from people like John McCain for further escalation.

They should resist them and it's possible that they will. The scholar Daniel Drezner argues in his blog on ForeignPolicy.com that the new move "is simply the next iteration of the unspoken, brutally realpolitik Obama policy towards Syria that's been going on for the past two years."

"The goal of that policy is to ensnare Iran and Hezbollah into a protracted, resource-draining civil war, with as minimal costs as possible. This is exactly what the last two years have accomplished, he writes, "at an appalling toll in lives lost."

If this interpretation of the Obama administration's behavior is correct, then the White House might well be playing a clever game, but it is Machiavellian rather than humanitarian games.

For more on this, you can read my column in this week's Washington Post. For a link, go to our website. And let's get started. Let us go to our foreign policy panel of pros. Anne-Marie Slaughter and Richard Haas were both directors of policy planning at the State Department.

Richard is now the president of the Council on Foreign Relations. Anne-Marie will soon be the president of the New American Foundation.

And Bret Stephens is not the president of a think tank yet, but he is the foreign affairs columnist and deputy editorial of the editorial page at the Wall Street Journal.

Anne-Marie, Obama goes to Berlin again from 250,000, it goes down to 10,000. Is there more to it than just the fact that he was the great white hope, so-to-speak, and, now, is an actual president? Is there more to the damp reception?

ANNE-MARIE SLAUGHTER, FORMER DIRECTOR OF POLICY PLANNING, STATE DEPARTMENT, AND PROFESSOR OF POLITICS AND INTERNATIONAL AFFAIRS, PRINCETON UNIVERSITY: Well, the damp reception was also 100 degrees Fahrenheit so that did have something to do with it. It was incredibly hot.

But, you know, honestly, I think people have realized that Obama is still pursuing U.S. interests and particularly on issues that the Europeans cared about enormously, like closing Guantanamo. He hasn't delivered on some of those. The drone strikes, that's something that's very sensitive.

So some of it really is recognizing he may be an American president they like a lot better than other American presidents, but he's still an American president, but he's still an American president and he's still pursuing American interests that in Germany anyway are often quite controversial.

ZAKARIA: What do you think?

RICHARD HAAS, FORMER DIRECTOR OF POLICY PLANNING, STATE DEPARTMENT, AND PRESIDENT, COUNCIL ON FOREIGN RELATIONS: Pretty much that. The reality, in some ways, is not nearly exciting as the promise because reality has responsibilities and the president had to make some tough choices.

And all of this was done against the backdrop of the NSA revelations. The Europeans didn't like the fact that, in some cases, they were being watched and listened to and read. And ...

ZAKARIA: But wouldn't European -- you know this from dealing with your counterparts. If the European -- if European governments had the power to do -- had the ability technologically, they have much more intrusive intelligence operations than we do.

HAAS: Also ...

ZAKARIA: They don't have an ACLU, you know.

HAAS: Well, it's also the balance in their societies, often has been less supportive or protective, if you will, of individual privacy to the extent the United States is.

They have been a little bit more intrusive and some of them, by the way, do have fairly extensive intelligence operations like the Brits and all these stories that they have done in terms of monitoring people like the various G8 summits.

I also think one other thing that the principle message of the president was about arms control and calling for further reductions in U.S.-Soviet warheads. There was something about it ...

ZAKARIA: Russia. You're dating yourself. U.S.-Russia warheads.

(LAUGHTER)

HAAS: Well, in some ways, he dated himself. There was a sense a little bit of this was an anachronism. This is no longer quite so exciting for people.

And he actually also gave fairly short trip to the real proliferation challenges which are North Korea and Iran.

BRET STEPHENS, FOREIGN AFFAIRS COLUMNIST AND DEPUTY EDITOR, EDITORIAL PAGE, WALL STREET JOURNAL: That's right and the most exciting thing that actually is happening between Europe and the United States is the possibility of a Trans-Atlantic Free Trade Agreement, which, to its credit, the administration is moving forward with.

And I hope they come up with some good agreement on the line of the new Trans-Atlantic NAFTA. But it really felt like warmed over food. On one issue ...

ZAKARIA: You mean the nuclear deal particularly?

STEPHENS: Well, we just had a nuclear deal what two or three years ago with the New START treaty. You saw the body language between Putin and President Obama at the -- in Northern Ireland at the G8 summit. It wasn't exactly friendly. Putin instantly dismissed the idea of bilateral cuts.

And the issue that we're actually confronting isn't the need to reduce nuclear weapons it's to confront proliferation in countries like North Korea and Iran.

ZAKARIA: What do you think about that?

SLAUGHTER: Well, I actually disagree there. I think this is something Obama cares a lot about and it was predictable that he was going to reraise it once he was reelected.

It's going to be really hard. The language with Putin was clear. But he has a vision and, again, it's a vision shared by Henry Kissinger and George Shultz and Bill Perry and Sam Nunn of really moving us toward a world without nuclear weapons.

Partly that's counter proliferation, but partly he recognizes the United States and Russia have to do their part. So it wasn't nearly as powerful and visionary as Prague ...

ZAKARIA: But don't you think ...

SLAUGHTER: But I think it really -- it wasn't warmed over Cold War.

ZAKARIA: But nuclear weapons have kept the peace. I mean you've had no war between major powers largely because they've been deterred from each ...

SLAUGHTER: That's ...

ZAKARIA: You know, do you really want to get down to a world before 1945 when we had 400 years of warfare between ...

SLAUGHTER: Look, I'm with Henry Kissinger and George Shultz on this and they're as realist as you are on that, but what they say, and I think is absolutely right, if you get to a world with 30 nations that have nuclear weapons, you are -- you do not want to be in that world.

And they believe we can't stop it.

ZAKARIA: All right, we got to come back and talk about the Iranian election. Was this an absolutely pivotal moment where we have a chance to talk to Iran. And if we get to it, we'll talk about talking to the Taliban as well when we come back.

(COMMERCIAL BREAK)

ZAKARIA: And we are back with Anne-Marie Slaughter, Richard Haas and Bret Stephens to talk about the world.

Iran, what struck me as interesting about this election, OK, it's a managed election. There's a slate of people that -- you know, chosen by the Supreme Leader, but the most liberal guy gets five times the vote of Jalili the hard-liner. He gets more votes than everybody else put together.

Doesn't that suggest that perhaps the Iranian regime will recognize that this is where the Iranian people are and this is an opportunity for them to repair relations with the world because he said that all through the campaign and he said that right after he got elected.

STEPHENS: Well, I mean if the regime respected the will of the Iranian people, you wouldn't have had Ahmadinejad in a second term in office.

There's no question that the election indicates that Iranians at the street level want as liberal a president as they can and that's exactly what they expressed. Whether they're getting that is another question entirely.

You know, we tend to look at Rohani as -- the word that is used to describe him is as a moderate or as a centrist. This is a guy who was encouraging the very brutal crackdown on students in Tehran in 1999. So, talking about crushing those protests, I think, "monumentally" was the word that he used. Also, you know, there was a an interesting book that appeared not long ago by Mousavian, who was his spokesman when he was the nuclear negotiator for Iran 2003 to 2005, who basically says that Rohani's strategy was essentially to play for time with the West, to appear to make concessions in order to continue to build the nuclear infrastructure.

The key point is that the real leader in Iran has been in power for 24 years. That doesn't change and he ultimately makes the decisions on the nuclear portfolio.

ZAKARIA: Isn't it worth giving it a try though?

HAAS: Absolutely. Bret is properly skeptical, but we ought to explore, we ought to test, we ought to put forth an offer that doesn't humiliate Iran, that basically allows them to do certain things, clear limits, clear linkage between what they're allowed to do and transparency and inspection.

We ought to make clear what the rewards and we ought to do all this publically. I think we have a much better chance of influencing Iranian decision-making if it's put out in public because the same 50 or so percent of the people who made this surprising electoral choice, we want them to know what their government's being offered.

We want their government to know essentially it has a reasonable way for Iran to rejoin the international community.

ZAKARIA: And it strikes me, Anne-Marie, that the Iranian people and maybe even the government aren't quite sure what they get if they do the things we want them to do.

We've been very clear what we want them to do. You know, to get rid of any traces of weaponization, get enrichment down. and so that's all the things they have to give up.

What do they get in reward? What sanctions would be lifted? We don't have a package that if I were an Iranian politician, that you could sell and say and this is what we get out of all this.

SLAUGHTER: Right. And part of the problem there is that our politics are so difficult. It took us so long to get those sanctions in place that we can't just lift them and then if the Iranians don't live up to their part of the deal, we can't put them back on.

So, it's a complicated offer that we have to be able to make. And I agree with Richard. I think we have to make a sort of transparent here is the terms of the whole deal if we can.

But Richard said something important. I think we should not talk about this as liberal versus conservative. This is Iranian politics. Most of the real liberals were never -- all of them were not allowed to run.

This guys says I am reasonable and pragmatic, which means he -- his first press conference he said to the Iranian people, this is the voice of reason and pragmatism against extremism and essentially Ahmadinejad-style rhetoric.

So, we should be thinking this guy wants to do a deal if there's a deal to be done, but he's every bit as much going to pursue Iran's interests.

ZAKARIA: One more person to talk to, the Taliban. Should we be trying to talk to the Taliban as part of this political settlement in Afghanistan?

You know, the issue is the Taliban set up an office and, then, Karzai, the president of Afghanistan, got upset so ...

STEPHENS: Only if we want to demonstrate any potential ally in the future never ever to take the side of the United States because, ultimately, we will tire of the war we are fighting on your behalf and we will sell you down the river, as we did the South Vietnamese and as we are doing with Karzai.

Look, there are many things not to like about Hamid Karzai, corruption, incompetence, et cetera, but he is not the Taliban and we should think carefully about what it means for the United States to be negotiating with an embassy purported to represent all of Afghanistan and leaving Karzai to one side.

The danger is we're going to find ourselves in a Middle East where we have no clients and no allies if we continue to pursue these negotiations.

You might say, look, we want a quick, face-saving exit from Afghanistan as possible and whatever happens afterwards, frankly, we don't care.

Maybe that's an argument to be made, but that argument should be made frankly rather than pretending that there is a peace deal to be made with a group that wants to seize total power again in Afghanistan.

ZAKARIA: You just came back from China. Sure enough, we can have a debate about Afghanistan. My guess is we will again. But you're just back from China/Korea.

Do you think that these efforts the administration has been making to reset relations with China are going somewhere?

HAAS: Something's changed in China a little bit. The summit out in California was a good investment, if you will, in the future. Years from now, we'll look back and see whether it made a difference.

But China itself is changing. As their economy slows, they know now that they've got to focus more on the internal. They now no longer resist the American pivot towards Asia.

They're ore worried, in some ways, about Japan than they are about us and they're beginning to see North Korea differently. North Korea is no longer a strategic asset, it's a strategic liability and it's become a real problem for the Chinese. So you get this sense for the first time in a while they are revisiting foreign policy in some basic ways that opens up, therefore, possibly not definitely, possibly some room for maneuver.

They call it the win-win relationship between this new model of major power relations. It's worth continuing to explore for our end.

ZAKARIA: You willing to give Obama that briefly?

STEPHENS: No, I'll give him the NSA wiretap story, but, look ...

ZAKARIA: You support him on that, but not on China?

STEPHENS: Look, China policy, first of all, I don't think is a right- left issue. I think the reality is that you have a China that is, on the one hand, confident about its future, but also insecure.

It is growing militarily. It has been threatening regional allies of ours. We have to be wary of that.

ZAKARIA: OK. Ten seconds. Anything to add?

SLAUGHTER: Anything to add? We should be focusing on what's happening in Brazil because what's happening in Brazil is what's happening in Turkey, what happened in Iran and across the ...

ZAKARIA: People protests.

SLAUGHTER: These are huge people protests. They're not revolutions in Brazil, but what they are is pushing back against managed democracy.

They're saying we have to be heard and we resist the sort of constantly being managed and being heard only in elections and that's a huge force.

ZAKARIA: Around the world in 15 minutes with very very smart people. Thank you all very much. We will be back.

(COMMERCIAL BREAK)

ZAKARIA: Now for our What in the World segment. The G8 summit was meant to be Japanese Prime Minister Shinzo Abe's moment. Under his leadership, the land of the rising sun seemed ready to rise again, ready to break out after 20 years of stagnation.

The stock market rose nearly 40 percent in his first five months in office. Businesses in Japan were talking about expansion for the first time in decades and Tokyo's property market, long moribund, was stirring to life.

It was all part of Abe's bold break with the failed policies of the past. Past Japanese politicians had danced around t he country's problems. Now, here was someone to take them on.

But a funny thing happened on the way to the coronation, Japan's stock market began falling sharply, businesses pulled back and serious observers wondered if this was one more false start in Tokyo.

So what's going on? Well, in launching his term in office, Prime Minister Abe announced that he would fire three arrows to revive the Japanese economy.

The first was a more expansionist monetary policy, buying tens of billions of dollars of Japanese bond each month to try to move from deflation to inflation taking a cue from policies of the Federal Reserve under Ben Bernanke.

The second was fiscal expansion, $116 billion stimulus plan. These two arrows were designed to shock the economy out of its stasis and businesses and investors cheered.

Then came the announcement of the third arrow and it turned out to be a rubber dart. It announced a series of tiny reforms and some attempts by government to boost certain industries.

What was missing is what Japan desperately needs, real reforms that open up the economy and make it more friendly for business. Monetary and fiscal stimulus, you see, are great, but the path to sustained growth is to get the economy to be more competitive and more productive.

For instance, The Economist magazine points out that unless a Japanese company is actually going out of business, it cannot fire any of its workers. Japanese economists have long argued that this makes firm highly unwilling to hire new workers or to raise anyone's wages.

The World Economic Forum's Global Competitive Index measures 144 countries on their flexibility of hiring and firing. Japan comes in at a staggering 134.

Japan has many storied companies, but it needs reforms to make easier to start new businesses. Among 31 high income countries, Japan ranks 26th in the east of starting a business in the World Bank's Doing Business report.

Japan also needs to open up its many protecting industries to competition which will create new energy and grow in these sectors.

Japanese agriculture, for example, gets massive subsidies. By some measure, three times those in the European Union and six times those in the United States.

Reforms are hard to do in democratic countries as we've seen from Greece to Italy, but there's still hope. The Economist reports that insiders in Abe's party, the LDP, say that they have been cautious because Japan faces an impending election for its upper house of parliament.

Once that's done and the signs are the LDP will do well, the prime minister will announce a new raft of reforms. Shinzo Abe has the opportunity to go down as his country's Margaret Thatcher, a leader who administered tough medicine to the country and revived its economy and its spirits. But to succeed at that task, he has to load up a powerful third arrow in his bow, aim carefully and fire.

Up next, Ben Bernanke speaks and world markets go crazy. We'll talk to Niall Ferguson about that and why the U.S. needs to reform as well.

(COMMERCIAL BREAK)

CANDY CROWLEY, CNN ANCHOR: I'm Candy Crowley in Washington. We are following the Edward Snowden story. Wikileaks says the NSA leaker has arrived in Russia. He left overnight on a flight from Hong Kong. The U.S. had urged Hong Kong to extradite Snowden back to the U.S. Joining us on the phone is CNN's crime and justice correspondent, Joe Johns. Joe, Hong Kong says they simply -- the U.S. didn't provide the appropriate paperwork.

JOE JOHNS, CNN CORRESPONDENT: Well, Candy, a DOJ official tells CNN on background that their extradition request met all the requirements of the agreement. They say they, Hong Kong, came back to the U.S. with a few questions on late Friday, and they say they were in the process of answering those questions. They think they were meeting all those requirements. They're saying this raises concerns for them and they're going to continue to discuss this with Hong Kong. The official also said the U.S. also had a provisional arrest warrant. And I did ask why there was no Interpol red notice, which is basically an international wanted poster. The official said my understanding is that when you have a provisional warrant like they did, and you know where the person is, that's not the route to go down. So that's the story from the U.S. right now, but it will get more interesting as days go ahead, Candy.

CROWLEY: So, Joe, just to clarify, did they ask the government in Hong Kong to in fact arrest Snowden?

JOHNS: Yeah, they say they had a provisional arrest warrant, and Hong Kong asked additional questions apparently about the arrest warrant. But they didn't get the answers from what we can tell.

CROWLEY: Got you. Joe Johns, thanks so much for that. CNN of course will continue to follow all of the day's events as regard to Edward Snowden and of course any other breaking news. Right now, though, back to "Fareed Zakaria GPS."

(BEGIN VIDEO CLIP)

BEN BERNANKE, FED CHAIRMAN: If the incoming data support the view that the economy is able to sustain a reasonable cruising speed, we will ease the pressure on the accelerator by gradually reducing the pace of purchases.

(END VIDEO CLIP)

ZAKARIA: And with that automotive analogy, Fed Chairman Ben Bernanke drove the markets down. We'll delve deeply into what happened with Niall Ferguson. Niall Ferguson is a professor at Harvard University and the Harvard Business School. He has a brand new book out, "The Great Degeneration, How Institutions Decay and Economies Die." Pleasure to have you on, Niall.

NIALL FERGUSON, HARVARD: Nice to be back.

ZAKARIA: So why are people, why are markets reacting so strongly to what Ben Bernanke says? And this has been happening now for weeks.

FERGUSON: Weeks, even years. After all, the idea that central banks are the only game in town has been doing the rounds for a while. Indeed it predates Ben Bernanke. Remember when Alan Greenspan was God? In those days we passed everything that he said. But the stakes are higher in our post-depression, post-crisis economy. And every single thing that Ben Bernanke says, and the same applies of course to his counterpart, Mario Draghi, in Europe, is parsed for any sign that there's going to be a significant change of policy. The economy has been living not just on zero interest rates, but on quantitative easing, which is this mumbo-jumbo term to describe large-scale purchases of bonds, $85 billion worth a month, to keep long-term interest rates low.

ZAKARIA: Was this, you think, a market overreaction to something he had been saying or could it have been a very clever effort by Bernanke to in a sense pop some of these asset bubbles that are building up? You know, let some of the air out of some of these bubbles.

FERGUSON: I think this was a perfectly consistent statement to make. He's been pretty consistent in saying that of course there will come a time at some future meeting when the data will be strong enough to justify a dialing down of the asset purchases, of quantitative easing, and a transition to a more normal, more conventional kind of monetary policy. For him to say otherwise would be bizarre. For him to say, oh, no, no, we're never going to stop doing quantitative easing - I mean, there are some people in the market who kind of want him to say that, oh, no, it's fine, we're going to carry on doing this forever and interest rates will never go up. But of course he's not going to say that, that would be absurd, and as people adjust to the end of quantitative easing, to a new policy regime at the Fed, there is going to be volatility, there are going to be huge up days, there are going to be huge down days. His every phrase, his every word has the potential to cost literally billions, if not trillions, of dollars as asset prices fluctuate.

ZAKARIA: Do you think it will matter whether Ben Bernanke himself is actually running the policy when it comes time to begin withdrawing this monetary stimulus? Because you heard President Obama. Again, people were reading between tea leaves of tea leaves, it struck me. He didn't say anything, but many people interpreted it to mean that he was thinking of appointing somebody other than Ben Bernanke. How crucial has Bernanke himself been?

FERGUSON: I think he has been crucial. I think we were very fortunate that we had somebody in the job who had studied the Great Depression, because we were in a Great Depression situation in 2008- 2009. And I think he must be given credit and a substantial amount of credit for having averted a second Great Depression. So I must admit my preference would be a couple more years of Ben, but it looks like we may not get that, and it may be that the president's affirmative action for women is going to get Janet Yellin into the job.

ZAKARIA: You don't say that -- she's perfectly qualified.

FERGUSON: She's highly qualified. She's highly qualified.

ZAKARIA: She's a very serious (inaudible) economist.

FERGUSON: But my feeling is that anybody new at this point, whether it's Janet Yellin or the equally attractive Tim Geithner, who's certainly attractive as a Fed chairman, it's a new face. It's going to be a new style. And that introduces, I think, another source of volatility. So my inclination would be a couple more years of professor Bernanke would not hurt.

ZAKARIA: You said in a "Wall Street Journal" piece that you just started a consulting company, and you've started - you have opened a business in England and the United States, and you were struck by the fact that it was easier to do business in Britain.

FERGUSON: Any kind of business would have been easier to start in the U.K. than in the U.S., I suspect. But my experience really surprised me. To find that it's easier to start a business in old England than in New England, I wasn't ready for. And it was really the beginning of my work that produced the great degeneration. The realization that the U.S. is no longer number one institutionally. It doesn't have the best rule of law, it is a really expensive, complex system, which is quite opaque and full of risks for any entrepreneur. It has more complex regulation for a small business than most European countries, oddly enough, and indeed one of the things that most amazes me when I look at the ever larger federal register of regulations, you know, regulations that pour out 3,000 or 4,000 a year from 63 different federal agencies -- we've created a jungle of red tape in the United States. There has not been a president, with one exception, who has not presided over rapid growth in regulatory complexity since World War II, and that one exception, you guessed it, was Ronald Reagan.

Under Reagan, the federal register shrank in size by 30 percent. He had 30 percent fewer pages at the end of his presidency. A unique achievement. And by the way, in that same period, the economy grew in real terms by 30 percent. We need to ask why are we not as a dynamic economy as we were back in the 1980s. And I think if you ask any small business, any small business, they will tell you, it's not that we don't have enough stimulus, they will say the problem is we are surrounded by an extraordinary forest of red tape. And it gets more burdensome every year. What's more, by creating these incredibly complex systems of regulation, whether it's environmental or financial, whatever, we actually advantage the big corporations. The more complex the system, the more the regulations are bewildering in their length, the more the big guys benefit, because they have the lawyers. They have the compliance departments. They can figure it out. But the little guy who's trying to get started just looks at this and thinks, wow, this is so bewildering - I mean, let's just take health care.

The new health care reform has all kinds of implications. It was one of the things I ran into, because guess what, Massachusetts already has that mandatory insurance requirement. Trying to sort out a system of insurance for small business took ages, it was really difficult. And I think this is a problem that people are going to be encountering all over the country next year, and of course it discourages people from hiring new workers.

Why are we not growing in terms of employment? Why there are still 12 million unemployed, 8 million plus people who want to be working full time who are working part-time? It is because small businesses are staying small. They are not becoming medium size businesses, which is what you would expect them to do if this recovery were for real.

ZAKARIA: From an academic to a businessman.

(CROSSTALK)

FERGUSON: I'll always be an academic first and foremost. It's just a hobby.

ZAKARIA: Niall Ferguson, pleasure to have you on.

FERGUSON: My pleasure.

ZAKARIA: Up next on GPS, you've heard about printing guns and printing food. But how about printing atoms and molecules? Fascinating stuff from MIT after the break.

(COMMERCIAL BREAK)

ZAKARIA: The Star Trek replicator could instantly fabricate anything out of thin air.

(BEGIN VIDEO CLIP)

PATRICK STEWART, ACTOR: Tea, Earl Grey, hot.

(END VIDEO CLIP)

ZAKARIA: It may be science fiction, but one MIT professor says the real thing is coming, and soon. Neil Gershenfeld is the director of MIT's Center for Bits and Atoms. He teaches one of the university's most popular classes called "How to Make Almost Anything." And he says the next digital revolution is right around the corner.

How would you like to design almost anything you wanted, and produce it on demand? So you say the next big digital revolution is in fabrication?

NEIL GERSHENFELD, DIRECTOR, MIT'S CENTER FOR BITS & ATOMS: Yes.

ZAKARIA: Explain what that means.

GERSHENFELD: What's emerging now is a science of digital fabrication that lets you turn data into things so we can program the physical world. And what it's leading to, the science is how to make the Star Trek replicator, and the impact is that anybody can make anything. ZAKARIA: Digital fabrication is already used for more than manufacturing prototypes or machine parts. NASA recently awarded a$125,000 grant for the development of a 3-D printer that would create food from powders and oils. There are medical applications like the production of custom-made prosthetic limbs, and believe it or not, scientists are even developing the technology to print human organs.

And the machines that come to mind are kind of 3-D printers that layer through a kind of a squirting process, layer by layer build up something that looks like a physical object, but there are actually many, many different--

GERSHENFELD: Right. I've used every 3-D printer from the beginning, but that's actually among the least useful machines. It's a little bit like in the 1950s, telling the chef the future of your kitchen is the microwave oven. Microwave ovens are good, we have them, but it doesn't replace the rest of the kitchen.

ZAKARIA: If a 3-D printer is like a microwave, then what are some of the other kitchen appliances? At MIT's fabrication lab, there are high-powered lasers that can cut shapes very precisely, allowing two- dimensional shapes to fit together to make three-dimensional structures. There are machines that can cut wax for making molds and casting parts. There are water jet cutters where high-pressure water pushes abrasive sand to cut materials. There are also milling machines that can manufacture other fabrication machines.

GERSHENFELD: We're transitioning now to a stage where not only can the machine make something, but the machine can actually make its own parts.

ZAKARIA: Nadia Peak (ph), a Ph.D. student at MIT, developed this machine. Controlled by a computer, it makes these inexpensive circuit boards. The circuit boards can in turn be used to control the machine. It can produce the parts it needs to run itself.

Explain the implications and the ramifications of this, because it strikes me that it seems to suggest that you in a sense have the -- a complete transformation of manufacturing. Let's say I'm on an oil rig somewhere. I would have five of these machines that would just manufacture every spare part I ever needed, things like that.

GERSHENFELD: You could certainly do that, but that's only a little piece of the impact. The impact is much broader.

ZAKARIA: Today 3-D printers deposit materials in layers. In the future, machines will deposit or assemble digital materials. This means tiny building blocks would be designed to fit together perfectly, analogous to Legos snapping together. So just as pixels come together to make up images on computer screens today, these materials will come together as what are essentially 3-D pixels, which will make up physical objects.

GERSHENFELD: Where the research is heading is, again, the Star Trek replicator, which builds from the atoms on up. At a real molecular level, you assemble anything, and that still may be 20 years away. ZAKARIA: While we wait for the Star Trek replicator, students at MIT are finding plenty of ways to put digital fabrication machines to good use.

GERSHENFELD: I started a class called "how to make almost anything," and it was overwhelmed with students.

ZAKARIA: It was the most popular class at MIT.

GERSHENFELD: I don't know, but yes, we're swamped with it. And then what they did was projects. A student made a device where you scream into it, it muffles your scream, but records it and then at a convenient time later, it lets it back out again. Another student made a dress instrumented with sensors and spine (ph) that defends your personal space if somebody comes to close.

ZAKARIA: The variety of student projects demonstrated what Gershenfeld believes to be the killer app of digital fabrication.

GERSHENFELD: The students were showing -- answering a question I didn't ask, which is what is this stuff good for. And the answer is not to make what you can buy in stores, but to make what you can't buy in stores. It's to personalize fabrication.

ZAKARIA: The MIT students were not the only enthusiastic pupils. Gershenfeld opened a fab lab in Boston's South End that provides free access to digital fabrication machines for local children, teens, and entrepreneurs in the community.

GERSHENFELD: We set up a community lab that was in-between the research tools on campus and the Star Trek replicator in the future. It was maybe $50,000 worth of machines, and that was the whole project.

ZAKARIA: But Gershenfeld's whole project soon got a whole lot bigger when MIT and the National Science Foundation were asked to set up a fab lab in Ghana, and that was just the beginning.

GERSHENFELD: They started doubling. There are about 200 now. They have been doubling about every year and a half. They're above the Arctic Circle, in rural villages, in Jalalabad in Afghanistan, in shantytowns. Every time we opened one, somebody else wanted one. The labs get used for education, learning skills. They get used for creating businesses. They get used for play, they get used to make art. Then we link them globally with video and online content.

ZAKARIA: Around the world people are benefitting from these fab labs, and the potential for this technology seems limitless. But as with many emerging technologies, there are downsides. Last month a Texas- based company successfully fired a bullet from a gun that was entirely made from a 3-D printer. Some lawmakers have rushed to ban these guns, and the State Department ordered that the online blueprints be removed. Before they were, the blueprints were downloaded more than 100,000 times.

So should we worry? One thing that people have pointed out about digital fabrication is you can make guns. You can make the keys to unlock any police cell in the world. You know, the power to use this in kind of disruptive ways is pretty intense. What do you say about it?

GERSHENFELD: Any remotely well-equipped workshop can make gun parts. And in fact, if I gave you a choice between a gun made in a weak piece of plastic versus a gun made out of a piece of metal, you'd pick the piece of metal.

ZAKARIA: You don't worry about the -- I mean, you're giving individuals enormous power that perhaps they didn't have before.

GERSHENFELD: Any technology in all of history has always been used for good stuff and bad stuff. It is at a cusp. With limiting this and the opportunities, it's a real kind of reinvention of if anybody can make anything, how do you live, work and play? Sort of how you organize society.

ZAKARIA: Big, big stuff. Neil Gershenfeld, thank you so much.

GERSHENFELD: My pleasure.

ZAKARIA: And we will be back.

(COMMERCIAL BREAK)

ZAKARIA: Despite the grim faces in this picture, Presidents Putin and Obama actually agreed on something at the G-8 this week. Sounding like the bad old days of the Cold War, the two agreed to put in a new hotline. This time not to avoid nuclear war, but to avoid cyber war. It turns out the agreement for the original hotline was signed 50 years ago this week, which brings me to my question from the GPS challenge. What were the original communication devices for the U.S./Soviet hotline? A, red rotary phones; b, fax machines; c, teletype machines; d, Morse code machines. Stay tuned, we'll tell you the correct answer. Go to cnn.com/fareed for more of the GPS challenge, lots of insight and analysis. Also you can follow us on Twitter and Facebook, and remember, you can go to Itunes.com/fareed if you ever miss a show or a special.

This week's book of the week is Peter Bergen's "Talibanistan." Peter, a long-time CNN contributor, has put together a volume of essays on all aspects of the Taliban, from terror to politics to religion. It's written with analytic rigor, historical depth, and lucid prose. This is the one book to read on Afghanistan now.

Many of you have expressed interest in last week's story on why U.S. ports may not be adequately prepared for a new era of shipping. I wanted to recommend a source that was very helpful for us as we prepared the report. It was the North American port analysis by Casey Conway, the chief U.S. economist for Colliers (ph) International. It's chockfull of information, including whether the port nearest you will be ready by 2015. We have a link to it on our website.

Now for the last look. Take a look at these stark images of refugees around the world. From Syria, the Sudan, Afghanistan, Iraq. Across the globe, some 45 million people have been forced from their homes by political conflict or violence. That's the highest in 18 years, according to the U.N. For this grim world, there is perhaps a bit of good news on the horizon. The U.N. high commissioner for refugees currently has two options for emergency shelter - a tent or a tent. Anyone who's ever slept in a tent knows it's far from optimal for long-term stays. Along comes the Ikea Foundation, the charitable arm of the furniture giant. Armed with its wealth of experience mass producing big items that pack up small, it allied with the refugee housing unit and came up with a hard-sided shelter, powered by solar, that even the tallest Somalis can stand up in. It packs up flat and is expected to cost about $1,000. 56 of these prototypes are en route to refugee camps in Ethiopia, Lebanon and northern Iraq for testing. Just don't lose the instruction manual or the little wrench that comes in the box.

The correct answer to our GPS challenge question was c. Teletype machines were the medium for the hotline to make sure there was no mutually assured destruction. They were used repeatedly during the Cold War to make sure actions or nonactions were understood during the six-day war in 1967, the India-Pakistan conflict of 1971 and on and on. The first message sent by the U.S. was a little less important. It read "the quick brown fox jumped over the lazy dog's back, 1, 2, 3, 4, 5, 6, 7, 8, 9, 0."

Thanks to all of you for being part of my program this week. I will see you next week. Stay tuned for "Reliable Sources."