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Fareed Zakaria GPS

Crisis in Ukraine; Interview with Bill Browder; The Greek Debt Crisis; Freedom in Retreat?; Interview with Bill and Melinda Gates

Aired February 15, 2015 - 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.

We've got a terrific show for you today. First up, a tale of murder and intrigue involving a familiar villain.

Then I know you've heard this before, but Europe is facing a major crisis. No, really. Within a couple of weeks, the money runs out for Greece.

What does that mean for the euro, Europe, and global economy? I have an all-star panel for you.

Also is freedom around the world in retreat? We have the numbers.

Then Bill and Melinda Gates on their big bets for the future. Their take on American education, how women are transforming the world, and the next technological breakthroughs. Think about a cloud that knows how you speak and write.

And finally, Mr. Putin goes to Cairo. And you won't believe what he brings with him.

But first here's my take. The deal announced Thursday to end the fighting in Ukraine will face the same obstacle the previous such agreement faced -- how to ensure that Russia will abide by it.

Frustrated by Moscow's continued support for Ukrainian separatists, Western statesmen have begun discussing military assistance for the Ukrainian government. But in trying to decide what would actually deter Moscow, it might be worth listening to what seems to scare Russians themselves. And it is not military aid to Kiev.

When asked recently about the possibility of so-called swift sanctions, which would bar Russia from participating in the international payment system centered on the dollar, Prime Minister Medvedev warned that Moscow's response would be without limits.

It's understandable why Putin's closest associates are so rattled by the prospect of additional economic sanctions. The Russian economy is in free fall. In a report released this week, the International Energy Agency said that Russia is facing a perfect storm of collapsing prices, international sanctions and currency depreciation. The IMF projects Russia's economy will contract by 3 percent in 2015.

And Putin needs strong oil revenues to maintain his power. From 2008 to 2009 when oil revenues did collapse during the global financial crisis, the Russian government increased its spending by a staggering 40 percent, all to preserve social stability. This according to the economists.

On the other hand, Russia could easily handle continuing its military skirmishing in eastern Ukraine. Moscow's defense budget in 2014 was roughly 20 times that of Kiev's, according to figures published this week by the International Institute for Strategic Studies.

The argument against sanctions is that while they may raise the cost for Russia, Putin has shown that he does not respond to higher costs in a rational calculating manner. But if that's the case, then military aid for Ukraine won't work either. No one believes that Kiev can actually prevail in a military contest with Moscow.

A recent think tank report urging military aid itself acknowledges that the aid package will merely raise the cost for the Kremlin in order to force it to then negotiate. In other words, the consensus is that the only possible strategy is to raise costs for Russia. The disagreement is really about what kinds of costs Vladimir Putin finds most onerous.

I think that military aid to Ukraine would stoke the fires of Russian nationalism, let Putin wrap himself in military colors and defend his, quote-unquote, "fellow Russians," in an arena in which he will be able to ensure that Moscow prevails. For a regime that waged two bitter and costly wars in Chechnya, a region far less central to the Russian imagination than Ukraine, the loss of some men and money in a military operation is not likely to be much of a deterrent.

Why would the West want to move from its area of enormous strength, economic pressure, to an area where it will be outgunned in every sense?

If Russia breaks this fragile peace, then more sanctions should be considered. Senator Lindsey Graham recently offered the most honest reason why some in Washington are advocating military assistance. Even though it doesn't seem likely to work, it's a way of doing something in the face of Russian aggression.

(BEGIN VIDEO CLIP)

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: I don't know how this ends if you give them defensive capability but I know this. I will feel better because when my nation was needed to stand up to the garbage and stand by freedom, I stood by the freedom.

(END VIDEO CLIP)

ZAKARIA: But the purpose of American foreign policy is not to make Lindsey Graham feel better. It is to actually achieve American objectives on the ground. That means picking your battles and weapons carefully. For more go to CNN.com/fareed and read my "Washington Post" column

this week. And let's get started.

To understand what motivates Vladimir Putin, we decided to call in a man who once helped him get rich.

Bill Browder went from being Russia's largest foreign investor to being blacklisted from that country. The CEO of Hermitage Capital Management, Browder was once a supporter of President Putin. That is until he was expelled from Russia in 2005 after being considered a threat to national security.

Browder writes about his experiences in his terrific new book "Red Notice: A True Story of High Finance, Murder and One Man's Fight for Justice." He joined me recently to tell me what he learned about how the Kremlin works.

(BEGIN VIDEOTAPE)

ZAKARIA: So you begin the book by -- with this incredible story. You're the largest foreign investor in Russia, you -- your fund has returned 1,500 percent returns, you're managing $4.5 billion in capital at a time when that was real money, and you get to the airport and they put you on a plane and throw you out.

What have you done that so pissed off the Russians?

BILL BROWDER, CEO, HERMITAGE CAPITAL MANAGEMENT: Well, I wasn't just a regular investor. I was what's -- what they -- what's commonly referred to now as a shareholder activist. I started out being just buying shares of Russian companies and I realized that the oligarchs and government officials were stealing all the profits out of these companies. And so I thought the only way that I could run a sort of moral and profitable business would be to try to stop it.

Basically we researched how they did the stealing and then we share it with the international media. And for about four years this naming and shaming of Russian companies actually worked because my interests coincided with Putin's. He was fighting with the same guys I was fighting with. The oligarchs were stealing power from him and they were stealing money from us.

And so every time I would publicize a scandal, Putin would step in and fix it. And so my profits went up, the company's profits went up. And I was feeling like -- I was feeling like the best guy in the world because I was making money and doing good at the same time.

ZAKARIA: But then Putin makes a deal with all these oligarchs and at that point things start to change for you.

BROWDER: He arrested the richest oligarch in the country and said to the other guys, if you don't want to be arrested you need to share your money with me.

ZAKARIA: Right. Right. BROWDER: So he became a business partner and then my -- all of my

activism became very inconvenient. At that point, I was not going after his enemies, I was going after his own financial interest. And so when I arrived at Sheremetyevo Airport in November 2005 after living there for 10 years, I was stopped at the VIP lounge. I was taken down to the detention center of the airport. I was kept there for 15 hours. Deported and declared a threat to national security.

What I didn't realize then, and it's become absolutely plain and obvious to me now, based on my experience, is that Putin wasn't above it all, Putin was intimately involved in it all. And it wasn't like he was restraining the oligarchs, he was the biggest oligarch. And everything that he's done since then has come to prove that.

ZAKARIA: Do you think Putin is about power or about money?

BROWDER: Well, I would say the first eight or 10 years of Putin's reign over Russia, it was about stealing as much money as he could. And some people, including myself, believe that he's the richest man in the world or one of the richest men in the world, with hundreds of billions of dollars of wealth that was stolen from Russia. It's changed, though. It's mutated. All --

ZAKARIA: Really? I mean, you understand numbers. And you understand the numbers of these Russian companies. You really think Putin is the richest man in the world?

BROWDER: I really think that. And I'm not just saying that crazily.

ZAKARIA: Estimate his net worth?

BROWDER: $200 billion.

ZAKARIA: Really?

BROWDER: I believe that it's $200 billion. After 14 years in power in Russia and the amount of money that the country has made and the amount of money that hasn't been spent on schools and roads and hospitals and so on, all that money is in property, bank -- Swiss bank accounts, shares, hedge funds, managed for Putin and his cronies.

ZAKARIA: And it would explain why he personally has so much power, right? It's not the power of the party or the army you worry about or the state.

BROWDER: But the power is very simple in Russia. Whoever has the power to arrest people is the person in power. And so what Putin does is he has a bunch of guys around him who have the power to arrest people. And so it doesn't matter how rich you are, if you can be arrested, put in jail and have your money taken away, the guy who can do that to you is the most powerful person in Russia.

ZAKARIA: The second half of your book is about this incredible campaign that you have -- you've launched ever since the death of Sergei Magnitsky, your -- the guy who was looking after your accounts and the legal issues surrounding them. How did you manage to get people in the United States, (INAUDIBLE) the

United States' attention focused on this issue?

BROWDER: Well, my attorney Sergei Magnitsky, he was murdered for exposing government corruption, murdered in pretrial detention, and they covered up his murder. What they did to him was so evil and so heartbreaking and so well-documented that when I went and told the story to members of Congress, it didn't matter whether you were the most conservative Republican or the most liberal Democrat, this is the one thing in Washington everybody could agree on, which was these people were bad.

These guys killed Sergei Magnitsky, my lawyer, for money. They all got rich, they all got bank accounts, and villas and cars. Why should we allow them to come to America, travel to America, keep their accounts here and spend that money? Everyone said, yes, that's easy. It doesn't cost anything to stop them from doing that. And so this started snowballing and against the interest of the U.S. administration.

The U.S. administration at that time wanted to play nice with Russia. We got the Magnitksy Law passed 92-4 in the Senate. It's the one thing that everyone in Washington could agree on.

ZAKARIA: Oil prices are down 15 percent. The Russian economy is being sanctioned, banks are in trouble. How does this -- how does this play out for Putin?

BROWDER: Well, there's the Zimbabwe-North Korea scenario where he just runs Russia truly and absolutely into the ground and stays in power. And that could happen. There's also the Ukraine-Georgia- Kyrgyzstan scenario where people -- the Russian people say, why are we allowing this man to ruin everybody's life.

He makes some decisions, some small decisions, it doesn't have to be big decisions, it just sparks a million people on Red Square and they get rid of him or it could even be that some members of the army and the police decide palace coup, let's get rid of him.

We don't know. But in the meantime while he's still in power he's going to be running Russia into the ground and causing the West a lot of problems.

ZAKARIA: Bill Browder, pleasure to have you on.

BROWDER: Thank you.

(END VIDEOTAPE)

ZAKARIA: Up next Greek and European officials are playing a game of chicken. Who will blink?

Stay tuned for a fascinating conversation.

(COMMERCIAL BREAK) ZAKARIA: Talks over the Greek debt crisis are down to the wire. And Greece's $240 billion euro bailout program is set to expire on February 28th.

So how will this play out and what chain reaction could be triggered by a Greek exit from the eurozone?

To ponder all this I am joined by Zanny Minton Beddoes, the newly appointed editor-in-chief of "The Economist." She's the first woman to run that magazine, which is bizarrely called a newspaper, in its 172-year history.

And joining her are Rana Foroohar, "TIME's" assistant managing editor for economics and business, and Gillian Tett, the U.S. managing editor at the "Financial Times."

Welcome all.

So, Zanny, explain to us very simply, it feels as though it's the Greeks versus the Europeans and they're playing a game of chicken.

ZANNY MINTON BEDDOES, EDITOR-IN-CHIEF, THE ECONOMIST: That's basically right. And the question whether they're playing a game of chicken where they're both going towards a cliff or whether they're going towards each other.

It is -- you know, we've talked often about the euro crisis. It's always felt like there was going to be a huge crisis that never actually happened. This time I think it really is going down to the wire. The Greeks do not want to stay in their current program. They don't want to extend it, they want to bridge loan to enable the negotiation of something more akin to what they'd like, which is a lot of debt relief and less conditionality or different condition.

The Germans are saying basically no, you have to work within the constraints of what you've got right now. And there is a standoff.

ZAKARIA: Are the Greeks being reasonable here? Paul Krugman of the "New York Times" keeps pointing out the Greeks are only asking for what the Germans asked for in 1950s.

GILLIAN TETT, U.S. MANAGING EDITOR, "FINANCIAL TIMES": Absolutely. People have forgotten that actually Germany enjoyed a lot of debt relief in the last century and these days, the fact they are taking a pretty patronizing turn towards the Greek from telling them to basically accept all this austerity is not working well politically.

I mean, the -- Germans keep arguing it makes good sense economically but that simply does not work well within the Greek electorate. The question that everyone should be asking themselves now is, is this going to be Europe's Lehman Brother moment? Are we going to see essentially some crisis occurred that's going to be cathartic and force the Europeans to work out a longer term solution to their problems or are we instead going to see a very nasty chain reaction that could be extremely bad for the economy.

ZAKARIA: Greeks or Germans, who's to blame?

(LAUGHTER)

RANA FOROOHAR, ASSISTANT MANAGING EDITOR, "TIME": You know, the Greeks often come out as the bad guys in all this but frankly the Germans have their part to play as well. It's ironic that they have probably benefited more than any other country from being part of the eurozone. It's been an incredibly help to their export economy.

Ironically, the quantitative easing program that's been started by the European Central Bank which they have protested against they will benefit from as well because it will again make the euro more competitive in the international market.

ZAKARIA: It makes the euro more competitive so Mercedes Benz's are cheaper.

FOROOHAR: Exactly.

ZAKARIA: And that helps Germany, yes.

(CROSSTALK)

FOROOHAR: They're cheaper. And I think that the Germans have done enough, frankly, to create a consumption economy, to bolster wages. They have a part to play, too. Ultimately there has to be an underlying political solution to this problem. There can't be a serious small step technocratic fixes. They aren't going to work here.

ZAKARIA: What's the political solution?

FOROOHAR: Well, the political solution is, you have to become the United States of Europe. They have to come together, they have to have a real integration fiscally, probably more power devolving to Brussels with Berlin holding the purse strings.

TETT: A good place to start doing that practically, and (INAUDIBLE), not entirely, is you could use German money to build holiday camps in places like Greece, give pensioners vouchers, German pensioners vouchers to go and have holidays down in Greece and spend money on --

ZAKARIA: Spend money.

(CROSSTALK)

TETT: It's actually what you need to see. And economically that would be most rational.

(CROSSTALK)

ZAKARIA: But --

MINTON BEDDOES: I think the problem is in part that the Europeans have fallen into the trap which -- the way you set the question up, who's to blame here. And I think the Greeks are blaming the Germans, the Germans are blaming the Greeks. Actually the solution, the sort of limited solution to this, and I agree with you that there has to be a broader approach within Europe, but the limited solution is actually relatively simple.

The Greeks have been asked to do too much budget belt tightening, too much austerity. They have got a lot of debt but they can't possibly repay, and everyone knows they can't possibly repay. But at the same time, they do need to continue reforming their economy, and what Alexis Tsipras, the new -- the head of SYRIZA, wants to do is throw away all of the reforms and -- as one my colleagues said, they've hit the ground running backwards on that stuff.

And I think they're wrong in that. And the Germans are wrong in demanding the austerity and refusing to think about the debt. And there's a clear solution here, which is you commit to doing more of the right kind of reforms and in return you get -- you have to have a lower budget -- lower budget surplus so you get not so much austerity and you get some debt relief.

ZAKARIA: But isn't there this larger point, which Steve Ratner wrote a piece, saying, look, you can do all the spending of money you want. But most European economies, southern European economies, are fundamentally uncompetitive. They have, you know, 2,700 pages of labor laws in Italy. You can retire 50 years ahead, rest there in Greece, and get a pension. I'm making some of this stuff up but it's not so far from the truth.

FOROOHAR: Right. Certainly the periphery has to reform. But there needs to be a comfort zone within which they can reform. It's very hard to say to any country you're going to have a 25 percent contraction of your GDP indefinitely and not have a sort of revolutionary impulse which is --

MINTON BEDDOES: It's kind of a not. Really, the irony is that the Greeks are doing this, their economy has actually I think hit bottom. It is beginning to grow. There's light at the end of the tunnel and the kind of insanity of this scandal right now is that just at the moment when it appears that Greece has got through the worst, and things could be getting better they, you know, are throwing baby out with the bath water.

And there is a -- to me, and to go back to your parallel with the Lehman moment, the question -- the interesting question is, would there be massive contagion if Greece left. And that's a very -- it's not clear that there would be. There might be. And I think it is certainly a risk but probably it's been so talked about that it -- they wouldn't necessarily be.

ZAKARIA: At the end of the day you've got to make a choice. Is a Greek -- are the Greeks or the Europeans going to blink?

MINTON BEDDOES: I suspect that in the end of the day we'll have the typical European solution which will be akin kicking fudge. But I think the odd of an accident this time higher than I've seen them in a very long time. TETT: I'd agree. Budget most likely. But what we're asking right

now are the tremors are getting more frequent and closer together in terms of the potential shock. And I agree the chance of accident is definitely rising.

FOROOHAR: I think eventually the Germans are going to blink and realize that they have gained more from the euro than anybody else but I think that we're going to have a lot of pain along the way. It's not going to get fixed this time around definitively.

ZAKARIA: Well, one of you pointed out that this is the "Charlie's Angels" of economic policy.

(LAUGHTER)

ZAKARIA: I think that --

MINTON BEDDOES: And I think that "Charlie's Angels" won. Isn't it?

ZAKARIA: Let's hope the ratings hold up.

Zanny Minton Beddoes, Gillian Tett, Rana Foroohar, thank you very much.

MINTON BEDDOES: Thank you.

ZAKARIA: Up next, what percentage of the world enjoys freedom? How many are living with oppression? We have the answers coming up.

(COMMERCIAL BREAK)

ZAKARIA: Now for our "What in the World" segment.

The fall of the Berlin Wall and the events in Eastern Europe and Russia that followed were a time when freedom throughout the world seemed unstoppable. Every time you turned on the news, you expected to see another company lifting the veil of tyranny.

Nowadays, the trend is actually moving in the opposite direction. Recently the watchdog group Freedom House released its insightful annual report on freedom and democracy around the world. It looked at 195 countries and 15 territories giving them numerical ratings, one being the most free, seven being the least free, basing their methodology primarily on the U.N.'s Universal Declaration of Human Rights.

The group's conclusion, democracy is under greater threat than at any point in the last 25 years. Overall 40 percent of the world's population is free, 24 percent is partly free, and 36 percent is not free.

Maybe that doesn't sound so bad. But in fact, freedom has been on the decline for nine straight years according to the report. In 2014, 61 countries saw their freedom deteriorate since the year before, compared to only 33 countries that saw freedom improve. That tally of countries gaining freedom was the lowest figure over the last decade. If you look at the 21st century overall, freedom has plateaued

according to the report. The tally of electoral democracies in the world has also been stubbornly stagnant.

What's the least free region in the world? The Middle East and North Africa, where 85 percent of the population is not free.

So much for the Arab spring.

The notable bright spot there is Tunisia, which freedom has moved into the free column for last year after it adopted a constitution and held successful elections. Just five years ago, Freedom House ranked Tunisia among the most oppressive regimes in the world.

But Tunisia notwithstanding autocracy is on the march. What's more, if you look beyond the metrics, Freedom House says the nature of autocracy is changing. Autocrats are no longer paying so much lip service to democracy like they once did and they're returning to old 20th century modes of oppression.

Russia's invasion of Crimea is the most prominent example, Freedom House, says of boldface move that recalled World War II. China is detaining activists under stricter conditions rather than just house arrests, the organization says. And they are also televising people's confessions. In Egypt, the military is in charge and the court sentenced hundreds of political prisoners to be executed in sham trials, the report points out. And it says there are overlooked autocracies, flying under the radar, like Azerbaijan, Vietnam and Ethiopia, which don't receive the full ire of the free world despite their oppression.

Of course, the news isn't all bad. The Ukrainians rebelled from their government and have since stood firm despite Russia's power moves. We've also seen resistance to oppression in Hong Kong. And Vladimir Putin himself is in a tough spot thanks to falling oil prices. Still, we must face a sobering fact. At the end of the Cold War, it seemed like freedom was an unstoppable wave. But every wave has an under tow. And perhaps that's what we're witnessing these days.

Up next, Bill and Melinda Gates on the future of technology, health, and the American education system when we come back.

(COMMERCIAL BREAK)

ZAKARIA: Bill Gates is no stranger to taking risks. Forty years ago he bet that personal computers and software would transform our lives. We all know how that worked out. So it's no surprise that he's made some more bets. In 2000, Bill and his wife Melinda started the Bill and Melinda Gates Foundation and they recently released an annual letter which makes some bold predictions for the future. Let's start with how mobile technology is transforming lives and how they hope to revolutionize education right here in the United States. Listen into my conversation with Bill and Melinda Gates whom I caught up with recently at the World Economic Forum in Davos, Switzerland.

(BEGIN VIDEOTAPE) Bill, let me ask you about mobile technology. It strikes me this is the next big wave that's going to coarse through the world. Particularly the third world. I look at India where I grew up. Most Indians don't have access to the Internet. Because the infrastructure is bad. There aren't, you know, people haven't run fiber optic cable.

But when you get 4G and when you get cheap smartphones, which are already happening, they are selling them for $30 you can imagine, I think the estimates are within five to seven years 800 million Indians will then be connected to the Internet, which is up from really about 100 million. Talk about this. What does it change? Why is it important?

BILL GATES, CO-CHAIR, BILL & MELINDA GATES FOUNDATION: Yeah, that cell phone is enabling. Now, today the cell phone doesn't give you banking and the online courses or not, good enough, they don't connect to what you need to learn. But in parallel over the 15 year period, we'll be getting coverage op, the price down, hopefully more gender equity in terms of who has those phones and the software, online software will be flourishing.

ZAKARIA: When you look at this issue, because a lot of the things you talk about in terms of empowering women is about giving them knowledge, giving them knowledge about markets, about products, about prices. Do you think that this could be a game changer, this, you know, rise of cheap smartphones, I guess?

MELINDA GATES: Absolutely. You know, Kenya has had mobile money now for a while and peso, which is mobile money, 90 percent of households use it in Kenya. It's a pretty closed system right now, but what women are talking about is the fact that it's so cheap now. But what they can do is they can save a dollar a day, $2 a day. If a husband goes into Nairobi and gets a job, she can ask for remittances back. So, when you start to see these things going to scale at Tanzania, 46 percent of households are using mobile money. We are seeing it start to go to scale at Bangladesh, you are seeing it go to scale in places like the Philippines. For women that's transformative.

ZAKARIA: And when you look at this mobile space, what do you think, you know - what are the next things we should be watching? Is it tablets? Is it - what, you know, paint a picture of this new world.

BILL GATES: Well, the tech companies keep doing amazing work. And today you kind of think of working on that one devise and then you have to think about switching to the other device. Basically, the cloud will know how to hear you speak, it will know your handwriting. And so the idea, helping you remember things, remind you of things, tracking your schedule. There's some pretty unbelievable scenarios that this pervasiveness and naturally used interface bring.

ZAKARIA: Melinda, what about education and technology. Where do you see its role in transforming education?

MELINDA GATES: Yeah, so today we predominantly focus on education in the United States. We feel like the biggest inequity is still our education system. It is fundamentally broken. The fact that a third of - only a third of the kids who graduate high school are really prepared to go onto college. You just can't have a public education system like that and have a great democracy. But the key, key thing in education is having access to a fantastic teacher. We know that a fantastic teacher gets more learning that gains from the kids.

But what we're finding is, in the U.S. getting a great teacher in front of every kid, if you have the digital tools that go along with that, he or she then can - then personalize the lesson. And that really draws kids in. And I think over time in the developing world, if you're a kid living in a rural area and let's say, you have a good teacher up to may be fourth grade, but you just don't have access to a great high school teacher in science, or a college professor. If you are actually a motivated kid, eventually you'll be able to get a lot of that online. And that's when I think it will be even more transformative in the rest of the world. And it may be some fantastic professor in India, or somebody that's a great professor in China or some teacher that you hear about, you know, in the U.K., that's when you start to get kids motivated and learning together.

ZAKARIA: When you look at education, one can't help but noticing that so much of your educational opportunities depends on what zip code you are in, because education is funded with local property taxes. And then you have this growing inequality. Is there anything to be done about it?

MELINDA GATES: Well, it is why we focus on the U.S. education system, because to tackle inequality you've got to make sure all kids are educated and educated well. In the U.S. I think there's some points of light. I mean one of the nice things about the charter school movement is taking public funding and using less dollars than are spent in the normal public school and educating kids for less expensive but getting a much higher quality of education. They are doing all kinds of innovations in the charter schools. And it gives us ideas and examples of what then can be taken to the public schools.

But again, our key thing about the U.S. schools, is how do you make sure you have a personnel system, given that it is for today a personnel system. How do you have a phenomenal teacher for every kid in the front of the classroom? And we don't feel you can really do that unless you have an open, fair, accurate evaluation system.

ZAKARIA: So, you know, when you think about education and technology, it seems to me that this has to be the hope that technology is going to have a huge transforming effect that will produce a much more productive system. Because as you know, Bill, there's this debate among economists about whether the technological inventions of the world we're living in are as significant as the ones from, say, the 1880s, 1890s, somebody like Peter Thiel, the entrepreneur says we wanted flying cars. And instead we got 140 characters, meaning Twitter. But if technology could be used to transform education, and I would say health care, that might provide for a kind of systemic transformation of the kind that we haven't seen for a long time.

BILL GATES: Yeah, I agree with that. But the fact that people can say they don't see the acceleration and innovation, including on fundamental issues, to me it takes almost a willful blindness. Our understanding of biology and tools that can help and what that means for childhood death rate, nutrition, we are finally beginning to understand nutrition and therefore malnutrition. And that unlocks so much potential. Because about 40 percent of the kids in Africa simply don't have the diet to be fully physically or mentally developed.

And it is strange you have the people who are afraid we're innovating too fast. And you have the people afraid we're not innovating. Well, the truth is we're innovating at a wonderful speed that in -- for the basic things we think everybody should get, we will be reducing that inequity far faster than ever before. And so, it's a far more positive picture than either the people who say it's coming too fast or too slow would point out.

(END VIDEO CLIP)

ZAKARIA: Up next, more from the Gates's on the amazingly good news about the state of the world and on why women should handle family finances. You won't want to miss it.

(COMMERCIAL BREAK)

ZAKARIA: And we are back with more of my conversation with Bill and Melinda Gates from Davos, Switzerland.

(BEGIN VIDEOTAPE)

ZAKARIA: The most remarkable trend of the last several years to me is that the number of people who live in poverty is almost down by half depending on how you measure it, it's down 40 percent or 50 percent. And I don't think I've ever seen an adequate explanation of why did this happen.

BILL GATES: Yeah, the key thing that economists have - always a hard time with, because it's exogenous, is the innovation. So, up until the last 300 years or so, with basically no GDP growth. And until you get things like energy intensification, modern materials, eventually deepening of education, infrastructure, that's where you start to see amazing economic growth. So there's really two reasons why those numbers are so great.

One is the China piece of it, which is a meaningful piece of it. And what they did between 1989 and even to today, every year there's a headline saying the Chinese miracle will end because there's this imbalance or that imbalance. And in fact, yes, its growth is lower than it was, but it still growth that we would love to have, or the globe would love to have.

ZAKARIA: And from much higher base. So, the growth is slowing but off a much larger economy.

BILL GATES: That's right. They are a middle income country now. And, you know, everybody slows down once you get into that phase. But the economic miracle really does extend outside of China. Not only do we get the economic growth, the basket of goods, the things, the fundamental basics have improved as well. And what we predict, is that that wonderful thing of the fundamentals improving is going to accelerate in the next 15 years.

ZAKARIA: But why has it happened? Have we just gotten smarter about how to eradicate poverty in the last 20 or so years?

BILL GATES: The ability to - not meets up the agriculture sector, to get the inputs, the latest seeds available, to educate the farmers. The information about when to plant, what the market prices are, all of those things are way easier to do now. And it's not something where we looked and said nobody ever did that before. The green revolution happened in India and Pakistan in the late '60s and '70s. And so, none of those seeds were used in China until they did the reform. So those seeds were just sitting there for the 1990s. And that's why Chinese agriculture stuff goes up so fast. It's almost impossible. But there was - the inputs were so out of date.

ZAKARIA: So, Melinda, the other piece of this was health. I mean in general, as you say, it's not just that we've gotten less poor, or, you know, I prefer that to saying richer, for, you know, people living on $1 to $2 a day. But that their lives have gotten better. And most importantly, the health care has gotten better. So you make a prediction about cutting the number of children who die before the age of five, and it's astonishing that it used to be one out of every ten children died before they hit five years of age. You're hoping that it will be one in twenty.

MELINDA GATES: Right.

ZAKARIA: Why do you think health has improved so much? Again, is it that we've gotten smarter about what to do?

MELINDA GATES: It's that -well, it's basically looking at the biggest childhood killers of the world and then tackling those. The vaccines that I think a lot of us take for granted in the United States or U.K. and France and other places in the world, those absolutely save lives. And we are getting those out and starting to get them out at scale in the developing world.

So what used to take us in the developed world 20 or 25 years to get a vaccine that came out in the U.S. and U.K. out to a place in Africa, that lag time is now being cut down to between one and three years and we have the right strains. For about $30, you can buy a basic set of vaccines for kids. That's why we're seeing eight out of ten kids are getting these vaccines and that is saving lives.

BILL GATES: Do you accept what I think has now become a kind of received wisdom that if you give money in the form of aid to women, it is a much better use of the money. That basically that was a simple way to put it, it would be - if you give the money to the man, he will go to the local tavern. If you give the money to the woman, she will put it into her child's education.

MELINDA GATES: The research suggests that every marginal dollar a woman gets in her hand, she's 90 percent likely to plow it back into her family. So, my sense is that if you empower that woman, you're empowering everybody else. And quite frankly, education is absolutely fundamental in this. So we

know that she is - if she's educated she's likely to marry later. She's likely to have children later. For every - for a literate woman, her child is 50 percent more likely to make it to their fifth birthday. And if she's educated, she's twice as likely to educate her daughter. That has profound effects for the family, the community, whole societies and I think whole geographies.

And it's why we start to talk about that. OK, if you can get labor force participation of women, you could raise them - the GDPs in Africa by 12 percent, or in India by ten percent. To me female piece of this is just absolutely fundamental.

ZAKARIA: And thank you, Melinda and Bill Gates.

BILL GATES: Thank you all.

ZAKARIA: Pleasure.

(APPLAUSE)

(END VIDEO CLIP)

ZAKARIA: Next on "GPS," Mr. Putin goes to Cairo bearing an unusual gift. We'll tell you when we come back.

(COMMERCIAL BREAK)

ZAKARIA: Vladimir Putin was quite the globetrotter this week. Before meeting with the leaders of France, Germany and Ukraine in Minsk he traveled to Cairo to meet with Egypt's President Abdul Fattah al-Sisi. This brings me to my question of the week, what gift did President Putin give to his Egyptian counterpart, caviar, a Kalashnikov rifle, Russian nesting dolls or a Faberge egg?

Stay tuned, we'll tell you the correct answer. This week's book is "A Path Appears: Transforming Lives, Creating Opportunity" by the "New York Times" columnist Nick Kristof and his wife Sheryl WuDunn. This is an amazing book that could change your life. If you ever wonder how you can do something to make the world a better place, this book explains that ten minutes, $40, a couple of hours of volunteering can all make a huge difference. It's a book filled with great stories and powerful lessons. Make your kids read this book. I intend to make mine.

And now for the last look. The formal photos and diplomatic discussions Putin took part in in Minsk could not have looked more different from the celebration and fanfare that welcomed him to Cairo. Banners festooned with his smiling face hung throughout the streets. As foreign policy pointed out, a state run newspaper showing some of his most macho photographs called him, quote, "Hero of our time."

The presidents dined together and took in a show at Cairo's opera house where a documentary played highlighting the history of Russian- Egyptian relations. There was just one missed beat. Following a gun salute, an Egyptian orchestra played the Russian anthem for the president. Take a listen to what the Russian national anthem is supposed to sound like.

(MUSIC PLAYING)

ZAKARIA: Now listen to the version Putin endured.

(MUSIC PLAYING)

ZAKARIA: Many called the rendition cringe worthy or worse. The anthem may have fallen flat, but throughout the visit Putin and el- Sisi seem to be in perfect harmony. And the undertones of the trip were clear, Putin showed the world he has friends outside the West announcing Russia would help build Egypt's first nuclear power plant. Welcome to the new Middle East.

The correct answer to the GPS challenge question is B, nothing says true friendship like a Kalashnikov assault rifle. This won't be the only Russian weapon to arrive in Egypt, of course, according to news agencies there have been discussions of $3.5 billion arms deal between Moscow and Cairo including fighter jets and air defense systems. So, it is an apt gift. Thanks to all of you for being part of my program this week. I'll see you next week.