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Fareed Zakaria GPS

Interview With Secretary Of State Antony Blinken About Israeli- Palestinian Conflict; Israel-Hamas Ceasefire Holds; The Future Of Capitalism. Aired 10-11a ET

Aired May 23, 2021 - 10:00   ET

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

[10:00:29]

FAREED ZAKARIA, CNN ANCHOR: This is GPS, the GLOBAL PUBLIC SQUARE. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria coming to you live from New York.

(BEGIN VIDEOTAPE)

ZAKARIA: Today on the show, after 11 days and thousands of rockets and missiles unleashed in hostility, a fragile ceasefire has taken hold in Israel. I will ask the Secretary of State Antony Blinken what comes next.

We'll keep the Middle East conversation going with a terrific panel. Peter Beinart, Noura Erakat and Dan Senor. I will also talk to Zachary Karabell about his terrific new book on American capitalism. And we'll explore why the Arctic may be the next great region of global discord.

(END OF VIDEOTAPE)

ZAKARIA: But first here is "My Take." It's been the same way for decades. Every time violence between the Israelis and Palestinians erupts, governments around the world urge de-escalation, a ceasefire agreement is reached, and experts warn the situation cannot continue like this. But it has and it will. Ultimately, this is not a problem that can be resolved through power whether political or military. It can only be resolved through moral persuasion.

The recurring pattern of violence obscures a seismic shift that has taken place over the last few decades. Israel is now the superpower of the Middle East. An institute at Bar-Ilan University recently laid out the disparities. Israel's per capita GDP dwarves that of its neighbors. It is 14 times that of Egypt, eight times that of Iran, six times that of Lebanon and even double that of Saudi Arabia.

Israel has built an industrial and information age economy that excels in highly sophisticated arenas like artificial intelligence, aviation, computer aided design and bio technology. It spends 5 percent of its GDP on research and development. More any country on the planet. It has built up foreign exchange reserves of over $180 billion placing it 13th in the world just ahead of the United Kingdom. For a nation of nine million people, these are stunning numbers.

A military comparison between Israel and its neighbors is even more lopsided. Israel beat a combined Arab force in 1967 in six days. Today, the contest would be over in hours. Israel has a larger defense budget than Iran's and enjoys both the quantitative and qualitative edge in crucial areas such as air power even though Iran has almost 10 times the population. And of course Israel has the only nuclear weapons arsenal in the region, estimated at almost 100 warheads.

Israel is powerful compared to its neighbors but it is close to invulnerable compared to the Palestinians. The economic gap is a chasm. The military gap is too large to describe. You can see this in the comparative casualty numbers from the latest conflict or any recent conflict with the Palestinians. For every Israeli killed, there are 20 to 30 Palestinian deaths.

Moreover, the Palestinians are politically weak and divided. They're led in Gaza by Hamas a group despised even by Arab states like Egypt and Saudi Arabia. In the West Bank, the 85-year-old Mahmoud Abbas runs an administration widely considered corrupt and dysfunctional. He has postponed elections for 11 years. In short Israel doesn't have any practical reasons to make a deal with the Palestinians. It doesn't fear for its security.

While the rocket attacks are unnerving and terrifying to civilians, they do not inflict much damage on the country. Israeli's ferocious and effective security services aided by the construction of a wall along the West Bank and the creation of the Iron Dome Air Defense System have virtually eliminated fatalities from terror attacks.

Economic boycotts of any significance will not happen. Israel's economy is too strong, diversified and advanced. Its straight in technology ties to countries have grown by leaps and bounds in the last two decades. Countries like Russia and India, once very weary of it, now eagerly court Israel and its tech industry. The reason that Arab countries like the UAE and Bahrain have normalized relations with Israel has much to do with economic opportunities.

[10:05:03]

So what is left is morality. Israel, a powerful, rich and secure nation, is ruling over nearly five million people without giving them political rights. This is an almost unique situation in a post- colonial world. Israeli leaders can marshal valid excuses.

The Palestinian leadership have rejected serious offers in the past. They are divided and vacillating. But ultimately that doesn't change the reality that Palestinians live in conditions that are demeaning and degrading. They are denied self-determination which is by now a universal right.

Over the last two decades, Israel has moved to a more and more intransigent position on the Palestinian issue. The government today is far more extreme than even previous right-wing governments from Begin to Sharon to Olmert. All of which made concessions for peace. But the country does remain a liberal democracy. It was founded by people who believed deeply that their new land should embody not just nationalism but also justice and morality. There are many in Israel who argue passionately that it can find a way

for Israelis to have security and Palestinians to have dignity. The only hope, and right now it looks remote, is that those forces will gain strength and one day lead the country to give the Palestinians a state of their own. That would finally fulfill Israel's historical mission, to be, in the words of Isaiah, a light unto the nations.

Go to CNN.com/fareed for a link to my "Washington Post" column. Let's get started.

Joining me now is the Secretary of State Antony Blinken.

Welcome, Mr. Secretary.

ANTONY BLINKEN, U.S. SECRETARY OF STATE: Thanks, Fareed. It's great to be with you.

ZAKARIA: President Biden says that he thinks now that there is a ceasefire in -- between the Israelis and Palestinians. There is a significant opportunity for even more positive developments. Genuine opportunity I think if I'm quoting him correctly.

And I'm wondering, is there really -- I mean, you have an Israeli government that seems pretty unyielding. You have a Palestinian Authority led by an 85-year-old man who doesn't -- you know, is too scared to hold elections for fear of what will happen. Hamas controls Gaza.

Is there really a prospect of some kind of movement towards a genuine political solution?

BLINKEN: Fareed, I think there has to be. I think both sides are reminded that we have to find a way to break the cycle because if we don't, it will repeat itself. At great cost and at great human suffering on all sides. Look, we worked very hard with this intense but behind the scenes diplomacy to get to the ceasefire. And I think President Biden leading this effort made the judgment that we could be most effective in doing that.

And ultimately after this intensive effort across the government, we got to where we wanted to be which was to end the violence. But now as the president said, I think it's incumbent upon all of us to try to make the turn to start to build something more positive and what that means at heart is that Palestinians and Israelis alike have to know in their day in and day out lives equal measures of opportunity, of security, of dignity. Something that you touched on in your piece in "The Washington Post" this week.

ZAKARIA: Will you use as a template the last peace plan put forward by the United States government, that is the peace plan shepherded by Jared Kushner?

BLINKEN: Look, I don't think we're at the -- in a place where the getting to some kind of negotiation for what ultimately I think has to be the result, which is a two-state solution, is the first order of business. We have to start building back in concrete ways and offering some genuine hope, prospects, opportunity in the lives of people. And of course in the first instance, we've got to deal with the humanitarian situation which is grave.

In Gaza, we've got to start to bring countries together to support reconstruction and development. And as we're doing that, we'll be reengaging with the Palestinians, of course continuing our deep engagement with the Israelis and trying to put in place conditions that allow us over time hopefully to advance a genuine peace process. But that is not the immediate order of business. We have a lot of work to do to get to that point.

ZAKARIA: But does the United States government still endorse the outlines of that plan?

[10:10:04]

BLINKEN: We're going to look at everything that's been done before. Learn from that just as we have in other areas. And see what makes sense and what doesn't. But our focus right now relentlessly is on dealing with the humanitarian situation, starting to do reconstruction, rebuild and engage intensely with everyone, with Palestinians, with Israelis, with partners in the region.

ZAKARIA: Prime Minister Netanyahu says that he will form a national unity government but not with any Israeli Arabs in it. Israeli Arabs as you know make up 20 percent of the population of Israel. Is that a positive step?

BLINKEN: Look, I don't do politics whether it's our politics or Israeli politics. They have to make their own judgments and a government will be formed eventually one way or another. We leave that to the Israelis. But we will work with obviously the current Israeli government, whatever government emerges from the current process, and it is really a decision for Israelis to make, not us.

ZAKARIA: But you've been very clear in being in favor of democracy and worrying about the decay of democracy in countries. Is it a step forward for democracy for a national government to explicitly on racial lines rule out 20 percent of its population?

BLINKEN: Look, one thing that's been I think deeply disturbing about recent events has been the intercommunal violence and that's something that we've not seen at least in recent years. And I believe and I hope that Israelis of all persuasions will find ways to come together to try to make sure that that doesn't happen again, and hopefully that finds expression as well in their politics and other governments but again these are decisions for Israelis to make, not for us.

ZAKARIA: Let me ask you while we're on Middle East, Mr. Secretary. The Biden administration, President Biden, when he was campaigning, said as soon as I become president, we will rejoin the Iran nuclear deal. The Iranians said the same thing. We're now four months into the administration. Nothing has happened. Both sides said there seems to be something of a standoff.

In Iran is meanwhile busily enriching the very thing people like you warned about when -- again when Joe Biden was campaigning. Isn't this a failure of diplomacy? Shouldn't you guys have been able to get back into the deal within a week or two?

BLINKEN: Two things, Fareed. First, I think the steps that Iran is taking underscore the urgency of trying to get Iran back into compliance with these obligations under the nuclear deal. A deal that stopped the dangerous aspects of the nuclear program, the prospect that they have could fissile material for a nuclear weapon on short order.

We've had I think five rounds of conversations now, of talks now, indirect in Vienna, and in fact our team is going back to Vienna in the coming days to pursue that. I think we've actually made progress in clarifying what each side needs to do to get back into full compliance.

The outstanding question, the question that we don't have an answer to yet is whether Iran, at the end of the day, is willing to do what is necessary to come back into compliance with the agreement. That's the proposition that we're testing. But it's getting I think through these rounds of discussions and talks, clearer and clearer what needs to happen. The question is, is Iran prepared to do it.

ZAKARIA: Well, the Iranians say that that's actually not what's happening. The United States, the Biden administration has moved the goalpost, that rather than talking about simply both sides getting back to the original deal, doing what was required to comply, the Biden administration is now saying they want to talk about ballistic missiles, they want to talk about regional issues, they want to talk about extending the timeline.

Are you willing to go back to the original deal as it was because the Iranians say they are willing to get back to that tomorrow?

BLINKEN: Fareed, we've been very clear. We are fully prepared to go back to the original deal as it was. That's our initial objective. And we -- again, we don't know if the Iranians are. If we do, if we succeed in that, then we can use that as a foundation both to look at how we can make the deal itself potentially longer and stronger, and also engage on these other issues whether it's Iran's support for terrorisms, its proliferation, its destabilizing support for different proxies throughout the Middle East.

All of that does need to be engaged in something we need to deal with. But we've been very clear that from our perspective, the first step needs to be a return to mutual compliance. That's what we're working on and that's where we still don't know if Iran is willing to say yes.

ZAKARIA: Saudi Arabia says that it now is willing to contemplate better relations with Iran. Is this a recognition by Saudi Arabia that its strategy so far has not really worked?

[10:15:02]

Is it -- is it a sign that we could see a peace deal in Yemen and we could see an easing of tensions over -- in places like Qatar and Lebanon?

BLINKEN: Well, there needs to be a peace deal in Yemen. We're working very hard on that. We've been doing that from day one. And I think Saudi Arabia has clearly indicated by some of the things that it's done that it now wants to move in that direction. So that's very positive. We need to get the Houthis to come along and that in turn I think depends significantly on whether Iran is ready to make clear to the Houthis that they need to engage positively, and need to resolve this war.

So to the extent that there is a better relationship between Saudi Arabia and Iran, that can produce or help produce at least more positive results in ending some of these other conflicts. Ending some of these proxy battles which are incredibly dangerous, incredibly potentially destabilizing and have a real human toll.

ZAKARIA: And do you see a shift in Saudi foreign policy?

BLINKEN: Look, my sense is that, again, on Yemen in particular, we've engaged intensely, we have a senior envoy who's doing this every single day. The Saudis have been engaged productively in trying to bring this war to an end. We need to see the same kind of response from the Houthis who continue to hold out and Iran should use the influence it has to move them in that direction.

ZAKARIA: You just met with the Russian Foreign Minister Lavrov and I was wondering, this is a country that has, by the acknowledgment of U.S. intelligence, engaged in what is possibly the largest cyber hack of America ever, massed 100,000 troops on Ukraine's border, and still continues to in various ways oppose U.S. interests and acts -- essentially to kind of act as a spoiler on the world stage.

Did you feel like you saw any possibility of any of that changing?

BLINKEN: Look, we had I think a constructive very business-like conversation over the course of nearly two hours. But President Biden has been very clear with President Putin. And I repeated what President Biden has said to President Putin to Foreign Minister Lavrov and that's this.

We would prefer to have a more stable, predictable relationship with Russia. We've all got lots of things going on around the world and lots of work that we're trying to do to make the lives of our citizens a little bit better.

A more stable, predictable relationship with them I think would be good for us, good for them and I'd even argue good for the world. And there are clearly areas where it's in our mutual interest to find ways to cooperate, whether it's on Afghanistan, whether it's on so-called strategic stability or arms control agreements, whether it's on dealing with climate change. But, equally clear, and the president has been very resolute on this, if Russia continues to takes reckless and aggressive actions aimed at us or aimed at our allies or partners we will respond.

Not for purposes of escalating, not to seek conflict, but to defend our interest and that was the nature of the conversation that I had with Foreign Minister Lavrov. It's really important to be very clear about what you're doing, why you're doing it. And ultimately it is up to Russia to decide whether it wants to have that more predictable stable relationship. We need to test the proposition.

ZAKARIA: Secretary of State Antony Blinken, thank you for coming on the show.

BLINKEN: Thanks for having me, Fareed. It's great to be with you.

ZAKARIA: Next on GPS, we have a terrific panel to talk more about what is actually going on in the Middle East.

(COMMERCIAL BREAK)

[10:23:06]

ZAKARIA: The Israeli Defense Forces say that they struck more than 1,500 targets in Gaza and that more than 4,000 rockets were fired at Israel. But for now, the skies above Israel and Gaza are quiet.

Let me bring in today's panel, Peter Beinart is a CNN political commentator and the author of the "Beinart Notebook" on Substack. Dan Senor was a foreign policy adviser to Mitt Romney and Paul Ryan, he is the author of "Start-Up Nation: The Story of Israel's Economic Miracle." And Noura Erakat is a professor at Rutgers and the author of "Justice for Some: Law and the Question of Palestine."

Let me start with you, Dan Senor. Can you tell us what do you think was going on in terms of the violence, because it all seemed to come or at least almost all of it from Gaza and directed by Hamas?

DAN SENOR, FORMER FOREIGN POLICY ADVISER TO ROMNEY-RYAN CAMPAIGN: I think that what Hamas is doing in Gaza, keep in mind Israel left Gaza in 2005, completely left it intact. It's part of an effort to gradually get to a place where there's a two-state solution. Hamas took over in Gaza and up until recently Hamas' entire play has been, you know, the politics of Gaza and waging war from Gaza against Israel.

What we're seeing now is an internal play, an internal Palestinian politics where Hamas is truly trying to marginalize and ultimately, you know, side line or displace Ramallah, the Palestinian Authority, Fatah, Abu Massen, and really become kind of the pan-Palestinian power player, to be a voice of Gazans, to be the voice of the Palestinians in the West Bank and to be the voice of Israeli Arab citizens living in Israel. And their charter, the Hamas charter is very clear on this front. There is no space for Jews in that region. That Israel must be wiped out.

[10:25:03]

It was one thing when Israel was at war with Hamas in Gaza and it was about issues around, you know, tensions over these Israeli-Gaza border. What's happening now is you have a government in Gaza that is committed in its charter to Israel's complete destruction and now they're trying to wage that fight on behalf of all the power centers within the Palestinian community.

ZAKARIA: Noura, what does this look like from the Palestinian point of view?

NOURA ERAKAT, PROFESSOR, RUTGERS UNIVERSITY: I just want to correct the speaker before you that Israel unilaterally withdrew from the Gaza Strip but maintained control of the sea space, the aerial space, even the water under the ground. The caloric intake of Palestinians has maintained control of the Gaza Strip remains the occupying power. All of its leaders successively have said and made clear there will be no Palestinian state.

This wasn't a faith-building exercise. Most significantly, it's important to remember that this is not Israel's problem with Hamas. This is Israel's problem with Palestinians. For 73 years, Israel has attempted to fragment Palestinians, separate them from one another, and undermine their national liberation movement at which seeks to simply remain and belong on their lands.

By pointing to Hamas, it's a red herring and obscuring that this is a liberation movement. This is a movement against colonialism which seeks to remove Palestinians and place Jewish settlers in their place. This is a movement to end apartheid which Human Rights Watch as well as B'Tselem, Israeli human rights organization, has said governs the life of all Palestinians across Gaza, the West Bank, within Israel, and throughout the diaspora.

ZAKARIA: Peter, this all began because of the eviction of Palestinians in East Jerusalem. Explain the significance of that from your point of view.

PETER BEINART, CNN POLITICAL COMMENTATOR: The significance is that Israel was created with an act of mass expulsion of Palestinians, more than 700,000. Israel had another mass expulsion in 1967. Israel has continued to expel Palestinians from their homes and from their homeland ever since it was created. So as you might imagine, the eviction of Palestinians from their homes cuts very deep for Palestinians.

And it's critical to remember that Palestinian in East Jerusalem, like Palestinians in the West Bank, like Palestinians in Gaza, are not citizens of the country that controls their life. That means they are essentially powerless over the decisions that are made about them and that's why Palestinian can be evicted from their homes in a way that could never be done to Jews inside Israel, because they don't have the most basic of human rights, the right to be a citizen of the country in which you live.

ZAKARIA: Dan, I want to give you a quick -- yes. I want to give you a quick response and then we've got to go to a break.

SENOR: OK, I just want to be clear. Israeli governments, left center and right, have been committed to a two-state solution. I agree that Palestinians do not have the rights that they should have. That's why they need to get their own state. That's why Israeli leaders from 1993 to 2000 to 2008 have been

consistently trying to provide a process that would give the Palestinians their own -- but withdrawing out from Gaza which is a unilateral action that is true with the hope they'll be on a path to giving the Palestinians their own sovereign state. Unfortunately Palestinian leadership specifically Hamas will not take yes for an answer.

ZAKARIA: All right. We are going to get back to all of this in a moment.

(COMMERCIAL BREAK)

[10:32:54]

ZAKARIA: And we are back with Peter Beinart, Dan Senor and Noura Erakat.

Noura, let me ask you, picking up on what Dan Senor said, I think it would generally be there are many people who believe that the Palestinian cause is just but that its leadership has not been particularly wise. It hasn't negotiated seriously going back to, say, the 2000 deal between Arafat and -- and the Israelis.

How would you respond to that?

ERAKAT: I would respond that, no matter what leadership we've had, Israel has considered its talking point that it has no serious negotiating partner.

I would emphasize to the audience that we remain a stateless people without an army or even an airport and continue to struggle under apartheid and occupation, despite all odds.

It's a lot to ask of us to then have more robust leadership when our best leaders are assassinated, exiled and imprisoned, a condition that we can't impose on Israelis because the power differential is real. We are under apartheid.

I want to emphasize that the two state solution has been long dead and is used as a liberal veneer in order to continue this violence. The U.S. provides Israel with $3.8 billion a year, has issued 43 Security Council vetoes to impede an international resolution to this issue, to the Palestinian question, as well as to protect Israel from any accountability.

If you really want to see some sort of just outcome, then you must place sanctions on Israel; then you must hold Israel to account; you must support Palestinians and recognize this power imbalance, and all people can become involved through participating in Boycott, Divestment and Sanctions, which is a robust, nonviolent movement for all of those who are preaching to Palestinians that they have to be nonviolent.

We have been. You're not paying attention. And we have thousands of Gahndis who are dying and being killed every day because of this abstinent -- obstinate refusal.

ZAKARIA: Peter, let me ask you about what do you think, whether there is a shift in Israel or among American Jews with regard to some of these issues.

[10:35:03]

And I ask this because you've just written a very powerful -- whether people will agree with it or not is of course a different matter...

(LAUGHTER)

... article called "Teshuvah: A Jewish Case for Palestinian Refugee Return." It's really worth reading, as I said, whatever -- whatever one thinks about it, and a very brave piece. The New Yorker has done a profile on you on the basis of it.

Are you sensing that there is a shift in -- in public opinion?

BEINART: There's a shift in public opinion in the United States, including among many younger American Jews, because of a recognition that there's a fundamental similarity between the struggle that Americans are engaged in here, between a country that really has equality under the law for all people, and a vision of a country that has a series of hierarchies based on white Christian supremacy, something that Jews particularly react viscerally against.

And there is a similar struggle, as painful as it is for many of us like me who were raised in very, very Zionist homes -- as painful as it is for us to recognize as Jews, there is a similar struggle going on in Israel-Palestine between a vision of equality under the law and a vision of Jewish supremacy, a vision in which Jews have rights that Palestinians don't have, that Jews dominate Palestinians in virtually every facet of their life.

And for me as a Jew, as a practicing Jew, that's a desecration of the fundamental belief that all people have infinite value in the image of God, and that includes Palestinians.

ZAKARIA: Dan Senor, I want you -- to give you a chance to respond.

SENOR: Yeah, I think it's important to make clear, if you're going to make clear, if you're going to point to Peter's piece, you should also point to another piece he wrote in which he came out saying he's against the existence of a Jewish state.

So Peter doesn't support the existence of a Jewish state. Noura has been very outspoken that Israel has no fight to defend against attacks in any part of Israel. So rockets are flying from Gaza into towns like Ashdod, Ashkelon and Beer Sheva, parts of the country that were never disputed.

And we talk about a two-state solution going back to 1967 borders. It was always assumed that those towns would never be part of a future Palestinian state. What she is saying is it's all up for grabs now. So basically we're no longer debating 1967 borders, as she's been very clear. We're debating 1948, the independence, Israel's right to an independent, sovereign state, which, again, Peter says we shouldn't have at all anyways.

So I think we should be honest about what we're talking about here.

(CROSSTALK)

SENOR: But Peter, Noura and the people they speak for...

(CROSSTALK)

SENOR: ... including the Hamas charter, by the way, says there is no space for a Jewish state. If we want to have a discussion about Palestinian rights to self-determination, which I support, which the overwhelming majority of Israelis support, let's do it in the context of a two-state solution, a Jewish state and a Palestinian state. You can't do it if, as Noura and Peter say, the Jewish people should not have their own independent state.

ZAKARIA: All right. Peter, I...

(CROSSTALK)

ZAKARIA: I'm going to give you 20 seconds to -- to explain. You're in favor of one state for Jews and Palestinians, right?

(CROSSTALK)

BEINART: ... equality with Palestinians...

ERAKAT: With all due respect...

BEINART: Equality under the law has been very good for Jews around the world.

ZAKARIA: All right. We are going to have to get back to this issue again because it is not going away. But I thank you all for a serious conversation.

Next on "GPS", the pandemic accelerated America's ongoing reckoning with capitalism. Where will that end? That story, when we come back.

(COMMERCIAL BREAK)

[10:42:37]

ZAKARIA: The global financial crisis of 2008 sparked calls for a new kind of capitalism, less risky, less rapacious. The pandemic has ramped up those demands, with everyone from Elizabeth Warren to hedge fund billionaire Ray Dalio joining in.

But a new history of American capitalism suggests that the answer isn't just new regulations and taxes. Zachary Karabell describes an older financial partnership model epitomized by the firm Brown Brothers Harriman in which banks bet with their own money and an older elite had an ethos that emphasized not more, more and more, but enough.

It's all in his new book "Inside Money: Brown Brothers Harriman and the American Way of Power."

So we're in the midst of a big debate about the future of capitalism and there are people in Washington who want to change it by fundamentally regulating and taxing it.

The message of your book, it seems to me, is that there is something much deeper that needs to change, which is the kind of fundamental attitude of capitalism's elites.

ZACHARY KARABELL, AUTHOR, "INSIDE MONEY: BROWN BROTHERS HARRIMAN AND THE AMERICAN WAY OF POWER": That's absolutely true. One thing I gleaned from doing this book, but probably thought about before, was that a lot what we have now in terms of the capitalism of "more, more, more, always more" is not the capitalism that we've always had, and that that's not a product of a massive regulatory state, 150 years ago.

It's a product of a different culture and a different attitude toward where capitalism fits within the social framework, that is part of a lattice of private good and public good, and that elites at an earlier point probably were more cognizant of the fact that they had to attend to that public good and that relentlessly pursuing more, their own more, risks beggaring the commons in a way that would ultimately produce less for them and less for the collective.

ZAKARIA: And explain how Brown Brothers exemplifies this. Because, at the heart of it, it seems to me, is that those -- that old model of finance that you describe so well in the book fundamentally depended upon people betting with their own money rather than other people's money.

KARABELL: Yeah, and that's exactly the -- it's the "other people's money" phenomenon. So when all these companies, when all the -- the financial firms that we know now that are both famous and infamous, the -- the Lehman Brothers and the Goldman Sachs, they all went public in the -- starting in the '70s and into the early '90s.

[10:45:10]

And so these private partnerships, which had predominated in the financial world were always limited by how much capital the partners themselves wanted to put up.

Every deal they did, they they could lose their own money, not other people's money. And as many people have said, we live in a world now where gains have been privatized but risk goes to the public. So you get bailed out by the Federal Reserve or by, you know, the government. But if you make a huge amount of money, you get all of that, other than what you pay in taxes.

And -- and that wasn't the predominant model before. And it meant that, you know, those cultures had to know that every night they went to bed, you'd better wake up -- you better be able to wake up knowing that the world might have changed negatively.

And that level of individual risk has been removed from the system. And so people do what they're going to do without the fear that, if this deal goes wrong, I'm not just going to have egg on my face reputationally, I might lose my house; I might lose my income.

ZAKARIA: I want to ask you about another one of your -- of the issues you've written a lot about, which is front and center now. We're taking on a huge amount of debt. We're spending -- you know, the deficits are really larger than at any point since World War II.

You have, for a long time, when this happened after the global financial crisis, you were saying basically "Stop worrying" -- really, "Deficits don't matter."

Is that fair...

KARABELL: Right.

ZAKARIA: ... and if so, explain?

KARABELL: Right. I think it's that deficits don't matter at the point at which we're spending. I mean, clearly there is a point at which the load of debt would be unsustainable. I just think that that load is multiple times greater than the current amount.

And I think that's where people have, kind of, misunderstood the amount of debt with the costs of debt. So if interest rates are 10 percent and you take on a billion dollars of debt, you're paying $100 million a year in interest. If the cost of capital is 1.2 percent, you know, it's $12 million.

And that, sort of, means, like, the amount of money you borrow is entirely related to the amount of interest that you pay on it -- but cost of that debt.

Same thing when you buy a house, right? People -- yes, they think about the cost of their house. But almost nobody buys a house. They get a mortgage that allows them to live in the house, and the cost of that house for them is how much money they have to spend monthly to service that mortgage. And I think that should always now be the criteria.

ZAKARIA: Zack Karabell, always a pleasure to talk to you. And the book is terrific. I see it behind you there, "Inside Money: Brown Brothers Harriman and the American Way of Power."

Next on "GPS, Russia wants to dominate the Arctic, especially now that much of it has melted and Putin's plan seems to be working. I'll explain when we come back.

(COMMERCIAL BREAK)

[10:52:15] ZAKARIA: And now for the last look. For their first face-to-face meeting, Secretary of State Antony Blinken and Russian Foreign Minister Sergey Lavrov chose to sit down not in Moscow or Washington but in Reykjavik, just a few degrees of latitude south of the Arctic Circle.

It's a fitting location, as the Arctic itself may prove to be one of the biggest areas of disagreement between the two Cold War rivals.

Before this week's meeting, the two men traded barbs and accusations about it in the press. Lavrov warned the West to keep its hands off the Arctic, saying it's long been well known to everyone that this is our territory; this is our land.

And Blinken said Russia was making illegal maritime claims and warned Moscow not to militarize the region. On that note, it may be too late.

You see, in recent years, Russia has been busily modernizing and growing a network of military bases on its Arctic coastline. Along with the planned deployment of new high-tech weapons, that amounts to an unprecedented Russian military buildup in the region.

Also high on the Western list of grievances, Moscow claims that its territory in the Arctic extends beyond its maritime borders and into international waters.

So why is there all of this wrangling and posturing about an area you may think of as an empty, frozen wasteland?

Well, because it's not entirely frozen any more. As global temperatures rise due to climate range, more and more of the Arctic is becoming navigable for longer and longer periods of the year. Russia, with the world's largest Arctic coastline, wants to take full advantage. It wants to assert control over what could become a major shipping route along its northern coast, linking Asia to Europe.

In theory, cargo could travel between the two continents twice as fast this way as it does now when it passes through the Suez Canal. This northern sea route is a potential game-changing revenue stream for export-dependent Russia.

It could ship its oil and natural gas directly to Europe and Asia without having to rely on pipelines. Its territorial claims could also allow it to tap into the vast reserves of natural gas believed to lie under the previously impenetrable Arctic ice.

According to the U.S., Russia has already begun to demand that foreign vessels traveling the route use Russian pilots and even that they ask permission to sail through what are really international waters, threatening to use force against ships that refuse to comply.

By former secretary of state Mike Pompeo's own admission, the U.S. is late to the party in countering Russia's assertiveness.

[10:55:05]

And that balancing act is a tricky one.

As the ice that acted as a natural barrier protecting Russia's Arctic coast melts, Russia is concerned it will become more open to attack. That means the militarization of the region that is already setting off alarm bells in Washington is likely to continue as the sea ice recedes.

Secretary Blinken's meeting with Lavrov and his five-day stay in the region shows that many in Washington are now taking this matter very seriously. They know this could become one of America's biggest foreign policy headaches.

Thanks to all of you for being part of my program this week. I will see you next week.

(voice over): Don't forget, if you miss a show, go to cnn.com/fareed for a link to my iTunes podcast.