Top Risks and Ethical Decisions 2012 with Ian Bremmer

Jan 17, 2012

What are the biggest political risks in 2012, and the associated ethical decisions? Political risk guru Ian Bremmer discusses his annual list, and his conclusions may surprise you.


Introduction

JULIA TAYLOR KENNEDY: Welcome to Ethics Matter. I'm Julia Taylor Kennedy, program officer of the series here at the Carnegie Council. It's wonderful to see you all here.

I'm going to use this opportunity to give a plug for our upcoming Ethics Matter events, which will include scholar and former Obama policy advisor Anne-Marie Slaughter, as well as poverty gurus Thomas Pogge and Nancy Birdsall, in the coming weeks and months.

Today we are very happy to kick off the new year with our own trustee and founding president of the Eurasia Group, Ian Bremmer. As he does each year, Ian has brought along his list of top risks and ethical decisions for us. You'll hear more about that in a moment, but first allow me to introduce our august moderator of today's event, Art Kleiner.

As editor-in-chief of strategy+business magazine and a longtime writer and professor, Art asks nuanced questions about geopolitics and delivers insightful answers to the business community. Who better, then, to interview Ian Bremmer, who has made analysis of the intersection of global business and politics a flourishing industry?

I hope you enjoy the program. I look forward to hearing your own probing questions after Art has finished with his. Thanks so much.

ART KLEINER: The days after New Year's used to be a happy time, a time for making resolutions, looking forward, thinking about our hopes and plans, our aspirations for the year ahead. But if you have looked at the news lately, everybody from the World Economic Forum on down is talking about the risks of the coming year, the potential problems, the anxieties, the things that are going to go wrong, at the macro level, at the micro level—everywhere. It's like a litany of dread.

Ian, I attribute this change to you.

When Ian Bremmer started doing the Top 10 lists of risks ten years ago, he set a trend that is now working its way into the mainstream. Yet throughout all that time, nobody has looked at the trends and looked at the potential risks and looked at the ways in which risks that are thought to be coming are not actually going to be coming—nobody does that as incisively as Ian Bremmer.

I'll just say one or two more things about you. The president of the Eurasia Group, the leading political risk research and consulting firm, panelist on CNN's Connect the World, and the author of three notable books: The Fat Tail, which was about the use of political knowledge in investing; The J Curve, which was about why nations rise or fall; and last year, the bestseller, The End of the Free Market, which was about the clash between corporate power and state power and who was going to win. I guess we're still waiting for that answer to play out.

As you have heard, everything is being taped. We're going to go for about an hour. We're going to talk together for about half an hour, towards the end of which I will do my best to kind of hurry us along so that at the half-hour point we can then hear questions from the people in this room gathered with us.

I would like to start by asking you to lay out the playing field a little bit and just quickly run down for us what those ten risks are, so we can get that out of the way.

Discussion

IAN BREMMER: First, before I do that, let me thank you, Art. It's great to have this opportunity to catch up with you publicly. It's not the first time that Art has been drafted to perform these duties, and it is always a true pleasure.

It's also great to see my buddy Joel here, and Joanne. Carnegie is a place we should all be supporting, and I know we all do. It's wonderful to be here. It doesn't really feel like the year has been kicked off until we do the event here at the Carnegie.

Laying out the risks this year—first of all, let me be upbeat this year. I never thought I would say this, but politics impacting markets have become so overdone, overstated today that I think the macro outlook in many cases is more problematic and keeping more people on the sidelines—more people in dollars, more people in cash under their mattresses, more people in gold—than probably should be.

If you look at three big economic spaces out there, I don't see a hard landing in China in 2012, certainly not with their political transition going on, but not from a structural perspective either. I don't see a euro zone fragmentation in 2012, though everyone is talking about it. And the numbers in the United States are starting to improve. Now, there are big problems in the United States. There's no question that the gap between rich and poor is growing, and that's something that needs to be addressed and isn't being addressed. We'll talk about that, I'm sure.

But from where the economy is going and how much we should be worried about gridlock in Washington, 2012 is not a disaster.

Furthermore, we have all of these elections going on. We have massive political transitions occurring—the United States, France, China, and Russia. In fact, about 50 percent of the world's GDP is engaged in political transition this year, and largely they are not going to have major negative impacts on the global economy. They are going to go smoothly. That's important, too.

Right at the end, I also said that there will not be a Mayan apocalypse in 2012, because if I'm wrong, I won't care.

I do believe that we should start with the upbeat. The reason I say to start with the upbeat is because the biggest risk that we labeled for 2012 is the end of the 9/11 era. I said that because it's very clear. The 9/11 era is over.

We're out of Iraq. The war is over. We're leaving Afghanistan. Troops are already gone and we have a defined end date. It's not going to go well, but nonetheless. Bin Laden is dead, and many of the top operatives in al-Qaeda are also, and it has been degraded very significantly. So if you wanted to point to a 9/11-era-is-over, 2012 is when it hits. Bam, we're done.

But what is happening instead is that everyone is focused about how governments are inside economic outcomes and need to get it right. And the markets hate that. They hate that.

ART KLEINER: Why are those two things connected, though? In other words, bin Laden dies, al-Qaeda is not a risk, and then where is the risk in it and how is that connected?

IAN BREMMER: It's the obverse of the red herrings that I just talked about, the things that aren't going wrong. I think the biggest concern out there is that, despite the fact that the euro zone isn't falling apart, despite the fact that gridlock in the United States is not an utter disaster, despite the fact that there is no Chinese hard landing, the fear in the markets is great. It's grave. People aren't going back into the euro.

They are waiting for someone else to. Money is staying on the sidelines. Big corporations have huge amounts of cash on their balance sheets, but they don't know where to go yet.

I was having this conversation early today with James Murdoch, the News Corporation, a few blocks away. This was what it was about: lots of cash; when do we make a move? Huge opportunities in Europe. But given even the slightest chance that it blows up, should we do that?

This is the way the corporations and big CEOs are thinking right now. I think that puts a pall on the entire macro environment. It makes everything more problematic.

I'll go through the others just really, really briefly.

Just to give you a quick one, I talk about the G-Zero a lot, the fact that there is an absence of global leadership. It's very clear in a lot of ways. It used to be that you had major financial crises—the peso crisis, the ruble crisis, the Asia crisis—one of the things they all had in common was the U.S. Treasury Department, the fact that the United States came in, in some capacity. They put money on the table. They provided leadership.

Geithner is more than happy to fly to Europe, but he's not signing any checks. When the French asked the Chinese for support, the Chinese said, "No, thank you." It's a very different environment.

The same thing that's happening on that front is happening from a security perspective. Libya was 2011. In 2012, we have Syria. We're going to see a lot more Syrias than Libyas. We're going to see a lot more places where the United States is not capable of fixing it, and who is? Not the Chinese, not the Russians, not the Europeans, not the Japanese. That's not even funny. Instead, it's going to be lots of local folks. The Arab League isn't going to get it done.

The G-Zero impacts everybody, but it impacts the Middle East in 2012 more than anywhere else. The lack of leadership, the lack of global intervention, for good or for bad, is making all of the conflicts that exist—it's exacerbating them. We're seeing this in Iraq. We will. We're seeing it and we will see it with the growth of governance in Libya and the transition. We're seeing it in Syria. We'll see it in Iran—and we can talk about that—across the Middle East. This is structural. This is a bad year for the Middle East, there is no question. 2012 is worse than 2011.

Beyond that, I focus on things like North Korea, which will look relatively quiet, at least in the early days. But that transition is going to be very difficult to effect. The guy was not groomed for a long time. He's not going to be able to run the country without massive support around him. No guarantees it will happen in an easy way, and if it doesn't, then, well, things could blow up very easily. So that's a big risk as well.

There is a risk in Europe. It's not that the euro zone falls apart; it's that the euro zone doesn't come together quickly enough. In other words, there's muddle-through. We're still going to be talking about European crisis, we're still going to be talking about the fact that the big bazooka from the Germans has not been fired through 2012. That's going to upset a lot of folks in the markets.

There are some smaller risks as well, smaller in terms of their global impact. We talk about Pakistan, of course, and Afghanistan.

We talk about China's security issues, in particular viz. the United States in Asia—something we have just seen in the last 48 hours—the Philippines, and then some smaller issues, like elections in Venezuela, populism in South Africa, and the like.

That's sort of a ten-minute, quick overview of the risks list as it is. Back to you, Art.

ART KLEINER: The financial markets—this is hot money looking for a rapid return. It isn't finding it and is sort of sitting on the sidelines. Also money that's looking for kind of a long-term return is equally shy. What is the risk if that money continues to sit things out? Why is that a problem?

IAN BREMMER: It exacerbates all downside risks. It creates more brittleness.

There's an analogy to be made here. When there is severe economic volatility and panic creeps in, then investors think a lot more about safety than they do about return. When geopolitical panic creeps in, people start thinking a lot more about resilience than they do growth. Japan looks better than a country like China. Why? Because Fukushima hits Japan, and Japan is fine. It was a horrible thing, but Japan is fine. Fukushima hits China, we have a problem.

WikiLeaks hits the United States, the State Department. I was in Dubai when it hit. I had ministers in the Gulf telling me that WikiLeaks was planned by the United States, because it made us look so good and it made some of them look bad, in terms of what they really wanted as opposed to what they were saying—a conspiratorial mindset in other countries out there.

One thing I should say is that people who say that the United States is insular—that is true compared to Europe. That is not true compared to Russia or China or the Gulf. Of course, when emerging markets are becoming more important, insular tendencies become more important, too, and you feel a lot of that.

But the point was that if WikiLeaks had hit Russia or China, you would have had purges.

ART KLEINER: Which it still could.

IAN BREMMER: And it will. It will. In the United States, when WikiLeaks hit, what did we find out? We found out that Karzai was corrupt—shocker. We found out that Cristina Kirchner was emotionally volatile. I never knew.

Look, our ambassadors leak stuff. Stuff gets out.

I was talking to a Russian oligarch recently, a smart guy and one of the wealthiest, and someone who has traveled, who was utterly convinced that the U.S. government had ordered and orchestrated the S&P downgrade of European sovereigns because the United States does not want a strong Europe. I swear to god. My ability to get through and explain the 50 reasons why that was actually operationally impossible—it would have leaked—despite the fact that it makes no sense. Let's just leave that aside. I couldn't get anywhere.

We're going to deal more with this.

ART KLEINER: So speaking of insularity, talk about the dangers of the Middle East and the Middle East as a core trouble spot in the year after Arab Spring and a time when—obviously, we're seeing Islamism in Egypt and many other places, but we're also still seeing possibilities of hope. Where is the source of concern? What are we really worried about there?

IAN BREMMER: A year after the Arab Spring, we have not seen a lot of transition to democracy—Tunisia. What the Arab Spring should have taught us, in my view, is that in a period of severe economic downturn, brittle regimes are more likely to fall apart. In a period of severe economic downturn, more resilient regimes are not likely to fall apart.

Which are the regimes that are more resilient? On the one hand, you have the United States and Japan. You have Germany. You have resilient democracies. On the other hand, you have China, you have Russia, you even have Saudi Arabia—more resilient authoritarian regimes. In the middle you have Egypt, Tunisia, Hungary, Greece—more brittle dictatorships and more brittle democracies. All are more likely to fall apart.

ART KLEINER: Do brittle regimes stay brittle or is there a path out of brittleness that regimes are traveling?

IAN BREMMER: I think, depending on the level of economic volatility that we see, they are as likely to fall apart as not. A lot of this is going to depend on what we see from the world economically. The United States will be a big piece of that. But, of course, what they do in Europe will as well. What they do in Japan will as well. What they do in China will as well. The disposition of the investors, how much liquidity is—all of that will matter.

In Egypt you needed to create 750,000 new jobs a year just to catch up with young people coming into the workforce. They couldn't do it. As a consequence, those people—this isn't like Saudi Arabia. In Saudi Arabia there are jobs that Saudi men won't take. We know this. In the United States there are jobs that Americans won't take. They're for Mexicans.

I hate to say that. It doesn't make me feel good. It's an ethical issue. But the level of development in the United States compared to other countries around us makes us a magnet for a lot of immigration to improve. There aren't a lot of Americans swimming to Cuba. We know that. There are a lot of people going in the other direction. That's still true of Mexico and the United States.

In Saudi Arabia, there isn't that level of brittleness, because of, frankly, the ability to pay off and the relative comfort is still very high. In Egypt, in Tunisia, in Yemen, in Afghanistan—

ART KLEINER: In Libya.

IAN BREMMER: In Libya—well, Libya has a lot of oil money. Libya's problems, I think, are a little bit more confused. But certainly in Syria to a degree and also in the European peripherals, maybe in Thailand. There are lots of places where a severe economic downturn is more problematic.

One of the things that worries me most greatly, which is not a 2012 risk—but it's coming—is that in an environment where there is not effective global leadership, it's going to get harder economically. One thing that is very clear is that we are not going to come back to a world where the United States gets to determine the values and the outcomes. There's a very simple reason for that, and that's China.

China will either do very well—continue to—in which case we'll have the United States and China, and we're going to have to share and we're going to have to compromise—or not—or China will not do well. If China does very badly, the impact that will have on the United States will ensure that the United States is not capable of providing that role. So there is no return to the G1. That's not happening.

ART KLEINER: How did you get into this line of thinking? In other words, talk a little bit about your own background. When you started the Eurasia Group, you were looking at risks in the context of investment, I assume. How did that evolve into the way you look at them today?

IAN BREMMER: I had no investment background whatsoever when I started the Eurasia Group. I was a Ph.D. I was at Stanford. I was an academic. I had written.

When I finished my Ph.D., I was basically told, "Well, if you want, you can go into policy—you can go to the CIA, you can go to the State Department, what have you, a public policy-relevant think tank—or you can go into academe, you can go into a university."

"What if I want to apply political science to the private sector?"

"Why did you get a Ph.D.? We don't do that."

In a world where global rebalancing is taking place, in a world where all of the rules are going to be impacted by a fundamental reordering of United States versus China, developed versus developing, creditor versus debtor states—in that kind of world, it's abundantly clear that politics will have a much greater impact on markets.

I guess the way I have come at this has been to try to take political science training, which looks at parties and political stability and sustainability and the impact of the state and geopolitical shifts, the move from security driving geopolitics to economics driving geopolitics and what that means—to look at all of that and to try to understand what the likely impacts are going to be.

The intersection between politics and markets is very interesting to me, not just in how politics impact markets, but vice versa. What we are increasingly seeing is that states and markets are becoming much, much more interlinked, much more impacted.

When the United States pivots away from the Middle East towards Asia, that's not just about sending more troops to Asia. Over the last 20 years, if you were secretary of state, you made your stripes on the basis of how you did in the Middle East. I had this conversation with Madeleine Albright on a panel about eight years ago. I remember this explicitly. At that point my response was, it's going to be Asia. It can't continue to be the Middle East. It makes no sense.

Yet it took until Hillary Clinton, which is the first thing we have seen—there has been no Obama doctrine. We have gone through three years, but no doctrine. There's a Clinton doctrine. A Clinton doctrine is emerging.

Number one, economic statecraft is increasingly critical, not security-driven. Number two, the United States has to get away from the Middle East and towards Asia. That is fundamentally about recognizing that economic issues are increasingly driving American national security, or lack thereof, and not issues of conventional, quote/unquote, security hard power.

ART KLEINER: From the Strait of Hormuz to the China Sea.

IAN BREMMER: Yes, but also from the Strait of Hormuz to Chinese state-owned enterprises, which I think is the more relevant point.

ART KLEINER: Talk a little bit about the haves and have-nots in this country. One of the things we have seen is labor wages going down and, as a result, more manufacturing coming back into the United States. Yet, as you said, there are jobs that Americans won't do.

This year, when so many eyes are on the U.S. economy, in part because of its impact on the elections, but also in part because people expect the U.S. economy now to drive the rest of the world's economy, what is the potential and what are the risks? How does that play out?

IAN BREMMER: One question that I think everyone is asking is, how many of these jobs are just sort of gone for good? I hear a lot about, as China gets wealthier and as Chinese labor gets more expensive, isn't that going to bring a lot of jobs back to the United States? I don't know.

I think you could make the argument that as Chinese labor gets more expensive and they get more advanced and they get more industrialized, increasingly they are going to be taking more jobs from the United States. They are going to be more competitive. The jobs the Chinese historically have been taking have been coming from the Mexicans. They have been coming from other emerging markets that were farther up the chain. Increasingly, the Chinese are moving into the industries where they are going to take real jobs from the United States. I think that's more of a concern.

I certainly see the jobs that have gone away in the United States as having gone away from the United States. I think that the fixes for that—and this is becoming conventional wisdom—are strategic and structural, and no one is prepared to talk about that yet, certainly not in an election period, because they are big and they won't show any short-term results. They are about education. They are about different sorts of focus on infrastructure. They might well be about strategic investment in sectors as well. They are also about regulatory issues.

ART KLEINER: Such as?

IAN BREMMER: About the fact that if you want to be strategic in the United States in sectors, you need to ensure that private sectors cannot capture the state. In other words—this has been a big theme for me for a couple of years now—China's ultimate problem long-term is that the state captures private enterprise, and that's inefficient. The United States' problem ultimately long-term is that the private sector frequently captures the state—not in every sector, not in technology, where the Americans are still by far the most competitive anywhere in the world, and no one is close.

I was on Fareed Zakaria [GPS] a couple of weeks ago, and I ended by saying, "Steve Jobs is dead. Long live Steve Jobs."

That's the United States for you. No one's close.

But if you want to look at the oil drilling sector, there's no question that corporations captured the state. If you want to look at some areas of the financial sector, corporations captured the state.

ART KLEINER: In other words, the state can't fulfill its function of keeping an even playing field or regulating effectively or efficiently because corporations are managing it, or do you mean something else?

IAN BREMMER: Right. I'm talking about the ability to lobby and, as a consequence, ensure certain outcomes which benefit incipient oligopolies and monopolies and all these sorts of things, which is great for profitability in the short term, but it is utterly destructive of value over the long term.You want creative destruction across sectors in the United States so that the United States can renew itself and go towards new sectors.

If corporations capture the state, they won't be able to do that. We're talking about green jobs in Detroit right now, and that's a really big driver. But your ability to effectively talk about green jobs when regulations can be captured by the automotive industry becomes much more problematic. Creative destruction hurts, there's no question, but only through creative destruction do you ultimately get to the place where you are more competitive, especially in an environment where other countries are doing their own thing and they are able to marshal those resources quickly.

I think this is a hard time for the United States, as a consequence, even though in a volatile environment the United States is the biggest thing out there and the most resilient, which really helps. And it helps with the dollar.

ART KLEINER: A lot of people would find it a shift of thinking to think of the government as the guarantor of creative destruction.

What I would like to do is open the floor—if you guys don't have any questions, we can just keep going, but I imagine that there is a thought or two out there.

Questions and Answers

QUESTION: We have a problem in this country with the lack of universal health care and a better social security system. Multinationals are going overseas to save costs of benefits and to exploit labor. How do you see that panning out for the United States' recovery?

IAN BREMMER: Recovery—if you are talking about whether or not American corporations that are typically—they are able to move to lots of jurisdictions and they will find environments that are amenable from a tax perspective and amenable from a labor perspective and all the rest. They will do that still more effectively in many other countries than most. They will show great profitability in that environment—maybe not as much as they did ten years ago because the global environment is more challenging, but more than their competitors.

So if you are asking about recovery from a U.S. corporate perspective, the top line looks good. If you are asking about recovery from a long-term systemic joblessness perspective in the United States, it looks bad. It certainly looks bad compared to where we have been historically.

Again, I don't see a change there anytime soon. But I think I'm speaking fairly conventional wisdom on that point. I think, generally, that's kind of where we have gotten to.

QUESTIONER: [Not at microphone]

IAN BREMMER: I'm not a domestic policy analyst. I'm not an economist. I would certainly say that those that I know that I respect, from places like Canada, that talk about how that program works compared to the United States, and certainly when I think about the extraordinary—lobbies that capture the state in America are not just about corporations. They are about vested interests.

You look at the AARP [American Association of Retired Persons]. Until we have an AAYP that challenges the AARP, we're likely to spend unsustainable amounts of money on things that don't really radically improve quality of life for people that probably we can't afford to provide them for. You have to make tough choices like that—certainly not in election season and not imminently. But those choices will need to be made, and they would have an impact on competitiveness, sure.

ART KLEINER: I imagine after this maybe somebody will start one.

QUESTION: One of the most interesting countries to me these days is Turkey. I was wondering what you would predict their role will be in 2012?

IAN BREMMER: One of the things that I think makes a country successful in a world where the United States is less dominant and not able to export its values, its rules, and the rest is the ability to effectively hedge between different centers of economic growth, different centers of opportunity, different centers of political power.

The Ukrainians can't do that. They would like to, and they would like a European Customs Union, but ultimately they are stuck with Russia. That's a problem for them—in the same way that Mexico is not going anywhere but the United States. If you want to bet on Mexico, if the United States does well, that's great; if not, they have a problem. Canada, much more flexible.

Turkey is much more flexible. We see this with Turkey's opportunities that they are developing across the board with the Middle East, with the Gulf in particular. They are not as exposed to Europe as they were five years ago, though still their biggest trading partner, of course, is the EU.

I also think that Erdogan is in pretty solid shape. But he does have a fight over changing the constitution on his hands. It looks like that is not going to play out in his favor, but it looks like he's not going to give it up.

So they may start to have some India problems. What I mean by that is infighting over domestic political stuff that stops them from continuing useful economic reforms in the near-term future.

So 2012 may not be great for Turkey, also because Iraq, which has been a wonderful story for Turkey, is starting to become more volatile and unstable. Turkey, which has been one of the biggest beneficiaries of that investment, is suddenly going to have a potential rocky ride there. But on balance, Turkey is clearly one of the very attractive markets to go to.

One exception is that, of course, Turkey is moving from a more secularist model to one where conservative Islam is not only tolerated but is actively promoted. In certain sectors of investment that will be problematic. For example, if you do media in Turkey, you had better change your programming or prepare for such. If you do clothing in Turkey, you are going to need to address that. Maybe tourism might take a hit in some areas.

So it's complex, but I think Turkey is still a very attractive environment on balance.

QUESTION: If there is an Arab Spring—it may be an Arab Spring 2.0 in 2012—it may be in Russia. It's also the case that Russia's impact on Syria may be appreciable as well. I would be interested in your thoughts about Russia.

IAN BREMMER: First of all, Time magazine recently came out with their Person of the Year being the Protestor, for 2011. I thought that was actually pretty good as a pick for 2011, especially since the runner-up was Kate Middleton or something like that. That was correct for 2011.

To be very clear, it's not correct for 2012. The protests in Russia are newsworthy but not structurally meaningful. There is opposition, of course, in Russia. The opposition is sufficiently great that Putin was forced, essentially, to allow it to persist and to be beamed on Russian state media, lest he take a hit. So he got that. But Putin is still vastly more popular than any other political figure in Russia, certainly much more so than Mr. Medvedev, who he is likely to let go at some point and scapegoat.

I see Mr. Prokhorov, of the soon-to-be Brooklyn Nets, as the state-sponsored Khodorkovsky, and I see Mr. Kudrin as the state-sponsored Yavlinsky. They are meant to show that Russia can run a pro-Western candidate, can run a more liberal candidate, but they are coordinating with the Kremlin, it's very clear.

They will reasonably effectively deflate a lot of the anti-Putin sentiment that exists. They all talk about evolution, not revolution. The Russian state coordinated and picked that up very, very quickly. Putin will win these elections.

The only meaningful question in 2012 for Russia is, once he wins those elections, has he learned enough about what has happened in his country that he is prepared to bring someone like Mr. Kudrin into the prime ministerial shop? Kudrin is a real reformer, one that can work with the Kremlin, but one that won't just sit and be a lackey as Medvedev did.

Medvedev gave the same speech every year about corruption and all the rest. He didn't do anything. Kudrin would not do that. Kudrin wants oil prices in the budget to be normal. He doesn't want to just play populist. He wants sustainability. He wants to actually make a difference. He's a guy that the West can actually work with.

If Putin decides to do that, then we can start to become a little bit more cautiously optimistic about not just exploiting stuff out of the ground in Russia, but more broadly over the long term.

I don't know. I don't know if he will. And I'll tell you why. I see Putin recently as someone who is increasingly not getting good information. We see this happen with very strong leaders frequently in authoritarian states. Chávez believes that Venezuela has larger oil reserves than Saudi Arabia, because were he not to believe that, he would fire or imprison advisors. Saddam Hussein believed that they were well on their way to a nuclear weapons program, because had he not believed that, those people would have been shot or imprisoned. And that doesn't have to be an either/or.

I see Putin increasingly—when I see him getting up and getting booed for a speech or a welcome with a wrestling match, when I see him welcoming a group of top global experts and just kind of giving them claptrap, as opposed to when he used to be truly on top of every issue, just a few years ago, that, to me, looks like someone who is no longer as in touch with his population.

So the question will be, is Putin capable of understanding that and making the transition? I don't know the answer to that, but I think there is reason to be at least somewhat skeptical that that truly is going to change. This is a very powerful guy who has undermined a lot of his institutions. He centralized a lot of power, and a lot of people around him are benefiting greatly from his largesse, and they are scared of him. So I think it's hard. It's hard to tell the emperor that he has no clothes in Russia. The emperor has to understand it himself and address it proactively. That may be a difficult thing to do.

ART KLEINER: It is, historically, a very human picture, but it's scary when it's such an amazingly influential, large, and precarious country.

QUESTION: I want to go back to something you said. You said the era of 9/11 is over. Nonetheless, we are enhancing certain activities that were used to counteract or fight against the 9/11—during the 9/11 era.

We have preventive detention in this country without the writ of habeas corpus, without counsel. We have indefinite detention without counsel, without writ of habeas corpus, which could be an entire life, as it's defined, of a suspected terrorist. We now have deemed that it's all right for the president of the United States to kill an American citizen who is suspected or determined to be a terrorist, without any arrest or trial. We have surveillance of citizens without warrants.

I can go on and on and on. This is affecting our society. This is accepted. It's not questioned. I have been a lifelong Democrat, and this is coming now from my party. I don't hear my fellow Democrats questioning it or criticizing it. I don't hear anybody raising their voices, or very few people.

What do you portend for the future for our society, how this will impact our society and also our role in the world? How can we go out there and criticize people and talk about democracy and how they should behave when they see how we're behaving here?

IAN BREMMER: First, a somewhat more optimistic rejoinder. I am very empathetic to everything you just said, but before I get to that, let's at least note that in terms of a number of social equality issues—the Clinton administration was unprepared to move, for example on "don't ask, don't tell." The Obama administration actually got it done.

Gender equality—compared to other countries, the United States was way behind. Now that is considered—certainly it helps the United States internationally in the way it's perceived. Certainly in terms of gender relations and the new generation and work opportunities, university opportunities, relative incomes in jobs as they come, and these sorts of things, the United States looks so much better than Europe today, than Japan.

I go to Japan and everybody says, "Do we need more immigration?"

I'm, like, "How about unlocking wealth for 50 percent of your population that don't do anything but serve me tea when I'm in the country? How about that?"

And they all go, "Oh, that's a good idea," because self-criticism is really good when it comes from an external person in Japan. They do. They really like it. So every time I go, I just keep doing that. This has become my big issue.

It's not as if everything is bleak in terms of the United States, in terms of the way the United States thinks about values and ethics internally for its citizens. I do think it's worth mentioning.

But, for all of the reasons you mentioned—Obama opposed Guantanamo and wanted to close it. He came into office. He had to put his big boy pants on. He took a look inside and said, "I don't know what to do about this."

It's the same way when I talk about the Republicans on Iran. They say they want to bomb it. They are going to come into office, if they win, and then they're going to say, "Oh, we can't do that." The same thing.

There is a little bit of reality once you get into power.

But one of the things that I find which is troubling is that while the communications revolution was decentralized—everyone could talk to each other, get information, you look at texting, social networking. All of that is done across the world, allowing people to communicate, understand, globalization, everything else. The data revolution is not. The data revolution is centralizing. The data revolution empowers very strong centralized actors with access to that data.

Historically, for the last 10 or 20 years, we have seen that basically multinational corporations have been out in front in monetizing that. But increasingly governments are doing it, too. When you talk about issues of liberty and privacy, you start talking about issues of data consolidation.

That's a trend, and it's a trend that is leading to more polarization in the society—political polarization, social polarization—but it's also leading to a significant tradeoff of personal liberties. That's one thing when you talk about Americans as consumers, but it's a very different thing when you talk about Americans as citizens.

ART KLEINER: You are talking about things like facial recognition and sensors and cell phone tracking and data analytics and being able to predict who's going to do what before they have thought of it themselves.

IAN BREMMER: I remember saying last year to this audience—a lot of you were here—that if I had been advising the Chinese government on Google, I would have told them to shut them down. The reason for that is because as we get facial recognition, that data, and so forth, the Chinese should, as a government, want to control it. They should not want a Western company to, because if there's a problem between the United States and China, I assure you, the U.S. government will go to Facebook, will go to Google, will go to AT&T and will ensure that they have access to that data.

This is a deeply polarizing and fragmenting development. I don't see a counter to it at this point. I think that drives a lot of what you're talking about.

QUESTIONER: Does it not lead to more authoritarianism?

IAN BREMMER: It clearly leads to more compromises of personal liberty. I would not argue that that is tantamount to authoritarianism. That's like saying more state intervention in the government leads to more state capitalism. State capitalism is a very different system than the free market.

ART KLEINER: We could spend another hour on this subject—

IAN BREMMER: Yes, we could. For ethics, it's a very important question.

ART KLEINER: It really is. I would like to hear from two more people and then I have a final question.

QUESTION: Throughout the world, and particularly in this country, the big gorilla in the room in 2012 is the November elections here. Obviously it's a little too soon to predict, but what is your judgment at this point as to what might happen in November?

IAN BREMMER: My judgment is that for the last several months Romney has been the Republican nominee, and the media really doesn't want to accept that. God help us, they want a story, they want a fight, they want a race, and they keep going with this. They keep talking about Romney like, "Oh, the polls"—the polls four years ago—Fred Thompson, Huckabee, Giuliani was in front. Irrelevant. Focus on money, organization, endorsements. It's over. It has been over. And it's frustrating.

I understand that he is not liked particularly. But I also understand that Obama is not nearly as liked as he was a few years ago, even by his own supporters. I get all of that. Obama is vulnerable. But the point is, it is Romney versus Obama. We're done. Everything else is sideshow.

No, Ron Paul is not going to run on a third party, for many reasons, one of which is that Rand Paul is his son and he's not going to take the Nader thing and destroy his son's career. He just won't do it. So that's not going to happen.

What do I think about the elections? I think Obama is likely to win, and I think he's likely to win because he's the incumbent. He has an enormous amount of money. He has great campaigning capacity. And most importantly, the economics are starting to turn in his direction and are likely to continue to.

Having said that, they are not turning fast, and there are many things that could go bump in the night this year. Obama is vulnerable to Romney. He could lose. At this point I would probably put it at 65 percent, if you want me to put a number on it. We talk about it internally all the time.

But I think the Republicans take the Senate. That's true mostly just because of what seats are up.

I don't think it matters that much. And I don't mean as Americans for a second here. Globally speaking, U.S. elections don't matter that much. The United States is, first of all, from a foreign policy perspective, much more constrained than it used to be by austerity, by their own willingness, by other countries, by everything out there. Also, presidents are constrained domestically by Congress, by the judiciary, by lobbies, by big money.

Ultimately, yes, we're going to see differences between an Obama administration and a Romney administration, certainly in the disposition of what kinds of cuts, what kinds of taxes, and everything. But, really, these are still things at the margins.Once it actually gets done and implemented, years and years later, we are still—this is not like an election in Ukraine or Indonesia, where the reality is that you could have radically different outcomes.

Consolidated democracies have relatively limited policy space they can actually work with. In relatively healthy times economically, that's a very positive thing. In times that are much more challenging, that could be a stagnating thing. That's something that we are addressing.

ART KLEINER: You may get some emails after this.

QUESTION: How do you see the Iran nuclear situation unfolding this year? Do you assume they are bluffing in terms of cutting off the Strait of Hormuz?

IAN BREMMER: Yes.

First of all, let me go to yesterday's news. Yesterday—very interesting—Obama—did anyone see what Obama said yesterday on Iran? Show of hands. Come on, this is the Carnegie.

QUESTIONER: Which one?

IAN BREMMER: President Obama, not Michelle. I'm giving you a hard time. If it had been Clinton, it could have been either one. With Obama, it's usually Barack.

Obama came out yesterday and said that the purpose of sanctions on Iran is regime change, which was domestically actually clever—domestically in the United States—because, number one, he doesn't want to change policy, and number two, he's trying to resist all the Republicans saying we need to bomb, without changing policy. So he comes across as more hard-line without changing policy—domestically clever.

Internationally? Not a good policy. Saying you're doing regime change in Iran, I guarantee you, is not helping you with entrenched hard-liners in Iran, who love this sort of stuff. They're, like, "Let me write that down. He says regime change." They'll use that in all their speeches.

So that's what the United States did.

Iran is troubled right now. They are troubled, yes, because of economic sanctions. True. The United States has put tougher sanctions on the Iranian Central Bank. There are plenty of waivers that can be effected on American allies. They don't apply. Of course, all the American allies have already been applying—the Indians, the South Koreans, the Japanese, and so forth.

The Europeans are putting these oil sanctions on. They get about 450,000 barrels from Iran. But it comes from Greece. It goes to Greece. It goes to Spain. It goes to Italy. All three have new governments in the last few months, and they are all oriented towards beating on the Iranians. The Iranians will sell to the Chinese at a lower price. That is going to constrain them, but that is not their biggest problem.

Their biggest problem is that economically, domestically, their policymaking has started to have a major impact, and they are having big infighting between the supreme leader and the president.

And, geopolitically, the Iranians are losing. They lost Bahrain. They are losing Bashar Assad in Syria, their best ally in the region. And—in some ways counterintuitively—in Iraq, with the United States out, it is now becoming a very big sectarian fight, Maliki, Shia versus the Sunni, versus the Kurds. It's harder for the Iranians to operate. This is not good for Iran. The GCC [Gulf Cooperation Council], the Sunni Arab monarchies, is coming closer together.

The United States leaving the Middle East has not been good for Iran, believe it or not, so far.

Are they bluffing about closing the Strait? One hundred percent, they are bluffing. That's economic suicide. But they will provoke. They will provoke more. More provocations in places like the Strait of Hormuz, which I believe is half a kilometer wide, actually narrower in some places, can lead to accidents. Those accidents can create market-moving events. They can create military conflict.

Six months ago, the possibility of military conflict between the United States and Iran was negligible. In 2012, it is not negligible. It would be by accident, but it could happen. Iran is becoming something that we must more seriously watch. Again, the G-Zero is bad in the Middle East.

QUESTIONER: [Not at microphone] Is there a slight chance that their provocation to us in the Strait could give us a great excuse to bomb [inaudible] facilities [inaudible]?

IAN BREMMER: The Obama administration strongly opposes that, which is why you saw the Obama administration come out with a regime change policy yesterday. If they were at all considering it—and they weren't, and I have been saying that—if they were at all considering it, they never would have said what they said yesterday. That's clear.

Then the question is, what about Israel? Israel really needs the United States. Israel has been doing everything it can to posture as if it might engage in strikes. Let's make it very clear: that is strongly in Israel's interest to do, irrespective of what they might do on strikes. So we learn nothing from the fact that Israel is posturing in that direction—nothing.

Will the Israelis engage in such strikes absent U.S. support, in this environment? It would be the one thing that would guarantee that the Egyptians rip up the peace treaty, and the Jordanians. In this environment? Oh, I don't see it. The Israelis are killing Iranian scientists left and right—today, a couple of months ago with the head of the ballistic missile program. I don't know if it's the Israelis per se.

It's very James Bond stuff. I don't know if you heard about this. Motorcycle, two magnetic bombs, boom, right on the car, and then boom, that's it. From a cinematographic perspective, this is heady stuff.

Then, of course, you have Stuxnet. You have the cyber capacity.

If you're Israel right now and you're trying to fight Iran, you're doing a fairly effective job without actually doing much lifting and without taking any heat. Israel is taking heat on every other issue. Do they really want to add Iran to that fire? I would argue no.

So again, a very important issue, but not one that I expect to see the Israelis actively blow up.

ART KLEINER: We have just a minute. This is a great segue into a question that takes us back to ethics, actually, and to international ethics.

Right at the beginning you talked about how one of the great risks is the lack of leadership. What did you mean by that? Is it leadership to provide an example of doing the right thing? Is it leadership to take the reins? What's missing, and why is that a risk?

IAN BREMMER: There are two types of leadership. One type of leadership is about actually doing the lifting and being seen to do the lifting. Certainly, economically, the United States is the only country out there with the real capacity to do that globally. The U.S. economy is twice as big as China. The United States spends more on its military than the next 13 countries combined. U.S per-capita income is higher than all the BRICs [Brazil, Russia, India, China] added up together. That's clear.

But I think there's a more important issue, which is the one that really is so important here at the Carnegie, and that is the question of American values. American hard power has not really degraded. American measurable metrics power has not really degraded. Look at the power of the American dollar, the dollar as reserve currency. It's stronger now than it was in 2008. It hasn't degraded.

What has degraded in America are American values. How have they degraded? I'm not just talking about the stuff that you were raising on Guantanamo. I'm talking much more structurally.

In 2000, we have an election in this country that 50 percent of people believe is fraudulent, determined by a partisan vote of the Supreme Court. We get through it in the United States, because we're very resilient. We can handle it. We still value our Supreme Court, and their ratings are still very high. But internationally our ability to project democracy—very important—gets hurt by that.

In 2002-2003, WorldCom and Enron. U.S. accounting firms used to be the gold standard globally. Look at what we had to go through internationally as a consequence of that. Then you look at the financial crisis and AIG and Lehmann and Bear Stearns and all the rest, and Madoff. Then you look at Guantanamo.

You look at all of these things where American values are no longer seen as credible as exports. I look at the Obama-versus-Romney campaigns, and I see problems on both fronts.

On the Obama front, I see someone who is prepared to stand up for the fact that the United States has made lots of mistakes and to talk about leading from behind, even though that's not his phrase and he doesn't use it, to talk about doing more with less, living within our means—all of that stuff, which makes sense and is good and is understandable. They say Obama—the Europeans like him because he feels more like a European president.

The one thing Obama doesn't do is talk about American indispensability. He doesn't talk about just how important those American core values really are globally. He did a little of that, of course, when he gave a speech in Germany, at the Brandenburg Gate, a little bit in Egypt, in Cairo, a great speech. But since he has been president, that is not what he has been doing. Now he's talking about, we have to focus on the U.S.A. and we have to get the economics right, that sort of thing.

Romney talks about channeling Reagan and he talks about the greatness of American values. He gets the indispensability stuff right on. But he pretends that nothing that I just talked about happened, that nothing has happened wrong to American values since 2000, which is crazy. And it's not credible.

What we need is to square that circle. I am a firm believer—James Chace, my mentor, someone who is very, very dear (not with us anymore) to Joel Rosenthal and me, talked about America as the indispensable nation. That meant something. Back in Eastern Europe in the 1980s, when you went and you met with the captive nations, you met the Poles, you met the rest—and the Soviet Union, when it fell apart—we didn't beat them because we beat them militarily. We beat them because we stood for something that meant more to them than anybody else.

We lost a lot of that. We don't talk about that anymore. If the United States truly loses its superpower status, it's because we don't get that back. It's not because our economy gets eroded by the Chinese. I really believe that.

I think, if we want to talk about ethics mattering, this is the most compelling issue we could be talking about as the American nation. We need to do more of this. That's my view.

ART KLEINER: Please join me in thanking Ian Bremmer.

You may also like

CREDIT: Abobe/hamara.

SEP 25, 2024 Article

Politico Op-Ed: Walking a Fraying Nuclear Tightrope

In a new op-ed, Carnegie Council President Joel Rosenthal argues that a recommitment to nuclear arms control is nothing short of a moral imperative.

Left to Right: Eleonore Fournier-Tombs, Ambassador Chola Milambo, Ambassador Anna Karin Eneström, Doreen Bogdan-Martin, Vilas Dhar. CREDIT: Bryan Goldberg.

SEP 19, 2024 Video

Unlocking Cooperation: AI for All

On the eve of the Summit of the Future, Carnegie Council & UNU-CPR hosted a special event exploring the implications of AI for the multilateral system.

SEP 16, 2024 Video

AI for Information Accessibility: From the Grassroots to Policy Action

How can citizens, civic institutions, and industry professionals work together to make sure that emerging technologies are accessible for everyone?

Not translated

This content has not yet been translated into your language. You can request a translation by clicking the button below.

Request Translation