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Chapter 1: What are the implications of predicting geopolitical outcomes?
Let me just say this upfront. Predicting the future is hard. We once made an episode called The Folly of Prediction, episode number 41, if you wanna hunt it down. The findings were clear. Most of us are much worse than we think at making predictions, and we're also much more confident than we ought to be. But that doesn't stop us from trying.
Look at the huge success of prediction markets like Kalshi and Polymarket. We are always dying to know what might happen next. I am not immune from this desire. You probably aren't either. One particular temptation is geopolitics. It is so complex and dynamic and important that it's hard to hold yourself back, even if you know that your prediction is at best an educated guess.
So you might as well get your geopolitical predictions from someone who is extremely educated in these matters. Someone like this. Fareed Zakaria. I work at CNN and write a column for The Washington Post and write books.
Zakaria is a foreign policy stud, a political scientist by training, a journalist by vocation and longtime member of the Council on Foreign Relations, which is why we are having him on the show today for a third time. His last appearance was just after Donald Trump had been reelected to the presidency, but before Trump took office. You did make some predictions last time you came on the show.
Uh-oh. The second Trump administration, you said, it's not going to be as bad as people think. This is a country with a lot of checks and balances. You have institutions, you have bureaucracies, you have laws, you have rules. These all can't just be willy-nilly dispensed with. Yeah, I'd say I was basically wrong.
A few months ago, Trump made one of his most unpredictable moves yet and possibly one of the most consequential to a joint military strike on Iran with Israel. Fareed Zakaria did not think this was a good idea. As he wrote at the time, bomb and hope is not a strategy. So what is the strategy?
Today on Freakonomics Radio, we ask Zakaria to look at some of his past predictions, and we force him to make some new ones about how the war with Iran will end, about whether the U.S. political system is due for an overhaul, and whether globalization is really dying. I think that the reports of the death of globalization are vastly exaggerated.
We also ask Zakaria to tell us something important that he has changed his mind about, because in a world that defies expectations, it's good to have an open mind.
This is Freakonomics Radio, the podcast that explores the hidden side of everything with your host, Stephen Dubner.
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Chapter 2: How does Fareed Zakaria assess the second Trump presidency?
Exactly. Regime change by jazz improvisation. Exactly. And so much of it is jazz improvisation. Reconciliation with China by jazz improvisation. Three weeks ago, they were the evil empire. Now she is his best friend. It worked in the moment. And I think what you've ended up, therefore, with is a much more ideologically MAGA in terms of what he has done and then much more amateur.
It's just like throw a bunch of things in the air, see what works. And all of it, as a result, has been very different from the first term, which surprisingly looks kind of ordered and predictable in comparison.
Let's talk about Iran for a bit. Here's something that you wrote recently, Fareed. For about 15 years, many American leaders, including all three presidents in that period, believed that the U.S. was too deeply entangled in trying to reorder the societies of the Middle East. They felt the more pressing challenges included rebuilding America's industrial base and confronting the rise of China.
Yet here America is once again. fighting a war to reorder a society in the greater Middle East. And like in Iraq, Afghanistan, and Libya, this war seems unlikely to turn out quite as its proponents may hope. Why, you wrote, does this keep happening? So I'll bite, why does this keep happening?
I think at a broad structural level, it is because the United States is, and Washington in particular, are very attached to the idea of an imperial America that orders the world, that exercises the enormous power it has, particularly military power. The two areas where the U.S. is unrivaled are military and currency.
And we have in both cases promiscuously used that power, misused it, abused it, and I worry very much that that will result in a kind of reaction in the world. But the specifics are important, again, as always with Trump. So much is being done by this one person that it's not just broad structural forces, because the truth is, the US had learned its lesson from the Middle East, and it had
Most importantly, by electing Trump, who ran on a platform basically that was centrally about getting out of foreign wars and getting out of the Middle East and things like that. But I think what happened again, Trump 2.0, unleashed, unconstrained, unchecked by people like Jim Mattis and generals who would tell him that this is a bad idea.
He fell in love with the kind of arbitrary unilateral power that the president has. If you notice, the thing Trump loves more than anything else is to wield unaccountable arbitrary power. That's why he loves tariffs. I don't like the way the White House has set up. I'm just going to destroy the East Wing and rebuild it. I am going to arrest Maduro.
You know, when he was asked, so who controls Venezuela's oil now? He said, me. Trump loves that idea. And so I think in that context, Bibi Netanyahu understood how to play Trump and told him to the effect, 47 years American presidents have tolerated Iran. You can be the one to liberate it. And Trump fell for all this nonsense.
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Chapter 3: What strategies does Zakaria propose for dealing with Iran?
So the point I was trying to make there, which I still believe is true, is that it's not an industrial powerhouse. It does not pose a threat to the United States. It does not really pose much of a threat to Israel, given the Iron Dome, which protects Israel from all its missiles. What is true, however, about Iran is two things.
One, the regime has shown the ability to survive and survive under very adverse circumstances. Remember, this is a regime that right after its birth was attacked by Iraq in the Iran-Iraq War. And that war lasted for eight years. So the regime, almost in its DNA, has figured out how to survive foreign attacks.
And it has set up multiple spheres of authority, multiple layers of control for precisely that. And secondly, that it is willing to take an enormous amount of pain. And this is the fundamental miscalculation that the United States has made, just like it made in Vietnam, which is you may be up against a much weaker party.
But if they are willing to take more pain than you are, ultimately they will win in the sense that you can't compel them. And that's what's happened in Iran, which is, yeah, we've destroyed their Navy and their Air Force, as Trump keeps pointing out. But the goal of destroying all those things was to get them to sign on the dotted line.
And they are not willing to sign on the dotted line, which means in some very fundamental sense, so far they have won. This has been a recurring problem in the United States because we always misunderstand nationalism. And we misunderstand the degree to which, you know, you may be talking about a small, weak country, but they have a powerful sense of nationalism.
And that makes them unwilling to cry uncle. If you think about Iraq, Iraq was created in 1921 by the British. Iran has been around for 5,000 years. This is one of the places in the world with the oldest and strongest conception of national identity. And you thought two days of bombings and the whole thing would collapse. It was insane.
Farid, what do you think Iran looks like a year from now? Who's running it? Who are they fighting with, if anyone? What's their relationship between Iran and the U.S. and maybe Iran and Israel?
I think the most likely scenario is that there is some kind of a deal that has arrived at between Iran and the United States. And so what does that look like for Iran? It means, first of all, Iran has essentially morphed from a theocratic regime to a military dictatorship.
Because what has happened is by attacking Iran, you consolidated the really tough guys in the regime, the IRGC, the Revolutionary Guard, and they now call the shots. The new Ayatollah, who is Khamenei's son, is very much a creature and an ally of the Republican Guard. But they now have the real power because he doesn't have the kind of legitimacy and authority that his father did.
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Chapter 4: How does the U.S. political system influence foreign policy?
The idea being that Iran, in order to stymie or beat a much more powerful military like the U.S., will attack neutral or neutral-ish third parties. Were you surprised to see Iran do that? And what do you think are the ramifications of those attacks, especially on the UAE, let's say?
Yeah, I was surprised. And I have to confess, I initially thought it was a miscalculation by the Iranians. Even the UAE had not been very gung-ho about this war. This really was a war that was foisted on us by the zealousness of one individual, Bibi Netanyahu, who was able to convince Trump. I don't want to make that sound like some conspiracy theory about Israel. It isn't.
It's about literally two people, Trump and Netanyahu. But I thought that the Iranians shouldn't have widened the war. And I still think that the most effective thing they've done has been to shut down the Strait of Hormuz and not so much this other stuff.
But they did, as a result, do exactly what that game theory concept tells you, which is they hit where they could rather than the most logical place. And they realized that these were the softer targets. These were the places they could hit. They hit them very accurately, by the way. There's not a lot of collateral damage and not a lot of missed targets.
It tells you this was very strategic and very well planned. I think there's a shadow of this war that will persist. One piece of it is that Not only do you know the Strait of Hormuz could be closed at any time, you now realize that liquid fossil fuels traveling around the world by tanker are vulnerable to very cheap asymmetric threats.
The most effective weapons in Iran's arsenal were not the ballistic missiles that it built at great cost. It were these $30,000 and $15,000 drones. Well, guess what? Pirates can get those drones. People can get those around the Strait of Malacca, through which more energy passes than through the Strait of Hormuz.
So I think there's a kind of risk premium that is going to be attached to liquefied fossil fuels going through tankers everywhere. And that affects the Gulf, obviously, and the economics of the Gulf. The second piece is the Gulf has presented itself as a kind of oasis of stability. The idea has been, welcome to Dubai. You're really not in the Middle East. You're in Switzerland.
Well, it's very hard to say you're in Switzerland when you've gone through this process. And I suspect that that changes the business model a bit, but I wouldn't exaggerate it. The one thing we've seen about tourism after all these crises, whether it's the Iraq war, whether it's COVID, people bounce back.
People have short memories. Let's just talk a little bit more about the UAE, especially in contrast to Saudi Arabia. So the UAE left OPEC. It seems to be developing more of a rivalry with Saudi Arabia. Also, the UAE has been using the Iron Dome system from Israel to defend itself against Iran, even though... Cooperation with Israel is still taboo among most of the Arab public.
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Chapter 5: What role does nationalism play in the current global landscape?
Now, it's very different. He's established diplomatic relations with Iran. He's made a rapprochement with the Qataris. He's made up with the Lebanese. He is looking for stability and peace so that he can enact his domestic modernization vision But he has a real country with real public opinion. And I think it's going to be much harder for him to normalize with Israel in the wake of Gaza.
I think he'd like to, because I think they all like the idea of tying up with Israel economically and technologically. But he's going to need some movement on the Palestinian issue.
Where do you think that moves? Because it's been put on pause during the Iranian war. You said earlier that... Israel was not really under threat by Iran, which surprises me because the proxies Hezbollah in the north and Hamas in the south, it certainly, I think, feels like a constant threat if you're living in Israel. But what do you think happens in Gaza over the next one to three years?
Is it a Palestinian enclave or is it something totally different?
Yeah, what I meant is that Israel is not under existential threat from Iran. And I agree with you. If you're living in Israel, it's a life of enormous anxiety and worry and things like that. But, you know, we know what the numbers are. Hezbollah launched a lot of rockets against Israel over the last 20 years. The number of Israelis they were able to kill. tiny.
The Iranians have never even tried a major offensive against the Israelis that have, again, achieved more than pinprick success. But the larger point I think is Israel's political spectrum has shifted so far right that I don't see how you could get the minimal concessions on the Palestinian issue that the Saudis would need to be able to make a deal.
And why do the Saudis care that much about the Palestinian cause, per se?
I don't think they really do. I think that certainly the elites in those countries have never really cared very much about the Palestinian cause, but they always believed that the street did, that their publics did, that it has a kind of symbolic resonance. Look, these are all... absolute monarchies. So these are rulers who are worried about their legitimacy, worried about their control.
And in that context, the Palestinian issue was always an easy way to signal something that the Arab street wanted. But I don't think they care very much, which is why, as I said, I think they're all searching for a way to do business with Israel. They need enough symbolically that allows them to do it. And all I'm saying is, I think Israel has moved so far on this issue
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Chapter 6: How has globalization been affected by recent U.S. policies?
You have 5 million Palestinians who are living in a state of colonial occupation by Israel, and he doesn't even want to have a solution to that. And I think that because of that, The other legacy of Bibi Netanyahu you would have to say is enormous military success that has made Israel the superpower of the region at some level, but coupled with enormous diplomatic and symbolic isolation.
Israel is more isolated in the world than it has ever been that I can recall, and it is now being isolated even from the United States. Bibi's legacy, the ultimate legacy might be to have ruptured the relationship between the United States and Israel by turning it into something so partisan.
So I think it's very much a mixed legacy. Where do you think that reputation goes in the future? I was talking to someone the other night about when Americans started buying German cars after World War II, how long it took. There was the same thing for Japanese products. And now we consider German and Japan two of our very, very, very best friends and allies.
So reputations of countries certainly change, but it takes a good amount of time. If you were to look at the Middle East, the major players... What do you see that landscape looking like way down the road, 10, 20, 50 years?
I think that if Saudi Arabia plays its cards right and allows itself 10, 15 years of modernization and development, It could emerge as a very, very powerful country just because, you know, it's the only one that has size and wealth. It has enough people and it has enough of a land mass and can field enough of an army. And, you know, it can be a kind of multidimensional power.
The problem with the UAE, which is extremely high tech and smart and sophisticated, is just too small. to be a global power of any kind. And the same is true of Qatar. Kuwait is also tiny in comparison. So it's really the Saudis who have that capacity. I think Iran is going to continue to be completely dysfunctional.
Don't forget that the Islamic Republic is not just Islamic, it's also sort of socialist. So it's been very, very badly run. When you look at per capita GDP, Iran was probably ahead of Saudi Arabia when the Shah was removed. And Iran is now way behind all these countries.
We always hear that the majority of Iranians don't want the theocracy and they want a more normalized state. What do you know about that sentiment now? And do you think there's enough sentiment to lead to an...
internal change a regime change by some form other than war i think this is a very good but very complicated question and i'll begin by saying i don't know and it's very hard to know most of the people who say these things confidently have not been to iran in 45 years much of the iranian diaspora are like the white russians after the russian revolution
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Chapter 7: What are the potential consequences of U.S. economic decisions?
It's the first time in human history that you have had this 80-year period with no great power wars, where you have allowed a single open international system economically to flourish and expand as communism finally collapsed. It has allowed poor countries to grow on a scale that they've never been able to grow before. It has allowed for the introduction of concerns about human rights.
It's allowed for the introduction of foreign aid, all these things which really were never part and parcel of the international system before. So I think it's a pretty unusual, extraordinary international arrangement that Franklin Roosevelt conceived, Harry Truman and Eisenhower built. What we have to understand, however, is it's been 80 years. There's been a lot of change.
Other countries want to be more involved. They want to be more powerful. It has to have that ability, that flexibility. But we shouldn't be trying to do what Trump is trying to do, which is basically abandon it and let it collapse. Because What will follow will be most likely the law of the jungle, which is what you've had for most of human history.
So I would say that the intelligent reform amendment and repair of this international system so that it makes sense for other countries. Now, by the way, it does, right? China, for all its desire to, quote unquote, replace the United States, has grown rich and powerful under this very international system. And it is aware of that. which is why it is not trying to tear it down.
It's actually the second largest supporter of the United Nations now, right? Which is amazing when you think about where Mao's China was only 40 years ago. It was a rogue revolutionary power. So what we need to do is to make sure that we stabilize a system that has been profoundly good for the United States, made us the pivot of the world, but also been very good for others.
Do you think nationalism on average is beating out globalization at the moment or it's just interrupted it? Oh, not at all.
I think that the reports of the death of globalization are vastly exaggerated. Look at it this way. So Trump has, as a result of his nationalism, taken the United States and gone from being the most free trade country in the advanced industrial world to the most protectionist country in the advanced industrial world. We now have the highest tariffs of any advanced industrial country.
However, if you look at the rest of the world, what they are doing is more free trade, not less. The European Union's response to Trump tariffs was to lower tariffs between Europe and Latin America, lower tariffs between Europe and India. Canada's response to American protectionism has been to lower the tariffs between China and Canada, between Europe and Canada, between India and Canada.
Some of these deals haven't been finalized. But what you see is the rest of the world trying to kind of re-globalize in a different way. Some of them are being wary of too much dependence on China. But what do they do when they think they're too dependent on China? They go to Vietnam, India, Mexico. Last I checked, those are still foreign countries, right?
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Chapter 8: How does Zakaria view the future of U.S.-Iran relations?
But additionally, the U.S. has been producing a lot more oil and gas over the last 10, 12, 15 years generally, but the export numbers from the U.S. in the last couple months have just spiked through the roof, yes?
And that's the globalization. That is, when you can't get your oil out of the Middle East, there are other places you can get it. The U.S., Venezuela, Nigeria, and that's all very real. But it's important to understand the fact that we produce oil means we don't have a shortage of oil But the price is a global price.
So we and the average American suffers as much the increase in price of oil as anybody else. The people who benefit are four American companies. I'm exaggerating, maybe 40 American companies, but the oil producers. But the fact that Exxon is making more money doesn't mean that the average American is doing better.
Can you explain why our federal government allows sitting politicians to freely trade stocks and companies over whom they have obvious influence and non-public information?
It's insane. The broader point to make is most people don't realize this. We have the oldest constitutional system in the world, and that's a glory. And we are going to celebrate the Declaration of Independence. It's 250th birthday. But it's also 250 years old, and it's an ancient Tudor polity and constitutional arrangement. And it has many, many gaps and many, many weak spots.
One of them, for example, is in most Western democracies today, the investigative judicial function, the Department of Justice, is set apart from and independent of the prime minister or president. Whereas in the American system, the attorney general is appointed by and serves at the pleasure of the president. That's not true in almost every European country. And so we have things like that.
And one of these is we don't have enough laws that are kind of anti-corruption laws in various forms. But the whole nature of our system allows for this kind of institutionalized corruption. Look at the president's stock account, which is mind boggling. I mean, he's 3,700 trades.
And in his case, it's so naked again that he literally will go visit a company, buy its stock, and then put out a tweet saying this is a hot company and putting the stock market ticker of the company there.
The level of self-dealing and grifting, let's call it, in the Trump administration is astonishing to a lot of people, including many people who voted for him. What do you make of it? I'm especially curious if you see parallels to other leaders in recent or ancient history.
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