Why emerging powers didn’t lead in 2011 and won’t in the coming year

By Fareed Zakaria

The past year has been filled with tumultuous events—the Arab Spring, the euro-zone crisis. But the most striking trend of 2011, one that will persist in 2012, was one that got little notice: the emerging powers that weren’t.

By now everyone knows that a new and rising group of nations, including China, India, Brazil and Russia, are reshaping the globe. Yet if 2011 demonstrated anything, it was the inability of these countries to have much influence beyond their borders. They continue to grow their economies, but they all face internal and external challenges that make them less interested and less capable of exercising power on an international or even regional scale.

Let’s start with China. Chinese growth continues to be robust, though clearly the government is worried about the inflationary effects of the massive stimulus program it implemented after the financial crisis, which has created a boom-bust cycle and inflationary pressures across the country. The regime, however, is expert at dealing with economic challenges; political ones are harder. China faces a transfer of power in 2012 that is unprecedented. About 70% of the country’s senior leadership— the top 200 or so members of the Central Committee—will be replaced by autumn. The new leaders—Xi Jinping and Li Keqiang—are the first generation that was not personally blessed and selected by Deng Xiaoping, the architect of modern China. Perhaps as a result, we are beginning to see factions develop within the Chinese Communist Party along regional, functional and ideological lines. The change comes at a delicate moment. Beijing’s foreign policy assertiveness over the past two years on the South China Sea and related territorial issues has provoked other Asian powers to stand up to China, band together more closely and ask openly for American involvement in the Pacific. The result is that Beijing is now quieter on the regional stage. Global leadership is unthinkable. No Chinese leader today has the authority or the inclination to make big, bold decisions that would involve, say, shoring up the euro or initiating a new East-West climate compact.

India is even more obsessed with domestic affairs than China is. With a bewildering array of local and regional pulls on it, the central government has had little scope for foreign policy—or indeed any policy. Facing opposition on –every front, with state and national elections looming, the coalition government of Manmohan Singh is like a patient on life support grabbing for the oxygen mask, simply trying to survive.

Goldman Sachs’ Jim O’Neill noted in late December, on the 10th anniversary of his coining the term BRIC, that the greatest disappointment among those emerging stars has been India. Indian growth rates are declining, its currency is the worst performer in all of Asia, foreign investment is slowing, and government policy has alternated between populism and paralysis. In this context, foreign policy has been almost entirely secondary, confined to regional issues like Pakistan and Afghanistan, and even in those showing little in the way of leadership.

The other emerging powers face their own challenges. Russia has presidential elections in 2012, though the outcome is predetermined. Still, it faces new political dissent on a scale not seen since the rise of Vladimir Putin. Abroad, it has a skeptical Europe on one border, an expansive China on another and a hostile and increasingly radical Muslim population on a third. Brazil is in better shape, though its economy actually contracted in the third quarter of 2011. (If that happens in the fourth quarter, it will technically be entering a recession.) And its moves to become a regional leader have run up against a Mexico that is determined not to be forgotten or dominated. Turkey has been the one emerging power that has successfully projected influence in its region, but there are natural limits to that influence. The rise of the rest is real, but the emerging powers are not ready for prime time.

The U.S. has been able to fill the leader–ship vacuum quite effectively in some places. It has deftly expanded its role in Asia; continues to forge strong ties with India, Brazil, Indonesia and Turkey; and has maintained a good relationship with Russia on nuclear-weapons reduction. But American influence is not what it used to be. During the Mexican and Asian crises of the mid-1990s, the U.S. managed global economic problems almost unilaterally. Today no one expects or believes that Washington could solve the euro-zone crisis or direct the outcome of the Arab Spring. It is a post-American world out there, one characterized more by the absence of great powers than by their presence.




Education is the engine of social mobility, and it’s sputtering. Americans have two options: improve our schools or accept a lower standard of living

By Fareed Zakaria

For the past month, we have all marveled at the life of Steve Jobs, the adopted son of working-class parents, who dropped out of college and became one of the great technologists and businessmen of our time. How did he do it? He was, of course, an extraordinary individual, and that explains much of his success, but his environment might also have played a role. Part of the environment was education. And it is worth noting that Jobs got a great secondary education. The school he attended, Homestead High in Cupertino, Calif., was a first-rate public school that gave him a grounding in both the liberal arts and technology. It did the same for Steve Wozniak, the more technically oriented co-founder of Apple Computer, whom Jobs met at that same school.

In 1972, the year Jobs graduated, California’s public schools were the envy of the world. They were generally rated the finest in the country, well funded and well run, with excellent teachers. These schools were engines of social mobility that took people like Jobs and Wozniak and gave them an educational grounding that helped them rise.

Today, California’s public schools are a disaster, beset by dysfunction and disrepair. They rank at the bottom of the country, just as the U.S. now sits at the bottom of the industrialized world by most measures of educational achievement. The World Economic Forum ranks the U.S.’s educational system 26th in the world, well behind those of countries like Germany, Finland, the Netherlands, Denmark, Canada and Singapore. In science and math, we score even worse.

We’ve been talking about America’s education decline for three decades now, so much so that we are numbed by the discussion. But the consequences of that crisis are only just becoming fully apparent. As American education has collapsed, the median wages of the American worker have stagnated, and social mobility—the beating heart of the American dream—has slowed to a standstill. Education is and always has been the fastest way up the socio economic ladder. And the payoff from a good education remains evident even in this weak recovery. The unemployment rate for college graduates is just 4%, but for high school dropouts it is 14%. If you drop out of high school—and the U.S. has a 25% dropout rate—you will have a depressed standard of living for the rest of your life.

The need for better education for most Americans has never been more urgent. While we have been sleeping, the rest of the world has been upgrading its skills. Countries in Europe and Asia have worked hard to increase their college-graduation rates, while the U.S.’s — once the world’s highest — has flatlined. Other countries have focused on math and science, while in America degrees have proliferated in “fields” like sports exercise and leisure studies.

Bill Gross, the head of Pimco, the world’s largest bond fund, sums it up in no uncertain terms: “Our labor force is too expensive and poorly educated for today’s marketplace.” There are two variables here: our educational levels, which are low, and our wages, which are high. Either we will raise our educational level or markets will lower our wages.

How to do it? Well, there is one simple, time-tested method. Work harder. Thomas Edison said that genius is 1% inspiration and 99% perspiration. Malcolm Gladwell found that behind many supposedly natural- born talents like musical ability lay lots of practice—by his calculations, about 10,000 hours of practice. U.S. schoolchildren spend less time in school than their peers abroad. They have shorter school days and a shorter school year. Children in South Korea will spend almost two years more in school than Americans by the end of high school. Is it really so strange that they score higher on tests?

If South Korea teaches the importance of hard work, Finland teaches another lesson. Finnish students score near the very top on international tests, yet they do not follow the Asian model of study, study and more study. Instead they start school a year later than in most countries, emphasize creative work and shun tests for most of the year. But Finland has great teachers, who are paid well and treated with the same professional respect that is accorded to doctors and lawyers. They are found and developed through an extremely competitive and rigorous process. All teachers are required to have master’s degrees, and only 1 in 10 applicants is accepted to the country’s teacher-training programs. The contrast with the U.S. is stark. Half of America’s teachers graduated in the bottom third of their college class.

Bill Gates has spent about $5 billion trying to research and reform American education. I asked him, if he were running a school district and could wave a magic wand, what he would do. His response: hire the best teachers. That’s what pro duces the best results for students, more than class size or money or curriculum. “So the basic research into great teaching, that’s now become our biggest investment,” he says. One study estimates that if black students had a top-quartile teacher rather than a bottom-quartile teacher four years in a row, that would be enough to close the black-white test-score gap.

There are many more ideas, many of them worthwhile and worth trying, but you can get lost in the details of the education debate. These two seem simple—work more and get better teachers. Yet implementing them is anything but simple. They bump up against an education system that is deeply resistant to change and teachers’ unions that jealously guard their prerogatives. All the specific measures that would allow students to work more and good teachers to be identified and rewarded— more days, longer hours, merit pay—are mostly opposed by the teachers’ unions and other guardians of the status quo.

When you get depressed by the obstacles to reforming the educational bureaucracy, you can get excited by the meta-reformers on the outside who are trying to revolutionize the system.

Take Sal Khan, who accidentally created what might well be a new way of teaching. Seven years ago, the MIT graduate was helping his cousin, who lived across the U.S., with her math homework. When scheduling got difficult, a friend suggested he put the diagrams and equations he had drawn on YouTube so she could access them. Five years later, Khan has produced 3,000 videos teaching mostly math and science that have been viewed 80 million times!

But the real revolution has been in the classroom. Last year, Los Altos, Calif., decided to use the Khan Academy videos and software in its public-school classrooms. Doing so turns the educational model on its head. In the traditional method, students sit in class and receive information from their teacher while they busily take notes—a passive process that wastes valuable classroom time. They do the most challenging work—solving problems—at home without help. Under the new system, they watch the Khan Academy videos at home and solve problems in class, where the teacher’s talents can be put to use most fruitfully. In addition, students can learn at their own pace — rewatching videos—until they actually understand the material. The early results show huge leaps in student skills. Technology is being used to create a customized, interactive education that is both novel and powerful.

The reason that I am so taken by the Khan Academy—other than that I have used its videos with my 12-year-old son—is that it is a quintessentially American innovation, a new way of thinking about education.

I went through the Asian educational system, which is now so admired. It gave me an impressive base of knowledge and taught me how to study hard and fast. But when I got to the U.S. for college, I found that it had not trained me that well to think. American education at its best teaches you how to solve problems, truly understand the material, question authority, think for yourself and be creative. It teaches you to learn what you love and to love learning. These are incredibly important values, and they are why the U.S. has been able to maintain an edge in creative industries and innovation in general.

The U.S. should truly fix its educational system by emphasizing the basics—like hard work—again but also by renewing its distinctly American character. We will succeed not by becoming more Asian but by becoming, as the writer James Fallows put it once, “more like us.” That’s what made America the world’s most dynamic society—and it can make it so again.


TIME: Fareed Zakaria.

By Fareed Zakaria

In narrow economic terms, the debt deal is actually not a big deal, neither as good as its advocates claim nor as terrifying as its opponents fear. The actual cut to the 2012 budget, the only budget over which this Congress has control, is $21 billion out of total expenditures of $3.7 trillion—a pittance. Everything else can and will be changed by future Congresses. What the deal does is kick tough choices down the road, this time to a congressional super­commission that will have to come up with a larger plan to reduce debt. And it does nothing to spur growth, without which the debt will expand well above projections. That’s why the usually circumspect Mohamed El- Erian, head of Pimco, the world’s largest bond fund, grades the deal somewhere between an incomplete and a fail. “Other than eliminating default risk emanating from a self-manufactured crisis,” he writes, “there is nothing good about America’s debt ceiling debacle.”

The deal’s largest impact will be political, and there it has been a disaster. The manner in which it was produced added poison to an already toxic atmosphere in Washington, making compromise even more difficult. Democrats now feel they need to mirror the Tea Party’s tactics and are becoming unyielding on any cuts to entitlement programs like Medicare. Republicans, emboldened by the success of their bullying, have closed ranks more solidly around a no-tax agenda. But the only solution to America’s debt dilemma will need to involve both cuts to entitlement programs and higher tax revenues. Even if the besmirched ratings agencies don’t downgrade America, we’ve downgraded ourselves. The system did not work.

Evidence of a working system would have been the adoption of a grand bargain almost forged between President Obama and House Speaker John Boehner to reduce the budget deficit by almost $4 trillion over 10 years, a plan that might actually have been enforced, because both parties would have been invested in it, each having contributed to shaping it. The system would have worked if it had adopted some version of the Bowles-Simpson plan, which reduces the national debt by the same amount, with pain on both sides of the aisle, but in an even smarter way. This is how Congress used to work: grand bipartisan bargains to solve difficult problems with compromises by both sides. This is not nostalgia. It is how the system worked in the 1980s and ’90s to save Social Security, reform the tax code, rationalize immigration policy and close hundreds of military bases.

Instead, we have demonstrated to ourselves, the world and global markets that our political system is broken and that we are incapable of conceiving and implementing sensible public policy. What we have instead is the prospect of more late-night cliff-hangers, extreme tactics, budget guillotines, filibusters and presidential vetoes. It makes for good TV news specials, but it is a sorry picture of how the world’s leading country governs itself.

There is one silver lining. The sword of Damocles that hangs over Congress (steep reductions in defense and Medicare if the two sides can’t agree to a basket of other cuts) is supposed to make legislators act more sensibly. Actually, it might provoke something more important: a national debate on the role of government. This might well have been Obama’s calculation and his purpose in accepting the debt deal—that it would end the crisis, in which the Tea Partyers held the country’s creditworthiness hostage to their agenda, and force a broader national discussion, one he is comfortable leading. If so, such a debate is long overdue. For more than a generation, Americans have delayed it, at incalculable cost to the country.

The modern seesaw about the role of government began with Ronald Reagan, who rode to the White House in 1980 on a tide of frustration with high taxes and big government. He promised to cut both down to size. He succeeded with taxes, reducing rates across the board and closing loopholes. Although he raised taxes several times during his presidency, by the time he left office in 1989, taxes were at 18% of GDP, down from about 20%.

But what he did not do was cut spending consistently. Spending under Reagan averaged 22.4% of GDP, well above the 1971–2009 average of 20.6%. Yes, much of this was for defense, but almost everything went up during his Administration. Farm subsidies, for example, rose 140%. If you lower taxes and don’t trim expenses, there is only one way to make up the difference: by borrowing. The national debt tripled, from $712 billion in 1980 to $2 trillion in 1988.

Reagan reflected the American public’s basic preferences. We want big government but low taxes. The only way to make this work, short of magic, is debt. And government at every level—state, city and local—followed this pattern and took on ever increasing amounts of debt. In fact, because of weak accounting requirements, politicians at the state level have even resorted to a kind of budgetary magic to satisfy key constituencies. When public-sector employees want pay raises, politicians provide just modest step-ups in salary but huge increases in pension and retirement health care benefits. That way, the (fraudulent) budget numbers don’t look that bad until years later, when the politicians who did the damage have safely retired.

Over the past three decades, this pattern has persisted, with a few exceptions at the federal level. Tax hikes and spending restraint under George H.W. Bush and even more so under Bill Clinton brought the problem under control and in the late Clinton years even produced a budget surplus. Then came the George W. Bush tax cuts, expanded health care benefits and two wars—all unpaid for—without any tax increases. The result: the surplus disappeared, and by 2008, the debt had ballooned to $10 billion. The final blow was the financial crisis and recession, which meant that federal tax revenues collapsed, followed by more tax cuts and stimulus spending. The debt rose to its current $14.3 trillion.

We couldn’t be grappling with this at a worse time. Many economists believe that the economy is fragile and that it would be better not to cut spending or raise taxes at this point. It’s true. The sensible economic policy would be more stimulus now and major deficit reduction in a few years. But that kind of smart, sequenced public policy is simply beyond the reach of the American system today.

So far, the national debate has been built around the fantasy that we do not have to choose between big government and low taxes—that we can get both by cutting waste, fraud and abuse. But the money is in the big middle-class items, from Medicare to the mortgage- interest deduction. With federal taxes at 15% of GDP, a historic low, and spending at 24% of GDP, there is really no conceivable way to close the gap without increasing taxes—either raising rates or eliminating deductions and loopholes. And Republicans might find to their dismay that when forced to choose, Americans will decide that they like their government programs after all. Polls show that the public would rather raise taxes than, for example, cut Medicare. (In fact, we would have to do both.) The public may hate government in theory, but it has warm feelings about most individual government programs, from the space shuttle to Head Start to Pell Grants. This may be why Obama might be happy to have this debate in 2012 and urge a mix of cuts and increased revenues.

Whatever the outcome of the ideological debate, that outcome has to then be translated into public policy. For that to happen, we need a government that works. What the debt crisis has highlighted is that Congress—the heart of day-to-day government—is utterly and completely broken.

Can one measure this breakdown? Yes. Congress is more polarized than ever before. A National Journal study shows that, for the first time since the publication began tracking the divide 30 years ago, the most left-wing Republican is more conservative than the most right-wing Democrat. There is no overlapping set of moderates, who used to engineer congressional compromises. This polarization has resulted in paralysis. More than two years into the Obama Administration, hundreds of key positions in government remain vacant for lack of Senate confirmation. The Treasury Department had to handle the global financial crisis, recession, bank stress tests and automaker bailouts, as well as its usual duties, with about a dozen of its senior positions—almost its entire top management—vacant. Senate rules have been used, abused and twisted to allow constant delay and blockage. The filibuster, historically employed about once a decade, is now a routine procedure that allows the minority to thwart the will of the majority. In 2009, Senate Republicans filibustered a stunning 80% of major legislation. Given how the chamber is composed—two Senators per state, no matter how thinly populated—people representing just 10% of the country can block all legislation. Is that how a democracy should function?

American parties now function like European parliamentary ones, ideologically pure and with tight discipline. But we don’t have a European system. In parliamentary systems, power is united so that when, for example, the British Prime Minister’s coalition takes office, it controls the legislative branch as well as the executive. The Prime Minister is, in effect, chief legislator as well as chief executive. The ruling party gets a chance to implement its agenda, and then the public can either re-elect it or throw the bums out. The U.S. system is one of shared and overlapping powers. No one person or party is fully in control; everyone is checked and balanced. People have to cooperate for anything to get done. That is why the Tea Party’s insistence on holding the debt ceiling hostage in order to force its policies on the country—the first time the debt ceiling has been used this way—was so deeply un-American.

The strength of the Tea Party is part of a broader phenomenon: the rise of small, intensely motivated groups that have been able to capture American politics. The causes are by now familiar. The redistricting of Congress creates safe seats, so the incentive is to pander to the extremes to fend off primary challenges, rather than to work toward the center. Narrow cast media amplify strong voices at the ends of the spectrum and make politicians pay a price for any deviation from dogma. A more open and transparent Congress has meant a Congress more easily pressured by small interest groups and lobbyists. Ironically, during this period, more and more Americans identify as independents. Registered independents are at an all-time high. But that doesn’t matter. The system in Congress reflects not rule by the majority but rule by the minority— fanatical, organized minorities.

These dysfunctions have reached crisis levels at the very time the U.S. faces intense pressures from an aging population, technological change and globalization. We need smart policies in every field. We need to pare spending in areas like health care and pensions but invest in others like research and development, infrastructure and education in order to grow. In an age of budgetary limits, money needs to be spent wisely and only on projects that are effective. But in area after area—energy, immigration, infrastructure—government policy is sub optimal, a sad mixture of political payoffs and ideological positioning. Countries from Canada to Australia to Singapore implement smart policies and copy best practices from around the world. We bicker and remain paralyzed.

Some of those best practices used to be American. The world once looked at America with awe as we built the interstate highway system, created the best public education in the world, put a man on the moon and invested in the frontiers of knowledge. That is not how the world sees America today. People watched what happened over the past month and could not comprehend it. We have taken something that the world never doubted—the credibility of the U.S.—and put it into question. From now on, every time the debt ceiling has to be debated, the world will wonder, Will America honor its commitments? Will it keep its word? Will the system break down? We have taken our most precious resource, the trust of the world, and gambled with it. If, as a result of these congressional antics, interest rates on America’s debt rise by 1% —in other words, if the world asks for just a little bit more interest to lend us money—the budget deficit will rise by $1.3 trillion over 10 years. That would more than wipe out the entire 10 years of cuts proposed in the debt deal. That’s the American system at work these days.