Homeroom with Sal & Fareed Zakaria

Hi everyone! Welcome to the daily homeroom livestream. Very excited about the conversation we're about to have. I will start with my standard announcement to remind everyone that we are a not-for-profit organization and we can only exist with support from donors like yourself.

I do want to give a special shout out to several corporations and partners that have stepped up in the last few weeks, especially when they realized we were running into deficit even before Covid. That deficit grew larger as we tried to have higher server capacity and more programs. So, special thanks to Bank of America, google.org, AT&T, Fastly, and Novartis.

And just a reminder, we continue to run into deficit, so if you're in a position to do so, please think about making a donation to Khan Academy so that we can serve many, many tens of millions more for a long time to come.

With that, I'm really excited about our next guest, Fareed Zakaria. He is a well-known host on CNN's GPS, a Washington Post columnist, author, and I would like to say a good friend and mentor of mine. You know, I think it's so good to see you, Fareed. If you can hear me...

Fareed Zakaria: "I can hear you! It's a little bit jerky, but I think we're all getting used to life with Zoom, which I have to confess does not work as well as the Khan Academy website."

Host: "I don't know if that's a veiled compliment or not! Well, thanks for joining. You know, when we schedule these things, there was already a lot going on in the world, and obviously, things are just layering on top of it. I would love to just get your raw take on how are things going for you personally, but just what's your sense of what the world is like? You know, you're in New York. What do you think the Covid layer is about? What do you think the economic layer is about? And now what do you think the kind of police brutality and racial systemic racism layer is all about right now?"

Fareed Zakaria: "Oh my gosh, that's a big ask! But let me try and do it. It feels to me like at the very start, it became clear to me—and I wrote this the week Covid kind of exploded—that this was going to be a series of cascading crises. We had never seen anything quite like this. First, we have the pandemic. We realize, okay, we're in a genuine global pandemic. You don’t have a lot of actual global pandemics. You know, SARS, MERS—these were regional; they never spread. So this is really the first thing we have experienced where it really... I'm sure you've noticed as well, when you call somebody in India, Bangladesh, you talk to somebody in Korea, you talk to somebody in Europe, they're all dealing with exactly the same thing. There's a strange sense in which we've been united around this disease."

"Then you had the second extraordinary thing, which is historically totally unprecedented: we induced economic paralysis in basically most of the richest countries in the world. Seventy-five percent of the global economy went into a lockdown. Nobody has ever done anything like this before. That's why the numbers we were seeing—frankly, in terms of the speed and scale—dwarfed even the Great Depression. Because even with the Great Depression, it took years to get to the unemployment numbers that we got to within weeks. So you've got that layer."

"Then I think we are now going through the third layer, which is the widening inequality of the response. The rich world is able to deal with this because they can print money; rich countries can borrow essentially in an unlimited fashion—China, the United States, Germany. The United States, above all, really has the ability to print money because it has sovereign capacity like nobody else. So while everyone's uneasy about it, you can do a lot. I mean, the United States did in three weeks what it did in 2008-09 in three years, and it was probably going to do more."

"But then you get to the part of the world where you can't do that. You're beginning to see that now with India's and Brazil's... all these places where the disease is spiraling. They cannot lock down any longer. A large part of the economy is day labor, which means people make the money that they spend on food for that day, right? So you're dealing with that kind of side."

"And then you add to it the protests, which I think are not unrelated. I think you've got, you know, in the United States, forty million people unemployed, nothing to do, watching this brutality on television. And I say, you know... what does all this do? It produces nervousness, anxiety, a sense of purposelessness, despair. And then, against that, you have the, you know, in America's case, the oldest story in American history—the great tragedy in American history—playing out one more time."

"So I think, you know, that's the trajectory. Now, personally, you asked. I gotta confess for me it hasn't been a big deal. I'm lucky; I have a large family. So I've got three kids. You know, I forget; I've gotten to see my kids more than I have been able to for a long time. My son is back from Yale, my daughter's back from boarding school, my little one is here. I've got a job which I can do reasonably well, you know, where I think about 90% of technological capacity and 110% of intellectual capacity just because it's so interesting and engaging. I've been working on a book that's easy to do from anywhere. You know, I miss real life, but I've been able to cope just fine."

Host: "And where do you see this going? You know, where do you see... I mean, there's really two layers that you've been talking about that I think are really interesting. One is that disparity between the rich and the poor countries. And, you know, it seems like your point... I've been studying this myself—it seems like the U.S. has almost this infinite capacity to print money. And then, the fact—the federal government could borrow money and distribute it. And it seems like there... and we could talk about what the implications are... Other countries can't. And then, separately, you have people who are angry—rightfully angry—about what they are seeing in the world, and it still has not changed. And there is probably an economic aspect that could morph into."

"I guess taking one at a time—maybe the latter one first—where do you see the protests evolving to? Do you think it's going to be, you know, 'Hey, here, this is how you have to reform police training...' and this and that? Do you think it's going to stay to that or everything is going to expand into other things?"

Fareed Zakaria: "I mean, this is at some level the oldest story in American history, which is the story of the way in which blacks have uniquely been treated badly by the American system. From the Constitution into which they were written into slavery, 250 years working without pay in the most brutal, dehumanizing conditions, their families broken up, a hundred years of Jim Crow, then mass incarceration. But there's another piece of it, as you say, which is really about the police and the way the police, you know, handle things, and they've come together."

"We have a police force that, frankly, looks more like an army in most cities. It behaves more like an army in most cities. It's totally outside of the black-and-white issue; it's a problem. So I think that the problem for the United States is this: you can marshal the anger and the movement for something like this at a national level very well. Martin Luther King did it totally brilliantly, but his ask was a national ask: the Civil Rights Bill, fair housing. The ask here is that 18,000 police departments—you heard that right—are 18,000 police departments in America. They have to reform themselves and create different rules that allow for, you know, bad police to be penalized, frankly to recruit a different kind of policeman in many cases. How are you going to do that? I don't quite understand."

"So I think that part of the frustration here, I think, has been that people have seen... Look, we've been hearing good stuff from the national leaders for a while now. Every time something like this happens, everybody agrees this is awful; we need to do something about it. But you have that national unanimity, or agreement, or consensus, and somehow it doesn't trickle down. It doesn't translate into a difference in the day-to-day live experience of an African American. And this is why—because, you know, most of that is about local police chiefs, local DAs, judges who are often elected. So you need, you know, we need a kind of a different model where you take this passion and start directing it at Washington and Trump—God knows he deserves it—but it's not going to make any difference."

"Do you think that's going to be effective? Do you think it's going to happen? And obviously it could be on the police reform dimension, it could be on the general criminal justice reform dimension, or it could be at the systemic racism, which is a much broader notion. Do you think this time is different, or will the frustration just, you know, continue and in three years from now we're back, back to where we were where people are angry because something like this happens again?"

Fareed Zakaria: "I hope something happens, but I think it's going to be hard in the short term because to sustain this kind of intensity of effort at the local level requires that people stay mobilized at the local level, which they have not tended to be. So then you would need a push from the federal government—from really the president. Clearly, Trump is not that president. He's not going to be the guy pushing this. So maybe if you had a different president, if you had, you know... you need some process because what? You know, the crowds go away; the police unions stay, you know what I mean? The forces that are obstacles are very powerful, local, and front-line forces. The passion of the moment cannot be maintained."

"This is what King was brilliant about. He figured out a way to channel that passion and to stand, and he used it effectively at strategic moments. So what you need is something like that at the local level. And the problem is you need 18,000 of those movements."

"Yeah, no, and I don't encourage anyone watching on Facebook or YouTube. Please send in your comments. You know, going into that— the economic layer. Here's a question from Facebook: Shoaib Mohammed asks, 'What will the future look like in terms of economic points of view?' And then from Facebook, these are related: Fred Adler, editor, asks, 'Do you believe universal basic income would help?' What are your thoughts? Are there... I mean, how will this be? Minor, it looks like the stock market thinks that, you know, nothing happened. No. Yeah, how do you think it's going to play out?"

Fareed Zakaria: "So with the stock, it seems to suggest... and look, you know, the stock market can also be right today and then wrong tomorrow; we've experienced that. But there's a message here: it is, don't fight the most powerful central bank in the history of the world. You know, there's no... You cannot fight the Fed. The Fed has said that they might, you know, buy bonds; they might back junk bonds; they might buy stocks. I mean, the Fed is basically saying we have infinite capacity, and we are willing to use it on essentially infinite assets where there is no asset that we regard as being off-limits for us. In that circumstance, how could an asset go down, right?"

"I mean, you have to be the floor of the most powerful central bank in the world saying we're not going to let this collapse. Well, that's a wonderful, you know, casino game to play, which is heads I win, tails the Fed wins. And the Fed can't lose; you're fine."

"So, I don't know how long can the Fed continue to do that. I mean, in a way it's a kind of... it's changing the rules of capitalism, right? I mean, there's a sense in which you wonder if you have—you have lectures on this—what does price discovery mean anymore? Whether you say, yeah, you know, there are markets that prices rise and fall, but if they—if things get too bad, the Fed will step in. So you have this kind of floor. Do we ever, for example, do we ever need to have a recession again if the Fed says, we'll just, you know, we will protect the downside? So that's a meta-meta question."

"Short-term, there's no question the United States comes out of this the best of all the countries in the world because of the same reason it came out of the overweight crisis the best of all the countries in the world. I mean, people forget we created—we caused the financial crisis, the global financial crisis. It was the irresponsibility of some combination of the private sector and the public sector in America that did it. Who came out of it best? Without any question, it was the United States. Our banks are more dominant in the world than they were before the pandemic. It’s the most extraordinary thing. The banks, which were supposed to be the origin of this problem, are now more powerful, you know, globally than they've ever been before. America's five biggest banks have larger market shares than anyone."

"So there's a long-run question of, can—you know, the article in Foreign Affairs that says, can you print money forever? I don't know the question that nobody knows the answer to that. I remember when Japan crossed the 75% debt-to-GDP ratio, people said, 'This is it. No country has ever done anything like this. This is... we're in uncharted waters. This is going to cause huge problems for Japan.' Japan is currently at 250% debt-to-GDP ratio. So, you know, maybe that’s... maybe something a small number of countries can do."

"I think the most important thing to remember is, you know, India can't borrow like that; Turkey can't borrow like that; Brazil can't borrow like that. They borrow in short-term debt in dollars, which means they have to pay it back. And if their currency depreciates, then they have to pay more. So that's very tough."

"So, I think for the U.S., the big part that I don't think has been fully factored in by the market is this is going to be a very slow, halting recovery. I mean, there's, you know, you're not going to have a crash and a collapse because of the Fed, but the Fed can't force people to go to, you know, to fly. The Fed can't force people to go to restaurants; it can't force them to go to movie theaters that are empty. It can't force the NFL to start holding games, so that all that spending is not going to take place. Now, the simplest principle of economics is: my spending is your income. So if spending is down, how can, you know, how can the economy be anything but at a much lower capacity?"

"You know, China is finding that their production is up to 90% of pre-crisis, but consumption is not even up to 50%. So the Chinese are now trying to give free gift certificates—one, I think, to billion dollars of literally, you know, like imagine getting those coupons on the street, which you can just spend at retail as a way of inducing expenditure. I mean, I wonder whether that's what we will have to deal with because we're not at the basic universal basic income that's kind of solving a different problem, which is technology, automation, globalization making so large numbers of people don't have enough to do and can't make enough money."

"Right now, the problem is we just can't get people to spend money because what do they do? They can't take a vacation; they can't get on an airplane; they can’t, you know, so how do you force that? How do you force expenditure into the system?"

Host: "Yeah, that's super helpful. You know, for those watching, I remember growing up, I was always confused if people talk about central banks printing money—where does the money go? And to just, you know, double click on that, what Free is describing is the center—especially the Federal Reserve of the United States—which is a quasi-independent but really governmental institution. Can essentially print money. Where does it go? It goes and buys assets. Normally, it buys government debt, so it's essentially lending money to the federal government. The more it does that, the cost of the debt goes down. But now it's buying almost everything. This is what Free is saying. But, and so you could imagine as the cost of debt goes down, then the federal government can borrow more and more and more and do these trillion-dollar-at-a-time stimulus. At the same time, the Federal Reserve could get more aggressive and buy debt from companies, maybe even one day think about buying things like equities and be a floor of the market."

"But you know, there's an interesting question there, your point. You know, maybe the Fed could engineer at least the mock the market has afforded it and certain parts of the economy—the debt markets—but that benefits and I think we saw this coming out of the financial crisis. It benefits homeowners; you can refinance, and your mortgage goes down. It benefits people who have 401(k)s in stock and shareholders. So, but that's the people I've just described are the more well-off already. What happens to, you know, this kind of... universal basic income or this, you know, a gift certificate-type program? What happens to the people who are waiters and waitresses, small restaurant owners, you know, Airbnbs, and their houses? You know, on a small scale, how do they live? It's not an obvious question and not an obvious answer."

Fareed Zakaria: "Yeah, so that's a... that's like the broader—the bigger question. Just one factoid which I think would be helpful for you to understand. So everything you said, of course, about the Fed is exactly right. Now, keep in mind, because of all the factors you were describing, the federal government is currently borrowing at 0.8%. So think about all you homeowners who have managed to refinance heroically at 3.25% or 3.5%. The government is borrowing at 0.8% for 10-year bonds. So at some level, it's very sensible for it to be borrowing the money as long as it spends it on useful things. I mean, that's the part which I've always felt: the government has borrowed a lot of money in the past 10-15 years and spent it on tax cuts for the rich, which is the most idiotic idea, you know, because it is not fundamentally productive."

"But what you're describing is the problem that we already had, which was rising inequality. And Covid is actually exacerbating it. It's exacerbating it on three levels: the gap between the richest countries in the world and the poorest is going to expand for the reasons we described; the gap between the biggest companies in the world and the small mom-and-pop stores is going to expand. Because in this digital world, what's happened is you've had a flight to digital, a flight to size, a flight to security. You know, all of which mean as the big gets bigger, the small mom-and-pop gets smaller. Google gets bigger; you know, all these big platforms get bigger and bigger. And even in the non-tech world, you're going to see that same thing happen. The biggest companies will be able to borrow at much cheaper rates than those small ones. Finally, for people, the Covid divide is a class divide. I mean, who can work from home? It's digital workers, service workers, you know, consultants, people like you and me who can work from home. It's people who work with their hands, people who, you know, generally have lower-paying jobs, lower status in many ways."

"Unfortunately, not now. I'm not saying it's the right thing, but the reality is that device again expands. So, you know, how do you solve it? Look, I tend to think that the better solution and universal basic income is a massive expansion of the many programs we have that would achieve something very similar. My favorite program in the federal government is the most difficult to explain, and it's one of my theories. That's why it doesn't do well, because nobody understands it. It's called the Earned Income Tax Credit. And basically, what it is is the government says, if you work, we are going to make sure that you will never be below the poverty line. We're going to pick an arbitrary number and say, if you work, but for whatever reason the private sector does not pay you enough to cross this line, we will top it up."

"The great thing about that is it incentivizes work, it keeps the private sector alive, it doesn't distort prices like, you know, the way that minimum wages do have that effect. You create a minimum wage and there is some general destruction because there are low, you know, low-level entry jobs that won't be available. This does none of that. It's more effective; it's a program that, you know, frankly Milton Friedman and Bernie Sanders both like. And yet it's hard to expand, which it's sort of complicated; it's easier to explain minimum wage. So if you could take a program like that and double or triple its size, if you could take food stamps, you know, if you could take Medicaid and things like that and just... I mean, I think the key should be to make it so that Americans are confronting a changing world with many different forces benefiting them. But they don't have to go into it naked; they don't have to go into it unarmed."

"They can have the security of health care, they can have the security of good nutrition from programs, they can have the security of retraining. You know, if you give them all that, then they can handle a world like this. But if you don't give them that, then I think you make it very difficult. And the problems with, you know, universal basic income... obviously, it's a question of whether you de-incentivize work. You destroy the market—there's a lot— but a lot of what it does, I think, doesn't address one of the core problems that we're going to face in the world going forward."

"Which is, it's not just that people need money; they need something to do. They need a calling; they need the dignity of work; they need the sense of status that that gives you. I think, honestly, particularly for men, a lot of men derive their sense of worth from things like that. And women are more complex, I think, because they've always had the reality of being, you know, mothers and caretakers. Because there is a, they frankly have a more sophisticated understanding of internal worth, which is a little more socially grounded. Maybe it's a construct; maybe we should move away from it, but the truth is that's where we are now. And I think that, you know, you put two or three million truck drivers out of work because you found self-driving cars, and just saying then, ‘Here's a handout,’ I don't think you've solved the problem."

Host: "Yeah, that's a good point. And I like the Earned Income Tax Credit as, I mean, I guess one way to view it is just negative taxes. You know, right now, you imagine I know the first X dollars is not taxed, and every increment above that, from say, twenty to thirty thousand, is taxed at 10%. You know, that first bracket is essentially negative— you get paid; the government gives you money. It’s exactly, exactly—nobody, I agree, makes a lot of sense."

"So, I mean, a lot of questions here actually. I mean, you know, one of them, you know, Dan Companion on Facebook, maybe we'll end with this: 'Is money just an abstract mechanism?' Well, I guess I'll change that into a slightly different question. People ask about financial reform. What we should do if they had to shut down the money? But I guess one question we talked a lot about what the Fed can do in the U.S. What's the negative of—what's the potential limiter on it? Inflation? Is it something else? And then, you know, just to finish up, you know, how do you think the world is going to be in two or three years? Or how do you think it should be?"

Fareed Zakaria: "So the limiting effect for a central bank usually takes two forms: one is, you have a fear your currency collapses; and second, you get hyperinflation. And the two are linked. And the basic idea is simple which is if people think you're managing your affairs really responsibly, if you have debts that you clearly can't pay, basically people start fleeing your currency; they start fleeing, you know, nobody wants to buy your government bonds and things like that."

"I think the U.S. is far, far away from that scenario; you know, at the end of the day, the taxing potential of the United States government is enormous. I mean, just to give one simple example, in the United States on average it has 8% sales taxes, right? Europe on average has 25% sales taxes. So I’m not saying it's going to happen, but one saying is, in extremis, if the United States government had to find a way to make money, it's very easy to imagine doubling the sales tax. It's very easy to imagine, you know, moderate rises in income tax for the middle class."

"And you're talking about getting huge amounts of money. Obviously for the wealthy, you can do a wealth tax. I mean, again, I'm not saying these things are all good, but the United States is not in a situation where you would say to yourself, 'Oh my God, they've got these big budgets and there's no way they could ever pay this back.' That's just not where we are. So I think, you know, my feeling is the focus should more be on what are you spending it on. Taking another trillion dollars out, it would be great to spend it on infrastructure, frankly. That's all the people you'd employ are exactly the kind of people we've been talking about who are having challenges—people who work with their hands, people without college degrees, people who maybe don't work in big cities."

"You know, there's a huge double whammy here, which is you help the economy by creating greater, more efficient transportation and communication, but you also help these people have really interesting jobs with dignity and some stuff. The small question of where will we be two or three years from now, I think that there's a part of me that feels like it's easy to exaggerate the degree to which, you know, there will be change."

"I mean, after the influenza of 1918, after all, don't forget we had the next big thing that happened in America was called the Jazz Age—the Roaring '20s. So, you know, people got back to restaurants. In fact, they went back so fast that even though prohibition was, you know, you had prohibition in place, alcohol was illegal, you still had the Jazz Age; you still had the Roaring '20s. So people obviously would kind of— you could even argue they were desperate to congregate; they were desperate to be together. So I've never bought the idea that what you're going to see is a kind of, you know, the kind of replacement of life with digital life."

"I think you would see some level of it, but you're also going to see an enormous amount of social... Aristotle said man is a social and political animal, and I think that's very true. But I do think you're going to see the acceleration of a lot of these trends that are already in place, you know, the further digitization of life."

"I think that every big company is going to ask, 'WeWork may have failed, but every company will become WeWork,' by which I mean every company is going to say, 'Why do you need to come in to the office 9:00 to 5:00?' I remember in your book you talk about how the school is kind of an outgrowth of the 19th-century factory model, where everyone gets at one place, you throw information at them, they get through the conveyor belt by the time they're 80, they're on their way. The modern office is very similar. Why does everybody need to be in the same place at the same time? Why do they need to work the same hours? It would be much, much more efficient, probably, to have a system where people come and go."

"I think there will still be an office; I think there's still an enormous importance of real-life meetings. But some people come in three days a week, some people come in two, some people come in five, you know, it varies week to week. Maybe you don't need a personal space that is your desk and your, you know... that's a very inefficient way to use assets, if you think about it. Why not have the WeWork formula? Well, you know, these are all shared; they are used by everyone. Maybe everyone has a personal closet or locker or something like that where you keep some of your stuff when you're there; you use it when you sum everything is up in the cloud anyway. So why do you need...?"

"And if you do that and reduce office demand by 25%, that's a huge impact on the way urban life changes. So I think that's just one example. I think those are the kinds of changes you're going to see that are the most important from a day-to-day life. The biggest change that's going to happen that impacts the kind of world we live in is, are you going to see an acceleration of nationalism and in particular an acceleration of the U.S.-China conflict?"

"Because if you look forward and say, is there are two possible models? One way this pandemic, which is global in nature, brings us together to realize, you know, we kind of need a better WHO, we need... we need a WHO that is better resourced, better staffed, and actually has the power to tell countries, you know, to push back against countries, which the WHO sure does not have, whether it's against China or the U.S. And those rules were written by the U.S. because we don't want the WHO telling us you're not doing a good job on this or that. Or do we go down the path of a cold war to where this whole thing becomes really fundamentally about a geopolitical, geo-economic, geo-technical struggle between the United States and China, which would be completely new because it is between the two biggest economies in the world."

"Do you know what I mean? The U.S. in 1950 was 50% of global GDP; the Soviet Union was... well, China and the U.S. will be in pure competitiveness, and that is a whole new world and a very dangerous world and a divided world. And so which one of those we live in I think is a big, big question."

Host: “Well, no, Fareed, you've given us a lot to talk about and hopefully you've enjoyed you know your day job. I know you get to write and on a lot of layers, but you know on TV you're always asking folks questions and I even when I see you I know that there's a lot in your head where needs to go. And I think for anyone who's watching this, I think has a new appreciation for Fareed's depth and breadth of knowledge in all things.

So I learn every... I learn something every time we chat, so thank you so much, Fareed, for joining us."

Fareed Zakaria: "Oh, it's my pleasure. I'm a huge fan of Khan Academy. I would only reiterate the point you made: what you've done is really revolutionary. It is a non-profit and anyone who's listening should realize that if you think about kind of bang for your buck, if you think about how much of an impact you can have on helping people, if you believe that education makes a difference, this is the best way to scale it. So when you're done with this, donate some money. I'll tell you what I'll do—the same. So you guys have to follow me."

"Now, if Fareed's been very kind, he's helped us over the years, and Free, I definitely draw you as family. I tell everyone, for those who are watching, we once sent our families—we went to the same conference, and both of us dragged our whole families along, so they put us in the same house together. And I woke up one morning, and you were feeding my son cereal!

So, anyone who's fed my son cereal in the morning, I consider family. So thank you so much, Fareed."

Fareed Zakaria: "Great pleasure. All the best to you."

Host: "Well, thanks everyone for joining! Hope you enjoyed that conversation. As I said, every time I talk to Fareed, you know, you can kind of talk about anything and everything, and he's got unusual depth and insight. So hopefully you enjoyed that, and I look forward to seeing everyone tomorrow. We're going to have actually a Khan Academy board member, James Mineka, who's also the head of the McKinsey Global Institute. He's done a lot of work on the future of work learning. Obviously, one of our board members and, you know, obviously, we'll talk a lot about what's going on in the world generally.

So look forward to seeing all of y'all noon Pacific, 3:00 PM Eastern tomorrow!"