Rob McClendon: Well, when it comes to public
policy and global relations, few people have the respect my next guest does. Fareed Zakaria
is an Indian-born American journalist and author who believes his adopted country’s
success will hinge on our ability to adapt to new changing dynamics in the global economy.
I was able to sit down with Zakaria shortly before he spoke to the Tulsa Town Hall.
Rob: Well, Mr. Zakaria, with the price of oil roughly half of what it was just this
past summer, we’ve been reminded here in the middle of energy country just how much a part
we are of the global economy. Any thoughts there from you?
Fareed Zakaria: Well, you’re right to highlight it. That is the single most important trend,
uh, economic trend, but even political trend that’s coursing through the world right now,
the fact that oil has gone down so fast and so far. I suspect the price of oil is gonna
stay in this range – it’s probably overshot on the downside just as it overshot on the
upside. But it’s likely to stay in this range, and I’ll tell you why. There are two factors
that are at play here. The first and probably the most important was the decline in demand,
particularly from China. China had been the great sucking sound that was taking in all
the oil, all the marginal oil. For the last 10 years China had grown its oil demand 7
percent year after year. In 2014, the growth in Chinese demand in oil was zero. So that’s
the big shift that took place. And the other one, of course, we all know is the rise of
American production, but production also around the world. Those two forces are still in play.
China’s demand has weakened, America will continue to pump oil, so I suspect that we’re
in a world of new normal where oil will be in perhaps the $60 range. And this is gonna
put enormous pressure on all the oil-producing countries in the world that have large populations.
Qatar and the United Arab Emirates in Kuwait will be fine because they don’t have any people.
But when you’re like Russia, you are the 140-million people, and you have subsidies, and you have
government expenditures, that’s a hell of a challenge. For America, it’s basically positive.
For most Americans, it means a huge tax cut. A cut in the price of oil is a tax cut. Obviously
for producers in America that puts a lot of pressure, but American producers are the most
efficient producers in the world. And so I suspect that you will find American producers
find ways to cut costs, find efficiency and, of course, some wells will close down.
Rob: Now, getting into the conspiracy theorists, the geopolitics of it all, this hurts Russia.
This also hurts Iran. Saudi Arabia is not particularly fond of Iran, and right now we
are, have been at odds with Russia a bit. Do you, have you heard any of that talk in
a wider sense? Zakaria: Oh yeah, of course, and especially
in the Middle East, people think that this is a U.S.-Saudi kind of deal, a conspiracy.
Highly unlikely. First of all, this hurts the Saudis; don’t, don’t make any mistake
of it. The Saudis can’t afford to bear the pain, but there is real pain here. Saudi Arabia
needs oil at about $85 a barrel to be able to balance its books, to not run a deficit.
Right now they are having to draw down tens of billions of dollars from their foreign
exchange reserves. They’ll probably have to spend a hundred billion dollars this year
out of their foreign exchange reserves to simply fulfill the commitments they’ve made.
So this, this is tough on them. Secondly, I think that that whole way of thinking about,
about oil prices is a relic of the past. Here’s the most interesting fact about the last year
or two. In 2014, for the first time since the first oil shocks of the early ’70s, non-OPEC
oil production was larger than OPEC oil production. In other words, there is no cartel that can
set prices anymore. There’s just a lot of supply out there and a lot of demand, and
the price, like the price for almost everything, is now increasingly set by those role market
forces, not by a bunch of sheiks sitting in, in Abu Dhabi.
Rob: Without the energy boost that we have become used to here in Oklahoma, many believe
our economy could look more like the national economy this coming year. What do you think
the national economy’s gonna be like in this coming year?
Zakaria: I think the America economy is gonna pick up substantially. I think it’s gonna,
the country’s gonna grow over 3 percent. I think we will be the fastest growing large
developed economy by far. That is to say, to compare the United States to Japan or Europe,
the United States looks, uh, probably the safest rich country in the world, the most
prosperous rich country and the most dynamic. But of course you’re right, there are, the
oil-producing states – Oklahoma, Texas, North Dakota now with natural gas – are gonna feel
some of the pressure. Nine percent of the American economy is tied to oil. That compares
with, I think, 70 percent of the Saudi economy. So we’re in a very different situation. It’s
a diverse economy. And there will be substitutions. But remember, this is good. Pressure is what
causes countries, companies, people to reform, to adapt, to change, so Oklahoma has made
some very important investments that will actually bear fruit. All that will begin to
matter. And there are many areas where things will still continue to be, to do very well,
agriculture and things like that. So I don’t see, I don’t expect there will be a kind of
crash in Oklahoma, but yeah, it will be the, the boom times as you well know, you know,
can never last forever. Rob: You’ve mentioned a skills-based culture.
In terms of workforce, how are, is our economy changing?
Zakaria: The fundamental change that is taking place is we are moving increasingly and rapidly
to an economy in which people who can manipulate symbols and knowledge, by which I mean numbers,
words, concepts, are going to do well. And people who use physical, their hands to make
things, are gonna find it more challenging because those tasks, those tasks that used
to be done by human muscle power are now being done by machines or by Chinese and Indians.
So either you can find somebody who can do it much cheaper than you can halfway around
the world or you find a machine to do it. So the entire focus of our country should
be, and our economy should be, how do you get knowledge workers? One of the great tragedies
I find is that at this moment the federal commitment to basic research, basic investment
has declined. We are at the lowest levels of federal funding for science in 40 years
– at the very moment when we are trying to create a knowledge-based economy. It should
be the opposite. We should be spending two to three times as much as we’re spending on
basic research, basic development because those are going to be the industries of the
future. We’re not gonna have a huge steel industry in the future. Those kind of jobs
are just going to places like China and South Korea. But we could have advanced manufacturing.
We could have software design. We could have all those things that require knowledge power.
Rob: So we’re not talking about an economy that’s full of Ph.D.s but an economy where
the workers are certified and skilled. Zakaria: If you look at the manufacturing
we get, there are jobs there. There are fewer jobs, but they’re higher paying. But those
people, that’s right, they need, they need real skills. But those skills are about, as
I said, the manipulating of symbols, numbers, words – so it’s software programmers, it’s
people who know how to operate complicated computers and machines, which inevitably now
means they have to understand some software. If you look at the whole world of entertainment,
which is a huge industry, the big jobs are in design, in, in program management. So none
of these jobs are Ph.D.s. These jobs are often — you can do it with a bachelor’s degree.
But you do need to focus in on the kind of skills that are gonna be important. The sweet
spot is actually to have a strong understanding of computers and software with some kind of
creative sensibility. So if you are the English major who understands computers, you could
work on the next “Frozen.” All right. Those are, those are big, big industries. We forget
about them sometimes. Rob: You’ve been quoted as saying, “We are
in a new age of thinking.” Where do you see that we may be stuck right now, in the old
age? Zakaria: Perhaps the most important way in
the United States is, you can, it’s what happens to people, it’s what happens to companies,
and it’s what can happen to a country. Your success blinds you to the new world. We’re
doing fine. America is doing very well. It’s a powerful dynamic economy. But we’re not
as a result, as you know, we’re not looking around and asking ourselves what could we
do better? How, how’s the world changing? And the world is changing very profoundly.
I — you know, one, one decade ago, 10 years ago, China made up about 1 percent of the
global economy. Today, it makes up 10 percent of the global economy. The so-called emerging
markets, China, India, Brazil, made up 20 percent of the global economy. Today, they
make up 45 percent of the global economy. Within five years they’ll be half the global
economy. We’ll be all these third-world countries that nobody ever paid any attention to. So
when you start to see those kind of changes, if you’ll look at it and ask yourself, where
is the tallest building in the world? It is now in Dubai. Where is the tallest, the biggest
bridge in the world? It is in China. Where is the largest oil refinery in the world?
It’s in India. That, you know, that’s the new world. And to ask ourselves how we can
take the greatest opportunities there we have to recognize that we can’t, we tend to be
parochial, we tend to be somewhat comfortable with the world we know. And understandably,
it’s worked very well for us. But it may not work that well for our children.
Rob: Fareed Zakaria, thank you for your insights. Rob: Now, I was able to speak to Zakaria as
part of the Tulsa Town Hall’s lecture series and their next speaker is James Bradley on
Feb. 27. Now, he’s the author of the best-selling book that was made into the acclaimed movie
“Flags of Our Fathers,” the true life story of the Marines and corpsmen who raised the
flag on Iwo Jima.