CHRYSTIA FREELAND: (In progress)—as you can see, talk a little bit just for a few minutes about their basic take on the result and what they need. Then, I’ll ask a few lead-in questions, and then, I would love to have an opportunity to take a lot of questions from you.
Our speakers this morning really need no introduction, but I will briefly introduce them anyway. To my left is Larry Summers, former secretary of the Treasury, former president of Harvard University. Most precious to me, though, I must say, as my own former teacher—and you all know the stereotype of Harvard professors who are bossy, unreachable types who have no time for mere undergraduates—the most clearest—very clear memory of Larry is his spending a couple of hours talking to me about how is it important—(inaudible)—(laughter)—and I’ve admired him ever since. (Inaudible)—how—(inaudible)—American one later on.
Larry, also most important of all right now, is a columnist for the Financial Times. You’ll see his latest column in today’s FT, and I hope you read his first one a few weeks ago, which I thought was really excellent and in some ways set the stage for the big issues that people were voting on this week.
To my right is Richard Haass, also our co-host this morning and president of the Council on Foreign Relations, which I think most of you remembered that. Richard, also needs very little introduction to the group here—(inaudible)—to me in particular—(inaudible)—he has probably the experience in working in the government very close to first and second Iraq wars, and Richard actually is now writing a book about that subject, which I’m really looking forward to (writing ?). And I hope we can get to it—but—to reading—(laughter, scattered applause)—which I’m looking forward to reading. And maybe we can get some early insights from him on that subject. Richard also has worked in government on Northern Ireland, Afghanistan and—(inaudible).
So without further ado, let me stop. Larry, do you want to kick us off—(inaudible)—what you think—(inaudible)?
LAWRENCE SUMMERS: Well, it’s very hard to know. It’s very clear that this was a repudiation election in which the president and his policies, particularly his Iraq policies, were repudiated. It’s the seventh time since the Second World War to have 16 midterm elections and that the president and his party has been repudiated. Three of those—of the previous six, three of those—1946, 1994, and 1996—worked out relatively well for the—(inaudible)—U.S. president and his party. Some positive things happened in the succeeding two years, the party was reelected. In three of them, it crocheted a major change in American politics, 1958, and then it had—(word inaudible)—1958 and in 1966. So it was very hard to know how this one will play out.
One hopes that it will be a constructive period of major policy realignment in Iraq and foreign policy more generally, as the Bush administration will take the message: Work in a cooperative way and seek to repair the damage done by a policy that has combined bellicosity to a quite dangerous extent at a time when the challenge now will be resist almost all over the world on North Korea, increasing—(inaudible)—is Russia and China that is now a factor to be reckoned with in the world in a way that was not truly—(inaudible)—and those forces not necessarily constructed from the United States—(inaudible)—increasingly coming together.
So—(inaudible)—domestically it’s quite clear that the momentum of the election will propel an increase in the minimum wage, will propel some changes in policy towards big oil and towards the pharmaceutical companies.
It does not seem likely that fundamental things will happen with respect to entitlements, with respect to the overall structure of the tax system, with respect to global warming, with respect to further trade liberalization; the action will increasingly be on the defensive in resisting protectionism, and in large changes that address what I think is going to be the fundamental factor shaping politics over the next decade—the anxiety of 3 (billion) to 4 billion citizens of Planet Earth, many of whom live in the United States, who neither feel they have the smarts to compete with Microsoft and Wall Street nor choose or desire to compete with China and India on the basis of the cost at which they offer—(inaudible). And how that fundamental issue is addressed, I think, will over time—(inaudible).
MS. FREELAND: Richard, I think a question on everyone’s mind about the—(off mike).
RICHARD HAASS: (Inaudible)—the area where I think the election had clear consequences, unexpected consequences and probably not any consequences.
MS. FREELAND: (Laughs.)
MR. HAASS: In terms of clear consequences—(inaudible)—in the sense that what you have is either a repudiation or a rejection of what you might call more of the same. That is not an option. That was already in train, but clearly reinforced, the—no more of the same policy.
On the other hand, there is virtually no stomach for a quid pro quo policy.
So we are now into—it sounds novelistic—the third way, or distinguished (politically ?). But basically everyone’s going to be searching for the third way, and it’s going to involve a military dimension and a diplomatic dimension. The Baker commission will come out with its reports in a month or whenever. And essentially what they’re going to see, I believe, is some sort of emphasis on military reductions, redeployments, slight change in mission from operating to advising, possibly some repositioning in the north to prevent a Kurdish-Turkish war in the west, to prevent or slow down the infiltration close to the Syrian border. You’ll see some sort of new military surge, which will involve less soldiers—(inaudible).
And secondly, I think you’ll see a greater diplomatic dimension, perhaps greater emphasis—(inaudible)—long shot. And I believe possibly the most interesting part might to be bring about a greater regional dimension, involving both Iran and Syria. So I think that’s where we’re going on the Iraq side.
The unintended consequences of the election—Larry did one, which is trade. I think whatever chances there were for moving on trade are now nonexistent. Indeed, I think we’re seeing the United States once again become—the president of the United States gets trade promotion authority, I will bet, in 2009—(inaudible).
I think, though, that one of the unexpected positives, if you will, of the election would be immigration reform. This came up in a press conference the other day. But I actually think there’s a good chance now, because those who were opposed the comprehensive immigration reform, who are mainly conservative Republicans—they have been weakened. So there there is natural bipartisanship to do that.
The place where there’s few if any consequences is the rest of American foreign policy. And I would think that this is in part because of the nature of our constitutional system, where the president has most of the latitude, but also that the president right now is largely unconstrained except for two things: Army—troops and money. For foreign policy which doesn’t involve a lot of troops or a lot of money, he basically has discretion under our political system. So tomorrow, if he wants to have a new approach to North Korea, he can. If he doesn’t, he doesn’t have to. If he wants to have a new approach to Iran tomorrow, he can; again, he doesn’t have to; towards the Palestinians, he can; he doesn’t have to. And you can go around the world—global climate change, or Venezuela. Essentially he has tremendous discretion, again, to do virtually anything diplomatically and even militarily—(inaudible).
If, for example, he did want to take a more muscular policy towards Iran, again, he could, because it would not involve ground troops, at least initially. It would involve largely airpower. And there again, all the initiatives in the American political system when it comes to foreign policy reside with the executive branch. And that—(off mike).
MS. FREELAND: And in particular on Iran, what’s the issue?
MR. HAASS: Well, again, you’ve had the slow-motion diplomacy, when the administration had rebuffed unconditional talks with Iran.
They’ve essentially said we’ll only have conditional talks on the condition that Iran ceases uranium enrichment. At the moment, the Iranians have evidenced very little interest in ceasing uranium enrichment. The international community is divided on how to respond to that. You could have some sort of modest sanctions, ultimately taking on—(inaudible). (My view is ?) some time in 2007 the United States and the world could be faced with a very grave decision, which is essentially to allow this (to continue ?) or to conceivably think about massive sanctions or conceivably also the use of military force.
And all I would say is, again, there’s nothing in the election or in the fact the we’re bogged down in Iraq militarily that precludes that. That option is still there.
And this is also a president—never forget—who has a penchant for the bold. This is president who likes to defy conventional wisdom. To those of you who are saying he’s a lame duck, and now he’s got a Democratic Congress, and he can’t do anything dramatic towards Iran, I would simply say: Don’t be so sure.
Which is not to say there are not—I’m not suggesting he necessarily will, but I’m also—obviously analytically, there’s tremendous downsides to doing it. There’s tremendous, I believe, costs in terms of the price of oil, in terms of Iran’s ability to push back in Afghanistan, Iraq and many other places. On the other hand, there’s also tremendous downsides to waiting on the world, for Iran—(inaudible—enriched uranium—(inaudible).
So it’s a terrible set of choices (to see ?). And all I’m suggesting was nothing happened in the election which would—this week which precludes the president from either undertaking a dramatic diplomatic approach or conceivably undertaking a military one.
MS. FREELAND: Larry?
MR. SUMMERS: I think Richard’s right in his analysis of the structures.
I think there two things that affect the climate. One is, if there’s the Bush 41 view of foreign policy and the Bush 43 view of foreign policy, a very powerful signal has been sent of a preference to the former rather than the latter. And the personnel change at the Pentagon operates very much in that direction, is likely to be followed—and is likely to be followed by others. And that affects the foreign policy (climate ?). The second is that it’s less—it’s—there are actions where this is less true, but in general, the way in which steps in the foreign policy arena are viewed depends upon tomorrow, and it also depends upon the day after tomorrow.
And the Bush administration steps that look out of touch with likely days after tomorrow will be much more difficult to undertake than strategies that look within the realm of days after tomorrow.
So I think it is more difficult to pursue policies that are discontinuous with what presidents would be likely to want after January of 1989—2009 than it was before.
That said, the impulse of late second-term presidents to make their mark in history by doing something in the arena where they have enormous discretion, which tends to be the foreign policy arena, is very much there. And that goes in the direction of what Richard says on not limiting—(inaudible).
MS. FREELAND: If we can move to the next issue—(inaudible)—
QUESTION: Could you speak up, please? We can’t hear you.
MS. FREELAND: Yes. Sorry. I think my mike is—maybe it’s off. Right there.
I’m just asking Larry if we could move to domestic issues, and I’d be particularly interested in his view on economic policy going forward—trade we’ve mentioned, but also whether you see—(inaudible).
MR. SUMMERS: Yeah, one thing that bears emphasis is that the Democrats who were elected are disproportionately the Democrats whom Rahm Emanuel recruited, are disproportionately very moderate Democrats, a surprising number of whom are Iraq veterans.
I mean, one new way of thinking about the election is that the—is that the wings lost. And there’s been a lot of discussion of what happened to (Bloomberg ?) conservatives, but I think it bears reflection that in a Democratic near-landslide, nonetheless Ned Lamont was badly beaten in Connecticut. So this is really a trial for alternative centrists, based on a perception of greater competence, rather than an ideologic—rather than a major ideological move.
History suggests that when there’s gridlock, when there’s divided government, you tend to get slow growth in spending, and I think that’s basically right. Why will Democratic appropriators appropriate pork that will redound significantly for the benefit of a Republican president politically? And I think that’s the basic mechanism why a divided government produces slow growth.
I think (the) government’s too divided to do fundamental things about taxes or entitlements. My strong sense is that the actual deficit problem of the United States is more serious than is projected because of the low optimism and economic forecasts and because I think we’re not facing up to what we as a country will need to responsibly spend on our armed forces on average over the next decade. So I would say there will be incremental progress on the budget, but not fundamental progress.
I would say on—you talked about trade, where I think the action from the point of view of people like me will be more on the defensive in resisting protectionism than on maybe on the offensive. And on the large systemic domestic questions—making health care work better, making education work better, addressing economic insecurity, I think the right thing to hope for is a robust and serious debate in the context of the presidential campaign. I think—(inaudible)—action in the next two years is really quite unlikely. I’m inclined to agree with Richard that immigration is probably a little more—(inaudible).
MS. FREELAND: And, Richard, maybe on that point about immigration, do you want to elaborate on that? When we talk to businesspeople, it’s remarkably high on their agenda of problems with U.S. competitiveness, although you don’t see—(inaudible).
MR. HAASS: Again, the principal obstacle to comprehensive immigration reform (was ?) conservative Republicans in the House, who essentially wanted a security—(inaudible)—if you will, the comprehensiveness of a potential package. That obstacle, shall we say, has been removed. So I think you are looking at something very close to what the president recommended, with a security dimension, some sort of earned citizenship, whatever you want to call it, in regards to (coming here ?) illegally. I think there’ll be, in order to get business support, some selective increasing of quotas in certain classes of people, certain sets of skills and so forth. So I think we are moving, in that sense, in that direction, and I think the odds are pretty good. Let me say one area on trade where I worry about. It’s not simply the absence of—(inaudible)—of renewing TPA. In general, I think where—the (foremost ?) example would (a ?) senator from Ohio. There’s an economic nationalism out there, and it’s going to affect—(inaudible)—senior senator from New York about China. It’s where the trade debate is going to intercept with the foreign policy debate, and I think the possibility of some fairly tough approaches to China, continued resistance, say, for Russia moving in the direction of the WTO.
I think the renewed economic nationalism is going to have foreign policy consequences, and I think that’s a question mark. And it’s also something for the Democrats to wrestle with is, as what Larry said, his view is—(inaudible)—debate within the Democratic Party on this. And he’s saying basically he’s going to have to play defense. But there are going to be those who are going to be playing offense on this issue, and I think that’s an interesting debate to see how the power balance unfolds.
MS. FREELAND: The final question that I’d like to ask you both before we throw it open is where you see these results positioning us ahead of 2008, and maybe particularly—(inaudible)—would be your feel about where this leads to internal debate in the Republican Party.
MR. HAASS: You can look at it at two levels. One is individuals, and the other is the internal debate.
In terms of individuals, I mean, it’s just so hard to answer because we don’t know what the context is going to be when people start focusing on presidential politics.
And it’s fundamentally different—for example, Larry’s talking about, to some extent—(inaudible)—play out various economic scenarios, where what some see as a house of cards doesn’t stand. Okay, well, if that’s the case, that will create a certain political climate. If there’s another major terrorism incident in this country, that would favor certain candidates within the Republican Party who are seen as, quote, strong on that set of issues. Depending upon how Iraq plays out would have potentially some consequences for a candidacy such as Senator McCain’s. So individuals, I think, will—besides their own organizational and other abilities, the performance question, context matters when it comes to presidential handicaps.
In terms of the debate within the Republican Party—you got at it a little bit before—particularly on foreign policy but also on domestic, there’s almost three fault lines. There’s a social fault line, an economic fault line and a foreign policy fault line. And we haven’t really talked much about the social fault line.
I think on the economic fault line, there’s a lot of soul searching: How have Republicans allowed domestic spending to grow at the rate that it did? That is not what Republicans were meant to do. It’s not what they got elected to do. How did this happen? How did Republicans lose their way? There will be that debate within the Republican Party. It’s already begun.
The social issues, very little, I think, has been resolved there.
Foreign policy, to me, is the most interesting fault line. I do believe that there’s been an overreaching in this administration, and I think Bob Gates’ appointment certainly (reinforces ?) a correction. The correction is going to come largely through personnel, but also the world will impose its own correction. The United States cannot do some of the things—(inaudible)—it can’t continue to do wars of choice that have proved to be costly. We’re tapped out. And I think that is a different subject. That includes one of the—(inaudible).
And I think also there’s a lot of soul searching and questioning going on about democracy (initiative ?). What should be the purposes of American foreign policy, and whether transformation should be as close to the—(inaudible). My sense is that’s going to be—(inaudible). So we’re getting close to the modest, humble foreign policy that George Bush talked about six years ago, and I think it’s almost the great irony of this administration, is that it was Iraq, which was a discretionary war of choice, which has now narrowed the choices of Mr. Bush and Republicans for the next two years, and I think—(inaudible).
My sense is that, all things being equal, a more traditionalist approach to foreign policy will become dominant regardless of who wins the next election. I would think that the nature of the world’s problems, different global problems and Iraq—proliferation, terrorism, trade, climate change—these are currently multinational problems, plus the fact that the United States simply doesn’t have the resources, because of our energy dependency, our economic situation, our military—(inaudible)—that we are getting into an era where American foreign policy is going to become, if you will, more traditionalist, and the Bush years, I think, will be seen as something of an exception to the broad outlines of American foreign policy.
MS. FREELAND: And Larry, where do you—(inaudible)—in 2008, especially within the Democratic Party?
MR. SUMMERS: Well, one quibble with Richard. He said when the presidential election came into focus. (Inaudible)—for a lot of people, the presidential election came into focus roughly six months ago. (Laughter.) So it’s very much ongoing. But I agree with him that it’s a mistake to underestimate the power of events, whether it’s terrorist incidents, economic fluctuations, foreign policy, the rest, to cause the environment to look very different in the future than it does today.
In the three areas that Richard mentioned, in foreign policy I guess the way I think about it is, containment was a basically centrist doctrine. It was neither Henry Wallace appeasement nor preemptive attack on the Soviet Union, but was a moderate, supple policy. And that’s what’s being sought today, some formulation of that, and those running for president will offer various formulations that seek to be the containment of this era, and something in that space is likely to be adopted, for good or for ill.
On economic policy, I agree and disagree with Richard. Yes, the Republicans have allowed domestic spending to grow very rapidly.
Yes, there are a set of Republicans who were upset about it. I know of no evidence of any voter who voted Democratic or voted against Republicans because they thought spending grew so rapidly over the last six years. It’s a great talking point for Democrats to say the Republicans are hypocritical, but I don’t think that was at all important in the election.
I think people are looking for some credibility, for some credible vision on the problems that actually families care about, and the problems that actual families care about are now not—(inaudible)—that their taxes are too high and are not dominantly that if their kids make $20 million, they’ll have to pay too much in taxes on it. They are: Are the public schools any good? What happens to my health care if I lose my job? And what happens to my family if my wife loses hers? And that set of questions people are looking for credible responses to.
And so ironically, I think the ability to build a case for economic internationalism is going to depend upon the success of domestic policy in creating a greater degree of security. If the economy does not do well in the next two years, which I think is a very real possibility, those pressures will increase very substantially.
I don’t know yet what the right’s view on the social issues is. I think there is some evidence that evangelicals did turn out in reasonable numbers last Tuesday, but that people who were disgusted with the general way that policy being operated showed out—showed up in even larger numbers. If that’s right, a big shift toward—back towards debates on social issues is not going to be a (viable ?) strategy for Republicans. And I have a feeling, a sense that the high tide—(inaudible)—may have passed.
MS. FREELAND: Okay. Well, as promised—(inaudible)—open to questions, and I should preface that by saying Richard and Larry have very kindly—and I think pragmatically given the size of this group—agreed that all of this discussion is on the record. When you ask questions, if you have a particular person who’s—(inaudible)—could you please say that—(off mike)—(cross talk).
QUESTION: Thank you. Thank you very much. My name’s Joanna Schneider. I’m with the Business Roundtable, based in Washington, D.C. (Inaudible)—I’d like to know, if you were advising 160 CEOs in this new political environment, what be your advice in terms of the two or three issues that you think they could impact? And then, in a perfect world, how would you like to see business leaders change the way that they’re dealing with government and trying to effect change with government?
MR. SUMMERS: I’d say two things (in answer to ?) your last question. One is get behind comprehensive immigration reform because I think it’s important on lots of levels for the society. Secondly, you get behind—to begin to rebuild a consensus in this country that would support free trade. That consensus is badly frayed, certainly in the Democratic Party, also in the Republican Party to a considerable degree. And we need to rebuild—(inaudible)—require—(inaudible)—trade adjustments on a much larger scale and so forth.
MR. HAASS: Well, actually, it’s to get back involved in the political debate. One of the sad things of the last few years is the business community has—with some important exceptions—lost its voice. It used to be the strongest—or one of the strongest internationalist voices in this society, and for reasons you will probably understand better than I will, that voice has largely been muted by business leaders that opted out. And unfortunately it’s one of the reasons that, as a result, this country has become in some ways more economically nationalist, and this is just the time we need to avoid that.
Business leaders, as a result, get involved in all sorts of programs that promote, if you will, internationalism. (Integration of ?) foreign trade is one, education’s another. But that’s got to be in some way—that’s the (natural ?) constituency in this society for internationalism, and that voice, I think, has too often been, if not missing, much more muted than it used to be and much more muted than it needs to be.
MR. SUMMERS: Joan Spero explained something to me early in the Clinton administration that helped me understand all this. We were talking about Super 301, and Joan explained to me that the reason it was so dangerous was that, in the old days, there were the export interests and there were protectionist interests, and in order for the export interests to get their way, they had to prevail over the protectionists’ interests so we could have trade agreements.
And when policy created a third alternative, which was we could pursue our export interests without overwhelming protectionism, then everybody could lobby for that. And the constituency to reject protectionism was lost.
And I think the concern that I have with the business community’s strategies is that they have become increasingly sort of “When the issue is funding the Ex-Im loans that will go to my company, the CEO is on the plane to Washington.” When the issue is the Doha Round, the—(inaudible)—the plane for Washington and it isn’t the CEO.
And so the main issue for the business community is to ask how much of its real and credible capital is being generated behind company parochial issues, and how much is being generated behind (longer-line ?) broad-gauge issues. And I think the pressure Washington experiences (at high conviction ?) from the business community is much more around the more parochial issues. That may make sense from the perspective of every individual CEO who can sensibly free-ride on the rest of the business community with respect to the (public ?) issues, but it has reduced the effectiveness of the business community as a force for responsible internationalism in ways that I think are quite dangerous.
I think the traditional business community has also not been entirely successful in drawing the new economy into its midst. So if you look at the fraction of the market value of the New York Stock Exchange that’s represented by the companies that are—(inaudible)—the Business Roundtable, it is, I suspect, much lower than it was 15 years ago. And so are we hearing from—(inaudible)—there is a problem that—(inaudible)—more rapid turnover in leadership of the business community, the new and rising don’t tend to take a very active part in public policy.
MS. FREELAND: Please.
QUESTION: (Inaudible.) I have a very narrow question for you, Richard.
MS. FREELAND: Wait for the mike.
QUESTION: Where’s the mike?
MS. FREELAND: Right there.
QUESTION: (Inaudible)—very narrow, noncosmic question for Richard. How will our election, what’s happened in this election—I mean, by way of the campaign strategies—affect the Iraqis dealing with each other now?
MR. HAASS: How will this affect the Iraqis with each other? The short answer is—I mean, there’s two ways for me to answer that. In terms of the immediate result, they read the election results, how will that affect them? Not much, if at all.
Their problems, shall we say, transcend anything that happened here. The schisms, the fault lines, the animosities, to say the least, within and throughout Iraqi society are so profound that I think they barely skip a beat in the pace to kill one another. And so reading the election returns here would hardly get in the way.
The real question is, again, as for the indirect results of our election, what are the policy changes? But again, I’m quite bearish—I forgot; how can you use economic metaphors sitting up here with Larry?—about the ability of the United States to broker an internal political combat, the idea that there’s some sort of a deal out there, with a weak central government, large autonomy, revenue-sharing, power-sharing and the rest, which essentially is enough to get most of the people of Iraq to lay down their guns and for militias to essentially dissolve.
I think the odds of that happening are incredibly small. I think almost whatever it is we do, this civil war is going to rage and probably intensify. So this is an indirect way of answering your question. I don’t think that what happened here is going to affect the dynamics, the—(inaudible).
MS. FREELAND: Kenneth Dale (sp).
QUESTION: I’m Kenneth Dale (sp). I’d like to press Richard and perhaps Larry on one of Richard’s comments when he used the phrase “the third way,” which is most intriguing. Everyone agrees that the election was a rejection of the administration, a rejection of leadership, a demand for change. One voice was a demand to get out of Iraq, bring them home tomorrow. And the other was, “Well, maybe we should double or trip the amount of troops there and get the job done right.”
Everyone agrees that, whatever the policy is, it isn’t working. And so you come up with an easy way out when you say there has to be a third way. But I wonder if you could explain a little more about a third way. Which way is the third way?
MR. HAASS: I don’t believe that increasing U.S. troops for a sustained period is viable for two reasons. One, I do not believe the military can sustain that. We’ve got roughly 150,000 Americans now, even going up. I just don’t believe it’s sustainable. The costs would be too high in terms of retention, materiel, and so forth.
Secondly, I don’t think it’s going to work. If I thought that after a certain number of weeks or months of that strategy we would have results which suggested that my previous answer was wrong, that we actually had created a political environment in which violence in Iraq was beginning to recede on a gradual, steady, discernible basis, then I’d say, “Great.” But I don’t think it would happen.
So as a result, I simply do not think that increasing troops is sustainable, physically sustainable, if you will, and I also don’t think it’s going to succeed.
The option of pulling out quickly and entirely, I don’t believe, politically is going to be embraced. It will be rejected by the administration, and I think the Democrats will reject it as well, because if that were to happen and you have scenes, which you would have, of chaos in Iraq and blood-letting on a massive scale, the Democrats would obviously not want to be in a position—to put themselves in a position of being blamed for it. This is not going to be Vietnam, 1975 redux. They are not going to make that strategic error.
More of the same, which is the basic, has been rejected by the voters, and I think increasingly rejected by the administration itself. It understands that.
So when I think of a third way, it’s basically between more of the same, because I don’t take seriously a long-term possibility of increases, or pulling the plug. And what I think it means, again, is the military dimension of what I would call a third way is reductions, less U.S. forces in the central region, which is where 90 percent of the violence is, less U.S. operations, more where a U.S. role increasingly becomes one of training, equipping and advising, where you have one or two Americans with small Iraqi units, for example, and you could have U.S. forces parked in significant numbers in the north to prevent the Turkish-Kurdish problem and in the west, again, to try to limit the infiltration across the Syrian-Iraqi border, possibly even in the south.
So essentially it becomes more of dealing with the expansion of the war problem rather than with the core civil war itself. So that’s where I think we’re going militarily.
And diplomatically, as I said before, I think we are going to—there are strong voices calling for some type of a regional approach. The closest parallel is what was established for Afghanistan, where there was the so-called six-plus-two mechanism of the neighboring states there to help come up with some policies to try to bolster Afghanistan.
And I think, even in this situation, though American-Iranian and American-Syrian policies and objectives differ significantly, there’s also some overlap. And I don’t believe that either of these countries, Syria or Iran, want an all-out civil war. I do not believe they want the country splitting apart. They don’t want to see the emergence of a separate Kurdish entity.
So I do believe there are some overlaps, despite the differences between the United States and Iran and Syria, which again is one of the reasons that I’ve been advocating some sort of an Iraq-related dialogue. I’d also be in favor of a broader dialogue, but that’s a conversation for another day.
MS. FREELAND: Anything to add, Larry?
MR. SUMMERS: Just one way of thinking about the problem. U.S. policies had two objectives for the last two years. One is withdrawal and the other is credibility and chaos avoidance. Those have been the objectives, and the problem is they’ve been in substantial conflict.
And what’s now happening is the weight that’s attached to withdrawal is going up and the weight that’s attached to credibility and chaos avoidance is going down. And so policy is going to be much more oriented towards making withdrawal for sure and hoping for the best on credibility and chaos avoidance rather than by the other direction, which was preserving staying there and adjusting away from the plans that were only six months away for withdrawal.
And the difficulty is that it’s not going to be an easy road for policymakers to talk completely explicitly about how the policy is operating, because the ability to continue to influence events depends upon there being flexibility with respect to the pace at which withdrawal is pursued and the ways in which withdrawal is pursued.
But I don’t think there’s any question as to how the problem is structured. It’s to find the set of tactical moves in military and diplomatic spheres that get us to substantial withdrawal from troops in harm’s way while preserving a maximum of credibility and chaos avoidance.
MR. HAASS: Let me sort of give a slightly different way of thinking about it, again, using an investing metaphor which is within one’s portfolio. We have made a very expensive bad investment in Iraq. So what can we do now? One is, we need to reduce the losses there. And that’s what I think we’re talking about with reducing the American presence, trying to build some type of a regional framework. But we are going to still suffer a major loss. There’s no solution here. There’s no silver bullet. There’s no silver lining.
And secondly, we need to then rebalance our portfolio. We need to look at other places in the region and beyond where perhaps we can have some gains to offset the losses that are inevitable in Iraq. But no matter how successful Iraq policy is from here on in, we’re still talking about the amount of cost, the amount of loss we take.
And that’s where, again, I think, if I were advising this team, I would start looking at things like what can we do with the Iranian situation; possibly, most interesting, between Israel and Syria. There are things the United States, I think, can and should do that would show that we can still be an effective actor in this region and beyond.
And that doesn’t reduce the cost of Iraq, but it can begin to offset it, which is important that the perception not take hold that Iraq is part of a larger trend of failure in American foreign policy. We need to show other areas where we are still willing to invest and where we can still succeed, because perceptions here become extraordinarily important.
MS. FREELAND: Okay—(inaudible)—one more, and then we have to have more questions.
MR. SUMMERS: To pursue the investment metaphor, if you’re in a position where you invest in something you wish you hadn’t invested in it and you want to get out of it, often it’s a very bad strategy to announce to the world that your desire is to liquidate your investment as quickly as possible—(laughter)—because that assures that you get as low a price as possible. And that’s why proper policy here involves a certain disingenuousness about what’s going on, with a greater commitment to withdrawal relative to the political solution. The more talk about the political solution relative to withdrawal then reflects the actual strategic intention.
There is also a standard device in politics, when things are going badly, to widen the frame and—(inaudible)—place of immediate disappointment in the context of great long-run aspiration. And I think that pressure will be very strongly felt and will incline towards broad Middle East type strategies which I suspect will have very important—may have important consequences for good or for ill in policy towards the Israeli-Palestinian conflict.
MS. FREELAND: Okay, on behalf of Financial Times readers, I really appreciate the investment metaphors. (Laughter.) (Inaudible.)
But does someone have a question?
QUESTION: My name is—
MS. FREELAND: There’s a mike.
QUESTION: My name is Mary Breasted.
This is a question for Richard. I heard you saying that the Bush administration might consider the military option in Iran before the end of his term. How serious a threat do you think this is, and how can we stop it? (Laughter.) Because surely this would be a disaster. Excuse me for editorializing.
MR. HAASS: I’m not sure I have much to add to what I said before. Iran has been moving towards and has now realized a limited capacity to enrich uranium. The question becomes, where does the United States, where does Israel, where does the world decide that it can’t? Is there a red line? Is there a point at which—is it to accumulate a certain amount of uranium, a certain number of centrifuges, a certain—is it weaponization? You’ve got a whole debate about where the red line should be, if anywhere.
And the concern is obviously that, given particularly Iran’s current leadership, with the—(inaudible)—talking about wiping Israel off the face of the earth, the idea that this country would have nuclear weapons, should alarm everybody, and particularly since this is a country which has a history of aiding and abetting terrorist groups. And so the idea of simply falling back on deterrence, which is always an option, is not one—(inaudible)—either. It’s an option, but it’s not one that, shall we say, is risk-free or cost- free.
So I’m not going to sit here and advocate the use of military force against Iran. I know the difficulties in destroying the Iranian capability. I know how politically it could backfire there. It could backfire throughout the Muslim world. It could constitute capabilities that could unleash terrorism and other—(inaudible)—oil could go to $150 or more a barrel.
There’s lots of things that could or would likely happen. All I’m saying is—it reminds me of when I taught at the Kennedy School. I used to tell people foreign policy is hard. This is hard. There are—these are really tough options. And all I would say is, the one thing I don’t believe we’ve done enough of yet is doing a full- fledged diplomatic option to Iran; lay it out, not just privately but publicly. And the reason is, the one thing the Iranian government is scared of is the Iranian people. And they know particularly that the economy of Iran is the single greatest source of friction in that society.
What I would do, if I were the administration, I would put on the table a package that says, “Here’s what we expect of you. Here’s what we’re prepared to do for you. And here’s what we’re prepared to do to you if you don’t agree to this set of standards.” And I would make it public.
And what I would tell the Iranian people is, “Here is the price you’re paying every day in your standard of living for the lunatic foreign policies of your government. And if this government would only give up terrorism and nuclear weapons, here is how your standard of living could increase in a small amount of time.”
I would put pressure on that government from within. It would also help build, I believe, international support for our policy, because we would look reasonable that we were giving the Iranians a fair and reasonable alternative to the path they’re on. This could include security guarantees, economic incentives, diplomatic incentives, what have you.
And, by the way, it’s the same sort of approach you want to have with North Korea. These problems are not totally disseminated, because again, you do not want to have countries with certain behavioral patterns sitting on mountains of nuclear material, in the case of North Korea now, with actual weapons.
So I can point out all the down sides of military options, and I have pointed them out. But we shouldn’t kid ourselves. There are down sides to a world in which countries like North Korea and Iran are sitting on enormous amounts of nuclear material or, even worse, nuclear weapons. In both cases, again, I would pursue much more developed diplomatic options, not because I’m convinced they’ll work, but because they might work. I don’t like the alternatives. But we also need to demonstrate they don’t work if we are going to think about building support for alternatives.
The analogy, by the way, is to the previous Iraq war, where we put all sorts of sanctions in place against Saddam after Iraq invaded Kuwait. And we didn’t put them in place because people like me thought that sanctions would work to get Saddam out, but I thought it was an important—(inaudible).
Sometimes in foreign policy you’ve simply got to demonstrate that lesser options don’t work before you can build domestic and international support for escalation, before you can persuade yourself that more dangerous and risky options are actually worth undertaking. And that’s where I think we are with both Iran and North Korea.
MR. SUMMERS: I don’t have a prescription on Iran. There is a difficult point about political debate and democracy. It is one thing to believe that a military attack on Iran would have terrible consequences and that U.S. policy should understand that. It is a very different state to say that the United States should have the kind of internal political debate that would establish to the world that the possibility of the use of force had been ruled out by the United States.
MR. SUMMERS: No, I know you don’t, but I’m saying the tone of the question suggests that wouldn’t it be great to have a kind of debate that established to everybody’s collective satisfaction that force was a terrible option, and so it was off the table? And so one needs to be very careful about trying to have domestic debates that serve to take things off the table.
MS. FREELAND: Okay, I’ll take just one last question.
Jason, do you want to ask it?
QUESTION: Jason (Wright ?).
I want to go back to your Business Roundtable response for a second, comment, and then a related question.
The comment is, I disagree with both of you the role of the business community in trade/foreign policy, which is I actually think, over the last four years, by default, the business community has had to do it themselves. So I don’t think that we have been absent in Washington, but rather, if you kind of survey our Business Roundtable person on the number of miles that CEOs have had to rack up traveling because the government hasn’t been there to the same extent backing us up. And the side benefit of that, obviously, has been that we’ve been, I think, the positive face in this current foreign policy environment for the U.S. So I just disagree.
But two, part of what’s gotten in the way is the neocon population in the whole foreign policy establishment. And I guess my question is, post-election—obviously we’ve seen what’s happened in the Pentagon—do you see more changes coming in the State Department, et cetera, where we might see a lessening of the neocons’ weight in policy?
MR. HAASS: I think that school of thought, shall we call it, has been—(inaudible)—and I think is one of the—(inaudible)—of Iraq, that that was the high point—(inaudible.) (Laughter.) I see the surprise in your face. By the way, it’s okay now to use French expressions again—(laughter)—as a consequence of the election. It’s no longer politically unacceptable.
Where was I?
MS. FREELAND: Death of neocons, question mark.
MR. HAASS: No, it will continue to be a branch of not just the Republican, but largely Republican foreign policy debate in terms of transformation. And it goes back 100 years. It’s Woodrow Wilson. It’s the whole idea of whether the principal business of American foreign policy ought to be to refashion the domestic policies of others—(inaudible)—the whole democratic (piece ?), which essentially says that you can’t have stable relations with non- democracies. So, therefore, you ought to have an ambitious foreign policy that tries to remake the world in certain ways, because that’s the only way to bring about the sorts of behaviors at home and abroad with these other countries.
And I think that—the question of how important that should be, as opposed to a more realist point of view that the principal business of foreign policy ought to be the foreign policy of others, and related to that is how you go about it, whether the use of military force, the use of incentives, sanctions, trade agreements, what have you.
But I think this question is not going away about the purposes and means of American foreign policy. That will be here. It’s been here for over 100 years. It’s going to stay. All I’m suggesting is, for the next year of American foreign policy, I think the pendulum has swung and will swing in the direction of a more traditional point of view. But it won’t be absolute.
We’re still going to talk about democracy promotion. We’re still going to have debates about human rights and the lack of democracy in places like China, about the shrinking of democratic states in Russia. Those debates are not going to—and obviously in terms of the war on terrorism and the Islamic world, these debates are going to stay with us. But I do think the balance of power—(inaudible).
MS. FREELAND: Okay, Larry.
MR. SUMMERS: Here’s what I’d be worried about on the Business Roundtable, on the business community’s side, and I think it’s—(inaudible)—of the business community. It’s the issue, not today or starting today, but will be a big issue over the next decade. Are the CEOs of the Business Roundtable on America’s team or are they on Davos’s? And that is a question that will be increasingly asked in the political debate.
Now, if you read Sam Huntington’s most recent book, what got all the attention—what got a lot of attention and was much debated were a set of views about immigration and the character of our immigrants from Mexico. But there were also very powerful chapters about the cosmopolitanization of elites, and in the same way that you’re looking at Rochester, which was once very importantly propelled forward by Xerox and Kodak, and it’s not the same today. And you do that with a variety of cities, that same issue at the national level is going to loom.
And on whose behalf is advice being given when the CEO of a company that earns half of its profits from operations abroad, 40 percent of whose shareholders live outside the United States, come and speak to Congress and the president of the United States and say, yes, they have been traveling a ton, and that’s been kind of a valuable thing, but their knitting the world together through their travels is not going to be seen self-evidently by the American people as being in America’s interest?
MS. FREELAND: I do, however, encourage you to remain members of the cosmopolitan elite—(you are our readership ?). (Laughter.) Don’t totally give that up.
Thank you very much for coming this morning. (Applause.)
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