thank you for watching state of the union. \s. in other words, we have the usual gps fare today. first up, great panelists to gaze deeply into their crystal balls and tell us what 2014 will bring for the world? more wars? more peace? will we all make more money? in the bon us round wharks will hatch in sochi. and some pointers on success

and create activity. from youtube's bono. and then from elan musk s. "fortune's" businessman on creativity in business and science. and thanks to globalization, we've gotten used to finding coca-cola in the kalahari and russian vodka in roswell. is globalization on its way out? there's one indicator that points decidedly in that direction. but first, my take. it's the beginning of a new year and time for people like me to make predictions. i'm feeling bullish. last time this year i argued that the economy would recover better than expected. that's basically proved to be true. this year i'm going to make a less clear-cut prediction. 2014 will be the year that china faces a fork in the road. it will revamp its economic

system, deal with some of its growing problems and set itself up for another decade of growth and stability. or 2014 will be the year that the great chinese miracle hits a serious road bump, perhaps more. i know, it seems odd to speak of problems an the snead for reform in the world's fastest-growing big economy, but china has built up imbalances in that economy for some years now, and they are not sustainable for much longer. even before the financial crisis, china's top officials were aware that the economy was in premier jiabao's own words, unstable, imbalanced uncoordinated and -- since then in response to the global economic slowdown, china bumped even more bien into the economy. the result is that china's total and public and private debt is more than 200% of gdp, an

unprecedented level for any, she wera points out while it took $1 of debt to produce one dollar of gdp growth for china, this year it -- businesses and local governments from piled on debt, the property boom that is acsell wrayed. wow pot changes soon, this will be a bubble that will burst. china faces other challenges, the average china ears person almost anywhere now experiences serious air and water pollution. they're also increasingly outraged by something as ubiquitous almost -- corruption. the party has promised to take on the challenges to ensure that officials are less corrupt and more focused on ecological damage, not just growth. if in fact the new leaders of china do all these things, they will face political resistance and backlash, and from powerful

sectors in society. president jinping has launched a campaign. he has also sought to stabilize the party's power by tightening the noose on any critics in the media, universities or even from private business people. i'm not ready to bet against china. its leadership has shown itself to be capable of difficult decisions and smart execution. if the leaders do manage this transition well, china will emerge stronger and become the largest economy in the world. if they don't, they will like lie face a slump and perhaps political tension that is bubble up in the wake of a slowing economy. 2014 in china in the year of the horse, but for all the rest of us, 2014 is the year of china. for more, go to cnn.com/fareed and reed my time column this week. let's get started.

you've heard my take on what to look out for in 2014, let's get straight to a terrific panel to get their opinions and. zanny minton beddoes is the economics editor of "the commission. ian bremer. bred stevens is the pulitzer prizewinning columnest for "wall street journal," and anne-marie slaughter is the president and ceo of the new america foundation, a former director of policy planning at the state department. okay. zanny, what everyone wants to know is will we get richer in 2014? i suppose the u.s. economy principally, but what do you think will be noteworthy? >> i'm going to stick my neck out. i think the global economy will get better and improve, largely because of an acceleration. that sustained acceleration that we've hoped to hasn't happened

yet, but i think will -- >> to 3.5, 4% growth? >> 3%. 3 rather than 2. why do i think that? because i think the headwinds from the deleverages, paying down of debt is over, mortgage credit is increasing, consumer balance sheets are in reasonably good shape, corporate balance sheets are in excellent shape. the fiscal tightening that's dragged down growth is abate. the budget deal is very important. push the tightening down the road when the economy can do it, and underneath it, the u.s. economy has some big strengths, whether it's the shale gas revolution, a much more competitive labor force, whether it's the kind of traditional strengths of this free market economy, i think they will come to the fore. we won't see the growth rates from the recession in the '80s. for a the lo of the americans it will still feel grim.

second biggest economy in the world. i think it's a moment of reckoning. the chinese will either make big reforms, or it's difficult to imagine how to keep this easy credit or easy money going. what do you think? >> i completely agree. i think jinping's 30i789 has -- and what sheer see in shanghai, in anti-corruption, trying to create more transparency of senior leaders -- >> but he hasn't eased up on the accelerator of easy credit that's currently fueling 8% growth. >> he hasn't yet. but what we also see him doing is putting in place a national security council that is focused internal security, giving him control. he's going hard on western press. why? because as he starts to engage

in the more difficult times of reform that you are talking about, that creates weakness and vulnerability, he doesn't need a national security council that will kick the can for a year, but he needs one if they start having seriously truculent people that say i don't i don't want to grow. he's created consensus at the top, and it may not work, this is unprecedented stuff. >> i don't want to -- we'll see about xi, but internationally he's been playing his hand very poorly. it's hardest to think of more useless prove indications they could make against the japanese, against the philippines, against vietnam, and increasingly against the united states as far as our treaty involvement. >> i'm much with ian, this is all about domestic politics,al

those prove indications are weighing of buying himself credibility with the pla, with the chinese army, and similarly he's -- i think he's just shown is tom freidman wrote -- do not ban numbs and bloomberg reporters, because you need a free pres what does he do? the next day he says i can investigate my own corruption. >> i think the $64 trillion -- or billion dollar question here is, is chinese aggression in its neighborhood a sign of weakness and insecurity by the leadership? or is it a sign of confidence and strength? i suspect it's weakness. >> let's get zanny in. you can talk about china, but i want to ask a simple question -- is the fear of the collapse of the euro off of the table. >> it is off the -- or collapse is off the table.

whether the membership will stay the same over the next two, three, four years, i'm less sure. i think 2014 will be a year where europe won't face financial collapse, but it won't grow again. it is basically a stagnant region. i think the risk of the euro area becoming like japan was is very, very real. >> that could be a drag on the u.s. economy on the global economy. >> well, i think the euro was a serious concern for the -- and that goes back to your -- the -- it's been a shrinking place, the fact that it's stagnant is not great, but it won't bring the rest of the world down. >> pry sizely because we're stronger and more competition, because we have shale gas an -- >> especially manhattan real estate. >> when we come back, we'll talk more about the united states

directly. what will it look like in 2014.

we are back prognosticating. ian bremer, bret stevens and anne-marie slaughter, looking forward to 2014, the one thing we know is the united states has the biggest diplomatic possibility in 34 years with iran and one of these huge moments. what is going to happen? >> well, i'm going to stick my neck out. that's the point of these kinds of shows. i think we will get a deal with iran. i readily do. i think the domestics politics and economics situation in iran is such that they have a great interest in getting a deal. we certainly do. when that happens, it won't change everything overnight, but that will redraw the geopolitics of the united states. if we can talk to iran, think what the pullout of the troops in afghanistan would look like.

suddenly we would be talking to the iranians, the pakistanis, the indians, a regional group. naturally we've been closer to iran that this to saudi arabia. i mean, for a long time iraq was our align. we would suddenly be working with both turkey and iran on a host of questions where iran could actually play a very positive role. that's not going to happen all next year, but if we go ahead a deal, the implications of that deal will shab the next decade in the middle east. >> bret, you thought this temporary deal was worse than munich? that was something of an exaggeration, but you think a deal could happen? >> i think anne-marie is right, we could get a deal. i think the iranians are interested in a settlement that allows them to become a threshold nuclear state, which is dangerous, effectively tantamount to become a nuclear state.

we won't get a reformed iran or an iran prepared to work with us on any more friendly basis than putin's russia has been since the so-called reset, but we're going to threw three, if not four core friends who have seen us as a bulwark. egypt and also israel. >> these are all allies of the united states when we had very close alliance with the shah's iran. why is it impossible to maintain a good relation with saudi arabia and iran, as we had in the '30s, '40s, '50s, '60s, '70s. >> the place you're speaking about is a country with a limited set of ordinary nation state interests. my contention is that it is and has been for 34 years a cause with global interests and

profoundly ideological view of the world. i don't think that changes -- >> sochi, what is going to happen? what does russia look like in 2014? >> one quick point, which i think there's a big difference between what the interests are of saudi arabia and israel in an iran deal and they're against it, and they should be, and what the americans' interests are, and they're largely in favor of it, because we want to strict ourselves. the syria deal was clearly bad from a saudi perspective, and clearly bad from the perspective of the syrian people. from an american perspective, we're out of it. i think it's important we identify where there are differences between american and traditional allies. those interests are changing. on russia's sochi, this is going to be a geopolitically interesting olympics. not what i like to hear about the olympics. we already know there are a lot of folks who aren't showing up. we've heard from a from the french, from obama, from biden.

there will be some gay american athletes showing up to show american diversity. putin will not like that. we're tweaking this guy. sochi will be a disaster. they've spent more on this olympics thain the last five together. my prediction, 2014, if putin isn't the prime minister by the end of the year. i -- >> you have to talk about -- >> the deputy guy. >> a technocrat. >> putin has had a fantastic year, russia has not. his interests are decoupled. what's russia won recently? snowden, assad, yanikovich. this is not helping the russian people. their balance is at $117 a barrel, when oil prices even if

there isn't an iran deal, are coming down. if there is, my god. this will be interesting. >> a quick thought on the iran thing. your prediction for 2014 would be that israel will or will not strike? >> you know, i've been making this prediction on this show for so many years that it will strike, that i have to stop and ask myself, what has kept it from striking? i think the issue has been capacity, can they actually do the job? and the internal politics? even at the highest levels of the security cabinet there are real doubts about whether they can accomplish something that would be worth of candle, so to speak. that's the real question for the israelis. >> the big question we were going to talk more about america, but the america the world will be watching most attentively is janet yell len. everybody has assumed she is going to be much more comfortable with an expansionary monetary policy. >> it's already begun, and i

think she will be in substance very similar to where the benangie fed was in style. she will be very calm, very considered, very well respected very fast. if, as seems now plausible, fisher is nominated to be her number two, it's going to be a top notch team. it's a tough thing to do. this shift from starting to taper to then indicating that you're going to continue to taper without scaring financial markets, they messed it up in 2013, the summer of 2013. the taper shock was in large part a communication misstep by the fed. they did the introduction of actual taper in this month, extremely well, so far so very good. they've convinced markets that tapering is not tightening. 2014, the test is can they continue that. i think much depends on how the u.s. economy does. i think she and the fed have every capacity to do that well. >> when you look around the

world, what are you watching in 2014? >> i'm going to -- i'm watching, among other places, kurdistan, which may seem unusual, but what you're seeing is turkey pushing closer and closer to the iraqi -- the kurdistan and northern iraq. that's driven by turkish domestic politics. that's a tremendous flash point in iraq, and also with respect to sirria. as syria falls apart, you have kurds in syria. >> one of the most oil-rich regions in the world. >> absolutely. and they could be playing around the issue of the kurds. >> what are you looking at? american allies, not canada and mexico, not israel, japan and britain, but you get right under that group, and everybody is in play, indonesia, saudi arabia, south korea, france, germany, britain, all of these

leaders that feel like american commitment to them is really open to question, and how is that going to be articulated in article -- their security policy, those are things i'm looking at. >> quickly, they precisely why you want to be mindful of what your allies want, a world of freelancer is ultimately very dangerous for the understand. that's what we're getting from too many countries to count. very briefly we should say something about mexico and the change of the oil law, which i think will have profound strategic effects on the north american energy market, you don't want to call it independence, but you want to call it security. >> they are opening up the oil industry, which should make it much more productive. >> 75 years of misbegotten socialism. >> two elections, india, looking at brazil, too enormously

populous countries. they're under a man who is a hindu nationalist, looking very likely to do extremely well is favored, because he's deemed to have a more business friendly approach to the economy, quite what that means will be very interesting to watch. brazil has a very interesting to see how that plays in the world cup. is brazil a catastrophe next year or do better than expected? >> and scotland, scotland will be very interesting. scotland will vote on whether to leave the union, the united kingdom the. i predict it won't, but in my little world that would be very interest. zanny minton beddoes, ian bremer, ann marie, thank you. very we reached the end of gobblization? also, one on one with a rock star. ♪ it's a beautiful day

u2's bono is on the show. nng in the morning? yeah. getting your vegetables every day? when i can. [ bop ] [ male announcer ] could've had a v8. two full servings of vegetables for only 50 delicious calories. i've got a big date, but my sinuses are acting up. it's time for advil cold and sinus. [ male announcer ] truth is that won't relieve all your symptoms. new alka seltzer plus-d relieves more symptoms than any other behind the counter liquid gel. oh what a relief it is.

notice for a what in the world segment. at the start of 2014, let's look at one of the great trends. you're tv was probably made in japan, sneakers likely manufactured in china, and your

coffee might be from kenya. so here's my big question. have we reached the end of globalization? let me explain what i mean. for much of the last 30 years, there has been a steady trend in commerce, global trade has expanded at about twice the pace of the global economy. for example, between 1988 and 2006, global trade grew on average by 6.2% a year. during the same period, the world's gdp was growing at nearly half that pace, but a strange thing has taken place in the last two years. growth in global trade has dropped dramically to even less than gdp growth. the change made me wonder, has the incredible transfer of goods around the world reached some sort of pinnacle? have we exhausted the drive toward ever-more globalization? a fascinating thesis. the world has seen historical developments in the l.a. few

decades, enter net, china opening up, fast and chafe travel, all these trends led to a massive accelebration in global trade. have those trends peaked? could the next big invention end the need for more and more trade? imagine a world where you need a new faucet in your rest room. instead of going to the local store which sells faucets made in china, which contributes to global trade, now you just print out your own faucet sitting at home or a local store. are people also getting more interested in local products compared to global xwrands? joshua cooper-ramo points 0u9 in an essay if "fortune," that localization is on the right. is this simply a pause, or could it be more? the answer will depend on politics. the last time the world saw a consistent period, where it

lagged behind global growth, one factor was the rise in protectionist policies, as a response in many cases and the disruption of the gold standard. at one point under what was known as the tariff, the united states government began imposing import duties, aimed at protecting domestic farmers. instead it exacerbated the depression, led to a steep drop in trade and wave of counterprotectionist measures by other countries. the world has learned its lessons, but perhaps not as well as it should have. according to the independent think tank global trade alert, we're in the midst of a great rise in protectionism. in the 12 months preceding may 2013, governments around the world imposed three times as many protectionist measures than moves to open up. andy trade policies arty highest according to the peterson

institute, the rise cost global tase $93 billion in 2010. there might be good news on this front. last month the world trade organization passed a deal to cuss red tape in customs. a small start and there's a lot more to accomplish. globalization and trade have produced huge benefits for people, especially the poor, who have been able to make their way out of poverty in a faster growing and more connected global economy. but globalization won't keep happening by accident or stealth. politicians will have to help make it happen. up next, two great conversations about create activity and innovation, first with bono of the rock group u2. the other with the man who wants to make traveling to mars a reality for human beings. elon musk, the founders of space-x. stay with us for these fascinating interviews. oh hey, neill, how are you?

[ male announcer ] ...you'd expect us to have a highly skilled call center. kevin, neill holley's on line one. ok, great. [ male announcer ] and we do. it's how edward jones makes sense of investing.

hello, everyone. i'm fredricka whitfield, with a check of our top stories. a dangerous arctic blast is barreling across the u.s. right now starting the u.s. with heavy snow, ice, and pushing temperatures well below zero. the front is marching "e.t." by tuesday, nearly half the country will be shivering. several cities are already closing schools for monday and opening up warming centers.

the nasty weather is being glamd for thousands of flight cancellations. two jets slid off icy taxiways at jfk airport, and chicago o'hare. no one was hurt. medical marijuana could soon by legal in new york. supporters say governor andrew cuomo will take executive action, allowing select hops to dispense it to certain patients. no comment yesterday from the governor's office. 20 states and the direct of column byy already allow it. tonight in green bay, what are the players thinking? well, i'll ask a former green bay parker. that and more coming up at 2:00 eastern. "fareed zacarias gps" continues now. i recently had the pleasure to tall to two of the most

creative people, who have brought them each great success. they are bono, the lead singer of u2, and elon musk, who heads two of the most innovative disruptive companies in the world. tesla and space-x, when manufactures and launches spacecraft. i saved some of the best parts of each of those interviews, exclusive parts where i talked to them about the creativity, where they find inspiration. first up, bono. what do you think makes somebody creative, in the sense that you understand it? >> a song, writing of songs and

thinking up opportunities. >> i can only speak from my own experience, but observing the species so close, as i have had over the years. i think it's, um, often emptiness, a void. and the attempt to fill the void is art, and the artist is the person who is making an absence if you were not completely of sound mind, you would not need 70,000 people screaming at you to find normal. it's the god-shaped hole i think one described it once. performing comes on like a twitch, really. i have no choice. a songwriting piece is different. it comes in two kays.

despair, an attempt to put things right that have been wrong, or joy, just ebullience. when things are going well in my life, my family, i write naturally, i can't stop writing, but also when i'm in a hole, a corner, i tend to write myself out of it. >> you wrote me once that sometimes you get up with a tune in your head, you don't know where it came from? >> the arrogance of artists is to be really despised, because it is a gift. you wake up with a melody in your head, so in that sense it's like inherited wealth or being born with a beautiful face. you should not be made arrogant by something you didn't create yourself. so the talent is latent. i guess my father was a tenor, a

really fine singer, and he also loved to paint. he loved shakespeare, loved to act. so i have all of that in me. it's very easy for me to write unfortunately it's not easy for me to be great at it. that seems -- that's the most maddening part of create activity, i can't seem to figure it out, how it works. like with u2, for many years in the studio, if you saw us, you would laugh. it was just this dysfunctional musicians making horrible noise. eventually it comes together, some top-line med did i appears, a harmony, rhythm, bam, we get to something special. it was easy to tell the special from the crap. 'lot of the music we -- through you is obvious political.

nowadays, it seems less so. why do you think that is? maybe it is. politics, or as policy dylan calls them, topical songs, they can often be very boring. we've written good ones. to have to come from a place, if you said yourself a task to write a song, i don't know how ever great the song will be. the great songs kind of write you. often i might be sitting here with you, and i might say, this is really on my mind, i'm very concernedo concerned about what's going on. you would think i would write a song about it, it's not like that. there's a whole other thing going on in my personal life, a whole other thing going on in my unconscious, and it is what is going to come out. now, sometimes they will connect, those two things. i will write a song, for

example, wrote a song for an san suu kyi, called "walk on." ♪ walk on ♪ walk on the song is not literally about her. it's also about -- you're always writing songs to yourself to try to get yourself through something. >> so it's more about looking inside of you rather than looking at the world? >> yeah. it's sort of a funny thing, and it's the same with singing. you know, sometimes you're on stage, you'll be singing, you know, and you'll be thinking, as mick jagger says, about the dry cleaning, though i find it hard for him to be thinking about the dry cleaning, but at other times, the song is -- it's you, you're one and the same, as an irish poet yates says, the dancer and the dance become the same thing. so it's slightly magic. i know you probably don't want to believe in that, because it

could be such hocus-pocus. i just caught myself here, it sounds like such ma larky. when you hear people on the grammys saying i want to thank got for that song. i'm like, don't blame god on that song. that's your song. but there is something magic, something unknowable about art. >> you are deeply steeped in poetry, opera, art. do you think -- is that a prerequisite, so really do great -- >> i don't know. i've seen it come out of people on the street. i've been in corners of africa, and somebody just doing amassing work. it helps, though, irish people love language. our revenge on the mother tongue, you know, english

language was to sort of make it our own was to chop it up and make it minimal. it's like chewing gum, stretch it and pull it. with -- more baroque and more ornate. our relationship with the language is testy, but i think it's done well for poetry, playwrights and popely no songwriters. >> do you think you get more creative over time or less? >> i'm looking at gravity right now, as a rock and roll band, no one has done their best work who's been around, no band, for 30 years. so i don't know, we're going to see. but you notice what, why should it be true of a rock and roll band?

i'm humbled that in our post-punk combo from the north side of dublin, and to think that maybe our best work might be to come, even if the odds are against it. >> well, let's hope that your best work is to come. bono, a pleasure to have you on. >> thank you. up next, elon musk, the founder of spacex, where does all his create activity come from? we'll find out.

i've got a job to do today. i've got a job to do today. have a good first day at work, mom! your donations to goodwill fund job-training programs right in your community. feels good to start fresh, right? sure does. narrator: and like that, you're a job creator.

elon musk is one of the most creative business people i know. he thinks big. he started spacex in order to perfect the technology tattle a colony of humans start odd mars. last year he released into the public domain his ideas for a concept he calls the hyper-loop to get people from los angeles to san francisco in about 30 minutes. i wanted to know just where that sort of creativity comes from. so i asked him. people think of you has something of a dreamer, like you're dreaming about life on mars, about people being carried in pneumatic tombs from city to city. do you think that imagination plays a large role in your life? >> yeah, absolutely. i think, with respect to create activity, a lot of it is just

trying really heart. what if i did you how do i be more creative? have you tried? >> they don't send their mind in that direction. which i find strange. like literally the first order of business is to try. >> do you find when you hire people you are looking for people who have that mindset who are willing to try stuff? >> yeah. what we look for is evidence of exceptional ability. and. >> defined by grades? >> grades is a fairly obvious way. but there are other things in their background that they have done that are exceptional. like they created something when they were a kid like some cool

technology. like maybe they won a robotics competition. >> and that would be important? >> yeah, i mean in college, you can gain a system that get you courses that get you a high gpa but they are not demonstrating creativity or out of the box thinking. >> how do you feed out of the box thinking? >> do you do anything to feed creativity? >> yes, in fact, if somebody is a senior engineer and executive and they are not trying to do radical improvements, that issen acceptable. do you feel like you draw inspiration from scientists? >> where else do you go?

>> i like i'm a big fan of history. i like a lot of things like history, lis teratureliterature happened to civilizations, clearly they have a life cycle in history, and so i think okay, what could we do to make the live cycle better. maybe we can't live forever but we want to live as long as possible. >> who are your heros? i notice a lot of the conference rooms are named after physicists. are those your heros or is it edison? um, i'm a big fan of people who have made a positive impact on

civilization. i love ben franklin. that guy did so many incredible things. he did what was needed at the time it was needed. do you look at yourself that way? >> it seems like you look at the world and see a problem and come up with the solution yourself. you start with the real world. yeah, if one isn't grounded in reality, like, physics is literally so if you are doing something that the fundamental laws of physics you are more likely to be wrong than get a nobel prize. >> kids are looking at you and know that you are the inspiration for iron man. >> i'm the partial inspiration for the movie, "iron man". i can fly.

>> if you can't to do things like me you have to be good at things like technology. understand how the world works and, try to be as accurate as possible about that. and like i said, also try to be creative which means try to think of things that haven't been done before but would probably make the world better. quite a lot of mental evidence to do that. i don't just come with stuff like willy nilly. occasion ali, but it is rare. you have to think until your brain hurts. good point to end on. thank you. >> up next, why we're number one. i don't think america missed something. right next door to my office i'll explain when we come back.

there is about a month to go until the sochi olympics, stay tuned we'll tell you the correct answer. this week's book of the week is the kenan diaries. he was america's great strategist of containment. these diaries reveal him to be a genuine classical conservative.

plus he's a beautiful writer. now for the last look. we have been inundated with the best of 2013. literally in columbus circle. one best round about of 2013. that is according to the brittist roundabout society. digging deeper the roundabout is a thing to be appreciated. according to america's department of transportation replacing cross roads with circles leads to a 90% fall in deaths. unless you drive like chevy chis in europea nxn vacation, we sugt

the world build more roundabouts. the answer is norway. when comparing the number of people in norway, the count is that much more impressive. thank you to all of you for being part of my program this week. i'll see you next week. >> hello everyone. here are the top stories we are foll following in the news room. half of the u.s. is getting hit by a polar brast. what you need to know to stay safe during the deep freeze. the governor of new york is about to announce a major change to his state's medical marijuana laws. anxious waiting tore millions of