this is gps, the global public square. welcome to all of you in the united states and around the world. i'm fareed zakaria. today on the show, tough talk on turkey. president trump's new tariffs have battered an already troubled economy. will it work, or will he throw europe and the global economy into a new crisis? we'll talk about trump's economic strategy and its costs. also, it's been a record-breaking summer, but not

in a good way. hottest heat waves. biggest fires. worst droughts. what does climate change have to do with it, and what can we do to stop it? president trump says the u.s. economy is the greatest ever. >> the economy is maybe better than it's ever been. >> that may be a stretch. but unemployment is low and markets are doing well. so why haven't people's wages budged? we'll get to the bottom of the mystery. but first, here's my take. we're approaching the ten-year anniversary of the global financial collapse in september. and financial systems around the world appear healthier than anyone could have imagined. turkey today is a rare exception. but even greece is doing well enough that on monday, after eight long years, the country will finally emerge from its bailout program. it certainly seems like the global financial crisis is a

thing of the past, safely put behind us. and yet in a sense, that crisis never really ended. steve bannon made this point when i interviewed him a few months ago in italy, where populist forces had won the recent elections. >> the implosion of those world capital markets, right, has never really been sorted out, that the fuse that was lit then that eventually brought the trump revolution is the same thing that's happened here in italy. >> let's remember, in the first months after the panic on wall street, world trade and industrial production fell at least as fast as they did during the first months of the great depression. this according to a new book, "crashed," by economic historian adam tooze of columbia university. global capital flows declined by a staggering 90%. the european and american financial systems were deeply intertwined and both were responsible for the crisis, tooze explains, yet it was washington that largely saved the day. the federal reserve became a

guarantor of last resorts, not just for floundering american banks, but also european banks. the obama fiscal stimulus helped break the fall as well, along with automatic government spending like unemployment insurance. the whole rescue worked. and it worked better than almost anyone could have hoped for. contrary to many predictions by doomsayers and opponents, there was no run on the dollar or american treasuries, no hyperinflation, no double dip recession in america, no crash in china. american banks stabilized and in fact prospered. households began saving again. growth returned, slowly but surely. the governing elite in america certainly did not anticipate the crisis, though few elites have over the hundreds of years of capitalism, which has had booms and busts and bubbles. but once the crisis happened, many of them, particularly in america, acted quickly and intelligently. as a result, another great depression was averted.

here lies the unique feature of the crash of 2008. unlike in 1929, it was not followed by a great depression. so it was not so much the crisis as the rescue, and its economic, political, and social consequences, that mattered most. what happened? on the left, the entire episode discredited the market-friendly policies of tony blair and bill clinton and gerhart schroeder, disheartening the center left and emboldening those who wanted much more government intervention in the economy in all kinds of ways. on the right, it became a rallying cry against bailouts and the fed, giving credence to an imaginary free market intervention that never had to be tried. bannon is right, stagnating wages, widening inequality, a distrust of elites.

but the fact remains, no government handled the financial crisis better than that of the united states. yet the backlash to the bailouts has produced the most consequential result here in america. so having led the world safely out of the financial crisis, the u.s. is now leading the world in a wave of nationalism, protectionism, and populism that just might send everything crashing down once again. for more, go to cnn.com/fareed and read my recent article in "the new york times." and let's get started. ♪ nine days ago, the president of the united states announced, on twitter of course, that he was increasing tariffs against turkey. and a tit for tat followed. thanks to the dust up, the lira has seemed to be in

freefall at times, raising concerns about the stability of this nation of 80 million people. turkey is a member of nato, host of an important american air base, and it sits as an important buffer between europe and the middle east. so is an unstable turkey what the world needs right now and are economics america's favorite new weapon? joining me now, stephen cook is a senior fellow at the council of foreign relations. rana fula is cnn's global economic analyst. stephen moore was a top economic adviser to donald trump's 2016 campaign. he is a senior economics analyst for cnn. steve cook, let me begin by asking you to help us understand what is happening in turkey, because this is one of closest alliances the united states has had geopolitically for 60 years, and it feels like it's sort of over. >> in ways, the relationship between the united states and

turkey is coming to an end. the two countries have different strategic interests. they have different priorities, they have different goals. the turks have developed their relations with the russians. they've complicated america's fight against the islamic state in syria, and have actually helped the iranians evade sanctions that are intended to arrest the development of iran's nuclear program. i think what you have in turkey at the moment, though, is two separate crises. a lira crisis, an economic crisis, and a crisis in relations between the united states and turkey that the two leaders have connected. president trump's tweet, which seemed gratuitous, has provided president erdogan of turkey an opportunity to blame the united states for turkey's economic ills. >> and just take us through where erdogan is right now. steve, this is a guy who came in, people thought he was a reformer, he wanted to join the

european union. at this point he seems to have turned into an authoritarian. is turkey -- what is the trajectory for turkey? >> you wrote the book about i will -- about illiberal democracies. there was a lot of hope that turkey would join the european union at least by now. turkey is really an elected autocracy. it really is one of the most repressive countries in its immediate region. and its immediate region includes a number of tough countries including places like egypt, iraq, iran. turkey holds tens of thousands of political prisoners, has engaged in a widespread purge and crackdown on opponents, real and imagined. and president erdogan has engineered a number of constitutional changes that have fundamentally altered turkey's political system, in which all the power flows to him.

>> rana, turkey is not that large an economy, 80 million people, but turkey relies on short term debt and a lot of that is held by european banks, a lot of it by greek banks. >> exactly. >> if this free fall of the lira continues, turkey's debt is essentially doubling, what does that mean and what's the danger? >> you pointed out the right things, it's not a large economy. you could see a domino effect. this is part a bigger problem. we've had ten years of easy money in the west, lower interest rates, and a lot of money flowed into emerging markets. there wasn't a lot of difference in terms of how people were perceiving risk. that's all changing now. u.s. interest rates are going up. we're at the end of that period of easy money. that's going to make it harder for anyone who is weak, turkey but a country like south africa,

for example, any number of latin american countries, anybody who has to pay down their debt in dollars is going to have a problem. you may see a ripple effect in emerging markets. china has got a big debt problem. if these issues spread to china, that could be a big issue for the global economy. >> steve moore, let me ask you about what trump is doing. what's always struck me about american economic strategy, for the last -- recent since the 1920s, the united states has tried to act to stabilize. so when other things were going haywire, the u.s. would step in and be the lender of last resort, the guarantor of last resort. it would cut interest rates, as alan greenspan did when the russians defaulted. this seems to be very unusual in that in the midst of an economic crisis with a nato ally and with a country deeply intertwined with the western economies, president trump is actually

exacerbating the economic crisis. he's creating more instability rather than creating stability. surely this is not the way the grownup in the room should be behaving. >> well, let's start with the fact that right now the u.s. economy is truly kind of the envy of the world. we're growing faster than just about any other nation. i've always believed, and i think donald trump believes the same thing, that the best way that the united states can create prosperity, not just here at home but abroad, is to get our policies right at home, which at least for the first 18 months clearly has been the case. >> but i'm asking you about exacerbating an international economic crisis, not about, you know, u.s. -- >> right, but what i'm saying is, what's happening now is you're seeing a lot of capital from around the world that's coming to the united states. we've become a pretty attractive place to invest in with the reductions in tax rates, the

reductions in regulations. if you look back, for example, in the 1980s, fareed, what happened was that we sort of led by example. when the united states moved towards more free market policies, the rest of the world did, and we had an economic boom. i guess what i'm suggesting to you, and we don't know whether this will happen yet because it's early in the game, that as we continue to get policies right in the united states, this will spread around the world. now, you mentioned china. and china is certainly, you know, an area where there's a lot of uncertainty about what our policy is going to be with china. and incidentally, what happens in china matters more than what happens in turkey. when we come back, what a chinese-american trade war would look like. it's america's most popular street name. but allstate agents know that's where the similarity stops. if you're on park street in reno, nevada, the high winds of the washoe zephyr could damage your siding. and that's very different than living on park ave in sheboygan, wisconsin, where ice dams could cause water damage.

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and we are back with stephen cook, rana fula, and stephen moore. steve moore, as a free market person, you can't be happy to see donald trump talking so much about tariffs and levying so many tariffs, specifically urging certain businesses to be favored. this seems a very corporatist, mercantilist, protectionist approach to economics rather than the free trade stuff you've been writing about for 20 years. >> when you're talking about a country that's protectionist and mercantilist, you're talking about china. for the last 25, 30 years, the united states has tried to nurture china along with a large and persistent trade deficit with them hoping this march toward free markets would lead to a good outcome. now we are in a situation where china is a richer country than they were, you know, clearly 25 years ago.

they're approaching the united states in terms of the size of their economy. and where i think trump has it right, by the way, you're right, fareed, i don't like tariffs, i am a free trade guy. but china has not been playing by the rules. they are becoming more militaristic. they have been becoming a cheater in terms of the trade rules and the protection of our intellectual property. and i think donald trump has basically said, enough, we can't go on with this kind of relationship, and i tend to agree with him on that. china is stealing a lot of our intellectual property. fareed, you know more and more of what we produce in america is are intellectual property. trump is basically using a club against china to try to get them to live by the rules. and by the way, think at the end of the day, even though it's a risky strategy and precarious, i believe at the end of the day china will come hat and hand and

they will make some concessions to the united states which they need to do. and at the end of the day, we may actually end up with freer trade, with lower tariffs and lower trade barriers. but we're still early on in this game. >> so rana. >> yes. >> play that out. i certainly agree with steve moore that china is a trade cheat, as i've often said. the question is, is the strategy right? we've alienated the europeans and the canadians. shouldn't we have brought them all on board and had a collective position against china? >> in a word, yes. and stephen and i i think agree on this point. a lot of the same complaints that we have about china, the europeans have, the germans have. absolutely, it would have been a great time to come together with the europeans and say, enough is enough, you'll have to play by the rules of the global game. that's not happening. what's interesting is china is in a very, very tight position right now, because rising interest rates in the u.s., a

falling chinese currency, is going to potentially create capital flight. but if the country moves to try and strengthen their currency, then they're going to see a slowdown. and they're already slowing down. so this is a very difficult political situation right now. and i think the trump administration could have played the timing of all these pieces a lot better, and we absolutely should have had the europeans on board in any kind of a trade issue. >> can i just make one quick point? again, we agree on this. and i think the kind of strategic mistake that donald trump i think has made with respect to, you know, confronting china, and by the way, i think the american people are kind of behind him on this, that china is a problem, but, you know, what is the lesson of history, fareed? you never want to fight a three or four-front war at the same time. we do need to restore our trade relations with europe and with canada and with mexico and with japan so that we can kind of isolate china as the bad actor on the scene. that may still happen. i'm hopeful we'll see a new nafta. i'm hopeful we'll see the trade deal that trump got the

handshake deal with a few weeks ago, that that will lead to a situation where we can couldn't -- concentrate on confronting china. >> i hope he's listening to you on that, steve. let me ask steve cook to play it out for us. trump is asking for this pastor back. erdogan has backed himself into a corner on that, he's a proud guy, he doesn't give in. interest rates are going to have to rise in turkey. the currency is falling. what's going to happen? is turkey going to cry uncle and release the pastor? how do you see it moving forward? >> well, the treasury department is preparing new sanctions on turkey right now. and president erdogan is going to continue to try to hang tough for as long as he can, to buy time, to whip up nationalist sentiment, to make trading one's dollars and lira a nationalist virtue, encouraging people to

destroy their iphones. this is his political play in order to buy himself some time and seek relief, whether it's from countries that come up with $15 billion, a small drop in the bucket of what turkey actually needs. what concerns me is something that you're suggesting, fareed, and something that stephen moore is suggesting, there's something actually the united states can do, either by getting it right at home or by the united states kind of being a stabilizer, yet president erdogan has quite unorthodox economic views. he believes that high interest rates actually cause inflation. his entire political success is based on the fact that it has low interest rates and extraordinary growth, making turks feel wealthier than they are. but this has all been done on cheap money. >> cheap money sounds like the big fuel for a lot of these things, and it seems like cheap money is ending as interest rates rise in america and therefore everywhere else in the world. thank you all so much, fascinating conversation.

next on gps, if the u.s. economy is doing so well, why aren't people making more money? find out when we come back.

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now for our "what in the world" segment. here is a puzzle vexing smart people in america. if unemployment is down, as president trump keeps reminding us, why aren't people earning more money? the equation should follow the law of supply and demand. if the pool of available workers shrinks, shouldn't the price they demand in the market rise? well, that's not happening. for america, unemployment is down to levels not seen since before the financial crisis. yet wages are growing only half as quickly as a decade ago. it's been a matter of heated debate fueling twitter face-offs and no small number of paul krugman columns. there is a compelling case made in a new report from the oecd which lays part of the blame on the rise of so-called superstar firms. many, though not all, are tech companies, and wealth is concentrating among them.

according to mackenzie global insights, among public companies, just 10% of firms account for 80% of corporate profits. but it's more than profits that are concentrating at the top. productivity, traditionally an engine of wage growth, is concentrating in those big money makers as well, the oecd report says. and what's mainly driving that productivity is not people but technology. for example, the atlantic compares detroit's big three in their heyday to silicon valley's big three today. in 1956, the automakers combined employed nearly 1 million people. today, apple, google, and facebook employ about 230,000 people all over the world. companies like apple and google have some of the biggest market capitalizations in the world, and their value lies not primarily in people but in intellectual property. these are not just anecdotes. they're illustrations of a fundamental restructuring of the

world economy from the post-war labor boom to the modern tech-fuelled boom. if the trend continues without a check, it will of course further exacerbate inequality, and that's where the u.s. is faring particularly poorly. among countries tabulated in 2015, it had one of the largest share of adults that qualified as low income. the only countries that beat it were spain and greece. that's right, greece, hit hard by a massive debt crisis, had only a slighter higher proportion of low income adults compared to the united states that year. part of the problem is the u.s. lacks sufficient government programs helping vulnerable workers. in 2015, the u.s. spent just 4% of its per capita gdp on various skill-building and placement programs for each unemployed person, putting it on the lower end of oecd countries. that lack of support may have compelled workers such as those who lost their jobs during the recession, to take low-skill, low-wage jobs out of

desperation. is there a way forward? sure. look at sweden. granted, it's a very different country than the united states. but it spent nearly seven times as much as the united states on those skill-building and placement programs for each unemployed worker in to 16. -- in 2015. sweden has more inequality and wage growth than the u.s. the point is this. in much of the wealthy world, the superstars of our economy are edging out the rest in a zero sum game for market share. but growth doesn't have to shower investors with profits and shut workers out. if more countries actively work to build a new kind of workforce, everyone can win. next on "gps," record heat waves, devastating fires, and the hottest la nina year on record. that was the summer of 2018 in a nutshell. and scientists point to climate change. that story when we come back.

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this summer has seen record heat waves, leaving dozens dead in places like canada, korea, japan, which hit the highest temperature ever, 106 degrees. perhaps more alarming,

meteorologically, are the heat waves being felt above the arctic circle this summer. a northern norwegian town hit a high of 92 degrees fahrenheit in july. it was far from alone. in next door sweden, there were record highs as well, and also wildfires. the scandinavian country averages around three wildfires a year. this year it saw 50. and we had california's largest wildfire ever, and in british columbia, 460 wildfires were sighted in one day. nathaniel rich published an extraordinary work on climate change in "the new york times" magazine. his article, "losing earth: the decade we almost stopped climate change," was published in the magazine. elizabeth kolbert is an author. a book called the "sixth

extinction." nathaniel, what does it say we're still having a debate whether there is climate change and whether it is man-made? >> in that regard we have gone backwards. there's no conversation we have today that wasn't being had verbatim by 1980 by senior scientists in the u.s. government and all around the world, by policy makers and people at the highest levels of the intelligence community, so it seems -- it has the feel of a kind of insanity. >> elizabeth, what does it mean that now the trump administration is actively, in many ways, denying it exists, going into the data and scrubbing it in various ways to make it seem less conclusive? what do the scientists you talk to say about all this? >> it couldn't be much more dangerous, when you have a

global problem that we keep adding to every single day, and we're seeing very serious effects. it's surreal, really, to have people at the highest levels of the u.s. government pretending that this problem doesn't exist, and pretending that we don't know the science, when really, kids who go to -- anyone who takes a high school class in basic earth science understands how climate change works. >> nathaniel, your terrific article, which i really commend, is at some level a little dispiriting. it seems like you're saying we had our chance. in the '80s, as you say, there wasn't denialism, people understood the problem, republican administrations took it seriously, but ultimately we weren't willing to pay the short term price for the long term gain. the problems seemed too distant, too far in the future. but now it seems as though there is -- there are some hopeful signs, there is this new green

revolution, there is solar energy and wind, all very small, i understand, but do you look at -- is your glass half full in any way or did that article leave you -- did writing it leave you particularly dispirited? >> it's depressing so see how close we came during that decade to a meaningful solution or the possibility of one. and i think it's also dispiriting how people then understood the science, had the same ideas about the need for a solution, and still struggled to rally support behind common sense solutions. so that's depressing, certainly. i also think there's impetus to start talking about this issue in a different way, not simply as a political issue or a scientific issue, but as a human issue, which is to say, a moral

issue. and i think that's only just beginning to happen. but i think that's where the conversation needs to go in order to rally the kind of support that's necessary for major transformational changes in our economy. >> elizabeth, do you agree with that? is nathaniel right, that the only way you can do that is not by appealing to just self-interest, but a global interest, a moral interest? >> i certainly think it is a moral issue. i think that's a very powerful appeal. you know, this is about literally -- and i am not exaggerating, this is about the future of everyone, every human, and ever7 other country on planet earth. the moral stakes, not to mention the practical stakes, couldn't be higher. and one of the things that i often think about when i think about why are so many people still actively trying to prevent action on climate change, and

what do they think when they look at their kids and their own grandkids and the kind of planet that they're leaving to them, and i don't know. i really would like to ask some of the big funders of climate denialism how they face their grandkids. >> and what gives me some optimism is when you look at any kind of major social issue where society has gone through a major transformation, so i think of, for instance, the civil rights era, or the recent developments in things like gay marriage or now the way we're talking about gun violence in the u.s., the questions become reframed in a much larger and more imperative moral context. and i think it gives me some hope that that really hasn't been attempted with this issue. it seems to me inevitable that it will, as you have younger generations coming up who are

not only looking for solutions but are demanding answers for how we've put them into the position, the desperate position that they're in. >> on that somewhat hopeful note, i'm going to have to leave it. thank you both for a fascinating conversation. and we'll be back. stay at la quinta. where we're changing with stylish make-overs. then at your next meeting, set your seat height to its maximum level. bravo, tall meeting man. start winning today. book now at lq.com

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the perfect may be the enemy of the good, but it turns out we actually need perfection to live our modern lives. the iphone in your pocket needs meticulously constructed transistors. that plane you might be taking to vacation needs precisely milled parts for its engines. and that gps that tells you where to go depends on satellites orbiting in space. but amid all this perfection and precision, are we losing something?

can we appreciate the beauty of the imperfect? simon winchester is the author of, among other books, "the perfectionists: how precision engineers created the modern world." simon winchester, pleasure to have you on. >> thanks a lot. >> why did precision become so important in the industrial revolution? >> it started actually, we know the birthdate, may 4th, 1776. someone wrote to me the other day and said, you do know the significance of may 4th is "star wars" day, "may the 4th be with you," this is not my joke. but may 4th, 1776, james watt, who invented the steam engine, couldn't make cylinders properly. and a man created a cylinder, an enormous thing, and the piston

watt had made fit inside it perfectly such that no steam leaked out. all of a sudden, at the beginning you had a steam engine which is incredibly efficient. up to that point they sort of chuffed but lost power. once made precisely, james watt then ordered 500 more of these. with 500 hugely powerful steam engines being released into the english market in the 1770s, that powered factories. it led to cities, edinborough, london, being created. it led to all sorts of social consequences. it truly began the industrial revolution. precision was key because it made things work properly. >> what strikes me about the book is that we are now at an age where precision of the kind you need can actually not be made by human beings, it can only be made by robots. >> i tell the story of a plane

flown by qantas with four rolls royce trent engines, hugely powerful engines. one failed on the inboard engine, it failed because of a tiny tube, the thickness of a drinking straw, was mis-machined by a hundredth of a millimeter by a human being in a factory in northern england. that caused the plane, as it took off from singapore to sydney, to fracture. oim -- oil cascaded over the engine, everything broke, shrapnel flew everywhere, the plane became uncontrollable, and nearly 459 people died but for the skill of the qantas pilots who managed to get it back to singapore. one wonders whether precision has gotten so extraordinarily -- the tolerances are so tiny that whether, as you say, humans are capable and maybe everything should be given over to robots.

but then robots have to be made as well. maybe we have reached our limits. >> what does it mean when everything is so precise and sharp. what i'm struck of is the rise of the analog, talking about humans falling in love with the a beautifully tailored suit will often have a line which is actually quite imperfect. deliberately to emphasize this is not machine made. >> to remind people. i mean, i mentioned my wife is japanese. i go to japan and korea a lot. in those two countries uniquely, they award to usually elderly people who have spent their lives working with wood or ceramics or lacquerware the title of living national treasure, which they get pensions and reverence and all the rest of it, to say to them, yes, we make precise things, all these companies we're so famous for, but we have our feet still

on the ground because as well as worshipping titanium, we worship bamboo and the analog and handmade watches, things with springs instead of quartz, vibrating crystals. so it is important, in my view anyway, that while we are in love with and accept precision is hugely important in precision, after all we're imprecise, nature is imprecise, there are no straight lines in nature, that we should give equal weight to craftsmanship and the love of the imprecise. >> where do you think -- is it going -- is this a happy balance that we can achieve for efficiency? we all accept fiberglass and plastic. we aesthetically prefer wood and bamboo. >> that's a very interesting question. in truly material societies, which i think of the far east as the most material societies on this planet, so china, japan, and korea. they have got it all in perspective, but we,

particularly in our race now with robotics, as you mentioned and more ominously in a way artificial intelligence are heading down a path where we tend to ignore the beauty and the relevance of the imprecise and saying, no, precision is the answer to everything. well, i think it's not. i think it's a good example. we should look east and remind ourselves that there are societies of great antiquity and wisdom who have said precision is fine, but hold on, imprecision is wonderful too. >> simon winchester, pleasure to have you on. >> lovely to be here. thank you. next, some observers are wondering if a porky postage stamp could mean more chinese children. i'll explain when we come back. for them. for all. get unlimited for as low at 30 bucks per line for four lines at t-mobile.

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it's back to school time in many parts of america and the rest of the world, and it brings many e to my question. what percentage of american students learn a foreign language at school? is it 12%, 20, 30, or 45%? stay tuned and we'll tell you the correct answer. my book of the week is "uncivil agreement." there are many books now explaining why americans are so divided. this slender academic strikes me as the most persuasive. it points out our political identity has been fused with our socialite. if you tell me who you voted for, i can tell you where you live, shop, eat, and pray. that turns out to produce extreme polarization and gridlock. now for the last look. for decades in china, most

couples were only allowed to have a single child. even today most families are limited to two. well, this month an unusual publication has parents and pundits alike speculates that changes are afoot. a postage stamp released for the upcoming year of the pig, the stamp features a family with three little piglets. it has chinese couples wondering if humans might soon be allowed a third child as well. and with good reason. in 2016, china's post office released a year of the monkey stamp showing two baby baboons kissing their monkey mama just days after chinese parentsing officially have two babies of their own. and the south china morning post points out when the one-child policy went into effect that year of the monkey stamp featured just one solitary.

t local governments have begun experimenting with indirect ways to boost fertility, such as subsidies for newlyweds, but it seems chinese leaders are realizing there's only one good way to actually raise birthrates, the old-fashioned way. the correct answer is, b, only 19.7% of american students from kindergarten through high school are learning a foreign language according to the american councils for international education. foreign language classes are required to graduate in only 11 states, including new jersey, which has the highest rate of foreign language enrollment at 51%. as the pugh research center points out, even that is far less than the last place european country belgium with 64% of students taking another language. across the european continent, the median of people taking a foreign language is a staggering 92%.

and in these seven countries, a full 100% of students are learning a foreign language compared to america's 19.7. the european students are even helping their future colleagues from across the atlantic. more than three-quarters of european elementary school students are already learning english. so those american kids will still be able to communicate with someone. thanks to all of you for being part of my program this week. i will see you next week. happening now in the newsroom -- >> we have a good sense, obviously, of what mr. mcgahn testified. mcgahn was a strong witness for the president. >> i think he's going to be a very, very valuable witness. if you're an investigator, you're a prosecutor, you want somebody who's been in the room when the key discussions happened, and that's don mcgahn. >> the white house counsel

spending hours being