chief of staff. pete hails from connecticut and is a lover of cats. >> former senate democratic leader tom daschle, a friend of rouse, says "he loves cats, and the way to suck up to pete is to get him sort of a cat gift of some kind." from here on out, the road to the oval office goes through pete rouse, for those looking for a little time with the president, we suggest a scratching post or a little catnip. thank you for watching "state of the union." i'm candy crowley in washington. for our international viewers "world report" is next. for everyone else, "fareed zakaria gps" starts right now. this is "gps" the global public square. welcome to all of you in the united states and around the world. i'm fareed zakaria. the big news on the foreign policy front is that the afghan government is in secret talks with the taliban, well, i guess not so secret anymore.

regular viewers and readers will know that i've been advocating this for years. don't expect miracles. after all, the u.s. government has just began its tenth year of fighting this war. but the idea of talking to the people we're fighting with makes sense. most civil wars end with some kind of negotiated settlement, and in the afghan case this is inevitable. much as we don't want to believe it, the taliban is a part of afghan society. it represents some section of the skrve conservative pashtun community. these people are not foreigners who will go away one day. finding a way to integrate them into the political system is a good idea. now talking to the taliban is going to be tough. it will rattle the anti-taliban forces in afghanistan. there are tajiks, uzbeks, who do despise the taliban and they will resist any kind of deal that makes them fear for their safe. and their interests have to be protected, so the talks will have to be handled very carefully. so far it appears that it is the afghans who are leading the

negotiations. this may be inevitable, but it is unfortunate. the united states has much at stake here and 100,000 troops there and it should involve itself in the process directly. a skilled negotiator like ambassador richard holbrooke would be ideally suited to be given a central role in the talks. if he could get the serbs to make peace as he did at the dayton talks over the balkans, he might make some headway with the taliban. the fact that the taliban are actually talking is a good sign. for the last year the united states and the karzai government have wanted to open negotiations, but it's been the taliban that has been resistant. the fact this has changed suggests the taliban are feeling the pressure of additional u.s. troops and the new krount counterinsurgency strategy. that doesn't mean success is anywhere close to being in sight. there is still the problem of pakistan, which continues to control elements of the taliban and another powerful group of militants, the hakani faction, and until the pakistani military turns its back on these groups,

peace in afghanistan will be temporary and fragile, because there will always be those base camps in pakistan. the people we should be talking to, bluntly, are the folks in the pakistani military. we have a great show for you today. first up, in just over three weeks, americans will go to the polls, and it is undoubtedly a wild time in the history of american politics. who will control congress after the elections? is the tea party here to stay or is it just a passing fad? we've got some great thinkers and historians to talk about all this and put it in context. then, you think u.s. unemployment is bad? what in the world is happening in south africa? 50% unemployment by some accounts. who's the blame? we'll take a look. next up, president obama's car czar, steve rapnor brought american auto companies from the brink of imminent collapse. but many ask if they were worth saving. he'll give us a look inside the white house, the bailouts, and more. ♪

and a last look at the surprising figure at the top of the pops in britain. it isn't lady, as in gaga. it is a sir, but he's better known for his policies than his pipes. you'll be surprised. let's get started. sompblts what to make of these tumultuous times when the tea party is all the talk in american politics? i want to delve deeper in the phenomenon to understand it better. i've gathered a group of people who understand the present but also the past. robert carro, historian currently working on the fourth volume of his famous biography of president lyndon baines johnson. peggy noonan, columnist for "the wall street journal," the 20th anniversy edition of her wonderful book "what i saw at the revolution" has just been published. go out and buy it.

charles postal has written "a history of populism" that won the bancroft prize, the most prestigious prize for american historians. richard writes for the "national review," he had his first cover story in that magazine when he was 15 years old. he has written biographies of everyone from the founding fathers to william f. buckley. welcome to all of you. what do you think? is this a garden variety conservative movement? something more? >> i think it is conservative, but it has potential appeal to centrists. i think it has some of the -- the tea party has some of the style and spirit, if you will, of classic populist movements. it is anti-establishment, it is anti-elites. it is broad. it is spontaneous. it is still evolving. it is not something that is set. it is not part of the republican party. it is a critique of and challenge to that party, and we'll see how that goes, how that relationship plays out as the tea party evolves, but i

think it's very much within american tradition and i also think it is where the energy is on the political scene right now. >> so bob, when does something that we would call modern populism, in other words not going all the way back but when does populism as we would understand it begin in the modern era? >> it's not only the when but where. you know, populism started 48 miles north of lyndon johnson's hometown, johnson city, in the depths of the texas hill country. when you think of populism today, you say lyndon johnson's grandfather ran for the legislature on the populist ticket. his father was a democrat, but he was a true populist who said to lyndon johnson, the job of government is to help people caught in the tentacles of circumstance. that's what populism warnered. populism was for social justice, for government stepping in to

help people fighting forces too big for them to fight themselves. so when i watch the tea party today try to appropriate the tag of populism, you really think that's really at odds with american history. >> so charles would you agree with that, the populist movement in its essence is really a kind of movement of people wanting government involvement? >> i agree with that very much so. this is a good description. it was, the epicenter was central texas back in the 1880s and '90s, poor farmers wanted to use government to make a better life for themselves. they wanted to use government to make a better life for poor people, so that's -- >> so what is the tea party? >> the tea party is a conservative movement, not a populist movement. it's a conservative movement that doesn't think the government should make a better life for poor people, for the common person. >> when you look at the tea party, what do you think it is? is it populist, what are its roots? >> there was a populist party in the united states, and we've

heard, you know, the history of that, but there is also recurring movements that say there is an elite that has control of our politics and they're mismanaging it and running it badly and we have to get rid of them, and this goes back to the late 18th century. well, it goes back to the american revolution. i mean, that was saying the elite is a british one, we have to throw it off, but then after our independence, lo and behold, people thought there's still elites here, and they're throttling the just desires of the american people. >> and the tea party is part of this kind of anti-elitist, anti-centralization of power? >> they come from different directions. i don't think you can say they're always from the left or they're always from the right. sometimes they come from the right, sometimes they come from the left. the anti-elitist movement of the 1790s was the first republican party, which was thomas jefferson and james madison, and they said look, the federalists are running things and they're

doing it badly. they're getting us into war with france, they're betraying the republican principles of the government, and we got to stop it, and they got elected president. >> peggy, what do you think? why is the energy there? >> because they feel, i think, i mean i spend a lot of time talking to and e-mailing with folks who were involved in various places in the tea party, they're so diverse in their thinking and some of them talk about the tenth amendment or some of them talk about this, but the one thing that they have in common, and if they stick with this i think they will be very attractive in the future to centrist voters and thinkers, the one thing they have in common is that they are making a kind of economic protest against the federal government in washington. they are saying you are too big. you demand too much. you are changing the shape of too many things. you're regulating too much and all of this promises to be bad for our country in the future.

but it's economic issues that they talk about. i think as they evolve if they become involved in other issues it may not be so attractive to centrists, but i think if they stay where they are and look to their knitting, it will move forward and be something very interesting and full of implication. >> bob? >> you know, peggy, you are perfectly right. it's economic interests they're talking about. the interests they're not talking about is social justice. the whole idea of populism is that government must step in to help people fighting forces that are too large for them to help fight themselves. who would say in the interests of, if you talk to the populist leaders and you said 39 million or 40 million americans don't have health insurance today, who in the original populist movement would not say then it's the job of government to step in and do that? that's the terrible thing that's been lost in this debate, the

whole history, the whole fight you might say for social justice in america is sort of being left out of this discussion of the tea party movement. >> bob, are we confusing populism and the populist tradition with progressivism and the progressivist tradition? i don't hear anybody in the tea party saying do away with social security. >> yes. everywhere. everywhere. >> in every movement there are some people. >> no, no. >> they are absolutely not saying social security should not exist. >> they are. >> they are saying reform the entitlements. they are saying change the way it's set up. >> this is what you would like them to say. >> it is what they are saying and saying to me. now they may be saying something different to you, but it is a nation of 305 million people you are describing something that i'm not seeing, and so it leaves me confused. this is a broad -- the tea party movement is broad and evolving. nobody is in charge of it. nobody's telling it what to think. >> the tea party movement is a

very well-organized, very disciplined movement, in my view. it has very important centers of power. the role of fox news, glenn beck is very important in this. he's not just a figure. he's just not one of the figures. he is a very important mover and shaker in the tea party movement. and what i'm describing is the stuff about -- >> free press, terrible. >> i'm all for the free press, but -- >> not having an effect. >> i'm not saying you shouldn't do it, but we should recognize that the fox machine plays a fundamental role in the organization of the tea parties with, and glenn beck is one of these people who's saying that obama is leading us or is a socialist, and leading us to -- >> charles, i think it's more interesting than that. >> so the "national review" institute took a poll about the tea party and related phenomena.

and of the respondents who said they had been to tea parties, one fifth of them said they had voted for obama. >>ville to break the discussion. we will be back to discuss more on the tea parties, on american politics, left, right, and center. back in a moment. racist is a dark and bloody ground throughout american history and it's appeared in populist movements, sticking up for the little guy, as long as he was the white little guy. so let's not have a any, not me, lord. ly answered, it helps to have a financial partner like northern trust. by gaining a keen understanding of your financial needs, we're able to tailor a plan using a full suite... of sophisticated investment strategies and solutions. so whatever's around the corner can be faced with confidence. ♪ northern trust. look ahead with us at northerntrust.com. [ indistinct shouting ] ♪ another day

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we are back with robert carroll, peggy noonan, charles postal, and richard brooke hooizer, talking about the tea party and the future of american politics. bob, let me ask you another element to all this, because at some level, the tea party does seem similar, and in a very vague sense, to the movements that you see aren't the west, in that they all seem to have a kind of populist, nativist, nationalistic feel to them. >> yes. >> how much -- and if you listen to tea party on issues like immigration or the islamic center at ground zero, they are very, very passionate about that. >> yes. >> how much of this is about

nationalism/nativism/race? after all we do have the first black president in office. >> it's a very perceptive question. because to me that's what's at the bottom of a lot of this. i mean like i'm writing in the book i'm writing about lyndon johnson, he is passing the voting rights act of 1965. at that time, blacks could hardly vote in any significant numbers. in 11 states, they weren't really a political force like they are today. that was 1965. this is 2010, which even by my math is 45 years. you know, that's in terms of history, fareed, that's a blink of history's eye. 45 years ago african-americans were not nearly as significant a force in american political life and today an african-american sits as president in the united states -- in the oval office. you say, that has happened so fast. i think that in a way, it takes

time for people to absorb that. i happen to believe that race does play a factor in everything in american life, even those of us who would like to pretend and hope that it doesn't, and i think that what you ask is at the bottom of a lot of what is happening today. >> if obama were a middle-aged white man, do you think as many people would be saying, he's taken the country away from me? he's not an american, things like that? >> well, i think that, my own view is if hillary clinton were president, we would have, we would have the same billionaires funding protest movements against her that we have against obama. >> the koch brothers were just as passionate against clinton as they are against obama. and we would be -- if she had pushed health insurance, we would be having the same cries of socialist addi isist dictato

we are today. i don't think there's a difference. there's no question that the tea party is tapping into racist feelings. >> it's an important part of it. >> i'm guessing you don't totally agree. >> i just want to back up and you know, yes, race is a dark and bloody ground throughout american history and we should acknowledge here that many of the populists were awful race is. so there was a lot of, you know, this bad baggage appears on the right, on the left. it appears from elitists, it's appeared in populist movements, sticking up for the little guy, as long as he was the white little guy, so let's not have any "not me, lord." it's that public. >> however, what about the tea party movement of 2010? is there an element of racism? >> look, i'll just repeat the statistic i gave you. we found one-fifth of people who had gone to tea parties had voted for obama. so if they were, they're very odd racists if that's what they

are. i'm not buying it. >> peggy, race? >> i don't think that's what this is about. i think the tea party movement is about a crisis in america and an attempt by people to deal with it in a way that is not driven by parties but is driven by individuals who are connecting through the internet, through various ways, and trying to move the ball forward in a way they think is commonsensical and right. i think it begins with a sense of crisis, not with race. >> and do you think when you look at this moment that the country is moving left, moving right, ideologically where are we moving? the obvious sense is that -- the conventional wisdom is obama moved too far left and this produced a reaction.

>> well, i think there's no question that when you look at obama approval ratings, one thing that we need to add into it is a lot of the disapproval comes from people on the left who don't think he did enough. the public option, closing guantanamo, the war in afghanistan. there are many people who are discontent with obama -- >> but they're not voting -- nobody is voting for the tea party and republicans because obama wasn't too far left. >> but we haven't had an election yet. when you look at the opinion polls of disapproval, that's part of the disapproval opinion polls. the other side of it is, there's the tea parties have had an enormous microphone and whatever you say about it, having the most powerful cable network behind them is a tremendous microphone, and -- >> free speech. gets you all the time, man. first amendment. >> the most powerful cable network, you mean the second most powerful cable network. >> whatever it is. >> guys, every time the left gets obsessed with fox news, i

know they're starting to lose. get your mind off that. talk to the tea party. get out there with the folks, not just the people who e-mail you and declare themselves to be john birch society members but forget that stuff. everybody's got a mic in america. everybody. what matters is the message that's going into it. don't look at shiny sparkling things. there are things below that that are more interesting. glenn beck is a shiny sparkling thing. >> last thought, bob, then we've got to go. >> if i had to sum up this whole argument -- >> you would act out frustration. >> no, i would say it's something that's been -- i would say it's a battle that's been going on in western civilization for a long time. and this is a moment of a real clash. i would put the clash differently than you. i would put the clash about issues of social justice. you would put the thing about, you know, government, economic issues and the crisis, but i don't think we can ignore the fact that right now, during the

obama administration, is a very climatic moment for democracy in america. >> on that climatic note, thank you all and we will be right back. ♪ [ male announcer ] it's luxury with fire in its veins. bold. daring. capable of moving your soul. ♪ and that's even before you drop your foot on the pedal. ♪ the new 2011 cts coupe from cadillac. the new standard of the world.

now for our "what in the world" segment. it was just a few months ago that south africa had a successful coming out party with the world cup. the images that came out of that event were warm and colorful so i was surprised to read of the bitter strikes that have crippled the country recently. striking teachers, health care workers and other government employees left aids patients and newborns without treatment, children without education. the strike has been resolved now, but it will cause new problems. see, the unions representing the workers have gotten hefty wage gains, twice the rate of inflation from the government. but to pay for these increases, the government has announced it will freeze all new hiring.

there you have the paradox of south africa today. powerful, prestigious trade unions that are holding the country. let me explain. south africa has one of the highest unemployment rates in the world. the official statistics say 25% of the labor force is unemployed but that number actually doesn't count people who are so discouraged as job seekers that they have given up on their hunt for work all together. in all, more than 50% of south africa's entire working age population is not employed. how does a country get to that point? there are many reasons but a chief cause is the incredible power and stubbornness of the country's unions. these unions once wielded their power to end apartheid but now they have such a stranglehold on government they might actually end up strangling the entire nation. strikes are so commonplace there's a designated strike season. the recent strikes which started

just after the world cup ended, consisted of more than 1 million government workers on the picket line, effectively shutting down the country. authorities had to result to water cannons and rubber bullets to break up the protests. in the end the strikers got much of what they wanted and cost the government billions. payroll is now a third of the nation's entire budget. amidst the global recession which took a whack at south africa, south africa's trade unions last year negotiated on average 9% wage increases for their members, according to the imf. the average public sector wage increase was 11%. these are unheard of raises in much of the world, particularly in these tough times. the private sector couldn't pass these costs on to the consumer and the costs were making south african products less competitive on the global market so factories and stores and offices were shut, adding to the country's already disastrous unemployment rate. but wages and strikes are only a part of what's bringing south africa down. observers say what's probably worse are the draconian regulations unions have on

hiring, and of course, more importantly, firing. it's essentially impossible to fire a unionized worker in south africa, so companies are unwilling to add to their payrolls, scared to hire anybody, because they're scared of bringing on a bad employee who they can't fire. they say if they can't date the employee before they marry them for life, they won't marry them at all. so executives make do with further workers or outsource the work to asia or elsewhere. here is the crucial bit to understand, unionized workers are a minority of the south african workforce, and they are the ones with the jobs that pay decently. again, a great minority, these union workers are rich compared to their non-union neighbors and friends. so the unions are not protecting the wages of the average south african worker. they are making the average south african pay the price for their own wages and benefits. it's precisely the opposite of our image of unions battling for the little guys. i remember the halo that surrounded south africa's trade unions as they helped bring down

apartheid. what a tragedy they have used the prestige and credibility that came from that incredible struggle and have become a special interest group, and one that is strangling the country they supposedly love. and we'll be right back. there's a lot of culture shock when you find out that you have to buy your own bottles of water for your guests or buy them lunch because there's no budget for these things. 345-2550 like it's some kind of dream. tdd# 1-800-345-2550 it's either this magic number i'm supposed to reach, or... tdd# 1-800-345-2550 it's beach homes or it's starting a vineyard. tdd# 1-800-345-2550 come on! tdd# 1-800-345-2550 just help me figure it out in a practical, tdd# 1-800-345-2550 let's-make-this-happen kind of way. tdd# 1-800-345-2550 a vineyard? give me a break. tdd# 1-800-345-2550 [ male announcer ] looking for real-life answers tdd# 1-800-345-2550 to your retirement questions? tdd# 1-800-345-2550 get real. get started. talk to chuck. tdd# 1-800-345-2550 we get double miles on every purchase. so we earned an la getaway twice as fast. we get double miles every time we use our card. [ whistling ] no matter what we're buying. and since double miles add up quick...

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there have been many czars in the american government but car czar is a title that has been bestowed on probably only one man in history. steve ratnor was asked to fix the auto industry. ratner spent most of his life on wall street in senior positions at morgan stanley and lazard freher. he then set up his own private equity company. before that, he had spent years as a reporter for "the new york time times". so with three different backgrounds, journalism, business, government, what are steve ratnor's views on the

economy, obama, and of course, the car companies? let's listen. what do you think of president obama as a ceo? you spent a lot of time in the private sector. was he a good ceo? >> i thought he was a terrific ceo. it was interesting, people said what does he know about being a ceo? he's never managed anything besides a senate staff. of course, he did run a campaign pretty well. but the fact was that he was a natural, and i thought he was a natural. and i have been around a lot of ceos over the years, but he didn't dwell on things. he was willing to make decisions but he did not awe rush through and say i've got ten minutes to make this decision. i'm going to make it. one famous day he adjourned a meeting until later in the day so he could have more time to reflect on whether to save chrysler, probably his toughest decision and i thought he was thoughtful. he came to the meetings read his briefing papers. i can't imagine when he started running for president, he thought dealing with chrysler was going to be something he would have to do, but he was a good soldier and he dug into it.

i came away with a lot of respect for his ceo qualities. >> what about his basic economic philosophy. you know that when you do the polls, something like 30% of democrats think that he is a socialist, whatever that means, and 70% of republicans think that. and they accuse him of this all the time. >> he's not a socialist, that's for sure. i would probably concede that he is maybe less comfortable with business, yet less familiar with business than president clinton was, even though president clinton never worked in the private sector. president clinton had some appreciation or fondness for business that was maybe a little bit unusual but it was there. i would also say that a president exists in a political climate and exists representing all the people in this country. one of the things i say often to my wall street friends who are very upset with the president, to a person, you have to deal with the climate out there. and this is a country that is

angry. this is a country that is suffering economically. it blames wall street for a lot of its problems. it blames business for some of its problems. the president's job cannot always be to stand up for business or to stand up for wall street. he's got to assimilate all the thoughts and put them together into a package he believes in but that's also politically salable. there was a famous meet being a year 1/2 ago where he said to a group of bankers, "i'm the only thing standing between you and the pitchforks." he meant it, he was the only thing preventing a bunch of bankers being metaphorically lynched by the american public, and he's balancing this and i think he's balancing it reasonably well. >> as you said all of your wall street friends, a man or woman, just incensed. what do you think explains the level of anger against obama from the business community? >> i think a couple things. first of all, because there is a lot of tough rhetoric about wall street, the president does believe that wall street was a significant part of the problem, more of a problem than wall

street believes it was. i think wall street is a little bit in its own little bubble, and doesn't really get what's going on out in the country and understand the extent to which they need to be responsive to it, need to appreciate it, whether they agree with it or not, they have to accept it. >> do you think he should appoint somebody who has real business experience to secede larry summers? >> i think it's a little bit of a red herring in the sense that is he very plugged in to the world. he has his economic recovery advisory board that consists of a number of very distinguished businessmen, including jeff immelt and so forth from general electric. he reads voraciously. so maybe, simply, simply to get rid of this one criticism of him, he could put somebody from the business community in there. but i would say somebody from the business community would find working in the white house and larry summers' job an extreme culture shock. >> what do you mean? >> you're going from being a ceo, running a company, saying this is what we're going to do, to a very complex organization that operates very much by

collaboration, consensus, bringing in opinions from all over the government. it's basically a staff job, it's a very important staff job but you're working for the president and the other senior staff members. it's very different from being a ceo. i think it would be a tough adjustment for most ceos. >> would do you it in. >> well, i'm not a ceo and i'm selling my book at the moment, so it's not something i'm thinking about. >> you spent a while working in government after many years as a journalist, many more years on wall street, founded your own firm. what was the dominant thing that struck you about working in government at a very high level? >> it was interesting, because it was different in a number of ways from what i expected. of course, i went in with low expectations. i had been around washington enough, i had all the stereotypes of what washington was like and so where it was different or the same, first there are quite a number, no particular order quite a number of career people in the

government who are really capable people, who don't leave the office at 4:00, who are there for you. we depend on a lot of them in the auto rescue to execute some of the policies that we were trying to put in place and i think a lot of them get a bad rap. secondly, government actually can do things when it puts its mind to it. now, t.a.r.p. was a unique set of circumstances, perhaps, but the use of the t.a.r.p. money was incredibly focused, sharp, commercial, done right, and had great results. and thirdly, of course, government is bureaucratic and nobody should confuse themselves. i went from a small firm to the largest bureaucracy in the world, and so there's a lot of culture shock when you find out that you have to buy your own bottles of water for your guests or buy them lunch because there's no budget for these things or hiring takes two weeks instead of two days when you're in the middle of a crisis. but you have to take that as being in the government. >> what about the politics around it? did you find that there was more, there was less? >> the politics from the hill are miserable. >> meaning? >> meaning you know, everyone knows they become more divisive,

more partisan, more parochial, more picayune. so i would be getting calls from congressmen, well, there's these two chrysler dealers in my district and they're being closed and i don't understand why. and you have to work through all this stuff. before i was even appointed, i was attacked by members of the democratic party from michigan on the grounds that i didn't know enough about the auto industry and they wanted someone with a real manufacturing background. so congress is a tough ombre, and my colleagues found it much more frustrating experience than i did having access to t.a.r.p. money. >> we'll be back with steve rattner. we'll talk about why, how he rescued the car companies. did he have to do it? how does it work now? >> we're dealing with companies that didn't have a handle on their own business so there was no plan and essentially we were on a very fast-ticking clock of trying to figure this thing out in realtime. one word turns innovative design

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hello. i'm randi kaye at the cnn center in atlanta. back to "fareed zakaria gps" in just a moment. but first, a check on your top stories. it's one of the largest military parades ever seen in north korea and it's marking the 65th anniversary of the country's communist workers' party. reclusive leader kim jong-il was joined at the event by his son. many see the kim's appearance as a transition of power. the u.s. believes kim jong-un has been tapped to replace his father. workers say it could be wednesday when the first trapped miner will be brought to safety. workers widened the shaft they finished drilling just yesterday. and they're starting to insert steel tubing in a shaft to reinforce it. when it's secure, officials plan to lower a doctor and a rescuer down to the miners before anyone to the surface. president obama is in pennsylvania today, trying to get voters energized ahead of the critical midterm elections. the president and vice president are both appearing at a major

democratic national committee rally in philadelphia. you can see it live right here on cnn, at 5:30 eastern. i'm randi kaye in atlanta. more news coming at the top of the hour. fareed zakar"fareed zakaria gps right after a quick break. at northern trust, we understand... that while you may come from the same family... you know, son, you should take up something more strenuous. you have different needs and desires. - i'm reading a book. - what's a book? so we tailor plans for individuals, featuring a range of integrated solutions. you at your usual restaurant? son: maybe. see you tomorrow. stairs? elevator.

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personal pricing now on brakes. tell us what you want to pay. we do our best to make that work. deal! my money. my choice. my meineke. we are back with steve rattner, going to talk about how he rescued the car companies and whether it was a good idea. at what point does obama decide i can't let these car companies go under? what happens that focuses this issue and makes him think about it? >> president obama really knew from the moment he first engaged in november on this issue, november of '08 that he was going to have to take some action and that's why they began reaching out for somebody to help organize a group of people

within the administration to address it. >> and at this point, was it clear the nature and extent of what you'd have to do? >> nobody had any idea what the nature and extent of what we had to do. there was no auto department in the federal government. one of the consequences of our desirable view of not having industrial policy is we don't have departments of the government that are deep experts on industrial sectors, so nobody in the government knew anything about autos. there were a couple people working on that transition, very talented people, but they were kind of drinking from a fire hose, trying to get up to speed very, very quickly on autos. no, and remember also when the car companies went in front of congress in november of 2008, they said, give us $15 billion and all of the car problems will be solved. they didn't know the magnitude of their problems. it was a big mess. nobody knew what was going to happen or what we should do. >> this was the meeting in which the car company executives flew on private jets to washington, correct? >> that was the famous meeting

and, ironically, a very distinguished economist called mark zandi, who was not an auto expert, said at that meeting that it was going to take $75 billion to $125 billion to fix this industry. people laughed at him. and the number ended up being $82 billion, have a handle on their own business. there was no plan. nobody knew what bankruptcy meant. nobody knew how to deal with this outside of bankruptcy. essentially we were on a very fast ticking clock of trying to figure this thing out in realtime. >> you say the decision to save chrysler was the most difficult one. why? >> because chrysler was a number three player that had been owned by daimler for seven years and owned by private equity for a couple of years and not one car on the consumer reports recommended list. only a north american player. no global business. and we also realize and i give great credit to austin goolsbee

for putting this idea away. most of the buyers would buy gm or ford cars and that would make them more profitable and sell more cars. it was a classic case of do you really try to save a weakling in an industry and let it go. it was a tough decision. in any normal economic time many of us would have voted to let it go. government shouldn't be saving losers and helping winners and so on. we weren't in normal economic time. this was early march of 2009. the economy was in free fall. the stock market was in free-fall. we didn't know if the financial markets were going to recover or not. and chrysler would have been 300,000 jobs on day one. .2% on the unemployment rate. that was a social experiment that we didn't really want to take if we thought chrysler could be saved. and we thought chrysler could be saved. >> looking forward is the american car industry viable with three companies?

should it really pair down over time to two? >> i believe that we restructured gm and chrysler to a place where for the foreseeable future it can make money. it involved sacrifice for workers. this is not the american dream for how people see their benefits and even their wages go down. but this is what was necessary to compete globally. gm's base wages are $28. in mexico gm pays $7 an hour. in india, gm pays $1 an hour and it's a relatively high wage p r payer. it's not the product that is most susceptible to this type of wage competition. it's very, very significant. i'll give you one quick example. an american company that is based in troy, michigan, it has a midwestern group of executives came in one day and said we need

help. chatting about this and that. i said how many people do you employee. it was about 135,000. how many are in the u.s.? they said 15,000. the rest were in mexico, lange l bangladesh and china and all these other places. the questions are where are the jobs and it's tough for us to compete on the manufacturing side with much, much lower wage and very high productivity. in mexico gm gets as much productivity as it does in the u.s. >> and yet pays -- >> and yet pays $7 an hour. >> and are you optimistic that in the next few years the economy is going to bounce back? >> i'm optimistic we'll have sake lia cyclical recovery. i think the two long-term structural problems we have to worry a lot about are the budget deficit that we talked about earlier and lack of any political will to address it and secondly our long-term global

competitiveness which isn't trying to protect inefficient industries but one of trying to make a transition like new york city did. new york city was one of the capitals of the industrial revolution. we made everything in the 19th century and today we make almost nothing. new york city is doing better than it has ever done. a unique example but that's what we need to aspire to. >> pleasure to have you. >> thanks for having me. >> we'll be right back. >> never in the field of human conflict was so many owed by so many to so few. what's around the corner is one of life's great questions.

and while it can never be fully answered, it helps to have a financial partner like northern trust. by gaining a keen understanding of your financial needs, we're able to tailor a plan using a full suite... of sophisticated investment strategies and solutions. so whatever's around the corner can be faced with confidence. ♪ northern trust. look ahead with us at northerntrust.com.

> our question this week from the fareed challenge is, the nobel prize in physics went to the discoverers of an element 100 times stronger than steel. what is that element called? it was in the newspaper this is week. is it hectosteel, b, graphene, c, maximene or d, ferramax. stay tuned. go to cnn.com/gps to try your hand at ten more questions on the fareed challenge. instead of a book of the week i have for you a magazine of the week or the year if you buy a subscription. it is "time" magazine, starting with this week's edition i will have a regular column in the magazine and write the occasional covery story as well. this week about china drawing off my interview with premier wen jiabao. it is the cover story in "time's" international edition and featured in the u.s. edition and a superb essay in this issue by joe klein about his road trip

across america, reading the tea party leaves. go to our website you'll find links to all of it. now for the last look, there's a british prime minister who has just climbed to the top of the pops, but i think you'll be surprised at which one. no david cameron and nick clegg have not formed the downing street duo and gordon brown isn't doing senate rah covers. the fourth features. the voice of sir winston churchill. he's not crooning. >> never in the field of human conflict was so much owed by so many to so few. ♪ >> churchill's famous speeches rallying the nation for the bat of britain have been put to the music of a royal air force band. >> against the british empire and its commonwealth, lost for a thousand years, mell