>> liu: welcome to the program. i'i'm betty liu of bloomberg television filling in for charlie rose who is away on assignment. tonight we look at the debate over china's currency. we talk with nouriel roubini of roubini global economics and richard mcgregor, washington bureau chief for the "financial times". >> t unemployment rate is the 9% encolluding partially employed workers. 16.5 including people in jail is 20%, among minorities closer to 30%. very little fraction of this problem has to do with china and the exchange rate, it these do with the policies that lead to the housing boom and t housing

bust about the fact that we're not invested in productivity and long-term economic growth. so bme it on t chinese doesn't make sense. of course, in a situation which you have high unemployment rate there is social and political malaise, people blame globalization, people blame trade, people blame china but the fundamental problems of the u.s. are deeper and structural. >> there's no doubt whatever term you use china does manipulate or manage its currency and there are both economic and politic reasons for doing that. obviously they want to support exports which, you know, which are mainly private companies or foreign-invested companys which are the greatest source of job growth in cha which, you know, helps keep the country stable. but tre's also a political imperive in a way. anormal sort of calibration of the strength of chinese export, the currey could be 20% to 40%. but if you had in china an open capital account and the freely

floating currency godnows what would happen because the financial system is not stable, money could flee the country as much as come into it. and you could see a collapse in the currency as you might see an appreciation of it. so i think china is quite unstable without strong controls and so it's not ju an attempt to get an economic advantage. i think it's a way that... it's one of the element it is communist party uses to manage the economy and then stay in power. >> liu: and then charl's interview with author robin wright. her new book is called "rock the casbah: rage and rebellion across the islamic world." >> i think what we're goi to see is something that confuses us in the west because it has two parts. one is this quest for political participation, accountability we're seeing in the trials, as in the hosni mubarak in egypt, the idea of justice and

fairness. but it also has a desire to be islamic and these two things are going to confuse us. it's a different kind of islam. today islam is a means to an end not an end in self. 40 years ago the majority of women in egypt didn't wear hijab, the islamic head covering. today over 80% do. but thatoesn mean there fanatics, that they want to see the muslim brotherhood take over in egypt, that they want sharia islamic law to prevail rigidly. it a expression of we want islam as the cultural milieu, the environment in which chan. it's no different, really, than the kind of judeo-chstian values so many of us have in the westn terms of defining what our political goals are >> liu: china's currency and robin wright on islam when we continue.

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from our studios in new york city, this is charlie rose. >> rose: i'm betty lieu you only bloomberg television filling in for crlie rose on assignment. we begin with the debate over china's currency policy. on tuesday the u.s senate mandated a bill that would have stiff tariffs onhina the bill faces an uphill battle in the house. the white house is also reluctant to support the measure. the issue emerged at the republican debate earlier this week. >> i don't subscribe to the don trump school or the mitt romney school of international trade. i don't want to find ourselves in a trade war. with respect to china, if you start slapping penalties on them based on countervailing duties, you're going to get the same thing in return because what they're going to say because of quantitative easing part one and part two, you're doing a similar

thing to your currency and then you'll find yourself in a trade war very, very quickly. d what does that do? that disadvantages our small businesses, it disadvantages our exporters. it disadvantages our agricultural producers. so i say for the first and the second largest economies in the world, we have no choice. we have to find common ground. we have to, of course, use our trade lawsnd use them very, very aggressively. at the end of the day, we've got toind more market opening measures. we've t to get more governors from this country together with governors from provinces of china, mayors tother with mayors a exploit the opportunities that exist for exporters. that's a job creator in this country, it's a huge job creator and we have to get used to the fact that as far as the eye can see in the 21st century it's going to be the uned states and china on the world stage. >> i'm afraid that people who've looked gnat this past have been played by the a fiddle by the chinese and the chinese are smiling all the way to the bank taking our currency and our jobs and a lot of our future and i'm not willing to let that happen. i'm in this race to make sure

we're strong again, we're creating jobs, we're the best place in the world to be middle-class again and far to happen we've got to call cheating for what it is. and you can't... >> but it was only... >> well, people say we might have a trade war with china. well, think about that. we buy this much stuff from china, they buy that much stuff from us. you think they want to have a trade r? this is a time when we're being hollowed out by china that's artificially holding on to their prices as you cede moment ago and that's having a massive impact on bs he. it's the wrong course forus when people have pursued unfair trade practices. you have to have a president that will take action and on day one i've indicated day one i will issue an executive order identifying china as a currency manipulator, we'll bring in action against them in front of the w.t.o. for manipulating their currency and we go after them. if you're not willing to stand up to china, you'll get run over by china and that's what's happened for 20 years. >> liu: joining me is nouriel

roubini. he's the chairman of roubini global economics and from washington, d.c. is richard mcgregor, he's the washington bureau chief for the "financial times." he was also formerly beijing bureau chief and i am pleased to have them both here with me, welcome, gentlemen. nouriel, let me start with you. who is right in this debate: mitt romney or jon huntsman? >> well, i would say the reason why we have a trade imbalance with china are long and complex. ey have to do with mistakes and policies of the united states, policies that have led us to spend more than our income running ever larger trade deficits. on the other side, china is not consuming enough and has had a model of growth has been based on a weaker currency but there are microfactors that affect currency so it's not very black and white in term who was is at fault. i think both sides have had mistakes in policies that have led to these growing trade imbalance and now it's becoming

a source of political and policy friction. >> liu: richard, let me throw that out to you, then, which is the right approach fro china or with china in this debate? >> well, i certainly don't agree mr. romney's approach and i think he's wrong on a number of levels. he makes a big deal out of saying he'll declare china to be a currency manipulator on day one of his presidency but, of course, if you do that, all that does is force you to talk with china or force china to talk with you. it does no more than that. and, frankl he also talks about the trade imbalance between the u.s. and china and how that would... china would be hurt more than the u.s. i don't think that's the case, either. because you can't simply look at it as a simple two-sided equation. these economies are intertwined as they are with the rest of asia. and if you start slapping large tariffs on chinese influence, it will reverberate around the global in ways that you can't

possibly imagine. >> liu: and yet we find ourselves, though, in this situation where we have a jobless rate near 9% here in the u.s. and that has americans riled up. they want to kw why the jobs moving overseas. so is there something that the white house and the president could have done to avoid a situation like this where we are at a critical point wherehe house may pass a bill like this, neurosglel >> well, you point out correctly. the unemployment rate is 9% encouraged partially employed workers, 16.5%. including people in jail 20%. among young and minorities closer to 30%. a very little faction of this problem has to do with china and the exchange rate. have to do with the policies that have led to a housing boom and bust. the fact that we're not invested in productivity and lonterm economic growth. so blaming it on the chinese doesn't make sense. nofk a situation where you have

high unemployment rate there is social and political malaise people blame globalization and trade and china but the fundamental problems in the u.s. are deeper and more structure. >> liu: do you think the level of the yen right now does reflect economic fundamentals in china? : no, there are of course... managing the exchange rate, they've allowed their currency to appreciate less that will be probably occurring in a free market. there is some reason why they're doing it. there's also reason that if they were to move too fast and too soon off hardlanding in china and social and political instability in china so we want the weaker currency because we want to have our own growth, china wants to have a weak currency because they want to maintain their growth. it's a bit of a zero-sum game and everybody in the world, by the way, not just u.s. and china, the europn is the weaker euro. the britain has a weaker pound.

japanese have a weaker yen. but it's a zero sum ga in trade balance because if my trade balance somebody else is worse. so in worl in which there is domestic demand, everybody wants a weaker currency but not all currency can be weaker. so we have currency tension in the world that can lead the currency wars and currency wars can lead to trade wars. that's what we are facing globally. even there's a fight between china and brazil on currency. not just u.s. and china. >> liu: how do you break the zero-sum game? how do you get out of it? how do you win it? >> in an ideal world we have to go back to more sustained global economic growth but now there's a risk of a doue-dip receson in the u.s.,in the ruhr roe zone and u.k. in advanced economies. global rebalancing in the long run means at we have to spend less and save more and we have to rely on more exports as a source of growth. thateans china

currencies appreciate faster and apply less savings more domestic consumption and balance their growth rates. that's a process to occur gradually in many years which n which the chinese have to d certain things, not just on currency, we have to do certain things not just on currency and you have a global rebalancing that sustains growth for everybody for both direction of trade war is going to be disaster for everybody. >> liu: richard, i know you spent many, many years covering china while in your opinion beijing i want to read for you the central bank of china, ty issued this statement wednesday after the nate vote on the currency bill. their statement was this "the exchange rate is gradually achieving a more balanced and reasonable level." now, isn't part of the problem, richard, that a majority of economists and people around t world don't believe that the ewan is at a reasonable level

and that the chinese are not doing enough to get it to a reasonable level. >> i think that's true. yuan. there's no doubt whatever term you use that china does manipulate or manage its currency and there are both economic and political reasons for doing that. obviously they want to support export which is, you know, are mainly private companies or foreign-invested companys which are the greatest source of j growth in china which, you know, helps keep the country stable. but there's also a sort of political imperatives her in a way because i mean, you know, a normal sort of calibration of fostrength of chinese eximportants, the currency could be uervalued b 20% to 40%. but if you hadn china an open capital account and a freely floating currency god knows what would happen because the financial system is not stable, is money could flee country as much as come into it and you could see a collapse in the currency as you might see an

appreciation of it. so i think china is quite unstable without strong controls and so it's not just an attempt to get an economic advantage. i think it's one of the element it is communist party uses to manage the economy and stay in power. >> liu: how precarious is the situation for the by a i didn't think leadership? how worried are they that they could see revolt on the streets if their economy sank lower and lower, if they saw a huge shift down in their economy? how worried is the beijing leadership about this? >> well, china is a funny xture of greater confidence and deep paranoia. but we're getting into the chinese election or i should say selection season because by a quirk of t calendar china will be choosing its leadership at the next five years at precisely the time the u.s. is going to the polls next november so that increasings tensions exponentially within theystem and it lessen its room to move

on all manner of issues. i suspect including the currency particularly if it's in response to pressure from the united states which, you know, which nobody can be seen to exceeding to. so i think it a ve difficult time for china to handle something like. this i mean as a general rule they do no wake up in the morng wondering what's happening in the senate in the united states. they wake up worrying about agricultural rights in hunan province, a problem in a coal mine or something like that. and if they have this incendiary sort of currency bill thrown into the mix next year-- if anything gets through-- that could be very, very difficult if it goes ahead. >> liu: nouriel, you've often chinted to china as a... as perhaps a leader a country that prevent a global recession. is that true? >> well, certainly if china maintains its high economic growth, that's going to be a

help for the global economy where there's economic weakness in advance economies, not just china. there's india, most emerging markets. but the reality is if there will be an economic contraction in u.s., europe and japan, chinese growth slow down sharply because of trade and other types of links and th chinese are already getting worried so they're letting their currency appreciate gradually. their own date on the trade balance is suggesting softness in the trade side of it. so increasingly they might just move to actually... you said the warning about the inflation in mark credit policy, if growth slows down they might ease monetary policy, might ease fiscal policy, might also allow le of a currency appreciation, let alone maybe weakening the currency. >> liu: but nouriel, if the currency did appreciate as fast as so what so many docratic lawmakers want, is there a risk that china could actually fall into a recession? >> well, over time the chinese

currency has appreciated by maybe 20% or 30%. the question is, if you do it fall one-- say in a year or six months-- of course there will be a hard landing in china. that process is to occur gradually becae otherwise the class of the export sector when you don't have yet enough domestic demand isoing to lead to a hard landing of china. so you have to understand the fact that the chinese have to do it n on the other side, they've been doing it too slowly and if they accelerate the rate of currency appreciation as the export sector becomes small, you're changing the distribution of income towards households, households will have more purchasing power, they will consume more and consumption is going to increase. th process that's ocrring anyhow because the u.s. cannot be any more the csumer of first and last resort. the chinese, however, want to do it much more gradually over te over the next ten yrs. they always ha their eyes on dedes while our unemployment rate says do it over the next six 12 months. that where's the stresses are

politically and economically. >> liu: you agree the currency should appreciate by 20% to 40%? what's your number? >> there are different estimates but i would say the currency is undervalued by at least 20% by some measure. the question is, however, if you do it all at once you have a hard landing in china, second any the world and you' have a global disaster. so the process should occur gradually. the question is they're doing some of it, should they accelerate? my view for their own interest, actually, modifying their structure of growth that has been based too much on exports, too much on fixed investment, too much on saving, not enough on consumption will also be in the interest in china but there's a political transition in china and wherever there's a political transition a year from now, everybody becomes much more cautious. maybe new leadership will rethink their growth model and maybe accelerate some other forms. the currency is only one of them. many other things have to happen in china for them to save less and to consume more. but for the time being, chances are they're not going to

accelerate those reforms. >> liu: but richard, this... and i understand the elections could slow down things on the politicafront and therefore on economic policy changes. but this whole issue of stirring dostic consumption that nouriel was talking about has been going on for decades in china. why can't the chinese spur domestic demand? >> you're absolutely right. i mean, this has been the policy since the beginning of the present government in002, a kind of kinder, gentler china in which households do get an increase in income and consume more. there are many reasons, i think, why it hasn't happened and i think most important reason once again is political and it's a bias towards the state and the types of industries in which the state is dominant. china grows between 8% and 10% and people say it should grow between at least 8% to get... to

create enough jobs. but they create very few jobs for the kind of growth they had because it's centered on building more steel mills, infrastructure, building roads and the like. and it's not in the service sector. and i think it's because the state is so dominant in those heavy industries where chinese has been most overinvested in that it struggled to boost domestic demand. the second point, of course, is they were moving along their track until the financial crisis in 2007. china saved itself with a massive fiscal stimulus which, of course, once again, had a great bias towards investment, as nouel mentioned. 50% of g.d.p. comes from fixed-asset investment. they're still trying tosort of digest the impact of that, which is why you see problems with chinese banks w and which, incidentally, make it more difficult forhina in the last year of this administration next year to do this again. because the incoming leadership whicstarts in 2012nd 13

doesn't want the administration of hu jintao and wen jiabao to go out with another fiscal bank because they'll be cleaning up after it. >> liu: is there any point in china richard and nouriel the chinese will be able to jump start domestic demand? has the financial crisis just delayed this? but is there a point where they could mp start this, richard? >> no, they can't jump start it. it's going to happen gradually if it hapns at all and i still think it will take some years because of the various sort of political power in the economy held by the large state enterprises which are largely oligopolys. and unless you can sort of get the banking system to lend to other firms, private firms other than the big state firms and sort of power that provincial party leaders, city party leaders, township party

leaders-- not to say the central party leaders-- over lending and infrastructure a investment untithese officials aret judge purely by the amot of g.d.p. they churn out every year. it's going to be tough because you have to make political... you have to have political reform alongside economic reform and so far the have not been able to do that. >> liu: so it sounds like you need the political will. >> you need the political will but we have been the political will it might take thatase to change the share of g.d.p. to consumption. the chinese have to save a lot because there's no real social safety net so if you lose your job you need to have savings. if you get sick you need savings. want to educate your children, you need savings. social security doesn't exist or is very small. you have to save for old age. you have one child, two parents, four grandchildrens and the old model of children taking care of their parents taking down so you have to save because of the aging population. there'been a redescription of

income from workers and wages to capital enterprises because of a weak currency because of subsidizing essentially t borrowings of the state-owned enterprises and penalizing the savings of household because it's not growing as much as productivity so income has been transferred to thoseho save too much and not for the consumers who couldpend more. so you need do a wide range of policies that are going to take probably decades until you reduce the incentive to save not just for the households but those of the corporate sector and you've got to have more income for consume joers they can spend. but as richard was saying in the political economy of china houses are weak and state-owned enterprises and exporters are strong so they're interest rate policy, their wage policy has been transferred to income from houses to state-owned enterprises with a marginal propensity to save more than the households. so that's one of the structural

reasons why the chinese have a growth model based and biased towards savings and capital spending and not enough consumption and you have to change that political economy. it's going to take time. >> liu: nouriel, let me ask you this: given all you've just outlined, what are the chances in ten to 15 years we will be transacting viz in chinese currency versus the dollar? >> it might take more than ten or 15 years. eventually this role of the dollar as a major reserve currency will decline. but there's not just the dollar, there's the euro, the yen, the pound. they could become a mor reserve kurn city the chinese liberalize their exchange rate, if they liberalize the capital account, inflows and out flows because nobody holds enough so that it's not convertible. if they develop a deep and liquid market for denominated debt because if something has to be reserve currency you have to have the assets to buy. if y liberaliz your domestic

capital market. now, they're doing some steps in that direction. they're doing bilateral deals with countries around the world where payments will occur in recommend biinstead of dollars. so you're not going to have overnight it becoming a major reserve currency. but over the horizon of ten, 20, 30 years, depending on how bad the use does in its own policy and declines the ren minute by could become gradually renminbi could become one of the global reserve currencies, we could get there eventually. >> liu: you think beijing would want to say one day as i put the time line business transacted in renminbi and not the dollar? >> well, i guess you won't be back on this program in ten to 15 years i can say what i like. >> liu: you never know, you may be.

>> i would say as a matter of national pride and global economic sort of power projection, yes, cna would like that. they're doing baby steps now and you can't have a global convertible currency unless you have... you liberalize your capital account which beijing quite rightly in my view is very cautious about doing. it may become an asian currency before it becomes a global currency. but, you know, i think people would stick by the dollar. your know,many of america's problems with china would be fixed if america fixed its own problems, frankly. and that would also shore up the position of the dollar as a reserve currency. i think there's a funny intangible here as well about soft power, if you like. about the ability of the country like the u.s., for example, to project power through the example of it's a democracy and culture, if you like that. helps in an intangible way.

i think the... the openness of the system helps the dollar as a reserve currency and china's a long, long way before its system is open. it was open enough, i think, to be a global currency that people caput faith in. >> liu: richard, let me get your final thought on this. do you think this currency bill is going to pass the house? >> it will dinitely not pass the house in its present form for a number ofeasons. the house republicans, funnily ough, allied with their enemies in the white house for once, both opposed it. i think the house republicans are much more pro-free trade thanhe democrats. also, of course, the bill comes from democrats in the senate like chuck schumer for the republicans that means is politically tainted from the start so they won't accept it. i ink the question is whether they write their ownill and whether there n be reconciled with the senate bill and whether a bill can... unified bill can th go to the white house which would be a very, vy awkward

choice, problem for the white house in the election year. >> liu: nouriel, ski you this same question. do y think it will pass the house? >> well, i agree with richard about it, it depends. in the current form maybe not. the speaker boehner is worried about actually having a vote on it because he's war lead the in spite of the fact many republicans are more free trade than the democrats, it might actually pass even in the current form so they're trying to modify it. and either way then eventually i would say obama will have to veto a billf th sort. but it will be very awkward for the white house as well. so the question is can you essentially dilute it or essentially kill it one way or another. >> liu: gentlemen, thank you very much. nouriel roubini and richard mcgregor, thank you very much for joining me. >> rose: robin wright is here, she a long-time writer about the middle east. her new book is called "rock the casbah: rage and rebellion across the islamic world." it explores many things, including the social and

political changes under by th the region. i'm pleased to have her here back at this stable. welcome. >> thank you. >> rose: there is no better guide that i know in a sense to this world that you are writing about who s been there, know the people, those who are huge and large and famous and those who are influential, not necessarily household words. and you have shn some of those people in this book to tell us a story. what's the story you want to tell us about the 21st century and islam? >> oh, i think the most important and in many ways convulsive change that's happened in the early 21st censure i have really this unfolding in the islamic world of change. catching up with what happened elsewhere in the 20th century. and redefining the kind of... not just the political forces but opening up and showing the path of globalization. that there is a common set of values that are evolving.

we talked about the end of democracy... end of history at the end of the 20th century and this is important not just for what's happening in the region but for the transition that now gives people a common set of values in many places. and it's very interesting that it happens at the same time that we're going through economic crisis because two forces are the things that define us almost on a daily basis and are so intertwined. because what happens in this part of the world is not just politil. it also isultural, as you point out. and i write about that a lot as well. but its fate will depend as much on the... our economic ability to help them make this transition. >> rose: i'll comack to how we can play a role but let me just... so for a long time there was some fear of something called a clash of civilizations. that is a dead issue? >> i think what we're finding is a more commonalty of civilizations that what we're seeing is... >> rose: it's not going to be

islam versus the world as some feared or islam versus the west. that idea has been replaced by another bigger and more interesting idea. >> more interesting idea and that is not just challenging the geriatric autocrats that have ruled in the middle east for decades. it's also about saying we want to be part of what's happening elsewhere. we want to reject violence which has also taken such a toll on us. look at iraq. this is a country where since 2003 in the american intervention the... we have lost something like 200 americans just to suicide bombs. the iraqis have lostver 12,000 killed, over 30,000 injured. their price is much higher. when it comes to the kind of suide bombings we've mean? saudi arabia, in morocco, that we think of 9/11 as the defing rce. ll, in the decade since 9/11

muslims have pai a far higher price across the board. >> rose: and it was in iraq and other places muslims killing muslims. sectarn battles. >> that's right. and what we've seen is a rejection of that and in many ways... the only way we will ever succeed in defeating terrorism, extremism and changing the biggest national security challenge we face is with the help of muslims who are doing it for us alongside us and who are doing it creatively, proactively and not... you know, they don't want foreign forces to come in. they want to be able to take the lead themselves and they have begun to do that. and so many ways the kind of... it's their initiative that is changing the dynamics on the ground far more than anything we do with whether it's troops on the ground or with the drones we fly that target people like anwar al-awlaki in yemen or osama bin laden. but what we've seen, what's happened in particularly the

last generation over the last ten years, you've seen the demographics in the region chan. so that today you have two-thirds of the population, 300 million people in the arab world, and two-thirds of them under the age of 30. and it's the largest baby boom proportionately in the world. and at changes everything. baby booms always do. and then you have the fact that for the first time the majority of the people in the region are literate. and that includes women. so when it com to the engines of change, you have to young and you have women w are the most dynamic. because they're feeling for the first time they want to define their future. and then the third factor is the tools of technology. and so they have access, the means. you know, al jazeera was one channel, the first one that circumvented state control in the mid-1990s. got around all the media this the government-- radio, television, newspapers-- controlled, the message. and today they're over 500 independent satellite stations

in the middle east that broadcast throughout. and it's not just thathey have alternative government control, but you have the whole idea of multiple ideas, diverse ideas. and that gives people sense that there's not just one path, one idea, one rigid ideology. so they have exposure on many fronts and they have the means through-to-express themselves through twitter and facebook. >> rose: you use this term called "counter jihad." what does that mean? >> counter jihad ishis fapl that that we're witnessing that pulls together different parts. there's one, the rejection of autocracy and the political stus quo that has prevailed in the region since most of these countries became dern states in the 20thcentury. the second part is the rejection of extremism. kids today in the middle east want laptops not rifles or suicid bombs. wh you look at even the palestinians, peaceful civil

disobedience is much more popular. rap has become the rhythm of resistance in the region and they're rapping words and lyrics against extremism. and the third is the rejection the kind of his lomb i can ideology, what we saw so much in iran that you have covered so well. and you get all of these pieces together and they reflect something historic, something very different and it kind of captures the idea that what we have feared the most really since i started covering the iranian relution in 1979, the first suicide bombs in beirut in the early 1980s that there is something ite different happening. >> rose: and this counterjihad will define the next decade or if not longer? >> the nex generation, i think. and what we're going to see is something that confuses us in the west because it twhooz parts. one is this quest for political participation, accountability we're seeing in the tri o

president hosni mubarak in egypt, the idea of justice and fairness. butt also has a desire to be islamic and thesetwo thingsre going to confuse us. it's a different kind of islam. today isl is a means to an end not an end in itself. 40 years ago, the majority of women in egypt didn't wr hijabs, the islamic head covering. today over 80% do. but that doesn't mean they're fanatics, that they want to see the muslim brotherhood take over in egypt, that they want sharia islamic law to prevail rigidfully the country. it's an expression of we want islam as the cultural milieu, the environment in which we change. it's no different, really, than the kind of judeo-christian values so many of us have in the west in terms of defining our what our political goals are. >> rose: you talked about rap, especially tunisia, it was a rap star that helped define the environment that allowed that to

explode. >> absolutely. >> rose: who was he? >> a 21-year-old guy who goes by the name el general and he wrote a set of lyrics to a song that was scathing. he cite sized presidenten alny a way no politician hath had done in a quarter century that he had ruled and rap is illegal in tunisia. they couldn't perform in public, couldn't record, couldn't be performed on state-controlled media. so he put it on his facebook ge. and 20% of tunisians weren faceok. the's a lot of debate about what role social medi played. but in truth, even 20% access to any population is extraordinary. and then it gets passe along to others. but facebook was the one item on the internet that the government couldn't sensor, couldn't block. and so it spread like wildfire. and it was a monthater that in that context as the song took

off and began to challenge the president about people living in poverty, eating off garbage, no law, no constitution protecting people, the police working fo their pockets rather than for principle and that a young street vendor was challenged b an inspector who wanted a bribe as well and he said no and she confiscated all his food and his electronic scale and he started protesting as well and he went if goverent office to government office trying to get recourse and in the end when he couldn't he went down to the governor's office and he poured paint thinner over hi bodynd he set himself on fire. and it generated such an enormous reaction and as people began to protest across the country over the next 30 days, they sang el general's song which was then picked up in egypt and bahrain as well. >> rose: tell me... as i said,

this book is about stories of individuals like that. whos shake salman elodai? >> he was a man who was a saudi cleric who had been very influential osama bin laden's life. and he had issued against t first fatwa against the united states for deploying troops in saudi arabia after saddam hussein invaded kuwait in 1990. >> rose: he also made osama bin laden crazy because he said the saudis should defend themselves and he would help them and it was sack ril lidges you to invite the american army to defend. >> and theshake was the one who took this public position and that's the moment this that osama bin laden, who's been a de facto ally of the united states in afghanistan for a decade... >>ose: as part of the mujahadeen. >> that's right: turned against the united states and sheikh salman elodai became his hero

and when the saudi government arrested the shake, that's when osama bin laden issued fatwas and started calling himself an emir, a sheikh, a religious person, someone to stand in. yes criticized the government and said he had no alternative because the government picked up shake alodia. and the shei, after a period of being in prison turned against bin laden. >> rose: why did he do that? >> there are lots of... you can be cynical and say well prison can change your mine. but he actually went on national television, issued fatwas, started a web site and has been active on every anniversary of 9/11or the last four years condemning bin laden, calling 9/11 a mistake and saying tha the killing of anyone of faith, of any faith, is against islam. and his message has changed dramatically. and it was... it kind of... it was a gradual evolution but it is quite decisive and he's not the only one.

in some ways it's the clerics that we waited for so long, people saying "where are the muslims? why aren't the sheikhs condemning?" and you're beginning to see that in very important places. >> rose: let's take a... iran for a second. what's happeni there in terms of the viability and, a, the conflict betwe ahmadinejad and the supreme leader and, b, you know, whatever happened to the reform that went into the streets to protest the election other than the fact that the leaders are under house arrest. >> well,... >> rose: and some of them are worse in prison. >> iran went on for six months. a protest after a dputed presidenal election and the government managed to quash it. this in in ways is what syria is trying to replicate now i facing its own opposition. it's not over. iran has been on a trajectory that has seen more and m and more people challenge the principles of the revolution and

the particular practitioners of revolutionary ideology and now you see even at the top as they've consolidated their hold, the conservatives and the hard liners now are going at each other and the supreme leader who put his professional reputation on the line in defending president ahmadinejad now... >> rose: at the time the election was disputed? >> just two years ago that now two men are at each other's throats, there have been questions about whether ahmadinejad will mage to finish his presidency. there are indication it is regime will do anything it can to prevent his heir apparent, his political cronies, from taking over. that there's an awful lot of political dynamism even in a place... >> rose: but this is within the conservatives. where is the reform movement, though, in terms of shaping the future of iran? and when do they have an opening? >> oh, well, look, they have been so sidelined right now, marginalized with a man who was prime minister for eight years until an through its grisly

eight-year war with iraq. he's now under house arrest. a man who was... >> rose: moussaoui? >> yes. and then the former speaker of parliament karoubi who also ran for the presidency and also is under house arrest. i mean, this is a regime that has become paranoid. it's not viable long term. the question is how does it play out? the interesting thing is my egyptianriends told me 2009 how inspired they were by what happened in iran. and that gave them hope... >> rose: these are people in tahrir square? >> in 2011, they said if it could happen in iran it could happen anywhere. and my friends in iran are telling me what's happening in the arab world is having fallout here, too. wait and see. nothing happens quickly in this part of the world. we're talking about a region that "chronicle"s its hisry at least five millennia. >> rose: when you look at egypt, what's your sense of how that government will find its place

and what will be the elements of the government and take note of the fact that you take note so that when the prime minister of turkey went to cairo and said "i recommend a secular state that looks at all religions as the same" which you talkedbout a a recent visit to me while he was here for the united nations assely, he was denounced by members of themuslim brotherhood. >> the interesting thing is egypt for so long has been the intellectual heart and soul of the arab world. turkey is not arab. >> rose: nor is iran. >> nor is ir. but turkey has become in many ways the most important muslim country today and egypt not the model for anyone. egypt is now starting basically from scratch and you he a lot of tension that's ongoing. the process started during the 18-day uprising that ousted president mubarak has only begun and egypt a microcosm of what we face across the region. it's the beginning of the againing and they have to go through a process not just of

elections where the current polls indicate that well over half don't know who they're going to vote for, no one... no party gets more than 3 3-% to 5% support. a lot of the assumptions about who's going to win... >> rose: there's also a debate as whether o not it would be the right time to have a presidential election because those who were looking for an alternate to the muslim brotherhood are t organized and they needed more time to oorg whereas the muslim brotherhood won an earlr election because they were organized. >> the two two most important and powerful forces in egypt today where you have to military and the kind of old party regime... the old regime's party this's reconfigured trying to run. so that you have. and whether some of them are going to be allowed to run is an open question. then you have to muslim brotherhood. there's dozens of parties in between trying to form that don't ve their resources, the network, the knowledge about how

to be effective campaigners. but the parliamentary elections will be first and then they get to the process of the constitution and in many of these countries the constitution is going to be the most important part. what we forget about iran's revotion is that for the first 18 months you had technocats running it. and it was only as they sat down to write the constitution and you saw 6,400 amendments offered to the constitution and the forces that had been united in taking on the shah, a monarchy or system of rule that prevailed for 2,500 years that you began to see the opposition fragment. and two of the parties began killing others. in the space of that year and a half, over a thousand officials 27 members of parliament, president, prime minister, all were killed and that was the moment that i tollly hoe mayny said clerics must come back.

we have to supervise the political chaos. khomeini. and he imposed the idea he talked about earer of a supreme leader overseeing it and these religious institutions to mirror the elected traditional executive judicial... >> rose: so the great debate is within islam, not islamnd some other place? >> absolutely. this is what's so interesting. islam means submission literally and the idea is that there is one path, one true path to god. that's what the fundamentalists have been arguing for decades. but the iranian revolution represented, what the rise of a lot of these parties, whether it was hamastor muslim brotherhood, one way or doing everything, only one righteous path. and what you're seeing today the emergeian of people who are saying in lots of different ways there are many ways of doing it. and taking on each other. one of my favorite subjects in the book is the chapter on the way that the young comedians have emerged to openly challenge

extremeism's... again, the diversity of opinion and islam is no longer about one idea. it's about a lot of different ideas. >> rose: roll tape. this is courtesy of ted of one these comics and kind of metsz messages that they are demonstrating on stage. here it is. >> b the fact is, there's good people everywhere, that's what i try and show in my st one persoo mess it up. like a couple months ago in times square in new york there was this pakistani muslim guy who tried to blow up a car bomb. now, i happened to be in times square that night doing a comedy show and a few months before that there was a white american guy in austin, texas, who flew his airplane into the i.r.s. building and i happened to be in austin that day. (laughter) doing a standup comedy show. as a middle eastern male when you show up around a lot of these activities you start feeling guilty at one point. (laughter)

i was watching the news i'm like "am i involved in this crap?" (lghter and applause) i didn't get the memo. what's going on? but what was interesting was the kistani muslim guy, he gives a bad name to muslims and middle easterne and pakistanis from all over the world. and one thing that happened there was also the pakistani taliban took credit for that failed car bombing. my question is why would you take credit for a failed car bombing? like, "we just want to say we tried." (laughter) "and further me, itis the thought that counts." (laughter) (applause) "and in concsion, win some; lose some." what happened was when the white guy flew his plane into the building i know all mmiddle

eastern and muslim friends were watching going "please don't be middle eastern, don't be hussein." and the name came outack and i'm like whoo! that's not one of us. but i kept watching the news in case they cam back and they'd say "before he converted to islam." damn it! why, jack? why? (laughter) >> rose: let me come back to this idea of the debate today which you look at some of the factors. this is also to compliment you also, anthony shadid and david kirkpatrick of the "new york times." "by force of this year's arab revolts and revolutions, activists marching under the banner of islam are on the verge of a reckoning decades in the making, the prospect of achieving decisive power across the region has unleashed an unprecedented debate over the character of the emerging political orders they are helping to build." just tell me more about this unprecedented debate, which is about what you're about to. >> i just tnk in every level, whether it's the women getting out there and saying look, all

you gu who interpreted the early sayings of the propt were all wrong. lam really empowers women. and they're going back and not just saying give us power becausit's the 21st century, they're taking islam apart thepgsin very sophisticated ways and reinterpreting thery lidge i don't know itself powerfully. anforcing the debate. in tunisia one of the amendments that they diussed was whether to give a quota of 50% of all elected seats to women. and they found that 53% of the country thought that was too high. but 41% thought that wathe right number. i'm not sure we eat get 41%or that kind of prop snigs the united states. >> rose: are there women... there are women in the parliament in iran, are there not? >> absolutely. and there's been a woman vice president. >> rose: right. so let me finally come to this notion of what are the fears? people who are there who applaud

the change, who applaud what happened from tunisia to cairo, bahrain and syria, what do they fear? >> well, look, the euphoria of change always comes up against the raw realities of the morning afr. >> rose: right. >> and in every one of these societies they're facing the hard truth tt no of them can afford change. that when it comes to dividing up not just the politicabut the economic spoils that they can't deliver. and what people went out to demand was to demand a sense of... they want a future. they want it in jobs as well as an honest vote. and there's only one country out of the 22 arab countries that may be able to deliver any time soon and that, ironically, is libya. because it only has 6.5 million people and a lot of oil compared to egypt has 85 million people

and very limited resources. a little bit of natural gas. so they fear not getting the dream, not being able... there's a really sad story in egypt about the guy who rides... has the camel down at the pyramids and takes tourists out there and he says "today i love the fact that we have... we got rid of hosni mubarak but i can't feed my family and i can't feed my camel and i may have to feed my cam knoll my family." and that... that's what people are kind of focused on right now. then there's the fact that ange takes a long time and that's true everywhere. a generation after the fall of the berlin wall and the soviet union we still have a former communist and kej bee chief in power in moscow who's just declared he's going to run again and could stay in power until 2024. the average black in south africa lives worse off, least economically, than he did under apartheid and there are just some really tough times about

change. how long was it before our civil war and blacks getting the vote. this is impatient because they've seen chae happen elsewhere. they think they have resources. they think they've put their lives on the line and they expect something. >> rose: the book is called "rock the casbah: rage and rebellion across the islamic world." thank you. >> thank you, charlie. captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org