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Peter Grace

Subject: How Academics Shaped the CIA
Bio: New Zealand Based Academic and Author of The Intelligence Intellectuals: Social Scientists and the Making of the CIA

Transcript:

Larry Bernstein:

Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast that covers economics, politics, and history. Today’s episode is How Academics Shaped the CIA.

Our speaker is Peter Grace who is a New Zealand based academic who has a recent book entitled The Intelligence Intellectuals: Social Scientists and the Making of the CIA.

I want to learn from Peter about how just after World War 2 and at the height of the Cold War, American academics worked inside the CIA’s research and analysis department to forecast enemy activity, and how they set up methods and processes that have been applied by the CIA ever since.

Peter, can you please begin with six minutes of opening remarks.

Peter Grace:

I would like to start by why you would want to read a book on CIA in the early 1950s. The world’s not a safe place right now. Our political leaders are asking their citizens to fight wars. Until recently, national security decisions have been made behind closed doors. And the intelligence that is provided to political leaders has been classified.

There is a move towards sharing that intelligence with the public that justifies the decision to send people to war. It is incumbent for us to understand the intelligence process, the mechanics of information gathering and analysis to help us become more informed.

My book is about the early Cold War and that the Central Intelligence Agency needed to be reformed in to provide better strategic intelligence. The Central Intelligence Agency was formed in 1947 with the National Security Act.

The idea of centralizing intelligence in one place became an imperative after Pearl Harbor. There was a belief that had all the jigsaw puzzle pieces been brought together, Pearl Harbor would not have happened. By the late 1940s, the CIA was at risk, its reputation was in tatters after three high profile intelligence failures: China turning communist, the Soviets getting the atom bomb early, and North Korea attacking the South.

In late 1950, the new Director of Central Intelligence General Walter Bedeel Smith set up a new type of strategic intelligence that was informed by the principles of social science: history, geography, economics, political science, psychology, anthropology, and sociology. There was hope that this new social science method would see patterns and trends that would help CIA’s analysts provide strategic warning about the intentions and capabilities of the enemy particularly when one side might use the atom bomb preemptively.

Larry Bernstein:

American intelligence took off during World War II under the direction of William Donovan. He had come from Yale and ended up hiring a lot of Yale professors to the OSS. This was the impetus for bringing social scientists into intelligence. Tell us about the role of Donovan.

Peter Grace:

Donovan had a view that to win the war, he needed to employ America’s best and brightest in what he called the research and analysis unit at OSS. The early work that was being done by OSS tended to be basic intelligence, which is getting things together like maps. If you are going to invade North Africa, you need a good map, and they would call on research and analysis to provide that.

They were reading newspapers shipped out of Europe. We had anthropologists and classicists in North Africa who knew the local tribe people and were able to sort things out logistically before the military arrived. This idea that the best and brightest were needed.

Donovan’s a maverick. He’s a man that used to turn up close to the battlefield in his own chartered plane to get firsthand information about what was going on. And the OSS was known as being a hard drinking, hard fighting organization with massive budgets for booze. Not asking for permission but asking for forgiveness afterwards was pioneered by the OSS. You just did things that had to be done.

Larry Bernstein:

What do you make of Britain being the leader? Pre-World War II, the United States was an isolationist country. It had no real offshore presence. You mentioned North Africa as an example. The British had the largest colonial power at the time. They administered Egypt. They were involved in activities all over Africa. It is no surprise that the colonial office had family that were all over the Empire. The interrelationship between the military forces, the colonial office, and academia to be mutually supportive.

This was not the case in the United States. The film Raiders of Lost Ark was more akin to what would be going on in the English Empire, where the relationship between an archeologist and the head of the military would not be uncommon.

How did the English give us a path to follow as it relates to the development of the intelligence agencies?

Peter Grace:

What we’re seeing is America’s role in the world changing after World War II being global. And that is a huge change from the pre-Second World War isolationist period with the Truman doctrine and the Marshall Plan.

To keep the peace, there needed information about the way people lived around the world, the way they thought. And the rising threat from the Soviet Union and what capabilities they had.

Sherman Kent was one of the leading proponents that social science was the window that could bring together different elements: psychological, anthropological, sociological, economic, and technological. America’s only going to keep the peace if they had that information.

Larry Bernstein:

Sherman Kent is the hero of your book. He is a historian, a tenured professor at Yale, who is invited to join the new CIA. His expertise was on the election of 1827 related to Louis Philippe in France. He had written a book on the art of writing history and is interested in process and methods to help decision makers. He believes that academics can add real value in that process and that their training across disciplines can make major contributions. Tell us about Sherman Kent and how it influenced the creation of the research and analysis division at the CIA.

Peter Grace:

I was not looking that social science was fantastic and changed the way we thought about analysis because I’m a social scientist myself and I wouldn’t believe that crap. Social science can make some major inroads. It can be the skeleton that you hang things from because it is so hard to work out why somebody does something.

Kent understood that implicitly right from the beginning. He said we can use social science to get us halfway there, but when somebody asks “I need this answer on my desk at nine o’clock tomorrow morning. Social science says, “Hold on, wait. I need to get all this information together. I need time to think about it.” There were times in the Cold War where you had to go with a gut instinct and Kent talks about that well.

Kent leaves behind this legacy of thinking about the craft. He knows right from the start that what he writes down can be used for the next few generations ahead of him.

He paints a picture of the fragility of the process. That is what makes the analysts of today so respectful of him, that he’s written it down, that he’s worn his heart on his sleeve, and that he’s shown them that there’s an awful lot they can bring to analysis.

Larry Bernstein:

What surprised me was his support of the library as being a place to look for answers, that there were answers in books. If you compare it versus G2 intelligence for the Army in North Africa, there is no library there. I do not know how they gather and apply information, but it is not from books. It is from human intel. The OSS originally had offices at the Library of Congress, and Sherman Kent argues that the CIA should get its own library so that they can have easy access to these books.

Questions that are being asked, will China invade Taiwan, or will the West face an invasion from the Soviet Union? These are not questions that are easily ascertainable from books. How do you think about using source material from the library as his primary method of intelligence?

Peter Grace:

It betrayed the prejudice of the social scientists, which is the peer review system. But what I’m reading has been double checked by leading experts. It’s a collaborative effort. And books were the place where you could have that trust in the source. He’s a historian, so he believes in an historical method. Just because somebody says, “I’ve just arrived from Moscow and here’s what’s happening,” doesn’t mean that you take it at face value. Part of that is this robustness that they were trying to impose, that if somebody said, “How did you get this information?” They could say, “Well, I can trace it through these sources, and it’s not just something that we’ve heard off the street today.”

Larry Bernstein:

There are obviously errors in every method and process, but let’s focus on human intel. Did you ever read the book, Our Man in Havana, by Graham Greene?

Peter Grace:

Yes, of course.

Larry Bernstein:

It’s the worst example of human intelligence. The Western Power Intelligence Agency has a man in Havana to get human intel, but the reality is he never leaves his hotel. He gets room service and types up reports and mails it in. And based on those bogus reports, major decisions are being made. And it highlights the frailty of this approach.

Peter Grace:

As does the Steele report in the dossier.

Larry Bernstein:

Now that we have poked a hole at human intel, let me try to defend it. In the mid-1990s, I got a new job as co-head of emerging markets proprietary trading at Salomon Brothers. My partner, Mark Franklin said, “Let’s go to Argentina and find out what’s going on in the ground.”

“Okay, when we land there, what are we going to do?”

“Well, first we probably should meet with the editors of the largest newspapers. We should meet with the heads of the largest banks and investment banks. We should meet with the current head of the Ministry of Finance. We should meet with the former head of the Ministry of Finance, the head of the Central Bank, and the former head of Central Bank.

We probably should meet with a billionaire who runs a large brewing company.”

I said, “Listen, we’re in the relative value bond trading business. Brewing is a sideshow.”

“Larry, do you have any idea how hard it is to make a billion dollars in Argentina? Do you know how plugged in you must be? We’re going to go visit the head of the brewer.”

We would go visit these same individuals every quarter and we would put in a few new people and drop a few each trip.

“Are you sure you want to go visit the same guy?”

He said,” Yes, because it’s not so much his level of concern about the finances of the country I’m interested in, but the changes. If a guy’s always saying it’s the end of the world and he’s saying it’s going to be fantastic, that’s new. And so, we can apply changes and not level as being a more important metric.”

We did this in Argentina, Brazil, Venezuela, Mexico, Thailand, wherever. We have a process of gathering human intelligence from political scientists, pollsters, journalists, government people, bankers, and traders. We could learn about what the issues of the day were. We could apply it with academic analysis. We could apply that with models, but at the end of the day, we were not getting it from books, we were getting it from people.

Peter Grace:

David Ogilvy says the same thing in Confessions of an Advertising Man.

You pick up something like a car account. The first thing you do is you go down to the car yards and ask the car salesman how the car is selling. They are going to tell you.

“Oh, people don’t like it because it’s not comfortable inside or they don’t like the new transmission system or whatever.” They are going to give you the whole thing. They are even going to tell you the advertising stinks or what could be done to improve the advertising. This idea of getting down to grassroots is a terrific idea.

Larry Bernstein:

Kicking the tires.

Peter Grace:

It is a terrific idea, but you balance it with other information. You do not do the whole thing and come back and say, I’ve solved the problem with the client, or I know which way the economy of Argentina is going just by getting that information. You are getting it with other sources.

A good social scientist, you are testing the value of each source and trying to work out which ones you’ve put more emphasis.

Larry Bernstein:

In reading your book, what surprised me was the breadth, depth, and quantity of academics working for the CIA in research and analysis. And they were not random guys. It was like the Sterling Professor at Yale, which is their top guy. One of the economists on staff is Charles Kindelberger. He wrote a fabulous book on the role of tariffs causing the Great Depression. I also read one of his books about European economics and what I didn’t appreciate was that he had worked at the CIA on the European economies. Now that makes total sense that he would write that book. I was baffled why he had written it previously, but now I know.

Our great social scientists working for the CIA would be untrue today. I do not know any social science community academics who freelance or work for or take a sabbatical to go work at the CIA. Since maybe the Vietnam War, academics have pushed away from the military and the intelligence community as being on the dark side and not a partner. Tell us about this inclusivity of academy and the CIA, and then if there has been a divorce.

Peter Grace:

I talked to somebody at Yale recently to this professor of history, “Would you have worked for CIA?” And he did not hesitate. He said, “It was an option. I would quite happily have gone to work at CIA if I hadn’t stayed in academia.”

So, there is something about service which seems to trump some of the question marks, particularly after Vietnam War, about whether you’d worked for CIA or not. This is a recognition of the greater good, that there are things that we can bring to promote peace in the world.

One of the reasons why I wrote the book. I had done Russian foreign policies since 2014 as my master’s. I asked my supervisor at the time, “What do you think the impact of social sciences is on foreign policy making?” And he said, “Well, I was trained in America.” He said, “I went to Columbia for my PhD. I went to Johns Hopkins for my master’s and my undergraduate was at the University of California.” And he said, “All of my professors at some stage had something to do with CIA.” And most of them, he said, were consulting.

Ernest May is one of those people who crops up a lot. And if you start to Google CIA documents, and people like Neustadt, Kenneth Arrow, Thomas Schelling, Robert Jervis come up again and again.

There is a link between academia and intelligence that has never gone away. And that is why I called my book The Intelligence Intellectuals, because it’s an uninterrupted link that starts at the Second World War and continues right up until the present day.

Larry Bernstein:

I had Ernest May speak at my book club years ago. He’s passed away now, and the topic was the 9/11 report. I asked him why he drafted the 9/11 report the way he did. He said, “Well, I broke it up into parts and the first part is history. What happened here? Why did these terrorists behave in this manner? How did this happen? And then I’ll explain what they did and what we can do about it. “ Ernest May was a Harvard historian. I thought his approach made an effective commission report.

I would have thought that if you went today to Harvard’s history department and said, “Would you consult for the CIA?” I think the answer would have been no. And if my colleagues found out, I would have been ostracized. It is also possible that the nature of historical study has changed. There are not military historians at Harvard like Ernest May. I read one of his books Strange Victory on the failures on why France lost in World War II. Military history as a discipline has collapsed among the major history departments in the United States and historians now study other topics like the history of Chinese Americans and their relationship to civil rights. It is less applicable to the questions that the CIA is interested in.

What do you think of the nature of study and its applicability, as well as the leftward leaning nature of the academy, which is opposed to military defense and the Central Intelligence Agency?

Peter Grace:

Why do they bring historians in? Because historians can give you an interpretation of what happened using the facts. They can show you also the psychic nature of history that history often repeats itself and they can use analogies to help you see that more clearly. Why would CIA want to use historians? What is happening now on the ground? Is there an historical comparison that we can make?

When I started writing this book, most of the books that were available that were of a similar nature to mine were left wing perspectives. And the view tended to be that anybody that worked for CIA, and particularly the people like Kent, were either deluded or wrong, imperialist, evil. I did want to present a more impartial view of that.

We need people who are interested in the challenges of democracy. We need people who have an ethical view on waterboarding. Without that picture that the left brings, we would be probably in serious trouble. If you went to Harvard today and asked somebody if they wanted to work for CIA, there would be a resounding closing of doors, but one or two doors would still be open.

Larry Bernstein:

I took a class in the History of American Foreign Policy at Penn, and one of the assigned books was The Best and The Brightest by David Halberstam. The underlying thesis of the book is that the best and the brightest contribution was negative, that they were overconfident in their philosophy and in their application…

Peter Grace:

Worldviews

Larry Bernstein:

Yeah, the whole thing. There were many people involved: the Rostow Brothers, McGeorge Bundy, and they had been advising Kennedy and then Johnson as it relates to policy and that their advice turned out to be poor. I think Kennedy fell in love with the best and the brightest as it related to their successes during the Cuban Missile Crisis, but that same team that applied it to Vietnam resulted in a catastrophe and Halberstam lets these guys have it.

Since then, there has not been this group of the best and the brightest held up by any administration as being critical to decision making. Tell us about the demise of the academic generalist as it applies to policymaking and why the best and the brightest are no longer at the center of power.

Peter Grace:

Ernest May and Richard Neustadt talked about presidential styles of decision making. And they mentioned that in Kennedy’s case, it was collegial. Kennedy liked to do a round-robin of opinion before he decided. There is also another story of Isaiah Berlin, the English philosopher who was in Washington during the war, he’s at a cocktail party and Kennedy asks him what to do about the missile crisis. The best and the brightest are an example of the collegial system that Kennedy was using.

There is a danger in believing that you have recruited the best and the brightest, because if your recruitment process is to say to get the A+ students from the best universities with the best degrees, that doesn’t necessarily mean that they’re going to be able to think on their feet when in a crisis situation.

Larry Bernstein:

There is a large literature on the CIA. I remember the first one I read when I was in high school, A Man called Intrepid by William Stevenson that begins with the story of the OSS. And then I read Alan Dulles’s book The Craft of Intelligence, which gave you background of Alan’s work originally working for the OSS out of Switzerland and then how he developed his own operation. And then Richard Helms book A Look Over My Shoulder, Director of the CIA. from an intelligence and operational standpoint.

And then most recently, Tim Weiner of the New York Times, who covers the FBI and the CIA, gave a behind the scenes of the success and the failures of the CIA. Mostly failures, frankly, comes out of that book Legacy of Ashes. And yours is a completely different approach. You’re not trying to defend the existence of the agency or slap it down because of its failures. You’re more interested in process. Explain how your book fits in and what it contributes to that discussion.

Peter Grace:

It’s not an overview of the history of CIA. It’s only a snapshot in time. It’s 1950 to 1953 where the professors are brought into CIA away from the universities to affect change and put down rules about the way analysis should work. We can learn about the history of the organizations, but what we want to know is how do they arrive at the conclusions? And are those processes good processes? If I sat down with somebody from CIA, would they explain it to me in a way that was credible? And that’s increasingly important because decisions are being made around the world that either ignore the input of intelligence agencies or twist it. And we are expected as citizens to take at face value these conclusions.

Larry Bernstein:

I end each podcast on a note of optimism. Peter, what are you optimistic as it relates to the gathering of intelligence?

Peter Grace:

Well, AI is the big question, and most of the intelligence analysts that I spoke to in the UK and in America recently said this was the thing that was worrying them the most.

Larry Bernstein:

When I was thinking about the questions that Sherman Kent highlighted in his book, Strategies of Intelligence, they were questions that AI would have a very easy time answering. Example, can we move wide trains with military equipment through Bulgaria? AI would be able to figure that out in seconds. You want maps of North Africa? No problem. You want to understand what languages are spoken on the coast of Algeria and in areas of Iran, no sweat. Interpret the newspapers in Casablanca for the last three months as it relates to American foreign policy, and give me an analysis, boom, done. And then when you ask follow-up questions, would you be interested in hearing more about this? The feedback loop that the decision makers can get it in a rapid formula.

If anything, if you believe in Sherman Kent’s view that if all I really need is a library, AI can read the entire library and get you the essence of what you want. And if you want more detail like what sources, no problem, AI can do those things.

Peter Grace:

40 years ago, we did not have the internet, so the ability to get information required driving to the library. We’re not talking about speed up, we’re talking about the ability to judge it and to critique it. AI is getting better at doing that, but there is a problem, and if you don’t know the process of how you got there, then it’s hard to know whether the quality of information is good or not.

If AI takes that process out so that it’s not transparent, then how can you trust that information has been good? The questions that you were asking were the basic intelligence questions, but they’re not the ones that Kent moved on to, which was, will the Soviet Union invade Western Europe and when and how? At what point should we have our armies prepared for that invasion? Will they attempt a preemptive strike using nuclear weapons to knock us out before we even start? And at the moment, AI can’t deliver that.

Larry Bernstein:

Thanks to Peter for joining us.

I am doing a series of podcasts on the war in Iran. If you missed our last podcast the topic was Why Did We Attack Iran Now. Our speaker was Eitan Shamir who previously was the head of the National Security Doctrine Department for Israel’s Prime Minister.

Our prior podcast was Why Does the Press Think We Lost the War? Our speaker was Mark Penn who was a senior advisor to President Clinton and was Hillary’s chief strategist for her senate and presidential campaigns.

Also Iran’s Rope-a-Dope Strategy with Anthony King, a Professor of War at Exeter University.

Previous to that, we had a podcast Allies Fighting Together with Yaakov Katz and a podcast on the Opening of the Strait of Hormuz with James Holmes from the US Naval War College.

We started the series with former Trump National Security Advisor John Bolton about what steps we need to take to win the war.

You can find our previous episodes and transcripts on our website. Please follow us on Apple Podcasts or Spotify.

I am Larry Bernstein with the podcast What Happens Next.

Check out our previous episode, Why Did We Attack Iran Now, here.

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Eitan Shamir

Subject: Why Did We Attack Iran Now
Bio: Political Science Professor at Bar Ilan University, Former Head of the National Security Doctrine Department at the Office of Israel’s Prime Minister

Transcript:

Larry Bernstein:

Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast that covers economics, politics, and history. Today’s episode is Why Did We Attack Iran Now.

Our speaker is Eitan Shamir who is a Political Science Professor at Bar Ilan University, and he previously the head of the National Security Doctrine Department at the Office of Israel’s Prime Minister.

I want to find out from Eitan why we attacked Iran and have we achieved are primary war aims.

Eitan, can you please begin with some opening remarks.

Eitan Shamir:

I would like to address the three major questions regarding this war. First, why are we going to war against Iran versus using diplomacy? Second, why did Israel and the US decide to attack Iran now? What was the urgency? And then the third, has the war achieved its objectives?

Larry Bernstein:

Start with your first point, why did we choose war versus diplomacy?

Eitan Shamir:

Diplomacy did not derail Iran from pursuing its nuclear capability. No matter what we did Iran refused to change its behavior.

Larry Bernstein:

The Americans used diplomatic efforts for 47 years with the regime. The Obama administration felt that it had been successful negotiating nuclear restraint with Iran. Was Obama successful or were the Iranians cheating?

Eitan Shamir:

War is not a desired course of action. We all know that war has risks. You lose men and material. There’s human suffering that is involved. So, war should be regarded as last resort.

What Obama did, not wanting to make war, we reached an agreement that kicked the can down the road. Every American president promised that Iran would not have a nuclear weapon, but none of them did much.

Trump is the exception. JCPOA, the agreement that Obama did, froze the situation for 10 years, so the Iranians could continue to enrich their uranium at a low level that is accepted for civil purposes from 2015 to 2025, but Iran didn’t dismantle their facilities. It did not take away their knowledge, capability, and learned experience.

The Iranians were not open and transparent about their nuclear facility at Fordow. There was nothing in the agreement that addressed the issue of proxies, terror activities and the missile program.

I don’t think Iran’s strategy was to make a nuclear device and then bomb Israel. But if the likelihood that I was wrong even by 1% means that the nuclear threat is existential.

Remember that the Iranians surrounded Israel with the Houthis in Yemen, Hezbollah in Lebanon and Syria, Hamas in Gaza with a missile capability in these nearby locales and ballistic missiles from Iran.

This gave Iran a hegemonic position in the entire region against the Gulf states and Israel.

In 2025, with the nuclear agreement no longer in place, what was next? They lifted the sanctions; they had a lot of advantages in economic terms. They felt immune because under this agreement nobody could attack them militarily. Even Israel would not dare attack them while there was an agreement with the US.

Larry Bernstein:

I understand that diplomatic solutions may not have been an effective means of controlling Iranian ambitions and power, but what motivated the war now? What was the triggered the United States and Israel to do a surprise attack? And how was it possible that it was a surprise?

Eitan Shamir:

Edward Luttwak defined the Obama law that Iran can hit everyone, but nobody can hit Iran. President Obama believes that Iran is a force that could stabilize the Middle East and the consequence is that Iranians learned to believe that they were untouchable.

We must consider the religious factor, which we as Westerns sometimes misunderstand, This notion that the West is weak and decaying. There was no reason to believe that Trump was bluffing. I think the Iranians simply miscalculated.

But going back to the why now? In 2021 Israeli intelligence became aware that the Iranians were enriching uranium from 20% to 60%. This is the famous 400 kilograms.

The only reason to enrich uranium to this level is to make a bomb. With the Biden administration, the law of Obama still applied. Iran was immune. We were not going to attack Iran. The Israelis came to Biden after he lost the election and told Biden, “Look, you don’t have to get elected again.” Let’s do something militarily. And Biden disagreed.

Now, what happened on the 7^th of October from the Iranians perspective is that Sinwar jumped the gun and undermined the Iranian plans. From their point of view, Hamas is destroyed as a military force.

Then Hezbollah next. Hezbollah is finished as a fighting force. The next disaster was Syria. Assad was literally under Iranian control. Now, Assad is gone and has been replaced with their Sunni enemies who were oppressed and killed during the civil war in Syria. These guys now control Syria, a total disaster for Iran.

Larry Bernstein:

In June 2025, the Israelis fought alone initially. They destroyed Iran’s aircraft defense systems, and so it created an opportunity for US B-2 bombers to drop massive bombs on Iran’s nuclear facility.

Eitan Shamir:

Exactly.

Larry Bernstein:

There was a lot of disagreement about whether the US attack on the nuclear facilities at Fordow were successful. How much did this undermine the Iranian nuclear program?

Eitan Shamir:

We don’t know for sure. I don’t get access to Israeli intelligence. But from what I hear, the strikes were successful. Those facilities are not operational.

Israel killed many nuclear scientists, took out their leadership and destroyed most of the missile sites and launchers, which was one of the objectives of this operation.

In June 2025, Trump stopped the and demanded that Israeli fighter jets make a U-turn and go back to Israel. Trump knew that the next wave of Israeli fighters was going to inflict heavy damage on Iran. And he stopped it because he wanted to give room for diplomacy. Since June 2025 the Iranians were negotiating but as usual this led nowhere.

They were stalling and stalling and stalling while they rebuilt their offensive and defensive weaponry. Israel intelligence estimated that Iran produced an additional 1,000 missiles per day.

And they transferred a billion dollars to Hezbollah so that they could recover. And today in Lebanon, this fighting with Hezbollah is the direct result of that.

To those who criticize the decision to go to war against Iran, I never heard arguments for what the alternative was. I suspect that the Iranians would reject the previous Obama agreement.

Why did Trump decide to go to war? He was influenced by the embassy crisis in Tehran. Iran tried to assassinate him, so it got personal. In addition, in Trump’s negotiations with a nuclear North Korea, that he had no leverage.

Iran is much more dangerous than North Korea because it has a hegemonic ideology in combination with religious radicalism. This was a big part in his decision to make war.

Larry Bernstein:

The Americans and the Israelis have not considered a ground invasion.

Eitan Shamir:

No.

Larry Bernstein:

And why is that? What is it about Iran’s geography that makes a ground invasion ridiculous?

Eitan Shamir:

Iran is protected by mountains. You have a few passageways like you see in Switzerland.

The Iranians have a historical memory of a glorious Iranian empire, the Persian empire before that, and they believe that their destiny is to be hegemonic in the Middle East. Shia is a minority in the Islamic world, and they were always the underdog. And the Iranian revolution in 1979 was supposed to change this historic relationship.

The struggle is multilayered. They are fighting the West because it is everything that they hate. The West is corrupt, anti-religious and colonialist.

Israel is a forward post of the West, and many radical Jihadi Sunnis say the same thing. The Jews under Islam were always second-class citizens. The Islamists are in shock that the Jews have an independent state in the heart of their Middle East. The plan is that after they kill off the Jews in Israel that they will continue the struggle against the West in Europe and against Sunni Islam in the Middle East. That’s core to their world view.

Larry Bernstein:

What are the Saudis thinking?

Eitan Shamir:

The Saudis are playing a sophisticated game. If you remember, they were trying to use China as a wedge to provoke the Americans to do what they wanted. But the Saudis have a lot to lose, and they are not risktakers. They want to stay low and hope that the fighting stops soon. But they are pushing hard on the Americans to be tough on the Iranians now to win the war.

Larry Bernstein:

How widespread is the view among the Gulf States that they want Trump to keep hitting the Iranians? It seems counter to these other points of making peace.

Eitan Shamir:

The Middle East is full of contradictions. And that is why most commentators in the Middle East have no clue what is going on. When Israel was fighting in Gaza, a lot of Middle Eastern experts in Britain and the U.S. were saying, “Because America is supporting Israel it’s going to alienate the Arab moderate countries.” People who actually visited officials in Riyadh and in the Emirates heard, “Don’t stop the Israelis. Let them finish Hamas because Hamas is our enemy. Hamas is the Muslim Brotherhood, and we are not afraid of Israelis. We are afraid of the Muslim brotherhood.”

Larry Bernstein:

What is the Iranian military plan and what was the purpose of their performative act of firing ballistic missiles that they knew would be shot down?

Eitan Shamir:

Their original strategy was to create deterrence by having a missile wall. We can attack everyone in the Middle East with this unprecedentedly large missile arsenal that is protected underneath the mountains. In addition, Iran will make their proxies fight for them. They had Hezbollah, the Houthis, militias in Iraq and Syria. Whenever Israel retaliates, it will have to retaliate against the Iranian proxies.

The next phase for Iran to get immunity was to be right on the threshold of obtaining a nuclear device, the threat to have the ability to make a bomb in a few weeks.

Since October 7, Iran has seen its global strategy fall apart. They were under enormous stress, and they responded by firing missiles at Israel. I do not think they had a choice. They were trapped. They had to do something because their proxies looked to them to provide leadership.

Now, the Iranians are being humiliated. Their proxies are defeated. Their plan to fire 100 ballistic missiles at Israel and thousands of smaller rockets from Hamas and Hezbollah each day for weeks to be combined with a proxy land invasion was expected to bring Israel to its knees. If Iran got a nuclear weapon, then Israel had no way to deter Iran. I think this was the Iranian plan. And everything went bad for them starting on 7^th of October. We should award the Israel security award to Sinwar for changing the whole military dynamic in the Middle East.

Larry Bernstein:

How is Trump different than previous presidents for the Middle East?

Eitan Shamir:

After the Gulf War, using force in the Middle East was taboo. I was sitting in a conference in the Israeli Foreign Ministry and there was a consensus that the Americans were unwilling to use military force in the Middle East after the Iraq war. And I disagreed. There is a reluctance in this Trump administration for certain kinds of military intervention, but Trump is not opposed to all military force.

Larry Bernstein:

Why didn’t the Saudis build a bigger pipeline to handle all the 22 million barrels out of the Persian Gulf and instead of a partial solution of a pipeline that could only ship 7 million?

Eitan Shamir:

There is inertia in the status quo in the Middle East. Being properly prepared for war is only obvious in hindsight.

You know the story of the scorpion and the frog. That the scorpion stings the frog in the middle of the river and the frog asks him just before they drown, “Why did you do it? You killed us both. “Well, I’m a Scorpion.”

Gulf countries are the frog and Iran is the scorpion. Iran is also dependent on sending oil tankers through the Hormuz Strait. Why would they do it? It is this cruel game where no one wins. That is my only explanation.

Why didn’t the Saudis invest more in their defense? They expected that the American security umbrella would protect them and that neither the US nor the Iranians would initiate a war.

Larry Bernstein:

The American and European media believe that the American-Israel alliance is losing the war. That their war plan is ineffective. There was an article recently in the Wall Street Journal that said that killing off the top 40 leaders was a bad idea because they will be replaced by even more horrible people. Some say that the threat to the Strait of Hormuz was not thought through, and that the Iranians are winning the war in every dimension. What do you think?

Eitan Shamir:

I don’t know where it is coming from really, but it’s more of a psychological problem. Foreign Affairs magazine has five articles explaining why the US is losing the war in Iran. I think this perspective comes from people who believe that military force does not solve anything. This is an ideological problem.

We saw the same response with the war in Gaza. All the experts in the media that quoted retired military officers, academics, and analysts said that Israel would surely lose the war in Gaza. And yet Hezbollah and Hamas were completely defeated. And now it is Iran’s turn.

The critics completely ignore the chaos, despair, and problems of the other side. There is a famous story from Israel’s Independence War in 1948, soldiers were complaining to their commander about the rain and the cold and why they cannot go on. And the commander said, “It is also raining on the other side.” Meaning you are suffering, but the other side is suffering as much as you are. Hold on because they will crack first.

Larry Bernstein:

The Europeans have opposed the war in Iran, and they are angry that the United States is not aiding Ukraine in the Russian-Ukraine war. How do you explain the European’s perspective on making war?

Eitan Shamir:

Where you sit is where you stand. The Europeans view Russia as the aggressor. So, this is a no choice war. Russia attacked Ukraine. If Russia wins it will border EU countries. Europe directly is under threat, therefore it’s a “just war,” therefore they must do something about it. But they don’t see a reason to go to war with Iran.

Larry Bernstein:

The Iranian Revolutionary Guard has said they will shoot their domestic opposition on sight, how does that impact regime change?

Eitan Shamir:

We don’t know. Maybe it’s going to get worse before it’s gets better. If you put full pressure on Iran by keeping the sanctions and bombing them, then it might trigger a severe economic crisis. If you remember an economic crisis triggered the previous demonstrations.

The alternative is to do nothing, which means at the end, Iran will get nuclear weapons and dominate its neighbors in the Middle East. This is not something we can afford. So, the military escalation is the best course of action. It’s not perfect. There are obstacles. Our enemy is shrewd and capable. The Iranian people are capable and educated. So this will be a struggle.

Larry Bernstein:

I end each podcast on a note of optimism.

Eitan Shamir:

What we see here is an evolution between Israel and the U.S. and a wonderful joint operation between the two armies. We also broke the taboo that Iran is immune from attack.

Larry Bernstein:

Thanks to Eitan for joining us.

I am doing a series of podcasts on the war in Iran. If you missed our last podcast the topic was Why Does the Press Think We Lost the War in Iran? Our speaker was Mark Penn who was a senior advisor to President Clinton and Hillary’s chief strategist for her senate and presidential campaigns.

Also Iran’s Rope-a-Dope Strategy with Anthony King, a Professor of War at Exeter University.

Previous to that, we had a podcast Allies Fighting Together with Yaakov Katz who is the former Editor in Chief of the Jerusalem Post and I also did a podcast on the Opening of the Strait of Hormuz with James Holmes from the US Naval War College.

We started the series with former Trump National Security Advisor John Bolton about what steps we need to take to win the war.

You can find our previous episodes and transcripts on our website. Please follow us on Apple Podcasts or Spotify.

I am Larry Bernstein with the podcast What Happens Next.

Check out our previous episode, Closing Small Colleges, here.

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Geoff Baird and Robert Zemsky

Subject: Closing Small Colleges
Bio: Geoff: Founder of Enroll ML, Robert: Professor of Education at UPenn and Former Chief Planning Officer

Transcript:

Larry Bernstein:

Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast that covers economics, politics, and history. Today’s episode is Closing Small Colleges.

Our first speaker is Geoff Baird who is a very close family friend. Geoff recently co-wrote a book entitled The Signal Solution: How Smart Colleges Stop Chasing Applications and Start Converting Students.

Geoff founded Enroll ML, higher ed's first AI thinking engine to guide and improve new student enrollment. Geoff is particularly excited about using AI to figure out who the admissions committee should focus on in their marketing efforts.

Our second speaker is Bob Zemsky who is a Professor of Education at UPenn and the university’s former chief planning officer. He is also the Co-Founder of College-in3- Exchange and is the author of 14 books including The College Stress Test.

In the past couple of weeks, Hampshire College and the Chicago Theological Seminary announced that they are closing. This is part of an ongoing trend that small colleges fail to attract enough students to survive. Bob will discuss what these schools need to do turn things around including experimenting with new programs like a 3-year degree.

Let’s start with Geoff Baird, can you please begin with six minutes of opening remarks.

Geoff Baird:

In the book, The Signal Solution that I wrote with Teege Mettille starts with higher education is struggling and in a state of disruption. The reasons are changes in demographics and pressures on delivering ROI and outcomes. What do we do about this? How do institutions change their enrollment? The environment in which higher education operates has fundamentally and permanently changed.

If we agree that it’s fundamentally changed, why would we expect our enrollment playbooks built for a previous era to work the same way? The signals on enrollment decisions, forecasts and investments that we spent a decade building up are not delivering the level of predictability that they did in the past. An enrollment environment where there are no longer pools of students and untapped pools of scholarships. In a world where there are fewer students, fewer dollars, competition is rising, what does higher ed do?

What do they do with enrollment? The answer is to shift strategies from the top of the funnel focus, which is where the playbooks have been centered. Estimations are that higher education spends between $10 and $15 billion acquiring students. That is a lot of money not going to the education of students. And so, institutions must change the way they are thinking about enrollment.

They have to shift from the top of the funnel to the movable middle, those students that are interested, but not all the way in. Institutions have got to compete harder for that smaller group of students. This is the big transformation particularly for the thousands of institutions that are not in the top hundred that do not have endowments to fall back on, where every student enrolled matters to the future of the institution.

The yield is the percent of admitted students that choose to enroll. For highly selective institutions the yield rate might be 50%. But for an average college in the United States that number might be 15%.

Of those 85 who were accepted, if you can get three more to say yes, you’ve grown your enrollment by 20%. For most institutions in America, that is a grand slam home run. That might be the difference between sustainability and survivability.

Larry Bernstein:

For every hundred kids the college accepts into the school, only 15 enroll. Most of those kids are excited to attend that college. They’ve done the work, they thought it through, it makes economic sense, they’re signed up. And those 85, some of them are on the edge and some of them are going to better schools or not going to school at all. If you can convince three more students who were accepted to enroll people, you go from 15 to 18, it’s a 20% increase. Tell me about these edge cases and how you can use tools to ascertain who those edge cases are so that you can provide resources to persuade them to join your student body.

Geoff Baird:

The analytics of enrollment are very complex regression models. They factor in geography, distance from the institution, other demographic and profile characteristics, and essentially students are put into groups.

When there were plenty of students that worked, and we were able to identify students by geography, by grades, by all sorts of things. And then when they visit their probability rises. Enrollment is now incremental. It is on the fringes.

What it requires is that we shift from looking at students who were admitted to now looking at them individually. The problem was we physically could not do that because there were so many applicants and data that all we could do was group them to make it manageable. That’s where AI opened up the door to change how we operate and how we think about the enrollment funnel because we now have the raw compute power of machine learning and AI, to look at every single student individually and to look at their deeper behavioral patterns that signal intent.

It is so easy to apply to college now that you can press a button and apply to 20 schools. The problem is for the institution whether this student is serious or not. They have checked all the boxes. They’ve come on a tour. They’ve done the traditional metrics measure, but someone is 22nd on that list of schools and someone is first. The signals that we’ve relied on have been diluted.

Larry Bernstein:

Applying to college for my children was a family project. It wasn’t like we let them go off half-cocked. We worked with them for years to make sure that they had the preparatory knowledge and capability to do well on the exams and get the grades. We tried to make it look like the decision was the child’s, but it was in combination with the parents. When you say that the school hadn’t contacted the child, it also means probably the school hasn’t contacted the parent either. There are lots of touch points. There’s the high school counselor, there’s the student, there’s the parents. Is there a coordinated attack plan?

When I worked at Salomon Brothers and there was a big deal, we wanted to get the business. There were many touchpoints at the company level where we spoke to the treasurer, the CFO, and the CEO. There were lots of different touchpoints to encourage them to give us the business. How can colleges get the business?

Geoff Baird:

When you are talking about a college decision, which is one of the big three decisions in someone’s life: buying a house, picking a spouse, and college. For parents that’s been a real focus. Where it becomes a challenge is there are big swaths of students in America that do not have that parental support.

We still have a problem of volume and scale. And when there are 10,000, because it is so easy to apply, you can’t talk to all of them. But the bigger challenge has been resource and prioritization. And the result of that is genericized messaging. And we are at a point now where students growing up in the Netflix - TikTok world, their expectation is that the system understands them. I am presented with the options on what I like to listen to or watch on my feed. It knows me. We hear our own kids saying that this is the world they expect and yet Higher Ed still lives in a world of simple communication.

Larry Bernstein:

What I noticed in my college visits with my children is that the schools were using one size fits all strategies. After my daughter was accepted to Northwestern, we went to their college visiting weekend, and it opened with a talk from the Vice Dean of the College of Arts and Sciences who gave a lovely speech to several hundred kids. We went to a lunch and sat next to a young girl who had just been accepted to Holy Cross. She was going in a completely different path than my daughter, yet they were lumped into the same pool.

As I was walking around campus, I got lost and I asked for help. It happened to be the head of the theater department and my daughter wanted to be a theater major. He asked her, “Tell me where else you’ve been accepted.” And she said, “Penn.” And he said, “Well, if you’re really interested in theater, Northwestern is far superior. Penn may have two shows a year. We have two shows a week. We have tons of different content and relationships with local theaters. This really isn’t comparable.”

That’s what you want. You want an individualized discussion between the student and the greater university.

It seems like universities have decided to engage using almost exclusively the admissions office as their center for marketing. They are not using their full tool set, and as a result, they miss students who are on the edge of accepting but need a push. These are the most important students to touch, and yet to your point, they are not talking to them and they’re leaving it to chance or worse, they’re leaving it to other universities to recognize that they’re also an edge case and then can close the deal.

Geoff Baird:

That is a great example of the challenge and the opportunity. In one of our partner institutions that we have done some AI work with we found the following statistics. The group of students who visited campus enrolled as a group at a 755% greater rate than those who did not. So, the natural conclusion is we need to get students on campus to visit. And when they visit, we’ve got to focus on those students because it’s such a tell.

But here’s what’s interesting. When we peeled back the onion, the percent of students who visit who enrolled from the same institution was only 30%. So, the ability to predict who will enroll based upon the visit alone was worse than a coin flip. And here’s where it became even more interesting. We started building more complex AI models to predict enrollment based on the last three years of data and our models we’re predicting at 94% accuracy. We cracked open the models to ask them, “What are you looking at to predict?” You know where the campus visit was? The college visit was 170^th best indicator.

This is mind blowing. What it’s really saying in plain English is it’s not that the visit isn’t important, it’s that the visit is not the same for everyone. Your daughter might visit because she is in serious consideration of Northwestern and it is one of our top choices. I might be visiting because my parents are making me. And historically, we have treated both of those as the same. The mission has always been to try and connect individually. It’s just we haven’t been able to because there’s been too much data and too much time that it requires. But what AI has opened the ability to look at each student individually based upon the entirety of their behavioral pattern.

Larry Bernstein:

Morty Schapiro is the former President of Northwestern University, and he had been a senior administrator at Williams and Penn. And I had him speak on my podcast and my book club, and he said a couple things I want you to comment about. Making a campus visit is a tell. When Northwestern thinks about their financial aid package, they offer more financial aid to those that don’t come for a campus visit than those that do, because he knows that if they go for the campus visit, they want this extra financial aid package can kick someone who didn’t bother to visit because maybe cash will talk.

When I attended Penn as a student, it was not anyone’s first choice to attend. Schapiro realized that if we want to get better candidates, we had to change the incentive structure. He was an early adopter of we will give legacies and others an edge but only in the early admission process. That forced people to say, “I’m going to use this silver bullet to apply to Penn, and I won’t do my Hail Mary for Harvard or Stanford.” It dramatically changed the entire dynamics of the admission process for highly selective schools. Each school doesn’t act in a vacuum. It’s a competitive environment for those marginal cases, and you’re competing in an ever more complicated, more aggressive situation. When the game is changing, what can these colleges do?

Geoff Baird:

It was game changing for the highly selective colleges. I have a story of an institution that was not highly selective that tried to replicate that because this worked at Penn. What the data concluded was that for their institution they were losing students by forcing that early admissions decision. Even though the faculty and the administration said, “We want to be this.” That was not the dynamic of their students. And so, it is a challenge to be able to find the right model for your institution. Someone says this worked but in this case, we could show statistically that it backfired and they lost students trying to replicate this.

The top large institutions, the flagship state systems, they are going to survive, but hundreds of other institutions will not. When an institution closes, it is catastrophic for the student body. Half of those students never complete their degree. So now you have got student debt and years lost and no degree to help you.

Larry Bernstein:

I applied to Stanford four times and was rejected four times. I applied to undergrad, PhD, and MBA twice, zero for four. I hosted an event at Stanford, and one of the speakers was the former president of the school, John Hennessy. And I said to him, “Who got fired over that? “ He said, “What are you talking about? “ I said, “Well, in any business, you should evaluate your decisions and you can look and say, Oh, it’s so interesting. The top 10 kids at Penn and top 10 kids at Princeton or Williams, they were all rejected by Stanford. They would have been great contributions to the school. What did we get wrong? And we can see those people who made those decisions, and we can say those people should be let go.”

He said, “That’s not how it works around here. Nobody got fired because we didn’t let you in.”

I said, “Why not? “

“Well, you don’t understand what we’re trying to accomplish. We are not looking for the smartest kids. We’re looking for a diversified pool. We have an orchestra. We need a French horn player, maybe the tuba. You don’t play the tuba. We have to consider that. We’ve got all these different majors. We got to fill needs across gender, interests, sports, the whole thing. It’s complicated to put together a university and no one is going to evaluate the fact that we missed the valedictorian at the Wharton Business School. That is not even a consideration. We wish you luck. We hope you do, but no, we don’t care.”

I noticed in your conversation, when you are trying to get from 15 to 18, you did not consider Hennessy’s objectives of creating a diversified class.

You are looking for bodies. Maybe you are trying to get the gender ratio close to 55/45 girls to boys. But away from that, I’ll take them. Describe the difference in the admissions process as it relates from a non-selective versus selective school and their desire to have a diversified class.

Geoff Baird:

They’re not mutually exclusive. Even the smallest, most niche institutions, ones that maybe fighting for survival every day, and I’ve sat in those rooms, the makeup of the class, and it’s referred to as the shaping of the class, is still paramount. There are institutions out there that have the luxury of saying we have so much demand that we can make these decisions focused on shaping the perfect class, but that is not the reality for a majority of colleges out there.

Larry Bernstein:

Going back to college visits, when my child and I, visited the college, what they showed us was bizarre. We saw a typical room. the cafeteria, and sporting facilities. What they didn’t talk about was median income after graduation. They didn’t highlight the rankings of biology versus computer science. They didn’t compare the economic decisions of attending Northwestern versus Holy Cross.

When you go to buy a car, they break down decisions. This car, you can lease it for three years for $450 a month. You can put it back. The residual values for these automobiles are pretty good. You should see the seats and the pickup. Would you like to go for a ride? There’s none of that.

It’s peculiar how they sell the school. We hear more about the economic consequences of these degrees and the importance of choice of major (see podcast Does Your College Major Matter), why is the selling points relevant for students?

Geoff Baird:

All institutions are going to be pivoting towards outcomes. Why come here? Because this is what you’ll get. Why isn’t it there now? We send out surveys and ask, “What are you interested in? “ And they say, “Tell me about the dorms or the recreational facilities. Do you have a climbing wall?” And that led to the facilities arms race that took place. That’s not to say campus and facilities aren’t important. It just consumed a lot of capital.

Larry Bernstein:

When I was 17, I decided to apply to the University of Illinois. I grew up in Glencoe, Illinois. I went to New Trier High School and 100 of the 1056 graduates from New Trier attended the University of Illinois campus at Urbana. My mother was making dinner and I was filling out the application. And as I was reading the materials, I said to my mom, “Ma, I made a decision not to apply to the University of Illinois.” And she said, “Larry, what are you talking about? “ I said, “Do you remember a few weeks ago we went to Highland Park to that Greek restaurant and I ordered some gyro.” Yeah, I remember that. “Do you remember that I threw up?” “Yeah, I remember that too.” “Now I can’t stand the smell of gyro.

I find it unbearable and so I can’t apply to the University of Illinois.” “Larry, what does that got to do with anything?” “I’m reading the materials.” It says that the University of Illinois leads the United States in Greek life. I mean, there must be gyro cooking on every corner.

17-year-olds are ignorant of the world. How do we deal with that fact when you are trying to persuade a consumer who doesn’t know what he’s talking about?

Geoff Baird:

It doesn’t surprise me that you would’ve not understood at 17 years old Greek life at a major university. But your point is very interesting, and this is hard. This is a big decision of someone’s life in many cases, and you’re dealing with 17 year-olds and they don’t necessarily understand the ramifications of the decisions. And why it’s easier to lean into the emotional component of college life as opposed to the outcome and what you’re trying to drive and deliver.

Ultimately, it still comes down to being able to drive a deeper connection with students. It is certainly tough to communicate with potential students is through mass email or campaigns that look exactly the same as they’re getting from five other schools, because everyone has hired the same firm to go put together their yield campaigns. It’s a real challenge. T It’s a unique situation with this level of stakes and decision. And you are talking about Larry Bernstein at age 17. This is why institutions can’t just follow the pack and have to find their own unique path to sort of break through the noise.

Larry Bernstein:

Thanks Geoff, I would like to turn to our second speaker Bob Zemsky who is a Professor of Education at Penn and the Co-Founder of the College-in-3 Exchange.

Hampshire College just announced its closing. Is this the canary in the coal mine?

Robert Zemsky:

You better believe it is. Hampshire was the ideal small liberal arts college nestled in New England with small classes. They were sure they knew what they were doing. They really did. The market is rejecting the Hampshire product.

Larry Bernstein:

What is it about the product that is unattractive?

Robert Zemsky:

The product is what the faculty want to do. It’s not what the students want to learn or do. This is a different student market than when I left Yale. The students who go to places like Hampshire are gamesters. They like problem solving of gaming. If you have a curriculum that has not fundamentally changed in 40 years, you are missing that revolution.

When a quarter of your freshman class checks out during the freshman year that is not an equation for success. You cannot lose a quarter of your market when you are a small market to begin with.

The biggest institutions are doing the best. They have variety and that they don’t trap students in endless rounds of Gen Ed in which the faculty get to teach exactly what they want to teach. There in a nutshell is the problem.

Larry Bernstein:

You have been an advocate for changing college education from four years to three years. Tell us about that.

Robert Zemsky:

There are 120 institutions that are ready to do this. They’re not going to swap their entire curriculum and go three years, but they’re going to find small groups of faculty to do the experiment who do not want to be trapped by the old shibboleths.

They want to do it their way. They don’t want to have to pass a vote of the faculty. If they can get 10 of them who will do it together, that’s great. What we know in college in three is higher education is on the brink of a major experimentation with an alternate curriculum.

Larry Bernstein:

Why do you want to cut the number of courses in college to get kids out faster to the working world?

Robert Zemsky:

I was looking at Gen Ed and I came to the conclusion that a lot of this is wasted energy. College in 3, what is attractive to it is not the time, but that you get to recast the entire product and that’s what’s needed.

Larry Bernstein:

You get your bachelor’s degree in three years and not in four.

Robert Zemsky:

The easiest way to do it is that you have a 90-credit degree, not a 120-credit degree, though it is possible to teach 120 credits in three years to go to summer school.

The idea is what can we do without? And what you can do without is the Gen Ed nonsense which is what the faculty want to teach. It is not what the students want.

Larry Bernstein:

Can you give me an example?

Robert Zemsky:

It turned out, institutions were experimenting with alternate degrees because that was the easiest to have a blank slate. They do cybersecurity or an AI degree. Degrees that didn’t exist before. So there are no hard and fast rules of what you have to do. You can truly experiment. College in 3 turned out to be a massive experimental mindset.

We have 82 institutions who think of themselves as members of our organization. A typical college in 3 program may be 40 students. It is a thin slice with 10 faculty members experimenting with what they want.

Higher Ed is consumed by diversity battles, by Trumpism battles, and by financial woes. You’ll need students for three years, not four, but that’s not the answer. They’re not going to stick with you because they want to save the money. They’re going to stick with you because you are offering them something different. This is one of those rare moment where the academic has said, “It’s an experiment.”

Larry Bernstein:

Why are small colleges less adept at providing what students want as compared to larger universities?

Robert Zemsky:

This is purely a question of scale. The big universities have lots of things hanging out the door. Big places aren’t susceptible to purity tests. Small places are.

Larry Bernstein:

And the purity test means you have to take in the first year these eight classes?

Robert Zemsky:

That’s what it boiled down to.

Larry Bernstein:

There are a lot of colleges that offer two-year degrees.

Robert Zemsky:

The community college business is shrinking. They were going to be for financially strained people who weren’t ready for college, whatever that meant. When you’re designing a two-year degree, what you’re designing is a set of pre-learning experiences that students need to do the real work. When you’re designing a three-year degree, you’re designing the whole thing. It turns out the first year is a lot more important than you realized, and that you have to be very purposeful about exactly what happens in the first year.

Larry Bernstein:

Small colleges have a retention problem. What is the dropout rate after a year?

Robert Zemsky:

Typical is 20%.

Larry Bernstein:

What do those students do? Do they transfer to a different college? Or are they dropping out of college entirely?

Robert Zemsky:

The evidence tells us they go to work.

Larry Bernstein:

What do the students want that would make them stay in college?

Robert Zemsky:

I think what students want is what you get from sophisticated gaming. That means you get a problem, you scope it, you scale it, and you test solutions to see if you have got a solution. That’s not the nature of college curriculum.

Larry Bernstein:

Do you think that a critical purpose of a college education is to teach values?

Robert Zemsky:

That just doesn’t resonate anymore. College does values, it does skills and it does problem solving. The values part is being overwritten, in part because it’s dangerous. It’s DEI and all of that, but the value part is losing traction. Students, as best I can tell from our experience, is they want puzzles to be solved. That’s not what I did in college. Is that what you did in college?

Larry Bernstein:

I was an undergraduate in the Wharton Business School at the University of Pennsylvania.

Robert Zemsky:

The Wharton School’s a good example. They actually teach problems.

Larry Bernstein:

That’s exactly right.

Robert Zemsky:

The Wharton School’s not losing enrollment, let me tell you.

Larry Bernstein:

Not only did it not lose enrollment, but there were enormous transfers from Penn’s liberal arts school to the Wharton Business School.

In the Wharton curriculum, if you take a management class, there will be a case study of a problem that needs to be resolved.

Robert Zemsky:

You got it.

Larry Bernstein:

But how do you do that in an English class?

Robert Zemsky:

Ah, now you’re getting to what the problem is. English or philosophy is the hardest. If you are in English, what you want is a population who can distinguish between pieces of the literature, and its things that young people do not like to do, but that is what it is. It is bibliographic work. Big surprise that it is the pure humanities that are the biggest problem, because they do not have what the market recognizes as learning problems to be worked through.

Business has learning problems. Engineering has learning problems. Healthcare has learning problems. Sociology has learning problems. The social sciences are doing much better, but you must have a recognized problem that you then say to the student, “Figure out what the problem is and give me back a solution.” Can you see that said to an English class?

Larry Bernstein:

Why are colleges and universities incapable of change? Why are they so inept at trying to listen to their customers and give them what they want?

Robert Zemsky:

Because that’s not why they learned what they learned. They believe they were following the truth and once they’ve got the truth, they want to give the truth to other people. That is not problem solving.

Larry Bernstein:

When you said kids are quitting to go to work, does it reflect a value judgment that college is not worth the money they are charged.

Robert Zemsky:

That is not the way the kid processes that. It’s money I do not have, and I can get a job and have money.

Larry Bernstein:

I want to go back to your previous point about gamification. That students enjoy games as a means of problem solving and that they find this entertaining and relevant to problem solving in the real world.

Robert Zemsky:

Yes. It’s all games. I say games, not pejoratively. Games are a good thing. Games are one of the nice achievements of the last 30 years. We’ve gotten better at games.

Larry Bernstein:

When kids come home from school, the first thing they do is play video games because it’s fun. It’s a challenge. It’s something that their peers are doing.

Robert Zemsky:

It’s confidence building.

Larry Bernstein:

They see a problem. They don’t get it the first time. They get to a one level. They’re so happy. They go to the next level. And on and on it goes. They’ll burn out sooner or later on that game. They’ll switch to a new game. The parent walks by and says, “Turn that off, enough already. Go do your homework.

Robert Zemsky:

No, the game is their homework. That’s the problem with gaming is we have a parental generation that still believes gaming is silly.

Larry Bernstein:

You mentioned that skill building is one of the reasons to go to college. An English professor would say that there is a benefit how to read analytically and critically, and write cogently and persuasively. And those are real skills.

Robert Zemsky:

It’s the writing skill that’s the most important, not the reading. Reading they do well. It’s the writing. And that’s why all this argument about AI, nobody’s going to write anymore, that’d be terrible.

Writing is not literary criticism. Writing is you write the solution to the problem. People who are good writers tell you, “Well, I don’t know what the answer’s going to be. I’ll tell you at the end when I get there.” That’s what a good writer says. A scholar says, “I’ll let you know when the proof is solved.” It is a totally different mindset.

Larry Bernstein:

Most Penn professors create scholarship, and that scholarship is written in a way meant only for other scholars to read. The language used is unappealing or unavailable to the laymen outside of their field. And it’s written in a way purposefully to be meant for a very select group. The scholars, as they teach their classes, are trying to teach this approach so that they can have another generation of scholars. But the student is not interested in being a scholar.

Robert Zemsky:

He’s not interested in that. That’s right.

Larry Bernstein:

He wants to be an applied person in the practical world away from the Ivy institution.

Robert Zemsky:

I’m a storyteller. My father is the one who showed me the power of storytelling telling stories rather than making proofs. Scholars write papers that make proofs. People understand stories. Let the story dictate the language, not the discipline. That’s a really important insight.

Storytelling is coming to a fore. Though he’s not my favorite president, Trump gets some credit for that. How often do we say he’s all over the map? Well, if you’re a storyteller, by definition, you’re all over the map. That’s just the nature of the beast.

Larry Bernstein:

Going back to problem solving as being the core principle.

Robert Zemsky:

I’m going to make you stop there. It isn’t problem solving as the core principle. It is finding problems that need to be solved. You discover problems. That’s the other part of gaming is that you don’t make them up. They must come up naturally out of the game. It is the recognition of the problem as a first step to solving it.

Larry Bernstein:

Voltaire said judge a man not by his answers but by his questions. I think the essence is if you are answering the wrong questions, you’re nowhere. So you got to figure out what question to ask to move forward.

Robert Zemsky:

You keep wanting to make it purely academic. We’re going to discover what a question’s to ask. That’s the scholar’s way of saying it.

The gamer says, “I’m going to solve this game whether it kills me or not. “ Wholly different way of looking at it.

Larry Bernstein:

There are many universities that are getting more selective and are excelling, and there are a substantial number of colleges that are shrinking that will go out of business. This is creative destruction. What is the problem with saying thank you very much, goodbye?

Robert Zemsky:

That’s what we’re doing.

Larry Bernstein:

But we’re doing it in a way where we feel bad. You read the article in The Wall Street Journal and the New York Times about Hampshire College closing.

Robert Zemsky:

They are mourned.

Larry Bernstein:

It’s a great loss for the faculty, students, and for the town it was in. It reflects something sad that is an emotional, moral and ethical loss.

Robert Zemsky:

What they are really saying is, this shouldn’t have happened. It’s sad.

Larry Bernstein:

Yes. And I’m saying it’s not sad. We are reallocating resources to institutions that provide products that the consumers want to pay for.

Robert Zemsky:

This current cycle, I think will go on for another 20 years, and we’re going to have a lot fewer colleges.

Larry Bernstein:

Thanks to Geoff and Bob for joining us. If you missed our last podcast the topic was Can Congress fix the Trump tariff refund problem? John McGinnis, a constitutional law professor at Northwestern was the speaker.

The Supreme Court decided that $165 billion will be refunded to importers—money that, in many cases, could be seen as a windfall. I think there may be room here for a bipartisan solution to give money back to consumers and John explained how Congress can fix it.

I am doing a series of podcasts on the war in Iran.

Our most recent podcast was Iran’s Rope-a-Dope Strategy with Anthony King who is a Professor of War at Exeter University in the UK. Previously, we had a podcast Allies Fighting Together with Yaakov Katz who is the former Editor in Chief of the Jerusalem Post and the author of While Israel Slept about the 10/7 massacre. Before that What Will Define Success and Failure in the Iran War with Hal Brands. I also did a podcast on the Opening the Strait of Hormuz with James Holmes from the US Naval War College.

I had a podcast on Fine Tuning the OODA Loop: Observe, Orient, Decide, Act Loop to Win the War in Iran with Israeli Brig. Gen. Eran Ortal. We started the series with former Trump National Security Advisor John Bolton about what steps we need to take to win the war.

You can find our previous episodes and transcripts on our website. Please follow us on Apple Podcasts or Spotify.

I am Larry Bernstein with the podcast What Happens Next.

Check out our previous episode, Why Does the Press Think We Lost the War in Iran?, here.

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Mark Penn

Subject: Why Does the Press Think We Lost the War in Iran?
Bio: Senior Advisor to President Clinton and was Hillary’s Chief Strategist for Senate and Presidential Campaigns

Transcript:

Larry Bernstein:

Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast that covers economics, politics, and history. Today’s episode is Why Does the Press Think We Lost the War in Iran?

Our speaker is Mark Penn who was a senior advisor to President Clinton and was Hillary’s chief strategist for her senate and presidential campaigns. Mark is now the CEO of Stagwell which is a advertising and marketing company.

I want to learn from Mark why the press thinks that the military campaign in Iran is failing and why the Democrats are not supporting arm sales to their Israeli allies at this critical juncture.

Mark, are the Americans winning in Iran or are they losing?

Mark Penn:

Well, as of this morning, the Strait of Hormuz is open to all vessels. Anything can happen over the next few weeks, but it seems that major progress has been made. What the president has been saying that the new regime is thinking over its position seems to be true.

Larry Bernstein:

Why do you think that the press has portrayed it so far as a loss?

Mark Penn:

I think the press’s position has been simple. Donald Trump crosses a street. The article: Donald Trump disrupts street. Street lights may break. Budget may not be able to cover street repair.

Rhey take every single aspect of the policy and look for everything that could go wrong. They write an article about it and then they call up favorable NGOs or favorable Democratic former administration officials who will say that everything is going wrong.

It has been remarkable in a war in which we decimated the Iranian military and regime leadership and lost almost no soldiers. In terms of the way that this has been depicted in the media is really shocking.

Larry Bernstein:

Why do you think they did that? Is it just pure partisanship or is it more complicated than that?

Mark Penn:

Well, it’s a combination of partisanship and Trump hatred. There was this New York Times writer who many years ago, when you’re dealing with Trump, I guess it’s okay to distort everything.

In this conflict, Tom Freedman said it best, which is they would rather Iran and Hamas won than Donald Trump be right. That absurd perspective, which is so counterproductive to the country and frankly putting soldiers more in harm’s way because it so undermines the effort.

As I like to say, the Iranians read the New York Times too.

Larry Bernstein:

Now, I can understand if a couple people behave that way, but there is no ombudsman above the media to put people in line. Why would the media behave in aggregate like this given what you’re describing it is absurd on its face?

Mark Penn:

It is hard to fathom. The media was trying to make this into Trump’s Afghanistan. And the truth is that the Biden presidency really fell apart over the actions in Afghanistan, which were, I think, fairly reported at the time.

The media was saying, “It can’t possibly work that he’s using extensive bombing and military actions.” They took their cues from the Democrats. The Democrats had a choice here. They could have sat quietly and then picked things up if it were unsuccessful.

What they did was they started illegal unconstitutional. Then even when those arguments fell apart, because after all Obama ran a seven-month war against Libya in a similar fashion, when those arguments collapsed, they clung to the idea that they should use the War Powers Act and try to stop the president.

It did not have any rationality behind it. They also knew they were never going to win. So, what they are really trying to do was keep their voters in line, not let a single voter who is a Democrat believe that the President or the administration, or the country, could do anything that was right here. I cannot think of anything so similarly distorted as what we have seen here in terms of the coverage of the Iran conflict.

Larry Bernstein:

You worked for the Clintons and for Hillary in a senior capacity during her 2008 Presidential Campaign, and her Democratic Party was very pro-Israel.

Mark Penn:

Having worked very closely with the President Clinton and Hillary, that there was a seminal event in terms of changing her opinion about the Israel-Palestinian conflict, which were the negotiations with the Palestinians that occurred at the end of the Clinton administration.

President Clinton was doing his best to do one more thing as he wound down his two terms as president, and that was to try to get a peace agreement. He got the Israelis to give everything. And then they both realized that the Palestinians were not negotiating in good faith, that there was nothing you could give them, that they just wanted to destroy Israel or had forces behind them that made it impossible for them to make any agreement. And that fundamentally changed Hillary’s view.

In recent times while a lot of Democrats defected or waffled or took various positions, the Clintons have stood fast because of that experience and because of that firsthand knowledge. President Clinton right after October 7th, recounted this experience that he had. And that changed their understanding entirely of the situation.

Larry Bernstein:

There was a recent vote in the Senate related to arm sales and bulldozer sales to Israel, and 40 out of 47 Democratic Senators voted against selling arms to Israel during a war. How do you explain the loss of over 80% of the Democratic senators to the Israeli cause? This is not just the progressive wing; this is nearly everybody.

Mark Penn:

Yes. And it’s up from the previous vote that was about 19 senators. This was a Bernie Sanders sponsored resolution. So, do you think all these senators change their mind that Israel in the middle of fighting a war against terrorist forces and being hit with thousands of missiles and drones should not have weapons?

Or do you think that what we have here is that all the moderate Democratic senators have become so frightened of the left and their potential ability to primary them and throw them out of office, that they’re going along in a vote that they knew would fail anyway.

In a choice between being on the record of supporting Israel or supporting the left, were they intending to support Iran and the other forces? No. They wanted to show that they should not be primaried.

They will fall in line. Even AOC has fallen in line when she voted for the iron dome to defend Israeli citizens. Clearly the left has asserted its power within the Democratic Party and Senators are falling in line. And that is a real problem for the party, for the country, and for people who care about Israel.

Larry Bernstein:

There is some theory in political science that the Congressmen or Senator votes reflect the view of their constituents. Do you think that this change in vote reflects their own belief that there’s been a switch in their local constituents’ views on this matter, or does it reflect what you described as a decision to fear a primary?

Mark Penn:

It represents a change within Democratic primary voting electorate. There is not a lot of change in the overall electorate. If I ask a question, for Israel or Hamas, it is like 75/25. If I ask the question, do you favor cutting off aid for defensive weapons? And in this case, including bulldozers for Israel, you would find a majority supporting it. The swing voters in America continue to support Israel. And what you have seen is a real change with young people who did not really have opinions before and have limited knowledge.

Within the Democratic Party this bizarre alliance between the Islamicists and the left that is changing the positions within the Democratic Party and particularly because of the perceived strength within the activist Democratic primary electorate. There are some changes. Israel is not as favorable as it was as a country, but people do not put that in perspective.

Right now, both parties are negatively perceived. The president is negatively perceived. All our institutions are negatively perceived. Hamas and Hezbollah and Iran are 30 or 40 points more negative than Israel is. When you look at the relative choices that people must make, Israel comes out way ahead of the choices between which you support Iran or Hamas.

What you see is a very unhappy electorate that is satisfied with no one. And Democrats may be winning, elections, but they are not winning because of anything that they are doing or that people support.

I would not want to be in power now until this electorate is significantly calmed down because right now, they are very pessimistic. They’re grumpy.

Larry Bernstein:

You mentioned that the progressives and Islamists are allies and that they’re mutually supportive, but who are these Islamists? I don’t think I know anybody who is an Islamicist. It’s more just anti-Israel. Who is a pro- Islamicist and what are their views?

Mark Penn:

Ilian Omar, Mamdani. The Democrats are not willing to stand up to Hasan Piker. Somebody who is not an Islamicist, he’s a full-blown anti-American, right? He says, “America deserved 9/11.” You would think it would be easy to disown people like this.

Larry Bernstein:

I don’t understand when you hear stuff like Gays for Hamas, I just assume that the individual who’s waving that banner is ignorant and doesn’t reflect a broad mandate. Am I missing something?

Mark Penn:

No, you’re not. What you see is social media, highly partisan environment in which information that particularly younger people receive is selective and tailored.

24% of the country would consider themselves liberal. Maybe half of that would consider themselves very liberal. And that change and their hardened position against Israel and willing to call it apartheid and genocide is what is creating this transformation within the party. And that is where they have come together here with the forces as you see.

There is no one saying that Ilian Omar should not be on the Foreign Affairs Committee anymore. No one’s saying that she’s someone who’s unfit really to serve and advance US interests.

The Democratic Party, as its DNC Chair said, is a big tent, and they are willing to take in this tent and even further it. It is tragic, but you see that when you look at that vote where they got 40 out of 47 senators, you see that it’s quite powerful and effective.

Larry Bernstein:

When you get 40 out of the 47, that is not letting someone in the tent, that is the tent.

Mark Penn:

Yeah, fair enough. But we are looking here at some real extremist movements that are not being condemned. Look at what President Trump did where it took a while, but he firmly blasted Tucker Carlson and Candace Owens.

You see Speaker Hakeem Jeffries moving away from mainstream Democratic positions day by day, becoming somewhat more hysterical and strident in tone. He is someone who previously would’ve been considered a moderate, quite reasonable. He’s going to be an incredibly effective speaker, and clearly he thinks the road to becoming speaker is to abandon a lot of his previously held positions and shift both left and sound somewhat more hysterical in tone.

Larry Bernstein:

The Republicans currently in the House have a very small majority, and there was a lot of fights over who would be speaker. It is very possible that when the Democrats win the House, that they would have an exceedingly small majority and Jeffries would need to get every single vote to go his way. How does that influence ...

Now, it may be obvious that the only way to win would be to go hard left, but then he may lose some moderates as part of that and then won’t have sufficient votes. How does that all work, the dynamics of a political system where you need to get everyone on the same page? How do you tailor it just to the progressive wing specifically versus say your more moderate side?

Mark Penn:

He has taken the steps recently to assure that he would become speaker without some intraparty brawl. The left has successfully asserted itself. And the question is whether the moderates are going to be able to do the same and win some concessions on their side. Let us see if they can get organized and come up with compromise like seats on the rules committee or other aspects where they don’t give complete control of Congress to the left. Of course, this election at the end of the day, what are the Democrats going to do with most of the House, do impeachments or investigations? They’re not going to pass any legislation. This is just an interim election for the big one in 2028, which will determine the flow of power within the country.

Larry Bernstein:

Impeachment has been used multiple times since the Clinton administration. It has been ineffective, mostly because they don’t have the two-thirds requirement in the Senate. It has been performative. Is that something that speaks to voters in a performative way or after a period it gets tiring and ineffective and not even successful as a performative act?

Mark Penn:

It went from an extremely serious, solemn event, which happened in Watergate and how the president resigned under pressure after the tapes came out and would not have survived an impeachment.

The Clinton impeachment we won, and I was working with President Clinton during that, and it was ultimately seen as an overreach by the Republicans. You see though that the impeachment has become almost like a ceremonial joke. It’s not serious in which real witnesses are called, in which evidence is put on. Let’s impeach the president and win some public relations points. It is a tragedy.

It will be a mistake for the Democrats to go down that path. It did not get them much of anything since the result is that they have none of the branches of government having gone down that path.

I doubt however, they will be able to resist that.

Larry Bernstein:

Going back to the first impeachment, which was President Johnson just after the Civil War, and the Senate by one vote failed to convict. And the Senator who changed his mind said that he thought it was bad to remove the president for policy differences and not for actual criminality, but that idea does not seem to resonate with the Democratic Party right now. If they had the votes, they would do it. Why is that? What reflects that change in heart?

Mark Penn:

Politics in Washington has taken a turn for the worse. In the Clinton years, you may remember, what we did was the House was Republican and the president made a few great legislative deals that got to a balanced budget and many other advances.

The president’s rating soared to 74% approval, even as they made the mistake of impeaching them, although they thought they had a good case against him. What has happened now is that this has become, is the word you used before, performative. Performative in nature as opposed to serious. They know they’re not getting the votes. They know that it’s not passing. It’s just a question of kind of airing their frustrations.

The most humorous thing is the 25th Amendment stuff. It’s like they’re holding congressional seminars on how we can use the 25th Amendment. Anybody who reads the 25th Amendment knows that it is a vote of the cabinet led by the vice president. Congress has nothing to do with the 25th Amendment. Giving voters the impression that they do to raise money is even more comical than what they are doing with impeachment.

Larry Bernstein:

So, why do that?

Mark Penn:

Clicks, dollars, anger. We are a victim of our social media world now, and I don’t know how we overcome that. I always like to say that everything that we would develop or innovate, you would find either in Star Trek or the Jetsons. When I go through all the science fiction movies that became true, the one thing that no one ever predicted was social media and the power that it could have to fragment communities and stir passions. We’re a long way from dealing with the dilemmas that are being created by this medium.

Larry Bernstein:

I had a book club with former Senate Majority Leader, Trent Lott, and I asked him about his relationship with Bill Clinton after the impeachment trials were finished. He said that immediately after the vote, Bill Clinton sent him a box of cigars and he called the president, and they had a good laugh and they moved on.

In other words, it was not personal. It was political, and they were ready to work together to resolve public issues. This Congress and the executive branch do not seem to be friendly. I can’t imagine Chuck Schumer picking up the phone and having some laughs with President Trump. What does that reflect, the lack of friendship across the aisle?

Mark Penn:

It is the growth of partisanship, the ideological sorting of the parties. When the parties were more ideologically diverse, each of them, it was the parties themselves would have to come up with compromises rather than compromise with their opponents. I think the social media world that we live in where the more extreme and hysterical they are, the more it seems to be their ability to raise funds or get clicks online. We have also had a breakdown of the committee process and that central leadership took over control.

That got rid of the horse trading that would go on at the committee levels to come out with legislation. So, we have seen a real breakdown.

Now, in fairness, could more legislation have been passed now with a Republican majority in both houses and the need to get seven Democratic senators across the finish line on some substantial legislation? That was certainly no more difficult to what President Clinton did, with Newt Gingrich. And I think more could be done here and we will see what the next president does. We have had a lot of presidents who talk in the campaign as though they’re going to bring the country together and work across the aisles. And when you get in, that’s just not what we see happening these days.

Larry Bernstein:

And why is that exactly?

Mark Penn:

Again, part of it is they start out or have several years in which they have all the branches of government, and then when they lose it, rather than say, okay, which I think President Clinton did. President Clinton tried during the first couple of years to get things like healthcare reform and ran into more problems that almost sunk his presidency. He did a lot better making deals with the Republicans whether it was welfare reform, the crime bill, the balanced budget that catapulted his popularity to 74%. That is just not the strategy that the presidents ... I think Obama said when he lost, he did not say, “Now I have an opportunity to roll up my sleeves and make deals across the aisle.” No, he didn’t say that. He said, “I have a pen and a desk.” And he said, “I’ll go do everything I can, “ basically contrary to that.

We have not seen anyone since Clinton take that on as their strategy for accomplishing things in the country and working to overcome what you see as the partisan resistance.

There are two presidents: Reagan and Clinton, who really broke through and had approvals in the ‘70s and even ‘80s, because they did work across party lines unifying the country behind an agenda.

Other presidents have failed to do that. Instead, they worked on their agenda and passed legislation during the small period when they had majorities that could sustain or pass the legislation or use reconciliation that only requires 50% to get it done.

Will another president come along and do the work that both Reagan and Clinton managed to do that genuinely unified the country instead of pointed fingers? That is a big question.

Larry Bernstein:

I want to give a case study example to you. I did a podcast about can Congress fix the tariff refund problem. As you know, the Supreme Court recently announced that the Trump tariff was inappropriately applied and therefore the government will have to refund $165 billion in tariffs. But the money can only go to those with standing and those are the people that paid the tax. That in most cases is the importer. And very often the importer merely passed on that tax to the consumer and therefore will get a windfall. In fact, I know someone who’s going to make nearly a billion dollars in the refund that he otherwise would not have received. And this seems like an unfair result. You would think that there could be a bipartisan solution to either giving money to some of the voters or paying down the debt, but currently giving the money to this importer does not fit the needs of either the Republican or the Democrats.

Just as an example of where the two parties could both agree on policy and decide to come up with a solution. Is that something that is possible or in the current setup is inconceivable?

Mark Penn:

Sorry. I would say the idea that the Democrats are going to agree with Trump to give every American a $500 check.

Larry Bernstein:

Yeah, exactly.

Mark Penn:

Is never going to happen because to go back to square one here, the Democrats do not want to do anything that appears like a victory for Trump on anything. A $500 check to everybody signed by Donald J. Trump is not something ... Now, Trump may be able to come up with this on his own and/or be able to do it. That I don’t know. But I don’t think Democrats are going to go for something like that.

Larry Bernstein:

Totally agree that they don’t want to give Trump a victory. So can you imagine that Democrats would come and say, “Let’s make a deal.” That’s how I imagine how it usually starts. There are things that Democrats want. They think that Trump has overplayed his hand on the tariffs. Could they somehow tie his hands, come up with some aspects of the legislation to make it better or give the money to Democratic Pet projects? Is there really no way to allow Trump to have any victory? I understand your instincts on that, but that reflects a complete breakdown. If we can’t allow the president to sign any piece of legislation, then you’re stuck.

Mark Penn:

Well, we are stuck because of that. That is the problem. Take something like the Iran war. If Democrats are not going to give fighting the evilest regime on earth that recently killed tens of thousands of its own people who are unarmed protestors, if Democrats are not going to rally for that, or they’re certainly not rallying for tariff refunds, okay?!

Larry Bernstein:

Mark, I end each podcast on a note of optimism. What are you optimistic about as it relates to the war?

Mark Penn:

Look, I’m optimistic. If you go back on December 31st, I put out a few predictions on my X. My first prediction was that Maduro would be taken out of office. My second prediction was regime change in Iran. And we do not exactly know who is heading Iran now. We do know it’s not the same people as were heading it before. We do know that there’s an opportunity for change no matter how it looks. And there’s tremendous pressure from 90 million people who must be fed, clothed, and watered. There is tremendous underlying anger about the killings. Imagine for a moment if 10,000 college-aged kids were killed in this country, the anger there would be among the parents and the communities.

They closed the internet, they have the guns, you do not see that anger, but it is there, and it is not going to go away. A new Middle East can emerge from this. The Gulf countries have seen the enemy, and Israel and America are not the enemy. And that is a sea change here in terms of the potential for the region.

Larry Bernstein:

Thanks to Mark for joining us. If you missed our last podcast the topic was Can Congress fix the Trump tariff refund problem John McGinnis, a constitutional law professor at Northwestern was the speaker.

The Supreme Court decided that $165 billion will be refunded to importers—money that, in many cases, could be seen as a windfall. I think there may be room here for a bipartisan solution to give money back to consumers and John explained how Congress can fix it.

I am doing a series of podcasts on the war in Iran. We had Iran’s Rope-a-Dope Strategy with Anthony King who is a Professor of War at Exeter University.

Previously to that, we had the podcast Allies Fighting Together with Yaakov Katz who is the former Editor in Chief of the Jerusalem Post and What Will Define Success and Failure in the Iran War with Hal Brands from Johns Hopkins.

I also did a podcast on the Opening the Strait of Hormuz with James Holmes from the US Naval War College.

We started the series with former Trump National Security Advisor John Bolton about what steps we need to take to win the war.

You can find our previous episodes and transcripts on our website. Please follow us on Apple Podcasts or Spotify.

I am Larry Bernstein with the podcast What Happens Next.

Check out our previous episode, Can Congress fix the Trump tariff refund problem?, here.

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Subscribe now

Listen on Spotify

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John McGinnis

Subject: Can Congress fix the Trump tariff refund problem?
Bio: Constitutional Law Professor at Northwestern

Transcript:

Larry Bernstein:

Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast that covers economics, politics, and history.

Today’s episode is about the question: Can Congress fix the Trump tariff refund problem?

I’m joined by John McGinnis, a constitutional law professor at Northwestern.

The Court has decided that about $165 billion will be refunded to importers—money that, in many cases, could be seen as a windfall. I think there may be room here for a bipartisan solution, and John helps us think through what Congress can—and can’t—do.

Thanks to John for joining us.

John, in the recent Learning Resources court case, the Supreme Court ruled against Trump’s tariffs arguing that he lacked the authority. I want to delve into the aspects related to the refund and the ability of Congress to rectify what Judge Kavanaugh called the upcoming mess.

Let’s start with the basics. What were the facts in the case, how and why did the court make its determination?

John McGinnis:

The president relied on the International Emergency Economic Powers Act, which is an extremely broad statute that allows him, once he declares an emergency, to interdict and to prevent any transactions with foreign nations. The problem for the president was that while it had broad language, it did not mention tariffs. And moreover, Congress has a variety of other permissions to the president to impose tariffs, but under more constrained limitations. And so, what the court said was that given the language of the statute that does not mention tariffs, given the other statutes that do mention tariffs, the president did not have authority over tariffs with respect to this statute.

The majority was split in its reasoning. The three conservative members of the majority relied on the Major Questions Doctrine, which suggests that when Congress gives the agencies, or in this case, the president, the executive authority, that is going to have a very substantial effect on the economy or the structure of powers between the states and the federal government, Congress must do so clearly. And those three justices concluded it was not a clear enough statement to meet that hurdle.

The other three liberal justices do not like the Major Questions Doctrine because they see that as constraining the administrative state generally. And they found under straight-up statutory interpretation, particularly relying on these other adjacent statutes about tariffs, that the president lacked authority under IEPA. There was a 6-3 majority to declare that the president for these tariffs were, to use the legal word, ultra vires outside of the president’s authority.

Larry Bernstein:

It seems to me that John Roberts believes that his adaptation of the Major Questions Doctrine is one of his most important contributions to our legal canon. The six conservative justices agree.

What was bizarre was that his group of 6 was split on whether the Major Questions Doctrine applied in this tariff case. Tell us why the Major Questions Doctrine is so important to Roberts and why he thinks it is critical to the separation of powers.

John McGinnis:

The Major Questions Doctrine has been most written about in administrative law in the Roberts Court. I think the reason that John Roberts likes it is it is a statutory substitute for something called the Non-Delegation Doctrine. The Non-Delegation Doctrine is a constitutional doctrine which says that Congress cannot delegate its powers unless it gives sufficient detail. Previously, that doctrine has not had much bite since the New Deal. The Court has never struck anything down because of the non-delegation doctrine. And yet it seems to many observers of the administrative state to allow Congress to essentially abdicate its responsibilities and give unbridled discretion to the executive. And so that threatens the separation of powers.

The problem is that if you really reinvigorated the Non-Delegation Doctrine, I think the conservatives and John Roberts suggests that this might upset settled regulatory law. So instead of having that constitutional doctrine, it suggests that the Major Questions Doctrine solves that problem because it applies to new powers. So, it is prospective.

It does not upset the apple cart, and yet it forces Congress to speak clearly, at least to say, “Oh yes, we really do want to delegate this substantial authority to the executive branch and therefore has accountability, less so than actually filling in the details that the non-delegation doctrine would require, but still a move to accountability.”

That is the understanding of the Major Questions Doctrine as a poor man’s Non-Delegation Doctrine, a way of trying to go back to principles of the separation of powers in a world where we operated against those principles for a very long time.

Larry Bernstein:

Justice Kavanaugh in his dissent articulated why he thought the Major Questions Doctrine did not apply in this case. And specifically, he thought that this existing statute was sufficiently defined, and that Congress historically had delegated a substantial amount of power and leeway to the president in foreign affairs. What did you think of Kavanaugh’s dissent?

John McGinnis:

I think he is right that in general foreign affairs as a constitutional matter, the president has greater powers than in domestic affairs, and perhaps that suggests the Major Questions Doctrine should not apply. The question for him is, what is foreign affairs? Because this is a question about tariffs, and it is quite clear in the Constitution that the power to regulate foreign commerce is in Congress. That is part of Article One powers that is expressly stated. So, it is a little odd to say for tariffs that the president has any peculiar powers in that respect. There is a case called Curtis Wright and other cases where it suggests that previously the Supreme Court had been somewhat open to larger delegations in the context even of tariffs.

He has some precedent on his side. I do not think he’s correct as an original matter that foreign affairs encompass imposing tariffs. What it does encompass is speaking on behalf of the United States, deciding what countries to send ambassadors to, and therefore what countries to recognize. The hard question for Kavanaugh is what are the contours of foreign affairs? And there the majority has the better argument, or at least the plurality in the opinion written by the Chief Justice.

Larry Bernstein:

I thought the most interesting opinion in this case was written by Judge Gorsuch because he goes after everyone. He attacked the three liberal judges by saying, it’s peculiar that you rely only on the statutory interpretation instead of the Major Decisions Doctrine, because previously you allowed for an expansive understanding for Biden’s executive order to write-off $190 billion of student debt.

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About his conservative colleagues who decided the Major Questions Doctrine did not apply in this case, he was also very tough on them saying, “You can’t be serious. This is clearly the greatest use of powers by the president without direct delegation to anything I have ever seen. So, what are you talking about?

What did you think of Justice Gorsuch’s concurring opinion in Learning Resources?

John McGinnis:

It was his greatest tour de force as a justice, although one wonders whether it will make him friends going forward.

Larry Bernstein:

Or not

John McGinnis:

It was an especially important opinion, and he did make some excellent points. With the liberal justices, it’s absolutely true that with respect to things like student loans, they gave a very expansive reading. I think the most extraordinary example was they allowed in a statute that gave some authority for the CDC to regulate diseases, they allowed it to declare a nationwide eviction moratorium, which seemed extremely peculiar because the language seemed to be connected to diseases. I think he did call out correctly the liberal justices on that.

With respect to the conservative dissenters, his point was essentially the one I gave before, which was, this is really in Congress’s bailiwick. After all, this is regulating foreign commerce, and this is an extraordinary breach of power.

With respect to Barrett, that is the most interesting debate intellectually. Barrett is a strict textualist and says we should not consider any values other than those in the text of the statute. And you might wonder, “Well, where do you get the Major Questions Doctrine?” And her argument is it is a matter of ordinary language, that when someone is given a lot of power, you would expect people to be clearer. And she gives a homely example in another case. Let’s say you told a nanny to go have fun and gave her a credit card and that would not authorize the nanny to go on an extended trip in hotels, right?

So that is her argument and Gorsuch says, “Well, that’s not right.” The roots of the Major Questions Doctrine, he says, “Go back to agency law before the Constitution.” The idea of that there is some substantive value of trying to constrain agents is very well established in the law. And we should reflect that in our law. It’s not just a matter of ordinary language, and that I’m sure is going to get a lot of attention from academics. In many ways, I think this is his best opinion since he joined the court, best analytically and of academic interest.

Larry Bernstein:

I read a few opinions each year, and so I do not understand what is typical. Were these opinions and argumentation typical of the court, or do landmark decisions see this kind of disagreement?

John McGinnis:

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This is atypical of the court. There is often a concurrence, but this is quite unusual. Barrett responded to Gorsuch as well. There were only two judges who did not write opinions: Sotomayor, and Alito. And so that is very unusual. And it is a testament both to the importance of the case but also to the centrality of the Major Questions Doctrine going forward in administrative law.

A lot of them wanted to get in their positions about its scope or justification. What I do think it suggests beyond the question of tariffs is how central the Major Questions doctrine has become and how entrenched it is in the law. Because even the dissenters seem to completely agree that it applies domestically, and we have three members of plurality who agree. So there seems to be a strong six-member majority for the Major Questions Doctrine even if they do not entirely agree on its justifications.

Larry Bernstein:

Immediately after the Learning Resources case was decided, Trump announced new tariffs applying other statutes. These new tariffs appear to fit the criteria required by this Supreme Court decision. The problem for Trump is that the powers delegated to the president in these other statutes are narrower and if implemented these tariffs would be for a short period of time before Congress would have to approve it going forward.

John McGinnis:

Because the other statutes would be more specific about tariffs. They would have met the clear statement rule. Congress clearly gives the president and some of his subordinates’ power to impose tariffs. So, I do not think any of the other statutes would run afoul of the Major Questions. There may be other questions about those tariffs, one of the statutes the president when he’s implementing it for balance of payments reasons. But as you say, these statutes are much narrower in scope and in time. And that is a problem for the president. What the president wants to do is impose tariffs and then negotiate good deals according to him with other nations. And things that are limited in time undercut his ability to threaten other nations and get them to the bargaining table.

Larry Bernstein:

In Kavanaugh’s dissent, he said, “We haven’t spent a lot of time talking about refunds.” And he says, “This is just going to be a mess. “ And since then, the tariff refunds got pushed to the Court of International Trade. Judge Eaton was put in responsibility for these collections, and he wants fast refunds.

Now we are getting to what I most want to discuss today which is the fact that the current process does not allow for a fair return of the refunds and what we can do about that.

I met someone the other day who personally owns an importer, and he told me that he paid the US Treasury over $1 billion in tariffs from his firm. And as a result, he will get a windfall of a billion dollars in tariff refunds.

I was just flabbergasted, but the courts are limited on who has standing on such a matter, and therefore the individual or corporation that paid the tax would be the one to get the refund.

Typically, the importer would have been the one to pay the tax, and the consumer would ultimately be the one who would pay the economic effect of the tax along with the foreign manufacturer. The importer would maybe have his margins fall slightly but probably not materially.

Kavanaugh said that this refund process will be a mess because even if contractually the importer had agreed to refund the consumer, that it’s difficult to properly refund, and in any case, it will be impossible to pay fair compensation to those individuals who were harmed by the tariff.

I believe that there is a bipartisan consensus that we should not enrich the importers. There might be a better result to give the tariff refunds directly to the consumer or for the government just to keep the money and treat this money as a tax. And I wonder what the constitutional limitations on a bipartisan legislation that would allow some other result other than the importer to receive a windfall profit.

John McGinnis:

Congress would have a lot of authority to make those decisions. I do not think it would work to give money to the consumers because it’d be very hard to identify who those consumers were. Moreover, there would be huge transaction costs given the small amount of money that would be due many of these consumers. Keeping the money, given our fiscal deficit, would be plausible. I do not think this would be afoul of any legal doctrine. Congress has a substantial authority to impose taxes retroactively. The only restriction of the constitution is a Bill of Attainder, and this would not be.

Larry Bernstein:

A Bill of Attainder is when a legislative act punishes a specific individual or group, and here this bill would tax people who import goods and that is nearly everyone. Do you think the judiciary will tolerate a bill that retroactively approves Trump’s tariffs ex post?

John McGinnis:

The court has some restraints on it, but the restraints I think would give way when there are these kind of good government reasons that you suggest.

So, I think this could be done. It certainly could be done for everything that has already been paid. As I understand it there is a lot of tariffs that are due but have not yet been paid and may already have been passed on to the consumer, I think that might be a little harder.

Larry Bernstein:

It is problematic to tax activity from years ago. But here, the President said there was going to be a tax, the money was collected, and then after the judiciary concluded that the President overstepped his authority that Congress then says that is what it wanted all along. That seems to be a reasonable result. The new law could then also handle transactions where the importer has yet to pay his taxes as well.

John McGinnis:

I think that’s quite plausible. There are equity arguments made, and the retroactivity doctrine is quite squishy and is open to those kinds of arguments.

Larry Bernstein:

There is a lot of money involved here like $160 billion. As I think about possible bipartisan legislation, neither the Republicans nor the Democrats want the importers to earn a $160 billion windfall. The Republicans would like to keep the money and the Democrats would likely want to give money to the lower and middle class. I can also imagine that the Democrats would want to include a provision that limits Trump’s ability to create additional tariffs and there may be the rub.

John McGinnis:

Plausible and incredibly, you might say the coalition is going to come because of the fairness question, but also because our fiscal imbalance, it’s extraordinary how indebted the United States is at the moment. The debt to GDP ratio is getting up to 100%, which is the largest in peace time.

I guess the only reason you might not think it might happen is political polarization.

Larry Bernstein:

I totally agree that our politics are polarized, but what is unusual and what may allow bipartisan support is why would either party want to enrich in the importer who really did not pay the tax relative to the consumer who is their voter constituent?

John McGinnis:

It just is not practical to give it to the consumer.

Larry Bernstein:

Let’s say the idea that the federal government keeps the money may sound to some partisans as being unpalpable. What you could do is say, we are going to give $500 to every person who has adjusted gross income less than 50,000.

John McGinnis:

That is a very creative solution. Because it gives money out and with the cap, it would satisfy Democrats and giving money back would satisfy Republicans.

I have not heard anyone suggest this.

Larry Bernstein:

Congress passes lots of laws that are vague, and the courts may interpret them in a way that is inconsistent with Congress’s wishes. This must happen frequently and then the statute is amended accordingly.

John McGinnis:

It certainly has happened. The Congress does not overrule the court but changes the statute when the court has said it is not clear. Congress comes back and says, “Well, this is actually what we want.” It certainly has done so. The difficulty is that that is more likely to happen the greater the bipartisanship you have because without some bipartisan buy-in, it is rather difficult to move. There is a lot of inertia in Congress, and there is the filibuster in the Senate. There is a tradition of bipartisan fixes that is likely to work. But even with bipartisan matters, people can hold this up strategically in Congress and say, “Well, we actually want something else or otherwise we’re not giving this bipartisan fix.”

I would suspect that that kind of behavior is on the increase today. And so, this may be easier said than done.

Larry Bernstein:

With that John can you please end this podcast on a note of optimism as it relates to the Supreme Court’s tariff decision in Learning Resources.

John McGinnis:

I think the tariff case is going to be good for protecting the Supreme Court, precisely because Trump hates it so much. He is going to denounce the Supreme Court. And that is especially important for the Supreme Court today because the Supreme Court is very unpopular with Democrats. You may remember the last campaign, President Biden were considering statutory term limits to the Supreme Court, essentially kicking people off the Supreme Court and to pack the Supreme Court with additional justices when there’s unified Democratic government. I think this would be a huge danger to our constitutional system.

What makes me optimistic is that Trump, oddly enough, has given the Supreme Court a chance to show its real independence from the president, even while not departing from its own jurisprudence, and that is going to help insulate it from the most dangerous attacks that I could foresee might happen even beginning in 2029, if we see as is quite possible, a unified federal government controlled House, Senate, and President by the Democratic Party.

Larry Bernstein:

If you missed it, John previously spoke about How the Rich Improve Our Democracy..

I am doing a series of podcasts on the war in Iran.

Our most recent podcast was Iran’s Rope-a-Dope Strategy with Anthony King who is a Professor of War at Exeter University in the UK.

Previously, we had a podcast Allies Fighting Together with Yaakov Katz who is the former Editor in Chief of the Jerusalem Post and the author of While Israel Slept about the 10/7 massacre.

Before that What Will Define Success and Failure in the Iran War with Hal Brands.

I also did a podcast on the Opening the Strait of Hormuz with James Holmes from the US Naval War College.

I had a podcast on Fine Tuning the OODA Loop: Observe, Orient, Decide, Act Loop to Win the War in Iran with Israeli Brig. Gen. Eran Ortal.

We started the series with former Trump National Security Advisor John Bolton about what steps we need to take to win the war.

You can find our previous episodes and transcripts on our website
whathappensnextin6minutes.com. Please follow us on Apple Podcasts or Spotify. Thank you for joining us today, goodbye.

Check out our previous episode, Iran’s Rope-a-Dope Strategy, here.

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Anthony King

Subject: Iran’s Rope-a-Dope Strategy
Bio: Professor of War at Exeter University

Transcript:

Larry Bernstein:

Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast which covers economics, politics, and history. Today’s topic is Iran’s Rope-a-Dope Strategy.

Our speaker is Anthony King who is a Professor of War at Exeter University in the UK.

What do you observe about the Iran War that the rest of us miss?

Anthony King:

It is a classic case where two states’ strategy is based on opportunity, not on a realistic assessment of what will happen. So what is the opportunity? The 12-day war last year and the uprising against the Iranian regime in January suggested an opportunity to Israel and U.S. They could, with limited military attacks, topple the regime that has been manipulating the Middle East and avoid that regime getting a nuclear weapon. The opportunity is significant. The problem is they have not thought through the downsides.

Is it possible to destroy an entrenched regime from the air? It has never happened before in history. It is like similar decisions that states make. Putin goes into Ukraine in 2022. Bush goes into Iraq in 2003. Opportunity exceeds actual cost assessment.

Larry Bernstein:

There have not been many wars that have been solely from the air. So, there is not tons of examples. What is unusual is that it is coterminous with a natural uprising. There is an angry but ill-equipped population that opposes the regime. And they were seeking outside help to accomplish this overthrow. The question is, can local rebels combine with the greatest force ever without ground forces?

Anthony King:

My answer would be no. It is worth looking at examples here. Attempts at changing regimes purely through air power: Kosovo, Libya, and the Taliban in 2001, in each case air power alone doesn’t do it. You need actual forces on the ground. Kosovo eventually worked because NATO began to send in K4. Libya, the regime fell apart. Taliban, air power is crucial, but the decisive element with that Northern Alliance supported by U.S. special forces. So, the idea that one can easily depose a regime from the air, there’s little empirical evidence for it.

A popular uprising is not enough to displace a regime of the scale, size and authoritarian nature of the Islamicist regime in Iran, where you have around 13 million security force. You need an extremely large and potent political party with an extremely capable military force.

Larry Bernstein:

Is there any way to split the Iranian army?

Anthony King:

The regime has shown over 40 years to be extraordinarily robust and unified. We don’t see massive fissures opening up in the regime. It can kill 30,000 of its own civilians and nothing happens. It’s ruthless and capable of doing that and that doesn’t engender a civil war.

Whatever you think of the strategic, legal, or moral elements of it, the strike killing 40 regime leaders with dynamic targeting, putting bombs through office windows, from a pure military operational point of view, it is absolutely extraordinary. But it’s not enough to depose a regime.

The Taliban fell apart very easily, but that is because the Afghan polity, even under the Taliban, is a centrifugal patrimonial system of alliances of convenience. And if you take the center of gravity away, which in 2021 was the Americans leaving, all of the warlords just side with whoever they want to do.

Iran is a unified civilization for a millennium. Its state is embedded into the system. The notion that you could get rid of a few leaders like you could with the Taliban and the whole thing would collapse. It’s a completely different social political edifice.

Larry Bernstein:

It seems like one of those Muhammad Ali fights where he stands in the corner and the other guy keeps punching him. And you may not topple the guy, but it seriously hurts him. How should we think about not knocking Iran out but only weakening it?

Anthony King:

They have already achieved that. The problem is war is a dynamic process. I am profoundly opposed and critical of the Iranian regime. I absolutely do not buy the commentary that is common that the Ayatollah and his Islamic regime of Iran are strategic geniuses who have everything planned out. Their decision making over the last five years has been disastrous.

The problem with Iran’s strategy is that the Israeli-US military campaign has been extraordinary. There is no Iranian Navy. The leadership has been severely decimated, but because there is no follow on, there is no connected political military movement inside Iran to replace the regime, you’ve ended up in this weird place where the Muhammad Ali rope-a-dope works. Iran is the rope-a-dope, and the U.S. and Israel can pummel it, but in Round 10, Iran comes out.

What has Iran regime has got to do is not collapse and threaten, does not even have to strike, the Strait of Hormuz and that puts massive pressure on the U.S. That is the critical vulnerability of the Trump administration and Iran have taken a course of action, which is effective. The problem is, how do you stop the regime from being in power? How do you stop it from closing the Strait of Hormuz?

You would say you have to have an opposition. And obviously the U.S. have been running around looking for Iranian Kurds to do the job. But they are a minority ethnic group with little political and military power. The trouble with this strategy, is that it puts the victim, Iran, into a position where paradoxically in strategic terms, it holds the upper hand. And it is not easy to see how to change that dynamic.

Larry Bernstein:

The U.S. has shipped the Marines to the region and are ready to go. What could they accomplish, and could they tilt the needle in a significant way?

Anthony King:

Last week they said they had a Marine Expeditionary unit of about 2000 or 3000 Marines.

Larry Bernstein:

That is not many men. Why were there so few Marines in the region when the war started?

Anthony King:

Yeah! It indicates a strategy that if you wanted a land force element, why weren’t the Marines stood up? 600 combat Marines what could they do? Something to do with the Strait of Hormuz, could they land on Kharg Island and secure that? Possibly, but that mission would be of huge risk and would escalate the war and would potentially put pressure on China in ways that might not be brilliant. And certainly, you would not want to put 600 Marines on Kharg Island and not have another 6,000 to support them.

Larry Bernstein:

What is your central case for how the war proceeds?

Anthony King:

Pessimistic, I’m afraid. The Israelis will keep bombing and pursue a strategy of decapitation. No doubt that they will kill quite a few more senior regime leaders. But they will not destroy Iranian military capacity nor bring down the regime.

What will Iran do in response? They will keep the Strait of Hormuz shut. They will continue to rocket, missile and drone strike Gulf states where U.S. bases are, and they will simply endure and we’ll get to a position, in three months’ time where maybe some deal worked out, but I don’t see what that deal would be. Certainly, the Iranians now are not going to remotely offer any nuclear guarantee.

Larry Bernstein:

The US and Israelis rejected the previous Iranian nuclear guarantees, how will the Iranians respond now that we have attacked them?

Anthony King:

Iran has a complete rationale to develop nuclear weapons as fast as possible. So, would their deal be that the Israelis and US stop bombing so that Iran opens the Strait of Hormuz? Yeah. You can see we end up with a strategy that doesn’t get us very far ahead of where we were beyond a regime that has been weakened, they have shot off 3,000 rockets and their arsenal is another 4,000 rockets, and they will be able to produce quickly long-range drones. The pure military resilience of the regime is way higher than anyone than the U.S. and Israel anticipated.

I would anticipate a much longer conflict. I struggle to find the down ramp. Why would Iran stop fighting?

Larry Bernstein:

What about the economic pressure that they face internally?

Anthony King:

That is not new.

Larry Bernstein:

They are more limited. Their export market is shut down other than oil. If they are bombing Tehran every day, it must impact the local populations willingness to invest and manufacture materials.

Anthony King:

The thesis here is that the bombing would have a military and an economic strand of your campaign and together they would lead to regime collapse.

Larry Bernstein:

There is an opposition that we can arm and train.

Anthony King:

I remain skeptical because historically and empirically, economic pressure works on such a long wavelength that it typically has not generated the political military response that you need for a regime change. Look at Putin, four years down the track, everyone thought that the economic pressure of Ukraine and the sanctions, the cost of it, the regime is bound to implode. Not at all, it looks stronger than ever. The U.S. and Israel will not bomb infrastructure. The Israelis tried it two weeks ago, and the U.S. said, rightly, you can’t do that because the Iranians will bomb the gas field in Qatar. And at that point, all sides drew back from infrastructure. Those broad economic pressures just don’t create the kind of crux points that you need for regime change.

The parallel for me that is closest to this is Kosovo, where NATO in 1999 starts bombing. They basically think they’ll just do a quick punitive series of raids, and the Serbian army will withdraw from Kosovo and Milošević will give up Kosovo. Doesn’t happen. Months later, they’re having to expand the bombing to Serbia and infamously hitting the Chinese embassy in Belgrade. And this campaign feels more to me like that.

Larry Bernstein:

To paraphrase Israel’s first Prime Minister, David Ben-Gurion that whenever there is a war against the Arabs, it is just a temporary victory, because Israel can destroy their military forces, but they will rebuild. They are not removing the regimes. The Arab countries are not going to be occupied. It is a series of temporary wins trying to prevent another Holocaust.

The goals and objectives for the Israelis are different from the United States, which is unconditional victory. The Israelis do not expect that. They got to be reasonable in their expectations. Can a reasonable result come out of this?

Anthony King:

I totally agree with it. The idea that somehow you fight a war and there’s victory and everything’s perfect, absolute nonsense. You apply military power, war violence, and the whole thing is messy. I agree that there is not a beautiful victory at the end does not mean that the whole thing was irrelevant and flawed. I am sure that is why the Israeli support for this operation is so high that it is weakening Iran.

But the problem is that does not seem to be the case for the U.S., despite all the greenery and fracking, oil going through the Gulf is still damn important. And it bears an international influence, and which means that its strategic goals are different. The problem is that if you don’t replace the regime entirely, you’ve still got a regime that can shut the Strait of Hormuz.

Larry Bernstein:

Next topic is the future uprising by opponents of the Iranian Regime.

Anthony King:

There must be an organized opposition with a military capacity. Organic uprisings simply don’t happen.

Larry Bernstein:

We had some organic uprisings in Eastern Europe just before the wall came down. The Eastern European militaries were unwilling to kill their civilians. The Iranian military seems willing to do that. Is that the distinguishing feature?

Anthony King:

Yeah, absolutely. Analogies with the collapse of Eastern Europe, you had a Soviet regime that collapsed from the inside and the popular uprises against it were in line with movements inside the regime. Gorbachev himself effectively recognized that the Soviet Union didn’t work anymore.

With Iran, that’s not what we’re talking about. To remove a regime that is powerful and entrenched is going to require an equal and opposite force, and I don’t see that. And the geographic accident of Iran bordering the Gulf and having the whip hand over the Strait of Hormuz makes it tricky.

Larry Bernstein:

Another weird aspect of this war was Iran’s decision to attack neighboring neutral states. They’ve hit UAE, Saudi, Turkey, and Cyprus. It has awakened those Gulf States as to the enemy nature of the Iranian regime. How does that change the long-term political and military aspects of Iran living and operating in that neighborhood?

Anthony King:

Well, this is the bit where I might be more optimistic. Over the last 25 years, it’s had puppet regimes in Lebanon, Syria, and now with the Shiite leader in Iraq. Since the 7th of October, that has gone into massive recession. Syria has collapsed. Hezbollah has been defeated. There is an opportunity in Lebanon. Hamas has been seriously weakened as a force. So, from a position of extraordinary military and proxy alliance strength, Iran has gone into serious recession, which offers up a real potential for the Gulf States led by Saudi.

Why haven’t the Gulf States gone to war? Some of the Gulf states have made a rapprochement with Israel, with the Abraham Accords. They are not going to fight against other Muslim states, even Iran, on the side of Israel. That is a bridge they are not going to go over.

Larry Bernstein:

I disagree that they do not want to join this war because their infrastructure is easily destroyed and that the upside/downside isn’t worth it.

Anthony King:

True enough and the vulnerabilities have been exposed. But at the end of the war with an even more weakened Iran, the opportunities for those Gulf states, especially Saudi, may be beneficial.

Larry Bernstein:

I want to use a metaphor with the Russian-Ukrainian war. Putin will not live forever, and the war in Ukraine is going to end, but Russia will remain an enemy of the West and Europe. The Europeans are going to have to contain Russia going forward. Because it is a nuclear power, the Europeans will not be able to mow the Russian grass, but they will have economic sanctions and military tools to cause trouble. Russia is not going away. Geographically Russia shares a border with Europe, and they want European territory to expand the Russian empire.

The Iranians also want a large and successful Iranian empire. How do you contain our enemy’s power in a way that is consistent with the tools available, the political pressures, and the moral and ethical guidelines that operate within the Western nation states ecosystem?

Anthony King:

You are in normal history, which is your enemy does not go away. I’m convinced that the successor of Putin will be from appointed within the Court of Putin, and therefore Kremlin policy and strategy will remain entirely the same, i.e., Hostile to the West. And from their perspective, and the West frankly is a threat to them.

European countries need to develop military capacities and political unity to ensure that they are countering Russia and that every so often there is likely to be friction points, maybe even conflicts. And the issue for me is keeping those conflicts within a limited non-nuclear frame.

Larry Bernstein:

It is very unusual where at the end of the fighting, your opponent becomes one of your strongest allies and not one of your foes. At the end of World War II, Japan and Germany become the crux of the American alliance. The expectation that somehow Iran would join hand in hand with us after the conflict is wishful thinking or remote. They will remain a foe to the extent their ideology, religious fervor and empire desires are inconsistent with our worldview.

Anthony King:

Yeah, agreed. I think exactly that is what will happen. The Second World War is so extraordinary, it really should be expunged from,

Larry Bernstein:

the historical record.

Lebanon is a failed state currently, but if Hezbollah loses, it’s possible that Lebanon could become a normal state. Israel could have a normal border and the people of Lebanon could have a normal life. I mean, it’s possible.

Anthony King:

Completely possible because the Israelis can exert enough military power on a contiguous state, and there are significant ethnopolitical groups in Lebanon to form a new regime, which excludes an extremist Hezbollah group. I agree with that. That is a great example of the normal realities of politics and strategy, limited successes in smaller areas, but it would be amazing if that was the case.

Larry Bernstein:

Iran it is split between a secular Iranian population that wants to be part of the world and a religious militaristic authoritarian segment of society that wants to undermine its neighborhood. It was not obvious 47 years ago that this would be the outcome. Is there any way to revert to that previous Iranian secular governing coalition away from using U.S. ground troops?

Anthony King:

The regime in Iran is not an inevitability, but it shows that political power is not wielded through organic popular sentiment. It needs organization and a political wing allied with a military. I can’t see the current regime standing aside without a civil war.

Larry Bernstein:

Iran has been defending itself with Chinese made or Chinese copied weapons, and it has not been successful in staving off the American and Israeli onslaught. What lessons do the Chinese take from this war?

Anthony King:

The Americans think that China, the People’s Liberation Army will be ready for an invasion of Taiwan next year. The Pentagon is preparing for a war with China next year, which puts this war with Iran in an interesting context as a strategic decision.

What China will take from it is two things. One, it’s really hard to achieve your military objectives by clinical strategic strikes. Taiwan strategically is a much easier fight. It’s a much easier strategic objective than Iran, but it suggests that if it comes to a fight, it’s going to be much more uncertain than you think it’s going to be. And second, the implications for the global economy and China are unpredictable, and probably not particularly auspicious.

China will look at this thinking if they can take Taiwan without military force, that would be massively the best option because once the rockets start flying, issues become difficult.

Larry Bernstein:

Thanks to Tony for joining us. If you missed it, our last podcast was on How the Rich Improve Our Democracy with John McGinnis who is a constitutional law professor at Northwestern.

I am doing a series of podcasts on the war in Iran.

I did Allies Fighting Together with Yaakov Katz who is the former Editor in Chief of the Jerusalem Post and the author of While Israel Slept about the 10/7 massacre.

Before that What Will Define Success and Failure in the Iran War with Hal Brands.

I also did a podcast on the Opening the Strait of Hormuz with James Holmes from the US Naval War College.

I had a podcast on Fine Tuning the OODA Loop: Observe, Orient, Decide, Act Loop to Win the War in Iran with Israeli Brig. Gen. Eran Ortal. He explained how the American and Israeli military have moved their command center to the battlefield so that the Iranian targets can be destroyed before they have time to react.

We started the series with former Trump National Security Advisor John Bolton about what steps we need to take to win the war.

You can find our previous episodes and transcripts on our website
whathappensnextin6minutes.com. Please follow us on Apple Podcasts or Spotify. Thank you for joining us today, goodbye.

Check out our previous episode, How the Rich Improve Our Democracy, here.

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John McGinnis

Subject: How the Rich Improve Our Democracy
Bio: Constitutional Law Professor at Northwestern Law School and Author of Democracy Needs the Rich

Transcript:

Larry Bernstein:

Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast which covers economics, politics, and history. Today’s topic is How the Rich Improve Our Democracy.

Our speaker is John McGinnis who is a constitutional law professor at Northwestern Law School.

John please begin with six minutes of opening remarks.

John McGinnis:

I would like to talk about my book Democracy Needs the Rich. It has three big ideas.

First, democracy does not need less elite influence; It needs countervailing elite influence. Representative democracy is never a system of equals. The real question is whether the influence of the rich on the top of the influence of other elites improves our political order. My core claim is that it does.

The rich are not the only group with outsize influence, and they are not the most influential. Journalists shape the short-term agenda, academics shape the long-term agenda, entertainers shape the culture that flows into politics, and bureaucrats shape the day-to-day operation of government. These people are the modern clerisy who lean sharply to the left.

It is not whether democracy will have powerful elites. It always will. The issue is whether one powerful and relatively homogeneous set of influencers will enjoy uncontested sway. The rich help prevent that.

This is the Madisonian point. In politics, liberty is preserved not by pretending power disappears, but by pitting ambition against ambition. The wealthy provide a crucial counterweight to professional influencers. They help make our democracy an open exchange of ideas not an echo chamber. They act like a lever amplifying the voice of the many against the concentrated power of the few. Counterbalancing both the intelligentsia and special interests. They help one of democracy’s great virtues, which is it is open to contestation.

Second, what makes the rich useful is their independence. The wealthy are not valuable because they are superior. They are valuable because they are freer. Influencing public debate is not their vocation, but they have the independence and resources to pursue influence as an avocation. That difference matters. The rich are not ideologically uniform. They come to wealth through varied pasts that create varied perspectives. And the rich are less shaped by gatekeepers than the clerisy is.

Consumers do not screen for ideology in choosing a new product or service. The rich thus have less power than professional gatekeepers of opinion to exclude those with unorthodox ideas from joining their ranks. In academia, by contrast, professors decide who gets tenure. In journalism, editors and institutions decide what counts as respectable opinion. The wealthy are less bound by those insular processes. Their financial independence also means they don’t need to curry favor with colleagues.

Wealth checks conformity, and that independence has democratic uses. The rich can fund institutions that break ideological monopoly. They can support causes that are broad and diffuse but hard to organize. They can back unpopular unfashionable ideas as they did with abolition and civil rights. They can support excellence against democratic mediocrity through their support of the arts. They can resist the paternalistic drift towards soft despotism as they do in calling out our fiscal crises. The point is not that every rich person is wise or good. The point is that a free society works better when no single elite has a monopoly of prestige, resources and voice.

Third, in America, the rich matter even more because ours is a commercial republic. They are not simply a pile of money. They’re often the engine of innovation. They widen prosperity by seeing what others miss, new combinations of talent and tools, better uses of existing resources, new ways of coordinating work. And they bear the uncertainty of trial and error. They often fail. When they succeed, most of the surplus of innovations go not to them but to consumers in lower prices, better quality, greater variety, and new capabilities.

In the digital age, these have even greater effects. A billionaire and a member of the middle class now enjoy relatively equal access to the wonders of the internet. What once required private libraries, chauffeurs, and privileged access can often be summoned on a phone. Ideas and information can be shared without diminishing their value. That changes the meaning of inequality. Technology equalizes production not just consumption. AI tools and digital platforms widen access to skill formation.

It is a mistake to imagine the rich in a dynamic capitalist republic are an entrenched oligarchy. In a static society, that fear made sense. But in a vibrant commercial republic, technological change and entrepreneurial churn constantly create new fortunes, new entries and new entrants. The wealthy remain an evolving group, not a closed caste. The same technology critics often fear democratize speech and opportunity by weakening old gatekeepers.

These are the three big ideas: The rich are Madisonian counterweight to other elites. They are a reserve of independence. And in a commercial republic, they are a relentless engine of innovation whose effects often broaden opportunity and democratize access. That’s why I argue that the rich are not democracy’s contradiction, as many argue. At their best, they are its collaborators. The reserve of independence that checks conformity, the counterweight that steadies the scale against rival elites, and the restless engine that helps renew our liberal democracy generation after generation.

Larry Bernstein:

John, what is the argument in opposition to your thesis?

John McGinnis:

The argument in opposition is that the rich have too much influence. They have greater influence than the ordinary citizen and that they will use this influence to entrench their power against the forces of democratic change.

Larry Bernstein:

Does Citizens United come out of that concept?

John McGinnis:

Yes. Citizens United is a poster child for that concern, even though it is a widely misunderstood case. The rich before Citizens United could spend as much as they wanted on elections that was the decision in Buckley v. Valeo. All Citizens United said was that all people could contribute to corporate forms to influence elections and issues. Citizens United was a little more democratizing because it allowed people even with small amounts of money to come together and collectively influence elections as they did in Citizens United, which was a group of upper-middle class people wanted to organize and say what was wrong with Hillary Clinton. So, Citizens United is completely misunderstood, but I do think it is a symbol for those who have that concern.

Larry Bernstein:

Where do we stand today as it relates to election finance from a constitutional and practical perspective, are there limits on money and speech?

John McGinnis:

Contributions to political candidates are sharply limited because of the fear that there will be a quid pro quo. The amount that can be contributed is $7,000. But increasingly, what’s important elections is not contributions but independent expenditures. I can create a PAC or spend money on my own so long as it’s not coordinated and say, “We should elect this candidate, or we should advance this issue.” I think that is correct decision because we do not limit the amount of money the press or others spend on getting out their messages.

So, it will be a strange world where we allowed only a portion of the elite the media and academics who could spend as much money as they wanted setting up their platform and use that to influence politics. The court is correct in saying that while money is not speech, all speakers necessarily use money to set up platforms to create their messages.

Larry Bernstein:

Fundamental to the purpose of your book is that the rich have been demonized and that needs to be reconsidered.

John McGinnis:

I do not think the rich would perform the same function in a dictatorship if they did not earn their money through commerce if they were just given their money by the state.

My argument is limited to a democratic market society, or at least the greatest virtues of the rich come out of that kind of society. To answer your question. One, the rich have always been a target because of envy. People have the illusion that money is going to make people happy, and they would be delighted to have some of it themselves and redistribute the money to them. That has been around forever.

Another issue in our society is this conflict among elites because insofar as the rich are confined in politics, that does not mean the influence goes to the average citizen. Most people are rationally ignorant of politics. It does not make sense for them to spend time on it because they’re not going to have much influence, but there are other big centers of influence: the media, entertainment, academics, and these people gain more influence if the rich are confined and limited.

That influence goes in an ideological direction because while the rich have very varied perspectives, what I call the clerisy in the book do not. I am an academic, we have around 10:1 Democrats to Republicans. Journalists are close to that. And the entertainment world is even more lopsided than that. So, there is an ideological reason that this is a way for the left to control public opinion.

Larry Bernstein:

Campaigns cost a lot more money than they have historically. A congressional election may require $10 million on both sides. They raised this money predominantly from wealthy people to articulate a message to a broad audience. The rich are funding more voice to get out the vote and make a case to a much larger audience. To the extent that the money is spent on arguments, on education, on persuasion, does that even further dilute elite influence? The rich are paying for this but they are doing it in a way that engages the public.

John McGinnis:

They are engaging the public has great benefits. Of course, campaign ads are often not what an academic would consider an articulate view of policy, but nevertheless, people have shown the more money that is spent, the better people can place a candidate on an ideological scale. And that is an advantage because then people know more about the candidates than they otherwise would. That is a virtue of democracy where the government spends so much money. We have a lot of money spent on elections, but it pales in comparison to the amount of money we spend on advertising junk food. Given a world where the government disposes of so much money and makes so many decisions that are important to our liberties, it behooves us to know where our candidates stand. The rich are helping people know where that is and a more informed vote.

Larry Bernstein:

Mancur Olsen, a British economist, wrote a classic work The Logic of Collective Action that highlighted the influence of special interests to stymie or undermine what the broader public wants. An example is the role of teachers’ unions to control school policy to maximize teacher compensation instead of the interests of the student. How do the rich act as a countervailing force against special interests that differs itself from other groups?

John McGinnis:

That is a great example. People across the country think education is the most important issue. The rich have been in the forefront to improve K-12 education, and the rich have a whole variety of suggestions. Some support vouchers and others charter schools. Still others like Mark Zuckerberg and Lauren Powell Jobs have tried to improve traditional public schools from within. They have spent billions of dollars and that gives us improvement in education and leads to a competition of ideas.

John Dewey famously said that democracy is governance through trial and error. And one of the things the rich do is they expand the choice set because they offer different ideas that government does not fund, and then we evaluate them.

The rich fund these ideas and fund studies to evaluate these ideas. And that is the only way we see progress in public policy is through evaluating public policy. Education is the best example of how the rich help improve our education and make it more effective as opposed to other industrial democracies.

Larry Bernstein:

The City of Miami Beach recently did a $159-million-dollar bond deal, and the proceeds were used to fund charitable organizations within Miami Beach like museums and the symphony. What seems problematic to me is that the city government may not be the best allocator of money to charitable institutions. If instead the money came from wealthy locals, they would get on the board and oversee the spending of their hard-earned money to make sure that it is spent wisely. There may be real agency costs by having government officials between the money and the spending. How do you feel about the application of your insight of the rich to charity?

John McGinnis:

That is exactly why government is less effective. I think you are absolutely right about that it allows one to differentiate between public goods what direction we need to go and therefore where agency costs can be extremely high. I completely agree with your pushback.

Larry Bernstein:

A friend of mine just joined the board of the symphony. He wrote a check to join, and he hopes he can contribute real ideas. Right next door to the symphony in Miami Beach is a for-profit theater. I just saw a David Byrnes concert there, place was sold out. When you are making money, there is no role for outsiders. It’s only when the institution can’t support itself, is when the rich are called in to help.

John McGinnis:

That’s right. And they perform an important function. It is one of the worries that goes back to Tocqueville, is that democracy may not create a culture of greatness. Most people do not take time to focus that leads to mediocrity. In areas like symphony and art museums, you need people who are passionate about it, who have the time to be prospectors for the sublime. And those are often wealthy individuals. They perform a function creating a culture of national greatness. That is what they have always done creating art museums, and great architecture that would not pay for themselves and become part of the country’s great treasures.

Larry Bernstein:

Can you end on a note of optimism about the role of the wealthy to improve democracy?

John McGinnis:

This is a timely book because of the attacks against the rich today. I think the rich are misunderstood. They are more independent and can inject those views into the body politic. That is valuable because we want to have diverse pluralist views with the great masses of people in democracy choose among the views.

What is worrying is if we do not hear different voices and the alternatives to the influence of the mainstream media, academics, and entertainment world. They marginalize ideas that the public needs to hear. The rich give us public goods, charitable goods that the government do not provide. And they are an engine of our commercial republic creating goods that make middle class people’s lives much more like the rich today than they were in the 18th century. Let me just end on this note. I often reflect how lucky I am. What if I had been born in the 18th century and had been an Oxford Don? My life would have been extremely different from a duke’s, much less pleasant in all respects.

But when I compare my life to some billionaire, we spend our lives in much similar ways. I am middle class, but I have access to the same information they do. I have a car. I have access to essentially the same healthcare. And that has been because of the great engine of our commercial republic that is, in large part, spurred on by the wealthy.

Larry Bernstein:

Thanks to John for joining us. If you missed it, I am doing a series of podcasts on the war in Iran.

The last podcast topic was Allies Fighting Together with Yaakov Katz who is the former Editor in Chief of the Jerusalem Post and the author of While Israel Slept about the 10/7 massacre.

Yaakov explained how the US and Israel are fighting in a way that is significantly different from our previous wars.

Before that I did a podcast entitled What Will Define Success and Failure in the Iran War with Hal Brands who is a Professor at Johns Hopkins. Hal discussed our war objectives and ways to improve our negotiating position.

I also did a podcast on the Opening the Strait of Hormuz with James Holmes who is a Professor of Maritime Strategy at the US Naval War College.

I had a podcast on Fine Tuning the OODA Loop: Observe, Orient, Decide, Act Loop to Win the War in Iran with Israeli Brig. Gen. Eran Ortal. He explained how the American and Israeli military have moved their command center to the battlefield so that the Iranian targets can be destroyed before they have time to react.

We started the series with former Trump National Security Advisor John Bolton about what steps we need to take to win the war.

You can find our previous episodes and transcripts on our website
whathappensnextin6minutes.com. Please follow us on Apple Podcasts or Spotify. Thank you for joining us today, goodbye.

Check out our previous episode, Allies Fighting Together, here.

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Yaakov Katz

Subject: Allies Fighting Together
Bio: Former Editor in Chief of the Jerusalem Post and author of While Israel Slept

Transcript:

Larry Bernstein:

Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast which covers economics, politics, and history. Today’s topic is Allies Fighting Together. Our speaker is Yaakov Katz the former Editor in Chief of the Jerusalem Post and the author of While Israel Slept about the 10/7 massacre.

I want to learn from Yaakov about how the US and Israel are fighting together and how it is significantly different from our previous wars.

Yaakov tell us about you.

Yaakov Katz:

I have been living in Israel for 32 years. I spent 25 years in journalism. Today, I write a regular column for The Jerusalem Post and other newspapers. I was the editor in chief of the Jerusalem Post for about eight years and served as the military correspondent for 10 years. I’m also the author of four books on the Israeli military. The most recent one is called While Israel Slept, which is how Hamas surprised the most powerful military in the Middle East.

In addition, I am a senior fellow at a think tank called the Jewish People of Policy Institute in Jerusalem and co-founder of an organization called the Middle East America Dialogue, MEAD, which is a gathering of policymakers from across the Middle East, Israel and America.

Larry Bernstein:

Give us some background on the history of the US/Israeli military relationship.

Yaakov Katz:

The war called Operation Epic Fury in America and Roaring Lion in Israel, is a merger of two militaries that have never been merged in the past. The United States after the ‘60s war, began to be the primary weapon supplier and ally of Israel. But anytime that America would come to help Israel, it was for defensive measures. We saw that clearly in ‘24 when with Iran America helped defend us.

We started to see change in the 12-day war in June. Israel fought for most of that period and there was that one day that the B2 bombers sent by Donald Trump to attack the nuclear targets of Isfahan, Natanz and Fordow.

What we saw from the beginning of this war was Israel and America hand-in-hand in a total merged operation. It’s like what the United Kingdom was to the America in World War II. It’s a NATO style operation. You have command centers in Israel that the language being spoken is English. This is Israel’s first English war. Israel has adopted Zulu time, which is the time that is used by the U.S. militaries, we’re totally synchronized.

You have a very crowded airspace in the Gulf. Just so our listeners understand this, all this talk of the Strait of Hormuz. We’re talking about 35 kilometers. You have Israel flying over there and the Emiratis flying 35 kilometers away not shooting one another. There is a conductor behind this called CENTCOM.

Larry Bernstein:

In your op-ed in the Wall Street Journal you discussed the movement of Israel away from the European-American command center to CENTCOM. Could you explain its importance?

Yaakov Katz:

Israel for many years was boycotted by the Arab League. As a result, the United States, when it divides up the world based on its different commands. It has SOUTHCOM, Southern command, it has CENTCOM, which is for the entire Middle East. It has an Africa command, and European command. Israel cannot sit at the same table with Saudi Arabia, UAE, Egypt, Jordan, Bahrain, and Kuwait. Therefore, Israel, even though geographically not in Europe, we were put into Europe.

The dramatic change came in Donald Trump’s first term in office when in 2018 the decision was made to move Israel into CENTCOM. It seemed like a mere technical detail, but it was far from it. When you compound that with the Abraham Accords of 2020, and Israel having formal diplomatic ties with the Emiratis and Bahrain, and until October 7th, 2023, on track potentially with Saudi Arabia.

All these countries sit around one table and talk to one another. You saw the first example of this in April 2024, when Iran fired its first barrage directly at Israel. It was the first time Iran directly attacked Israel. CENTCOM led a coalition that included the French, British, America and Israel, but you had Jordan and Saudi Arabia. It was unbelievable, something that you would never have imagined.

Larry Bernstein:

I want to go back to the historical relationship between Israel and the United States. In 1956, Israel joined the French and the British in a war against Egypt. There was very close ties between the French and the Israelis. The French supplied the Mirage Jets and helped Israel develop nuclear weapons. But the relationship with France deteriorated over time and America replaced it to provide military equipment and close relations. But the US State Department was still pro-Arabist and anti-Israeli, but it took, ironically, the Iranian hostage crisis to turn the state department against Iran.

Since then, the relationship with Israel has continued to grow and be mutually supportive. But there was concern that if Israel became too close to the United States, the relationship with some Arab nations would be less successful.

But what you are describing is the opposite. As U.S. relations with Israel become stronger and more integrated on the battlefield and with intelligence that the relationship with the Arabs for both the United States and Israel is improving. Is that a function of winning or does it relate to a common enemy?

Yaakov Katz:

With this president, winning is big. This president is focused on results. For example, in the 12-day war when in the first hours of the attack, which obviously Donald Trump had approved, but immediately the statement that came out of the White House was, “We got nothing to do with this. It’s not us.” But then if you look throughout the day, when Trump started to see that it was working, he was calling up journalists, talking to everyone about how amazing this is.

The United States from the inception of Israel in 1948 had an arms embargo, did not want to get involved. It was not until JFK decided to sell Israel Hawk missiles in 1962, that it started to change.

And after the 1967, Six-day War, when Charles de Gaulle imposed an arms boycott of Israel because of the war, then America stepped up in a big way. We have hit this amazing pinnacle, but we cannot fool ourselves into believing that this is the new normal. We are facing a daunting challenge down the road that we will not have a president like this, support like this, and face a massive challenge.

Larry Bernstein:

The attack on the Supreme Leader that killed him and 40 of his lieutenants. What happened?

Yaakov Katz:

America’s amassing the largest military presence in the Middle East since the invasion of Iraq in 2003. It shows how they miscalculated the President of the United States.

With that said, we are 2.5 weeks into this war and Iran still can launch missiles. I just got out of the bomb shelter because we had a missile siren go off here in Jerusalem. We had missiles that landed earlier today in the center of the country. You kill off a guy and his lieutenants, it has an impact, but it was not debilitating, and it has not stopped the regime.

Larry Bernstein:

What are you hearing about the quality of the next guy in line?

Yaakov Katz:

There’s not clarity on who is replacing who. Khamenei Jr. has not appeared in public, and it is unclear what his real state of health is and if he’s seriously wounded.

When you are doing a decapitation operation, is this person a legitimate target? It is not just about what the person has done but what they might still do.

The second question, “Can I potentially even carry this out?” You must ask about collateral damage. There is a limit to what would justify killing many innocent people to eliminate a single individual. And then who will replace that person? Khamenei, let’s say, is the right move to kill him, or keep him in place? Who could replace him and whether that person would be worse?

Khamenei took over from Khomeini in 1989, so for the last 37 years, he led Iran to become the regional hegemon, but also to become a repressive state.

Go back and watch videos in Iran, the celebration upon hearing of the death of Ali Khamenei.

Anyone who thought that Iran is just a paper tiger and cannot do anything. In Israel, the people I talked to in government and the military, they have humility. Iran is a country of 90 million people. We’re 10 million.

Larry Bernstein:

The United States is a volunteer army composed of enthusiastic warriors. The Israelis have a civilian army. Away from the ultra-religious, it is everybody. Everyone has a piece of the equity in the IDF.

Yaakov Katz:

When you have access to such a wide pool of people that gives you raw talent. And if you can identify that talent, you can utilize it. Men and women who would be the best pilots. The best language proficient analysts to study Farsi or Arabic.

The ultra-Orthodox do not serve in the numbers that they should. Most of the Israeli Arabs about 20% of Israel do not serve.

In Israel, the competition is to be in the most elite combat unit or the most elite technological intelligence unit because

Larry Bernstein:

Those guys get jobs in venture.

Yaakov Katz:

Correct. I want to gain skills that when I walk out the door after my service, I’ll get scooped up by a tech company that will pay me a six-figure salary because I have years of experience writing code and deploying cyber weapons against Iran, Hezbollah and Hamas. And that could be used to defend Meta and Goldman Sachs from cyberattacks against them.

Israeli pilots are amazing. That caliber of talent shows that selection process is remarkable, and they get the best of the best.

But the flip side of that is that you sometimes have people not in the right place. I’ll give you an example. I met with one of the IDF chiefs of staff and he said to me, “Tell me what you did in the Army.” I worked in a warehouse in the IDF. He said, “Why?”

I’m deaf in my left ear since I was born. I could not be combat. And he said, “But you’re clearly intelligent.” That was his words, not mine. You know how to write, to speak, you are fluent in English, why didn’t we take you to foreign relations or intelligence? And I said, “I had an incredible service.”

He said, “Tell me more.” I said, “I was on a base I was the only new immigrant there.” Most of them were Sephardic origin. There were some from the former Soviet Union. The idea of the IDF being a melting pot is true, and it was just an amazing experience.

We are a very multicultural, diverse society. You find in units in the IDF combat units that will have an Ethiopian Israeli, a Moroccan Israeli, an Ashkenazi Israeli, a settler, a guy from Tel Aviv, from the South, the North, rich and poor. That is a remarkable cultural societal character of the State of Israel.

Larry Bernstein:

Most Israelis that I know are Ashkenazi whose grandparents were born in Europe. When you hear complaints about settler-colonial Israel, the image that people have is that these are white, rich, Europeans dominating poor Arabs.

Yaakov Katz:

When you look at Israel today, under 50% are Ashkenazi and the rest are of Sephardic origin. And then you had the million that came in the late 80s, early 90s from the former Soviet Union, which is an influx of talent. We have about 250,000 Jews from Ethiopia. This is just the Jews. Two million Arabs, non-Jews who live here are Muslim, Christian, Druze and Bedouin. It is a very diverse society.

Larry Bernstein:

How is the Israeli public responding to this war?

Yaakov Katz:

The Israeli public in polls 80% favor this war. That will not last forever. It is tough on people in different parts of the country. People in the North right now have it really bad because of Hezbollah’s missile fire. In Jerusalem, I had one siren today. Hopefully, that’ll be the last one. Yesterday we had two. People in the center of the country in Tel Aviv have many more. If I go near the Ben-Gurion International Airport, they have had hundreds because Iran is targeting the airport.

Larry Bernstein:

I had John Bolton on the podcast and his biggest fear is that we would not finish the job.

Yaakov Katz:

A clear victory is regime change. I don’t know exactly how to achieve it. But I know that what we are doing is working. We are decapitating them and degrading their capabilities. Most Iranian people are opposed to this regime.

The missile fire will decline over time, but this is highly disruptive. I got kids at home who are not in school. They have not been in school for two and a half weeks. Then you have three-week Passover vacation. They will have missed two months of school. But if the regime falls, this changes everything.

Larry Bernstein:

Explain what that means.

Yaakov Katz:

To me, the world changes. We have never had an enemy like Iran that was so bent on our destruction, that built up proxies purely to destroy us, that undermined countries in our vicinity, that prevented us to normalize relations. When this regime is gone, not only is the nuclear and the ballistic missile threats gone but the entire apparatus of the proxies like Hezbollah will die. The Houthis in Yemen, Hamas, Islamic Jihad in Gaza, the militias in Iraq, everything changes.

You have an opportunity for stability. From the Israeli perspective, the opportunities for normalization in the region, with us in Lebanon, Syria, Saudi Arabia, and the Gulf States, and even talk about the Palestinian issue. We can make moves with the Palestinians right now because we would be afraid, we can’t take risks when Iran is looming on the horizon. Once we do not have the big threats on the external, we can deal with the internal.

I said to my kids in the beginning of this war, “I want you to remember two things running up and down the bomb shelter.” I said, “Number one, these are missiles are being launched to kill us.” It is sobering. Two, “This is a moment in time history when the whole world can change.”

People, say “There wasn’t an imminent threat, we didn’t have to attack now.” Imminent depends on your perspective. If you talk to the Emiratis today, they have been hit by over 2000 projectiles and drones. The threats are not yet imminent for the United States, but it’s imminent for people here. I do not understand what they want us to do. Wait for them to have a nuclear weapon, wait for them to have 10,000 ballistic missiles. Look at what they can do with just 3,000.

Look at the Strait of Hormuz. Everybody is bent out of shape. Flow of energy, gas, oil, et cetera. Now imagine they had 10,000 missiles, 30,000 drones, and nuclear weapons. What would happen then to the Strait of Hormuz, Iran would snap a finger and its closed. You would not be able to do a thing like with North Korea. The Russia-Ukraine war raged for more than four years, and the world cannot do anything because Russia has nuclear weapons.

Joe Kent and people who are attacking the war and going off against Israel that we dragged America into this. It’s shortsightedness and misunderstanding of what the nature of this challenge.

Larry Bernstein:

What would you tell Americans about why this war is in America’s strategic interest?

Yaakov Katz:

If I’m an American and I care just about the cost of gas. And now it’s gone up 20%. It’s painful. Look at what the Iranians would be empowered to do to the global energy market. If they have nuclear weapons. How much more would people eventually be paying for a gallon of gas?

If I’m an American and I care just about the security and safety of the United States. Look at Iran’s missile capability. This is not just about Israel. This is not just about the Gulf States. They are creating a missile capability that already reaches Europe. If Israel is just the problem, why do they need missiles that can reach Europe? Cypriots have already been targeted and Turkey. Assassination attempts against American political leaders: John Bolton, Mike Pompeo, and Donald Trump.

We could wait and sit back and say it will not come our way, but we could also be strategic and recognize that the moment the missile is already able to reach the East Coast of the United States, it’s too late. This is an enemy of the United States that has long been engaged in killing Americans. The Marine Barracks bombings in Beirut in 1983, the Khobar Tower bombings a few years later, and the IEDs that maimed and murdered Americans throughout the wars in Iraq and Afghanistan.

Larry Bernstein:

How do the Saudi and Gulf public respond to this war?

Yaakov Katz:

In the beginning, the public there wanted this over fast. We are seeing a shift. The Gulf states turned to the President of the United States and said, “Go all the way. Bring down this regime.”

For decades, we were conditioned to believe that Israel is the source of instability, that it is the conflict with the Palestinians. It is the so-called occupation. It is the Ashkenazi colonialist presence in this land that leads to instability. I do not think there’s a single person today in the Middle East who believes that anymore. There are people in America and Europe who do, but I don’t think there’s anyone here in this region who does. Whether you are in Riyadh, Abu Dhabi, Doha, or Kuwait City, you understand that your enemy is Iran, that if Iran’s not there, it is a different ballgame.

That is what creates this amazing opportunity right now. You’re seeing this shift in this recognition from MBS, Muhammad bin Salman, the Crown Prince of Saudi Arabia, calling Donald Trump to say, “Keep going. Don’t Stop.”

Larry Bernstein:

It seems that the Saudis made some poor planning. They built one pipeline, they needed three or four. They should have dredged part of Oman and have a separate avenue for tankers to get across. Any thoughts on military strategy for the Arabs?

Yaakov Katz:

Arab countries, particularly the Emirates and Saudi Arabia, have built up a powerful military. The Emiratis were one of the first countries to buy the THAAD, the terminal high altitude aerial defense system that is effective against ballistic missiles. They have been using American made helicopters and fighter jets to shoot down the drones. Saudi Arabia is not engaging offensively in this war. Their concern is that if they were to attack Iran that would lead Iran to escalate and attack the oil and gas depots that will disrupt the flow of energy and undermine the countries themselves. It could be that Donald Trump will say to them, “I also want to see skin in the game.”

Larry Bernstein:

What are you optimistic about Israel as relates to this war?

Yaakov Katz:

I’m optimistic about three things. One is this new military alliance between Israel and the United States. It is incredible what we can achieve as two nations working together.

I am optimistic about the security if the regime is toppled. And for the freedom of the Iranian people, let us not forget those brave people that fought for their country in January, many of them lost their lives.

Israeli men and women are going through this again. They have not healed from the previous trauma. The resilience that you see here is remarkable. It shows what this country is about. It is unbelievable. Israel has proven that it is a superpower. We have paid a horrible price. I wish we could have avoided it, but this is one hell of a comeback.

Larry Bernstein:

Thanks to Yaakov for joining us.

If you missed it, I am doing a series of podcasts on the war in Iran.

The last podcast topic was what will Define Success and Failure in the Iran War with Hal Brands who is a Professor at Johns Hopkins. Hal discussed our objectives in the war and ways to improve our negotiating position.

I also did a podcast on the Opening the Strait of Hormuz with James Holmes who is a Professor of Maritime Strategy at the US Naval War College about ways the US Navy can open the Strait of Hormuz.

I had a podcast on Fine Tuning the OODA Loop: Observe, Orient, Decide, Act Loop to Win the War in Iran with Israeli Brig. Gen. Eran Ortal. He explained how the American and Israeli military have moved their command center to the battlefield so that the Iranian targets can be destroyed before they have time to react.

We started the series with former Trump National Security Advisor John Bolton about what steps we need to take to win the war.

You can find our previous episodes and transcripts on our website
whathappensnextin6minutes.com. Please follow us on Apple Podcasts or Spotify. Thank you for joining us today, goodbye.

Check out our previous episode, What will Success and Failure be in the Iran War, here.

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Hal Brands

Subject: What will Success and Failure be in the Iran War
Bio: Professor of Global Affairs at Johns Hopkins and former Special Assistant to the Secretary of War for Strategic Planning

Transcript:

Larry Bernstein:

Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast which covers economics, politics, and history. Today’s topic is What will Success and Failure be in the Iran War?

Our speaker is Hal Brands who is a Professor of Global Affairs at Johns Hopkins and former Special Assistant to the Secretary of War for Strategic Planning.

I want to find out from Hal what are our objectives in the war in Iran, how effective American and Israel’s military has been in destroying its adversaries, and what we should expect Iran to do to try to do to improve its negotiating position.

What is the United States trying to achieve in this war?

Hal Brands:

You should pose that question to President Trump because it is unclear what the U.S. is trying to achieve. Trump talked about annihilating Iran’s navy, making sure it can never have a nuclear weapon, eviscerating its missile program. All steps meant to reduce Iran’s capacity to create harm for the United States and its regional allies including Israel. There ambiguity about whether the United States might want the destruction of the Iranian regime. Trump has sometimes implied that this is a U.S. war aim without ever explicitly stating it. And while making clear that the responsibility to topple the regime ultimately lies with the Iranian people, the Israeli government has been more forward leaning in saying that regime change is an explicit war aim, although even there there’s ambiguity. So my sense is that the minimum objectives are essentially the forcible disarmament for a time of the Iranian regime. And the maximal aspirational objective might include regime change.

Larry Bernstein:

Your opening comment was the president has not made it that clear. Some historical examples of other wars where presidents often make some statement, but then it is not what we’re actually fighting for. In the Civil War, Lincoln talked about preserving the Union as the primary reason. But as the war went on, we had new reasons.

World War I, Wilson laid out his reasons related to the destruction of the Lusitania and other objectives, but he later came up with a whole series of points at the end of the war as to what he wanted to achieve.

In World War II, Roosevelt does not get to unconditional surrender to substantially into the war. And then there were meetings with the allies to consider what we wanted to achieve.

Why are you surprised that Trump has not laid out his objectives when the history tells us that the reasons come later?

Hal Brands:

Well, it’s true that war aims often evolve. That was the case in the Civil War. Although Lincoln did that as much for reasons of political expediency and because to make freeing the slaves of war aim in 1861 would have ensured the destruction of the Union rather than its preservation. So, you had a case of nested objectives.

What is unusual about this case is that this is presumably not a war that President Trump believes is going to go for a long time. The most aggressive estimate he gave was eight weeks, which pales in comparison to any of the wars that we just discussed. And so, there is less time for that evolution of war. What is also idiosyncratic is that we are dealing with a president who is a master of giving self-contradictory statements that preserve flexibility.

The president has given every possible version of how it can end. It can end with a ceasefire in two or three days. It can end with the destruction of the Iranian regime. It can go for weeks. It can be long. It can be short. We’re almost done. We’re not nearly done. A critic might say that this indicates a lack of planning within the administration about exactly what the goal is, maybe. It might also represent that President Trump is careful about being pinned down on anything. And so. he lifts an array of objectives and confusion because it maximizes his flexibility.

Larry Bernstein:

You mentioned that Lincoln’s objectives related to political expediency, but it seems like that’s true with every war. Franco Roosevelt after December 7th met with both Houses of Congress to request a Declaration of War. President Trump was meeting with a Joint Session of Congress at a State of a Union Address only a couple of days before. Now, Trump was going in for a surprise attack, and so you do not want to give away the surprise. How does he want to deal with Congress and what maximizes his political interest?

Hal Brands:

You are right that politics always suffuses the conduct of military operations in the United States. That’s been true since 1812. Why did Trump not seek congressional authorization for this? One reason might be that he did not think he was going to get it, that he would face unified opposition of Democrats and might have a few Republican defections like Rand Paul. It would have been uncomfortably close at best. It’s also because President Trump likes to keep his cards close to the vest. In every military operation he has undertaken so far he is engaged in a game of will I, or won’t I, right up until the bombs start falling.

That is just his nature. He thinks it maximizes his leverage to keep everybody guessing about what he’s actually going to do. In part, that is because he likes to delay decisions until the last minute. And he may have had hope that a diplomatic deal was possible, although that was always going to be a challenge. And then the last piece of it pertains essentially to the tactical surprise issue. That was certainly true with the Maduro raid. It was true with Operation Midnight Hammer.

Trump does believe that provides a military advantage. And he is probably right. The challenge is that it makes it harder to build political consensus before you go in. That’s not a problem if the intervention is short and smashingly successful, as with the case in June 2025 and January 2026. If it’s costly, or more drawn out, you may eventually pay a price for that.

Larry Bernstein:

I took an American foreign policy class at the University of Pennsylvania in 1985, and the textbook was Strategies of Containment by John Lewis Gaddis.

Hal Brands:

Great, great book.

Larry Bernstein:

And in it, the author said there was two different types of strategies. There was a symmetric and asymmetric strategy. And the book concludes that the asymmetric strategy is better. And that meant that the behavior of the executive was uncertain. You didn’t know what he was going to do day-to-day. With a symmetric approach, you acted proportionately. If they attacked something at place X, you respond at place X. You didn’t blow up their refineries of place Y.

With Trump, he is the ultimate asymmetric responder. You don’t know what he’s going to do, why he’s going to do it, or if he’s going to change his mind the next minute. He may raise the stakes, he may lower the stakes. It’s chaos. And Gaddis says that’s the way to do it. Do you view asymmetric response to be the way to run foreign policy, and is Trump doing it appropriately?

Hal Brands:

John Gaddis was my dissertation advisor at Yale, and so that book is literally burned into my brain. It is indeed one of the great works, not just of diplomatic history, but of American history. I agree with the characterization that Trump falls in the category of asymmetrical rather than symmetrical response. The advantage of asymmetrical response is just what you said. It keeps everybody guessing, and it allows you to play to your strengths rather than playing to the opponent’s strengths.

If you look at the military interventions that Trump has ordered, they are all oriented around unique American capabilities that nobody has a way of countering: stealth bombers, special operations forces, a global power projection architecture. All of that is keeping with the idea that you fight on your terms rather than on the opponent’s preferred turf.

It works well when Trump uses it against overmatched opponents. Venezuela was totally overmatched by the United States. Iran is militarily overmatched by the United States-Israel coalition, even though they have more ability to strike back. There are remaining questions about how well that strategy has worked in a diplomatic or economic sense dealing with China which has greater capacity to push back. It has asymmetric strengths of its own like rare earth export controls. What you got in the U.S.-China trade war of 2025 was a messy situation because Trump’s preferred weapon tariffs had been stalemated by China’s preferred weapon rare earth export controls.

Larry Bernstein:

What is unusual about this war is that we have an ally working together. Usually, if we do have allies, they are more in the cleanup operation. Talk about fighting with an ally right next to you.

Hal Brands:

I don’t want to understate the contributions of other U.S. allies in the wars that the U.S. has fought over the last 25 years. There were European forces that saw tough combat in Afghanistan. But the basic point is right, which is that Israel is America’s most militarily capable ally by a significant margin. And what this war has revealed is the emergence of a full-blown war fighting alliance between Israel and the United States. We think of Israel and the United States as being exceedingly close, so what I just said might sound unsurprising, but it’s only in recent years that the US and Israel have operated together in public on a sustained basis in the military sphere.

Larry Bernstein:

Just as an example, when Saddam Hussein was firing those scuds at Israel, the American response was stand down, we got this. Stay out.

Hal Brands:

There is not much you can do and you’re going to spoil the coalition, and that’s changed in part because Israel is more politically accepted in the Middle East than it was before. Now they are operating as a war fighting coalition. They are dividing up targets and servicing them together in parallel. Israeli operations are reportedly based on American intelligence and vice versa. There are always strains within alliances like this. And one strain may come back to what we talked about at the beginning, which is how far to take this and what the ultimate objectives are. But this is a new factor in the Middle East and it’s reshaping the region before our eyes.

Larry Bernstein:

I want to just expand on the interactions within the military itself. In the movie Patton (see my podcast on Patton, here), Montgomery and Patton are trying to take Salerno in Sicily, and Patton was told to stand down to let Montgomery take it, but Montgomery faces some resistance and Patton decides to make an end run and gets to the city first and Montgomery’s marching band meets Patton on a pedestal in a defining scene.

That showed that although they were allies, that there was real tension between US and UK forces. What we are hearing in the public press is there is none of that nonsense, that it is an alliance that is working together to achieve its objectives. How would you describe ally tension versus something that appears to be integrated and effective?

Hal Brands:

There were reports over the weekend that the U.S. was surprised by the ferocity of Israeli airstrikes against the fuel storage tanks around Tehran. The U.S. critique was we do not need any more pressure on energy markets than we have right now. And two, let’s try not to make things miserable for the Iranian people because they should be our allies in trying to take down this regime. So that is one source of tension.

I would not be shocked if there is some tension in these phone calls that are happening between Trump and Bibi every day. These guys have not always had a placid relationship in the past, but that is totally normal.

Allies come into wars with slightly different understandings as what they want to achieve. It’s normal that there is friction in trying to operate together. It is normal that even close friends don’t agree on everything. For me, the big story is how closely, efficiently, and effectively these two countries have worked at an operational level over the past couple of weeks. And then there’s the larger question of how strategically successful the war will be.

Larry Bernstein:

Learning by doing. Militaries on both sides are learning about how these weapon systems work, communication and command structure, where their weaknesses are, what succeeds, what fails. The United States is constantly in battle globally and that allows it to ramp up its learning process.

Other nations, to their benefit, do not engage in war, but they do lose this learning process. The Chinese have not been in battle since their interactions with Vietnam years ago, and there is no one in their leadership who fought a battle.

Hal Brands:

It is important. It is something that Chinese military and political leaders worry about. The Chinese military has not seen serious combat since the war with Vietnam in the late 70s and early 1980s. It did not go particularly well for Beijing back then. When we talk about China invading or blockading Taiwan, we are talking about a military that has not played in prime time in quite some time.

There’s nervousness about how well the PLA will perform under wartime conditions. There are caveats. One, what we are seeing every day, literally, is that the PLA is doing realistic exercises of what these types of operations would look like. So, they are not going to be making it up as they go along.

Two, the US military has not done anything like a Western Pacific fight in decades. And taking apart Iran’s military is impressive. It indicates the gap between the best and rogue states that have been under sanctions for decades, but you have got to assume that China’s going to be more capable than Iran. The scenario is more demanding in the Western Pacific than it is in the Middle East. The geography is less favorable to the United States. It’s an advantage that the U.S. military has done complicated operations. I’m sure the US military has learned a lot of useful stuff over the course of the past couple of weeks. But if there is a war against China, it is not going to look anything like this.

Larry Bernstein:

Some of Iran’s weapons were Chinese made or copies of Chinese weapons. In a previous podcast with Brigadier General Eran Ortal of the IDF, he said that this shows to the Chinese that these weapons aren’t putting up much of a fight against the American weapon systems. How do you think the Chinese will respond to that as they witness this?

Hal Brands:

There have been a couple of these incidents over the past year. You saw Russian air defenses taken down easily by the Israelis in 2024 and 2025, although those were not the most advanced Russian air defenses, they are a generation behind. We saw Russian and Chinese made weapons rendered essentially ineffective when the US went into Venezuela, although there are questions about whether the Venezuelans had even deployed those air defenses and radars. And then we’ve seen similar things just in terms of the outperformance of Western weapons vis-a-vis Russian and Chinese weapons, as well as some indigenous stuff in the course of this conflict.

But we have only seen a Russian and Chinese kit used by substandard militaries. We should not assume that the folks who make these things will use them in equally inept fashion.

And we are also dealing with a different ballgame quantitatively. If you are thinking about a U.S.-China war, the problem is not simply one of quality, it is one of quantity. China has huge numbers of the air defenses, ballistic missiles, and other weapons it would use to try to make it difficult for the U.S. to operate in the Western Pacific. And so there’s that old saying that’s attributed to Stalin that quantity has equality all its own. And that may be the problem the U.S. would run into in a great power war.

Larry Bernstein:

We had war games related to a war in Iran and the United States did quite poorly. Ironically, Iran was able in the war games to effectively use decentralized command and control structure to its benefit.

Hal Brands:

The Millennium Challenge war games a couple of decades ago back.

Larry Bernstein:

They got their wish, they got forced into some decentralized command and control structure, and so far, it has not really been working out for them.

Hal Brands:

It is going terribly in the sense that by any military metric, they are getting their clock cleaned. They’re losing a lot of their missile launchers. Their Navy is essentially sunk. Their key weapon systems and defense industrial assets have been wiped out. This is not a close ballgame in military terms, and yet Iran has been able to sustain strikes against regional partners of the U.S., particularly the UAE, which is the most vulnerable place because of geography. It has been able to close the Strait of Hormuz, even though it’s only firing off a small number of drones at ships that come through each day.

It has been able to achieve economic pain for countries in the region which cannot export their energy products. As of March 11th, when we are recording this, gas prices are up 12% since the beginning of the war, but the markets are okay. The Iranian calculation is that pain is going to build. Once the markets start reckoning with the prospect of a prolonged conflict, you are going to have a different economic and political reaction in the United States and in other countries.

Larry Bernstein:

Yesterday’s news cycle was that the Iranians were going to try to lay some mines, and the mine layers were sunk. I would not want to be that ship captain. The drones are working okay.

Ballistic missiles are causing a little bit of trouble, but they are not firing that many anymore.

What is next?

Hal Brands:

If you are the Iranian regime, the question is not how many boats were sunk. The question is, how many mines did you manage to get in the water? It doesn’t take a whole lot to scare off shippers. And were you able to create the fear that Iran might make the Strait of Hormuz more impassable? The strategic fact that matters is not the number of drones that Iran launches per day. It is the number of non-Iranian ships that get through Hormuz.

This is the Iranian game. You try to maximize pain and hope that it forces Trump to look for an exit ramp short of the destruction of the regime. Iran is paying a terrible price for this strategy. And it is embittering countries throughout the region because it has struck many of its closest neighbors, even ones that did not have anything to do with the initial U.S. and Israeli strike.

But out of the set of terrible options that Iran has, this strategy may be the best of the bunch.

Larry Bernstein:

What’s unusual is this idea that the attacking power is looking for the people of the country to come to its aid. We did not seek that with the German population in World War II. We weren’t hoping that these guys would take out the Nazi regime. Instead, we burned the cities and everything else for that matter. How does that change the calculus when you want the local population to rise up? How do you do it effectively? When will they get the memo that this is the time? How should we think about that as a strategy?

Hal Brands:

There was a line of thinking in World War II that bombing the German population was meant to demoralize them and make them ultimately demand an end to the war. Did not quite work out that way, although the bombing campaign had other positive effects from a strategic perspective. In this case, the operations were colored by what we saw in January when you had mass protests in the street, a political uprising against the regime. And so there may well have been still be a hope that if the regime is embarrassed, weakened, crippled militarily, then you’ll get those protestors back in the streets at a time when the regime is less able to respond. And that was what President Trump seemed to be gesturing at in his initial comments on the war and he occasionally comes back to it.

There is another theory which is that the way to cripple the regime is to support an insurgency by ethnic minorities, particularly by the Kurds, and hope that that essentially overstretches the IRGC and other Iranian repressive capabilities. But there is no scenario where the Kurds can take power in Tehran. And the risk is that if you turn anti-regime Persian nationalists against the war, because now they see the war as a threat to the territorial integrity of the state, as opposed to a war against a regime that they may loathe.

Larry Bernstein:

The betting markets think that land forces is a possibility. When you talk to military folks, they say it’s not. We’ve talked about special forces, but that’s limited like taking out nuclear sites or specific places that air bombing may be insufficient. Can you imagine any use of forces around Tehran to allow the population to feel comfortable to rise up?

Hal Brands:

The entire U.S. army is not big enough to occupy Iran in the way that the U.S. occupied Iraq. Even the more limited scenario where you are putting 10 or 20,000 troops in place around the capital in hopes of toppling regime or encouraging an uprising. This is not Caracas where you fly in with helicopters because the capital is 30 miles from the coast. Tehran is hundreds of miles inland. This is a big country. Putting those troops in a very exposed situation sustaining them logistically is difficult, let alone defending them. There are a couple of lesser scenarios that are possible, although still difficult. A commando raid to go after the highly enriched uranium that is apparently buried under one or more of the nuclear sites. It’s still hard because you’ve got to have perimeter security, which means probably several thousand forces deployed to keep the Iranians away from the site.

You could do an occupation of Kharg Island. This is the Iranian oil export terminal. About 90% of Iran’s oil flows through there. If you are trying to strangle the regime economically, make it quit, maybe you try to grab that island as a means of coercive leverage, but that is still a big operation. You’re putting some significant number of U.S. boots on the ground in a potentially hostile setting. You’re going to need a lot of air power and naval power to back it up. It’s not a formula for a quick and clean resolution of the conflict. So, it is possible that President Trump would choose one of those escalatory options if he was committed to something that looked like a decisive victory and worried, he was not going to get there through what is happening militarily so far, but there’s a lot of risk around all these options.

Larry Bernstein:

How do you think this is going to play out?

Hal Brands:

I think you’re going to end up with an Iranian regime that is badly battered. It’s much weaker than it was a month ago, let alone three years ago when Iran appeared to be at the peak of its regional strength, but it’s probably still going to be a problematic regime. It’s probably still going to be run by the IRGC or other relative hardliners. Even if there’s a ceasefire, it will be hostile to the United States and Israel, and a source of insecurity in the region, even though its capabilities will be much reduced for a time.

You’ll have the question of how do you prevent Iran from trying to rebuild the air defenses and the missile capabilities? And that’s one of the reasons why this war is being fought because the fear was that the effects of the June 2025 war would eventually wear off. You got to go back and mow the grass again. I do not foresee a clean ending of this war where the threat is removed. We’re going to be preoccupied with this for a while to come.

Larry Bernstein:

Do you think there is a chance that as part of the negotiation will leave American forces on the ground there to observe to make sure they do not violate this?

Hal Brands:

No. I could imagine a version of what the US did with Iraq after 1991 where you had a no-fly zone. But no, I don’t see us leaving a division of troops in Iran.

Larry Bernstein:

Stepping way back, we’re looking at a battle, but we have a globe to enforce. How do we think about Iran in the context of the axis of evil that are opposed to the U.S.?

Hal Brands:

There’s a couple of benefits from this war. If you smack around one bad actor, then maybe it causes other bad actors to think twice before they do bad things. If you show that the U.S. military is capable, maybe it makes Xi Jinping think one more time before he tries to take on Taiwan.

Larry Bernstein:

We kidnapped the leader of Venezuela and we decapitated the Iranian leadership in a surprise attack. This is unusual for a great power to act like this. Is this the future?

Hal Brands:

This is a tool that President Trump likes. He feels that it gives him a lot of leverage because you can kill or apprehend the bad guy and hopefully that example will have a disciplining effect on the successor. It has worked so far in Venezuela. It has not worked so far in Iran. Trump has been grappling with that disappointment in public over the past few days. Probably a lot more dangerous to carry out if you’re dealing with rival great powers like Russia and China, it may be the wave of the future in US foreign policy for dealing with rogue actors. Look out Cuba.

Larry Bernstein:

I end each podcast on a note of optimism as it relates to the war in Iran.

Hal Brands:

Think back two and a half years to the period immediately after October 7th. Iran and its proxies were at the peak of their power. They had embroiled Israel and to some degree the United States in a multi-front war. Today, Iran’s power has been dramatically reduced. Hezbollah has been eviscerated. Hamas is a shadow of its former self. The Houthis, interestingly, have been sitting this one out contrary to many expectations, and the Iranian Empire is much weaker.

Larry Bernstein:

Thanks to Hal for joining us.

If you missed it, I previously did four podcasts on various issues on the war in Iran.

The last podcast was on the Opening the Strait of Hormuz with James Holmes who is a Professor of Maritime Strategy at the US Naval War College where we discussed ways the US Navy could open the Strait of Hormuz including the use of convoys, area defense, tactical offense, and arming the tankers to beat back the influx of drones.

Earlier last week another topic was Fine Tuning the OODA Loop: Observe, Orient, Decide, Act Loop to Win the War in Iran with Brig. Gen. (Res.) Eran Ortal where he explained how the American and Israeli military have moved their command center to the battlefield so that the target can be destroyed before the Iranians have time to react.

Another podcast was with former Trump National Security Advisor John Bolton where we discussed how to best win the war in Iran.

You can find our previous episodes and transcripts on our website
whathappensnextin6minutes.com. Please follow us on Apple Podcasts or Spotify. Thank you for joining us today, goodbye.

Check out our previous episode, Opening the Strait of Hormuz, here.

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James Holmes

Subject: Opening the Strait of Hormuz
Bio: Professor of Maritime Strategy at the US Naval War College and Author of Red Star over the Pacific

Transcript:

Larry Bernstein:

Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast which covers economics, politics, and history. Today’s topic is Opening the Strait of Hormuz.

Our speaker is James Holmes who is a Professor of Maritime Strategy at the US Naval War College. He is also the author of the book Red Star over the Pacific.

I want to learn from James about what strategies the US Navy has to open up the Strait of Hormuz including the use of convoys, area defense, tactical offense, and arming the tankers to beat back the influx of drones.

James can you please begin with six minutes of opening remarks.

James Holmes:

Unobstructed shipping lanes are the major concern for anybody who depends on oil and gas, which is to say everyone. You need to be able to move materials across the sea. That is how freedom of the sea is supposed to work.

There are three ways to defend the system of global trade and commerce against Iran. The first is convoys. Ships travel in large groups and warships escort to defend them. That is what President Trump talked about. Warships escort mercantile shipping through hazardous water such as the Strait of Hormuz, fending off subsurface as well as surface and air and missile attack. They do not go chasing attackers around the sea. They stick close to the merchant ships. If you have not watched Greyhound starring Tom Hanks, I implore you to watch it or read the C.S. Forester novel based on the Good Shepherd.

Second, there’s area defense as another passive approach. This is what the U.S. and European warships did in the Red Sea in 2023 and 2024 in the aftermath of the October 7th attacks on Israel. In this case, defenders spread out across wide areas. Ships remain relatively stationary to perform picket duty. This worked to a considerable degree against the Houthis, though not perfectly. Coalition warships took no hits, although there were some close calls, and a few merchantmen were hit. The Red Sea campaign underlined a basic fact of naval warfare. Lloyds of London and insurance companies are strategic actors. If shippers confront prohibitive insurance rates, they will hold their vessels back or reroute them to more roundabout courses. That is what happened in the Red Sea, and that is what’s happening in the Strait of Hormuz today, except that the strait is the only gateway to the Persian Gulf, whereas there are alternatives to the Red Sea routes. Merchant shipping tankers are largely idle in the Gulf.

Third, strategic defenders can go on tactical offense, much as the boxing legend Jack Dempsey claimed the best defense is a good offense. You defend yourself by hitting your opponent first and preemptively. A naval flotilla can go against shore sites that are trying to interdict shipping either by lofting land attack missiles or by calling in air support. We did this in the campaign against the Houthis and we are doing it against Iran today.

These approaches are not mutually exclusive. These are all joint operations, meaning that multiple services, the United States Navy, the Marine Corps, the Air Force, and potentially even the Army help shape events at sea. If the joint force can reduce the threat emanating from land by conducting air and missile strikes, convoys might be able to eke their way through the Strait of Hormuz.

Larry Bernstein:

I would like to start with convoys. You referenced the movie Greyhound starring Tom Hanks. We did a podcast on that movie a few months ago called You Sank My U-Boat. The WW2 convoys were attacked by U-boats using a wolf pack with more than one U-boat causing absolute chaos, loss of life and Merchant Marine.

The Iranians don’t have a submarine force. Instead, they have to use missiles and other above-surface devices. Tell us about what the opponent looks like in this war.

James Holmes:

Iran does have a submarine force. They have submarines that came from Russia after the Cold War. It does appear that the submarine force is not operational because we have hit them like the rest of the Iranian Navy. The threat is primarily drones and missiles. We have seen from the Ukraine war that drones, even though they are low-tech and inexpensive are highly effective against high tech and expensive defenses.

Drones that cost about $35,000, which is a good when surface to air missile costs about $4 million. Iran pioneered this. So that is a huge concern. You could shoot most of them down, but antagonists can afford to flood the zone. They can bank on some of them getting through.

The ballistic missile threat is recurring. The Trump administration has made that a major focus of U.S. military. A lot of these missile facilities are buried deep. They are hardened as we say in military circles. Trying to get at those, it’s difficult, although our bombers are probably targeting the entrances and the exits to those facilities to seal them up and achieve what you could call a mission kill.

Larry Bernstein:

Going back to Greyhound and the World War II convoys, these would be like a hundred merchant marine ships and maybe as much as a dozen destroyers surrounding it. The convoy would move slowly at the speed of the slowest boat in the convoy.

These drones are seeking out various ships and the destroyers are going to have to destroy these drones near all the relevant ships in the convoy. Tell us about how that would work in practice.

James Holmes:

That is a problem. One thing we found in the Houthi war was that we were expending a lot of expensive interceptor missiles on very inexpensive drones that were being launched at the merchant fleet and at European and coalition warships. We are starting to get that cost equation, where you try to fight more cheaply than your adversary, but at least increase the financial pressure on them.

Interestingly, the Ukrainians, who have a lot of experience of this after the last four years, have come to the United States to provide advice and drone technology.

We have two carrier strike groups in the region, each one of those is going to have escorts. It would be propaganda gold for Iran to hit the Abraham Lincoln. There is no way that U.S. commanders are going to draw off destroyers from that duty to escort tankers for that reason.

We are at that phase when thinking about convoys because Navies hate convoys. It’s not sexy. You do not get a lot of decorations, but it’s very important because commerce is king. It’s about keeping the world economy afloat.

Larry Bernstein:

You mentioned that insurance markets help price risks. You mentioned Lloyds of London would charge exorbitant amounts if the risk got to be high. And that is what happened in the events with the Houthis and the Red Sea. The same logic applies to oil tankers coming out of the Strait of Hormuz. It will be awfully expensive and therefore uneconomic to risk moving those tankers at this time in the middle of the war. There are many alternative oil options, including tapping the American oil reserves.

James Holmes:

The Trump administration has tried providing subsidies to defer in the cost of insurance for shipping firms that dare the transit through the Strait of Hormuz.

Larry Bernstein:

In lieu of putting oil in the tankers, you could put them on trucks to an area away from Iran to get on a tanker there. You could put oil in a pipeline, and you could store oil waiting when the war hostilities have declined.

James Holmes:

There is a good reason why like 80% to 90% of world trade travels by sea. It’s because it’s inexpensive relative to aircraft and the shore base conveyances.

Larry Bernstein:

In normal times, shipping by water is by far the cheapest. But if insurance rates surge, then it will not be. And so, you take some other path.

James Holmes:

The main concern there is capacity. Can you pass all that oil and gas through a pipeline?

Larry Bernstein:

Ukraine was effective in destroying Russian naval ships in the Black Sea using drones, putting bombs on jet skis. Should we expect to see low tech have massive disruption for the Iranians?

James Holmes:

Ukraine essentially has no Navy, and yet it’s driven off the Russian Navy, the Black Sea fleet from its shores simply by using cost-effective modes like jet ski bombs. We had Ukrainians here in Newport give us lessons that you can do this inexpensively and inflict heavy damage on a serious adversary.

Larry Bernstein:

I want to talk about environmental problems associated with sinking a tanker. If the Iranians are successful in blowing up a tanker or two in the Strait of Hormuz this would be a massive oil spill. Tell us about what that will look like and the ramifications.

James Holmes:

We have nuclear powered warships, and nobody seems to worry too much about what happens if you sink a nuclear-powered submarine or aircraft carrier. What does that look like at the bottom of the sea when you have a reactor exposed to the elements. That we have overlooked. Working back towards the oil spillage problem, look at the scale of some of these tankers. Some of the tankers displace 600,000 tons.

Think how much oil they are carrying. And the Persian Gulf and the Strait of Hormuz is not a large place. That is a serious question that I have not seen anybody ask, how do you clean up given that you’re an open war against the adversary that caused this spill to happen?

Larry Bernstein:

These tankers are bigger than the one at Valdez.

James Holmes:

Oh, hell yeah. They displace five or six times as much as a US aircraft carrier, which is about a hundred thousand tons. It is amazing.

Larry Bernstein:

In World War II, the British, Americans, and Canadians armed their merchant ships directly during these convoys. Do you think it makes sense to arm the tankers to prevent them from being attacked by either the missile or the drones? Because the destroyers are far away in a convoy, and you need to cover a lot of ground and the ground most specific we need to cover is the tanker itself. You could put the defense systems directly on top of the tanker, you could put little PT boats and surround the tanker with the various necessary arms to knock down those drones or missiles. How do you think about defending a tanker?

James Holmes:

It’s a great question. It points to a serious issue. In 2009, when Somali piracy off the Somali Coast was a thing, I was invited to take charge of the Somali counterpiracy effort. And that’s what I said why not arm merchant crews to defend themselves rather than have U.S. Navy and European warships running all over the place trying to counter every blow before it lands.

In the Persian Gulf, the answer is nuanced. If the tankers could defend themselves against the drone threat, they have established a division of labor between themselves and the Navy to fend off the high-end threats. A tanker’s not going to shoot down an anti-ship ballistic missile or an anti-ship cruise missile. But if they could fend off all the Kamikaze drones that lets the naval fleet concentrate on what matters most.

Larry Bernstein:

It does not appear ground troops are landing in Iran. We may have some special forces, but how do you think about the role of the Navy to support the effort?

James Holmes:

President Trump and his advisors have refused to rule out ground troops. I would do the same thing if I were in their place, simply because you don’t want to publicly rule out any option. I have a hard time seeing there being a ground component against a country made up of 90 million people. I’ve flown over Iran back in 2016, there was fighting in Iraq and Syria, and I was in Jaipur in Western India.

And I was like, “I would never want to invade this place.” So, I have a hard time seeing there being a ground component. I could see some indigenous uprising, but I have a hard time seeing U.S. Army or Marine Corps components on the ground, unless it’s like a Caracas where you have special forces going in.

Larry Bernstein:

We have been at war for a couple of weeks. How is it playing out? What are you surprised by?

James Holmes:

I am surprised that it happened. I’ve always assumed that Iran is going to go nuclear. Even if Iran becomes a liberal democracy like Germany or the United States, I think it’s still going to happen. And the reason for that is national pride. You are with the permanent five members of the UN Security Council, you’re in the company of India and Pakistan; there’s honor.

Larry Bernstein:

There were some war games that were tried a couple of years ago. And during the war games, the Americans did quite poorly against Iran.

James Holmes:

2002 Millennium Challenge.

Larry Bernstein:

In the war games, the decentralized command structure in Iran played to their benefit and that they were able to cause havoc around the Middle East and undermined the American’s ability to take advantage of the sky and use its naval forces to its maximum. That was my takeaway from those war games. But it does not appear that that’s working out on the battlefield. Their command and control have been severely limited. The decentralized control has not shown to be a big positive. The Navy got destroyed in a day. They’ve lost control of the air and they’re getting pummeled day in and day out. What are your thoughts from the war games versus reality on the ground?

James Holmes:

That’s another great question. In the Gulf War, we were told that 100,000 of us were coming home in body bags, and we ended up losing 100 to 200 soldiers, sailors, airmen and Marines. I guess the good news is things are working out better. We are strategically fatalistic.

Where we get into trouble is when we start getting into protracted engagements trying to remake a society and its government. We talk about regime change but think about how Aristotle defines the regime. It’s not just the government. It’s the way of life for a city, state or whatever political polity you’re talking about. It’s hard to do that with a cruise muscle, bomb or torpedo. It’s hard to do it from outside.

Larry Bernstein:

How do you think this war will end up?

James Holmes:

We are going to take down Iran’s military capabilities, which is good. I am very skeptical about our ability to remove the regime, which is entrenched for 47 years and has set itself up to endure. You will never hear me predicting the fall of the North Korean regime or the Chinese regime or anybody like that. And that’s where I am with Iran as well.

Larry Bernstein:

What are you optimistic about as it relates to the battle?

James Holmes:

We have taken a lot of capabilities away from the Iranians. That is a good thing, taking away the Iranian Navy and their ballistic missile force. If we have ended their nuclear program, that’s a cool thing as well, because this is a regime you could imagine using nuclear weapons. So as far as the capabilities side, that is the optimistic view.

Larry Bernstein:

You are a China naval scholar. A lot of the weapons that Iran has was acquired from the Chinese. The Americans and Israelis had great success outwitting those weapon systems. What have the Americans and Chinese learned from this proxy war?

James Holmes:

What people in Beijing and Moscow are thinking when they see their sensors and weaponry fail repeatedly is they may be having second thoughts that are a huge part of deterrence? If they do not know their stuff is going to work on behalf of Iran, are they going to invade Taiwan?

People in Washington think next year is the critical year as far as China being willing to invade Taiwan. If they think they’re going to lose, think about the consequences for the Chinese Communist Party. That could mean that the Party’s downfall.

I hope the reporting on the failures of Russia and the Chinese weaponry are as true as it sounds like from reading the press because if you look at the People’s Liberation Army, Navy, Air Force, and rocket force, they look impressive.

I am an old coal warrior. The Soviet Navy, Army, and missile forces looked impressive too. And yet we saw what happened to them during the end the Cold War. So that is the very optimistic view that they might hold their fire.

Larry Bernstein:

Thanks to James for joining us.

If you missed the previous podcast, the topic was Fine Tuning the OODA Loop: Observe, Orient, Decide, Act Loop to Win the War in Iran.

Our speaker was Brig. Gen. (Res.) Eran Ortal who is a former Israeli Defense Forces officer who previously served as the Commander of the Dado Center for Interdisciplinary Military Thinking in the IDF. He is the author of the book “The Battle Before the War.”

Eran explained how the American and Israeli military have moved their command center to the battlefield so that the target can be destroyed before the Iranians have time to react.

You can find our previous episodes and transcripts on our website
whathappensnextin6minutes.com. Please follow us on Apple Podcasts or Spotify. Thank you for joining us today, goodbye.

Check out our previous episode, Fine Tuning the OODA Loop: Observe, Orient, Decide, Act Loop to Win the War in Iran, here.

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Eran Ortal

Subject: Fine Tuning the OODA Loop: Observe, Orient, Decide, Act Loop to Win the War in Iran
Bio: Former IDF officer, previously served as the Commander of the Dado Center for Interdisciplinary Military Thinking in IDF Operations Directorate. Head of the Military Program at Begin–Sadat Center for Strategic Studies (BESA Center), visiting scholar at the American Foreign Policy Council (AFPC). Author of The Battle Before the War.

Transcript:

Larry Bernstein:

Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast which covers economics, politics, and history. Today’s topic is Fine Tuning the OODA Loop: Observe, Orient, Decide, Act Loop to Win the War in Iran.

Our speaker is Brig. Gen. (Res.) Eran Ortal is a former Israeli Defense Forces officer who previously served as the Commander of the Dado Center for Interdisciplinary Military Thinking in the IDF Operations Directorate. Today he is the Head of the Military Program at the Begin–Sadat Center for Strategic Studies (BESA Center) and a visiting scholar at the American Foreign Policy Council (AFPC). Eran is the author of the book “The Battle Before the War.”

I want to learn from Eran about how the American and Israeli military have moved their command center to the battlefield so that the target can be destroyed before the Iranians have time to react.

Eran Ortal:

This war, how is it going to end? How do we know we are winning? What are the chances this regime collapses? And before we can answer, I have to offer some framework to discuss the current events.

Iran intervened with war directly the first time in April ‘24. The IDF retaliated modestly, some said even weakly, to Iran, but retrospectively, it was a trial for the IDF. It proved the capability to strike Iran from a very far range. Another thing that happened was the key component of the air defenses in Tehran was already gone that set the stage in June for an operation focused on preventing a breakthrough to a nuclear bomb for the Iranians.

June contributed enormously to the populist demonstrations in Iranian major cities and created the conditions for now the combined American and Israeli operation against Iran. I don’t think anyone can promise that this regime will be gone when this operation is over. But military force can only destroy things. Nevertheless, I’m quite positive that this operation is pushing forward in the right direction.

Larry Bernstein:

What do you see? What is effective? What is ineffective? What has happened so far and how do you evaluate it?

Eran Ortal:

We live in a time where standoff weapons and air defenses, coastal defenses, cyber capabilities, electronic warfare capabilities make it extremely hard for troops to move around. You can see that happening in Ukraine, where the war is stuck in a frozen front for the last four years. What you can see in Iran is a breakthrough because Israel in June demonstrated the ability to gain control over Iranian skies.

The Iranian air defenses and its coastal defenses are Chinese-made, or Chinese copied. What you have here is a closely coordinated American and IAF campaign that is punching a hole in the A2AD, that is an American phrase, in this case of the Iranians and proving these capabilities.

Larry Bernstein:

Just to define A2AD for our audience, that acronym stands for Anti-Access/Area-Denial which is a military strategy using long-range missiles, sensors and air defenses which is the anti-access part to restrict or area-denial an opponent’s freedom of action in a region. As an example, this is what China wants to do in the South China Sea if there was a war between China and the US.

Eran Ortal:

I’m sure the American military is thinking about the future possible campaigns in the Pacific. I’m sure the Chinese are watching. So military speaking, you have a dry trial before you go into actual battle.

This is a miniature China that is now being punctured with its air defenses, air forces and coastal defenses. And it’s no coincidence that CENTCOM is mainly focused on the Iranian Navy and coastal defenses.

Larry Bernstein:

The Americans destroyed the Iranian Navy in a single day that war is already over. Is there more to say about the coastal defenses?

Eran Ortal:

You are right. I do not think the Iranian naval ships are the main issue here. The more complicated capability to take out is the coastal missiles that threaten both merchant ships and the American Navy. They are connected to radars and command control systems and air defenses that have the responsibility to defend the coastal defenses. That is complex to take out. It is not the ranges or the density of what the American military might face in a Pacific war, but it is a good case to try the American capabilities.

This war is about Iran, but it is also useful to gather some relevant combat experience in the face of future conflicts that might come.

Larry Bernstein:

Iran employed Chinese missiles, radar, and weapons, and a combination of American and Israeli forces have been able to destroy those weapon systems with relative ease. That gives the Americans confidence that if China employs these same weapon systems that Chinese coastal defenses are in great danger. Is that your key point?

Eran Ortal:

It is, and it is not about the specific weapon system. It’s about the tactical know-how of how to identify the command centers, how to neutralize for critical periods of time, the networks, the cyber capabilities. What both sides, the IAF, the IDF, the American forces, CENTCOM are learning together is how to break this network, how to exploit the small gaps in the enemy’s capabilities.

Air defenses and long-range munitions and missiles are the key factors in warfare today. If you can take them out, if you can create a complex system of technologies and capabilities that can neutralize them effectivity, you can avoid the tough reality of four years of attrition happening in Ukraine. And if we go back to those future scenarios the United States is facing in the Pacific, prolonged war of attrition between China and the United States is something that everyone wishes to avoid.

Larry Bernstein:

A few decades ago, there was an American military theorist, his last name was John Boyd who had this idea that you needed to get within the decision-making process of your enemy so that the American aircraft needs to react faster than its opponent’s decision-making process so that even before it could turn around and shoot you, you’ve already destroyed that aircraft.

Eran Ortal:

Exactly. And he called that OODA loop. OODA meant orientation, observation, decision, and action. Back in the old days, the breaking of the OODA loop was a burden of the local commander on the field or the pilot in the cockpit. And what we created since the 1990s, is a system where that burden is laid more upon the higher echelons. In the IDF, it’s the command posts in Tel Aviv that has the broader picture.

The 1990s military transformation was about computer and networks combining sensors and precision munitions. Nowadays, we are living in the fourth industrial age revolution, the age of AIs and robots and drones. Things happen much faster than they have used to happen just 15 years ago and much more capabilities are now on the edge, not with the command post, but with the tactical units in the field and the response of systems is much faster. And if you want to break the OODA loop of the other side, you must be even quicker and more accurate. And that means you cannot rely solely anymore on delivering data from the battlefield to the headpost in Tel Aviv and then having the correct orders coming from Tel Aviv back to the field.

It needs to happen right now with proximity of time and space to the other side. And so much of the burden right now lays on the shoulders of the pilots over Tehran more than they have maybe trained to carry. There is a struggle within militaries between the ways we were built for the last few decades, and then new needs, new technologies and new tactics that needs to be created. So, this is a crucial learning experience that we are having today above Iran.

Larry Bernstein:

Can I try to repeat back what you said in layman’s terms? The first breakthrough in the early 1980s that the Israelis developed was to get the decision-making process faster. At a special headquarters in Tel Aviv, all the information coming from the battlefield could be used and a combination of weapon systems could be employed to destroy the targets before they even had a chance to react. This same philosophy is being played out now in Iran, except that the amount of time necessary to go back and forth to Tel Aviv is no longer an available option, and therefore this decision loop must be done instantaneously on the battlefield without a central command. And therefore, decision making is decentralized to the battlefield using the same OODA strategy to be inside the decision-making loop of its opponent.

Eran Ortal:

That is a perfectly accurate description of the general idea. Now, practically we are not all the way there. And a lot of the burden is still being managed by the headquarters in Tel Aviv and elsewhere, but yes, more of it is now on the shoulders of the pilots in the cockpit, the soldiers on the ground, and they are going to have to carry much more of this burden and have much more of what used to be only higher echelon capabilities, like the capability to identify an enemy soldier, rapid fires capabilities. And this all must be closer to the enemy position because the enemy realizes it’s threatened by precision capabilities and tends to move faster. Let’s just take the starting strike of this war, the taking out of Ali Khamenei and the 40 leaders gathering in his house.

This meeting was recognized by intelligence hours before it happened, and it was only there to go on for maybe one hour or two. Now, getting an armada of jets from the airports and flying all the way to Iran, that takes hours.

Getting into the OODA loop and striking this target in a timely manner is a much harder challenge than even taking out those same sites in 1982 that could change places in a matter of hours, not in a matter of minutes.

Larry Bernstein:

That said, the Iranians learned something. They cannot have another meeting of 40 of their leaders in a single location. That’s over. So, they too have learned that command and control operations need to be a Zoom call like we’re doing right now.

Eran Ortal:

That is beautiful, Larry, because you’re hitting the point because I was surprised that this meeting actually even happened at all.

“Is the other side stupid?” And I strongly urge you not to think that way. You cannot have a complex network of capabilities coordinated efficiently without having command and controls. You can decentralize command and control, but then you give up battle efficiency. What we see right now is missiles dropping on Israel one at a time, three or four times a day. That is a huge difference from the 100 missiles and 200 missiles coordinated at once, that failure in April ‘24 and October. To survive decentralized, one gives up communications, coordination and therefore stops being efficient.

This is the way you break down what we have called earlier, this A2AD complexes. Once the enemy must survive, run for his life, give up radio signature, give up cyber signature, give up phone calls, coordination is gone. And this is the point exactly where missiles and air defenses stop to be as efficient. And we hope internal security ceases to be efficient. This is true for any military force, but this is especially true for a military force that serves a dictatorship because dictatorships do not encourage initiatives. They do not teach their junior commanders to initiate, to think for themselves, to take responsibility. They fear initiatives. They fear people taking more responsibilities upon themselves. So, this development of the battlefield truly benefits more the Western democracies than it is for the other side.

Larry Bernstein:

One of the big surprises in the war was the decision to attack a UK base located on Cyprus. I was totally baffled by this decision to attack NATO forces. Ridiculous because NATO seemed to be a constraint on American and Israeli efforts, and to attack NATO and bring them into the war would have been a catastrophe. What I’ve heard is that this was not an Iranian attack, but instead was a drone fired by one of their proxies in Lebanon. A Hezbollah warrior took the initiative and decided to attack UK forces.

This goes against the strategic interests of the Iranian regime and that’s why they would be very wary of decision making that’s decentralized.

Eran Ortal:

You can see the incoherence of the other side’s strategy, not just with the Hezbollah striking Cyprus and bringing NATO into the fight but listen to the Iranian president apologizing for the strikes on the Gulf States. And as he finishes his broadcast apologizing, the IRGCs are firing a drone into Doha’s international airport. All authoritarian regimes have factions, and they find it exceedingly difficult to run a strategy without Khamenei. I do not put that on the hardship of communications. That is just the way this loose coalition of bad guys is being run.

Larry Bernstein:

I want to give an historical example when in 1982, Argentina and the UK were at war over the Falklands. It was a mismatch with a leading NATO country fighting a backward authoritarian Latin American dictatorship.

The UK sent their fleet to the South Atlantic and an Argentine battleship successfully fired an Exocet missile that blew up the HMS Sheffield. It was a shock that a single missile shot from miles away could destroy a major naval vessel that resulted in substantial loss of life.

Earlier you were discussing coastal defenses for Iran, will their missiles deter the American naval presence and undermine our ability to protect oil tankers going through the Strait of Hormuz?

Eran Ortal:

Margaret Thatcher was prime minister. Taking out a ship is more than just an operational blow. It is a blow for political will. Understanding what missiles are about, what anti-axis area-denial (A2AD) tactics is about. It’s about the political will. People ask, “How did we get to the point where Hamas has 40,000 strong military based right outside our Kibbutz on October 6th, 2023?” We knew about them, we followed their exercises, the military drills, the digging of the tunnels. We knew about their plans to strike our side, and yet Israel was reluctant for at least a decade and a half to do anything significant about it.

The rocket umbrella that Hamas developed has a lot to do with the huge failure of October 7th, because the rocket umbrella is the deterrence umbrella that allows the other side to equip himself and weaken Israeli political will to take that capability out.

Larry Bernstein:

I want to step back and think about the stakes that are involved. In the war in 1973, the question that Israel was asking itself, if we lose the war, have we lost the nation state? Will Israel cease to exist?

In this case, Iran will survive the war. That is not in question. No one is thinking about taking out Iran as a nation state and then have it be subjugated by its neighbors. The only question is, will this regime stay? President Trump has said that his goal is to allow the Iranian people to have an election and establish a democratic nation state, not a revolutionary guard nation state for Iran.

And as a result, the decision making for the armed forces is different. What does losing mean? Every day that the war continues, the American and Israeli forces are going to destroy Iran’s military capabilities. And if it surrenders sooner, those will not be destroyed.

How do you think about the question of this is not an existential threat for the nation state, it’s only an existential threat for the regime?

Eran Ortal:

Ben-Gurion has called it the basic asymmetry, no matter how successful Israel is in battle, we will never change the neighborhood. We will not change the ideology. We will not even change the capabilities. We can repel immediate threats. They will come back a few years from now. All the other side has to do is win once and we’re gone.

As you’ve said, there’s going to be Iran on the map no matter what. And although the optics is about Israeli military air and technological superiority and still the Iranian network is here to stay even if this regime is done. The Houthis are going to be there, the Shiites in Lebanon are going to be there even if we defeat Hezbollah this time, and there’s going to be some new Islamic forces coming up to replace it. All that Israeli strategy can do is make sure we have another period of time to rebuild, bring more Jews to Israel, build our nation, make some more technologies, thrive, and be ready for a next round.

Military success does not change that. We speak about regime change, I do not like this term because military force does not change anything. All we can do is take out Iranian capabilities and threats and hope for a better future to come. We do not politically engineer the Iranian society. We hope that someday a consensus will be reached that Israel is a legitimate entity in this region.

The good news is that more players in this region do accept this idea. And it has a lot to do with the alliance with America and Israeli technological and economical success, but it also has to do with the fact that Israel is a military power not to be thrown off the map.

Larry Bernstein:

There are certain rank order of targets available in Iran. And if they knock out the first hundred targets, then they start working on the next hundred targets. And Trump has said that he wants unconditional surrender. The question is, at least from my perspective, is if you’re losing badly, when do you call it quits? Enough already. I’ve already lost the top 200 targets. What’s the point of having my next 300 targets destroyed? We’re an ongoing nation state. We don’t want to lose these extra 300 targets. Or alternatively, are the people who oversee this decision, think of their own and the regime’s livelihood as their top priority, and they don’t value the next 300 targets in their decision making.

How do you think that the Iranian opponents will evaluate when to give up?

Eran Ortal:

No one knows whether there will be an Iranian leader that decides, “Well, this is enough. I want to save my life, my family’s life. I want to save my economy.” Or whether the decision makers in the other side are resilient to any amount of pain inflicted on the nation to keep this regime. And no one knows whether there is a military leader in Iran that will flip sides and in what circumstances that might happen. And no one really knows whether it’s the 1,000th target or the 10,000 target point where people rise up.

One must evaluate with good intelligence and some gut hunches. We stripped Iran’s capabilities to rebuild itself in a few years. They will always be able to rebuild someday, but we’ve postponed it. This might be the final campaign against this regime, or it can be just one very dramatic, very important step in this ladder.

All that military force can do is destroy things and create conditions. Whether those conditions are met with the more positive forces on the ground is not for us to decide. Some forces are bigger than military force.

Larry Bernstein:

You spoke today about the organization at the battlefield with the military command back in Tel Aviv, the lack of command and control and organization available in Iran. What else can you tell us about organizational development being the key aspect to success for the American and Israeli forces and its relative weakness for the Iranians?

Eran Ortal:

We are very satisfied with the aerial campaigns in June and right now over Iranian skies. But as we speak, rockets are fired from Lebanon into Tel Aviv. Our conversation can be interrupted any second by sirens and new missiles coming in from either Lebanon or Iran. And the question is, with military superiority, how come Hezbollah is still out there? We had an offensive operation a year and a half ago in Lebanon. How come the IDF right now is still on the defense in the Lebanese front? It has to do with your questions because the last period of military change was focused mainly on aerial capabilities.

We have ground forces on defense in Lebanon, being fired on by long range anti-tank missiles, but still against Hezbollah the big offensive, needs to wait till the end of the Iranian campaign. The dependency of ground forces in what Western militaries has called in the last three decades joint efforts is so deeply rooted that we are now paralyzed in our northern front against an enemy who is way weaker than it used to be just a year and a half ago.

If you go back to Ukraine, you can see that the drone warfare has paralyzed ground maneuver and they are stuck. And so, whoever comes out first with the capability to much more efficiently identify and target, not the drones, but the drone operators will have the upper hand. In the ground battle, we still haven’t figured out how to achieve what the Air Force has achieved in Tehran.

The parallel for the Iranian air defenses is the Hezbollah’s anti-tank missiles warfare or in Ukraine, the FPV or tactical drone warfare. And if we can’t pull ourselves together and combine the new technologies to regain maneuverability and push tactical power in ground operations, just air superiority will not be enough.

Larry Bernstein:

I end each podcast on a note of optimism. What are you optimistic about as it relates to this war?

Eran Ortal:

Whether we throw out this regime or not, we have moved forward by taking out its capabilities. In a broader point of view for the Americans, this war has tried out and made a learning experience to strengthen standing up to Mr. Putin in Europe or the Chinese Communist Party in the Pacific.

Larry Bernstein:

Thanks to Eran for joining us.

If you missed the previous podcast, the topic was Evaluating Success on the Iranian Battlefield.

Our speaker was Amir Avivi who is a retired Israeli Brigadier General and the Chairman of the Israel Defense and Security Forum – ISDF. Amir is the author of a recent book entitled No Retreat: How to Secure Israel for Generations to Come.

Amir detailed Israel’s decision making to achieve surprise with its decapitation of the Iranian leadership. We discussed the implications of a compromised Iranian command and control structure and why Iran is attacking its neutral neighbors.

You can find our previous episodes and transcripts on our website
whathappensnextin6minutes.com. Please follow us on Apple Podcasts or Spotify. Thank you for joining us today, goodbye.

Check out our previous episode, Evaluating Success on the Iranian Battlefield, here.

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Amir Avivi

Subject: Evaluating Success on the Iranian Battlefield
Bio: Retired Israeli Brigadier General and Chairman of the Israel Defense and Security Forum and author of No Retreat: How to Secure Israel for Generations to Come

Transcript:

Larry Bernstein:

Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast which covers economics, politics, and history. Today’s topic is Evaluating Success on the Iranian Battlefield.

Our speaker is Amir Avivi who is a retired Israeli Brigadier General and the Chairman of the Israel Defense and Security Forum – ISDF. Amir is the author of a recent book entitled No Retreat: How to Secure Israel for Generations to Come.

I want to learn how Israel was able to achieve surprise with its initial attack of the Iranian leadership. I plan to discuss the implications of a compromised Iranian command and control structure and why Iran is attacking its neutral neighbors.

Did the United States and Israel make the correct decision to go to war with Iran?

Amir Avivi:

Iran has been the biggest global perpetrator of terror and this regime wants the complete destruction of the US and Israel. They are not just talking. They were moving fast towards the production of nuclear bombs.

They build proxies: Hezbollah, Hamas, Houthis, militias in Iraq, terrorizing the whole Middle East and surrounding Israel with a ring of fire. They are responsible of killing multiple Americans. This regime needs to be destroyed like the Nazis.

It is a wise decision to bring a change of regime to create stability and prosperity for both Americans and Israelis.

Larry Bernstein:

How did the Israeli public react to the war?

Amir Avivi:

Israelis are happy. For many years, we were terrorized by Iran. In the 12-day war, we had the chance to see the might of Israel and dominate Iranian skies within two days. Something that Russia has not been able to do throughout the Russian-Ukrainian war, and they are a hundred miles, not a thousand miles.

Once Israel showed that it can be done, the Iranians crumbled from the inside and outside. Even the Europeans reinstated harsh sanctions on them. This reality brought the demonstrations in Iran, unfortunately, also the killing of demonstrations, tens of thousands, and the promise of President Trump that help is on its way.

It is important to understand the US is not fighting for Israel. The US is fighting for the US, for the security of every single American. We see results in four days. This regime is on its knees and it’s not something easy to do. Iran is a huge and an advanced country. And yet, we manage again to dominate Iranian skies within 48 hours. Now we are dismantling the capabilities of this regime.

Larry Bernstein:

Tell us about the initial surprise attack that decapitated the Iranian leadership?

Amir Avivi:

The most surprising thing in this attack was that we surprised them. We surprised them in the 12-day war. We decapitated many of their leaders in the army and government and to surprise them once again and kill their leader and 40 of their leading military and political figures is amazing. It required accurate intelligence and unique military capabilities. Israel must attack from afar and precisely and simultaneously like we did in the 12-day war.

I want to talk about this state of mind of this regime. When you look at the way they behave, it seems like it does not make sense. They made plans to destroy Israel, but then Israel attacked them. Israel showed complete superiority over them and then the US joined the fight. The US attacked them with strategic bombers destroying their nuclear sites. So, you would have expected that the regime would say, “Okay, these guys are much stronger than we are. Let’s stay quiet and wait until President Trump finishes his three remaining years in office, and maybe also wait for Netanyahu to move on.” But no, a minute after the 12-day war, the Iranians started rebuilding their nuclear sites and manufacturing more ballistic missiles. And even when the US started amassing a huge naval force in the Middle East and Israel was sending clear messages that they were going to attack again, they ignored reality.

We are currently celebrating Purim and we read the story of Mordecai and Esther and how the Jews were saved in Persia, a similar story.

You are talking about Iran, huge, beautiful country, amazing history, people, food, oil, and everything. And they are obsessed with one thing, destroying Israel and the US, the little Satan and big Satan.

Iran has limited water supplies and inadequate electricity. Their currency is broken, and their economy is in terrible shape. But they do not care. In the past year, Iran funded Hezbollah with $700 million. Where did they get the money from? They are not functioning as a country. Just as it was 2,500 years ago, the same story, same mentality, and it is going to end the same. Haman and his sons were hanged, and this regime will also end. There will be an unconditional surrender in this war. It is not going to stop until they surrender.

Larry Bernstein:

Going back to your metaphor of the biblical story related to the Jewish holiday of Purim. Esther persuaded the Persian King to eliminate Haman who was his evil chief of staff. Why was the Iranian Supreme Leader incapable of appreciating the importance of the public unrest as witnessed with the demonstrations, that the United States sent a fleet of warships, and yet the regime decided to reject the overtures of the Trump negotiators. Why didn’t the leadership make better decisions?

Amir Avivi:

No, I think the analogy here is wrong. The supreme leader is parallel to a Haman, to the evil guy in the bible that wanted to destroy the Jewish people. Khamenei years ago, when he was interviewed was asked, “What are your plans? Khamenei said only one thing, “to destroy Israel.” That is it. King Cyrus in the biblical story is like President Trump. President Trump’s leadership and the amazing people he surrounded himself with acted brilliantly. The Secretary of War did a wonderful job expressing the spirit and the resolution of the fight.

So yes, the story repeats itself. It will end the same way with the Jews and the Americans happy and the regime gone, and the Iranian people freed. Cyrus let the Jews return to Israel to rebuild their second temple. We remember Cyrus and what the Iranian people did for the Jews. Now we are paying back our debt by releasing them from this evil regime. The Iranian people are very appreciative of what Israel is doing for them.

Larry Bernstein:

A few weeks ago, you spoke on this podcast for an episode entitled Defending Israel. You previously contrasted Israeli versus American decision making. You said that the Israeli leadership can discuss plans in the evening and make war in the morning. The Americans make decisions but going to battle has longer lead times. You mentioned after Pearl Harbor on December 7th, 1941, American forces did not go into battle until the invasion of Morocco in Operation Torch in November 1942, almost 11 months later.

Amir Avivi:

We planned for months. The US attack was supposed to be carried out Saturday evening. And then there was an opportunity in the morning based on intelligence to destroy the Iranian leadership, and Israel requested to do this attack earlier.

In the first four days, Israel conducted 5,000 attacks and within a day and a half, we controlled the areas inside Iran on the Western side, and we are attacking with our airplanes above the Tehran sky.

The US in the four days did 2000 attacks, but the US just started and now more and more. It is like a huge rock starting to move at the beginning slowly down the hill and gaining momentum.

Israel is running fast, attacking, attacking, attacking. The US has the power. They are bringing overwhelming force with strategic bombers: the B2, B1, and B52. They sank the whole Iranian Navy, all of it. 17 ships are in the bottom of the sea and a submarine. The US is amassing a huge force. It will take one more week, maybe more, to see the US in its full might.

Israel is already attacking at its maximum pace. the US has just started. We have a completely different culture and ways of doing things, but we managed sitting in the same war rooms, conducting together the operation making sure that we bring the advantage of each side. We are working together, and the combination is unbelievable.

Larry Bernstein:

I am perplexed by Iran’s decision to attack neutral countries since the beginning of the war, specifically their attack on the British military base in Cyprus and missile strikes at a dozen Arab states. Do you think this reflects a breakdown in the command structure?

Amir Avivi:

There’s hate between the Shias that the Sunnis, and the Iranians are happy to shoot at all the Sunni states. They want to drag as many countries as possible to create international pressure to stop the war. The contrary is happening. These countries are joining the fight. Even Britain and France now are more proactive and joining at least on the defense.

It is a big miscalculation by Iran not understanding the issues. This is moving towards a decisive win; everybody wants to be on the winner’s side.

They are trying to get oil prices to go up. They know that the American society is worried about the price of oil. They are trying to pressure President Trump’s through the oil prices. They try to close the Strait of Hormuz. Then they started shooting the oil fields and the refineries in different countries.

They are managing to bring up oil prices, but I think it is something that will change in the coming weeks as we destroy their capabilities to shoot at these countries, and we make sure that the Straits are open.

They are losing command and control and different units are taking initiative. It will take a few more days to dismantle more of their command and control, but eventually they are going to lose control and capabilities.

Larry Bernstein:

Before the Iraq war, the United States made diplomatic efforts to make sure that the Europeans and its other allies were on board. Maybe because of the surprise attack there was a disconnect between the Europeans and the Americans about this Iran war. Why have the Americans and the Israelis been less proactive with their European allies this time?

Amir Avivi:

President Trump lost faith in Europe, does not trust them. This explains why he did not share any plans with them. The response of Europe to the attack was weak, even disgraceful. And President Trump and his staff see Israel as a model ally. They want countries who are strong, independent, can defend themselves, bring value to the US and be willing to fight together. Not countries that are dependent and just use US resources. Europe is in a serious problem with a big Muslim minority with a culture that is distancing itself from patriotism, from willingness to fight and defending themselves. This is problematic.

Larry Bernstein:

Do you think that the Iranian attack on its Arab neighbors will ironically expand the Abraham Accords?

Amir Avivi:

Definitely. At the end of this war, there will be a big alliance. Many countries will join the US and Israel and there will be a big expansion of the Abraham Accords and this will bring stability and prosperity to the region. I saw a poll that half of the Americans are not supportive of this war. I believe that in a few months when we see the results of the war with peace agreements, people will view it completely differently and will understand how big of an achievement this is.

Larry Bernstein:

With each war, there is radical changes in technology. What have we seen so far that would have surprised military leaders in the advancement of military technology on the battlefield?

Amir Avivi:

AI is huge issue with intelligence real time to shoot instantly. For situational awareness, for targeting, all these processes require AI to take in many sources and combine them very fast and get relevant analysis of what you are seeing and what you need to do.

Air defense that has become crucial, and in Europe they are purchasing huge amounts of air defense from Israel. Tanks were important in the war on the ground with Hamas and Hezbollah. And as we speak, our tanks are operating in Lebanon and soon will operate in Gaza. It is always a combination of capabilities.

Larry Bernstein:

After 10/7, the Israelis supported efforts by the opposition to Hamas to take over the leadership of Gaza, but that did not happen. Why do you think it will be different this time in Iran?

Amir Avivi:

Hamas is still controlling half of Gaza, but not for long. After Israel win the war with Iran, we will go back to Gaza and finish the job and dismantle this organization and change the governance in Gaza. As for Iran, Israel and the US are attacking fiercely the Revolutionary Guard, the police, dismantling all these organizations that terrorize the Iranian people. And once you degrade them dramatically this will give the Iranian people the ability to go to the street without being butchered. The Iranian people will have to take their future in their hands, go to the streets and move towards a change of regime.

Larry Bernstein:

How does that all happen?

Amir Avivi:

President Trump and Netanyahu will tell them, “This is your moment. We are here with our airplanes, protecting you,” maybe weaponize them. The people will understand and claim their freedom from this regime.

Larry Bernstein:

This entire unwinding of Iran and its proxies began with Hamas’s surprise attack on 10/7.

Amir Avivi:

Definitely. The 7th of October was terrible, on a biblical level, but it gave us the opportunity to change our fate and future. The first day Prime Minister Nathaniel spoke that we are going to change the Middle East, Israel together with the US.

We will remember this as the moment where this Lion of Judah woke up and started fighting back. Yes, it is a long and complicated war, but we are moving steadily towards the biggest win the Jewish people have had ever in their history. We are lucky to have a president like Trump that understands the dangers and shows leadership and fights for freedom for the US and for Israel. Iran is a huge danger to the globe and to the US. And the fact that we have the privilege to fight together to win decisively, this is great for both countries. It is an historical moment.

Larry Bernstein:

Thanks to Amir for joining us. If you missed the previous podcast, the topic was Bolton on the War in Iran.

John Bolton was the National Security Advisor in Trump’s first term. John justified the war in Iran from a policy perspective and discussed its legality under international law and under the US constitution. He also explained how if he were in charge what his next steps would be diplomatically and about working with the Democrats in Congress. We also discussed what will likely happen after the fighting stops.

You can find our previous episodes and transcripts on our website
whathappensnextin6minutes.com. Please follow us on Apple Podcasts or Spotify. Thank you for joining us today, goodbye.

Check out our previous episode, Bolton on the War in Iran, here.

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John Bolton

Subject: Bolton on the War in Iran
Bio: Trump’s former National Security Advisor

Transcript:

Larry Bernstein:

Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast which covers economics, politics, and history. Today’s topic is Bolton on the War in Iran.

John Bolton was the National Security Advisor in Trump’s first term. I want to know from John if attacking Iran is a good idea? Whether it is legal under international law and is constitutional? How he would handle the diplomacy with our allies if he were back in charge, and how this will end up?

John, did the decision to attack Iran makes sense?

John Bolton:

The case for overthrowing the regime is very strong. I thought this for decades now. The regime of the Ayatollahs is determined to have deliverable nuclear weapons and to support terrorism around the world.

Consecutive American administrations have tried to change their behavior. They have failed. The threat continues both on the nuclear and the terrorism side. If you cannot change a regime’s behavior, the alternative is to change the regime. This is the objective that is absolutely required for peace and security in the Middle East.

Larry Bernstein:

Is it appropriate to do a surprise attack like the US and Israel did to decapitate the regime?

John Bolton:

Yes, because the structure of the Iranian regime, much like governments and other countries, puts these leadership positions in the chain of command, starting with the Supreme Leader. The Iranian regime does everything they can to hide their activities from us. To deal with that concealment and camouflage, this attack is both necessary and appropriate.

Larry Bernstein:

I was stunned at the simultaneous nature of the attack and its success, which showed both a technical military as well as a fabulous intelligence effort. What did you make of that initial salvo?

John Bolton:

I agree with your assessment. For the first four days about as well as anybody could expect. It does show the best military planning, both by the US and in coordination with Israel.

On the intelligence side, there is no guarantee that’s going to continue, but the planning on the operational side stands in stark contrast to what I’m worried about which is a lack of planning on the political and diplomatic side, which is correctable, but we should have been underway months before the actual attack began.

Larry Bernstein:

Let’s start with diplomacy. This was an operation done by the United States and Israel and some of the Gulf States who were supportive, but it did not include Europe our normal allies. With the war in Iraq, we spent a year managing the diplomatic aspects to make sure that other nations were supportive. What are you making of the decision not to engage with these other nations prior to the attack?

John Bolton:

This is one of the mistakes that endangers the ultimate outcome. I’m very much supportive of achieving the objectives, this is a criticism that’s intended to be helpful. We could have argued very effectively to the Europeans. They are more threatened right now by Iran’s missile capabilities than we are. The Iranians have intermediate range ballistic missiles that can hit significant parts of the European Union. They can’t hit us yet. They can obviously hit Israel and the Gulf Arabs.

The Europeans have been the target of Iranian terrorism over the years as we have in this country. So they have a stake in this too. As I speak to people, I am getting the impression that they would like to go along if they could find an excuse to do it.

But we did not engage in diplomacy, as far as I can tell. And right now, interestingly, three additional governments have come out in support of the strikes: Canada, Australia, and New Zealand. It can still be corrected. We can go to Japan, South Korea, and others that we have not contacted and urge that we’re in this together. We can find a way to bring political support.

Larry Bernstein:

Does it suggest that our NATO allies have not been that helpful in the last Middle Eastern war?

John Bolton:

The Europeans have had a different view of Iran for a long time, and it’s a mistaken view. They have been the ones pressing for agreements on the nuclear weapons issue. Their pattern on Iran has not been helpful. That said, we should still have gone after them because we want to minimize the political disagreement, and we will need them in the aftermath if we get a successful outcome and a new regime is established. So, it’s an exercise that doesn’t guarantee our success, but failing to do it enhances the chances that if things go wrong, the allies are going to turn their back on us and say, “We told you so.”

Larry Bernstein:

Political theory suggests that nation states what will do what’s in their political interests. If this is in their political interests, they’ll support us even without diplomatic dialogue.

John Bolton:

Well, sometimes you must persuade people what’s in their interest. And in Europe, and you can see it in the government of Prime Minister Starmer of the United Kingdom, they’re just obsessed with this idea that somehow it violates international law. Emmanuel Macron, the President of France was the first out of the gate with that argument. I happen to believe that’s incorrect, but we should have been engaging with them on that to at least minimize that argument. The diplomats who would be involved in all this persuasion are not preparing for combat. They would not have been diverted from other tasks. This would have been a particularly good use of their time.

Larry Bernstein:

The same argument about international law is also used in our domestic politics. What do you make of Senator Kaine and Schumer’s arguments that this would violate international law and was unconstitutional?

John Bolton:

Well, they are wrong on both counts. But let me say the failure to encourage and educate Congress on the reason for this attack, not with sharing operational secrets, but building the political environment is something that I think the administration failed to do.

This is an action that most Republicans agree with; they’re going to get broad support. Their big problem is, as usual, the Democrats and the isolationist wing of MAGA, but they didn’t do anything in the front end to alleviate support. The idea that the administration is compelled to ask Congress for a declaration of war as a matter of constitutional law is flatly wrong.

In our history, we’ve probably fought 200 wars or more depending on how you define the term war. We have declared war exactly five times. The War of 1812, the Mexican American War, the Spanish American War, World War I and World War II. You might well ask, “Well, where’s Congress been since World War II? Since 1941, the last time they got up enough energy to declare war.” So that’s the constitutional argument.

If you are going to take an action like this, you should consider building your political strength, as George H.W. Bush did in his campaign against Saddam Hussein’s invasion of Kuwait, go to Congress and get an authorization to use force. You may conclude you can’t get a resolution like that, but I don’t think there’s any evidence that the White House even thought about doing it here. And I might say on George W. Bush’s behalf, he believed even if he had failed to get a resolution authorizing force from Congress, even if we had failed to get a UN Security Council resolution, which I spent a lot of time working on, he was prepared to attack Iraq anyway and risk impeachment.

Larry Bernstein:

If the Democrats are successful in getting the House at the midterm election, they will probably impeach Trump for if not this, something else. Given the antagonism and partisanship that’s going on right now, why do you think that was a good use of Trump’s time to try to persuade the Democrats. As an example, Senator John Fetterman, I met personally with him, since the invasion, and he was matter of fact to say that this makes total sense. The Trump administration had not met with him in advance, but he concluded that on his own. It seems that either you believe in the mission, or you don’t.

John Bolton:

I’m a lawyer. I believe in advocacy. I believe you can change people’s mind. Trump will have almost unanimous Republican support. There’ll be one or two libertarians in Congress who flake off. Jim Baker always used the old phrase, “in on the takeoff, in on the landing.” And that as a political matter if you conclude it’s not worth the effort that you’ll have leaks, then you don’t do it. Trump can still do it now and we will have to see what transpires.

I do think efforts to pass War Powers Act resolutions are going to fail in Congress and that will be giving breathing space.

Larry Bernstein:

In any war, the other side gets a vote and how they decide to define the war effort. The Iranians have chosen some strange decisions. They lobbed a missile at Cyprus, which is a member of the European Union and that was a British base they hit. When you mentioned before that Starmer decided he may take the position that he doesn’t want to participate, it’s going to be more challenging after they hit their forces and kill their men.

They hit a dozen different Middle Eastern countries. Why do you think Iran decided to fire off so many missiles and so many different people?

John Bolton:

I can’t understand it. The attack on Cyprus what is called a sovereign base area. When the British gave Cypress independence, they kept two bases that are sovereign British territory. So, the United Kingdom has been directly attacked here. There are reports of NATO defenses in Turkey shooting down a drone or a missile approaching Turkish airspace. That’s another thing that’s hard to understand.

The attacks on the Arab countries, completely contrary to any logic I can understand because now the Gulf Arabs are going to have to come in with us. They want this regime to fall, make no mistake about it. They just wanted it done without any pain and strain, which I can understand, although that was never going to happen. But now they have to show their own citizens that they’re not going to put up with deliberate attacks on civilian targets.

We’re past the point where somebody can say these were mistakes. The volume of attacks and the clear aim points show what Iran was doing. It just hastens the demise of the regime. It doesn’t make either political or military sense what they’ve done. I don’t have an explanation.

Larry Bernstein:

If you were advising the military about what it should be targeting, is there anything that they’re not thinking about beyond the obvious?

John Bolton:

There is a division of labor, where the Israelis are taking out leadership targets and we’re going after military targets. For the Israelis, regime change is the number one paramount objective.

Our strategy looks to be proceeding is to destroy the instruments of Iranian state power that threatens us and the near neighbors of Iran in the region, and the instruments that suppress and brutalize the civilian population in Iran.

As you degrade their capabilities, you demonstrate that the Iranian state itself is disintegrating. And you want the conclusion to spread that its days are numbered. It cannot defend itself. It’s only a matter of time until it falls.

The air campaign alone will not bring it down, but it’s intended to enable the fracturing of the regime at the top and to work with the opposition to bring over elements of the army. And this highlights to me where I’m worried that they have not adequately cooperated with the opposition.

We need to know what they’re doing, what they’re capable of, what contacts are they making inside the regime to try and bring people across to their side? What can they tell us about how we might help in that regard? How do we coordinate this? And then at some point begin to think about the day after.

Now, we have press reports that the president spoke to the two main Kurdish leaders in Iraq representing two major families, and they basically run the Iraqi Kurdish region for the last 30 plus years. We know from press reports back in January during the demonstrations, the administration supplied roughly 6,000 Starlink terminals to help the opposition communication.

I just hope that they’re doing a lot more to get together with the opposition and figure out how we can mutually support each other.

Larry Bernstein:

The axis of evil incorporates Russia, North Korea, Iran. I’m not sure China fits in those criteria, but do we expect that those beautiful friendships will result in any mutual support of Iran or not?

John Bolton:

North Korea is not a factor here. We know that China is a major purchaser of Iranian oil in violation of our sanctions reflecting China’s status as an energy poor country that desperately needs supplies of oil. They have provided anti-ship missiles, including a contract recently signed as reported in the press. I don’t know whether that material has been delivered, but we think as well aid with the Iranian ballistic missile program and a range of other capabilities, perhaps including cyber warfare, which both countries are engaged in. As of four days after the beginning of the attacks, I don’t know of any evidence of new Chinese support.

It may be that they’re still trying to figure out what they’re going to do, but as of now, it’s more support assistance that they’ve given before the attack than they’ve given after. So, what they do next remains an unknown. Russia, I don’t think, has the capability to do much. They didn’t have the capability to do much in Venezuela, and I don’t think they have the capability to do much in the case of Cuba, which could be another adversary regime of ours falling in the near future. There have been diplomatic contacts between the foreign ministers of Russia and Iran.

Russia’s spread too thin in Ukraine as when the Assad regime fell in Syria a couple years ago, the Russians didn’t have the bandwidth to come to their aid. Iran is in deep trouble. We know their foreign ministers been going from country to country around the world in a tin cup exercise, asking for help, not getting much of a response.

Larry Bernstein:

One of its neighbors is India. They’ve historically had a decent relationship with Iran. What role do you think they will play in this war?

John Bolton:

India lives in a complex neighborhood and their main adversary is China. They have close relationships with Russia, although they shouldn’t. And they have developed relationships with Iran in part because they see the threat from Pakistan that India deals with all the time is something that Iran can help them with.

My guess is that India will stay as far away from this as they can politically. India is a country that’s of enormous strategic importance to the United States for the rest of this century because of China. We should be on the phone right now with them.

Larry Bernstein:

How is this going to play out?

John Bolton:

The main objectives are to kill as many top leaders as possible in Iran and to destroy all of Iran’s ballistic missiles and drones. It explains why Trump said a few days ago that the big hits are still to come. There are things we want to do, but first we want to eliminate the retaliatory strike capabilities that Iran has.

Larry Bernstein:

Will the regime fall?

John Bolton:

Some would say the regime is falling every time the Israelis drop another bomb. Hegseth and Trump said something similar. And this is another worry I have. I do not think that Iran is not Venezuela, and I don’t think even in Venezuela removing Maduro but not the rest of the regime is a lasting solution. Trump made comments that some of the people we could have accepted as successors to the Supreme Leader were killed in the initial attacks.

I don’t know who the successor will be. It looks this morning like it may be his son, but with the Ayatollah removed, you could pick anonymous Ayatollah, wouldn’t make the slightest bit of difference just as fanatic and dangerous. If we killed people that the White House thought they could deal with when the military activity stopped, then we were playing the wrong hand.

This regime’s been in power for 47 years and they are not going to go easily, but the optimal outcome would be a military government, not by the Revolutionary Guard, that could restore order and then hopefully hold the ring while the Iranian people through whatever consultative process they chose came up with the new regime. I don’t see how we can accept a paler version of the Islamic Revolution, unless we’re prepared to deal again with the nuclear program and the threat of international terrorism. Regime change is the answer.

Larry Bernstein:

The Shah of Iran’s son has thrown his hat in the ring. When we say we want to begin negotiations with someone, who is that guy?

John Bolton:

It’s going to be the leadership inside the opposition in Iran. It is fragmented, which shows that you can’t wipe out a handful of people and see the opposition collapse.

I don’t think that anybody’s going to rise up. We’ve learned this in the case of Iraq, that a bunch of people who have been sitting in Los Angeles are going to waltz into Tehran and take over the government that is not going to happen. And we shouldn’t try and pick leaders now. I am not all that troubled by the fact there’s no day after plan. When we declared our independence and people signed the Constitution, they didn’t have a day after plan. They weren’t sure what was going to happen. And somehow, we muddled through. I think the Iranians can too. I’m not underestimating the difficulties, but I do think in the case of Iran, it’s very hard to see that any other government would be worse than what we have now.

Larry Bernstein:

What will this war do with our relations with the other countries in the Middle East?

John Bolton:

The Arab countries want this regime change to happen. They, 15 years ago, came to the conclusion that the biggest threat to them was the Islamic Republic, both through its terrorist program and pursuit of nuclear weapons. That strategic assessment by the Gulf Arabs was almost identical to Israel’s strategic assessment of the threats to Israel. That’s what permitted the Abraham Accords. That was the tectonic shift in perception in the region that has led to the possibility of widespread diplomatic relations between Israel and all the Arab countries. There are issues like the Palestinians to resolve, but if you remove the Iranian threat, indeed, if you put in a normal government, then there’s real possibility for progress toward a stable Middle East that would benefit everybody. So, they want this. They didn’t want trouble incurred, but I think that was never realistic. And I don’t think the damage they’ve suffered to date is inordinate. Let’s hope it stays that way.

Larry Bernstein:

Of their Iranian proxies, only Hezbollah decided to join in. What risk did they take for their continued presence in Lebanon?

John Bolton:

The Lebanese government has been clearer than it has been in a long time that Hezbollah’s activities are unacceptable. And the way to root out Hezbollah is there has to be some relationship between Israel and the government of Lebanon. It’s very hard for the Lebanese to accept, but it’d be better to do that than continue to put up with Hezbollah.

Larry Bernstein:

The last Iran war with Israel lasted 12 days. How long did this thing last?

John Bolton:

I do not think you ought to put a limit on it. I think Trump made a mistake in the 12-day war by stopping it after we had had an incredibly successful day of dropping bunker busters. That was great. The Israelis had a target list if your arm they were still wanted to go after. Trump is saying four to five weeks, maybe more. I hope he is passed the one and done temptation. I hope he does not declare total victory tomorrow and the thing ends prematurely. Setting an artificial deadline does not make any sense. There is a great anecdote from the war in Afghanistan that applies here for the Taliban said of the Americans, “You have the watches, we have the time.” Well, I think we ought to be saying, “We have the time. We’re going to get it done right.”

Larry Bernstein:

What are you optimistic about?

John Bolton:

If there were ever a moment to try for regime change in Iran, this is it. There is never any guarantee, as Bismarck used to say, when you launch a war is rolling the iron dice, but this is the moment.

Larry Bernstein:

John, you’ve been advocating for this war. How does this make you feel personally, the fact that Trump has decided to pursue your vision?

John Bolton:

I wish I had been more persuasive in the first term, and more persuasive 20 years ago, because the world would have been spared a lot of misery that has been caused since then.

This is a tribute to Bibi Netanyahu who has been thinking about this even longer than I have.

And I know that this has been his mission for a long time. To me, it just underlines why we have got to do everything we can to be successful here and why people of whatever partisan stripe in the United States should be wishing our military and Israels every success to accomplish their mission.

Larry Bernstein:

Thanks to John for joining us. If you missed the previous podcast, the topic was Requiring English. Our speaker was Nick Griffin who is the author of The Year of Dangerous Days: Riots, Refugees, and Cocaine in Miami 1980.

This podcast was about Nick’s new play English Only.

In 1980 125,000 Cubans arrived in Miami in just two months and many of them did not speak English frustrating many native Miamians.

Nick discussed the importance of English being the lingua franca in the US and the debate on whether the Miami government should encourage its use by immigrants.

You can find our previous episodes and transcripts on our website
whathappensnextin6minutes.com. Please follow us on Apple Podcasts or Spotify. Thank you for joining us today, goodbye.

Check out our previous episode, Requiring English, here.

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Nick Griffin

Subject: Requiring English
Bio: Author of The Year of Dangerous Days: Riots, Refugees, and Cocaine in 1980 and Writer of English Only

Transcript:

Larry Bernstein:

Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast which covers economics, politics, and history. Today’s topic is Requiring English.

Our speaker is Nick Griffin who is the author of The Year of Dangerous Days: Riots, Refugees, and Cocaine in 1980, and he spoke about that book on a previous podcast. Today, Nick is going to speak about his new play English Only which had its opening run at the Colony Theater in Miami Beach.

In 1980 125,000 Cubans arrived in Miami in two months and many of these new Spanish speakers were not fluent in English and that frustrated many native Miamians.

I want to discuss with Nick the importance of English being the lingua franca in the US and whether the government should encourage its use by recent immigrants.

Nick, can you please begin with six minutes of opening remarks.

Nick Griffin:

A few years ago, I wrote a book called The Year of Dangerous Days set in 1980 Miami. There are three extraordinarily large events that happened in Miami in rapid succession. The biggest race riot in American history, the industrialization of the drug industry, and the largest single burst of immigration directed at a single city, which was the Mariel boat lift. Miami at that point was roughly 300,000 people, and in 2.5 months they got another 125,000 people from Cuba.

It is Jimmy Carter’s last disastrous year. Inflation’s running at 20%. There are no jobs, no room in schools, no spare apartments. People are literally sleeping under I-95. It is a crisis for the city.

The Cubans were stepping into what was already a bilingual city. Miami had been declared bilingual in 1973, so 7 years prior, and no one had uttered a peep. And yet suddenly it becomes a hot topic when it’s followed by this large wave of secondary immigration. There’s a nativist reaction to race, drugs and immigration. The reaction is against the weakest and least politicized newly arrived Cubans.

Only in Miami is the anti-immigration movement is led by an immigrant. She is an extraordinary character who speaks six languages. Her name was Emmy Shafer and a survivor of the Holocaust. What sparked her movement was walking into a mall one day and trying to buy a dress for her daughter and not finding anyone who could speak a word of English. She starts a ballot initiative to get an ordinance on the November election, which will also be the Reagan versus Carter election. Her idea is that to revoke Miami’s standing as a bilingual city.

That was the story of what I wanted to do in the play was to have Emmy Shafer on one side and a shocked Cuban organization on the other side. The Cuban immigrant community was successful. They had resurrected downtown Miami. They connected North America and South America, and the city was thriving in those last years of the seventies.

But Miami goes from being the poster child to the ugly duckling within months. One thing that does not happen is federal help for any of these issues. No help in immigration, race riots and combating cocaine. And that’s the context in which this anti-immigration movement starts.

Larry Bernstein:

I moved to Miami in 2020, and the first thing I did was get a driver’s license at the DMV in Hialeah, a very concentrated Cuban community. I was one of the only native English speakers in the DMV. I got hungry and there was a Cuban diner a hundred feet away. They handed me a menu in Spanish, and I said, “do you have a menu that has English?” “No, we don’t. Tell me what you want?”

A Cuban sandwich and a decaf coffee, please?” I can get it done, but I can imagine the frustration for people who want to buy a dress with basic customer service. I rolled with the punches, but I could see walking out in frustration.

Nick Griffin:

It is unnerving. Arriving in Miami International Airport, there’s bilingual signs everywhere. Despite nativist movements like English Only, in 1980, 60% of Miami households spoke a language other than English at home. In 2026, that number is 70%. It’s worse than it was.

There’s a nonprofit called SALAD because the theory in Miami is that we’re not a melting pot. We are a salad bowl that we are distinct ingredients that live next door, but we’re not properly mixed. Little Havana is 96% Cuban. We self-segregate.

Larry Bernstein:

In 1980, Miami was a classic southern city. It was white and black when there was this influx of illegal Cuban immigrants. There were positive and negative consequences. The positive was it reinvigorated the city and Miami became the capital of Latin America. But the negative consequences were that it blew up the schools and a huge surge in crime. South Beach became a series of SROs. Overnight, white and blacks were in a rear-guard action.

A.O. Hirschman the famous Harvard economist wrote a book called Exit, Voice, and Loyalty. In that book he said, when an individual or a subgroup in a population is unhappy with public policy, they can scream and yell, and they can create a political movement if they want to change policy. But if they cannot, then they can exit, they can leave.

When there was a mass immigration of a foreign population, your choices are I like my life the way it is. I like a school that offers predominantly English. I like having safe streets. I do not like having homeless people in my yard. I will leave if I cannot succeed politically. And they did leave. Whites and blacks left Miami predominantly for Broward County, which is not that far away, but with traffic, it is impossible.

Whites left for safety and blacks left for new jobs that paid more because of competition from Cuban workers. Tell us about voice and exit.

Nick Griffin:

It becomes a minority majority city between the end of 1979 and the beginning of 1981. It’s a sudden shift. It creates an enormous amount of white flight and the Latin population brushes towards 60%, which is fairly staggering considering that it was 5% in 1960. I remember the Mayor of Miami being interviewed in 1980, and they asked if the boatlift is going to change Miami. And he went, not really, just in the same way the Irish changed Boston. He is teasing the press, but you look back at anti-Irish immigration laws passed in the 1840s and 1850s; it is similar.

They don’t necessarily target you because you’re Irish because they don’t want to say that out loud, but they target you because you’re Catholic. They target you because of anti-poverty laws. But guess who are the poorest people in Boston in the 1840s? They even have an Irish deportation movement in the 1850s. So there’s no doubt that immigration changes the flavor of cities, there is absolutely no hiding that. And if you decide to run for the hills, then you change the hills as well.

Larry Bernstein:

Bilingualism, talk about what that means. The state cannot prevent the speaking of Spanish in the home. What they were referring to was public documents predominantly. After I got my driver’s license, I went to City Hall to vote. The form was in English as well as in Spanish. I cannot read Spanish, so I read it in English. This is a minor matter that does not change our life. How do you feel about bilingualism for official documents?

Nick Griffin:

I do not think it is the real point of the fight. It is the entry point to talk about immigration. Just two weeks ago, Florida passed a new law to have the Florida driving test only in English. Now, the incident that sparked that change was a Hindi speaking driver not being able to read signs and causing a huge crash with his truck. But there are less than 1000 Hindi people in Miami-Dade. And yet, the first language it was aimed at was Spanish.

I do not think English Only does much. It might spur people into learning English a little bit quicker. There was frustration in 1980 because they saw money was not spent on hurricane warnings and voting documents. They were using public money to do things like the Cuban parades and felt like favoritism or a waste of money.

What was fascinating was in those first days after the English Only Vote passes is that you get this sudden surge of attempts by private companies like Burger King for about a week or two, they try and enforce that Spanish shouldn’t be spoken in the workplace.

Announcements by companies to say, “That’s it! No more speaking Spanish in the workplace,” but it lasts maybe a couple of weeks. Employees do what they want anyway. It didn’t matter. The culture does what the culture’s going to do and pass as many laws as you want.

Larry Bernstein:

There were two massive waves of Cubans to Miami. But since then, there have been waves of other Hispanic populations: Venezuelans, Brazilians, Argentines, and Colombians. There are people from the Dominican Republic, El Salvador. And when you look at the demographics of Miami, Cubans were important but now it is one of many different communities of Hispanics.

Nick Griffin:

Many of these Caribbean, Central American and South American immigrant communities have in common is none of them thought they were staying long. When you look at registration to vote in 1980 for Cuban Americans, it’s 17%. Why? Because they thought Fidel was going to fall any day.

You are now going to have an interesting test case with the capture of Nicholas Maduro in Venezuela and the green shoots that seem to be starting to grow in Venezuela. I spend a lot of time with Venezuelans because my wife’s Venezuelan, but I would say 80% would like to get back there within the next one to two years. A lot of them see this as a chance in a lifetime they can rebuild an entire country.

That is going to be a fascinating test of what America means and whether it is a temporary stop and that you are going to get this return of immigrant communities.

Larry Bernstein:

I want to go back to language. In the early 1900s, Nebraska passed a referendum banning the use of German in schools. It had a large German influx, and the people of Nebraska felt that English was the official language.

My mother grew up in Skokie, Illinois, and it had a very vibrant Jewish community with a lot of Holocaust survivors. But today, Skokie is home to a diverse population. 60 languages are spoken in the local high school. Imagine the staff trying to cope. It is one thing if 70% of the students speak Spanish, it’s something else entirely when we have 60 languages.

That goes to the heart of this language question. It’s not that big a deal about the voting ballot or a driving test with 30 questions that are pre-assigned, but the local school having to deal with this situation. How should we think about language and schools, which goes to the core of your play, which is should English be the official language?

Nick Griffin:

Every country needs a lingua franca, and it’s obviously English in the United States. Yes, there are famous stories in Miami of people who come here and 25 years later have not learned a word of it. But let’s be honest, those tend to be all the arrivals who aren’t necessarily stepping into the workforce. You’re going to encounter thick accents all over Miami, but you will find English with 90% of people.

If you are planning to live your entire life in Miami, you could probably get away with bad English, but you’re going to limit where you get ahead. Everyone wants their children to succeed.

We have seen this play out again and again where thick accents parents and then the young people can’t wait to embrace America.

I remember talking to the ex-mayor, Maurice Ferre and I said to him, this city’s now been majority Latin for 60 years, and this is the way it’s going to be. And he vehemently denied that. The idea of America is much stronger and better than any other division and it is going to overcome. He thinks it may last a century and we’ll end up pretty much looking like the rest of the country, but maybe the rest of the country begins to look like us.

Larry Bernstein:

Former UK Prime Minister Gordon Brown met with his constituents and one elderly woman said that she went back to the area where she was raised in London, and it was filled with immigrants, and she could not communicate with them. And her old community was gone and she was saddened by it, but she had exited that community and wondered what Gordon Brown thought about it, what he could do about it to let England be England.

Gordon Brown answered it, and there was a hot mic and he said that woman’s a racist and it caused a big hullabaloo. It was very damaging to Gordon Brown. He later reached out and apologized.

When you said that Miami went to 70% Cuban, it was a Cuban city. It will have the values of Cuba with its language, cultural heritage, and you can love it, which I do, and that is why I moved here. But other people may not, or they want it the way it was.

What that woman was saying to Gordon Brown was, I like England, you said we were going to limit immigration to something reasonable so they could assimilate, but immigrants did not assimilate at all. What are we going to do to encourage assimilation? And one aspect of assimilation is language. Latins are part of the Christian cultural heritage. That is not the case of what is going on in Europe currently, and that is another hot button. What do you make of assimilation as a core goal of the American project?

Nick Griffin:

The key thing you must remember is that Britain’s very much a welfare state. If you do not pay in, you can’t take out. England’s ideal immigrant is a Portuguese woman because 98% of them get a job within the first year that they arrive in the UK. Your worst immigrant is a Bangladeshi woman because 66% of them do not get a job within their first five years of entering the UK. This put enormous stress on the UK’s welfare system.

People do their best not to go to hospitals in England. I go to England every three months. I have elderly parents and have had to deal with the hospital system a lot over the last two years. It’s depressing compared to when I was a kid. It is under severe pressure. England has been taking over a million people a year for many years in a row. They have not been successfully integrated into society. And that holds true across different countries in Europe. We are in a different position than America. The US is a country built on ideals of you eat what you kill, and your insurance is tied to your private job. You are not leaning on a welfare state.

If you are going to come here and expect government handouts, that is not going to be anywhere near the degree that it is in most European countries. It’s a different issue here. Latin culture and American culture seem to have plenty of intersection points, so it does not worry me. I am extremely comfortable in Miami, but I can see why it’s unnerving to many people. It’s much more unnerving to think that your entire welfare system could fall apart any second.

Larry Bernstein:

In the 2008 presidential campaign, Hillary sets the conditions for illegal immigrants to get on the path to citizenship. And one of the requirements that gets the biggest cheers from her Democratic audience is the desire for those immigrants to learn English. What do you think has happened? Why has the Democrats decided that learning English is no longer a prerequisite?

Nick Griffin:

The movement in politics over 16 years is incredible. You’ve got one party that barely believes in national boundaries at all. And the other party thinks that America should cease to be the city on the hill. It is lonely in the middle.

Larry Bernstein:

After the end of your play English Only, there was a discussion with the audience, the cast, you the playwright as well as the assistant director. It used to be the play ended and you went home. Nowadays the play does not end with the final scene. It is just the beginning of a conversation. I was amazed by how many people stuck around. The theater looked like it was at 80%, talk about that discussion and the role of this post-play environment in modern theater.

Nick Griffin:

I do not love the whole talk back stuff. My theory in life, if you buy a book, read the book and make up your own mind. You go and see a play, go out with your friends afterwards, and if you want to argue about it, argue about it. There was a moment in there where extreme things were being said by a cast member about ICE and suddenly 25 people got to their feet and marched out.

The whole point of the play was to try and give both extreme sides a voice and let it happen on stage in the way it happened in 1980. And to leave the audience questioning their own beliefs and either reaffirming or changing them.

Larry Bernstein:

What are you optimistic about for the use of English and bilingualism?

Nick Griffin:

It’s key to have a native tongue. If you want to speak Hindi, speak Hindi. That is a wonderful thing if we all have this culture in common at the center, and that is the American ideal. This goes all the way back to the Book of Genesis. The Tower of Babel story is a people who are trying to create one language and be one people to have one aim. There is that moment when God says, “no, you’re going to be split into hundreds of languages and your job is to create a covenant despite those differences. Can you get a more American question than the one that is asked in Genesis? And the answer is we are a work in progress.

Larry Bernstein:

Thanks to Nick for joining us. If you missed the previous podcast, the topic was Mr. Warsh Goes to Washington.

President Trump recently nominated Kevin Warsh to be the next Chairman of the Federal Reserve Board. In October 2022, Kevin spoke on What Happens Next along with my old boss Myron Scholes who was the recipient of the Nobel Prize in Economics.

In this episode I included excerpts from that previous meeting as well as an additional interview with John Cochrane who is a Senior Fellow at the Hoover Institute, and he discussed the challenges that Kevin will face in his new job.

John explained Kevin’s plans to reduce the Fed’s investment in US Treasury bonds as well as what the Fed’s role should be in regulating banks. We also discussed limiting the Fed’s independence.

You can find our previous episodes and transcripts on our website
whathappensnextin6minutes.com. Please follow us on Apple Podcasts or Spotify. Thank you for joining us today, goodbye.

Check out our previous episode, Mr. Warsh Goes To Washington, here.

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Kevin Warsh, Myron Scholes and John Cochrane

Subject: Mr. Warsh Goes To Washington
Bio: Warsh: Next Chairman of the Federal Reserve Board, Scholes: Recipient of the Nobel Prize in Economics, Cochrane: Professor of Finance and Economics at Stanford’s Graduate School of Business and Senior Fellow at the Hoover Institute

Transcript:

Larry Bernstein:

Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast which covers economics, politics, and history. Today’s topic is Mr. Warsh Goes to Washington.

President Trump recently nominated Kevin Warsh to be the next Chairman of the Federal Reserve Board. In October 2022, Kevin spoke on What Happens Next along with my old boss Myron Scholes who was the recipient of the Nobel Prize in Economics.

In this episode I include excerpts from that previous meeting as well as an additional interview with John Cochrane who is a Professor of Finance and Economics at Stanford’s Graduate School of Business and a Senior Fellow at the Hoover Institute, and he will discuss the challenges that Kevin will face in his new job.

I want to learn from John about Kevin’s plans to reduce the Fed’s balance sheet of US Treasury bonds as well as rethink the Fed’s role in regulating the banks. I also want to discuss Fed independence especially as the Fed’s responsibility grows beyond simply setting the overnight interest rate.

Let’s begin with our interview of Kevin Warsh and Myron Scholes.

The interview with Kevin Warsh and Myron Scholes was taped in October 2022. Below are excerpts that have been edited for clarity and to be easier to read.

Larry Bernstein:

Kevin, tell us about your paper that you wrote with your co-author John Cogan from the Hoover Institute entitled Reinvigorating Economic Governance: A New Framework for American Prosperity.

Kevin Warsh:

To summarize it, the 21st century has been decidedly unkind to most Americans. A series of shocks have shaken their American ethos. The policy making response has been extraordinary with both positive and negative connotations. It’s changed expectations for policy going forward.

Those shocks: 9/11 led to wars, the global financial crisis where I still have the scars from my 10 years in government, the pandemic, and the Russian invasion of Ukraine.

I begin the paper with one of my favorite lessons from Myron, which he used to call the ice cream truck.

What happens is there’s kids on a playground doing their thing. And then Myron’s ice cream truck comes by and rings the bell. They get an ice cream. The ice cream truck leaves and you’d think they go back to the place in the playground where they were before. But they never go back; It’s changed. The environment’s changed, the ecosystems change, their wants and preferences have changed. And that is a metaphor for what’s happened to the US economy during these shocks.

We begin the paper with a quote from Hayek, where he says, “If old truths are to retain their hold on men’s minds, they must be restated in the language and concepts of successive generations.” Well, that’s what we tried to do.

The world is different. The G2 rivalry with China is different than the rivalry with the Soviet Union. Our economy is different.

What we say is that the core of the American experiment and its leadership in a peaceful world has three I’s: ideas, individuals, and institutions. And these three I’s must be applied to the conduct of public policy in Washington: fiscal policy, trade policy, monetary policy, regulatory policy.

But we need a framework.

The first were ideas. Ideas are different than goods. There is no fixed pie of ideas where one slice of that idea for you means less of a slice for me. The promulgation of ideas is key to American prosperity in the 21st century.

The conduct of economic policy suppressing these ideas by keeping rates at zero for more than a decade is the first part of the triptych.

The second is individuals. Cogan and I maintained that individuals are different. They’re the core of civil society. They’re not cogs of a machine. They have a set of preferences and inclinations that are unique to them. But if we treat individuals as part of groups, are we going to extinguish the flame that would cause them to create new ideas? Connecting the other part of the triptych. We wonder whether the culture, to use a loaded word, is civil society doing harm to individualism.

The third is institutions. Ben Bernanke’s work brought institutions back into an understanding of financial crises and the Great Depression.

Cogan and I fear there’s a conflation of roles of institutions between the public sector and the private sector where we think there’s a very red line that should separate the roles and responsibilities. And inside the public sector our government trying to compensate for the failures of other institutions in government. An example, whether the Fed has become an appeals court for broken fiscal policy and has wandered in areas that are outside of its remit. Cogan and I worry about that institutional creep, and it happened to coincide with this period of price instability.

Larry Bernstein:

Let’s start with Myron’s ice cream truck metaphor. When the government spent in 2021 and 2022 $1.9 trillion on a stimulus program, it changed ordinary American’s economic behavior. Some might save less for a rainy day, there is an expectation that the government will protect us when we fail in the future and that impacts risk taking, investment, and consumer decisions. After the ice cream truck left the playground, the economy is now radically and permanently altered.

Kevin Warsh:

The size and scope of these shocks have changed expectations among businesses, households, participants in financial markets, and told them that there will always be a backstop. The Fed will always be there to ensure rates are zero, quantitative easing will become not the exception but the rule. When the extraordinary becomes ordinary, we lose the sense of the magnitudes of these events.

Larry Bernstein:

What does that mean of having year over year inflation running hot at nearly 9% in 2022 when the Fed’s inflation target is only 2%?

Kevin Warsh:

Too long after the pandemic’s darkest days, after we knew that vaccines were going to mitigate the morbidity. In 2021, the US economy was booming. Real economic growth was 5.7%. The country was moving on from lockdowns. And yet we had massive stimulus. And importantly, the Fed bought 54% of all the net new issuance from the Treasury Department.

I go back to the dark days of the 2008 financial crisis with Chairman Bernanke when I was sitting by his side. Quantitative easing was debated. We weren’t sure about its efficacy. We were certain of one thing, Larry, it was really only to be used in break the glass times. But I’ve lost track of how many times the G-20 central banks have used quantitative easing. Why is it that the spending in Congress became so profligate? It is because both among Democrats and Republicans didn’t have to internalize the cost of their spending.

Larry Bernstein:

Myron Scholes, how do you think about your ice cream truck metaphor in the context of governmental pandemic policies?

Myron Scholes:

I agree with what you are saying, Kevin. In my way of thinking when the kids leave the ice cream truck, then the teachers intervene, is that they do not return to the previous spot. They get new locations. Thinking the economy is going to go back to where it was before is fallacious. It is going to be on a new trajectory.

Larry Bernstein:

Kevin, in your opening remarks, you mentioned that Quantitative Easing should be used rarely, that you should only break the glass under certain circumstances. During the financial crisis, ECB governor Draghi stated that the ECB will do whatever it takes, and that became their mantra. How do we put whatever it takes, back into a box with a glass seal?

Kevin Warsh:

I will remind your listeners when we were enduring the darkest days of the financial crisis when you’re referencing Mario Draghi announcing from the scribbled notes on his speech that day, “we will do whatever it takes, and it will be enough.” I believe that is the role of central banks to do extraordinary things in extraordinary times.

Larry Bernstein:

Is that shorthand for Walter Bagehot’s idea from the 1870s when he said that the appropriate role of the Bank of England was to “lend freely, at a penalty rate, against good collateral.”

Kevin Warsh:

Yeah. And how did we go from that to providing overwhelming liquidity and free money in all seasons? And for all reasons! I fear it is because the profession thought there was a free lunch to be had that’s what quantitative easing was. Policymakers broadly around the world misunderstood the risks of inflation and were late to react to it.

Myron Scholes:

To what extent does this interdependence now of the Fed and the fiscal authorities make it more difficult for the Fed to affect policy?

Kevin Warsh:

Is the Fed independent? It’s up to the Fed Chairman. Powell gets to decide whether they’re independent. They can invite him to the Oval Office and browbeat him. But what does he do when he goes back to the Fed?

The independence is today in the Fed’s hands. The question is, can they ever get back to a slimmed down balance sheet? Will the markets permit that? Will the fiscal authorities permit that? They’ve promised quantitative tightening is now going to happen on autopilot, leading to a runoff on of their balance sheet of more than a trillion dollars a year, presumably for the next few years.

Through the best of intentions, the fiscal and monetary role have been conflated. Since the immediate post-war period when the Fed and Treasury figuring out how to conduct themselves. We broadly stuck with that accord with some imperfections until the current period. I wonder whether we’re at a moment where a new accord needs to be struck, and whether at some level of interest rates will become non-serviceable, even by the government of the United States.

Larry Bernstein:

I think one of the incredible surprises was how low and how stable inflation was for the period between 2008 and 2020. It was below 2% with a very small variance. Why was inflation nearly 9% in 2022 and its variance so high?

Kevin Warsh:

Congress told the Fed that they should ensure price stability. Congress didn’t give the Fed a number. Chairman Bernanke wanted to come up with a number so that markets would understand what price stability is. The number that the Fed came to was 2.0%. I use the decimal point there just for jokes among friends. When we in the economics profession look to the right of the decimal point, we are confusing economic science with physics. I was always skeptical of the prudence of a hard certain inflation target.

Price stability and the number associated with it changes over time. I liked the definition of price stability that Chairman Greenspan used to use that we want the change in prices in the US economy to be such that no one’s paying attention to it.

Households and businesses aren’t talking about inflation. Your question makes that so painfully clear. There is barely a kitchen table or a boardroom where the change of prices isn’t paramount to discussion. We have an inflation problem.

Now to your question, how is it that during that long period we had stable prices? And who deserves the credit? Well, some credit belongs to the Fed. The Fed I joined in 2006 had inherited this price stability legacy, which began with Chairman Volcker continued through Chairman Greenspan. Markets came to think that central bankers deserve substantial credit for it, and we broadly knew what we were doing to ensure it.

I’d say the third are the structural factors. Starting in the early 1980s, the integration of the global economy was bringing new competition, the emergence of China, both factory workers to keep prices of final goods low and a vast consumer market for exports that drove structurally lower prices. Demography and other factors had something to do with it. I want to give some credit to the world’s central banks, to the regime that we inherited, in the regime we practiced, but also to some structural factors.

In the last several years, we took an integrated global supply chain, integrated product markets, service markets, integrated financial markets, and they are being ripped apart because of this G2 rivalry. It’s happening. And as we rip apart this into two big spheres of influence, that’s perhaps not inflationary in the long-term, but that’ll take several years. Structural factors are important.

Milton Friedman used to say, “The only thing we know in economics, we teach in Econ 1, everything else is made up.” And he was a Nobel Prize winner, like Myron here. And I remember thinking, I was 20 at the time when I heard that, maybe the old man has lost it. Well, no, it wasn’t until the 2008 financial crisis. I said, Milton has it exactly right.

We goosed the demand side of the economy with massive stimulus, massive transfer payments, long after the vaccine was there. You goose demand, you shrink the supply side by making it harder for capital to be deployed, by reregulating, by encouraging a lot of workers not to work. I don’t know what else you’d expect. And then inflation moved higher, and it was commented on by most of our colleagues that it’s transitory and temporary and has to do with pandemic this and war that. But it’s found its way into the fabric of every kitchen table and boardroom discussions.

Myron Scholes:

Milton Freedman said, “If you give the checkbook to the Treasury, then that’s akin to helicopter money.” Do you think that that the inflation surge that we’ve had is because the checkbook was given to the Treasury?

Kevin Warsh:

I worry whether we have created a situation where the Fed and the Treasury have a hard time acting independent of each other as the Congress had originally intended.

Myron Scholes:

If you have quantitative easing, you get trapped and then a short-term policy becomes a long-term policy.

Kevin Warsh:

We had this fight in the Fed in 2008 about whether to do quantitative easing. We hardly thought that it was going to be as successful as it was. As Chairman Bernanke likes to say, QE worked in practice, but it doesn’t work in theory. He said that “How could it possibly be that if one part of the government issued debt, the other part of the government buys that same debt later that week that things are miraculously better?” To Myron’s point, we made a risk management judgment. When the world was coming undone in 2008, it was worth the risk.

And in my judgment, we also made a pact when the world financial markets were functioning again, we’d get out of that business.

Myron Scholes:

Back to 1982, when Volcker was the Chairman of the Fed, my reading of history is that he stopped raising rates and then inflation roared back again, and then he had to increase rates again. It wasn’t a continuous policy. The second part is that Reagan in his policies, deregulated which freed the economy to produce more and have a greater pie that brought down the inflation rate.

Kevin Warsh:

Chairman Volcker was an awfully tough man. When he took the job as chairman, he’d run the New York Fed before. I didn’t come to know him until I was joining the Fed in 2006 and had a wonderful relationship with him until the end. Tough Paul Volcker was a great Fed Chairman, saved the country and the institution, even he paused, even he got cold feet.

Paul Volcker deserves enormous amount of credit for beating inflation. Milton taught us that inflation is always a monetary phenomenon. But I would say if Milton were with us today, especially if he saw the conflation of fiscal and monetary policy like we have discussed, he would say, the way these guys are running policy, fiscal matters a lot too. I think he would amend his famous aphorism.

Question is can we have an expansion of the supply side of the economy, a deregulation in product markets, new incentives for workers. If we have that the Fed would have a much more successful effort in bringing inflation down to target. My objective assessment, the broad conduct of monetary policy is not productivity enhancing. It is not expanding the supply side of the economy.

What would you do to be more growth oriented? The expansion of the supply side of the economy is about creating production in its most efficient place. We are talking about how to make potential GDP as big as possible because of our view that the fruits of that would be high.

What is potential GDP? It is simply the calculation of hours worked and the productivity of those hours. The way to make those hours more productive is to have that incredible mix of capital and labor, new ideas that make the factory floor more efficient, that give that worker the best tools so that he can be more productive. And history says when he’s more productive, his wages are going to move up smartly. His company’s going to be more efficient, and we are going to have a more prosperous nation.

Larry Bernstein:

Kevin, what are you optimistic about?

Kevin Warsh:

The 21st century requires economic strength. And that’s not just going to make us richer. That is going to take the divisions in our society, and it is going to mitigate those.

How do we have a more peaceful, prosperous civil society? Where there’s more opportunity more people want to be part of the American experiment. Instead of where we find central banks on the front of the newspaper every day and say they do not matter so much because our communities are stronger, and we feel safer and more prosperous. That is the objective function of what we are trying to do. And the economics we have talked about are just a prerequisite to getting there.

Larry Bernstein:

Thanks to Kevin and Myron. We’re now going to move to our second speaker which is John Cochrane who is professor of Economics and Finance at Stanford’s graduate school of business.

Kevin Warsh has recently been nominated to be Chairman of the Fed and he will be taking over from Jerome Powell if in fact his nomination goes through. What do you expect to be a change in policy?

John Cochrane:

Congratulations to my friend and colleague, Kevin Warsh, the dog who caught the car. There’ll be several challenges. The first is to navigate interest rates. President Trump’s evident desire for lower interest rates, some of which is to lower interest costs on the debt and help the fiscal problem. So, we have an interaction of monetary and fiscal pressures.

Warsh has a program of institutional reform, which is one of the big challenges at the Fed. He wants to change the balance sheet and fix financial regulation. His plate is full. It will be interesting to see where he goes as well as keep the collegiality of the Fed. It would be terrible for the Fed to turn into a five to four Republicans versus Democrats institution.

Larry Bernstein:

Trump began as a real estate entrepreneur and interest rates drive everything. Trump is very cognizant of the level of interest rates, and he perceives that as driving the economy particularly around election dates.

John Cochrane:

Trump has two instincts going here. Real estate developers like low interest rates, the lower the better. Many people confuse individual businesses versus the whole economy. There is always supply and demand. Low interest rates are good for people who want to borrow money, but they are terrible for people who want to save and are investing for retirement.

Most economists faced with the lower interest rates question, clutch their pearls, and say inflation, inflation. There has got to be a downside to everything, right? If low interest rates were an unmitigated good, then set the interest rate to negative a hundred percent and hand out free money.

And what is the theory and evidence on how long it takes low interest rates to produce inflation? Something I work on as an academic, and typically takes quite a long time for low interest rates to result in inflation. If interest rates go down one of the dangers that not just private people borrow, but the government goes on a borrowing binge too. Then you could replay 2021 inflation quickly. These things always got to work together.

Larry Bernstein:

The Phillips Curve was an empirical result between the level of unemployment and inflation. And if you caused a recession and unemployment went up, you were able to reduce inflation. Where are you on the relationship between the level of unemployment and inflation?

John Cochrane:

There is this longstanding historical correlation that boom times in the economy tend to be times of high inflation. Bust times tend to be times of deflation or disinflation. That correlation then in economists’ minds turn into a set of levers.

The Fed currently thinks that inflation is driven by the Phillips curve. So, if we cool the economy, that will cool off inflation, which sounds reasonable except the central theoretical problem is that inflation is the level of all prices and wages. So, you can see why the slack economy prices would go down, but why should everything go down, not just prices relative to wages and so forth. There are also lots of times when inflation comes and goes with no change in employment whatsoever.

Larry Bernstein:

The Fed has a dual mandate. It is supposed to have stable inflation and full employment, and if you believe in the Phillips Curve, these are in conflict. The ECB on the other hand only has one mandate and that is to maintain stable inflation without that employment overlay. How do you think about the role of the dual mandate and its conflict?

John Cochrane:

The mandate is get both things at the same time and the Phillips Curve says you cannot have both at the same time. That mandate came in at a time when people believed in this Phillips curve more strongly. Now economists are thinking about employment, horrible schools, taxes, social program disincentives, labor laws, the overnight federal funds rate and how many people have jobs?

The Fed is trying to square this circle, you got one tool and there is a tradeoff between the two things. The Fed was always getting it wrong. As Milton Friedman put it, you are turning the shower on hot and cold and hot and cold and not waiting long enough. The standard thinking became, if you pay attention to only inflation and keep that under control, then you never have to turn the shower to cold again because it got too hot. Just leave the button alone on the inflation and the employment will take care of itself. I still think that was a good idea.

That is how inflation targeting came along in the 1990s, and that’s the way the ECB operates because there’s a lot of countries and it doesn’t want to get in the business of employment in Spain versus employment in Germany. Let’s just worry about inflation for the whole Eurozone, that was a wise setup. It was mandated price stability and it interpreted as perpetual 2% inflation.

Larry Bernstein:

During the 2008 to 2010 financial crisis, global central banks decided to do dramatic quantitative easing, which meant acquiring a substantial amount of government bonds. Draghi was famous at the ECB for saying, we will do whatever it takes. To go back to a normal situation where you’re not supposed to be doing whatever it takes. You are supposed to be managing the inflation target and minimizing the role of governmental interference in the markets.

John Cochrane:

Let me just back up for our listeners and explain what this is all about. The Federal Reserve is a giant money market fund. When the Fed does quantitative easing, it buys treasuries and gives banks interest paying reserves in return.

I would say that quantitative easing basically was a PR gimmick rather than anything particularly important to the economy.

Larry Bernstein:

Myron Scholes gave an example to Kevin Warsh about an ice cream truck arriving at a park and the kids were busy playing and the Good Humor guy was ringing his bell and the kids ran and got their ice cream. What Myron said was that forever changes the nature of park dynamics that kids will be expecting to get the Good Humor bars. With a central bank when you announce things like “we’ll do whatever it takes,” it changes financial markets in a way where lenders may expect that in a time of crisis that they’ll be taken care of, and they can come up with different conclusions about credit spreads or liquidity or other factors that may go into judgments of whether or not to hold risky assets.

John Cochrane:

I want to distinguish quantitative easing, trying to nudge down long-term treasuries in normal markets versus crisis interventions like March 2020 or the financial crisis when they buy securities that are falling in value with the goal of keeping up the values of those securities. The bailouts of 2008 and buying treasuries in March 2020, they started buying essentially all the new issues and then Powell gave an essentially “whatever it takes,” the corporate bond prices shall never fall because we will buy whatever it takes later in 2020 to keep those prices from falling. And this is the problem of our financial regulatory architecture in general.

The Fed basically puts a floor under all asset prices. Now that’s nice if you’re an investor, no risk here. Anything bad happens, the Fed will come in and keep prices up. But exactly as you put it, then the incentive for people to keep some liquidity around and be ready to buy on the dip is gone because the Fed will front run you. And why are financial markets fragile? Well, because there’s not enough people holding some liquidity ready to buy in the dips and keep the prices up.

I’ll compete here with Myron for stories. If you build a really good fire department, then people keep gasoline in the basement because they know the fire department will always come. Our financial system has become more fragile. People borrow more money than they should. They don’t issue as much equity as they should. They do not keep enough resources around to buy the dip because everybody knows that in a crisis, the Fed will come in and keep the prices up. The result is that every time a crisis comes, the prices are more likely to fall because there’s no one around to keep them up again.

Larry Bernstein:

The Fed historically has been responsible for managing the short-term interest rate, but sometimes interest rates in the long end of the curve get to levels that seem unappealing to policymakers. And so they’ve engaged in what they referred to as Operation Twist where they would try to also manage the longer term interest rate. And the way they did it was the Fed went ahead and acquired a substantial amount of long-term Treasury bonds to lower long-term interest rates. You mentioned that the Fed is acquired a substantial money market position, and Kevin wants to get those positions down.

Currently, the Fed has more than $6 trillion of assets and that has influenced the absolute level of interest rates When Warsh says that he wants to reduce this balance sheet that requires a change in the duration of government securities that will be available to the public. Tell us about unwinding of Operation Twist by changing the nature of the Fed’s holdings.

John Cochrane:

When the Fed buys a bunch of long-term debt and pays for it by issuing short-term debt, that’s what quantitative easing is. How much effect does that have on long-term interest rates? Now, the evidence on this, it is surprisingly weak. I am very dubious of the idea that the Fed’s operations on the margin have a huge effect on long-term bonds.

Larry Bernstein:

The U.S. government owns a hundred percent of the Fed, and the U.S. government is responsible for all the treasury debt. The left hand owns the bonds. The right hand is short the bonds. And so, when I think about the duration of the U.S. government’s liabilities, I net out the Fed’s holdings. I think we could step back and say, what is the optimal duration structure for the U.S. debt?

John Cochrane:

Oh, Larry, I love you. You are asking all the right questions. So, let’s introduce our listeners to the consolidated balance sheet. The Fed and the Treasury pretend they are different, but they are married to each other. And the way they are married to each other is if the Fed buys treasury debt, earns interest on that, and uses some of that interest to pay the banks interest on reserves. The rest the Fed gives back to the treasury. So, there’s no sense of the Fed making money or losing money. It’s like a husband and wife; she goes out and makes the money and he goes shopping for a new Porsche. This is all one balance sheet.

The government borrowing is just like you or me borrowing. Let’s go buy a house together. And so now we face the choice. Are we going to buy a get a 30-year fixed mortgage or we’re going to get the adjustable rate, which has a low initial rate?

Larry Bernstein:

Do you feel lucky punk?

John Cochrane:

Exactly. The adjustable rate looks like a lower yield, but if interest rates go up and you have got the 30-year fixed, you are not going to lose the house. The US Treasury, when it issues bonds, thinks about, do we save a little money by issuing short or by going long? Do we insure ourselves that if interest rates go up, we are not going to lose the government?

In my view, the treasury was scandalously short. When interest rates were 1% or 2%, they should have refunded the whole federal debt with perpetuities and locked in the interest costs forever. They did not, interest rates went up. And now here we are spending a trillion dollars a year on higher interest costs because we didn’t issue the 30-year fixed bonds.

Now finally, where’s the Fed fit in? The wife goes out and she’s thrifty. She goes to the bank and says, let’s get the 30-year fixed. The husband says, I want the floating rate. I want the extra cash flow. That’s what the Fed did. Unwittingly the Fed doesn’t think about fiscal policy, it thinks about financial markets, but when it bought long-term treasuries and issued short-term stuff instead, what it did was expose the government overall to more interest rate risk. And as we have seen, the Fed lost a ton of money. It bought these long-term treasuries and issued short-term reserves. The value of the long-term treasuries falls just like Silicon Valley bank did when interest rates went up.

Now there cannot be a run on the Fed, but the Fed doesn’t have any profits to give back to the treasury anymore. And so that is a measure of how much the Fed exacerbated this issue of too much short-term debt.

In an era of big debts and deficits, we are used to thinking of the monetary and fiscal policies as being different. You handle deficits, we handle money and financial stuff, but when there’s huge debt outstanding, these things are related. Raising interest rates raises interest costs on the debt to the tune of a trillion dollars. Buying long-term debt and issuing short-term debt exposes the treasury to more risk. That’s a hard fact of monetary policy today.

Who oversees and decides the maturity structure of the U.S. government debt after we recognize that the Fed and the US Treasury are all in this together? I have asked officials at both places, and they deny the tension. The treasury says that they just issue the debt. What the Fed does is their business.

And the Fed says, we do not do fiscal policy. So, we need a new Fed-Treasury Accord on who is going to be responsible for the government’s overall maturity structure.

Larry Bernstein:

Asset prices give information to buyers and sellers. This information of price is amazing because there’s so many products in this world, and all you need to do is look at relative prices to make decisions. Kevin Warsh on my program previously said that when the Fed buys various assets that they’re manipulating prices and undermining this price discovery for people who supply and demand those financial assets. How should we think about the Fed’s role in distorting financial prices?

John Cochrane:

The Fed is deliberately distorting financial prices. It is the last remaining central planner in many ways and not necessarily bad. Nobody knows why prices change because you can’t know all the information that’s out there. But there is a feeling that sometimes prices are not reflecting fundamental information. The ECB likes to use the word dysfunctional and fragmented markets. Central bankers think that they are God for knowing what prices should be, but the Fed was founded to stop financial crises. There are times that we think some prices are too low, that there is some dysfunction going on, and they are there to stabilize markets.

Larry Bernstein:

We have had several financial crises. 2008 was one of the worst. And there was a sense that the regulatory agencies in the US government were insufficient. We have lots of different regulators. We have the FDIC, the Fed, the OCC, the CFTC, the SEC, all these regulators. And there was a sense in Congress that the Fed was more talented or could understand financial problems better than these other agencies. They wanted to concentrate the new regulatory body in the Fed. You have been talking about the Fed as being responsible for monetary policy, but Congress enacted legislation that made it responsible for much more than that. And this makes things more challenging. You mentioned the dual mandate being problematic. Now we have got another mandate, which is chief regulator. How do you think about this additional responsibility?

John Cochrane:

One of the problems for the Fed if it raises interest rates, there is the Phillips curve that might cause unemployment. That is going to raise interest costs on the government debt. Congress can be mad about that. And if it raises interest rates, the too-big-to-fail banks go under. We saw that in a small way with Silicon Valley Bank. It’s a regulated bank. The Fed miserably failed to see, here’s an elephant in the room. This bank is holding long-term treasuries by issuing deposits, and if it raises interest rates, the long-term treasuries are going to fall in price. There is going to be a run. That’s another constraint on the Fed for raising interest rates. Part of the problem here is the fundamental architecture of financial regulation went wrong. The problem is Congress viewed this as a lack of regulation, and so they just added more regulation.

Here’s how banks work. They put in $1 of their own money and borrow $9 and then they invest in a portfolio of debt securities. They might lose some money on that portfolio of debt securities. If they lose one and a half dollars, they have wiped out the equity. There isn’t enough to pay back the debt there. There is a run in the bank.

Now what is the problem with this system? Well, Congress said the problem with the system is we don’t have enough regulators looking at how safe those assets are. So, we need to pile more regulators to see if the assets are while leaving the 9 to 1 leverage in place, the scandalously low amount of your own money put into the investment in place. And this is what abjectly failed with Silicon Valley Bank. Hundreds of thousands of pages of regulations, an army of regulators, and they could not see plain vanilla interest rate risk staring them in the face.

Where is a dangerous asset in the U.S. economy? SpaceX rockets to Mars. Is that a safe investment? No way. Do we have any regulators looking over the safety and the value at risk in Tesla? No. Why? Because it’s all funded by stock. And if the data centers to Mars blow up, stockholders lose their money. That’s not a financial crisis.

This is the problem with banks. Their assets are safe, but they’re leveraged to the hilt. We’ve known the answer to this for a hundred years, which is that banks need to get their money more by long-term debt and issuing stock and less by overnight interest borrowing if they are going to invest in faintly risky stuff.

What I like to call equity finance banking. Nobody wants this. Why? Because the banks love the current system. The banks get to borrow 9 to 1. They get to live off the hugely levered profits in good times, and in bad times, they call up Uncle Sam and say, “we got a crisis here, bail us out again.” So the banks love it, and when you look at the actions of the Fed, the Fed does a lot in its regulation to prop up the profits of the big banks.

They wanted segregated accounts. That’s the way you can put your money in the bank. The money is backed by short-term treasuries or reserves, zero risk of ever failing.

The problem with banking regulation is easily solved. If you are going to make risky stuff, ramp up the equity in it, and if you want risk-free deposits, let them have risk-free a hundred percent backed deposits.

Larry Bernstein:

Stable coins are a huge potential opportunity, but Congress swayed by the big banks announced that stable coins cannot pay interest. Cash is a medium of exchange with low transaction costs. As a public policy matter, we should seek a means of exchange with even lower transaction costs. A stable coin that pays interest backed by the full faith and credit of the United States is the ultimate transaction cost-free vehicle.

John Cochrane:

Stable coins are a fantastic innovation as far as technology, but they are not a financial innovation. A stable coin is a money market fund with a blockchain transaction feature.

The Fed providing the underlying securities that private parties use to provide good user interface. Customer facing transactions is the right way to go, which is why I would like the Fed to open up its reserves to money market funds, stable coins, narrow banks, everybody else who’s a reasonable financial intermediary.

Cash was anonymous, and if you can go back and phone up the founders and say the federal government will have a record of every single transaction you ever made anywhere, they might be horrified at what that means for your personal liberties. Now on the other hand, if you have totally zero transaction costs, interest paying electronic money, that is totally anonymous. No one will ever pay taxes again and it’ll be a field day for scammers.

I like not enforcing China’s currency laws. Enforcing all laws all the time is not the best thing in the world. So, there is a delicate balance here that our design. I like private parties in charge of the transactions and government provides the backing securities and you need a subpoena and a court order before the government looks at my transactions.

Larry Bernstein:

One big topic recently has been the role of Fed independence. Our constitution does not talk about federal bureaucracies as being its own branch. Do you like Fed independence? When we talk about regulatory, treasury liability management, these fall within what have historically been the responsibility of the executive branch. Tell me what you think about Fed independence.

John Cochrane:

We have a legislative, executive, and a judicial branch, and where is the independent agency and all that? You do not want Congress writing the rules on how many hours it takes to get a pilot’s license. There is a reason we have independent agencies.

The Fed is independent, and I think that is a good thing, but it is with limitations. In a democracy, you cannot just say, Larry Bernstein, you are chair of the Fed go print money, do whatever you feel like with it and you can stay there forever.

The Fed’s independence is quite limited. It has independence, but the people are appointed by the President and confirmed by the Senate, and then they must report to Congress and then they roll over. The design of the system responds to political imperatives and responds to voters. But slowly, and that is one of the geniuses of our constitutional system, is we don’t just elect the king 51% - 49%, all the laws change overnight. We slow things down. And that is the cycle of Fed appointments. The most important thing is that they are independent within their limited mandate. When the Congress says inflation and employment and nothing else.

A Central Banker might decide that reshoring manufacturing, climate change or whatever is the most important thing in the world. That is not part of their job description. All the central bankers can do is fiddle with short-term rates and buying or selling treasury bills, and you are not allowed to do anything else. Why? Because suppose you want to cure inflation. What is the easiest way to cure inflation? Go out and take a hundred bucks out of everybody’s wallet. The Fed’s not allowed to do that. The treasury must do it because that is taxation. The Fed has no taxation authority because it cannot be independent in a democracy and tax people. You must be politically accountable to do that. The Fed is allocating these tools, short-term interest rates that do not have an obvious connection to employment and inflation. You want employment? Go hire people. Government does that all the time, make work jobs, but the Fed’s not allowed to do that because in a democracy that must be subject to political accountability.

Larry Bernstein:

The Fed owns a couple trillion dollars of mortgages. That is not part of that mandate.

John Cochrane:

The criticism is that the Fed went far beyond the mandate into the political arena.

Larry Bernstein:

Once they do that, they lose their independence.

John Cochrane:

That is where we are now, if you are going to have a very grand agency that is allocating credit to housing and not to industry, and that is interfering with the treasury’s maturity structure of the debt, well, then you must be less independent. We do not have an independent treasury secretary.

The president tells them what to do. Why? Because raising taxes is political, now that would be a shame because the of independence is a pre-commitment mechanism, and that is a fancy word for Congress knows that it will want to inflate just before the election. So, we put that decision in the hands of an independent agency to tie our own hands. Odysseus tied his hands to the mast so that he would not listen to the sirens. And that is the point of an independent Fed with a limited mandate. Let’s put this issue of goosing the economy in an independent agency that slowly responds to political pressure but will insulate Congress and the President.

Larry Bernstein:

It turns into an empirical question. Does having a so-called independent fed within this new framework effective in achieving its inflation target? If you looked this decade, how would you grade an independent Fed’s ability to target the inflation?

John Cochrane:

Well, the Fed, we had 10% inflation and a 2% target. So, there was a major institutional failure there.

Larry Bernstein:

I think what you are saying is Fed independence should be limited to determining the short-term interest rate. Away from that, whether it be the regulatory authority, the composition of the assets, you have abandoned the strict requirements of independence, you’ve entered the political realm, and therefore you’re responsible to the president’s beck and call. Is that where you are?

John Cochrane:

The Fed is founded to step in for financial crises in ways that we do not particularly like. But those tools are limited goals like inflation, employment, and financial stability. Those limitations are what allows the Fed to be independent and not going off and doing things. And right now, we are at a test of independence. The Fed does want to keep interest rates higher than the President wants. And so, the standard constitutional order is the president must wait until he gets to appoint new people to the board. And our president is not that patient.

Larry Bernstein:

What are you optimistic about as it relates to the Fed and Kevin Warsh’s participation?

John Cochrane:

There is a chance of making deep institutional conceptual changes at the Fed. Everybody has known about problems with the regulations for years and nothing ever happens. The Fed is in a bubble about how it thinks about monetary policy. That bubble is going to get shaken up, so the chance of institutional reform is bigger now than it was, and the chance of screwing up is also bigger.

Larry Bernstein:

Thanks to John, Kevin, and Myron for joining us.

If you missed the previous podcast, the topic was Why Is Trump’s Rhetoric Effective? Our speaker was Henry Olsen who is a senior fellow at the Ethics and Public Policy Center.

Henry explained why Trump is successful despite with his non-traditional and outrageous speaking style. No other world leader talks like Trump with the use of threats and hyperbole Henry predicted that we are going to see other politicians mimic Trump’s methods in social media and public speaking in the 2028 presidential campaign and beyond.

You can find our previous episodes and transcripts on our website
whathappensnextin6minutes.com. Please follow us on Apple Podcasts or Spotify. Thank you for joining us today, goodbye.

Check out our previous episode, Why is Trump’s Rhetoric Effective?, here.

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Henry Olsen

Subject: Why Is Trump’s Rhetoric Effective?
Bio: Senior Fellow at the Ethics and Public Policy Center

Transcript:

Larry Bernstein:

Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast which covers economics, politics, and history. Today’s topic is the Why Is Trump’s Rhetoric Effective?

Our speaker is Henry Olsen who is a senior fellow at the Ethics and Public Policy Center. Henry studies American politics with a focus on populism.

I want to learn from Henry about why Trump is successful with his non-traditional and outrageous speaking style. No other world leader talks like Trump with the use of threats and hyperbole. Is that going to change if there is a perception that it is successful? I want to find out if Henry thinks that we should expect other politicians to mimic Trump’s methods in social media and public speaking in the 2028 presidential campaign.

Henry, please begin with six minutes of opening remarks.

Henry Olsen:

Take immigration, his opponents focus on that he would make Mexico pay for the wall. He never tried to make Mexico pay for the wall, but everyone knows he is serious about putting up the wall. You can love it, or you can hate it. But he has persuaded you of his sincerity and his belief. That is effective rhetoric.

The same is true on the world stage with respect to peace in Gaza or Greenland. He amps up what he says or repeats it often enough until they get, “Oh, this guy’s serious.” Serious directionally, not necessarily serious literally.

If his priority is tariffs, maybe the tariffs have not produced $20 trillion in investment, but what he is telling you is the tariffs are good to re-shore manufacturing.

His non-traditional style is reinforcing his directional sincerity. Trump taking on outsized enemies convinces their target audience, people who are angry at the current system and want a dramatic change.

Pre-Trump, political rhetoric was hyper-stylized, audience tested, not written by the person themselves. Speeches would say nothing, and people got used to that and that’s conveyed this person either doesn’t believe what they’re saying, or this person is not somebody who is going to support radical change. Even if they are telling me they are going to support radical change stylistically, they were separate from what the target audience wanted. And so, in conclusion, what I would say is that Trump’s rhetoric is marginally effective in one way, which is that while he built a domestic coalition who are devoted to him. He has not created the durable partisan majority bringing landslide elections. What he has done is taken himself from the margins of quasi-political life to being the most important man in the world. He has taken ideas that were not part of mainstream political discourse and made them the centerpiece of policy in the most important nation of the world.

Larry Bernstein:

I want to start with Charlie Brown. Charlie Brown has those Christmas and Thanksgiving specials, and the adults in the room always sound ridiculous over the intercom. The children pay no attention to it. They do not think it is interesting. General political discourse fits into the realm of the teachers in a Charlie Brown cartoon.

Henry Olsen:

Political rhetoric in the 35 years before Trump became professionalized and non-risk taking. The person considered to be a great communicator Ronald Reagan wrote his own speeches. He knew how to put together ideas that made people listen and that propelled him to the presidency. His opponents always said, “he’s just an actor reading cue cards.” No, he’s Sylvester Stallone who wrote the script of Rocky and put himself in the starring role. He was both the actor and the script writer.

When Ronald Reagan went on television in 1964 for Barry Goldwater, the tenor and the words of his speech did exactly what millions of people were feeling, and he became their hero. Doing something right is communicating an idea with a tenor that hits the times that tells people you are on their side.

Larry Bernstein:

During the 2016 Campaign, Hillary Clinton was going to give her major foreign policy speech, and every line was reviewed. It reflected an enormous amount of work with her policy staff. About 30% into her speech, CNN switched to an upcoming Trump rally, and they showed the podium saying he will be here shortly. Hillary was outraged, but it reflected CNN management’s thought that people were uninterested about Hillary’s foreign policy or didn’t care about the words that she was going to articulate.

Henry Olsen:

The 2016 campaign was a great example of what I am talking about. You might cover Trump because news might be made. What comes out of Hillary Clinton’s mouth is overly tested dry pabulum that you know exactly what she is going to say. It is not going to be memorable. Donald Trump is both informative and entertaining, and Hillary Clinton is neither. It is a wonderful example of why Donald Trump ended up beating her.

Larry Bernstein:

Some people find Trump’s rhetoric entertaining. Other people are angry and upset. Why do some people feel one way versus another? It is partisan but not completely?

Henry Olsen:

You listen to Trump and if you have an appreciation for style, or are looking for an argument that’s rhetorically clear, Donald Trump won’t give that to you.

Particularly among Republicans, the more formal education you have, the more likely you are to be either marginally attached to Trump or all the way over to I am no longer a Republican. Most people who are doing well in this country have a stake in global trade, progressive social values, and American internationalism. They see themselves as winners. So, when Donald Trump declared war on those things, they are going to hate what Donald Trump does. But the flip side is the losers in the last quarter century know what Donald Trump wants to do. He wants to restore them to the center of American life.

Larry Bernstein:

I was chatting with a buddy of mine who is the president of a major bank, and he said, I agree with Trump’s policies. I just do not like the way he says it. So that differentiates from what you just mentioned about how they disagree with the content. He says,” I Agree.” But why does he have to talk and behave like that?”

Henry Olsen:

Trump carries things too far. During the first term, the tweeting would often be over the top. What he is doing is audience tests is he is seeing how far he has to go to get the response that he wants.

Your bank president likes a lot of Trump stuff but is not on board with radical change. In which case you must choose between a person who will defend the status quo or somebody who wants to change the status quo. And that is the choice Donald Trump presents.

Larry Bernstein:

Karl Rove writes in the Wall Street Journal each week on Thursdays, and he did one on Trump rhetoric. He said that Trump’s desire to lead the news cycle every day means that he cannot make a case for his accomplishments in a consistent and thoughtful way, and that people get run around on Greenland and Venezuela and so many different issues that it does him a disservice. Do you think that his Trump rhetoric style that incorporates widely divergent content does him more harm than good?

Henry Olsen:

Trump and the Republican Party would benefit from less noise and more signal. He would benefit from not trying to dominate every news cycle with things that are not as important to Americans like Iran or Greenland. Trump could do a lot more to tell Americans directionally where he is taking the economy.

Larry Bernstein:

Trump gave a speech at Davos a few weeks ago that does not resemble a speech by any of the other leaders at that conference. When he talks about Greenland, he opens it by saying, I wasn’t going to talk about Greenland, but here we go. Then he starts making arguments. Some are ridiculous, some are poignant, but he makes arguments that no other leader would make let alone in its style.

I’ll give you an example. He said Denmark has no way to defend Greenland. He said that when Germany invaded Denmark, the country fell in six hours and that if it had not been for America, this audience would be speaking solely in German. This is something that nobody would ever say to a European audience. Tell us about Davos, his rhetoric with this international community and his objective, which is take care of your own defense, pay for it yourself, and do not rely on us.

Henry Olsen:

The latter point is the $64,000 question. The European elites have been the example par excellence of people invested in the order Donald wants to destroy. Europeans like American primacy because it means they are defended without having to spend money. They can have a welfare state that is financed by the United States.

Trump tried soft peddling it in his first term. NATO went from like 1.4% of GDP of defense spending to 1.6%. It was woefully insufficient. I think Selena Zito is right in her book Butler where she says that it was the assassination where Trump realized I have got a few years of life left. Let’s just not be pussy footing around. You have got Trump unbound in the second term, which is pushing everywhere on everything all at once.

The Europeans are used to very cozy consensual politics and are shocked. Merz the Chancellor of Germany has said we can no longer depend on the Americans. Chancellor Merz is serious. The rest of the Europeans will follow suit enough that you can say Europe will collectively move towards some degree of self-reliance in their own defense.

Larry Bernstein:

Trump sometimes does not act like a leader of the free world. He behaves like a Fox News commentator. I will give an example from Davos. He said, I love Macron, but what were you doing wearing those sunglasses here inside? This is not a topic of conversation normally discussed on the world stage, but the audience probably responded with, yeah, what was Macron doing wearing those sunglasses?

Another example, after Super Bowl Sunday, he came out against the Bad Bunny halftime show. This is not something the President of the United States usually interacts with, and a third example when the Saudis killed Khashoggi in its Istanbul embassy, the expectation is the US President would condemn the murder and say, this is outside the realm of behavior by nation-states in modern times. Instead, he said that the United States is no better than the Saudis.

How do you explain Trump’s willingness to use rhetoric and subject matter that is like a Fox News commentator?

Henry Olsen:

Not everything Trump does is right. There are times when he should not go there. He could limit himself more, and there are times when he is shown himself able to do that but that’s what his fans like. Media trainers will tell you to never answer the question. People have gotten used to everyone who’s media training.

Donald Trump answers the question. Sometimes it is weird. Sometimes he preempts the question like, Macron, what are you doing wearing sunglasses inside? The fact is that Macron was talked about before President Trump said it because you do not usually wear blue reflector sunglasses inside on a January day and Trump just picked up on that. The fact that he answers questions directly in a way that seems unfiltered or unscripted is part of his success.

Larry Bernstein:

Let’s compare it with other politicians responding to Trump rhetoric. I will pick a Republican first and then a Democrat afterwards. As vice president Vance has to articulate Trump’s policies using different words and style. He will speak on the Sunday shows making the same arguments, but in better soundbites, clearer answers, but the content’s the same or adding arguments. How do you feel about the interaction between Vance and Trump explaining using a different word style?

Henry Olsen:

Vance can both communicate in a Trumpian and a traditional way. Rubio is another person who exemplifies that, and that is one reason why they have elevated themselves above the other successors, both in Trump’s and in the public’s eyes.

Larry Bernstein:

California Governor Gavin Newsom decided to use non-traditional media and making stylistic points in a Trumpian way to articulate the Democrat’s message. Do you think we could have a bipartisan change in rhetoric? What are your expectations for Newsom’s use of Trumpian style?

Henry Olsen:

Newsom’s use of Trumpian style is much more online. That is not the same as his in-person persona. What will be interesting to see is when Newsom becomes a candidate, how he adapts to answer a question directly.

We must see more nuance as a national candidate subject to the daily pressures that a presidential candidate is subject to see. Democrats like Jasmine Crockett in Texas is doing that online and in television appearances. The snappy one-liner with sometimes some profanity.

We have come a long way from the time when Hubert Humphrey in 1968 refused an invitation to appear on number one show in America, Rowan and Martin’s Laughin’ because it was below the dignity of the president. Richard Nixon accepted it. Humphrey after the election said,” I made a mistake.” We have moved a long way from that.

Larry Bernstein:

I once met with Mitt Romney and in a group setting, he was funny. sharp, and excellent at presenting his ideas. A woman in the audience said to him, “I don’t get it. The Mitt Romney I see on television is not you. Why are you so incapable of projecting this style of rhetoric to the American people?”

He said, “I do these advertisements with me running around with my grandkids and I give long speeches, but it seems like the mainstream media picks only those things that are either mistakes or ridiculous. The good stuff doesn’t make it.” How was Trump able to bypass mainstream media or use mainstream media to his advantage where traditional Republican candidates like Mitt Romney failed?

Henry Olsen:

Social media was only coming to fore when Romney ran in 2012. Facebook was a new thing in 2008. People were just learning. It took a long time for people to figure out how to use television effectively. Television was a big thing in 1952, but Roger Ailes helps Richard Nixon perfect how to use television effectively in 1968, and that’s 16 years.

You don’t get the 30 second attack advertisement until the seventies. It takes 20 years for people to figure out how to use a new technology. I do not blame Romney for that. Romney could be at ease with people in a small non-televised setting. Romney was afraid of being himself in public in a way he wasn’t in private. I cannot ever remember except for the first debate against Obama when there was a Mitt Romney success.

It’s like when people talk about Romney supposedly roping his dog to the top of his car like in the move Vacation. That is weird. But there must be a way to roll and laugh with yourself.

Larry Bernstein:

Harry Frankfurt was a Princeton professor in philosophy, and he wrote a book called On Bullshit.

It is a fantastic book. Short and sweet, and its premise is straightforward. He says there is three different types of rhetoric. There is the truth, falsehood, and bullshit. Truth is the truth. Falsehood is something where the speaker is very aware and cares about the truth but wants to pursue something that’s false. A person who uses bullshit is uninterested in the truth, does not care about it. And Frankfurt wrote an essay explaining why Trump was consistently articulating bullshit. You have referenced it as something different distinguishing from Frankfurt’s work. It seems to me that you would say, is the heavily tested boring political claptrap that borders on bullshit?

Because it may be something that the foreign policy experts believe, but it is something that they are expected to say and not deliver on. Where Trump is saying, “I know that’s not true. Maybe this is not the lowest inflation of all time. Maybe there are not more people at my inaugural address in 2017 that were at Obama’s,” Trump is saying that the establishment is bullshit. Mine is more entertaining. Sure, it is embellishment.

Henry Olsen:

Absolutely. Trump would say it is that the elites have been bullshitting you for years and millions of people agree with him. People in Washington, we are trying to help America, and nobody believes that. Trump is not telling the truth, but directionally he is telling you what he honestly believes, and millions of people agree with his diagnosis and are willing to follow his prescriptions. When you listen to the highly manicured speeches of other people, many things may be literally true, but you are not at all convinced that they actually mean what they’re saying, and then oftentimes the fact that they don’t deliver what they’re saying. I think the failure of the British Conservative Party right now, it’s directly due to that.

They have been saying for years, we want to bring down immigration. The rhetoric is bullshit, and you have to ask yourself at some point, did you believe it when you were saying, and you were incompetent or you lying to us all the time in this highly manicured tested way?

Larry Bernstein:

In my previous podcast was on the Spanish Civil War, and one aspect of it was analyzing George Orwell’s book Homage to Catalonia, where he first became aware of blatant falsehoods by the Stalinists as to what was happening in Barcelona during the Spanish Civil War. And he recognized that unchecked we could end up like in 1984 with the Ministry of Truth, where they were deeply concerned about the truth and therefore would go back and edit previous newspaper articles and take out various characters once they had been decided that they were no longer supportive of the regime.

Thinking about Orwell’s Ministry of Truth, how do you think of that as a model to what Trump is trying to achieve inside and outside the government?

Henry Olsen:

I do not think Trump is engaged in a systemic campaign to create an echo chamber of lies. You hear people on his opponent say, oh, free press is in danger. No free press is not in danger in the slightest. When people get dragged into the Ministry of Truth and have a cage stuck in front of their face and rats are coming at you, that’s when free expression of ideas are endangered is when they kill or torture you.

What Donald Trump is trying to do is using provocation to help create that narrative by forcing his opponents to talk about something that he wants to talk about. It’s like JD Vance talking about how they’re not eating the cats in Springfield, but it got you to talk about problems of mass migration. I don’t think that saying it that way was the best idea, but the fact is, a lot of times by attacking the left in an over-the-top way, he forces the left to talk about something in a way that defends the left’s presuppositions that are not agreed on. Trump is a master at forcing the left to compete on his own playing field.

Larry Bernstein:

I watched an episode of the Phil Donahue show back in the eighties when Trump was doing the circuit related to his new book, The Art of the Deal. Phil Donahue went after Trump, and Trump was able to deflect and energize Donahue’s own audience against him to his shock and chagrin. It wasn’t like Trump was different then than he is now. He’s the same. It is not like Trump is philosophical about language or about his approach or methods. He has been behaving this way his whole life.

How do you think Trump adapted to the current opportunity?

Henry Olsen:

Trump has always been a master at manipulating media attention. He has always been open to new technologies. The Apprentice was a brilliant use of the new reality television. Instead of American Idol and Survivor, he put it in the broader way that was captivating television. Social media was just another thing that Trump did not shy away from, or think was beneath him. It was this new way of communicating.

Larry Bernstein:

My mother always asks me, “why does Trump have to talk like that?”

Henry Olsen:

Trump must talk like that because it is the way to convey to people who have felt disrespected and unwanted for many years that he’s the person who respects them. If Trump does not talk like that, Trump is not president of the United States and Trump is not effective in wielding the power of the office of the President.

Larry Bernstein:

In 2017, I bumped into you in Central Park. It was immediately after Trump put his foot in his mouth regarding Charlottesville. You said to me, here is what Trump should have said. You articulated in beautiful language highlighting the distinctions so that his opponents could not make him out to be a racist.

I said to you at the time, if he spoke like you Henry, he could not be President of the United States and would sound like other politicians. Tell us about your reflections on Henry Olsen in 2017 versus Henry Olsen in 2026.

Henry Olsen:

I have been persuaded to every time Donald Trump opens his mouth is a win. Donald Trump does put his foot in his mouth. What we have seen is that the harm was less than I thought, and the good was more than I thought. Trump had to be much more confrontational, direct, and untraditional.

Larry Bernstein:

Trump has three years left in the White House. After he is gone, do you think political rhetoric will be Trumpian or will it return to pre-Trumpian?

Henry Olsen:

It won’t return to being pre-Trumpian because people adapt to the innovation. What we have seen is that rough and tumble directness is rewarding, and you see that Governor Newsom is adopting it. You’ve got Cory Booker trying to be Spartacus on the Senate floor, trying to adapt in his own way. If you try to be Donald Trump, you will fail because you are not Donald Trump. But the directness and offensive language that’s proven to be effective will be a feature of both presidential campaigns in 2028.

It’s like I said about Rowan and Martin’s Laughin’. Once Richard Nixon appeared on the number one television program in a self-deprecating, non-traditional way and won the presidency, people were going to follow. Trying to be authentic using direct-to-viewer communications ever since. The way Trump does it has proven to be effective, so we should expect politicians to do that.

Larry Bernstein:

What are optimistic about as it relates to political rhetoric?

Henry Olsen:

The positive aspect of Trump’s rhetoric is getting us out of where everything is fully tested, and politicians are manifestly not sincere in their presentation. When you are full testing everything, you are not leading, you are following. The positive aspect of Trump’s rhetoric is it forces politicians to adopt a rhetoric that displays real convictions, real direction, real differences, and that reinvigorates democracy.

Larry Bernstein:

Thanks to Henry for joining us.

If you missed the previous podcast, the topic was 90^th Anniversary of the Spanish Civil War.

Our speaker was Giles Tremlett who is the author of several books on the Spanish civil war including El Generalisimo: A Biography of Francisco Franco.

Giles explained why anticlerical actions by the Republicans triggered the civil war and why it later became a proxy war between Hitler and Stalin.

You can find our previous episodes and transcripts on our website
whathappensnextin6minutes.com. Please follow us on Apple Podcasts or Spotify. Thank you for joining us today, goodbye.

Check out our previous episode, The 90th Anniversary of the Spanish Civil War, here.

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Giles Tremlett

Subject: The 90^th Anniversary of the Spanish Civil War
Bio: Historian and author of several books on the Spanish Civil War including El Generalisimo: A Biography of Francisco Franco

Transcript:

Larry Bernstein:

Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast which covers economics, politics, and history. Today’s topic is the 90^th Anniversary of the Spanish Civil War.

Our speaker is Giles Tremlett who is the author of several books on the Spanish civil war and his most recent work is entitled El Generalisimo: A Biography of Francisco Franco.

I want to hear from Giles about what triggered the civil war, why did it become a proxy war between Hitler and Stalin, and what happened to Spain after Franco’s nationalists won the conflict.

Giles, please begin with six minutes of opening remarks.

Giles Tremlett:

90 years have gone by since the Spanish Civil War. That war absorbed everybody across Europe and Russia. It’s an attempted coup by the conservative reactionary faction in the Spanish military. They think it’s going to be short in the classic version of a coup d’etat, you capture the interior ministry and the radio station and a few other significant places in the capital and with that, you’ve grabbed power. Well, in this case, it didn’t work. The uprising failed in Madrid and in Barcelona. It only worked in a few places which were provincial.

Spain had only thrown out its royal family in 1931. So, this republic was five years old. It started off with a left-wing phase then a right-wing phase. There had been elections in 1936 that changed the government back to a left-wing government. This war’s going to go on for three years until 1939 which is the start of the Second World War. I would say that the Spanish Civil War is the start of the Second World War because it is a civil war between Spaniards but it’s also an international war. Hitler and Mussolini will send troops, aircraft, pilots, and munitions to back the insurrectionary side. Stalin will send tanks, arms, pilots, and advisors supporting the Republican government.

There’s also a volunteer transnational army, the international brigades who fight for the Republic from all over the world. This war is defined in negative terms as anti-communists, that’s the insurrectionist side, and as anti-fascists that’s the Republican side.

Larry Bernstein:

Can you give us some historical context of what is happening in Spain beginning with the rise and fall of its empire?

Giles Tremlett:

The Spanish Civil War is in an era of imperial decline. Spain founded the first great global empire in 1492 when Columbus sailed across the Atlantic. For centuries it had the world’s greatest empire. I’m speaking as an Englishman, so I know what this feels like: God’s chosen, to teach the rest of the world how to organize itself and possibly rake off goodies at the same time, and suddenly wham, it’s all gone.

Spain during the 19th century lost its Latin American colonies and in 1898 the Spanish American War Cuba and the Philippines both lost. The American Navy completely trashes the Spanish, manages to sink both fleets in a morning reportedly with a break for tea in one battle.

Spain realizes its great past is gone, and that plays out violently over three civil wars in the 19th century between the Catholics and traditionalists and the liberals. Liberals are the people who want to bring change. The Spanish Civil War is the final battle of a foundational idea of Spain as a place run by Spaniards on the basis of Spanish tradition and ideas, or whether it should be open to the world and absorb modern ideas.

The rise of the great ideologies of the 20th century with fascism and communism setting up the great confrontation that will come in the Second World War all get mixed together in poor old Spain. That’s going to be three years of war with half a million people dying in battle another half a million dying outside the battle. It was a vicious war behind the lines. Afterwards it will get a 40-year military dictatorship led by Francisco Franco because his insurrectionists win, and Spain will not taste democracy again until after his death in 1975.

Larry Bernstein:

What triggered the Civil War?

Giles Tremlett:

You get a change of government, a left-wing government comes in and immediately pardons the people who had had a revolutionary strike against the previous government in October 1935 where the left was convinced that the right wing government was fascist, it wasn’t. Francisco Franco, the top general, was called upon to put down the revolutionary strike.

There is this anticlericalism, people are going out and occasionally burn down a church. In a deeply, traditionally Roman Catholic country like Spain that created an opposition to the government, which was much wider than the small fascist party or the military right wingers. Social support was created by the conditions in the months running up to the beginning of the war.

Larry Bernstein:

Talk about the anti-clerical nature of the left-wing regime. Churches were burned down, priests and nuns were killed. There was a law passed to close the Catholic schools. In a deeply traditional Catholic country, this was viewed as an anathema to the more conservative elements. And then there was a very anti-property approach, businesses with more than 50 workers were nationalized. Larger farms were taken over by the communes, and that this was communist in nature. How do you feel about the nature of the anti-Catholic and anti-capitalistic policies instigating this civil war?

Giles Tremlett:

I think the anti-Catholic policies have a much wider impact. Spain was a very traditional and rural country. The traditions of small towns and villages revolved around the church calendar, the yearly events, the Easter week, and the various saint celebrations are part of the tapestry of life. So, to try and tear that out is a violent act.

I think that is more important than the question of property, which particularly was to do with land reform. Spain had a very inefficient system of Latifundia, which meant huge properties that were farmed inefficiently that were dominated by landowners but populated by landless peasants, who were the workforce.

Larry Bernstein:

In the book, you say that to many in Europe, Africa started at the Pyrenees. You mentioned previously that Spain had this ideal of being a leader of the West in its grander days of empire, but it was not an industrial country. It was a rural country with a relatively high birth rate, and the only thing it seemed to export were people that moved to places like Argentina and Latin America. How should we think about the fact that it was an afterthought of Europe and a poor country and how does that impact this civil war?

Giles Tremlett:

Part of this crisis that occurs because of this fall from glory is that Spain begins to compare itself to other countries, to France, Germany, Britain, Italy and Belgium. The big measuring stick of the time is, “Is my empire bigger than yours?” And to Spaniards everyone else had an empire but Spain no longer had any empire at all. It was already a lesser nation than Portugal, its neighbor which was poorer but had land in Africa, India and elsewhere.

One of the terrible situations for Spain in the Civil War is that it’s this slightly irrelevant country where others can come and play at war. And that explains partly why Hitler will send troops and arms. He’s testing out his new airplanes. He has only just got his arms industry going. Spain is a practice ground for him. It is also a place where Mussolini and Stalin can come and play.

Larry Bernstein:

I had a podcast last week on the collapse of Venezuela with Francisco Rodriguez. He mentioned was that one of the reasons that Venezuela is a catastrophe is that both political parties there played scorched earth politics, that they lost their trust in the Democratic process, that winners of elections could win and rule, and that there would be no room for an opposition. They changed their constitution in the late 1990s so that the executive could pack the Supreme Court and replace heads of institutions, including members of Congress. And as a result, it became an executive autocrat after an election with little chance of removal.

I wonder if that was also something that happens here in Spain in the mid 1930s, is that although it had just begun a democratic experiment in 1931, which is not long, but there was a sense that the current government would not be a separation of powers or requirements of bipartisan support for certain actions. And this triggered the initial coup, particularly the attacks against the church, which set off reactionary forces.

In the book, you highlight that the coup leaders did not have an ideological bent. It was just to return to traditional nationalism. Take us through scorched earth politics as being a potential cause for the unrest.

Giles Tremlett:

Way back in the early 19th century, Spanish intellectuals and poets were writing about called the two Spains. There is a great famous poem which starts off, “Little Spaniard who comes into this world, may the Lord look after you, one of the two Spains will freeze your heart.” It’s this idea of a Spain that’s already divided between traditionalists and liberals and that divide already exists. There’s also a dictatorship in the 1920s, short lived. So that element is already present when Spain does this experimental leap. It goes from a monarchy supported by a dictatorship to democracy in the Republic.

Spain had had some electoral system in the 19th and early 20th century. All elections were corrupt, two parties decided that they would take turns to rule, and they would make sure that every two or three years, elections brought the other party in. So, there had not been a tradition of democracy in Spain. We have the two Spains, bitterly divided, suddenly trying to find a way to work in a democracy.

One of the problems precisely is that when the different parties came into power, they had an all or nothing version of power. The pendulum would swing wildly from one side to the other when it might just be that the percentage of votes that it had changed was 5%, which is enough to swing the government from one side to another, and then each side would do fairly radical reforms, which then would antagonize the others. And these two sides simply crystallize into something hard and violent in 1936.

Larry Bernstein:

When the Spanish Civil War is discussed in the United States, particularly in schools, it’s described as a proxy war between the fascists and the democrats. But when I read your book, I came away thinking that that had been a misleading description. Most proxy wars after World War II between the United States and the Soviet Union are made between those two sides, like North Korea versus South Korea or South Vietnam and North Vietnam. But here, the two sides are oblivious to each other.

When the coup starts, Franco, who was a military commander in the Canary Islands flies to Morocco to gather the Spanish Legion troops to cross the Mediterranean. He has to ask Mussolini and Hitler for air support. And Hitler was completely unaware that this was even going on. He was oblivious to it. It wasn’t like he was an instigator. It was unknown to him. He’s like, “Sure, whatever. You need some planes to get some troops across the Mediterranean. Knock yourself out.” It doesn’t start as a proxy war, it becomes one. Take us through the Spanish Civil War and why it really is a Spanish civil war first and foremost.

Giles Tremlett:

It starts off as a purely Spanish war, and then it becomes a proxy war as everyone else piles in, takes advantage of the situation, or responds to the appeals for help that arrive from elsewhere. But essentially this confrontation between the two Spains produces a war in a moment where the rest of Europe is heating itself up for a big war.

Larry Bernstein:

An international brigade shows up to help the left side. These are a ragtag group of individuals from all over the world. And Franco is completely shocked. Who are these people? What are they doing here? Who do they represent?

Giles Tremlett:

Volunteers decided that what was happening in Spain was terrible, that Franco’s side was fascist and that it was their desire to come and defend Spain. One of Churchill’s nephews turned up, for example, Esmond Romilly. And so there was, to begin with, just a ragtag of people.

They also turned up cycling over and lots of foreigners who were already here joined in. The day the war started was the day that Spain was meant to have an alternative Olympics. There was an Olympiada Popular was to be held in Barcelona. It was the rival Olympics to Hitler’s great Berlin showpiece Olympics. They never happened because war broke out the night before, but some of those people stayed including a team from the United States.

There was a Jewish team. It was a very progressive for the time. It was very multicultural as well. And on the other hand, you have the big organizing capacity of the International Communist Party or Comintern which is run from Moscow, and is synced with the Spanish Communist Party. There were so many Jewish brigades who came from different countries that one of the common languages that the brigades could communicate in was Yiddish.

That was important now how we think of the Spanish Civil War, because a lot of the information that people received about it came from the international brigades. George Orwell was another volunteer. He joined a Trotskyist outfit, but he is part of this wave of people who arrive and want to help.

Larry Bernstein:

George Orwell wrote a famous book, Homage to Catalonia, in which he describes his volunteering and moving to Barcelona to fight. The book spends time discussing the struggles between the various left wing communist organizations that hated each other. The Franco forces do not even show up in the book. It’s about the Trotskyites versus Stalin’s groups. Stalin has provided substantial arms and this international brigade shows up to fight on behalf of communism. What were these guys trying to achieve? What was their ultimate utopian vision?

And what did Franco and his supporters make of this Marxist-Stalinist intrusion on Spain?

Giles Tremlett:

You have got an assortment of left groups, the anarchists, socialists who are running the government, the communists were Stalinist. And then the Trotskyists in the communist world are the romantics who want the revolution to happen now, and they want everything, all property be shared.

Funny enough, it’s the Stalinist communists who are the pragmatists in this moment. They are saying, “Forget the revolution guys, we’ve got to win this war.” They see the Trotskyist as the danger. This mirrors what’s happening in the USSR.

Stalinists decided that Trotsky is the big enemy and Stalinism is becoming a form of Russian nationalism and is losing its utopian ideas. In Spain the international communist community, they are becoming pragmatist. This idea of world revolution is dying down. It is becoming communism in Russia, and we will see what we can do everywhere else. The split on the left, the Trotskyists slightly supported by the anarchists versus the Stalinists.

What George Orwell saw infused his later writing. Spain is the place where Orwell became anti-Stalinist and led to his writing of Animal Farm. In Spain, Orwell saw himself as fighting for a just cause, suddenly finds posters on the street saying, “You are evil,” because the communist propaganda machine goes into overdrive. He becomes convinced that Stalinist communism is about power, repression, and manipulating the truth.

Larry Bernstein:

I want to discuss Franco’s ideology in the context of what was going on in Europe on the right to compare it with Vichy and Marshal Pétain’s philosophy. In 1940 when France surrenders, the Vichy government to set up in Southern France and decides that the reason France lost the war is that the French government is corrupted. To return France to greatness requires going back to its core values, the French Catholic Church, the French nation, the role of the family and the father as being the decision maker, going back to traditional values. That is in 1940. (For my podcast on Pétain and Vichy France here is link.)

Here we are in Spain in 1936 where Franco is espousing similar views as Pétain. Spain is culturally bankrupt. We need to reinvigorate the greatness of the Spanish nation. To do that, we need to extol the benefits of the Catholic church, the family, and the role of the genders to reinvigorate a great Spanish society.

I do not see Franco coming out of left field here. I see him as core to the traditionalist segment of these countries. What do you make of that?

Giles Tremlett:

What ideology did Franco have? Well, he did not have one because he is not a socialist, he is not a fascist, he’s not a communist, he’s not a conservative, he’s not a liberal, so what the hell is he?

Before he came to power, nobody would give you an answer about General Francisco Franco, this ambitious young military officer, what his politics were. He was ambitious, determined to get to the top of the army. There are certain advantages in not being overtly ideological. It meant, for example, that during the Second World War, he could drift towards the fascism, support Hitler, but not quite go the whole way. Then after the war, embrace a self-reliance of Spain, then flip in the 1960s to a more open liberal regime.

One way of describing Francois is that more than an ideology, it is a form of social control keeping people within certain margins of behavior, and it is a very military concept as well.

Larry Bernstein:

I think of it as traditional Catholic, family oriented, less opposed to anti-religious, anti-clerical behavior, instilling moral values through Catholic schools, just highly traditional, family and church.

Giles Tremlett:

Absolutely. He wants people to be obedient and for there to be a strong chain of command. He is going to go to his own traditional view of what Spanish society should be like. And you are right to draw the comparisons to Pétain’s Vichy because it is also about, what is the essence of being Spanish? We need to be true to ourselves. Everything else he opposed such as freemasonry, liberalism or even democracy. The ideas that come from France, Britain, or the United States. If you are going to be true to yourself in Spain, then the key identity factors are church, nation, and army.

Even priests will be incorporated into the functioning of Franco’s state. Under Francoism your local priest will be asked to help make wider governmental decisions about things that happen in your village. They started calling it National Catholicism.

Larry Bernstein:

We think of the Spanish Civil War as a proxy war between fascism on the one hand and Stalinism on the other. But there are two countries very nearby, England and France, and they play a peripheral role in this war away from the international brigade. Churchill was asked about it and he said he does not like either side, but if he had to pick one, he would be on the side of Franco. The French have a very liberal government at the time decides not to intervene on either side. What do you make of Churchill’s view that if he had to pick a side, he would choose Franco?

Giles Tremlett:

The British conservative establishment was very much in favor of Franco rather than the Republican elected government. Later in the Second World War, Churchill took a different opinion on Franco because Franco was helping Hitler.

All the calculations that are being made by all the sides have a lot to do with are we about to go into a big war? And the idea of being sucked into a war in Spain was something that the Britain and the French did not want even though they had a left-wing government.

Spain was left to look after itself and was pushed towards Stalin because that is all there was left in terms of support. There was a non-intervention agreement. Everybody signed up to it, including Hitler, Mussolini, and Stalin. But Mussolini had 70,000 men on the ground and Hitler sent squadrons of aircraft.

Larry Bernstein:

And Stalin sent his latest tanks and aircraft as well. And you mentioned in your book that they were superior.

Giles Tremlett:

The Russian tanks and fighter planes were better than the early German ones. It was a lesson for the Germans that they had to up their game. Their anti-tank guns were fantastic, and they would invent the idea of bombardment of civilian targets, and Blitzkrieg is taken out for trial. All those things we saw at the beginning of the Second World War with Stuka bombers coming down screaming, and tanks rolling forward quickly. All that was practiced and worked out in Spain.

Larry Bernstein:

Hitler and Franco do not get along very well personally. Take us through their one fateful meeting in France on the Spanish and French border in October 1940, just a few months after the French surrender.

Giles Tremlett:

Hitler wanted Spain to join the war and no one’s sure what Franco wanted because he was very sinuous and wily when it came to negotiating deals and hated committing himself. He found it hard to sign agreements that nailed him to a particular posture in the future. Hitler turned up convinced that Spain was about to join the war on his side. They had this conversation in Hitler’s train where Franco rabbited on about everything. He could talk nonstop about battles he had fought in or anything to stay off topic.

At the end, Hitler famously said, “I would rather have my teeth pulled out than to sit down with this man again.” Even then, Hitler came away convinced that Spain was going to join the Axis powers in the Second World War and treaties were written and they were signed.

But what those treaties basically said was, “Yes, we’ll join the war, but when we are ready,” and that never happened. Spain stayed out of the Second World War.

Franco wanted things in return for joining and what he really wanted, and people forget this, he wanted an empire, and he wanted Hitler to say, “Okay, you can have the whole of Morocco,” which was mostly in French hands. If he had been given Morocco and Gibraltar, which was in British hands, he quite possibly would have joined the war. But Hitler was not prepared to do that.

Spain was worn out after the civil war, so its army was not in that great condition. It would not have been able to add much to Hitler’s war effort. It was more useful to him as a source of raw materials and as a place where the Brits were not welcome and that suited both Germany and Franco’s Spain. The result was Spain stayed out of the war.

At the end of the war, Franco declared that this was all due to his own personal brilliance. The headlines in the Spanish propaganda papers are, Franco has won again by keeping us out of the war.

Franco is not an ideologist. Hitler is. Mussolini is. He does not share the passion for some modern future. He is not bound to them in that way. He is pragmatic.

Larry Bernstein:

I consider Spain in the context of my own family’s movements. My grandparents and my mom lived in Vienna in the late 1930s, and after the Anschluss, they moved to France. My grandfather joined the French Foreign Legion as a physician. And then after the war ended in June 1940, went into hiding in Southern France just outside of Marseille. When the Americans and the British invaded North Africa in November 1942 in Operation Torch, the French did not put up much of an effort. Hitler decided that he had to occupy Southern France as well.

In that second week of November 1942, German storm troops entered Marseille, and my grandfather turned to my grandmother and said, “We got to get out of here.” And his landlord said that as she had gotten a letter from a friend that a bridge to Spain was unoccupied and might be an easy way to get out. And so, my grandfather, grandmother, and mom headed for the Spanish Pyrenees. He was able to hook up with the Maquis the French resistance in that area. Because of his participation in the French Foreign Legion during the war, he, along with two dozen British pilots, led by a Spanish smuggler, was able to cross the Pyrenees in December of 1942.

And when he crossed the border, he was quickly arrested by the Spanish police and military forces there. And under an agreement with Hitler that Franco had signed, Franco agreed to give all refugees back to the Germans, but that is not what happened.

My grandparents and my mom were released. They had a Spanish transit visa, and they were on their way to Lisbon to get to the United States. 80,000 Jews were able to escape through the Spanish Pyrenees under Franco’s regime, that they decided not to play ball with Hitler as it related to Jews coming through the country. This is important to think about is the role of the Spaniards during the war as it relates to Jews on the run.

Giles Tremlett:

Franco’s speech was antisemitic. Jews along with Freemasons are his other obsession as the natural enemy of the world that he wants. He appeals back into Spanish history; Spain expelled its Jews in 1492. The entire Sephardic diaspora starts with an expulsion of Jews from Spain.

As you say, Spain turns out to be a relatively safe country for Jews fleeing from Hitler’s world to cross. It is also a sign that that antisemitism was not as visceral as it was in other countries, quite possibly, because Spain did not have a Jewish population of its own, and therefore there was none of this neighbor against neighbor or envy. They had no experience of living with Jewish people.

Larry Bernstein:

I end each podcast on a note of optimism. It is the 90th anniversary of the Spanish Civil War. What lessons can we take from it for today?

Giles Tremlett:

This hatred that the two Spains had for each other can go away eventually. Spain became a remarkably successful democracy as of 1978, just three years after Franco died. There is still two Spains, but they just argue in a parliament. And that’s fine because there are two of everything. There are two Britains, there are two United States’s. The idea of democracy is to civilize debate.

In the long term, Spain is a story of success. The civil war is not part of that success. It became defined by the people who are fighting it as we are anti-Fascists, and we are anti-communists.

I wonder whether there isn’t a warning to be learned from the Spanish Civil War about how we categorize our opponents. What language do we use to speak about them? And the more I read there was a centrist Spain in 1936, it was not necessary for Spain to go into civil war. There was a center that disappeared, and people scuttled off to the extremes.

Larry Bernstein:

Thanks to Giles for joining us. If you missed the previous podcast, the topic was Venezuela after Maduro.

Our speaker was Francisco Rodriguez who is a Senior Research Fellow at the Center for Economic and Policy Research and the author of the recent book entitled The Collapse of Venezuela: Scorched Earth Politics and Economic Decline, 2012-2020.

Francisco explained why the US sanctions resulted in the implosion of the Venezuelan economy. Francisco also explained why he wants the US to encourage a negotiated settlement between Maduro’s party and its opposition to create a functioning civil society.

You can find our previous episodes and transcripts on our website
whathappensnextin6minutes.com. Please follow us on Apple Podcasts or Spotify. Thank you for joining us today, goodbye.

Check out our previous episode, Venezuela After Maduro, here.

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Francisco Rodriguez

Subject: Venezuela After Maduro
Bio: Senior Research Fellow at the Center for Economic and Policy Research, and author of The Collapse of Venezuela: Scorched Earth Politics and Economic Decline, 2012-2020

Transcript:

Larry Bernstein:

Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast which covers economics, politics, and history. Today’s topic is Venezuela After Maduro.

Our speaker is Francisco Rodriguez who is a Senior Research Fellow at the Center for Economic and Policy Research and the author of the recent book The Collapse of Venezuela: Scorched Earth Politics and Economic Decline, 2012-2020.

I want to learn from Francisco about the importance of sanctions to explain the catastrophic performance of Venezuela’s economy for the past 20 years. I also want to hear about whether the US should encourage a negotiated settlement between members of the regime and its opposition to create a functioning civil society.

Francisco, please begin with six minutes of opening remarks.

Francisco Rodriguez:

Venezuela suffered between 2012 and 2020 the largest growth collapse ever documented outside of wartime. GDP per capita dropped by 71%. That’s the equivalent of three consecutive great depressions. Poverty rates shot up to greater than 90%. Malnutrition, which was virtually non-existent in Venezuela, grew to more than a quarter of the population. Another quarter of the population left the country.

What happened? To a certain extent, disasters of this magnitude are a challenge to our theories of development and economic growth. Some people think that they know the Venezuelan story. It was failed policies, corruption, mismanagement. Some say it is the failure of socialism.

It is not that simple, because if you look at the policies that were implemented in Venezuela over this period, you find nationalizations, price controls, exchange controls, excessive regulation, corruption, mismanagement, and you find all of those in several Latin American experiences. Rudiger Dornbusch and Sebastian Edwards many years ago described this cycle as the macroeconomics of populism. Countries would go through expansions that were fueled by irresponsible policies, overspending, overvalued exchange rates, and these countries would invariably end in crisis. And those crises sometimes took 10% of GDP, sometimes 20, sometimes as much as 30, never 70%.

What happened in Venezuela? That is what I tried to answer in my book. The first thing to understand is that in Venezuela, it is two crises going on. The first one is the Dornbush and Edwards style crisis, which starts at around 2013, as the economy was adjusting to a previously unsustainable peak. President Chavez had overspent on his last reelection, the economy was overextended, and you start getting import cuts, a devaluation, and a classic macroeconomic adjustment. But then something different happened when oil prices started recovering in 2017, the economy did not recover along with it, and the reason it did not recover was that oil production was collapsing.

Since the 1920s, oil has been the driver of the country’s economy, and between 2012 and 2020, oil revenues declined by 93%. The economy’s engine of growth disappeared over this period. So, what drove this collapse in oil production? After 2017 the increase in oil prices, which would have typically stabilized the Venezuelan economy was unable to do what it had done in the past.

It was the breakdown of the institutions that had managed conflict between political elites. At a certain moment, the country’s competing political elites decided that it made sense for them to weaponize the economy in their fight for power. To adopt what I call scorched earth strategies that directly target the economy. Politicians choose because they believe that it works to their advantage; Maduro to his advantage of staying in power; the opposition to their advantage in terms of driving him from power. When both sides to a political battle adopt this type of strategies, you get economically destructive political conflict.

The economy becomes a political battlefield. You saw that from the moment that Maduro started imposing price controls, monetizing deficits and in 2013, Maduro went on national TV to direct the looting of the country’s largest electronics retailer whom he accused of price gouging. The opposition doing the same when it decided to lobby for economic sanctions, which severely harmed the Venezuelan economy and a great part of the decline in oil production.

The question becomes, is there a way to step back from this? Is there a way in which you can rebuild the country’s institutions so that it does not affect the majority of Venezuelans? I believe that there is, although it’s complicated because the two sides that are trapped in a winner take all battle to the death.

Larry Bernstein:

Let’s start with the collapse in oil production driving down the economy. We had your friend Ricardo Hausmann on the program a few weeks ago. Ricardo is an economist at Harvard, and he spoke at my DC conference about the role of know-how. He said that if you have know-how, you can do things and if you lack know-how you can’t, and if you add more workers who don’t know what they’re doing, it can’t change or improve the productive nature of the capital. Venezuela is a country sitting on the most oil reserves of any country in the world, and yet that oil predominantly stays in the ground.

Venezuela had a functioning oil sector for a long time. It was run and managed by a combination of Western oil companies and Western trained oil workers. But first, the western oil companies were kicked out as PDVSA was nationalized, and then many of the workers left the country with that specialized knowledge leaving the country with a lack of know-how to continue production. Tell us about the role of know-how and the collapse in oil production in Venezuela.

Francisco Rodriguez:

It’s important to distinguish two questions: Why is this country that’s sitting on the world’s largest oil reserves not producing more oil? And why Venezuela between 2012 and 2020 suffered this huge decline in living standards. Why did it suffer a decline of more than 80% in oil production? You point to the nationalizations that happened in 1976. In the period between 1991 and 1993 when Chavez fired 20,000 employees of the state-owned oil industry because they had participated in a national strike to paralyze the oil sector. But production only starts falling in 2017.

The puzzle was that when oil prices started recovering that production did not recover. With some of these state-run oil industries and some of these so-called petrostates, they can be inefficient exploiting their oil wealth, and that means that they will not have the incentives to have optimal levels of extraction of these resources.

But petrostates do not kill the goose that lays the golden egg either. Petrostates have a basic instinct to self-preservation. You can see this in places like Iran, Iraq, Saudi Arabia, Nigeria, Venezuela, and they maintain a level of oil production that is necessary to fund its state and fund the governing elite.

What happened in Venezuela after 2017 was completely out of the ordinary. The problem with Venezuela after 2017, and particularly after from 2019 on it could not import bents (bentonite) because the firm was sanctioned.

This country could have been exporting 10 million barrels. It has more reserves in Saudi Arabia. It was not doing that in 1999. It was not doing that in 2012, even with oil prices at a hundred dollars a barrel. And that has a lot to do with the inefficiency of the Chavez government. Chavez overtaxed this industry because he wanted to have that money for other projects. Chavez was about the short run. He wanted to have the money to spend right now, so he did not want to wait 10 years for that investment if that meant a sacrifice to current spending for that investment to turn into a higher production capacity. But what happened from 2017 is that this is an industry that simply could not do the basic things that it needed to do. And that has a lot to do with sanctions.

Larry Bernstein:

The United States has implemented substantial sanctions against Iran and Russia, and yet their oil production has not collapsed.

Francisco Rodriguez:

If you look at the collapse of oil production in Iran in 1979, it is similar to the one that Venezuela has had had in 2017. Iran, between 1979 and 2026 has adapted to sanctions, which you see happening in Venezuela because after the imposition of sanctions production declines significantly to 400,000 barrels a day in 2020, and then it recovered under sanctions to its current level around 900,000 barrels a day.

In the case of Russia in 2022 when they invaded Ukraine, oil prices went up largely because of that invasion. Russia was selling its oil at a greater discount because of sanctions, but because oil prices had gone up, the revenues didn’t go down.

There’s a vast literature on the effects of sanctions. I published a survey of 31 quantitative econometric studies. 30 of them found significant adverse effects of sanctions on living standards. Sanctions lead to a decline of GDP per capita for around 28%. That is the equivalent of the great depression. According to a study by Gutman, they lead to declines in life expectancy of around one and a half years. That’s the equivalent of the life expectancy effect of the COVID pandemic. I published last year in the Lancet Global Health a study quantifying the mortality effects of sanctions. And we found that sanctions are associated with approximately 500,000 deaths a year.

Larry Bernstein:

Endogeneity between factors. Sanctions result in a downfall of the economy. And then oil field workers with specific skills emigrate, and you do not invest in maintenance capital expenditures in your existing oil fields, then they start to have lower production. You do not build new fields because you want to use the available money to help your voting constituents. You do not invest to take advantage of new fields. And then it is a disaster with collapsing production.

Francisco Rodriguez:

I am not arguing that sanctions are the sole clause that the collapse. Table 10.2. says that sanctions explain 52% of the collapse. All the other stuff that you are talking about is in the other 48%. I’m not denying that these factors have an effect.

Larry Bernstein:

The U.S. and European governments love to use sanctions to promote policy objectives and regime change. The United States put sanctions against Russia, Iran, Venezuela, Cuba, and it’s had mixed results as it relates to promoting regime change. Sanctions are particularly good at reducing GDP in these countries and harming individuals that live in those countries. One alternative has been the use of military force to do the regime change, but some Americans and many Europeans prefer the use of sanctions in lieu of military force as being a more benign way of altering the behavior of these regimes they dislike. Why do you think that sanctions are a poor way of achieving these foreign policy objectives?

Francisco Rodriguez:

When you impose economic sanctions on a country, you are hurting everybody in the country. And the evidence that we have is that typically those effects tend to fall on the population on the most disadvantaged sectors. Leaders insulate themselves from the effect of sanctions, but most of the population does not. There is a deep ethical question is it right to target the population because you want to change the behavior of their leaders?

And then there’s the question of effectiveness. What do we know about the effectiveness of these tools? Because it’s one thing to say we dropped the nuclear bombs on Hiroshima and Nagasaki and got the Japanese to surrender. But imagine if you had dropped those nuclear bombs and it still hadn’t caused it to surrender.

What we know is that sanctions do not have high success rates. Maduro was taken out because of a military operation not because of sanctions. We also know that the success rate of sanctions tends to be much lower when you try to generate regime change and particularly when that is not within the framework of a negotiated transition.

The stakes of power are the way in which the benefits of power are distributed. There are the benefits of being in power and the cost of being out of power. The Venezuelan system that was built through the 1999 Constitution, which Chavez promoted. It is one that accumulated all power in the executive branch. The president can force the dissolution of the Supreme Court, of the electoral authorities of Congress, of all other branches of government. You do not really have a democracy. I would call it the constitution of an electoral autocracy.

There are elections, but people vote for somebody who has dictatorial powers. This has a lot to do with the crisis that we saw in Venezuela over the past couple of years where the opposition was campaigning for an election, Maduro was highly unpopular, and the opposition won, and the government stole the election.

If the opposition had assumed power, it would have been very difficult for the opposition not to use the constitutional power to dissolve the Supreme Court, to dissolve the electoral branch, and to dissolve all other branches of government. In fact, there were many people planning to do this on the opposition side, and there were many people that would have said that anything less than completely getting rid of Chavismo would have been not living up to its promises.

Democracy is not just elections. Separation of powers have restraints on the use of power by the executive to protect political minorities, to guarantee the rights to compete. You don’t have that in Venezuela, and that feeds into a certain type of political confrontation that makes it very attractive for governments and oppositions to appeal to scorched earth strategies.

The opposition says that the only way we can stop this authoritarian government is to get our international allies to block their access to resources. That is when sanctions start playing an important role in driving the collapse of oil production and driving the economies collapse. There was a moment which the economy became a political battlefield and both sides were depriving the other of control of the country’s oil resources.

Democracies are institutions born out of negotiation between powerful actors. That is precisely what we should have in Venezuela constitutional and institutional reform before we have elections. The elections come at the end of that process once the guarantees are in place.

Larry Bernstein:

At the end of the US constitutional convention in 1787, a reporter asked Benjamin Franklin what happened? And he said, we got a republic if you can keep it. If you notice, Franklin did not say it is a democracy if we can keep it, because the separation of power’s doctrine is that we don’t have a winner take all. The leader in power cannot do what he wants. The Democrats have desired to terminate the filibuster in the Senate and pack the Supreme Court.

In Mexico, they changed the composition of the Supreme Court to being in the party’s favor pushing Mexico towards a complete winner take all environment. And you would say that is bad. And you would say embrace the filibuster, embrace the long-term nature of the Supreme Court, and adopt legislation and make it bipartisan.

Francisco Rodriguez:

It is extremely tempting to get rid of restrictions. That is what Chavez said in 1999. He convinced Venezuelan voters to go along with it. He said to Venezuelans, the country is in shambles. And it’s true. Venezuela had one of the worst performing economies in Latin America in the quarter century before Chavez came to power. People were disillusioned with the way that it was run by political elites. he said, you need to give me power. I cannot govern with a Congress and a supreme court that is stacked by the old elites. He took that case to voters to change the Constitution. That moment the change in the Constitution completely altered the structure of political competition in Venezuela and is at the root of the crisis that we are living today.

Larry Bernstein:

What do you make of Trump’s decision to extract Maduro to a Brooklyn courtroom?

Francisco Rodriguez:

It violates international law. A lot of people are incredibly happy that he is gone. And I do not think that we should live in a world in which the U.S. can just say, I will go into a country and kidnap its head of state. The U.S. made a choice that it was going to carry out a surgical operation instead of doing a full-fledged invasion and occupation of the country. The U.S. was very mindful of the risks that came along with its Middle Eastern experiences, particularly in Iraq and in Afghanistan, of having to govern these countries directly and having these interventions cause a deeper collapse in societal arrangements, which effectively fueled the violence in both of those countries and led the U.S. to end up losing the country to the Taliban again.

And here is where the U.S. also takes this decision, which surprised a lot of people of saying, we are not going to install Maria Corina Machado. I think that has a to do with who Maria Corina Machado is in terms of her political message. She is not a moderate politician. She is not somebody who’s talked about reconciliation, about healing old wounds. Her whole message has been one of a fight between good and evil. Her project is driving Chavismo totally from power. The Trump administration decided that it was going to be a disaster if they tried to get her to work together with the current structure so that if you need a power sharing agreement, she was probably not the most ideal person for it.

If you want to have peaceful change in Venezuela, it must be through negotiation redesigning the country’s institutions so that they allow for coexistence between the country’s dueling political factions. The problem is that you can get revolutions.

Larry Bernstein:

What is interesting about you is you are applying political science and economics together. Fundamental to the book is your opposition to sanctions because it hurts the little guy and destroys the economy.

This is the 90th anniversary of the Spanish Civil War. Hundreds of thousands of people died. I do not want that either.

What do you want? A productive country that has opposition coming up with reasonable solutions to run your own country. You just complained about the extraction in Maduro, but it only hurt Maduro. It did not result in hundreds of thousands of deaths.

We can bomb it to the Stone Age, which we did in the Japan example you gave. We can sanction it so that we drive people to migrate and exit or deprive them of nutrition and a productive society or we just take out the bad guy.

What is fascinating about Trump’s decision to not install Machado into power. The Trump administration seems to want Maduro’s regime to coexist with the opposition. They are trying to figure out with the benefit of time how to do that. Maybe we end up with a constitutional result that can allow for power sharing to require the country’s two parties to coexist. The world right now is scratching their heads as to what the Trump administration is up to.

Francisco Rodriguez:

I do not know what the Trump administration wants. Trump does not talk about democracy or institution building. He talks about oil, crime and drugs. I agree with you when you have a regime like the Maduro one, there are no good solutions. Taking out the bad guy through a military operation with extremely limited effects in terms of lives does not seem like a bad option among all the bad options that we have even if it does break international law.

Sanctions are being lifted. Venezuela can sell oil to Western markets. I can assure you that we’re going to see a rapid recovery of Venezuelan oil production in coming months and years, and that’s going to be good for Venezuelans. It’s also important that the U.S. now has leverage, which is something that it has not had in the past in Venezuela. Maybe this does allow it to shape the outcomes. What do I think that they should use this leverage to sit the opposition and government together in negotiations to reshape the country’s institutions so that you can have coexistence between the country’s political factions so that you can ultimately go to an election in which when somebody wins that election, it doesn’t mean that the loser of that election is going to go to jai Francisco l. That is fundamental. Maybe you had to take out Maduro.

Transitions are built between moderates to form a coalition for change. The radicals must be sidelined. This happened with Maduro and with Machado. She is being very politely sidelined. Maybe this is enough for there to be incentives for her to become more moderate. If Machado became more moderate, it would be fabulous because she has the credibility to tell her followers, I’m doing this not because it’s necessary for us to get change.

To get the conditions for oil firms to go into the country, you need to jumpstart the economy so that this country becomes a livable place. When you have the economy on a sound footing, elections make sense.

You need to focus on human rights. You need to have a new prosecutor general with credibility. The Supreme Court, the Electoral Counsel, and the Controller General need credible people in those institutions with significant opposition participation so that you have power sharing, which restrain the power of the executive branch.

Larry Bernstein:

What are you optimistic about the future of Venezuela?

Francisco Rodriguez:

Venezuela has a long democratic tradition. That is the reason why it has been so difficult to install dictatorship here. If you look at Chavismo, they feel that they need elections. If you look at Cuba, the Cuban regime does not have the pretense of holding elections.

Venezuela is the country that has the longest streak of uninterrupted competitive presidential elections in South America and the second longest in Latin America after Costa Rica. That makes me confident that the country is going to find its way to democracy. Despite the level of political polarization, you have not had in Venezuela political violence nor civil war. That reflects a tradition of peaceful resolution of conflicts.

The Venezuela economy is very vulnerable with its dependence on oil. It also makes it easy to rebuild. Because if you get the oil sector running, you can also get the rest of the economy running. You can get a lot of bang for the buck in the initial moments of reconstruction. You can create positive dynamics where you have political and economic reforms, and coalesce around national unity, and building a prosperous and inclusive democracy. That is very possible in Venezuela.

Larry Bernstein:

Thanks to Francisco for joining us.

If you missed the previous podcast, the topic was Defending Israel.

Our speaker was Amir Avivi who is a retired Israeli Brigadier General and the Chairman of the Israel Defense and Security Forum – ISDF. Amir is the author of a recent book entitled No Retreat: How to Secure Israel for Generations to Come.

Amir discussed how the Palestinians could govern themselves using city states instead of Hamas or the Palestinian Authority. Amir explained why Israel’s previous peace negotiation strategies were flawed and that going forward Israel should focus primarily on seeking borders that can be easily defended.

You can find our previous episodes and transcripts on our website
whathappensnextin6minutes.com. Please follow us on Apple Podcasts or Spotify. Thank you for joining us today, goodbye.

Check out our previous episode, Defending Israel, here.

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Amir Avivi

Subject: Defending Israel
Bio: Retired Israeli Brigadier General, Chairman of the Israel Defense and Security Forum – ISDF, and author of No Retreat: How to Secure Israel for Generations to Come

Transcript:

Larry Bernstein:

Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast which covers economics, politics, and history. Today’s topic is Defending Israel.

Our speaker is Amir Avivi who is a retired Israeli Brigadier General and the Chairman of the Israel Defense and Security Forum – ISDF. Amir is the author of a recent book entitled No Retreat: How to Secure Israel for Generations to Come.

I want to learn from Amir about why he thinks that Israel should encourage the Palestinians to govern themselves using city states instead of a single state sovereign. In addition, I want to discuss why Amir believes that Israel’s previous negotiating position was flawed and that going forward that Israel should focus foremost seeking borders that can be easily defended with its neighbors and with the Palestinians.

Amir, please begin with six minutes of opening remarks.

Amir Avivi:

My passion is how to secure Israel for generations to come. This is what I dream about and do every day. This is a people that has been expelled from its land four times: the Assyrians, the Babylonians, the Romans, and the Muslims. 2000 years in the diaspora, persecuted, pogroms, and the Holocaust. We miraculously managed to build Israel. The only question that matters: what is needed to secure Israel for generations to come? There isn’t a single think tank or government in Israel that gave a clear answer to this question. This is what we do at IDSF -- Israel Defense and Security Forum. In the last six years, it has become one of the most impactful organizations in Israel, shaping our hearts and minds and emboldening Israel to win the war.

Larry Bernstein:

Core to your book is rethinking peace negotiations with its enemies with Israel’s national security in mind. You don’t have borders on a line on a map. You look and see is this a defensible border. Why hasn’t this approach been applied in the peace negotiations?

Amir Avivi:

In the army, they teach us if you want to build a plan for war, you need to do it with the right priorities. Usually when two Israelis start arguing, one minute later, one will say, “So, what’s your solution?” They don’t even agree on the problems. You cannot go to a negotiation without a clear understanding of what is needed to secure something that came from Mount Sinai.

Don’t mix up your values with problem solving. We are the people of Israel. This is the land of Israel. It’s our land. We are the ancestral people of this land, and you do not give up your values to deal with the problem.

Trying to solve the Israeli-Palestinian conflict, when some Jew says about the land of Israel, that it is occupied by the Jews, he has sold his values. He doesn’t believe that we are the ancestral people of this land.

I am a son of a very distinguished diplomat. My father was Israel’s ambassador in Chile, Colombia, and Turkey. I am all about diplomacy, but I do not mix my values with problem solving. We cannot be expelled from our land again. We do not know the challenges in the future. The land of Israel is in a nexus between Africa, Asia, and Europe. It is also religiously one of the most important. There will always be a fight over the land of Israel. And if the Jewish people want to exist, you need to figure out what are the defensible borders.

Larry Bernstein:

Could you define the problem?

Amir Avivi:

It is managing to bridge our existential long-term needs and a solution that will not require us to annex two million Palestinians in Judah and Samaria. You have more than half of the Jewish-Israeli society saying, “They all want to kill us. They are our enemies. We need to live along defensible borders. We need to settle the mountains of Judah and Samaria. This is the Bible belt. This is our connection.” And we oppose two states. Then there is the other half saying, “Yes, but we want to be a democracy. We don’t want to annex millions of Palestinians because this goes against Zionism. We need a majority in Israel of Jews to be a Zionist country.”

The first half is right, and the second half is right but disregarding what the other side is saying. And what we do in IDSF is managed to bridge between the need to ensure security and prosperity. The nation that has been around 3,700 years needs to be able to think a thousand years ahead. The good thing about thinking long-term is it goes beyond petty politics, beyond the questions people deal with today.

Larry Bernstein:

In the recent week, there have been protests in Iran and the regime has been shooting protesters. Do you think the Iran regime is about to be toppled?

Amir Avivi:

We are witnessing now is different from the 12-day war. The 12-day war was focused on military capabilities, the nuclear sites, ballistic missiles, air defense. It was a pinpointed attack with no aim to topple the regime. It showed to the world and the Iranian people that this regime is a paper tiger. They are much weaker than what they seem. And this emboldened Europe to reestablish harsh sanctions on Iran and get out of the JCPOA, but it also awakened the Iranian people that this regime is weak. We saw Israeli airplanes flying over to Iran.

This regime cannot provide water or electricity. The currency is completely broken. Iranians want a change of regime. Everything that is going on in the Middle East, Iranians doing the buildup of Hezbollah, all these militias. There is a crystal-clear understanding in the U.S. and Israel that this regime needs to go.

Why isn’t the US attacking? And the answer is simple. U.S. is a huge carrier. From decision to action, it’s not Israel. Israel can decide in the evening and in the morning attack. The U.S. is different. In the Second World War, in December 1941, the U.S. decided to join the war. But the first attack on North Africa happened 11 months afterwards. It takes time. This regime will be toppled.

Larry Bernstein:

All governments have a thin veneer. It governs based on the will of the people. A regime’s survival depends on the population agreeing to participate. When you say that the government of Iran is a paper tiger, what does that mean?

When we think about the strength of a government, whether it controls the sky is not imperative. Many governments do not control their skies. Denmark does not control its skies. Estonia does not control its skies, but the people in Denmark and Estonia want their governments to rule them.

In Iran, I saw some videos where their security forces were shooting protestors at will. That upsets people. They do not want their kids killed. You mentioned other issues. The currency is valueless. The economy is sour. They cannot build a world for their children that makes economic, security and freedom. It’s hard to believe that a US military force will be the catalyst that topples this regime.

Amir Avivi:

It’s almost impossible to topple a regime from the air. It happened in Kosovo, but it does not happen a lot. The combination of the people’s uprisal with an attack on the regime will topple the regime. The Iranian people are determined. They cannot do it alone. They need help. And the combination between help and their resolution will bring this regime down.

We must destroy their nuclear program and air defense. But this attack will also concentrate on forces that are shooting the Iranian people. When you want to topple a regime, you must hit the leadership.

You have to destroy their symbols and the centers of control and government. It’s a whole different planning and takes time. This regime needs to fall. It’s a danger to Israel and the whole globe.

Larry Bernstein:

The axis of evil countries is weak. Iran, Russia, and Cuba are weak. Each of these nation states employ a global strategy. You got the Russians goofing around in Africa. You got the Iranians engaging with the Venezuelans and the Moroccans, but they cannot even do the most basic functions of a society. The Cubans are dark seven hours a day, and yet they are sending doctors to Namibia. What motivates their global reach when they cannot provide basic functions at home?

Amir Avivi:

One of our generals Gershon Hacohen wrote an interesting book called What is National About National Security? People tend to look at national security as if it’s something technical. No, it’s all about vision. Countries like Russia, Iran, Turkey, are very proactive all over Africa and Pakistan and different places. They culturally believe they need to go back to be empires. Turkey is all about building again the Ottoman Empire. Same goes with Russia. Iranian the Persian empire who want to go back to the glory when they dominated big parts of the world. And in the Iranian case, it’s also a religious issue. They believe every single person in the world needs to be Muslim, Shia, or be a slave to them. They need global domination. This is about religion.

In the West, there is a tendency to disregard religion. Especially about the Middle East, if you don’t understand religion, you cannot understand anything that’s going on. Religion is the major factor that motivates decision-making.

Larry Bernstein:

The Europeans specifically seem to be most oblivious to that. I don’t mean in 12th century when they did the crusades. But in France, they don’t even look at religion in statistics or collect that information. They deny religion as a critical factor. When they look at peoples around the world and say, why can’t you people just work this out amongst yourselves? They seem not only oblivious but opposed to it as a framework to analyzing the problem.

Amir Avivi:

These countries 20 or 30 years will have probably be a majority Muslims. They will go to civil wars or completely change. The problem is not what France understands about the Middle East. It is what France understand about what is going on inside France. These countries have no future. They don’t understand that. They are dead. They are done. Maybe now it is too late, I don’t know. They will learn a big lesson, what religion is, and culture is all about.

Human nature is all about culture and religion. You see today, the rise of the right-wing parties in Europe, there is an understanding that something is very wrong. President Trump talks to England, France or Spain saying to them, “Listen, guys who are destroying your countries.”

Larry Bernstein:

They were shocked and horrified by those comments.

Amir Avivi:

They will be more horrified when they’ll see is right. It’s a big problem because these groups are not assimilating. They’re not becoming part of the European culture. If you had groups coming and then the next generation saying, “We’re part of this amazing liberal democratic country.” Great, but it’s not happening. It’s the other way around. The next generation are becoming much more radical than their parents. And this is a phenomenon that is growing in Europe. It’s a big danger to these countries.

Larry Bernstein:

I want to go to your point about how they’re going to wake up one day and recognize that the society they have is not what it thought. I want to use a metaphor about Israeli society. The right and the left couldn’t agree on first principles as it related to national security 40 years ago.

During the Intifada, recognizing the Palestinians as a threat changed. The peace parties lost the Israeli public to the point of it being a trivial minority now of the population. It took some change, a threat, the lack of national security, it’s that epiphany that we’re in a different state of the world. The West has not recognized what’s going on even within Israel.

Amir Avivi:

All Israel is for peace. We greet each other when we meet with the word “Shalom,” peace. Jewish culture is all about peace, but the left didn’t bring us peace. It brought war and devastation. And the number of Israeli civilians killed or injured in the last 30 years following Oslo is 20 times more. But 30 years ago, Israeli media was completely monolithic and dominated completely by the ideas of the left.

Today, Israel has completely changed. Social media has changed everything. IDSF which I started six years ago with eight generals, and today has more than 55,000 Israeli officers, commanders, and operators has completely changed the public sphere. Today you have the voice of officers and commanders who are much more connected to reality to the needs for Israel to be secure. And now Israelis hear these voices, they are empowered by them.

Israeli society is moving strongly to the right. We have big challenges. We will deal with these issues. I do not know if France, Spain or Britain are able to deal with the huge challenges that are with them in the coming years. Israel will thrive.

Larry Bernstein:

You come from a diplomatic family, but you have a military background. There is an old expression that if there’s a military solution to an Israeli problem, they’ll take it. If you ask the Europeans, if they have a military option, they will take the diplomatic one. You are concerned about the way that diplomats are worried. The way you describe the problem, the words that you use are carefully selected. How you describe people or place, especially important, and I think that comes from your diplomatic background. I assume that your father would be incredibly careful on his word choice, and you picked up on that.

Amir Avivi:

Definitely. My father has a huge impact on my way of thinking. I’m a strong believer in peace through strength. It does not matter what peace agreements will do because the war in the Middle East, it is all about religion. If there will come a day when Israel will be weak. If the countries around us think that they can destroy us, even if we have a peace agreement, they will destroy us because religiously, Islam cannot accept a Jewish state.

Larry Bernstein:

Is it because it is in the Middle East? Are they willing to accept it if it is in Europe? I am wondering about how Islam thinks about non-Islamic nations globally.

Amir Avivi:

Both Christianity and Islam took the Jewish Bible, how strange it is. They recognized that the Jews are the chosen people of God. But then they said, yes, you were chosen, but you made so many problems God finally got upset and now there is a new covenant.

Now it’s the Christians who are the chosen people. But then came Islam and said, we recognize that the Jews were the chosen people. And then for a while Christians became the chosen people. Now we are the chosen people. But when you see the Jews rising again, and the prophecies of the Jewish people becoming a reality coming back to the ancestral home, just as the prophet said, and every year that passes, Israel is becoming stronger.

Today, it’s becoming a global power. Israel’s economy has surpassed some of the biggest economies in the world. Israeli society is 10 million people. This undermines Islam. They cannot accept a reality where their basic identity based on the idea that there are the chosen people is being undermined.

The only way for the Jewish people to thrive is to be strong and proactive. And when you are strong, then you can have peace agreements, but you must be connected to reality and alert because even when we sign peace agreements, then they will think about other ways to undermine us. It is not going to stop. We cannot be naive. We must seek peace. We must seek relationships. We are on the verge of extending the Abraham Accords.

There will be peace agreements that will extend all the way to Indonesia. But I was a deputy division commander in the Gaza Strip, and I want to give you an example. They would ask me, “Colonel, what’s going on in Gaza?” And no matter what went on in Gaza at that time, I would answer the same. I would say from the day of the Judges in the Bible, same thing, Gazans attack us, we attack them back again and again and again. Same dynamics. You read the Book of Judges, you look at today, nothing changed.

At the end of the Book of Judges, after many wars with the Gazans, including the famous story of Samson, it says, and the land was quiet for 40 years. So, our rabbis asked, why does the Bible need to state that? Every sentence in the Bible has a deep meaning. And the answer is that 40 years of quiet in the land of Israel is an event of biblical dimension. It never happened in 4,000 years. We can achieve peace and maybe it will last 40 years, but we need to build our national security in a way that takes in account that peace is never lasting.

We need a national security strategy that ensures that if there is a war and when there will be a war, we will manage to deal with this. We cannot lose a war. If we lose the war, we will not exist.

Larry Bernstein:

10/7. What motivates a leadership to put themselves in a situation where they will be destroyed? What are they doing? This does not make sense.

In retrospect, how can you explain the behavior of the Hamas leadership to pursue this attack?

Amir Avivi:

My wife woke me as soon as the war started, 6:30 in the morning. I understand after a minute that Hamas is attacking. And the first thing I am thinking is, why isn’t Hezbollah attacking? Why isn’t Iran attacking? What we envisioned in IDSF was a multi-front simultaneous attack. We knew the Iranians, Hamas, Hezbollah, and Houthis met multiple times to coordinate. And I thought “Maybe Iran is thinking that launching Hamas alone would be enough to disrupt the normalization with Saudi Arabia, which was about to happen. And maybe they are keeping Hezbollah intact because they do not want to lose both organizations. They do not want to take a chance on Hezbollah because that defends Iran, they need Hezbollah. Later, I heard another explanation, the fact that Israel has penetrated completely Hezbollah and that they were afraid that if Hezbollah knows about the attack, Israel will know about the attack. So maybe this is an explanation and maybe it’s a miracle.

When I saw just Hamas attacking, I said, “Okay, what are these guys thinking?” I mean, it is devastating what they are doing, but it will take a day, maybe two, maybe three. We will kill all of them on our side. We push them back to Gaza. And then what?

I realized that they believe they will survive this. They do not care about how many houses are hit or if we kill thousands. It’s meaningless to them. They believe that with all this huge underground city they have, which the Air Force cannot hit, that looking at Israel with the political system broken, five elections, Israelis fighting each other over judicial reform, army not functioning, they believe we will not be able to deal with them. So, maybe we launch some pinpointed operation and maybe months later, the world will stop us. They could have not imagined Israel fighting for two years amid pressure continuing to fight, determined to destroy them.

Larry Bernstein:

I had a podcast on urban warfare with a UK professor Anthony King, and he said that the Israeli losses will be astronomical in a city environment. I tried to push back and say, “If time is on your side, you can go house to house.” the number of Israeli casualties is so much lower than the expectation going in. Do you think that may have reflected their strategy that they thought they could make it so painful for the Israelis that they would sue for peace and not only their shock, but a shock of military analysts globally, that this was such a successful tactical approach.

Amir Avivi:

They said if we take more than 200 hostages, this will completely paralyze Israel. Israel will not be able to function. And not only the hostages didn’t stop Israel for fighting, it became the reason and the legitimacy internationality to fight. They understood that these hostages are not assisting them. They are a burden.

At the beginning of the war, we amassed 300,000 soldiers outside of Gaza. And there was a big question, are we going in or not? And the U.S. sent the experts to talk with the prime minister, the minister of defense, the chief of staff that said, “Thousands of Israeli soldiers are going to be killed. Don’t go in, cut your losses, finish the war.”

At this defining moment, Prime Minister Netanyahu invited us for a meeting. I came to the headquarters of the army, eight generals came. As we were sitting outside, I was thinking to myself, it feels to me like a Churchill moment when Churchill was elected, when the Nazis conquered all of Europe, the British army surrounded the darkest moment for the British people.

Churchill stood in the Parliament and gave this amazing speech talking about victory. They are about to lose. And he is talking about fighting on the beaches that we’re not going to stop. There is no surrender. We are going to win. And he uplifts the British people, and they go to fight five years until they win the war.

I was thinking when we go inside the room to speak to the prime minister, it is not just about giving him the right advice. It’s all about spirit. I see him sad, pale, and tired, a devastating moment for the prime minister. I said to him, “Mr. Prime Minister, I cannot even imagine how you feel. It must be devastating. But listen, you must not feel like that. You are privileged. I wish that I were sitting in your chair. You were chosen to lead Israel in its most defining war. You were chosen. All your life has prepared you for this moment.

We got a huge opportunity to change everything for Israel and the Jewish people. And the generals told him, “We know the commanders, we know the soldiers give them the command. When they go into Gaza, nothing will stop them. Amid this failure, we know what the IDF can do. Two days later, he gave the command to go into Gaza.

And from that moment onwards, we started our journey towards the biggest victory in the history of the Jewish people. And this victory will come in a few months.

Larry Bernstein:

The Israelis have won the military victory.

Amir Avivi:

Not entirely yet but we are going to finish the job.

Larry Bernstein:

Trump described the catastrophe and said, there’s rubble in Gaza. What is the path forward? There is still two million people living there. Now what?

Amir Avivi:

First, we need to finish the job. We are controlling 53% of the Gaza Strip. Hamas is controlling the rest. It is rebuilding its capabilities. It is getting stronger. I do not see any scenario where an outside coalition force goes in and dismantles Hamas. Only the IDF can do it. The IDF has prepared the plan. They are waiting for the cabinet to give them the command to go into Gaza City, the camps. The remaining places where Hamas is controlling.

First stage, we need to destroy Hamas, dismantle them, and completely demilitarize the Gaza strip will take a long time. Even in the areas Israel is controlling now, we still have not found all the tunnels.

There are areas in Gaza we have not operated in at all because there were hostages that we did not want to endanger them. But now there are no hostages alive, and we can operate freely everywhere. We need to destroy Hamas. And following the destruction of Hamas, as it was planned in the 20 points of President Trump, there will be a different government managed by the U.S. probably based mostly on the local clans. We are already working with clans. There is a clan controlling Rafah and another one controlling Khan Younis and another one controlling Deir el-Balah. So, the local clans are starting to work with Israel.

The issue of the clans, not only in Gaza, also in the Palestinian cities in Jenin, it’s a very good long-term solution. The clans of Hebron, for example, they joined together like 400,000 people and gave Prime Minister Netanyahu a formal letter saying, we want to be recognized as an emirate, like a city state, and we want to join the Abraham Accords. We want to detach from the Palestinian Authority, which is a terrible terror organization. I think a city-state is a good idea. It seems as if Israel is embracing this idea. There will be no Hamas, no Palestinian Islamic Jihad, and no Palestinian authority.

The only viable solution is built on the local clans. This is the right way also culturally to manage things like Abu Dhabi, which is a highly successful model.

Larry Bernstein:

One of the lessons you were highlighting was Sharon’s decision to allow the Palestinians to completely control Gaza meant that the Israelis were completely blind as to what was happening there relative to what was happening in the West Bank, that these IDF was embedded effectively in these towns and making it impossible to build tunnels in those cities. What does that mean going forward as it relates to disengaging with the Palestinians?

Amir Avivi:

When we started Oslo, at the beginning, we did not pull out of towns. We did not give up Philadelphi corridor with the border with Egypt. We gave the Palestinian authority control over the cities: Gaza, Rafah, and Khan Younis. We said, “You manage these places. We don’t want to be there.” And we took a decision that will turn out to be devastating. We are not operating in these cities at all, ever. We are not going in. And what happened was that they took advantage from the fact that we were not operating.

We are talking about the Palestinian Authority not about Hamas. The moment we left Rafah and they controlled it, they started building massive amounts of tunnels connecting the Gazan side of Rafah to the Egyptian side. This started in ‘94. In ‘97, I became a combat engineer officer of the Gaza division. In the two years I was in the Gaza division ‘97 to ‘99, I found 35 tunnels on Philadelphi, which they dug.

What is the lesson? We need to control the border to prevent massive smuggling of weapons into Gaza, and we need freedom of operation. Without that, Israel will not deal with the buildup inside these places.

When I talk about the land of Israel from the sea to the river, the overall responsibility security-wise needs to be Israeli. You can have local civil management, you can have Emirates, you can have trade and economy. But security-wise in this small land from the sea to the river, it is 45 miles. You can have only one entity taking care of the security of this place, and this is the State of Israel.

Larry Bernstein:

I like to end each of my podcasts on a note of optimism. What are you optimistic about as it relates to the security of Israel?

Amir Avivi:

I’m very optimistic, and I’ve been saying that from the 7th of October, at the most devastating moment. I said that night to the Israeli people on national TV, yes, it’s devastating, but we are going to win this war, and the bigger the more decisive this win will be, the greater the golden age of Israel will be the day after. In a few months, there will be peace agreements. And the Israeli economy, which is already booming. Israel will become a corridor of energy and the trade, and there will be a great era economically. Israel is going into a golden age.

On the other hand, antisemitism is rising everywhere. Many Jews will see Israel as the place to be in. And also at the birth rate, we spend a lot of time in the shelters, many babies on the way.

Larry Bernstein:

Thanks to Amir for joining us.

If you missed the previous podcast, the topic was Getting on a War Footing. Our first speaker was Seth Jones who is the President of the Defense and Security Department at the Center for Strategic and International Studies – CSIS. Seth wrote a new book entitled The American Edge: The Military Tech Nexus and the Sources of Great Power Dominance. Our second speaker is my good friend David Susser who is the President of HEICO Distribution Group which is a leading company in commercial and defense aviation.

We discussed how to get on a war footing to compete against our adversaries by reducing delivery times for weapon systems by changing our procurement processes and outsourcing production to our key allies to reduce costs. We also chatted about the growing role of venture capital in the defense industry which is driving military armament innovation.

You can find our previous episodes and transcripts on our website
whathappensnextin6minutes.com. Please follow us on Apple Podcasts or Spotify. Thank you for joining us today, goodbye.

Check out our previous episode, Getting on a War Footing, here.

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Seth Jones and David Susser

Subject: Getting on a War Footing
Bio: Seth: President of the Defense and Security Department at the Center for Strategic and International Studies – CSIS and author of The American Edge: The Military Tech Nexus and the Sources of Great Power Dominance, David: President of HEICO Distribution Group

Transcript:

Larry Bernstein:

Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast which covers economics, politics, and history. Today’s topic is Getting on a War Footing.

Our first speaker is Seth Jones who is the president of the Defense and Security Department at the Center for Strategic and International Studies – CSIS. Seth is also the author of a new book entitled The American Edge: The Military Tech Nexus and the Sources of Great Power Dominance.

Our second speaker is a very good friend of mine and golf partner David Susser who is the President of HEICO Distribution Group which is a leading company in commercial and defense aviation.

I want to learn from these two speakers about getting on a war footing to compete against our adversaries. How can we reduce ever increasing delivery times for weapon systems and how can we change our procurement processes to reduce costs? In addition, I want to hear about the rise of venture capital in the defense industry to drive military armament innovation.

Seth, please begin with six minutes of opening remarks.

Seth Jones:

The great historian Paul Kennedy said in his book, The Rise and Fall of the Great Powers that in a long drawn out, great power war, victory has gone to the side with a more flourishing, productive base. That leads to three major points in my book. The first, countries in a wartime environment need to operate with urgency, to spend to maximize defense production, minimize excessive regulations, and streamline their acquisitions and contracting systems.

The goal should be what Andrew Gordon calls more like ratcatchers, those who are committed to win wars, and less like regulators who are prone to bureaucracy and process. That leads to my second point, the tragedy today is that the U.S. defense industrial base is operating on a peacetime footing.

The U.S. is at risk of losing deterrence to China in the Indo-Pacific.

Third point the Chinese are operating on a wartime footing and outpacing the U.S. The PLA Navy with an overall battle force more than 370 ships larger than the U.S. and has a military and commercial shipbuilding capacity that is roughly 230 times larger than that of the United States.

Larry Bernstein:

Trump has spoken publicly about possibly buying Aegis cruisers from the South Koreans who have offered to build these ships with fixed contracts and a quick delivery. Should we use foreign defense contractors to manufacture our armaments?

Seth Jones:

The Navy needs to fight against adversaries who conduct precision strikes. In the first island chain, the Chinese can hit a range of targets. On the maritime front, what is most important is the subsurface fleet. Submarines like Virginia and Columbia class are critical in conventional and nuclear capabilities. Second, the unmanned underwater vehicles or UUVs.

These are both integral parts of what the INDOPACOM Commander, Admiral Paparo talked about as developing a hellscape operations that will make it difficult for the Chinese to conduct an invasion of Taiwan. The Chinese are vulnerable. They cannot do anti-submarine warfare. They cannot see what is going on subsurface. It is their biggest vulnerability. Submarines should stay U.S.-built.

UUVs that are being produced across various countries, that is what the U.S. should be looking to buy. There are some good ones that come from American companies but there are going to be others elsewhere.

When it comes to surface ships, especially at the lower end of the spectrum like frigates and certainly commercial vessels that can be used for logistics, countries like Japan and South Korea should be leveraged. The Chinese have 50% of shipbuilding capacity in the globe. The South Koreans and Japanese are number two and three. U.S. is less than 1% of shipbuilding capability. So, it is going to take far too long for the U.S. to get up to speed on surface vessels.

Larry Bernstein:

What did you learn in the Ukraine war about the future of the navy? I was shocked at how incapable the Russian Navy was in the Black Sea. Ukraine successfully used a jet ski with a weapon to blow up a Russian ship and afterwards the Russians have laid low. This story reflects the vulnerabilities of surface ships.

Seth Jones:

The challenge becomes once you cross over into a shooting war, there are limitations. Having surface ships close to the Chinese mainland around the Taiwan Straits; they’re going to be very vulnerable.

Larry Bernstein:

Richard Fontaine from the Center of New American Security spoke on my podcast about a Taiwan war game in which neither the Chinese nor the Americans were able to control the skies. How do we plan and prepare for this battle eventuality?

Seth Jones:

The U.S. has what it calls operational plans or O-plans. These are war plans for respective countries. The U.S. has a war plan for Russia on the Baltics, China on Taiwan, and North Korea on artillery against Seoul. What becomes important in these war games is what capabilities do the adversaries and the U.S. have?

One of the biggest issues is protracted war. With the Russia-Ukraine wars about to hit the four-year mark, major power wars can be long duration. War games involving Taiwan one consistent finding is that the U.S. runs out of its long-range missiles in less than a week of war that raises huge questions about the ability of the U.S. to fight a protracted war. How effective is the U.S. going to be in deterring an adversary if its stockpiles are so limited?

Larry Bernstein:

Let’s go back to your primary thesis, which relates to wanting the US defense establishment to act more like ratcatchers. Eric Labs from the CBO spoke on my podcast where he discussed the ever increasing lead times required to make naval ships. Tell us about the problems with our defense procurement.

Seth Jones:

Right now, it takes a long time for companies to build infrastructure to purchase additional land, securing permits. Then the production timelines for weapon systems are long. When you add onto that, the contracting is completely anachronistic. One Department of War study warned that major defense programs continue to take 10 years or more to deliver less capability than planned, often at two to three times the planned cost. The challenge is the dizzying federal acquisition regulations. These are regulations established to make sure contractors follow best practices. All these requirements add years to the acquisition, contracting and production process for weapons.

Larry Bernstein:

Do our allies or adversaries have superior defense procurement processes?

Seth Jones:

We have seen Chinese timelines decrease. The Ukrainians produced a range of different weapon systems like the Flamingo their long range missile. The U.S. is not going to provide Tomahawk cruise missiles to the Ukrainians, but they are building their own. When you are in a war, it tends to expedite timelines. The Ukrainians have cut red tape. They are doing the same thing with drones. The Ukrainians are an ally that able to produce quickly.

Larry Bernstein:

What about the Israelis?

Seth Jones:

The Israelis have moved on the air defense side. They’ve got Aero, Iron Dome, David Sling and the munitions that go with them. Look at the wartime environment that they’re in. In both cases Ukraine and Israel, there is an impetus to shrink those production timelines because there’s an urgency.

The U.S. has done this in peacetime. It did it in the 1950s during and the 1970s. Wartime doesn’t have to exist for a country to have urgency, but these are the two best examples today of countries in conflict.

Larry Bernstein:

In the book, you tell the story about how in WW2 the US put our manufacturing onto a wartime footing and successfully made record numbers of Liberty ships and aircraft. Implied in your book discussion was that today the Chinese should be able to change their consumer-oriented factories to manufacture armaments, but that would be nearly impossible for us. Tell us about the relationship between peacetime industry and its ability to change to wartime manufacturing?

Seth Jones:

The Chinese have tried to fuse both the civil and military sides of production. Their shipyards are producing both commercial and military ships. I looked at the World War 2 example where the U.S. was able to leverage commercial companies like Ford Motor, General Motors, and Chrysler. There would be big challenges having companies today building weapon systems.

I don’t think there’s a close parallel to what the U.S. faced in the 1940s with today, but I do think there’s examples of where the commercial sector should be better integrated, and that is in advanced technology, quantum, and artificial intelligence. Nvidia or Google are not involved in the defense sector because of the barriers that we talked about earlier. In practical terms, you have defense companies spending money on AI when we should be leveraging our big tech firms.

Unmanned and autonomous platforms have huge commercial applications. SpaceX or Starlink have huge commercial and military implications. Star Shield, the military version of SpaceX has become important. Starlink has been used on the battlefield. There are areas where our commercial sector can be useful.

Larry Bernstein:

In your book you tell the story of the Last Supper. After the collapse of the Soviet Union and the expected peace dividend our Secretary of Defense suggested to the defense industry that they merge to just a handful of firms and reduce their operations. Did this governmental policy serve us well?

Seth Jones:

There is a great quote from Norm Augustine, the chairman of Martin Marietta, and eventually the chairman of Lockheed Martin, that regulations grow at the same rate as weeds, and that gets to the regulators versus ratcatchers theme in the book. In the Last Supper was a briefing by senior Pentagon leaders in 1993 to the CEOs of the main defense companies, May 18th, 1993. A slide presentation that shows the number of current suppliers of key weapons systems. There were three companies building bombers, five building fighters, four building helicopters, and on down the line. The next column was the number of future suppliers the Pentagon wanted to see.

The Pentagon said, “Industry, you figure out your mergers.” Some companies die or sell off their defense. That was understandable at a time in the 1990s when the Soviet Union had collapsed. But we are now in a world where the U.S. does have to worry about two major adversaries and conflict in Europe and the Indo-Pacific. Our defense sector had come down to big firms like Lockheed, Boeing, Raytheon, Northrop, and General Dynamics. We need to rebuild a diversified set of companies big and small that can produce technology and equipment for the military.

Larry Bernstein:

Tell us about the role of new firms funded by venture capital like SpaceX and Palantir and how they are at the forefront of technological defense applications.

Seth Jones:

In the Cold War, investments in the defense sector came from DARPA and the Department of Defense. Starting in 2010s is the role of private capital. Venture capital investments in defense companies goes from $2 billion in 2013 to over $40 billion by 2021. It’s a massive increase. Private equity deals in the defense sector quadrupling. Investments in early stage companies like SpaceX, Anduril, Palantir, Shield AI, where venture capital. Venture capital firms like Founders Fund has been critical.

We don’t see anything like this with the Chinese. They have companies producing technology like Huawei that includes AI and quantum, but most of the big defense companies on the China side are state-owned enterprises, which are corrupt and inefficient. The U.S. does have an advantage in the private sector.

Larry Bernstein:

In Eisenhower’s final farewell speech, he spoke about the military industrial complex driving U.S. foreign policy. And when you tell a story like “The Last Supper,” it seems the opposite and that the military industrial complex could not put up a fight. Eisenhower’s fear of too much power being concentrated in our defense industry seems misguided.

Seth Jones:

The United States faces a dicey international security environment. We have seen a big increase in cooperation between the Chinese and the Russians. The Russians invaded Ukraine; we have seen Russian activity in Africa and Chinese activity in the South China Sea.

It is much more costly in blood and treasure to fight a war with some combination of the Russians and/or the Chinese. It is infinitely cheaper to be spending money to strengthen deterrence.

Eisenhower was at the front end of deterring a Soviet advance. Eisenhower supported the building of Polaris nuclear weapons and the B-52. From my perspective, the U.S. needs to spend money on weapon systems to effectively deter adversaries.

You want to eliminate as much as possible fraud, waste, and abuse. But I would push back on those who interpret that Eisenhower closing speech as being wary of the defense sector in general, because that was not his action as president.

Larry Bernstein:

Russia did a particularly poor job in executing its Ukraine battle plans. Yet, we hear that the Europeans perceive the Ukraine invasion to be an existential threat to their existence. Do you think that Russia’s behavior in Ukraine shows weakness and what have we learned about our adversary’s ability to wage war?

Seth Jones:

Predictions in the first few days that the Russians were likely to win in a matter of days if not weeks. The Chairman of the Joint Chiefs of Staff said that. That was reflected in U.S. intelligence assessments from every intelligence agency because the quantitative military balance between the Russians and the Ukrainians in the number of soldiers and weapon systems. Those assessments did not appreciate the qualitative side: morale, corruption, or the importance of joint operations. Four years into this war, the Russians are not able to effectively combine their air-ground operations, firing from aircraft in support of forward deployed forces to break through Ukrainian territory. They are like a third-world military.

That is not to say the Russians are poor across the board. We’ve seen the Russians effective in developing new types of drones, effective in electronic warfare and jamming, but militaries have to execute.

Larry Bernstein:

How problematic is it for the Chinese that they have not been in hot war since the 1979 conflict with Vietnam?

Seth Jones:

They can produce weapons at scale and have been quite innovative in technology including artificial intelligence and quantum. But the Chinese have huge challenges, massive corruption within the People’s Liberation Army including in China’s Central Military Commission.

They are very weak undersea compared to the Russians. Their submarines are pretty loud, easily findable by the U.S.

Big questions about their ability to conduct a kill chain and their organizational structure for fighting a war. Unlike most militaries, the Chinese have a dual-hatted command structure. On a ship the Chinese have both a PLA Navy military commander as well as a political commissar.

Larry Bernstein:

That sounds ridiculous.

Seth Jones:

The Soviets ditched that organizational structure during World War 2. It was very inefficient and a lot of chaos in it. They had that command structure against the Indians in the 2020 war.

Larry Bernstein:

Do you think that the US can get on a war footing?

Seth Jones:

The United States, as Franklin Delano Roosevelt said, can be the arsenal of democracy. Alexis de Tocqueville expressed deep admiration for the innovative spirit and the boundless energy of Americans. The U.S. has what it takes to conduct a national industrialization strategy to bring the commercial sector to mass produce at speed and scale. It can fix supply chain challenges of strategic stockpiles. We see that with critical rare earth minerals. Our allies like the Japanese and South Koreans are very capable of filling in gaps in shipbuilding. There is a mindset issue.

There’s got to be a White House level initiative. The U.S. is going to have to spend money to get to a wartime footing. The whole goal here is deterrence. The U.S. has what it takes. The question is, is it going to wait for a war to do this?

Larry Bernstein:

Thanks Seth. I would like to move to our second speaker my buddy David Susser.

David Susser:

My name is David Susser and I have been in the aviation and defense business for 38 years. I started a company in 1990 and sold it to a public company in 2005. I currently manage three businesses in commercial aviation and defense for the firm is HEICO Aerospace. It’s got a market capitalization of approximately $40 billion.

Larry Bernstein:

What it is like to interact with the Department of War?

David Susser:

Working with the Department of Defense is cumbersome to say the least. Trying to interpret how to bid on certain contracts requires specific software. It requires a lot of man-hours to figure out who is approved to supply a particular product. For instance, you could have an approved source at the Department of Defense and there could be three other viable ways to provide a similar product, but the mechanisms to get them approved at the Department of Defense could take years to accomplish and you need to have buy-in from a particular engineer.

Larry Bernstein:

Our previous speaker Seth Jones was saying that there is a difference in how you manage defense procurement when you are on a war footing. If it is life and death, the decision-making loop can be much faster. Obviously, we want cost transparency without mistakes. In WW2, Seth said that we converted factories, developed new armaments with delivery in months not decades. Why does the current system take so long and toilets cost $40,000?

David Susser:

There are different reasons why we have these extended lead times. The commercial version of the approval process for alternative products could 100% apply to the defense department, and we could open the world to a larger number of suppliers. Increased competition makes the OEM and the aftermarket suppliers more competitive.

For F-15s, F-18s, and F-16s, Lockheed granted licenses for third parties to develop alternative parts and it has worked effectively. The F-35, which is our newest state-of-the-art stealth fighter, Lockheed 100% controls all spares and will not grant any licenses on that. That aircraft was predominantly funded by the U.S. government, I do not understand why they cannot force Lockheed Martin to open up licenses for all those parts, particularly when the operational readiness of that aircraft is hovering around 50% to 60%.

Larry Bernstein:

The Jones Act limits production of U.S. naval vessels to the US with American citizen employees. We used to have a large shipbuilding industry, and Congress passed a law with the intent of maintaining domestic production. But the United States is not the best, cheapest, or most efficient shipbuilder. How should we think about relying exclusively on U.S. production of armaments?

David Susser:

Even if we wanted to increase our spending on shipbuilding, an area where the Chinese are dominating us, we don’t have the labor to build ships. We could partner with the South Koreans which can use their labor and manufacturing capabilities without necessarily sacrificing proprietary secrets of the United States. We could use them to manufacture heavy metal hardware and the sophisticated electronics could be fitted out once the ship is in the United States.

There is a lot of ways we can protect our IP and know-how and utilize other countries to manufacture the labor-intensive hardware.

Larry Bernstein:

Regulations exist because we fear fraud and cost overruns by the defense industry, so we put in regulations and systems to prevent us from getting ripped off. But does this end up costing us in time and money?

David Susser:

On the commercial side of the business, when a customer approaches us to come up with an alternative part for a particular aircraft, we do a safety evaluation and determine is this a product that if it failed, what type of downstream damage can it cause and could it lead to a potential safety issue?

The major issue here is cost and availability of products. When you hear stories of operational readiness below 75%, clearly there’s a supply chain problem. We want alternative products for cost and availability. You add the component of criticality in there and you can segment the procurement process and perhaps cover at 50% of your operational needs with an option of either OEM equipment or some alternative product.

Larry Bernstein:

A couple weeks ago, I did a podcast entitled You Sank My U-Boat. One of the subjects that we discussed was the rapid technological evolution during the Second World War. It’s like football, the offense and defense try new strategies and opponents need to adapt.

When the fighting started the U-boats were sinking a large number of cargo ships, so the British responded with convoys of ships and destroyers. The Germans U-boats evolved a new strategy of using a wolfpack of six U-Boats to overwhelm the destroyers. When the British began using sonar, the Germans coated their submarines to confuse the sonar. War is a a constantly evolving game of cat and mouse. Tell us about the war in Ukraine and the evolution of technology particularly for drones.

David Susser:

The use of drones has become an offensive weapon, an incredible tool for surveillance utilized at altitudes practically undetectable. In Iran we tried to strike their nuclear capabilities, the first order of business is to take out their communications and that gives our aircraft huge flexibility in how they attack their targets.

When the Russians took out the communications for Ukraine, we had Starlink an option for countries when communications get knocked out. There ultimately will be a defense to that. So as you said, there’s a measure and then a countermeasure.

When drones were first introduced into the Department of Defense, they were utilized as target practice, and then people started to realize that you could make slight modifications to utilize drones for surveillance, as well as for offensive wartime engagement. Drones are significantly more cost-effective than flying aircraft. They do not put pilots at risk. You can have them be precision guided with a pilot in a remote location. Drones are an unbelievable tool to fly longer distances and cause more catastrophic damage than anyone imagined.

Now, if you compare that to operating an F-16 or an F-35, you’re still going to want a pilot in the cockpit who’s making real-time decisions in a forward location as opposed to being on a camera thousands of miles away.

There is a measure and then a countermeasure that we will ultimately come up with some jamming device which will disable them, and then they will be modified again. The game will go back and forth between technological improvements and then countermeasures to those improvements, but drones have clearly changed the landscape of the battlefield.

Larry Bernstein:

Going back to Seth’s book, FDR hires Knudson away from General Motors to take over the War Department’s weapon procurement in World War II. He simplified matters by asking, “What equipment do you want, how much are you willing to pay, and when do you want it. And I’ll deliver it. I am in the manufacturing business not the policy and planning department.”

You, David, are in the manufacturing business. Seth says, “We need to be on a war footing, meaning we need to be able to deliver armaments in shorter time less expensively. How can we change things around to be most efficient?

David Susser:

The complexity of being operationally ready for our armed conflicts throughout the world has changed dramatically. It’s conventional warfare, urban warfare, and cyber warfare.

Prior to the Russia-Ukraine war, we felt that most of our conventional hardware was obsolete. Now we’ve learned since Russia-Ukraine that we need to have operational readiness with conventional warfare. And as we see what is going on in the Pacific with the Chinese, we need naval warfare.

Not 100% sure how we prepare to fight all these battles to defend territories with all these different weaponries. We are going to have to commit defense dollars towards what we believe are the highest probability to defend the nation.

The flexibility to change those priorities with rapid notice is the real challenge for the Defense Department. Streamlining decision making on the allocation of resources is important but cycle times for weapon development is a multi-year commitment. 3% of GDP on defense is not enough. We need to be committing a larger percentage of our GDP towards defending the United States.

Larry Bernstein:

Thanks to Seth and David for joining us.

If you missed the previous podcast, the topic was The Wondering Jew.

Our speaker was Abby Pogrebin was previously the President of the Board of Central Synagogue where I am a member. She is also the author of My Jewish Year: 18 Holidays, One Wondering Jew. Abby spent a year celebrating every Jewish holiday and we discussed what she learned from her adventures.

You can find our previous episodes and transcripts on our website
whathappensnextin6minutes.com. Please follow us on Apple Podcasts or Spotify. Thank you for joining us today, goodbye.

Check out our previous episode, The Wondering Jew, here.

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