The 'Chaos' of Failed Nation-Building

DATE June 5, 2008 ACCOUNT NUMBER N/A
TIME 12:00 Noon-1:00 PM AUDIENCE N/A
NETWORK NPR
PROGRAM Fresh Air

Interview: New York Times business columnist Joe Nocera
TERRY GROSS, host:

This is FRESH AIR. I'm Terry Gross.

The volatile stock market and repercussions of the subprime mortgage crisis
have made this a very confusing, even scary period for figuring out what to do
with any savings you have. My guest, Joe Nocera, doesn't have easy solutions
but he can explain some of the issues you need to understand. Nocera is a
business columnist for The New York Times and a commentator on NPR's "Weekend
Edition Saturday." Over the past 25 years in various publications, including
Esquire and Fortune, he's written about issues in business and personal
finance. Many of his essays and profiles are collected in the new book "Good
Guys and Bad Guys: Behind the Scenes with the Saints and Scoundrels of
American Business and Everything in Between."

Joe Nocera, welcome back to FRESH AIR.

You know, a few years ago when I interviewed you, I asked you a question and I
want to start exactly the same way. A lot of people are invested--a lot of
middle-class people are invested in the stock market now, through their
401(k)s or their mutual funds that they've personally invested in; and after
the recent collapse of the market, this time because of the subprime market,
people who are lucky enough to have savings are very confused about what to do
with it. What are some of the new problems we're facing as savers?

Mr. JOE NOCERA: Well, first of all, the first problem is that we're not
really savers. And so point number one is so many people, middle-aged baby
boomers, who are getting ready for retirement don't have nearly enough money
in the market to retire. They haven't put enough away or they have quite
possibly frittered it away foolishly by, you know, becoming day traders during
the Internet bubble. So, you know, problem number one, they don't have enough
money in the market. And problem number two is that, and this is a position
I've come to over a long period of time,,I've come to the belief that most
human beings are not emotionally equipped to be in the market in any serious
way.

GROSS: Why not?

Mr. NOCERA: It's hard to zig when everybody else is zagging. It's hard to
sell when everybody else is buying. It's very hard emotionally not to get
caught up in the madness of crowds. And so the Internet bubble is a classic
example. Rationally, things were insane. Prices were too high. They were
going to come down. Companies with no profits had hundred, $200 stock prices.
But instead of sort of saying, `I need to stay away from this.' So many
Americans--myself included--dove into it with both feet and didn't sell and,
you know, loaded up on Cisco at $80 a share when it should have been 20, and
then, you know, wound up having their portfolio cut by two-thirds. It's just,
you know, people like Warren Buffet who just have the calmness and the iron
stomach to go against the crowd are few and far between.

So it just--that's why, you know, I've basically become an advocate of index
funds which don't try to beat the market. They just try to track the market.
An S&P 500 fund or a Russell 2000 fund, so you're just tracking the general,
overall stock market. When those markets go up, your portfolio goes up. When
they go down, your portfolio goes down. But over time, I mean, even in this
tough period, even since the '87 crash, even since the end of the Internet
bubble, stocks are substantially up, and that is what history tells you will
happen. But index funds are also something that you should be in in your 30s,
rather than in your 50s.

GROSS: Now you say this is something better suited for people in their 30s
than in their 50s. Why is that?

Mr. NOCERA: Well, only because you're not going to make 20, 30 percent a
year. You're going to make 7 percent a year, 5 percent a year, 10 percent a
year. And so the miracle of compounding, you know, your money makes money on
your money, it takes a while to kick in; and so the earlier you start, the
better off you are. And if you're, you know, I'm 56. You know, you're 56 and
you're staring at retirement in nine years, and you have, you know, $200,000
in your IRA when it should be a million plus at this point, you know, you got
to have a bit of a panicky feeling. And I just--this is kind of not what you
asked me but it's kind of where it inevitably goes--I think that when the
great bulk of baby boomers begin retiring, it's already started, but when it
really starts to rev up, there's going to be a retirement crisis in the
country because people are not going to have enough money with which to
retire.

GROSS: So let me get back to my first question about looking for safety in a
financially volatile period. What is considered safe now? If you're willing
to accept a very modest amount of gain in return for safety, what are your
options?

Mr. NOCERA: Well, you know, Treasury bills. You're sort of hitting at the
fundamental conundrum of modern investing life, which is, if you're willing to
accept 2 or 3 percent, you can have your money in a CD or a bank or a Treasury
bill or a fund that traffics in Treasury bills or in a money market fund. But
the minute you decide that you want to make a little more money with your
money, it entails some risk. That's what the market is. You take a risk for
a potential reward. And the higher the potential reward, the larger the risk.
That is at the core of investing.

And most people don't have the wherewithal to--there's all this psychological
work that has been done now about investment behavior. There's a whole
science called behavioral economics that delves into how people think about
risk and how they think about reward. And, you know, people don't really
think about risk properly, or they don't assess it as well as they should, and
they think they're more--they think they're more risk-taking than they
actually are because once they start to lose money they sort of panic and they
don't know what to do. So, you know, the big problem for Americans is that
they have to take a risk to get a reward.

The reward has become a part of American life that you can't avoid. You need
it to send your kids to college. You need it in order to retire. You can't
opt out of this is you want any kind of decent life. So, you know, people are
basically being put in a position of having to do something that they're not
really well equipped to do. And 20 years ago, I was very optimistic about the
democratization of money; what I've seen over the last 20 years has made me
quite discouraged about the democratization of American money.

GROSS: Why?

Mr. NOCERA: Because 20 years ago, I thought, `This is great. The middle
class is going to get to use the same tools as the wealthy. They're going to
be able to invest in the market. They won't be able to have--their money
won't be stuck in a checking account that makes no interest or a savings
account that makes 5 percent. Their reward won't be a toaster that you get
for opening up a new account. Their reward will be real money that they can
make with their money.' And what I've seen over 20 years is what we've just
been talking about, that people just make mistake after mistake after mistake.
Even though they should know better, even though they read all the right
things, even though they sort of--it's like dieting. You know? You say, `I'm
going to go on one. I'm going to lose 20 pounds.' Maybe you lose 10 pounds,
maybe you lose 15, and then you sort of lapse, and then you lapse some more,
and then the next thing you know, you've gained all the weight back.
Investing is so similar. It's so hard to kind of stick to it and do it right.

GROSS: You know, the experts always say over time markets go up, and that
should give you confidence.

Mr. NOCERA: Well...

GROSS: But they neglect to mention that, yeah, but, every 10 or 15 years,
there's this incredible collapse. And, you know, for people who are nearing
retirement, you never know, well, is that collapse going to happen when you're
ready to retire on the money you have in your 401(k)?

Mr. NOCERA: That is completely true and that is why starting at 55 is a lot
dicier than starting at 20, 21, 30; because if you start when you're 30, you
know, you are going to get downs but you're going to get more ups, and you
will ultimately make, you know, a fair amount of money on your money,
especially if you keep putting in month after month as you should. If you
start at 55, yes, you absolutely risk the possibility that when you hit 60 or
62, and you're ready to take some money out, the market's in a bad place. So,
you know, this is another one of those things that we've been talking about,
Terry. You got to, you know, doing it right is hard. When you're 30 years
old, you're thinking, `Well, you know, I can wait another decade before I have
to really start doing this, and I don't really have to think about this now.'
And then at the point at which you start thinking about it, it's too late.

GROSS: So, you know, if you have a lot of money in your 401(k), a lot. I
mean the money that you've put in over years of working and maybe a lot, maybe
not so much, but it's what you've got. You know?

Mr. NOCERA: Mm-hmm.

GROSS: It's what you've got for your retirement. And then you see like what
happened over the summer and then the early fall that, you know, what you have
in your account is starting to collapse as the market collapses. What are you
supposed to do? Do you just kind of like white-knuckle it and leave it there
and just wait for the long-term future to play out? Or do you start like
shifting things around even though you don't really know what you're doing?

Mr. NOCERA: Well, it has to do with risk, again, it has to do with risk
tolerance. I mean, what I would argue in that case--first of all, I don't
think people should be looking at their account every day. I think you should
be, you know, tuning it out most of the time because so much of it is just
white noise. Second of all, as you get older, you need to start reallocating
so that you're more in bond funds, that you have more cash, that you're
protecting pieces of your money over time. So that when you get to the point
where you're 58 and the market starts to crater, instead of having 80 percent
of your portfolio in high-risk stocks, you only have 15 percent and some of
them are in safer stocks and more of it's in bonds.

Which leads me to another point, Terry, which is that I think that many, many
baby boomers--who thought they were smart and could outsmart the market and
could make a lot of money in the market--have discovered that they need help.
And I think that one of the things that's happened in the wake of the Internet
bubble is that brokers have become more important, and especially good brokers
who aren't trying to turn your account. I know I have a broker and--my
money's in a blind trust because I work for The New York Times. But I have a
broker that I feel as though is looking out for my best interest. And it's a
little like having a relationship with your lawyer or your doctor. It's
become a fairly important relationship.

GROSS: I was going to ask you what you've learned about yourself as an
investor since you were talking about the psychology of investing, and a lot
of people just aren't psychologically equipped...

Mr. NOCERA: Right.

GROSS: ...for the market. But if you have a blind trust then you might not
even know about your psychology.

Mr. NOCERA: Well, that's probably--no. I've only been working for The New
York Times for less than four years, so the blind trust is relatively new.
And the fact--the truth is that my own--I know this better than most people.
I can preach this better than most people, but I'm as bad as everybody. I
mean, I remember during the Internet bubble looking at my portfolio every day
to see how much it had gone up. I mean, that's idiotic behavior. Idiotic.

And another thing that people do is that when stocks start to go down, they
have a very hard time selling, even though they're still in plus territory.
So Cisco goes from 80 to 70 and you say, `Well, you know, it will come back
to, you know, it will start coming back.' And it's 70 to 60. And good
investors know, they absolutely know how to cut their losses. And they don't
look back and they don't have regrets. And even if it goes back up, they
don't have regrets. And normal people, you know, don't act that way. And so
I watched my Cisco go from 80 to 20. Well, guess what? It was still in the
plus side; but, boy, did that feel lousy.

And so one of the reasons I feel it so powerfully is I actually do see it very
consciously in my own behavior, and sometimes I just sort of think back.
Sometimes it's almost like self-therapy or something. I sit back and think,
`Now why did I do that? And, boy, that was dumb.' And, `What can I learn from
that and what does that say about the way everybody else?' I do feel a little
bit like Everyman as an investor because I'm really not very good at it; and
when I talk to people, I realize, huh, `They're just like me. They're not any
better than I am.' So, you know, that's my true confession and you have now
wrenched it out of me.

GROSS: My guest is Joe Nocera and he writes a column, a business column for
The New York Times, and he's also a commentator for "Weekend Edition Saturday"
on NPR. And he has a new collection of his pieces called "Good Guys and Bad
Guys: Behind the Scenes with the Saints and Scoundrels of American Business
and Everything in Between."

Let's take a short break here and then we'll talk some more. This is FRESH
AIR.

(Announcements)

GROSS: My guest is Joe Nocera. He's a business columnist for The New York
Times. He's a contributor-commentator for "Weekend Edition Saturday" on NPR,
and the author of a new book that's actually a collection of his business
pieces called "Good Guys and Bad Guys."

Some people say that credit cards--and you've referred to this your
writing--that credit cards are going to be the cause of the next big mess, the
next equivalent of the subprime meltdown. What are they looking at when they
say that?

Mr. NOCERA: The statistics are pretty stark. I wrote a column about this
not all that long ago. Think about the home equity loan and think about what
the housing bubble did to people's borrowing behavior. Basically, as housing
prices went up dramatically and people felt like they were house rich, they
did several things. One is they would refinance the house, especially with
rates so low, and they would pull some cash out and use that cash, you know,
for vacations or for remodeling the kitchen or for buying something, or just
for living expenses as people were living--not everybody, but many people were
living beyond their means.

The second thing they would do is they would take out a home equity loan. And
then the way they would pay that back would be to refinance the house and fold
the equity loan into that. So this is very common behavior during the housing
bubble. So then the housing bubble collapses and suddenly you can't do that
anymore; and some people, it's like musical chair, they're left without the
chair. They have the loan outstanding, and they weren't able to refinance and
they can't refinance. Or they want to live the same living standard and
suddenly the spigot's been turned off.

Many, many people have then turned to credit cards to sustain the lifestyle or
to pay back the home equity loan. And the numbers--I don't have them in front
of me--but the growth in credit card debt over the last, say, three years, has
dramatically outpaced what it did the previous five, six, seven years. So
when people worry about credit cards being the next shoe to fall, that's what
they're worried about. They're worried about people reaching the end of the
line on their credit card, and then beginning to default on their credit card
debt, and that this having the same kind of ripple effect on Wall Street that
the housing crisis has had on Wall Street for the same reason. Because the
Wall Street big boys buy up credit card debt and they "securitize" it, as they
say in the business, and they turn it into, I mean, they turn it into
securities that are traded as debt.

And if those credit card--so, do I really think this is going to happen? Not
to the same extent as the housing bubble, but I absolutely think it could
happen if this recession that we're in--and yes, I think we're in a
recession--lasts a long time.

GROSS: So is a recession a particularly difficult time for paying off
personal debt?

Mr. NOCERA: Absolutely. You know, a recession is when people get tossed out
of work; and, you know, recession is when they don't get raises; and
recessions are when, you know, times is tough.

And the second issue is if people are, in fact, using credit cards to replace
home equity loans and they don't have the means to repay that through a
refinancing of their home, you know, how are they going to pay that debt back?
They can't pay that debt back because they don't have the money. So, yes,
it's a dicey time for Americans, American consumers, American borrowers,
Americans in general.

GROSS: What are your thoughts about whether this is a good time or a bad time
to buy a home?

Mr. NOCERA: If you don't have to sell a home, it's a fabulous time to buy a
home. If you have to sell a home in order to buy up, it's a terrible time. I
mean, I was out on Long Island a few weekends ago; and just driving around,
you saw "For Sale" signs everywhere, just everywhere. You know, there's a
kind of paralysis in the market. So it's a wonderful, wonderful time to be a
first-time home owner if you have a down payment, for instance, because you're
going to be able to get a great house at a terrific price. That's what
happens in a time like this when the housing market is depressed and
paralyzed.

GROSS: I've heard that in some cities the housing prices haven't really
fallen that much in spite of everything that's happened.

Mr. NOCERA: Well, I think that's true of New York City, and maybe a few
other big cities; but for the most part, I mean, especially in places like
California or, you know, up and down the East Coast where housing prices
really rose, I mean, Florida, for instance, housing prices have fallen
dramatically. And I think in most of the country, they've fallen quite a bit
and there's a high anticipation that they'll keep falling.

GROSS: You say, "Over the past 20 years I've come to believe deeply in the
importance of business, a far cry from where I was when I started on this
path." What changed?

Mr. NOCERA: Me. Learning about business, understanding about business; but
also the culture changed. The culture came to appreciate business more in a
way that it didn't 20 years ago. They don't take it for granted quite so much
anymore. And we kind of understand its importance in daily life; that, you
know, companies create standards of living, they employ people, they do
important technical innovations, and breakthroughs come from companies. But
also great crimes come from companies, too, such an Enron. So, you know, they
can have a powerful effect on American life in negative ways as well.

GROSS: Joe Nocera, thank you so much for talking with us.

Mr. NOCERA: It was a pleasure. Thank you, Terry.

GROSS: Joe Nocera is a business columnist for The New York Times and a
contributor to NPR's "Weekend Edition Saturday." His new book is called "Good
Guys and Bad Guys: Behind the Scenes with the Saints and Scoundrels of
American Business and Everything in Between."

I'm Terry Gross and this is FRESH AIR.

(Announcements)

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

Interview: Author Ahmed Rashid on new book "Descent into Chaos:
The United States and the Failure of Nation-Building in Pakistan,
Afghanistan and Central Asia"
TERRY GROSS, host:

This is FRESH AIR. I'm Terry Gross.

Today an al-Qaeda operative based in Afghanistan claimed credit for Monday's
bombing of the Danish embassy in Islamabad, Pakistan. My guest, Ahmed Rashid,
says al-Qaeda has expanded around the world and now there are full-blown
Taliban insurgencies in Pakistan and Afghanistan. Rashid also says that the
mistakes of the Bush administration have created a far bigger crisis in south
and central Asia than existed before 9/11. Those mistakes are the subject of
his new book "Descent into Chaos: The United States and the Failure of
Nation-Building in Pakistan, Afghanistan, and Central Asia." Rashid is a
Pakistani journalist who has covered the region since the late 1970s. His
best-seller "Taliban" was one of three books he wrote before 9/11 about the
problems of failed states, the raise of al-Qaeda and the Taliban, and the
failure of US policy in the region.

Ahmed Rashid, welcome back to FRESH AIR.

Before we get to your book, Denmark's embassy in Pakistan was bombed this
week. What message does that send?

Mr. AHMED RASHID: Well, I think it's a very horrendous message. It's
obviously a major escalation by the Pakistani Taliban and al-Qaeda to show
foreigners what they can do. We've had two attacks this year, this is the
second, on the diplomatic community in Islamabad. And despite the enormous
security that there now exists around the diplomatic quarter, this embassy,
you know, was bombed. People were killed.

GROSS: You write in your new book that compared to what's at stake in
Afghanistan and Pakistan, Iraq may well turn out to be a mere sideshow. Why
do you think there's even more at stake in Afghanistan and Pakistan than there
is in Iraq?

Mr. RASHID: Well, I think, you know, Iraq--despite the horrors that have
happened in that country, 2.5 million refugees, tens of thousands killed--Iraq
is going to remain a problem for the Middle East, and any eventual settlement
there is going to involve the Arab countries, Israel and possibly the
Americans.

You know, Iraq is not an international issue. We have not had terrorist
attacks in Europe and America launched from Iraq; and that's what I think the
crux of the issue is. That despite all the hype by the Bush administration
about Iraq having nuclear weapons and al-Qaeda and terrorism, Iraq as an
international issue has been sort of fairly benign in the sense that it has
not posed a threat to the international community the way that the
administration envisaged when it launched the war in 2003.

Afghanistan and Pakistan, on the other hand, now house all the major terrorist
groups and their leaderships, particularly most of them are on the Pakistan
side of the border, in the borderland, the tribal areas. And the Army now is
pulling out of there. That's going to leave a free hand to many of these
terrorist groups. And if we look at any terrorist attack since 2004--in
Europe, in North Africa, in the Far East--there has been the hand of the one
or two members of these groups have either been for training or they've got
explosives or they've got money or they've got some kind of support from
either al-Qaeda or the Taliban in these tribal areas. So this region remains
a major global threat, in my opinion.

GROSS: Your new book is in part a critique of what American did wrong in
Afghanistan. You say that you were in support of the invasion of Afghanistan
at the time and that you argued it was a just war, not an imperialist
intervention, because only intervention could save the Afghan people from the
Taliban and al-Qaeda. But then you came to think that the United States
really mishandled things in Afghanistan. So let's talk about why. One of the
issues you write about is that the routing of the Taliban left the warlords in
Afghanistan in place and even more powerful than they were before. Why did
the US consider the warlords its allies and strengthen them?

Mr. RASHID: Well, you know, the reason for that simply was that the
Americans, you know, in 2002, immediately the war ended, were really not
interested in rebuilding Afghanistan. And I kept hoping that, you know,
they're going to build the roads, they're going to give electricity, they're
going to invest in agriculture, and nothing happened. And clearly, you know,
what emerges then is that because the preparations for Iraq were already
underway in the spring of 2002, huge amounts of resources were taken out of
Afghanistan: the surveillance satellites, special forces, the reluctance of
Donald Rumsfeld to deploy troops there. All this happens. And to fill the
vacuum, the power vacuum that there was in the countryside, the CIA had a
budget of about a billion dollars and they were told to go and buy up the
warlords. The warlords would now be the peacekeepers, as it were, in the
provinces, outside Kabul, and they would maintain the peace and at the same
time help the American forces look for al-Qaeda.

Now the problem was that a lot of these warlords were also taking money from
al-Qaeda. So they were quite happy to receive American money, and they were
now empowered by the US military. And once that policy ended around the end
of 2003, 2004, and the Americans stopped these stipends to the warlords and
stopped enlisting their militias into helping US forces, it was too late. The
warlords then went straight into drug trafficking, most of them, and became
very, very rich businessmen, now not needing any US money. And, of course,
they're still very much there.

GROSS: So when the US started giving the warlords even more power than they
had by putting them on the CIA payroll, what did they want the warlords to do?

Mr. RASHID: Well, essentially, they didn't want the warlords to disrupt
anything. They wanted the warlords to keep the peace in the countryside, make
sure that the tribes under their control didn't fight each other, the ethnic
groups didn't fight each other. And they really gave them a carte blanche, I
mean, as long as they kept the peace and they helped gather intelligence about
members of al-Qaeda who might have fled here and there. But what, of course,
having been empowered by the Americans, they really threw their weight around.
They created enormous law and order problems in the provinces because, of
course, they gave the best jobs, they gave the best positions to their own
family, to their own clan, ostracizing other families and other clans and
tribes; and so many of these warlords became very partisan in what they did.
They began to smuggle, they got involved in drugs. They got involved in, you
know, all sorts of shady dealings, buying weapons, selling weapons, etc. And
all this was cause for enormous disruption.

And what happens, you know, later on in 2003, 2004, when the central
government tries to get a grip of the provinces and tries to send out
governors and police chiefs who will now govern these provinces on behalf of
the central government, these governors are not able to do so, because the
warlords are so powerful and so important.

GROSS: You know, I'm thinking of Iraq as I hear your description because, in
Iraq, part of the recent approach during the surge has been to give money to
militia leaders to pay them basically not to fight the US but to join in the
fight against al-Qaeda and other militants in Iraq. Do you think we're
running the same risk in Iraq with the policy of basically paying warlords
there that we ran into in Afghanistan?

Mr. RASHID: I think partly you are, simply because there will come a time,
as there came a time in Afghanistan, that these warlords had to be disarmed.
Their militias, which numbered up to eight to 10,000 men, had to be disarmed.

The same thing is going to happen in Iraq. When the central government
becomes stronger, it will not want warlord militias wandering around the
countryside. They will want the central Iraqi army and police force to be the
main source of security and stability in the country. They will want to
disarm these warlords and they are going to find it a very difficult problem.

However, I will say there's one difference, and that is that these tribal
chiefs, warlords, as you will, in Iraq who are being armed by Americans,
really do hate al-Qaeda because they have been, you know, shot and killed and
murdered by al-Qaeda. The problem in Afghanistan was that many of these
warlords were in bed with al-Qaeda. They had given al-Qaeda sanctuary before,
or they'd taken money from them, or they were using al-Qaeda contacts to
smuggle drugs into other countries. So in Iraq, you do have these militia
leaders. They genuinely do hate al-Qaeda. And why some degree of stability
has come about in Iraq is because these militia leaders have actually gone
after al-Qaeda. That's not what happened in Afghanistan.

GROSS: If you're just joining us, my guest is Ahmed Rashid, a journalist from
Pakistan who's the author of the best-seller "Taliban." His new book is called
"Descent into Chaos: The United States and the Failure of Nation-Building in
Pakistan, Afghanistan and Central Asia."

Let's take a short break here and then we'll talk some more. This is FRESH
AIR.

(Announcements)

GROSS: My guest is Ahmed Rashid. He's a journalist from Pakistan who has
covered that region extensively for decades. He's the author of the
best-seller "Taliban." His new book is called "Descent into Chaos: The United
States and the Failure of Nation-Building in Pakistan, Afghanistan and Central
Asia."

You're very critical of how the United States handled Afghanistan after the
bombing and its failure to really help Afghanistan rebuild itself. Do you
think that the United States' action, or inaction, contributed to how the
borderlands between Afghanistan and Pakistan became headquarters for Islamic
terrorist groups?

Mr. RASHID: I think the lack of a US policy for nearly three years in
Afghanistan certainly contributed to this, because the Taliban were able to
come back into Afghanistan and say, `Well, we told you that these Americans
will do nothing; in fact, they've given you more terrorism. These warlords
are back. And we at least had got rid of the warlords.' Which was true.

And secondly, I think there was enormous optimism amongst all the extremists
who had gathered along the Pakistan-Afghanistan border that the Americans were
really not serious about Afghanistan. You know, there would be this holding
operation, they would have a few troops there, and once we launch our
counterinsurgency against the Americans, you know, the Americans will just
pull out and disappear.

And I think the third negative this had was on Pakistan. The Pakistan army
also believed that we would still like to see the Taliban back in some shape
or form in Kabul. They are, after all, our proxy force. They're loyal to
Pakistan. They're anti-India. And these Americans don't seem very serious
about Afghanistan.

GROSS: Another thing you're critical of the United States for is this: you
say that the CIA condemned the opium trade in Afghanistan, but allowed it to
flourish. And, subsequent to that, drug money has permeated local government
in every province. How did the CIA allow the opium trade to flourish?

Mr. RASHID: Well...

GROSS: What could it have done that it didn't do?

Mr. RASHID: What I mean there was, it was not just the CIA, it was
basically, you know, the US government, the military, the State Department and
everyone. Nobody really had a policy towards the drugs issue. Now, basically
it was seen as a benign issue. Really, Americans have not invested in
agriculture, so I suppose we can't blame the farmers for growing opium because
it's a lucrative crop. It's cheap to grow. It doesn't need much water. And
eventually it'll disappear. Not understanding that this crop was first of all
to spread right across the country, was to grow enormously, was to feed the
warlords, and then was to fund the resurgence of the Taliban and al-Qaeda in
Afghanistan.

And the real debate has been--what I was arguing very early on was that, OK, I
can understand that American troops do not want to be going to the fields and
actually start chopping off the poppy flowers and eradicating poppy fields and
antagonizing the local population and farmers. But the alternative was that
the American forces should have interdicted drugs traffickers. They should
have interdicted convoys of drugs. And I recount several instances in my book
where, you know, American officers are telling me, `Well, we're sitting here
in the middle of this desert outpost and, you know, this morning I woke up and
I saw 12 trucks passing and they were all full of opium. And I couldn't do
anything about them.' Now, it would've been the easiest thing for these
American troops just to walk outside and stop these trucks and burn the crop,
burn that opium which was in the trucks. But they weren't allowed to do even
interdiction.

And let me tell you, seven years on, there is still no American policy on
drugs control. And of course why interdiction was so important was that the
Afghans were not capable of doing it themselves. You needed the foreign
troops--I mean, this should have been the major contribution of the foreign
troops--to at least raise the stakes for the drug traffickers and for the
opium dealers. And that was never done.

GROSS: How would you rate Hamid Karzai, the president of Afghanistan, and his
performance in trying to hold the country together and get it back on its
feet?

Mr. RASHID: Well, I think, you know, the problem is that he's been unwilling
to understand how state structures are built, and the role that the president
must play building these state structures. And instead what we've had is
massive corruption. You know, the drugs economy is now by far the largest
economy in the country. Now, I met him, you know, just a week ago in Kabul,
and I had a very long talk with him about--in fact, their elections are coming
up next year, and he told me certainly he was going to stand, you know. And I
said, `Well, have you thought of an agenda for the next 18 months?' He didn't
really seem to have a very clear answer about that, as to what his agenda will
be.

GROSS: So what message did you deliver last week?

Mr. RASHID: Well, I really delivered the message saying that he's losing
credibility fast, that he is not popular anymore, the international community
is losing a lot of faith in him, and he'll have to do something to pull his
socks up in the next 18 months if he wants to win the elections and if he
wants to retain the credibility of the public and the international community.
And I said that several times in several different ways. And I think, you
know, I mean, he took it in a good way.

GROSS: You write that the World Bank estimates that there are now 26 failed
states in the world that could breed terrorism, as opposed to 17 such states
back in 2003. Is Afghanistan considered one of those failed states?

Mr. RASHID: No. I still don't consider it a failed state. It was a failed
state, of course, in 2001. We should also highlight the progress and
advancements that have been made. I mean, you know, more than half the
country's children are now in school for the first time in the history of the
country. Health has dramatically improved. Women's health has dramatically
improved because of health facilities. I mean, there's a whole level of
progress in the social sector that has been extremely positive and really
heartwarming to see. I mean, every time you go back you see this. Businesses
have started, etc.

The real failing continues to be the infrastructure, because you can't
re-float or re-jig the economy until you have electricity and roads and water
and the bare essential. And, you know, Kabul even today still has five or six
hours of electricity every other night. Every other night. You have no
electricity during the day whatsoever. So seven years on, I mean, are you
going to build a factory in Afghanistan with, you know, alternate night
electricity? No, you're not. And we're just talking about Kabul. We're not
talking about, you know, other parts of the country.

And of course infrastructure needs very heavy investment. Power, utilities
don't come cheap, nor do roads. And nor do dams and water supply, etc. So
what is being done has been--a lot has been done on the social side, health,
education, etc. Not enough has been done on the infrastructure.

GROSS: Recently there were articles in The New Yorker and The New Republic
about how there's a rift in al-Qaeda and that, you know, some people within
al-Qaeda are now challenging terrorism and saying that, you know, terrorist
acts are not justified by the Quran except in very, very limited
circumstances; that, for instance, the attack on 9/11 doesn't count for, you
know, that 9/11 wouldn't be justified under these limited requirements for
violence. How major a movement is that within al-Qaeda? How seriously are
you taking this dissenting point of view?

Mr. RASHID: Well, you know, my problem with this is, and the advocates of
this, is of course it's a good thing, that there should be dissent. But where
is this dissent coming from? This dissent is really coming from what I call
the old al-Qaeda, that is the pre-9/11 al-Qaeda, or those members of al-Qaeda
who were members just before and after 9/11. It's not, this dissent--many of
these people who are dissenting now have spent time in jail. Many of them
have been propped up by governments. For example, the government of Saudi
Arabia, the government of Egypt, other Middle East governments are propping up
these people to say these things. And it is important. It's a good message
to give out. It's a powerful message. It will have some influence.

But my qualification is that the new al-Qaeda is really nothing to do with
these people. These people do not understand something like the Pakistani
Taliban, or even what the Afghan Taliban has become, or what some of these
Central Asian groups are today. Al-Qaeda was an organization that, in those
days, stood on a platform on its own. It had allies that were distant allies.
Today al-Qaeda is meshed in within a huge number of groups, and we really
don't know where al-Qaeda ends and these groups begin, or we don't know where
these groups begin and al-Qaeda ends. Now clearly al-Qaeda still has a
structure. It has leadership. They're able to plan and plot; but they're not
necessarily carrying out plots themselves. I mean, the suicide bombers in
9/11 were personally vetted by bin Laden. Now that is not possible today.
Bin Laden is not vetting anyone today. He's giving you a vision, he's giving
you symbols of attack, you know, such as, for example, the Danish embassy in
Islamabad; but his group is so enmeshed with all these other allies now, and
many of these allies are coming from very different backgrounds. I mean, the
Taliban are basically tribesmen, illiterate, unversed in Quranic studies and
Islamic studies; and many of these dissidents that we're talking about belong
to a highly educated Islamic school of thought. I mean, wrong--it was
wrong--but they were well educated. The new Taliban are not well educated.

GROSS: So you don't see a whole lot of hope in the few dissenters within
al-Qaeda now?

Mr. RASHID: No. I think it's an important part of the anti-al-Qaeda
campaign. I'm not diminishing it in any way. But I don't think it's
critical. I mean, I don't think these guys have the capacity to halt
terrorist attacks, for example.

GROSS: Right.

Mr. RASHID: I don't think they have the capacity to lead to desertions from
al-Qaeda or from the Taliban or from one of these groups. It's interesting.
It's an intellectual kind of debate. It will be debated, certainly, in Muslim
quarters, in Muslim circles all over the Arab world in particular. Remember,
most of these people are Arabs so it's very much an Arab phenomenon, this
debate. I wouldn't say it's a phenomenon that's taking place in countries
like Indonesia or Pakistan or where there other large Muslim populations.
It's interesting, but it's not going to be critical.

GROSS: Well, Ahmed Rashid, I want to thank you very much for talking with us,
and I wish you safe travels.

Mr. RASHID: Terry, thank you very much.

GROSS: Ahmed Rashid is a journalist who lives in Pakistan. His new book is
called "Descent into Chaos: The United States and the Failure of Nation
Building in Pakistan, Afghanistan and Central Asia."
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