There’s a saying “from your lips to God’s ears”, if you say so, Shekhar.

•But times have changed a great deal since we talked last, January 2004 is when we talked last.

I remember that very well — at Haji Ali.

•Yes, Haji Ali at Bombay.

Yes, times have changed. I think that was probably the pinnacle of the US power. If you think about the unipolar world from 1989, the fall of the Soviet Union, to about 2006-2007, the period from 2003-2004 was the high point of American power. This one country could almost unilaterally depose two regimes 6,000 miles away from it, expand its military budget by $60 billion, which is more than the combined military budgets of Britain and Germany. But that world is passing now.

•Are we now talking about what could be the lowest point of American power in many decades?

I would have agreed with you maybe six months ago. But, in a sense, we have passed the phase of critiquing the Bush administration. Now, I think what we are really into, if you pardon the expression, is understanding the post-American world. I think everybody understands that level of American or German unilateralism has passed. Now, we try to understand this far more complex world with America still at the centre but in a room of equals, and you saw that vividly with this G20 summit. The actual existence of the summit was in itself an event to be marvelled at. Every previous financial crisis has been discussed by the G7 or G8 or the IMF, in other words, western clubs. For the first time, they did it with 12 emerging market countries, and the dominant theme by everyone’s account was that these countries — India, China, Brazil — will have to be given more power, more representation.

•These countries are the ones that will provide the hormone of growth. Isn’t it?

If you look at the next three years’ global growth, 100 per cent of it will be provided by the emerging market nations. Western Europe will shrink, United States will either stay flat or will shrink, Japan will shrink, China will grow 6-8 per cent, India will grow 5-7 per cent. But that growth will be the only substantial growth in the global economy. Then if you think about cash in a credit-starved world system, who has got cash? The Chinese, the Japanese, the Saudis, not the Americans, not the Europeans. So if you need money you have to go to emerging markets. If you need growth you have to go to the emerging markets and if you need legitimacy increasingly you have to go to the emerging markets.

•And maybe if you need jobs you have to go to emerging markets.

It may well start happening. They may well be the engines of growth.

•After your book on the post-American world, you have been called a declinist.

Many people have called me a declinist. But I think that the basic idea I was trying to point out is the tectonic shift in the global structure of power. America, as you know Shekhar — you have read the book — does pretty well, and I am an optimist about America’s place. Yes, it won’t dominate quite the way it has for the past 20 years, but that was totally unnatural. No country has ever dominated the international system like that. It will be the leading power. But in a world of equals. And in a world of increasingly assertive equals.

•While you call it the post-American world, you see millions of people around the world shedding tears when they watch Obama giving his victory speech. The American virus infects the whole world’s financial and economic system. The global economy will not improve unless the American economy recovers. So, it’s not exactly a post-American world.

As I keep saying, America remains the central power. But if you think about the Obama thing, I think you are absolutely right. It’s a global phenomenon and it may be a story of both America’s importance and the extraordinary nature of communication. We really have become one planet in that we were all watching this one election at the same time. Your TV channels were all there. But what I am talking about is the hard issue of power. You appreciate this, Shekhar. The issue is can you make other countries do what you want them to. And I say that on that crucial dimension, it is not an American world anymore, it is the post-American world. If the US wants to change the outcome in Afghanistan today, it will find that it cannot do it on its own. If it wants to change the outcome in a lasting way in Iraq, it will need to involve the neighbours, including Iran. If it wants to change the global financial system, it will need China. Take that one country. If the US doesn’t get cooperation from China on the global economy, it is impossible to do anything. Now that’s a very different world from 10 years ago. When the Asian economic crisis happened, Washington issued fiat after fiat, dictating to the world what it should do. That world is gone.

•Let banks fail, they said.

When the Asian financial crisis happened, the Americans told the Indonesians, the Thais that ‘here are the three things you must do. You must let all the bad banks fail, no problem on that. You must keep the interest rates high to preserve the value of your currency. And you must not spend a lot of money because you must show fiscal discipline’. What are we doing in our crisis? We are propping up all banks, slashing interest rates, and we are spending lots of money. You know, now I think we have a greater appreciation on the ground for the difficulties.

•What has diminished American power more: George Bush’s diplomacy, or his strategic skills, or his strategic calculations, or is it just economic mess?

Looks like it’s both. But I think in a sense the American political power was delegitimised by the Iraq war. I think not by the actual fact of the war but by the handling of the war, the consequence of the war and in that circumstance, the political military sheen of the US started wearing off. The economic crisis has eroded America’s financial and economic power.

•And these two wars, particularly the way they were conducted, they also took away the aura of invincibility around the US armed forces. They exposed the limitations of the bombing missions.

I think they made us realise — and this is an old lesson that the British learnt by the end of their empire — that you can have these extraordinary superiorities either technologically or numerically but the question is, what are you trying to achieve? If the object is to kill lots of people in a foreign country you can achieve that. If the object is to assert local control for a party, to change an outcome on the ground, that is a political task, and we haven’t yet invented high-tech politics. We may have invented high-tech military. You go into Afghanistan. The basic problem in Afghanistan is, can you find Pashtuns with whom you can deal, who have credibility on the ground and who are not al-Qaeda or extreme Taliban. Now, that’s a political challenge. You can have all the machinery in the world...

•Yeah, you pave the road but you have got to have someone driving on it.

Exactly and that is maybe one of the enduring lessons of politics and of political philosophy. You know that this is ultimately a skill that is not about technology. It’s a skill that is political in nature and perhaps the way you do it is to know something about the country, know about the culture, understand the history and don’t fight that.

•And I think be realistic about your objectives.

In a sense, you know, it’s a very American idea. We have always wanted to recreate the world. Tom Paine has this wonderful line. He says you can make the world anew. It’s an American idea. No non-American would believe that you can make the world anew. And it’s what gives America its optimism. They go to a place like Afghanistan and they say ‘here’s a divided authority, a fractured state. So, let’s create a modern, democratic, you know, a responsible state’. The problem is you can’t do that.

•You have to deal with 53 tribes.

And if you don’t deal with them the Taliban will. And that’s what we are watching right now. So America has to choose, in a sense, between its modernising project and its anti-al-Qaeda project. Because the two can’t be combined.

•And you can’t confuse one with the other. And one can’t be used to morally legitimise the other.

Because the old structures of authority in a place like Afghanistan are deep, are tribal and they are not related to votes and democracy. They are related to something different. And you just have to accommodate yourself to them. The new structures of authority which are based on western aid...

•In the American way, B-52s come first and the rest follows. So Fareed, now Obama begins with these two wars and one economic collapse. These three things, you argued at some place, may actually be his strength. How does he handle this and how does he reconstruct his world? How does he reconstruct America, forget reconstructing the war now?

I think, in a way, the most important thing he has to deal with is Afghanistan. Because in Iraq, I do believe, there is a trajectory on which American forces can withdraw, not to a zero though. He will never be able to fulfil that pledge and he actually never made that pledge. But he will get troops down in substantial numbers — tens of thousands of troops. He will have to deal with the financial crisis and I think he is equipped to deal with it. In a way, this is a moment to be a Democrat. The need is for an aggressive, assertive, governmental intervention in markets, and Democrats do that whole-heartedly. Republicans do that very incompetently because they don’t believe in it. Afghanistan is the problem, this is his war, he says it’s the central front on war on terror and he says that you should send 20,000 more troops. Unfortunately, I am not sure that is the right answer. Afghans defeated the British Army, the Soviets put in 150,000 troops in Afghanistan, and the central problem is the one we have been discussing. How he handles this will be a very interesting test of his judgement and character as a foreign policy President. Because it will mean, forgetting all the rhetoric, forgetting all the hoopla — more troops, less troops — and getting into a very sophisticated understanding of the nature of Afghan politics: what are the limits of what can be achieved and trying to achieve that. His temperament, to my mind, suggests that he will.

•Because you know a terrain like that, how can you bomb rubble into rubble?

Exactly, if you go there, it is one of the most primitive places in the world.

•What can you take from the Afghans?

You can’t hold their territory. So what you have to do is to find politics that works, is stable and is anti-al-Qaeda. I think that is important because there is a jehadi culture in Afghanistan and Pakistan that has developed across the Durand line, and you face a real dilemma which is that you don’t want to kill people who are there because you are in their valley. There is this story that an Army officer told me. They asked these young Afghans why they were killing the Americans. They said there was nothing going on in their valley, there was this big fight going on, and they had to take part. They would have been dishonoured and shamed if they had not. He said ‘but why did you fight against the Americans?’ They replied ‘well, we can’t fight against the Afghans’. So, in other words, for the locals, it was just spurring a nationalistic reaction. Now, you don’t want to be engaged in that. On the other hand, left to their own devices, they have allowed large jehadi cells to crop up. They have allowed groups like Bin Laden’s to flourish.

•Because Afghans don’t count winning or losing in terms of number of casualties.

No, it’s a staying power. When an American general told his Vietnamese counterpart that ‘you lost every battle against us in Vietnam’, the latter said ‘that’s true but it’s irrelevant because we knew one day you would have to leave’. And at some level, that’s the problem with Afghanistan: they know that one day the Americans will leave.

•It was different leaving Vietnam then but if they leave Afghanistan now, what will happen to Afghanistan is a less important question, what will happen to Pakistan is more important, at least for us in India, because Pakistan will get sucked into it.

If you look at the comments Obama made about Kashmir, they are exactly right. If one could change the political climate so that the Pakistani Army would not focus its entire mission on a pointless, futile effort to defeat the Indian Army and train itself in counter-insurgency which is a real threat — the existential threat — to Pakistan right now, it would be a win-win situation for both sides.

•Is it possible to convince the Pakistani Army?

You know, Shekhar, I have always felt that Musharraf was pretty good for Pakistan and India. He, like all dictators, went mad at the end but I don’t think anyone can do it now. The Pakistani military can only be reined in by itself. No civilian government in Pakistan has ever had the ability to tell the military in Pakistan to rein in itself.

•And certainly this one doesn’t look like it has any.

No, you are talking about redefining the military’s core mission in Pakistan, a mission it has had for 50 years.

•Not just that, their very position in the political structure.

Why do you need to have 20 per cent of the federal budget if you aren’t protecting Pakistan against India? You see the whole centrality of the Army in Pakistani culture relates to war.

•So how does Obama fix it?

I think you try to make Pakistan understand that all these loans, alliance with America, the friendly relations — all depend on it becoming a civilian power, as it were. It’s what the EU has done with Turkey, where the Turks are being slowly edged back from the military.

•Some time has passed so I can quote to you a conversation I had with Colin Powell when he was Secretary of State. I told him ‘what you are doing with Musharraf is a bit like what you did with Sadat, but should something happen to Musharraf, do you have a Hosni Mubarak in place in Pakistan’? You know what he said? He said ‘that’s a good line, I will go back and repeat it many times but you can be sure I shall give you no credit for it’. So they did it without putting a Hosni in place.

But you know they couldn’t. That’s a part of the problem in much of the world, even in South Asia. People exaggerate the power of the US. I mean the US has to deal with what it has, and Pakistan is what it has.

•In fact, it’s democratisation which further limits the power of the US. Because you can fix a general, or you can persuade a general.

And it’s built into the DNA of the American system. So you can’t say to the Americans: pay no attention to this democratisation. You know you can moderate it but at the end of the day, Americans are going to be very uncomfortable being in a situation where they are actively propping up a military regime. They do it but they have very bad feelings about it, so there is always going to be a search for ‘can we push a little bit of democracy here even when it acts against our interests’.

•Talk about yourself, Fareed. You were called a neocon once, you have been called a declinist, you have been attacked by Republican blogs now because they said your son, who is 9, may be more confident in an America governed by Obama. Where do you belong now?

You know my view has always been that you should look at the situation on the ground and form your political ideas. Your political ideas should come out of the facts on the ground. John Maynard Keynes said this wonderful line, “When the facts change, I change my mind. What do you do, sir?” I don’t know whether I would call it being a neocon but when Reagan was president, he had a very tough line towards the Soviet Union which I agreed with, and he was in favour of cutting taxes and deregulating the Government when marginal tax levels in US were 75 per cent and in India they were 95 per cent.

•But we didn’t pay those taxes. So it didn’t bother us.

My point is that at that point, it made sense. But for the last 12-15 years, it has seemed to me a policy of low taxes. Deregulation is not called for, is not the right policy. And a kind of unnecessary hostility towards the rest of the world shows as if we were in the cold war, missing the fact that the cold war has ended. When the strategic situation changes you have to look up and say what are the ideas that would work now. On my son, by the way, this is when I said that.

•Absolutely, but the larger point you made was that America will become America again if young students from around the world feel as welcome as they did in the past to come to America, bright young boys and girls. Do you think Obama will be able to bring about that change?

I think he will begin to make that change happen.

•And the amazing ability of America to attract brilliant, talented people like Fareed Zakaria and to retain them.

You are very kind to say that.

•Fareed, wonderful chatting with you. It is always such a pleasure.

My pleasure, Shekhar.

Transcript prepared by Rupinder Kaur