•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...

... contd.