By Michael Savage
Written off as a Blairite, the new Transport Secretary has made a startling new beginning in a job that he has always wanted

When Lord Adonis, the man behind New Labour’s controversial shake-up of the education system, left the education department for a new job looking after the nation’s railways, the end looked nigh for the most Blairite of Blairites.

It was seen as a hint that he would not last long under the leadership of Gordon Brown and that his drive to relaunch struggling schools with private money had lost favour. His relocation to the Department for Transport (DfT) was written up as an unwelcome consolation prize for a politician on the way out.

However, that version of events was laid to rest in the mind of one political rival upon their first visit to Lord Adonis’s new office. Two documents lay on his desk. One was a historic train timetable from the 1920s, the other an opposition party’s transport policy manifesto, criss-crossed with yellow marker pen. The obsessive attention to detail Adonis had demonstrated during his time running the rule over Britain’s schools was being applied to the railways immediately. “You cannot have big ideas, unless you understand the detail,” he told The Independent, appropriately enough from a train heading to Marylebone station. “In all my experience of public service reform, it is intimate knowledge of the detail which helps you generate those big ideas. I hope I know my stuff.”

Now officially in charge of the whole train set since being promoted to Secretary of State at the last reshuffle, he has wasted no time in showing he means business, renationalising one of Britain’s most popular rail lines rather than handing taxpayers’ cash to its struggling private owner. In acting tough against National Express and taking back the keys to the East Coast mainline, he effectively ended the company’s future in the rail industry. His steely underbelly had been noted by mandarins before, earning him the nickname Muscles while an education minister. His premature obituary writers have been left in no doubt about his renewed enthusiasm. “I’m passionate about transport, so this is my dream job,” he said.

His fastidious qualities have seen him eclipse two of his former bosses while in Government. He drew up Labour’s education policies while under the supposed leadership of Ruth Kelly. Business and political figures often chose to deal directly with Lord Adonis when he was a transport minister, bypassing the former Transport Secretary, Geoff Hoon. “He is the man getting things done,” one rail executive told The Independent before Lord Adonis’s promotion to the top job. “He is the one making decisions.” A senior Tory agreed. “He was the de facto Secretary of State.”

At first glance, his background looks quintessentially New Labour. Like Tony Blair, he was privately educated, attending Kingham Hill boarding school in the Cotswolds. He went on to Oxford, where he earned a first and a DPhil before taking up a fellowship at Nuffield College. But his educational achievements belie the fact that he had a difficult childhood. He managed to win a place at boarding school through a public scholarship, having grown up in a north London council estate, spending some time in a care home. He admits he spent much of the time unhappy. Friends say his range of experiences played a major part in his drive to reform the education system, having benefited from his boarding school days. Though now a Labour member, he served as a Liberal Democrat councillor and backed the SDP before joining the party. Despite his apparent political journey, he has said he would not take a job offered to him by a Tory government.

After a stint as a journalist at the Financial Times and then as a columnist at The Observer, he joined Tony Blair’s policy unit, masterminding plans to wrest control of schools away from public authorities, introduce top-up fees, and reinvent struggling schools through the city academies programme. It was a controversial set of ideas from the start and won him many critics. His policies soon became known in the education world by the acronym ABA, standing for “Adonis Blair Axis” among the polite, or “Andrew Bloody Adonis” among the more distracted.

There seems little to connect the education of children and the punctuality of commuter trains, but there is one clear motive behind his passion for both. “I’ve always been very interested in modernising public services and I’ve always seen transport as a key part of that,” he said. “I’m interested in the social purpose of public transport. A good society is one that has a well-functioning public transport system and in this country we have historically had a very patchy one. We were the first country in the world to have a railway system, but we let it stagnate badly in the 20th century.”

As for the suggestion that he left the education department because he could not work under the new Secretary of State and Prime Minster’s right-hand man, Ed Balls, he was baffled by it. “It was totally untrue,” he said. “I’d been working on education policy for a long time and needed a new challenge. I’d always been interested in high-speed rail.” Most politicians with any sense would fight tooth and nail to avoid the political graveyard of the DfT, which has seen 12 secretaries of state come and go in just 20 years. Yet it was Adonis who approached Brown with an offering – to move him to the department and allow him to push ahead with an extraordinary plan to bring high-speed rail to Britain. He certainly isn’t playing it down the scale of the project. “It will be one of the biggest infrastructure projects the country has ever undertaken and we’ve been embracing it with real enthusiasm,” he said. “I’m a man on a mission.”

His stock shot up after he embarked on an epic tour of the country by rail to discover such oddities as being unable to find something to eat at Southampton at 8pm. His political opponents have found themselves falling victim to his work rate. Norman Baker, the Lib Dem transport spokesman, was pleasantly surprised to be invited to join him on his adventure at Lewes, though Baker was a little disheartened to discover Adonis was eager to catch a train at 5.30am. “We were pretty much the only two people on the train,” Baker said. “We had a bleary-eyed conversation. But it is great that he is happy to talk things over very openly.” His desire to deal with the minutiae of everything from the frequency of trains to Kettering to the number of bike racks at stations is a mixed blessing for the rail bosses. “He has a lot of ideas,” one rail company chief executive said. “It is great that he is interested in what we’re doing, but sometimes it is easier when the Secretary of State prefers to do nothing.”

However, the state of Britain’s coffers is in danger of damaging his ambitions. There are serious questions over whether a man with such zeal for big reforms can operate in an era marked by spending cuts and the rebalancing of public finances. But judging by how he dealt with cash-strapped rail companies this week, the Prime Minister will have a fight on his hands if he attempts to row back on the deal he made with Muscles over high-speed rail. Anyone spending even a few minutes talking to the new Transport Secretary is left in no doubt that it is a resignation issue.

A life in brief

Born: Andrew Adonis, 22 February 1963, north London.

Early life: Won a scholarship to Kingham Hill school, Oxfordshire. Gained a first-class a degree in modern history from Keble College, Oxford and a DPhil from Christ Church College, Oxford.

Career: Became a Lib Dem councillor in Oxford in 1987 before taking a fellowship at Nuffield College, Oxford. Moved into journalism, first with the Financial Times and then The Observer. Joined Prime Minister’s policy unit in 2001. Appointed to the Lords and made an education minister in 2005. Moved to transport in October last year, becoming the Secretary of State last month.

He says: “I’m a man on a mission. I’m passionate about transport, so this is my dream job.”

They say: “It is good to have a Transport Secretary who is actually interested in transport.” Norman Baker, Liberal Democrat transport spokesman

Chris Nelder|Jul. 4, 2009, 7:05 AM|26
I have dished out a healthy share of criticism about the paths we are taking into the energy future, so perhaps it’s time I offered some paths of my own. I will outline them as simply as possible, since the data and thinking behind them could fill a book.

First we must know where we’re going.

Credible models show that by the end of this century, essentially all of the fossil fuels on earth will be consumed—oil, natural gas, and coal. Presumably, whatever fuels do remain at that point will be reserved for their highest and most valuable purposes like making crude oil into plastics and pharmaceuticals, not burning it in 15% efficient internal combustion engines.

Consider the following world model for all fossil fuels:

Source: “Olduvai Revisited 2008,” The Oil Drum, by Luís de Sousa and Euan Mearns. Cumulative peak of fossil fuel energy is 2018. Data sources: Jean Laherrère for natural gas, Energy Watch Group for coal and The Oil Drum for oil. [This is an exceptional study and I recommend it to my readers!]

By the end of this century then, a mere 90 years from now, we’ll need to have an infrastructure that runs exclusively on renewably generated electricity, biofuels, and possibly nuclear energy. That’s where we’re going.

Fortunately, there is more than enough available renewable energy to meet all of our needs, if we can harness it. Unfortunately, we’re starting from a point at which less than 2% of the world’s energy comes from renewables like wind, solar and geothermal.

Hydro provides about 6%, and nuclear about 6%, but for reasons too numerous to get into here, some of which my longtime readers have already heard, I don’t believe either source will increase much in the future, and both could actually decline.

Our challenge then is to make that 2% fraction grow to replace about 86% of the world’s current primary energy, in 90 years or less.

We are currently at peak oil, a short, roughly 5-year plateau which goes into terminal decline around 2012. All fossil fuel energy combined peaks around 2018, less than a decade from now.

All strategies for accommodating the fossil fuel decline require decades to have any significant effect. The now-iconic study “Peaking of World Oil Production: Impacts, Mitigation, & Risk Management” (Hirsch et al., 2005) demonstrated that it would take at least 20 years of intensive, crash-program mitigation efforts to meet the peak oil challenge gracefully. Another study, “Primary Energy Substitution Models: On the Interaction between Energy and Society,” (C. Marchetti, 1977) showed that it generally takes decades to substitute one form of primary energy for another, and 100 years for a given source of energy to achieve 50% market penetration.

Therefore, we are going to have to accomplish most of the renewable energy revolution in a scenario of ever-declining fuel supply. In just 50 years, we’ll be working with about half our current energy budget. So in fact we may only have about 50 years to build most of the new renewable energy and efficiency capacity we will need to get us through the end of the century.

Another important factor is that exports will fall off much faster than total supply. (See my article on the oil export crisis from last year.) Foucher and Brown (2008) have shown that the world’s top five oil exporters could approach zero net oil exports by around 2031. Net energy importers like the US could be increasingly starved for fuel as decline sets in and accelerates, and net energy exporters could wind up shouldering much of the burden of new manufacturing. This factor means that we will have to front-load as much of our development as possible.

The final and most important factor is population. The few population models that actually take fossil fuel depletion into account assume that global population increases roughly out to the global fuel peak, and then stabilizes at that level or declines naturally while economic development promotes lower fertility rates and renewables and energy efficiency increase to fill the gap of declining fossil energy. I understand why this assumption is made—because the alternative is too ghastly to contemplate—and for the immediate purpose of this article I will go along with it. I will note however that history and scientific observation of populations suggest some sharp episodes of decline are more likely, and in my estimation we will end this century with a considerably smaller population than anyone forecasts, at some level well below today’s.

How, then, can we replace or offset through efficiency at least 40% of our current energy supply with renewables in the next 50 years, while fuel prices are rising and the global economy is flat or shrinking due to a lack of fuel?

A proper model for achieving this goal would be a very large undertaking, the sort of thing that should be done by a team of experts with a budget. (Is anybody at the Department of Energy listening?) But I can identify some key pathways that are, in my estimation, no-brainers. Because the solutions going forward will be quite different for each country, I will limit my recommendations to the US.

Seven Paths to Our Energy Future →
1: Rail. Rail should be Priority 1, and should be granted the largest portion of public funding.

2: Rooftop Solar PV. Utility scale projects like giant solar farms in the desert and giant wind farms in the Midwest (or offshore) all face serious hurdles in siting, permitting, environmental impact, and transmission capability. Rooftop photovoltaic (PV) solar systems face no such issues and can be deployed right now, building capacity incrementally over time.

3: Alternative Vehicles. Since reconfiguring our urban topology around transit and deploying light rail will take decades, we will need some transitional solutions that still allow us to get around in cars for a good many years.

4: Efficiency. Most of the efficiency gains we can make are thermal: reducing the energy it takes to heat and cool buildings.

5: Utility Scale Renewables. We’ll need large solar plants across the Southwest, and huge wind farms in the Midwest and offshore.

6: A Beefier, Smarter Grid. The good news is that we already have most of the technologies we need in this area. All that we lack is the will and the funding to put it in place.

7: Keep Drilling. If we back off too much too soon from oil and gas production, it could leave us without adequate or reasonably priced fuel to accomplish this transformation, and sink the entire effort.

Why bother with reforms? After all, India’s economy has weathered the global financial crisis quite well. This is testimony to the country’s tremendous potential – exemplified by a young labour force, a dynamic entrepreneurial class and an improving financial system. But India will always punch well below its weight if it does not remove barriers that keep it from fully tapping that potential.

The list of needed reforms is long. India’s labour laws, which constrain large enterprises in particular, have hurt productivity growth. Shackles on the educational system are keeping India from reaping the full benefits of its young workforce. The dilapidated physical infrastructure is hurting growth in all sectors.

Above all, financial sector reforms will determine the pace and quality of India’s growth. Loss of momentum in this area could be very costly, for finance is the thread that runs through all other reforms and will determine their ultimate impact.

The reform agenda is about the basics of financial development rather than sophisticated innovations. It is tempting to draw the lesson from the global financial crisis that a closeted economy with a state-dominated banking system is the best and safest option for India. But the financial system should be evaluated against a broader set of criteria.

The basic purpose of a financial system is to channel domestic savings and foreign capital into productive investment. On this criterion, which is how the financial system can contribute to growth, there is a long way to go. Indian banks may have held up well during the crisis but that does not make them efficient intermediaries that are channelling credit to its most productive uses. Many sectors of the economy, especially small and medium-sized enterprises, are still starved of credit.

The banks should be freed of their role as instruments of social policy through government-directed lending programmes. This would allow them to channel credit to enterprises that could effectively convert financial capital into productive physical capital and generate desperately needed job growth. “Priority sectors” identified by the government, including agriculture, should get direct budget financing rather than subsidies through the financial system. A dose of private ownership would force public banks to become more efficient, especially some of the smaller ones that are unviable in their present form.

The opening up of corporate bond markets is also a priority to give firms an alternative way of raising finance, especially for long-term projects such as infrastructure investment.

While the crisis shows that weakly regulated exotic derivatives can wreak havoc, not all derivatives should be tarred with the same brush. Indeed, India has made progress on basic derivatives that enterprises use to hedge against various types of risk. For example, there is a huge demand from exporting and importing firms for derivatives to hedge currency risk and that market has flourished. Opening these markets to more participants, including foreign investors, and improving trading systems would make them more robust.

India’s strong growth over the past decade has reduced poverty but much of the population remains at the margins of subsistence. A better-functioning and broader financial system would help entrepreneurs to generate jobs. Wider access to banking products would help households save more efficiently and build up a buffer for a rainy day. The government has made it easier for banks to set up cashpoints but a lot more could be done to push forward initiatives such as mobile banking using cell phones and provision of basic banking services through retail outlets.

Mr Singh should seize this chance to rejuvenate the process of financial development and reforms. His legacy, and India’s future path to sustained and inclusive growth, depends on it.

The writer is a professor at Cornell University and a senior fellow at the Brookings Institution

While it attempts to kick-start its struggling auto industry, the U.S. is talking about building a high-speed rail network with an initial $8 billion in stimulus funds. Meanwhile, China is investing over $300 billion in high-speed rail through 2020, in a bid to speed ahead of the rest of the world’s train systems.

The numbers alone are head-spinning: 16,000 miles of new track by 2020, requiring 117 million tons of concrete just to construct the buttresses on which the tracks will lie. Top speeds from Beijing to Shanghai will approach 220 miles an hour, halving the current travel time to four hours. This year China Railway Company plans to hire 20,000 young engineers. Can we say leapfrogging?

Rail at Center of Stimulus Package
China’s high speed rail build-out is at the front and center of its stimulus spending, in large part out of fear: little is more intimidating to Beijing’s leaders than the sight of thousands of unemployed workers. So far the construction of the Beijing-Shanghai route alone has employed about 110,000 people.

The rest of China’s stimulus program is focused on building airports, highways and environmental projects, particularly water treatment plants.

But alongside the need for jobs, the demand for better rail in China is also significant. Last year saw 1.46 billion journeys by rail, a 10.9% rise from 2007. The figure could double by next decade.

Stunning Rail Plan
Most of the new high-speed links will not be considerably faster than European trains. Thirty-five lines for trains traveling at 125 mph or more, measuring 6,800 miles in total, will be brought into service by 2012, officials say, with 4,350 more miles by 2020.

But the first phase will include five major routes – three running north to south, two east to west – with trains reaching 217 mph or 236 mph.

China spent $44 billion last year — up from $12 billion in 2004 — on rail.

“I don’t think anything compares except maybe the growth of the U.S. rail network at the start of the 20th century,” John Scales, the transport coordinator for China at the World Bank, told the Times.
China Speeds Off
In a recent piece by Bill Powell in Fortune, China’s build-out plays foil to the U.S.’s sputtering $8 billion rail plans.

That $8 billion isn’t much considering that as of last month, 40 states submitted 278 pre-applications for various high-speed passenger rail projects, amounting to $102.5 billion in requests. California wants to link San Francisco with L.A. via a high-speed link. Senate Majority Leader Harry Reid wants the private sector to get into the act, proposing a high-speed spur to connect Las Vegas with L.A. Final applications are due August 24, and the FRA will begin distributing funds in September.

As Americans wait for projects to be approved, by 2012 Chinese rail travelers could begin to use the largest, most technologically sophisticated rail system in the world.

Much of the high-end rail technology, by the way, is coming from overseas. Canada’s Bombardier is working on signaling systems and on 40 of the systems trains.

And the kicker to the Fortune piece:

Maybe, after environmental reviews are finished and eminent domain issues settled, [America's] lines will be built. Meanwhile, IBM opened its new global high-speed-rail innovation center last month.
In Beijing.

Rail Growth = Economic Growth
The infrastructure spending appears to be driving surprise growth in China’s economy. The country’s second-quarter growth, at 7.9%, beat expectations, while economists at Goldman Sachs expect China’s growth this year will exceed Beijing’s estimate of 8.1%. Despite slowing exports from the global downturn, China’s overall steel production capacity has increased by 10% to 12% over a year ago.
There’s no doubt that “the acceleration of [the massive railroad build-out] is playing a key role in China’s recovery,” says David Li, an economist at Beijing’s Tsinghua University.

In May we cited a piece at Infrastructurist arguing that a serious investment in high-speed rail in the U.S. could provide as many if not more jobs than the country’s auto industry.

And, as Andy Kunz told us recently, a serious high-speed rail network could significantly cut American carbon emissions, boost technology and help wean us off of foreign oil.
Why is China So Good at This?
As with China’s push to become the world leader in electric cars and hybrids, the country’s command economy management means that big projects can get going faster than they might under a clunky American bureaucracy. Meanwhile, the manufacturing sector provides more than enough steel and concrete. But China’s infrastructure success also rests on the early start it got: the rail build-up began in 2005, meaning projects were “shovel-ready” by the time recession hit.

The U.S. meanwhile is still looking for its shovel.

Over the past decade, whenever I went to China and engaged Chinese on their pollution and energy problems, inevitably some young Chinese would say: “Hey, you Americans got to grow dirty for 150 years, using cheap coal and oil. Now it is our turn.”

It’s a hard argument to refute. Eventually, I decided that the only way to respond was with some variation of the following: “You’re right. It’s your turn. Grow as dirty as you want. Take your time. Because I think America just needs five years to invent all the clean-power technologies you Chinese are going to need as you choke to death on pollution. Then we’re going to come over here and sell them all to you, and we are going to clean your clock — how do you say ‘clean your clock’ in Chinese? — in the next great global industry: clean power technologies. So if you all want to give us a five-year lead, that would be great. I’d prefer 10. So take your time. Grow as dirty as you want.”

Whenever you frame it that way, Chinese are quizzical at first, and then they totally get it: Wow, this energy thing isn’t just about global warming! In a world that is adding one billion people every 15 years or so — more and more of whom will be able to live high-energy-consuming lifestyles — the demands for energy and natural resources are going to go through the roof. Therefore, E.T. — energy technologies that produce clean power and energy efficiency — is going to be the next great global industry, and China needs to be on board.

Well, China has gotten on board — big-time. Now I am worried that China will, dare I say, “clean our clock” in E.T.

Yes, you might think that China is only interested in polluting its way to prosperity. That was once true, but it isn’t anymore. China is increasingly finding that it has to go green out of necessity because in too many places, its people can’t breathe, fish, swim, drive or even see because of pollution and climate change. Well, there is one thing we know about necessity: it is the mother of invention.

And that is what China is doing, innovating more and more energy efficiency and clean power systems. And when China starts to do that in a big way — when it starts to develop solar, wind, batteries, nuclear and energy efficiency technologies on its low-cost platform — watch out. You won’t just be buying your toys from China. You’ll be buying your energy future from China.

“China is moving,” says Hal Harvey, the chief executive of ClimateWorks, which shares clean energy ideas around the world. “They want to be leaders in green technology. China has already adopted the most aggressive energy efficiency program in the world. It is committed to reducing the energy intensity of its economy — energy used per dollar of goods produced — by 20 percent in five years. They are doing this by implementing fuel efficiency standards for cars that far exceed our own and by going after their top thousand industries with very aggressive efficiency targets. And they have the most aggressive renewable energy deployment in the world, for wind, solar and nuclear, and are already beating their targets.”

Here’s the key point on energy from the draft report of the president’s Economic Recovery Advisory Board: “If the U.S. fails to adopt an economywide carbon abatement program, we will continue to cede leadership in new energy technology. The U.S. is now home to only two of the ten largest solar photovoltaic producers in the world, two of the top ten wind turbine producers and one of the top ten advanced battery manufacturers. That is, only one-sixth of the world’s top renewable energy manufacturers are based in the United States. … Sustainable technologies in solar, wind, electric vehicles, nuclear and other innovations will drive the future global economy. We can either invest in policies to build U.S. leadership in these new industries and jobs today, or we can continue with business as usual and buy windmills from Europe, batteries from Japan and solar panels from Asia.”

Indeed, if you look at those top 10 lists, compiled by Lazard, the investment bank, Japanese companies have the most, then Europe, then China — then us.

This is a major reason I favor the climate/energy bill passed by the House. If we do not impose on ourselves the necessity to drive innovation in clean-technology — by imposing the right prices on carbon emissions and the right regulations to promote energy efficiency — we will be laggards in the next great global industry.

And this is why I disagree with President Obama when he signals that he has to focus on extending health care and put the energy/climate bill — now in the Senate — on the backburner.

Health care and the energy/climate bill go together. We need both now. Imagine how poor we would be today if U.S. firms did not dominate the top 10 Internet companies. Well, if we don’t dominate the top 10 E.T. rankings, there is no way we are going to be able to afford decent health care for every American. No way.

July 3, 2009
OP-ED COLUMNIST
Chinese Fireworks Display

By DAVID BROOKS
On July Fourth, we think about our country and its future. But these days it’s impossible to think about America and its future role in the world without also thinking about China. This was the subject of a combative discussion this week at the Aspen Ideas Festival.

The agent provocateur was Niall Ferguson of Harvard. China and the U.S., he argued, used to have a symbiotic relationship and formed a tightly integrated unit that he calls Chimerica.

In this unit, China did the making, and the United States did the buying. China did the saving, while the U.S. did the spending. Between 1995 and 2005, the U.S. savings rate declined from about 5 percent to zero, while the Chinese savings rate rose from 30 percent to nearly 45 percent.

This savings diversion allowed the Chinese to plow huge amounts of capital into the U.S. and dollar-denominated assets. Cheap Chinese labor kept American inflation low. Chinese efforts to keep the renminbi from appreciating against the dollar kept our currency strong and allowed us to borrow at low interest rates.

During the first few years of the 21st century, Chimerica worked great. This unit accounted for about a quarter of the world’s G.D.P. and for about half of global growth. But a marriage in which one partner does all the saving and the other partner does all the spending is not going to last.

The frictions are building and will lead to divorce, conflict and potential catastrophe. China, Ferguson argued, is now decoupling from the United States. Chinese business leaders assume that American consumers will never again go on a spending binge. The Chinese are developing an economy that relies more on internal consumption.

Chinese officials are also aware that the U.S. will never get its fiscal house in order. There may be theoretical plans to reduce the federal deficit and the national debt, but there is no politically practical way to get there. Depreciation is inevitable and the Chinese are working to end the dollar’s role as the world’s reserve currency.

Chinese nationalism is also on the rise. The Internet has made young Chinese more nationalistic. The Chinese are acquiring resources all around the world and with them, willy-nilly, an overseas empire that threatens U.S. interests. The Chinese are building their Navy, a historic precursor to expanded ambitions and global conflict.

Think of China, Ferguson concluded, as Kaiser Wilhelm’s Germany in the years before World War I: a growing, aggressive, nationalistic power whose ambitions will tear through pre-existing commercial ties and historic friendships.

James Fallows of The Atlantic has lived in China for the past three years. He agreed with parts of Ferguson’s take on the economic fundamentals, but seemed to regard Ferguson’s analysis of the Chinese psychology as airy-fairy academic theorizing. At one point, while Fallows was defending Chinese intentions, Ferguson shot back: “You’ve been in China too long.” Fallows responded that there must be a happy medium between being in China too long and being in China too little.

Fallows pointed out that there is no one thing called “China” or “the Chinese,” and that many of the most anti-American statements from Chinese officials are made to blunt domestic anxiety and make further integration possible. That integration, Fallows continued, is deep and will get deeper. Many, many Chinese leaders were educated in the U.S. and admire or at least respect it. If you go to cities like Xian, you find American and European aviation firms fully integrated into the commercial fabric there.

Fallows’s main argument, though, was psychological. When he lived in Japan in the 1980s, he said, he sometimes felt that the Japanese had a chip-on-their-shoulder attitude in which their success was bound to U.S. decline. He says he rarely got that feeling in China. Instead, he has described officials who are thrilled to be integrated in the world. Their mothers had bound feet. They themselves plowed the fields in the Cultural Revolution. Now they get to join the world.

Some of the officials interviewed by Fallows believe the U.S. is following unsustainable fiscal policies that will lead to decline, but they view this with frustration, not joy. Fallows doesn’t know what the future will hold, but he believes that Chinese officials still see the dollar as their least risky investment. Domestically, China will not turn democratic, but individual liberties will expand. He agreed that China and the U.S. will dominate the 21st century, but he painted the picture of a more benign cooperation.

I came to the debate agreeing more with Fallows and left the same way, but I was impressed by how powerfully Ferguson made his case. And I was struck by their agreement about what to do. This conversation, like many conversations these days, gets back to America’s debt. Until the U.S. gets its fiscal house in order, relations with countries like China will be fundamentally insecure.

Former US Secretary of State Henry Kissinger, 86, discusses the painful lessons of the Treaty of Versailles, idealism in politics and Obama’s opportunity to forge a peaceful American foreign policy.

SPIEGEL: Dr. Kissinger, 90 years ago, at the end of World War I, the Treaty of Versailles was signed. Is that an event of the past only of interest to historians or does it still shape contemporary politics?

Henry Kissinger: The treaty has a special meaning for today’s generation of politicians, because the map of Europe which emerged from the Treaty of Versailles is, more or less, the map of Europe that exists today. None of the drafters understood the implications of their actions, and that the world that emerged out of the Treaty of Versailles was substantially contrary to the intentions that produced it. Whoever wants to learn from past mistakes, needs to understand what happened in Versailles.

SPIEGEL: The Treaty of Versailles was meant to end all wars. That was the goal of President Woodrow Wilson when he came to Paris. As it turned out, only 20 years later Europe was plunged into an even more devastating world war. Why?

Kissinger: Any international system must have two key elements for it to work. One, it has to have a certain equilibrium of power that makes overthrowing the system difficult and costly. Secondly, it has to have a sense of legitimacy. That means that the majority of the states must believe that the settlement is essentially just. Versailles failed on both grounds. The Versailles meetings excluded the two largest continental powers: Germany and Russia. If one imagines that an international system had to be preserved against a disaffected defector, the possibility of achieving a balance of power within it was inherently weak. Therefore, it lacked both equilibrium and a sense of legitimacy.

SPIEGEL: In Paris we saw the clash of two foreign policy principles: the idealism embodied by Wilson who encountered a kind of realpolitik embodied by the Europeans which was above all based on the law of the strongest. Can you explain the failure of the American approach?

Kissinger: The American view was that peace is the normal condition among states. To ensure lasting peace, an international system must be organized on the basis of domestic institutions everywhere, which reflect the will of the people, and that will of the people is considered always to be against war. Unfortunately, there is no historic evidence that this is true.

SPIEGEL: So in your view, peace is not the normal condition among states?

Kissinger: The preconditions for a lasting peace are much more complex than most people are aware of. It was not an historic truth but an assertion of the view of a country composed of immigrants that had turned their backs on a continent and had absorbed itself for 200 years in its domestic politics.

SPIEGEL: Would you say that America inadvertently caused a war while trying to create peace?

Kissinger: The basic cause of the war was Hitler. But insofar as the Versailles system played a role, it is undeniable that American idealism at the Versailles negotiations contributed to World War II. Wilson’s call for the self-determination of states had the practical effect of breaking up some of the larger states of Europe, and that produced a dual difficulty. One, it turned out to be technically difficult to separate these nationalities that had been mixed together for centuries into national entities by the Wilsonian definition, and secondly, it had the practical consequence of leaving Germany strategically stronger than it was before the war.

SPIEGEL: Why? Germany was militarily disarmed and geographically decimated.

Kissinger: Territorial expansion and power are relative. Germany was smaller, but more powerful. Before World War I, Germany faced three major countries on its borders: Russia, France, and Britain. After Versailles, Germany faced a collection of smaller states on its eastern borders, against each of which it had a huge grievance but none of which was capable of resisting Germany alone, and none of it probably was capable of resisting Germany even if assisted by France.

So that from a geostrategic point of view, the Treaty of Versailles met neither the aspirations of the major players nor the strategic possibility of defending what had been created, unless Germany was kept permanently disarmed. It would have been correct to include Germany in the international system but that precisely what the victorious powers omitted to do by demilitarizing and humiliating the country.

SPIEGEL: Despite the failure of Versailles, this Wilsonian idea is remarkably prevalent. Is our affinity to the ideals of democracy perhaps naïve?

Kissinger: The belief in democracy as a universal remedy regularly reappears in American foreign policy. Its most recent appearance came with the so-called neocons in the Bush administration. Actually, Obama is much closer to a realistic policy on this issue than Bush was.

SPIEGEL: You see Obama as realpolitician?

Kissinger: Let me say a word about realpolitik, just for clarification. I regularly get accused of conducting realpolitik. I don’t think I have ever used that term. It is a way by which critics want to label me and say, “Watch him. He’s a German really. He doesn’t have the American view of things.”

SPIEGEL: Then it’s a way to cast you as a cynic, isn’t it?

Kissinger: Cynics treat values as equivalent and instrumental. Statesmen base practical decisions on moral convictions. It is always easy to divide the world into idealists and power-oriented people. The idealists are presumed to be the noble people, and the power-oriented people are the ones that cause all the world’s trouble. But I believe more suffering has been caused by prophets than by statesmen. For me, a sensible definition of realpolitik is to say there are objective circumstances without which foreign policy cannot be conducted. To try to deal with the fate of nations without looking at the circumstances with which they have to deal is escapism. The art of good foreign policy is to understand and to take into consideration the values of a society, to realize them at the outer limit of the possible.

SPIEGEL: What if values cannot be taken into consideration because they are inhuman or too expansive?

Kissinger: In that case, resistance is needed. In Iran, for example, you need to ask the question of whether you have to have a regime change before you can conceive a set of circumstances where each side maintaining its values comes to some understanding.

SPIEGEL: And your answer?

Kissinger: It is too early to say. Right now I have more questions than answers. Will the Iranian people accept the verdict of the religious leaders? Will the religious leaders be united? I don’t know the answers, nor does anyone else.

SPIEGEL: You sound very skeptical.

Kissinger: I see two possibilities. We will either come to an understanding with Iran, or we will clash. As a democratic society we cannot justify the clash to our own people unless we can show that we have made a serious effort to avoid it. By that, I don’t mean that we have to make every concession they demand, but we are obligated to put forward ideas the American people can support.The upheaval in Teheran must run its course before these possibilities can be explored.

SPIEGEL: So you are calling for a kind of realistic idealism?

Kissinger: Exactly. There is no realism without an element of idealism. The idea of abstract power only exists for academics, not in real life.

SPIEGEL: Do you think it was helpful for Obama to deliver a speech to the Islamic world in Cairo? Or has he created a lot of illusions about what politics can deliver?

Kissinger: Obama is like a chess player who is playing simultaneous chess and has opened his game with an unusual opening. Now he’s got to play his hand as he plays his various counterparts. We haven’t gotten beyond the opening game move yet. I have no quarrel with the opening move.

SPIEGEL: But is what we have seen so far from him truly realpolitik?

Kissinger: It is also too early to say that. If what he wants to do is convey to the Islamic world that America has an open attitude to dialogue and is not determined on physical confrontation as its only strategy, then it can play a very useful role. If it were to be continued on the belief that every crisis can be managed by a philosophical speech, then he will run into Wilsonian problems.

SPIEGEL: Obama did not only hold a speech. At the same time, he placed pressure on Israel to stop building settlements in the West Bank and to recognize an independent Palestinian state.

Kissinger: The outcome can only be a two-state solution, and there seems to be substantial agreement on the borders of such a state. Now, how you bring that about and what phases of negotiation, what issue you start with, that you cannot deduce from one speech.

SPIEGEL: Do concepts like “good” and “evil” make sense in the context of foreign policy?

Kissinger: Yes, but generally in gradations. Rarely in absolutes. I think there are kinds of evil that need to be condemned and destroyed, and one should not apologize for that. But one should not use the existence of evil as an excuse for those who think that they represent good to insist on an unlimited right to impose their definition of their values.

SPIEGEL: What does the word “victory” mean to you? After World War I, there was a victor and a victim, the Germans; and the Versailles Treaty was an effort to contain the power that had lost. Do you think it’s a smart idea to claim victory over another country?

Kissinger: The important thing after military victory is to deal with the defeated nation in a generous way.

SPIEGEL: And with this you mean not to subdue the defeated nation?

Kissinger: You can either weaken a defeated nation to a point where its convictions no longer matter and you can impose anything you wish on it, or you have to bring it back into the international system. From the point of view from Versailles, the treaty was too lenient with respect to holding Germany down, and it was too tough to bring Germany into the new system. So it failed on both grounds.

SPIEGEL: What would a wise winner do?

Kissinger: A wise victor will attempt to bring the defeated nation into the international system. A wise negotiator will try to find a basis on which the agreement will want to be maintained. When one reaches a point where neither of these possibilities exist, then one has to go either to increase pressure or to isolation of the adversary or maybe do both.

SPIEGEL: Were the Western countries wise in respect to their dealings with the former Soviet Union after their implosion?

Kissinger: There was too much triumphalism on the western side. There was too much description of the Soviets as defeated in a Cold War and maybe a certain amount of arrogance.

SPIEGEL: Not only towards Russia?

Kissinger: In other situations as well.

SPIEGEL: What’s the difference between the conflicts in Europe in the early 20th century and the conflicts we are facing in today’s world?

Kissinger: In previous periods, the victor could promise itself some benefit. Under the current circumstances,that no longer applies. A clash between China and the United States,for example, would undermine both countries.

SPIEGEL: Would you go so far as to say what we are seeing is end of major wars?

Kissinger: I believe that Obama has a unique chance to conduct a peaceful American foreign policy. I do not see any conflicts between suchmajor countries, China, Russia, India, and the U.S., which will justify a military solution. Therefore, there is an opportunity for a diplomatic effort. Moreover, the economic crisis does not permit countries to devote a historic percentage of their resources to military conflict. I am structurally more optimistic than a couple of years ago.

SPIEGEL: The situation in Iran doesn’t make you fearful?

Kissinger: Fear is not a good motivation for statesmanship. It could be that some kind of at least local conflict will happen, but it does not have to happen. Iran is a relatively weak and small country that has inherent limits to its capabilities. The relationship of China with the rest of the world is a lot more important in historic terms than the Iranian issues by themselves.

SPIEGEL: Mr. Kissinger, we thank you for this interview.

Interview conducted by Jan Fleischhauer and Gabor Steingart.

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