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Transcript:

October 12, 2007



BILL MOYERS: Welcome to the JOURNAL. The stock market hit record highs this week, and while that makes some people giddy, it gives people my age the October jitters. To us October is still the month of the crash...

The crash of 1929, a seismic calamity. Share prices rose like balloons then fell through the floor. Investors panicked. Banks failed, their assets frozen. Savings disappeared. Business after business went bankrupt. Millions were thrown out of work for years. People went hungry and homeless.

I was born in the midst of that depression - among people laid low by it, their memories seared by it forever. Today even as the stock market booms, some people are asking if it could happen again.

In testimony before congress last week, veteran economic journalist Robert Kuttner talked about those parallels.

ROBERT KUTTNER: I am chilled, as I'm sure you are Mr. Chairman, every time I hear a public official or Wall Street eminence utter the reassuring words "the economic fundamentals are sound." Those same words were used by President Hoover and the "Captains of Finance" in the cold winter of 1929. They didn't restore confidence. The fact is the economic fundamentals are sound if you look at the real economy. It is the financial economy that is dangerously unsound.

BILL MOYERS: And in a talk at Princeton University, the 27th chairman of the Securities and Exchange Commission...William Donaldson talked about Wall Street malfeasance in the 1920's and the exuberance of more recent booms and busts.

Let's find out now why both men have a case of the October Jitters.

William Donaldson began his long and notable career in 1959 when he co-founded the international investment bank and stock research firm Donaldson, Lufkin and Jenrette. Over the years he served as Under-secretary of State in the Richard Nixon administration... the founding dean of Yale University's school of management.... Chairman and CEO of the New York Stock Exchange. And in 2003, he was named chairman of the Securities and Exchange Commission by President George W. Bush. He resigned two years ago to return to private life as an investor.

Robert Kuttner has made economics and public policy his beat over four decades as a journalist, teacher, editor, and public official. After a stint as a legislative assistant in congress he was a staff writer for THE WASHINGTON POST. a columnist of the BOSTON GLOBE and BUSINESS WEEK. and a founder and co-editor of the AMERICAN PROSPECT magazine which once had the financial support of the Schumann Foundation, with which I am associated. Among Bob Kuttner's seven books, THE REVOLT OF THE HAVES, EVERYTHING FOR SALE and this new one, to be published in three weeks called the SQUANDERING OF AMERICA: HOW THE FAILURE OF OUR POLITICS UNDERMINES OUR PROSPERITY.

Thanks to both of you for joining me.

BILL MOYERS: Thanks to both of you for joining me. All right, what worries you?

ROBERT KUTTNER: I think there are three big parallels between what happened in the '20s and what has been happening on Wall Street lately. One is insiders with conflicts of interest that are not fully disclosed to the public, generally. Secondly, there's much too much borrowed money. There's much too much leverage in the economy, and particularly in the financially engineered parts of the economy.

BILL MOYERS: Which would be hedge funds?

ROBERT KUTTNER: Which would be hedge funds and derivatives, which are instruments that hedge funds often use. And I think the third is the lack of transparency. The regulators--

BILL MOYERS: What do you mean?

ROBERT KUTTNER: Regulators and the public don't get any kind of disclosure. And hedge funds, because of the loophole in the securities laws, they're not regulated at all. And to the extent that there is a degree of transparency, regulators do get to look at the assets of banks. Sometimes they don't know what they're looking at. Now, you put those three things together, you have a risk of an economy based on asset bubbles where people--

BILL MOYERS: Asset bubbles?

ROBERT KUTTNER: Yeah. It's what happened in the '20s and it's what happened in the '90s. There's a euphoria that sets in. Some of it's engineered euphoria. If you cook your company's books to make it look like your profits are higher than they really are, that's gonna bid up the price of your stock.

And if you're an executive who's compensated on the basis of the price of the stock, that's called a conflict of interest. And that was at the heart of what happened in the '20s and what happened in the '90s. That's why we need the kind of transparency that Mr. Donaldson was promoting when he was head of the SEC.

WILLIAM DONALDSON: Well, I think we've created a number of instruments in this country in particular derivatives and so forth and so on. I think these instruments are not necessarily understood in their entirety.

BILL MOYERS: Let me tell you, I don't understand them.

WILLIAM DONALDSON: Well I'm not sure that many of the people that buy them understand them. I have a feeling that somewhere there's an institution that's just bought a derivative and they don't understand what they bought.

ROBERT KUTTNER: You know, the problem is that in the old days when a bank examiner went to a bank and looked at its portfolio of loans, the examiner could tell which of the loans were performing. Was interest being paid on the loans? Was the principal being paid back? Which ones weren't? And the examiner could direct the bank to reserve assets against the risk of a loan default.

Well, today it's a kind of a regulatory black box. The regulators are relying on the banks' own so-called stress models, which make certain assumptions about human behavior. And we just had a full field test of this in the sub-prime mortgage meltdown. The models didn't work. Behavior wasn't supposed to occur along these lines.

And a lot of this turned out to be junk. And a lot of innocent people got hurt. And the only reason the economy didn't crash was the Fed, which was not inclined to do this before the sub-prime meltdown-- the Fed opened the spigots. And so even though the sub-prime sector is a complete mess, the stock market, as you pointed out in your introduction, hit new highs.

Why? Because the more alarmed the Fed is about the economy, the more the Fed is gonna lower money. And that's good for the stock market.

ROBERT KUTTNER: I mean Alan Greenspan, is one of the revered public figures of our time. I think he made one huge mistake — he did not use a lot of the regulatory power that he had. Every time there was a credit crunch, he would race to the rescue.

BILL MOYERS: By putting in cheap money?

ROBERT KUTTNER: Yeah. So it seems to me, if you're gonna bail out-- problems after the fact, you have an obligation to prevent some of them before they start. And for 13 years, Greenspan's Fed and now Bernanke's Fed has had not just the authority but the mandate from Congress to look at mortgage loan origination standards.

Had they issued regulations under that authority, you never would have had a sub-prime crisis because they would have gone in and noticed that loans were being made that people couldn't possibly pay off. And the only reason they were being made was that somebody at the end of the daisy chain was willing to buy the paper.

WILLIAM DONALDSON: I don't, you know, I don't know about the Federal Reserve system and why they didn't do what they should have done. I do know about the SEC and I do know the efforts that we made to anticipate where things were gonna go wrong. We formed an office of risk control and risk management.

And the idea was to assess where risks were growing up. And we did that with our inspectors that go out into the firms under our jurisdiction. And we basically tried to look over the hill and around the corner and see what was coming down the path. Instead of arriving at the scene of the accident after it's happened, and mopping up we were trying to anticipate where problems were gonna come from.

BILL MOYERS: But you know, you are a conservative, and yet you believe-- you've long believed in managed capitalism. When you went to the SEC, you took with you a belief that government had a role, even though you were conservative. That capitalism, to save itself, needs to be managed. What's happened to that idea, that government does have a role to protect even capitalism from itself?

WILLIAM DONALDSON: Well, first of all, Bill, I think you have to stop using the words "conservative" and "liberal." I would hope that I would be called independent in thought, and not adopting a conservative or liberal — clearly what's needed is an independence of thought, if you will. And an approach to regulation. Markets don't regulate themselves. Clearly. Anymore than you can have an intersection and no stop signs and red lightS.

ROBERT KUTTNER: What drives me crazy, Bill, is the assumption that this is a linear set of choices. Either the Fed does nothing and lets the economy go down the drain, or the Fed cheapens money and bails the economy out and then invites the next round of speculative excess.

There's a third choice that nobody's talking about. That's regulation. It's what we had between the New Deal and the late '70s. There are certain things that are illegal because they're too risky.

BILL MOYERS: Yeah, but when Bill Donaldson went to head the SEC after the Enron, the scandals, and set out to regulate wrongdoing, you became the skunk in the garden, right? Big business, the U.S. Chamber of Commerce, the right-wing circulated rumors that you were a Stalin-like planner. I mean, they didn't want to be regulated, right? They don't want regulation.

WILLIAM DONALDSON: Well, I think a lot of people realized that we needed regulation. You just had to look at where public opinion was and where investor sentiment was after Enron and WorldCom. A very dangerous situation. And the people were asking "Where were you, the SEC, when all of this stuff happened?" And so I think that they welcomed the firm action that the SEC took.

BILL MOYERS: Well, the NEW YORK TIMES, when you retired, gave you credit for restoring faith in the markets. And you did it by strong enforcement.

ROBERT KUTTNER: But, you know there was a window that lasted maybe two years. It took a calamity like the meltdown of '01. '02. 2000, 2001, rather, to get support for regulation. As soon as that calamity passed it was business as usual. And I think the people who gave you such a hard time didn't want any more regulation. I mean what really occurred was that the sub-prime crisis was the result of the Fed's failure to enforce lending standards.

The game was give a loan to somebody who may be at risk of not being able to pay it back. And then an investment bank turns the loan into a security, and some hedge fund or pension fund buys the security, and a private rating agency certifies that it's a safe security. No one knew what in the heck these things were worth until people got a little bit skittish. And then it turned out that a lot of them were worthless. But anybody who talked about the idea that maybe this should be regulated was another skunk at the garden party.

BILL MOYERS: But you were one of the first that I remember calling for regulation of the hedge funds, when you were at the SEC. Why did you want hedge funds regulated? What's dangerous about them?

WILLIAM DONALDSON: Well, these are private pools of capital. They originally started out as a way of investing by both going long and short stocks, supposedly market neutral, as they say. But through the years, the name "hedge fund" has been applied to any pool of capital that is not registered under the SEC--

BILL MOYERS: Unregulated?

WILLIAM DONALDSON: Well, it-- yes. And this has grown, like Topsy. Latest figure's $1.7 trillion of money in hedge funds today versus-- that's ten times growth in less than ten years.

Through a quirk in the regulatory structure hedge funds are not regulated like mutual funds are, or like investment advisors are, or like investment management and brokerage firms are. This is, I believe, just crazy, that we can have, you know, $1.7 trillion dollars. On some days, hedge funds account for 50 percent of the volume on the New York Stock Exchange. So it seems like we ought to at least understand what's going on in the hedge fund business.

BILL MOYERS: So what's at stake? Why should people care about what happens to hedge funds?

WILLIAM DONALDSON: Well I would start by saying that we can't condemn the whole hedge fund industry. There are certain hedge funds, many of them, that are well run by professionals, et cetera, et cetera, et cetera. On the other hand, I think that if you just look at the compensation structure in the hedge fund business where they receive two percent fee on the assets under management, and 20 percent of the profits, and anybody can go into that business and set up a hedge fund. Now, in order to achieve a return, if you're taking 20 percent of the profits and two percent of the assets under management, you have to reach for spectacular returns.

ROBERT KUTTNER: And big risks.

WILLIAM DONALDSON: And big risks. And the problem-- the thing that I think people don't understand is the impact that hedge funds can have on the marketplace itself. People were saying - that George Soros doesn't need--

BILL MOYERS: "Leave him alone, he's a big guy. He-- he'll take care--"

WILLIAM DONALDSON: --guy, he understands what's--

BILL MOYERS: --"of himself." Yeah.

WILLIAM DONALDSON: --going on. That's not the point. That's a slight point. I mean, we do have to assure, even wealthy investors, that the way the funds are priced, the way the fees are gathered, et cetera, et cetera, is being done. That there's no inside trader, trading, all that sort of stuff.

But the real issue is every time a hedge fund buys or sells something, it's doing it with the public, with institutions, with the market. And I think we need to know a lot more about the techniques that are being used in the marketplace itself.

BILL MOYERS: And the bottom line, is that the gov-- is that the SEC's job to make sure we know?

WILLIAM DONALDSON: Absolutely. The SEC is-- that's its role: investor protection. And a protection of the markets themselves, to make sure that they're being run properly.

ROBERT KUTTNER: And I would add that there are two purposes to regulation. One is to protect investors; the other's to protect the whole system from systemic risk, from meltdowns. And when people talk about George Soros can take care of himself, people forget that other purpose of regulation, it's to protect the whole system. And the other problem is that pension funds and university endowments and-- the endowments of charities are now investing in hedge funds. So it is funds that sort of--

BILL MOYERS: That scare you?

ROBERT KUTTNER: --little-- terrifies me.

BILL MOYERS: Terrifies you.

ROBERT KUTTNER: The other day, it was reported that Yale's hedge fund-- Yale's endowment, which is heavily invested in this stuff, had a return last year of 26 or 28 percent. There's a Lake Woebegone problem, you know? Everybody can't be above average. And when you have 9,000 hedge funds, and all the investors want their hedge fund to be above average, as Bill Donaldson was saying, it puts pressure on these hedge funds to take outlandish risks with borrowed money. And also to cross over what's legal and engage in insider trading, trading ahead of markets. All the same kind of stuff that we saw in the '20s that we thought was prohibited under the New Deal is creeping back in.

BILL MOYERS: Let me ask both of you, 'cause I get so much mail, e-mails and letters from people who say, you know, you and your guests are talking about the world as it is, but I'm depressed. I'm discouraged. What can we do? Are there some positive things you would like that could happen right now that would make you both feel better about what's happening?

ROBERT KUTTNER: Well, I'd like to see much tougher policing of conflicts of interest so that if somebody is a middle man on Wall Street takes a company private, pays himself a huge dividend, goes public again, gets fees on both ends and in the middle, and takes assets out of the real company there should maybe be a windfall profit tax on that. I'd like to see the loophole that allows hedge funds to escape disclosure be closed. American capital markets used to be the envy of the world

BILL MOYERS: After the crash of '29--

ROBERT KUTTNER: Be--

BILL MOYERS: --when all of those reforms were put in, those--

BILL MOYERS: --safeguards were put in, right?

ROBERT KUTTNER: Right, because they were so clean and so transparent. There were no meltdowns in the '50s and '60s because there were certain practices that you just couldn't do. And the economy grew at four percent a year. You don't have to indulge a corrupt middleman economy in order to have the real economy grow. I think it will be better for the real economy, not to mention the preventive effect it would have on heading off-- the next crash.

BILL MOYERS: What do you mean by "real economy"?

ROBERT KUTTNER: I mean everything other than the financial economy. And the purpose of the financial economy is to connect entrepreneurs and users of capital with investors. And when the middleman has his thumb on the scale, or extracts too much of the proceeds, or takes too big a risk, that's bad for the rest of the economy.

BILL MOYERS: But does capitalism ever agree that enough is enough?

WILLIAM DONALDSON: No, I don't think so. I mean-- I think that-- not to get into a political diatribe here. But I think the sharing of the benefits of a society are increasingly disproportionate. You talked about people being upset and feeling--. That's because, you know, they read every day about the fantastic profits being made by hedge fund managers and so forth.

And yet they're out there, two-family, two-- Mom and Dad both working. They say there's no inflation, but they're paying more for gasoline and paying more for the everyday necessities of life, and so forth. So in effect, the great middle class in this country has not gotten it -- it's tough. They have not really shared in what's going on now.

BILL MOYERS: Are you saying that this insecurity that you sense in the market has something to do with inequality in America? That is--

ROBERT KUTTNER: Directly. I called my book THE SQUANDERING OF AMERICA because I think the promise of the economy as an economy of shared prosperity is being squandered because the middlemen in the financial markets--

BILL MOYERS: And the middleman is?

ROBERT KUTTNER: Well, it can be a banker, it can be a trader, it can be a broker, it can be someone who's running a hedge fund.

BILL MOYERS: So he or she is doing what that you don't like?

ROBERT KUTTNER: They are taking risks that put the whole economy at risk, and they are cutting themselves too big a slice of the pie at the expense of little people. The biggest hedge fund operators make over $1 billion a year. A normal CEO pay packet now is $40 million or $50 million a year. And the median worker in this country hasn't had a raise. Just barely keeping even.

So, what I want people to appreciate is that the risks in the financial economy, and the increase in security in the rest of the society, are two sides of the same coin. We've given up on a form of managed capitalism that produced board prosperity. And we need to get it back.

WILLIAM DONALDSON: I'm not quite as pessimistic as Bob is on this. I think when you step back the economy is working pretty well.

ROBERT KUTTNER: For most people.

WILLIAM DONALDSON: For a lot of people. But--

ROBERT KUTTNER: Yeah, I agree.

WILLIAM DONALDSON: --as I said before, I think it's disparate sharing of the wealth. I think we need to pay more attention to - as you said, the negative aspects of this. I think we need to understand what's going on globally in terms of our markets.

I'll put in a plug for the people at the SEC. It was and is one of the finest agencies in the country, known for its independence. Known for being nonpolitical. I think that's changed a little bit in recent years, just as everything's become more political. I don't think there's any room for political thought on the SEC commissioners. I think they have one charge and that is to protect investors and to make sure that the rules work. And I think that we've got to give the SEC the horsepower to do its job.

Again, as we were talking earlier, some of these instruments-- they're extremely difficult to understand. Some of the Ph.D.'s that devise them, I'm not sure they really understand them. And you've got people at the SEC who are trying to keep up with that. Trying to understand it. It's a big job.

ROBERT KUTTNER: But the SEC does have a wonderful tradition as an independent regulatory agency. However, the commissioners are appointed by the President, they're confirmed by Congress. And the budget is legislated by Congress.

Whenever Arthur Levitt, who was the distinguished predecessor of Bill Donaldson, tried to be an aggressive regulator, Congress threatened to cut off his budget. So the forces against regulation in the public interest, as good as the SEC is, are stronger than they had ever been. I don't know if that makes me an optimist or a pessimist.

BILL MOYERS: Are we courting a repeat of '29?

WILLIAM DONALDSON: Well, I think that's a little strong. Again, I think that the Federal Reserve, the Central Bank, has an ability to reverse a downturn, but at great cost. I mean, we haven't mentioned the where the dollar is overseas. We haven't mentioned--

BILL MOYERS: We can't see it.

WILLIAM DONALDSON: Well it's disappearing.

BILL MOYERS: Through the floor.

WILLIAM DONALDSON: So I think that the central banks have a greater technique and ability to meet this problem. But insofar as they do-- we run into a moral hazard, i.e. we bail out the people who made bad or devious, or whatever you wanna call 'em, investment decisions. So you sort of are saying, "Go ahead and do whatever you want, and you can count on the good old Fed--"

ROBERT KUTTNER: Right, and the risk--

WILLIAM DONALDSON: --"to bail you out.

ROBERT KUTTNER: The risk is that every time we repeat this cycle, we get bigger and riskier bubbles. And with the dollar being in the tank-- it's not a costless kind of bailout. One would have thought that if the dollar were down to 140 Euros there'd be a run on the dollar. We're gonna see inflationary pressures as a result of the cheap dollar. So it's not as if the Fed can simply print more money to bail out these excesses, and there be no cost to everybody else.

BILL MOYERS: Do you agree with Bob Kuttner's thesis that our politics is undermining our prosperity by squandering America?

WILLIAM DONALDSON: Well I think that we are seemingly paralyzed on a number of issues that face the country. Not just in the financial markets, but the resolution of Social Security system, the resolution of the health care system, the rebuilding of our infrastructure, the attention to the environment. All of these things seem to be taking a second seat to issues that have nothing to do with making sure that this great economy we have continues for the benefit of everybody.

BILL MOYERS: William Donaldson, Robert Kuttner, thank you very much for joining me on the JOURNAL. I've enjoyed this discussion.

WILLIAM DONALDSON: Nice to be here.


BILL MOYERS: Once upon a time, heretics were burned at the stake. You're about to meet a man would put a microphone in their hand and have all of us listen to them. Heresy, says Anouar Majid, just might save us from an apocalyptic future.

ANOUAR MAJID: I think all of us are fundamentalist in some sense.

BILL MOYERS: Anouar Majid wrestles with what he believes is the most inflammatory issue of the 21st century — the rivalry between America and the Islamic world, and he has some provocative ideas about what we should be doing to diffuse the conflict. The answer is for both to rediscover their radical roots. His new book is A CALL FOR HERESY: WHY DISSENT IS VITAL TO ISLAM AND AMERICA. To Majid, America as a nation and Islam as a religion are both bound in straitjackets of religious, political and economic orthodoxies. It will take creative thinking from courageous dissenters, he says, to set them free and put the world on a path away from catastrophe.

ANOUAR MAJID: If we do not have dissent, if we do not have heretics among us, if we do not cultivate these habits of mind, in other words to think creatively and imaginatively and so on we're gonna remain doomed.

BILL MOYERS: Anouar Majid came to the U.S. as a student from Morocco twenty years ago. He went on to write numerous articles, a novel, and two acclaimed books about Islamic ideas and culture. And he beaome the founding chair of the department of English at the University of New England, where he also teaches. He was in New York City this week and we invited him to join us here in the studios. Anouar Majid, welcome to THE JOURNAL.

ANOUAR MAJID: Thank you.

BILL MOYERS: You call yourself a Muslim heretic. What is a Muslim heretic?

ANOUAR MAJID: Well, a Muslim heretic is a Muslim who believes in social and cultural pluralism, someone who believes very firmly, strongly believes, that people ought to have different ideas. Because that's the basis of a good and fruitful conversation. If people did not espouse different viewpoints and if people were to all embrace the same orthodoxy, then cultural and social and intellectual creativity withers. And that is very dangerous and eventually detrimental to any civilization.

BILL MOYERS: And you say that for both Muslims and Americans, heresy is the only life-saving measure left to avoid an apocalyptic future.

ANOUAR MAJID: Yes.

BILL MOYERS: Why is that?

ANOUAR MAJID: In the case of the Islamic world, we know that religious orthodoxies have stifled creativity and have silenced the voices of dissent. And that has been happening for over a long period of time. Consequently, now the Islamic world, now, is in a very precarious intellectual and cultural state and unable to take care of itself properly if it does not allow for those heretical or dissenting voices to emerge in order to engage in solid meaningful debates, philosophical debates and conversations.

BILL MOYERS: I understand you were moved to write this book in no small part because of your experience when your-- one of your children-- was being treated for leukemia in the hospital. How did that shape the writing of this book?

ANOUAR MAJID: My son was diagnosed with ANL, which is a severe form of leukemia, in 2004. And I was in the hospital for seven months. And right there in that hospital, in his room, I was watching the unfolding war in Iraq and other events.

And on one hand, it was almost a surreal experience or maybe it's a schizophrenic experience. Here I am in this place where everybody is rushing and people are just making this heroic attempt to save lives. And out there in the real world, lives are being wasted almost nonchalantly.

BILL MOYERS: Did you want to write a book based upon that experience?

ANOUAR MAJID: I initially wanted to write a book on why America matters. To explain, because I felt at that time that the United States has not been able to explain it--has not been able to explain it adequately to Muslims and Arabs. Instead of, like for example, in my view, emphasizing the significance, the landmark event of the American Revolution and what the American Revolution had inaugurated and how Americans have have been trying to negotiate the tension between a religious life and a secular one from the very early days of the-- from the late 18th century on to today--

BILL MOYERS: You're very much of an admirer of the American Revolution, right?

ANOUAR MAJID: Oh, absolutely.

BILL MOYERS: I mean, you write about it not only here but elsewhere with great appreciation.

ANOUAR MAJID: Yes.

BILL MOYERS: What about it that appealed to you?

ANOUAR MAJID: I think it's the greatest event in modern history. Probably surpasses, in my estimation, the significance of the French Revolution because it's the first attempt in human history to create a political system where people can live without a king, without a monarch, for example. And-- it was almost like a miracle-

BILL MOYERS: You say in here that no place offers more instruction about how Islam and America might co-exist than that, the American Revolution.

ANOUAR MAJID: Absolutely.

BILL MOYERS: How so?

ANOUAR MAJID: Because in the early days of the American Revolution, the decade after the American Revolution-- we see it's an attempts to use Christianity for example, to justify the Republican system of government. People were quoting the Bible. The people are using Christianity as the moral edifice. And that combination, that combination would be extremely useful to Muslim society today, trying to combine, wrestling with how to create or maintain religious piety, to maintain their own spirituality while at the same time, creating cultures of freedom for everybody including for non-Christians and atheists and people with different political and cultural practices.

BILL MOYERS: But one thing that happened is that the founders substituted natural law for revealed law. The founders did not say God tells us to do this. These laws are self-evident.

ANOUAR MAJID: Yes.

BILL MOYERS: And you can't do that in the culture, when it's the Koran, the revelation of God, that is the is the measure. Right?

ANOUAR MAJID: That's true. But if you have the Koran sort of supervising that entire structure, it makes it very difficult for the people who are not of the Islamic faith to live comfortably in those societies and have equal, full equal rights on those societies But it's equally bad for Muslims. Because Muslims are losing the opportunity to engage and to converse. Conversation, by the way, was a critical element in the philosophy of the enlightenment. Adam Smith and Condorcet and others thought of conversation as that which keeps enlightenment alive. If conversations vanish from any society, meaningful conversations where you're talking with people that are very different from-- radically different from you, then you end up with a series of monologues.

BILL MOYERS: But there's another conundrum in what you write and say, which is that in the early days of the American republic, there was almost a bipartisan agreement among our founding fathers, that Islam was a despotic religion. And that it was to be resisted. In fact, our first war as a nation, as you know, was with, what you could say were Muslim rogue states, the Barbary states. We had-- our Navy came out of that war with the Barbary corsairs, right?

ANOUAR MAJID: Yeah, yes.

BILL MOYERS: And there was a great animosity toward, and fear of, Islam.

ANOUAR MAJID: And Jefferson was a hawk in that war. He was a strident, an absolute believer that the United States should not negotiate with the Barbary state. But by the same token, it was also Jefferson who created the Religious Act in Virginia prior to the writing of the Constitution. It was Jefferson who was the first one to eliminate - the religious-- quo-- religious--affiliation.

BILL MOYERS: No religious test--

ANOUAR MAJID: No religious test to become-- every other state had it except Virginia. Virginia was the first one to do it. And Jefferson was behind it.

BILL MOYERS: In the world as polarized as it is right now, how do you get Muslims in the theocracies to take this kind of look at the American Revolution that you recommend?

ANOUAR MAJID: What I've noticed is Americans berate themselves all the time for not knowing enough about other cultures. But the truth is, a lot of Muslims do not know nearly enough about American history and culture. Most of their understanding of American culture comes through TV and current events and so on. Very little understanding of the origins of the settlements and the colonial period and how-- you know, and how it became the revolution it became and so on. Almost none.

And the other interesting thing, and it's something I've always believed in, is like, if you're gonna bring foreign students from the Islamic and the Arab world to study in the United States, they should at least take a number of course in American studies. Because most of them tend to be in the sciences, in the hard sciences or engineer, you know, MBA. Very few go into humanities. So, if people had a much fuller understanding of American history and culture, maybe what they see on TV or the commercial-- in the commercial world will be somehow alleviated or attenuated by their understanding of the history, the depths of American history.

BILL MOYERS: Where I come from, heresy is belief or practice contrary to orthodox opinion. What is the orthodoxy ruling the Islamic world today?

ANOUAR MAJID: The Sharia is the cannon law that regulates Islamic behavior. And it's basically the tyranny of the imams -- imams who are highly schooled in very traditional form of Islamic learning. So, what happens is, they they basically influence people thinking about their fate and their spirituality. And that is the kind of orthodoxy that you see. For example I was reading recently a number of reports on-- you know-- morality cops or vice cops in a variety of nations in the Islamic world, watching people behave or how they dress or where they're breaking the fast of Ramadan. It's really — faith ought to be a personal matter. It should not be monitored by the police or by a security apparatus that makes sure people are in line and so on. The relationship between the individual and his or her God ought to be in some ways a private relationship.

BILL MOYERS: But the orthodoxy is that we have God's voice in our ear. We have the last word from God. Right?

ANOUAR MAJID: Yes.

BILL MOYERS: And anybody who challenges that is in trouble. I mean, if you look at what happened to Salman Rushdie --

ANOUAR MAJID: Yes.

BILL MOYERS: And the, the penalty for asking questions or for challenging the tenets of faith is often death, right?

ANOUAR MAJID: Yeah, and I think - for me, it's like-- when I talk about heresy, I'm, as I said, I don't care too much about settlers and/or religiosity. What I want is to preserve a culture of augmentation and discussion and conversation.

BILL MOYERS: Critical thinking?

ANOUAR MAJID: Critical thinking. Because anything-- if I were to preach secularism and secularism can become tyrannical. Atheism also can become tyrannical -- any system they put in place-- whether it's economic, political or cultural, has a tendency over time to harden into orthodoxy. And if it's not perpetually ventilated by social discourse, by critical thinking, by conversation and so on, systems have a tendency to get self-enclosed over time.

BILL MOYERS: But you also say that America, which is not a religion, it's not a faith, it's a country, suffers some orthodoxy.

ANOUAR MAJID: Yes.

BILL MOYERS: And needs heretics?

ANOUAR MAJID: And it needs free thinkers, heretic and dissenters.

BILL MOYERS: What is the orthodoxy?

ANOUAR MAJID: The orthodoxy in my view has in the last, maybe century at least, it's economic orthodoxy, a particular kind of economic thinking that has sort of marginalized other possible ways of understanding community and how people relate to each other, or basically the pursuit of happiness in the broader sense, that Jefferson defined or described in the Declaration of Independence. What does it take to be happy? What does it take to be a happy American? These are questions that have been sort of neglected under the banner of a particular kind of economic orthodoxy.

BILL MOYERS: Cutthroat capitalism-If I may say so, right?

ANOUAR MAJID: Yes.

BILL MOYERS: That's the orthodoxy?

ANOUAR MAJID: Yes.

BILL MOYERS: You say the capitalist economy also leads to a lot of violence and suffering. It has terrorized many nations and communities with consequences similar to those of theocracy, right?

ANOUAR MAJID: Yes.

BILL MOYERS: But are you equating Wall Street with Wahhabism?

ANOUAR MAJID: Well, what is Wahhabism? Wahhabism is a particular religious ideology that is very orthodox and strict in its doctrines. It does not allow for deviation. It does not allow for transgression. Because all deviations are punished. If Wall Street is doing the same thing, one might give it the same definition. Because fundamentalism and orthodoxy are not necessarily all religions. They can be political. They can be economic. They can be cultural. And in fact one could say we all live with a certain amount of fundamentalism and orthodoxy. Because that's what gives us identity. But we have to be sort of mindful and careful with those. That's why I'm say-- that's why we need those conversations.

Heresy is a tool that opens up those spaces. I mean, I hope people understand that I am not using heresy as an attack on any religion or any culture. I'm using it only as a tool, as a device that allows for the opening up of this tradition that would then bring up-- that would allow for all kinds of conversations to take place. And if those conversations take place, society becomes more creative, more productive and, in the end, happier.

BILL MOYERS: But you can't have a conversation with somebody who doesn't think you're human, a conversation with somebody who wants to kill you, somebody who thinks you're subhuman, somebody whose purpose is to manipulate you, right? You can't have a conversation. That's-- I can hear people out there now, saying, "Well you see? Anouar Majid and Moyers are exactly what we're talking about. We gotta take care of the-- we gotta get rid of these secular liberals. Because they're always calling for a conversation in a world that has no place for it." Right?

ANOUAR MAJID: It cannot be. I mean, we lived-- and that's why I also talk about Sam Harris in his book.

BILL MOYERS: The author of-- THE END OF FAITH--

ANOUAR MAJID: The End of Faith.

BILL MOYERS: --that recent-- an atheist, by the way.

ANOUAR MAJID: Yes.

BILL MOYERS: Who's very opposed to religion.

ANOUAR MAJID: And that's right. And in fact, part of this book is, in a way, a response of Sam Harris. Because Sam Harris is cha-- the book is challenging. He's telling us-- how could we in the 21st century still live by the precept of people who live more than-- 2,000 years ago? I mean, it's a very good question. And it's an embarrassing question. Because, you know, we have tens of thousands of cultural institutions, universities and colleges. We have a body of knowledge that is absolutely astronomical. And yet, when it comes to our identity and our belief system, we rely on the people who didn't have any of the assets we have today. And we have not been able somehow to create new spiritualities, new ways of understanding faith, new way to relate to each other based on our present circumstances and conditions.

BILL MOYERS: In fact, you say in here that both Islam and America are refusing to change with the times.

ANOUAR MAJID: That's right.

BILL MOYERS: How so?

ANOUAR MAJID: Well, because in modern society, I think Islam is a broad category. But you see in a lot of societies, Muslim society, people do not have the freedom to have this conversation you and I are having now. It's difficult. Because, you know, people somehow are heavily and emotionally invested in their faith. And so, they're not comfortable listening to contrary opinions, at least not publicly.

BILL MOYERS: You wouldn't be saying these things, would you, if you were living in Saudi Arabia? I mean, you might be thinking them. But could you write them? Could you publish this book in Egypt, in Saudi Arabia, in Morocco today?

ANOUAR MAJID: Sure. Morocco I think, you know, you've-- I mean, I quote some Moroccan publications there. I mean, actually I make a point of mentioning some of the books I read, and I mention this book I bought in Moroccan bookstore.

BILL MOYERS: I know. But you also say in here with with a raised eyebrow, you say that the Morocco-- you grew up and-- in Morocco where there are beaches and music where people could talk about God with a glass of wine in their hand.

ANOUAR MAJID: Yes.

BILL MOYERS: That Morocco is under assault from Wahhabiism, from radicalism from Saudi Arabia. Even as we speak, right?

ANOUAR MAJID: And that's another effect of globalization. I mean, Al-Jazeera, for example, the satellite channel has had a tremendous impact on Moroccan thinking. Just like CNN and Coca-Cola and other companies that are associated with the west have some influence on global opinion. Al-Jazeera has a different kind of influence. So, there's a clash of-- media influences competing or media outlets competing for, let's say, the Moroccans allegiances. And it's a very interesting phenomenon to watch. That's another example of how globalization is operating and how it's shaping and how it's exacerbating existing conflicts. Or at least tension.

BILL MOYERS: What are the contradictions that need to be addressed in Islam and what are the contradictions that need to be addressed in America?

ANOUAR MAJID: How to maintain the spirit of the American Revolution alive in the United States. How to maintain that spirit alive and make sure you don't let a form of economic tyranny intrude and somehow almost completely undermine, you know, this legacy, which is the best thing that the United States has ever done.

BILL MOYERS: The legacy of?

ANOUAR MAJID: The legacy of the American Revolution. It's America's best gift to human civilization. It's the conception of a state. The conception of a society that came out of the American Revolution. That is miraculous almost.

BILL MOYERS: With its own scriptures.

ANOUAR MAJID: With its own scriptures.

BILL MOYERS: The Declaration of Independence.

ANOUAR MAJID: Yes.

BILL MOYERS: Gettysburg Address.

ANOUAR MAJID: Yes.

BILL MOYERS: The Constitution, right?

ANOUAR MAJID: Yes. There's always a tension. And a tension is fine between those who want more religion in society and those that want to maintain that kind of artificial, imaginary wall that separate the two camps. But, in any case it's being negotiated. The tension still exists today. But I think that America offers a model. The United States offers a model to religious societies like Iran, like the Islamic world where if they could combine the-- if they could be more mindful of this history, they might find solutions to their own contradictions by studying American history in and the early American history. But, the United States over time, has sort of abandoned a lot of these ideas and principles because of the economic system that governs and dominates the social structure. And I'm not saying that economic-- by the way, the economic system is not necessarily American. It is global. It has no nation. In fact, Americans are victims-- as much victims of it as Mexicans and Canadians and Moroccans and Spaniards.

BILL MOYERS: Why did you come to America from such an interesting culture of your own?

ANOUAR MAJID: I came to study. I came to study New York first. And then I--

BILL MOYERS: When was that?

ANOUAR MAJID: In 1983.

BILL MOYERS: What was your impression?

ANOUAR MAJID: Fascinated. I mean, New York City. I mean, so, it was amount-- you know, the diversity is what struck me. The diversity. I mean, every national cuisine in the world you can find in New York City. All languages. Almost un-American a sense. In a sense-- I mean, because the perception in other places about New York is not truly American. But-- or it does not represent--

BILL MOYERS: But, I think it is.

ANOUAR MAJID: It is!

BILL MOYERS: It's that ideal you were talking about that's actually playing out in the streets.

ANOUAR MAJID: Yes.

BILL MOYERS: All the time.

ANOUAR MAJID: It's a port city like Tangiers. It's a port city. So, it's connected to the outside world through maritime trade and historically and so, port cities are very interesting. That's why if I may venture this crazy hypothesis-- that's why coasts usually tend to be more liberal than the hinterlands or than the-- because they're exposed to outside influences. Tangier is more liberal than Marrakesh and Fez, Morocco. Historically have been.

BILL MOYERS: A subversive heresy comes by osmosis, right?

ANOUAR MAJID: Contact. And, by the way, Morocco if I may add this-- I always mention this as a bit of trivia. The first country to recognize independence of the United States-- you know that probably. The first country to recognize independence of the United States--

BILL MOYERS: Was?

ANOUAR MAJID: Yes.

BILL MOYERS: Morocco?

ANOUAR MAJID: Morocco.

BILL MOYERS: I did not know that. I'll be darned. You said elsewhere that Iraq is a symbol of our dangerous orthodoxies. Explain that.

ANOUAR MAJID: In my estimation the intervention has failed primarily because they focused on the political process, on changing the political process but, not encouraging cultural and intellectual freedoms in Iraqi society. For example, the Iraqi Constitution-- the one they are operating under right now proclaims Islam as a state religion. I mean, all politicians have to be Muslim to serve in the Iraqi government. The president has to be Muslim--

BILL MOYERS: This government nurtured by American occupations--

ANOUAR MAJID: Yes. So, that's what struck me is that it almost doesn't surprise me that-- you know that that was not a problem at all for the US authorities in Iraq. Much more important to them was just the process of elections-- establishing the process whereut, what's lacking in the Islamic world is not the political process. What's lacking is a culture of freedom, a culture where people can be very radically different from each other and still coexist nicely-- so, if I may identify one deficit in the Islamic world, is the ability of Muslims to live comfortably with people who are not Muslim.

BILL MOYERS: You are saying that an election is not necessarily the measure of democracy or freedom. That it is the extent to which the society permits, if I may, heresy, dissent?

ANOUAR MAJID: Yes. People who cannot live comfortably with differences always have a tendency to slide into tyranny. That's why we have to maintain robust differences within any-- every society-- any society to continue to prevent those practices from ever taking root. Or at least of becoming dominant in those particular societies. Differences are crucial to the emancipation of the mind. And as Adam Smith and other of his contemporary said-- "To a happy life." I mean, there's nothing better than a conversation.

BILL MOYERS: A CALL FOR HERESY: WHY DISSENT IS VITAL TO ISLAM AND AMERICA. I hope a lot of people read it. Anouar Majid, thank you for joining me on THE JOURNAL.



BILL MOYERS: Doris Lessing won the Nobel Prize for literature this week. No sooner had reporters cornered her on the stoop of her London house then she abruptly excused herself. "I'm going upstairs," the 87 year old writer explained. "To find some suitable sentences which i will be using from now on." Finding just the right words, time and again, has made Doris Lessing one of the world's most distinguished authors. Born in Persia and raised in Africa, Doris has transformed her remarkable life into a literary tour d'force and making the personal, political. She first came to world-wide attention in 1962 with her novel "The Golden Notebook." More than twenty more novels followed, along with operas, plays, poetry and other works This month, her 25th novel, "The Cleft" arrives in bookstores. Four years ago, I talked with Doris Lessing about her life and work in this interview which was first broadcast on "NOW"...

BILL MOYERS: Do you never stop writing?

DORIS LESSING: No. I'm compulsive. And I deeply think that it has to be something very neurotic. And I'm not joking. It has to be. Because if I've finished a book, and this wonderful release, which I'm now feeling-- it's off, it's in a parcel, it's gone to a publisher. Bliss and happiness. I don't have to do anything. Nothing. I can just sit around. But, suddenly it starts, you see. This terrible feeling that I am just wasting my life, I'm useless, I'm no good. Now, it's a fact that if I spend a day busy as a little kitten, racing around. I do this, I do that. But I haven't written, so it's a wasted day, and I'm no good. How do you account for that nonsense?

BILL MOYERS: Was there-- what we call an ah-ha moment-- a eureka moment ...when you knew that you were going to spend your life writing, rather successfully or not. Was there such a moment?

DORIS LESSING: Well, I was writing all my childhood. And I wrote two novels when I was 17, which were terrible. And I'm not sorry I threw them out. So, I wrote. I had to write. You know, the thing was, I had no education.

BILL MOYERS: You left school at age 14, right?

DORIS LESSING: Fourteen. Yeah. And I wasn't trained for anything.

BILL MOYERS: What was there in a young girl-- you know, 12, 13, 14 or 15, that said "I want to write?"

DORIS LESSING: I was, at that time, being what we now called an au pair. I was a nursemaid. And it was pretty boring. So I thought, "Well, let's try and write a novel." I wrote two. I went back to the farm, and wrote two novels.

BILL MOYERS: In Africa.

DORIS LESSING: This was in Africa.

BILL MOYERS: Where did that idea come from? Had you read a lot? Had somebody ...

DORIS LESSING: I never stopped reading. You know. I read and read and read. And it was what saved me. And educated me. So, writing a novel seemed to be a way out.

BILL MOYERS: As you talk I think of the traumatic century you lived through ...all those events. You were born right at the end of the first great war. You lived through the Great Depression. You lived through the Second World War. You lived through the nuclear era, the Cold War, the genocide, the collapse of the British Empire. I mean, does anything remain of the world you knew when you were young?

DORIS LESSING: Nothing. Nothing at all. The World War I, I'm a child of World War I. And I really know about the children of war. Because both my parents were both badly damaged by the war. My father, physically, and both, mentally and emotionally. So, I know exactly what it's like to be brought up in an atmosphere of a continual harping on the war.

BILL MOYERS: Your father couldn't stop talking about it?

DORIS LESSING: No. He was obsessed with it. He talked and the other old soldiers in you know the district I was brought up in-- there were half a dozen of them. And I used to listen, it was terrible, you know? These men were-- had been so traumatized. Though, of course, outwardly, they were very civilized and good and kind and everything. But in actual fact, they were war victims.

BILL MOYERS: That's it for the JOURNAL. We'll be back next week. Until then, keep in touch on the blog at pbs.org. I'm Bill Moyers.



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