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a lot of people who came out of third-world countries felt, “We are never going to catch up with the West if we just wait for the market to work its way over hundreds of years.” They looked at, in the ’30s, the Soviet Union and thought, “This is a way to accelerate modernization, industrialization.” They all were much more comfortable with the idea of something that sped up the historical process of modernization.

Milton Friedman used to say that there are two groups of people who don’t like the free market. Academics, intellectuals because they think they can do it better than the market, and businessmen because they don’t like competition. What they really want — this is a variation of the Peter Thiel argument — what they all really want is to be monopolists. That former part is, I think, what explains the Bengali intellectuals.

I think that the reality is, the market is much more powerful than they are in these areas. To give you one simple example, they decided, “Okay, we need to be making high-end chips.” Who do they bet on? They bet on Intel, a company that has failed miserably to compete with TSMC, the great Taiwanese chip manufacturer. Intel is now getting multi-billion-dollar grants from the United States government, from the European Union, because it fills all the categories that you’re looking for: big company, stable and well-run, in some sense, can guarantee a lot of jobs.

But of course, the reality is that chip making is so complicated

Who knew that, actually, it’s Nvidia, whose chips turned out to be designed for gaming, turned out to be ideal for artificial intelligence? That’s a perfect example of how the Hayekian market signals that come bottom-up are much more powerful than a political elite who tries to tell you what it is.

COWEN: What did you learn from the Anglican Book of Common Prayer?

One was a reverence for tradition, and in particular, I loved the hymnal. I think Britain’s great contribution to music is religious music. It doesn’t have anything to compete with the Germans and the Italians in opera and things like that. Religious music, I think the Brits and the English have done particularly well.

The second thing I would say is an admiration for Christianity for its extraordinary emphasis on being nice to people who have not been lucky in life. I would say that’s, to me, the central message of Christianity that I take, certainly from the Sermon on the Mount, and it’s imbued through the Book of Common Prayer: to be nice to the people who have been less fortunate than you. Be nice to poor people. Recognize that in God’s kingdom, the first shall be last and the last shall be first.

There is an enormous emphasis on the idea that those things that make you powerful in this world are not the things that really matter, that your dignity as a human being doesn’t come from that. I think that’s a very powerful idea. It’s a very revolutionary idea

Tom Holland has a very good book about this. He’s a wonderful historian in Britain. I think it’s called Dominion.

He points out what a revolutionary idea this was. It completely upended the Roman values, which were very much, the first shall be first. The powerful and the rich are the ones to be valued. He points out, here is this Jewish preacher coming out of the Middle East saying, “No, the first shall be last, the last shall be first in the kingdom of heaven.”

COWEN: I went to Amritsar the year before, and it was one of the most magical feelings I’ve ever had in any place. I’m still not sure what exactly I can trace it to — I am not a Sikh, of course. But what, for you, accounts for the strong, powerful, wondrous feeling one gets from that place?

I think there’s something about it architecturally, which is that there is a serenity about it. Sometimes you can find Hindu temples that are very elaborate. Sikhism is a kind of offshoot of Hinduism. The Hindu temples can be very elaborate, but very elaborate and ornate. This somehow has a simplicity to it. When you add to that the water — I’ve always thought that water adds an enormously calming effect

Hindi and Urdu are two Indian languages, very related. They both have roughly the same grammatical structure, but then Hindi derives its vocabulary entirely from Sanskrit, or almost entirely from Sanskrit, and Urdu derives its vocabulary almost entirely from Persian. Urdu is a language of Indian Muslims and is the official language for Pakistan. It’s a beautiful language, very lyrical, very much influenced by that Persian literary sensibility.

If you’re speaking one of the languages, there’s a way to alternate between both, which a lot of Indian politicians used to do as a way of signaling a broad embrace of both the Hindu and the Muslim communities. Nehru, India’s first prime minister, used to often do that. He would say, “I am delighted to be coming here to your home.” He’d repeat the word home, first in Urdu, then in Hindi, so that in effect, both constituencies were covered.

Modi, by contrast, India’s current prime minister, is a great Hindu nationalist. He takes pains almost never to use an Urdu word when he speaks. He speaks in a kind of highly Sanskritized Hindi that most Indians actually find hard to understand because the everyday language, Bollywood Hindi, is a mixture of Hindi words and Urdu words

I think the partition of India was a complete travesty. It was premised on this notion of religious nationalism. It was horrendously executed. The person who drew the lines, a man named Radcliffe, had never been to India. He’d never been east of the Suez and was given this task, and he did it in a month or two, probably caused a million-and-a-half to two million lives lost, maybe 10 million people displaced. It broke that wonderfully diverse, syncretic aspect of India.

If you look at cities like Delhi and Lahore, what was beautiful about them is that they mix together all the influences of India: Hindu, Muslim, Punjabi, Sindhi. Now what you have is much more bifurcated. If you go to Lahore, Lahore is a Muslim city in Pakistan, and it has a Punjabi influence. Delhi has become, essentially, much more Indian and Hindu and has lost that Muslim influence. To me, as somebody who really loves cosmopolitanism and diversity, it’s sad to see that. It’s almost like you’ve lost something that really made these places wonderfully rich.

I feel the same way when you read about the history of Europe. You think of a place like Vienna, which, in its most dazzling moment, was dazzling precisely because it was this polyglot population of people coming from all over the Habsburg Empire. A large segment of it was Jewish, and it had, as a result — think about Freud and Klimt and the music that came out of there, and the architecture that came out at the turn of the 19th century. And it’s all gone. It’s like, at this point, a somewhat beautiful but slightly dull Austrian city.

I remember once being asked when I was a graduate student at Harvard — Tony Lake was then national security adviser, and his office called and said — I’d written something in the New York Times, I think — “Mr. Lake would like you to come to the White House to brief him.”

I think, in a sense, Islam fit in within that tapestry very easily, and it’s been around for a while. When people talk about cleansing India, Hindu nationals talk about cleansing India of foreign influences. Islam has been in India since the 11th century, so it’s been around for a long time

I was amazed that America — it wasn’t America; it was where I was at Yale and Harvard and all that — that nobody cared where I came from. Nobody cared.

the syncretic nature of India, that India has always been diverse. Hinduism is very tolerant. It’s a kind of unusual religion in that you can believe in one god and be Hindu. You can believe in 300. You can be vegetarian and believe that’s a religious dictate. You can be nonvegetarian and believe that that’s completely compatible with your religion. It’s always embraced almost every variant and variation.

I walked in and there were five people around the table: Tony Lake; Deputy National Security Advisor Sandy Berger; George Stephanopoulos, who was then director of communications at the White House; Joe Nye, who was a senior professor at Harvard; one other person; and myself. And I kept thinking to myself, “Are they going to realize at some point that I’m not an American citizen? They’re asking me for my advice on what America should do, and I am on a student visa.” And of course, nobody ever did, which is one of the great glories of America.

My thesis topic was, I tried to answer the question, when countries rise in great power, when they rise economically, they become great powers because they quickly translate that economic power into diplomatic and military power. What explains the principal exception in modern history, which is the United States?

My simple answer was that the United States was a very unusual creature in the modern world. It was a very strong nation with a very weak state. The federal government in the United States did not have the capacity to extract the resources from the society at large because you didn’t have income taxes in those days.

COWEN: What put you off academia? And this was for the better, in my view.

ZAKARIA: I think two things. One, I could see that political science was moving away from the political science that I loved, which was a broad discipline rooted in the social sciences but also rooted in the humanities, which was rigorous, structural, historical comparisons. Looking at different countries, trying to understand why there were differences.

It was moving much more toward a huge emphasis on things like rational choice, on game theory There was an economist envy. Just as economists have math envy, political scientists have economist envy. It was moving in that direction

COWEN: After 9/11 in 2001, you wrote a famous essay for Newsweek, “Why Do They Hate Us?” You talked about the rulers, failed ideas, religion. If you were to revise or rethink that piece today, how would you change it? Because we have 23 more years of data, right?

He had a routine, which is, he’d get up about 6:00 a.m. He’d go down to the basement of his townhouse, and at 6:30, he would start writing or working on whatever his next big research project was. He’d do that, uninterrupted, for three hours at least, sometimes four. Then, at about 9:30, 10:00, he would take the subway to Harvard.

His point was, you got to start the day by doing the important work of academia, which is producing knowledge. All the rest of it — teaching, committee meetings, all that — you can do later. He was so disciplined about that, that every five years or so, he put out another major piece of work, another major book

I looked at that, and I said to myself, I do not have the self-discipline to perform at that level. I need to go into something that has deadlines,

It’s all within you, and you have to be able to generate ideas from that lonely space. I’ve always found that hard. For me, writing books is the hardest thing I do. I feel like I have to do it because I feel as though everything else is trivia — the television, column, everything else.

The second piece of it was actually very much related to Huntington. Sam Huntington was quite an extraordinary character, probably the most important social scientist in the second half of the 20th century. Huge contributions to several fields of political science. He lived next to me

ZAKARIA: Yes. Not very much, honestly. The central point I was making in that essay was that if you look at the Arab world, it is the principal outlier in the modern era, where it has undergone almost no political modernization.

The Arab world had remained absolutely static. My argument was that it was largely because of the curse of oil and oil wealth, which had impeded modernization. But along with that, because of that failed modernization, they had developed this reactionary ideology of Islam, which said the answer is to go further back, not to go forward. “Islam is the solution,” was the cry of the Islamic fundamentalists in the 1970s.

COWEN: I’m struck that this year, both you and Ruchir Sharma have books coming out — again, Fareed’s book is Age of Revolutions: Progress and Backlash from 1600 to the Present — that I would describe broadly as classically liberal. Do you think classical liberalism is making a comeback

the reason these books are coming out — and certainly, mine, as you know, is centrally occupied with the problem that there’s a great danger that we are going to lose this enormous, probably the most important thing that’s happened in the last 500, 600 years in human history, this movement that has allowed for the creation of modern liberal democratic societies with somewhat market economies.

If you look at the graph of income, of GDP, per capita GDP, it’s like a straight line. There’s no improvement until you get to about, roughly speaking, the 17th, 18th century in Europe, and then you see a sharp uptick. You see this extraordinary rise, and that coincides with the rise of science and intellectual curiosity and the scientific method, and the industrial revolution after that. All that was a product of this great burst of liberal Enlightenment thinking in the West.

If you think about what we’ve gone through in the last 30 years — and this is really the central argument in my book — massive expansion of globalization, massive expansion of information technology so that it has completely upended the old economy. All of this happening, and people are overwhelmed, and they search in that age of anxiety. They search for a solution, and the easy solutions are the ones offered by the populists.

They’re deeply anti-liberal, illiberal. So, I worry that, actually, if we don’t cherish what we have, we’ll lose what has been one of the great, great periods of progress in human history.

COWEN: Why does your book cover the 17th-century Dutch Golden Age? ZAKARIA: The Dutch are the first modern country. If you think about politics before that — certainly with the exception of ancient Greece and Rome — in modern history, the Dutch invent modern politics and economics. They invent modern politics in the sense that it’s the first time politics is not about courts and kings. It is about a merchant republic with powerful factions and interest groups and political parties, or the precursor to political parties.

It’s the beginning of modern economics because it’s economics based not simply on land and agriculture, but on the famous thing that John Locke talked about, which is mixing human beings’ labor with the land. The Dutch literally do this when they reclaim land from the sea and find ways to manage it, and then invent tall ships, which is, in some ways, one of the first great technological revolutions that has a direct economic impact.

You put all that together, and the Dutch — they become the richest country in the world, and they become the leading technological power in the world. It was very important to me to start the story — because they are really the beginnings of modern liberalism

COWEN: Circa 1800, how large were the Chinese and Indian economies?

Circa 1800, the Chinese and Indian economies are the two largest economies in the world, and people have taken this to mean, oh, the West had a temporary spurt because of colonies and cheap energy, and that the Chinese and Indians are just coming back to where they were.

First of all, the statistic is misleading because in those days, GDP was simply measured by using population. All society was agricultural. The more people you had, the larger your GDP. It was meaningless because the state could not extract that GDP in any meaningful way, and it’s meaningless because it doesn’t measure progress. It doesn’t measure per capita GDP growth, which is the most important thing to look at.

If you look at per capita GDP growth from 1350 to 1950, for 600 years, India and China have basically no movement. It’s about $600 in 1350 and $600 in 1950. The West, by comparison, moves up 600 percent in that period. It’s roughly $500 per capita GDP to roughly $5,000 per capita GDP.

You can also look at all kinds of other measures. You can look at diet. There are economic historians who’ve done this very well, and people in England were eating four to five times as much grain and protein as people in China and India. You can look at the extraordinary flourishing of science and engineering. You can look at the rise of the great universities. It’s all happening in the West.

The reason this is important is, people need to understand the rise of the West has been a very profound, deep-rooted historical phenomenon that began sometime in the 15th century. The fact that we’re moving out of that phase is a big, big deal. This is not a momentary blip. This is a huge train. The West define modernity. Even when countries try to be modern, they are in some way becoming Western because there is no path we know of to modernity without that.

One other way of just thinking about how silly that statistic is: in pure GDP terms, China had a larger GDP than Britain in 1900. Now, look at Britain in 1900: the most advanced industrial society in the world, ruling one-quarter of the world, largest navy in the world, was able to humiliate China by using a small fraction of its military power during the opium era. That’s what tells you that number is really meaningless. The West has been significantly more advanced than the rest of the world since the 16th century at least.

In Greece, an unlikely economic star since the pandemic, as many as 44% of all jobs are connected to tourism. 

Can Europe’s emerging “museum economy” support sustained wealth creation and the expansive welfare systems Europeans have become accustomed to since the end of World War II? And what happens if the dollar falls and the tourists leave?

Rent and other living expenses are rising in hot spots, making it harder for many locals to make ends meet. A heightened focus on tourism, which turns a quick profit but remains a low-productivity activity, tethers these economies to a highly cyclical industry

It also risks keeping workers and capital from more profitable areas, like tech and high-end manufacturing. 

some economists, residents and politicians are concerned about the boom’s long-term implications.

The strong dollar—and a powerful post-Covid recovery—has empowered millions of Americans who would have vacationed in the U.S. before the pandemic. They are now finding they can afford a lavish European holiday.

“It is literally, for Americans right now, the place to go,”

One reason is the brutal sovereign debt crisis that hit the continent’s south especially hard just over a decade ago. Unable to stimulate demand with public spending or to energize exports by devaluing their currency—the euro, which is shared by 20 states—those countries could only boost their competitiveness by lowering wages.

“Your dollar goes a lot further,” Cross said over coffee in the lobby of her five-star hotel. “You don’t feel you’re scrounging as much.”

Tourism now generates one-fifth of economic output in Lisbon and supports one in four jobs. That boom has reverberated far beyond the capital.

Portugal’s gross domestic product grew nearly 8% between 2019 and 2024, compared with less than 1% for Germany,

The government recorded a rare 1.2% of GDP budget surplus last year, and its debt-to-GDP ratio is expected to fall to 95% this year, the lowest since 2009

Portugal’s population is growing again after years of decline, thanks in part to an influx of migrant workers and to various tax incentives and investor visas that have attracted high-income workers. 

In Portugal, a country of 10 million that juts out into the North Atlantic from Spain, Americans recently surpassed Spaniards as the biggest group of foreign tourists. 

The trend is part of a global readjustment following the Covid-19 lockdowns. Spending on travel and hospitality worldwide grew roughly seven times faster than the global economy over the past two years, according to Oxford Economics. That pattern is expected to continue for the next decade, though to a lesser degree.

Europe, especially southern Europe, has benefited more than many other regions. Though it is home to just 5% of the world’s population, the European Union received around one-third of all international tourist dollars—more than half a trillion dollars—last year. This is up roughly threefold over two decades, and compares with about $150 billion for the U.S., where tourism has been slower to rebound.

Moedas, Lisbon’s mayor, says there’s room for further growth. For a city that doubles in size to around one million every day, including commuters, only around 35,000 are tourists, he said. “We are very far from a situation of so-called overtourism.”

This and a real estate collapse that left hundreds of thousands of workers suddenly available made the region’s tourist industry ultracompetitive, much cheaper than Caribbean beach destinations and on a par with Latin American destinations like Mexico. 

Once an owner of TAP, Neeleman increased the number of direct flights to the U.S. eightfold between 2015 and 2020, adding major hubs such as JFK and Boston Logan, betting that would open up an untapped market. As bookings soared, other U.S. airlines followed. 

Signs of discontent are bubbling up across the region. Tens of thousands of local residents marched in Spain’s Balearic and Canary islands in recent months to protest mass tourism and overcrowding. On Mallorca, activists have put up fake signs at some popular beaches warning in English of the risk of falling rocks or dangerous jellyfish to deter tourists, according to social-media posts.

For Gonçalo Hall, a 36-year-old tech worker, the influx of foreign cash that has transformed Lisbon has been overwhelmingly beneficial for the city. When he lived in the capital 15 years ago, he wouldn’t walk in the historic downtown after 8 p.m. It was “full of homeless people, not safe. Lots of empty and abandoned buildings,” he said. 

“The quality of life in Lisbon doesn’t match the prices. Even expats are leaving,” said Hall, who moved to the Atlantic island of Madeira during the pandemic and continues to work remotely.  

The average Portuguese employee earns around €1,000 a month after tax, or around $1,100 a month, and only 2% earn more than €2,000. A one-bedroom apartment in Lisbon can easily cost more than €500,000 to buy, or over €1,200 a month to rent. Rents in nearby cities are also climbing as people leave the capital, squeezed out as lucrative short-term rentals transform the housing market. 

Jessica Ribeiro, a 35-year-old sociologist, pays around €490 a month for an apartment that she shares with her ex-husband in a town close to Lisbon. Neither can afford to leave. Both make a little more than the minimum wage of €820 a month, and soaring rents mean it is impossible to find an apartment in the neighborhood for less than €700, Ribeiro said. 

“The harm that tourism has brought is infinitely bigger than the benefits,” Ribeiro said. “It sends people away from their place of work, making their lives much harder.” 

A frequent complaint from residents and housing advocates is that some of the boom’s biggest winners are American companies, from Airbnb to Uber, which often pay little tax in the places where they do most of their business.

Lisbon is cracking down on Airbnbs and increasing taxes on tourists, doubling the nightly city tax from €2 to €4, which should raise €80 million a year. Airbnb has paid Lisbon and Porto, Portugal’s two biggest cities, more than €63 million after entering into voluntary tax collection agreements with local officials. Moedas said he is considering “a bit more regulation” of the city’s many Ubers, whose drivers he said don’t always respect traffic rules. 

Around nine in 10 Airbnb hosts in Portugal rent their family home and almost half say the extra income helps them afford to stay in their homes, according to a spokesperson for the company. “Guests using our platform account for just 10% of total nights booked in Portugal, and we follow the rules and only allow listings that are registered with local authorities,”

Higher rents are forcing many businesses and cultural and social spaces catering to locals to close, according to Silva. “This is not an economy that is serving the needs of the majority of people,” she said.

“It was actually comical, because I went from knowing no one who had been to Portugal to everyone telling me they were going to Portugal,”

Serving foreigners is difficult to scale up and is more exposed to economic headwinds. Like the discovery of oil, southern Europe’s new focus on tourism can crowd out higher-value activities by hogging capital and workers, a phenomenon some economists have dubbed the “beach disease.”

“Portugal isn’t an industrialized country. It’s just the playground of the EU,” said Priscila Valadão, a 43-year-old administrative assistant in Lisbon. She makes €905 a month and rents a room from a friend for €250 a month. “The type of jobs being offered…are restricted to a type of activity that really doesn’t enrich the country,”

For Europe’s policymakers, having people open hotels or restaurants is easier than incentivizing them to build up advanced manufacturing, which is capital intensive and takes a long time to pay off, said Marcos Carias, an economist with French insurer Coface. 

“Tourism is the easy way out,” Carias said. “What is the incentive to look for ingenuity and go through the pain of creating new economic value if tourism works as a short-term solution?”

Proponents say tourism attracts capital to poor regions, and can serve as a base to build a more diversified economy. Lisbon’s Moedas said he is trying to leverage the influx of foreign visitors to build up sectors such as culture and technology, including by developing conferences and cultural events. 

“Some extreme left parties basically say we need to reduce tourism,” Moedas said, but that is the wrong approach. “What we have to do is to increase other sectors like innovation, technology…. We should still invest in tourism, but we should go up the ladder.”

In Athens, Mayor Haris Doukas says he is working on extending the tourist season, increasing the average length of stay and promoting specific types of tourism, such as organizing conferences and business meetings, to attract visitors with higher purchasing power. He’s also called for new taxes to help the city accommodate the millions of additional tourists thronging to the ancient capital.

More than one-third of highly qualified Portuguese students leave the country after graduating,

Even higher-paid technology workers have started decamping to cheaper places. 

Tiago Araújo, chief executive of tourism tech startup HiJiffy, has held on to his employees but says many of them have been moving out of Lisbon. The trend, which started during Covid, is now being primarily driven by the housing crisis.

While Dias, the hotel owner, is diversifying into nightlife, he refuses to envisage a future where the sector would have to rely heavily on visitors from elsewhere.

If Americans stop coming to Lisbon, he said, “I don’t think we can charge this kind of [price] because we will have to go to Europeans, and the Europeans, they don’t have money.”