Please read, it's long but good!!
This article succinctly gives an interesting
perspective on global issues which will likely affect the future world
economy.
This is a paper presented several months ago by
Herb Meyer at the World Economic Forum in Davos, Switzerland which was
attended by most of the CEOs from all the major international
corporations -- a very good summary of today's key trends and a
perspective one seldom sees.
Meyer served during the Reagan administration as
special assistant to the Director of Central Intelligence and Vice
Chairman of the CIA's National Intelligence Council. In these
positions, he managed production of the U.S. National Intelligence
Estimates and other top-secret projections for the President and his
national security advisers.
Meyer is widely credited with being the first
senior U.S.Government official to forecast the Soviet Union's collapse,
for which he later was awarded the U.S.National Intelligence
Distinguished Service Medal, the intelligence community's highest honor.
Formerly an associate editor of FORTUNE, he is also the author of
several books.
WHAT IN THE WORLD IS GOING ON? A GLOBAL
INTELLIGENCE BRIEFING FOR CEOs
by HERBERT MEYER
FOUR MAJOR TRANSFORMATIONS
Currently, there are four major transformations
that are shaping political, economic and world events. These
transformations have profound implications for American business leaders
and owners, our culture and on our way of life.
1. The War in Iraq
There are three major monotheistic religions in
the world: Christianity, Judaism and Islam. In the 16th century, Judaism
and Christianity reconciled with the modern world. The rabbis, priests
and scholars found a way to settle up and pave the
way forward. Religion remained at the center of life, church and state
became separate. Rule of law, idea of economic liberty, individual
rights, human Rights-all these are defining points of modern We stern civilization.
These concepts started with the Greeks but didn't take off until the
15th and 16th century when Judaism and Christianity found a way to
reconcile with the modern world. When that happened, it unleashed the
scientific revolution and the greatest outpouring of art, literature and
music the world has ever known.
Islam, which developed in the 7th century,
counts millions of Moslems around the world who are normal people.
However, there is a radical streak within Islam. When the radicals are
in charge, Islam attacks Western civilization. Islam first attacked
Western civilization in the 7th century, and later in the 16th and 17th
centuries. By 1683, the Moslems (Turks from the Ottoman Empire) were
literally at the gates of Vienna. It was in Vienna that the climatic
battle between Islam and Western civilization took place. The West won
and went forward. Islam lost and went backward. Interestingly, the
date of that battle was September 11. Since them, Islam has not found a
way to reconcile with the modern world.
Today, terrorism is the third attack on Western
civilization by radical Islam. To deal with terrorism, the U.S. is doing
two things. First, units of our armed forces are in 30 countries around
the world hunting down terrorist groups and dealing with them. This gets
very little publicity. Second we are taking military action in
Afghanistan and Iraq.
These actions are covered relentlessly by the
media. People can argue about whether the war in Iraq is right or wrong.
However, the underlying strategy behind the war is to use our military
to remove the radicals from power and give the moderates a chance. Our hope is
that, over time, the moderates will find a way to bring Islam forward
into the 21st century. That's what our involvement in Iraq and
Afghanistan is all about.
The lesson of 9/11 is that we live in a world
where a small number of people can kill a large number of people very
quickly. They can use airplanes, bombs, anthrax, chemical weapons or
dirty bombs. Even with a first-rate intelligence service (which the U.S.
does not have), you can't stop every attack. That means our tolerance
for political horseplay has dropped to zero. No longer will we play
games with terrorists or weapons of mass destructions.
Most of the instability and horseplay is coming
from the Middle East. That's why we have thought that if we could knock
out the radicals and give the moderates a chance to hold power, they
might find a way to reconcile Islam with the modern world. So when
looking at Afghanistan or Iraq, it's important to look for any signs
that they are modernizing.
For example, women being brought into the work
force and colleges in Afghanistan is good. The Iraqis stumbling toward a
constitution is good.
People can argue about what the U.S. is doing
and how we're doing it but anything that suggests Islam is finding its
way forward is good.
2. The Emergence of China
In the last 20 years, China has moved 250
million people from the farms and villages into the cities. Their plan
is to move another 300 million in the next 20 years. When you put that
many people into the cities, you have to find work for them. That's why
China is addicted to manufacturing; they have to put all the relocated
people to work. When we decide to manufacture something in the U.S.,
it's based on market needs and the opportunity to make a profit. In
China, they make the decision because they want the jobs, which is a
very different calculation.
While China is addicted to manufacturing,
Americans are addicted to low prices. As a result, a unique kind of
economic codependency has developed between the two countries. If we
ever stop buying from China, they will explode politically. If China
stops selling to us, our economy will take a huge hit because prices
will jump. We are subsidizing their economic development; they are
subsidizing our economic growth.
Because of their huge growth in manufacturing,
China is hungry for raw materials, which drives prices up worldwide.
China is also thirsty for oil, which is one reason oil is now over $100
a barrel. By 2020, China will produce more cars than the U.S. China is
also buying its way into the oil infrastructure around the world. They
are doing it in the open market and paying fair market prices, but
millions of barrels of oil that would have gone to the U.S. are now
going to China. China's quest to assure it has the oil it needs to fuel
its economy is a major factor in world politics and economics.
We have our Navy fleets protecting the sea
lines, specifically the ability to get the tankers through. It won't be
long before the Chinese have an aircraft carrier sitting in the Persian
Gulf as well. The question is, will their aircraft carrier be pointing
in the same direction as ours or against us?
3. Shifting Demographics of Western Civilization
Most countries in the Western world have stopped
breeding. For a civilization obsessed with sex, this is remarkable.
Maintaining a steady population requires a birth rate of 2.1 In Western
Europe, the birth rate currently stands at 1.5, or 30 percent below
replacement. In 30 years there will be 70 to 80 million fewer Europeans
than there are today. The current birth rate in Germany is 1.3. Italy
and Spain are even lower at 1.2. At that rate, the working age
population declines by 30 percent in 20 years, which has a huge impact
on the economy. When you don't have young workers to replace the older
ones, you have to import them.
The European countries are currently importing
Moslems. Today, the Moslems comprise 10 percent of France and Germany,
and the percentage is rising rapidly because they have higher
birthrates. However, the Moslem populations are not being integrated
into the cultures of their host countries, which is a political
catastrophe. One reason Germany and France don't support the Iraq war
is they fear their Moslem populations will explode on them. By 2020,
more than half of all births in the Netherlands will be non-European.
The huge design flaw in the postmodern secular
state is that you need a traditional religious society birth rate to
sustain it. The Europeans simply don't wish to have children, so they
are dying. In Japan, the birthrate is 1.3. As a result, Japan will lose
up to 60 million people over the next 30 years. Because Japan has a very
different society than Europe, they refuse to import workers. Instead,
they are just shutting down. Japan has already closed 2,000 schools,
and is closing them down at the rate of 300 per year. Japan is also
aging very rapidly. By 2020, one out of every five Japanese will be at
least 70 years old. Nobody has any idea about how to run an economy with
those demographics.
Europe and Japan, which comprise two of the
world's major economic engines, aren't merely in recession, they're
shutting down. This will have a huge impact on the world economy, and it
is already beginning to happen. Why are the birthrates so low? There is
a direct correlation between abandonment of traditional religious
society and a drop in birth rate, and Christianity in Europe is becoming
irrelevant.
The second reason is economic. When the birth
rate drops below replacement, the population ages. With fewer working
people to support more retired people, it puts a crushing tax burden on
the smaller group of working age people. As a result, young people delay
marriage and having a family. Once this trend starts, the downward
spiral only gets worse. These countries have abandoned all the
traditions they formerly held in regard to having families and raising
children.
The U.S. birth rate is 2.0, just below
replacement. We have an in crease in population because of immigration.
When broken down by ethnicity, the Anglo birth rate is 1.6 (same as
France) while the Hispanic birth rate is 2.7. In the U.S., the baby
boomers are starting to retire in massive numbers. This will push the
elder dependency ratio from 19 to 38 over the next 10 to 15 years. This
is not as bad as Europe, but still represents the same kind of trend.
Western civilization seems to have forgotten
what every primitive society understands-you need kids to have a healthy
society. Children are huge consumers. Then they grow up to become
taxpayers. That's how a society works, but the postmodern secular state
seems to have forgotten that. If U.S. birth rates of the past 20 to 30
years had been the same as post-World War II, there would be no Social
Security or Medicare problems.
The world's most effective birth control device
is money. [I love this line!!] As society creates a middle class and
women move into the workforce, birth rates drop. Having large families
is incompatible with middle class living.
The quickest way to drop the birth rate is
through rapid economic development. After World War II, the U.S.
instituted a $600 tax credit per child. The idea was to enable mom and
dad to have four children without being troubled by taxes. This led to a
baby boom of 22 million kids, which was a huge consumer market. That
turned into a huge tax base. However, to match that incentive in
today's dollars would cost $12,000 per child.
China and India do not have declining
populations. However, in both countries, there is a preference for boys
over girls, and we now have the technology to know which is which before
they are born. In China and India, families are aborting the girls. As a
result, in each of these countries there are 70 million boys growing up
who will never find wives. When left alone, nature produces 103 boys for
every 100 girls. In some provinces, however, the ratio is 128 boys to
every 100 girls. [I have read that this creates a potentially explosive
situation. You have to keep all these potential sources of political
instability contented. One way, historically often used, is war.]
The birth rate in Russia is so low that by 2050
their population will be smaller than that of Yemen. Russia has
one-sixth of the earth's land surface and much of its oil. You can't
control that much area with such a small population. Immediately to
the south, you have China with 70 million unmarried men who are a real
potential nightmare scenario for Russia.
4. Restructuring of American Business
The fourth major transformation involves a
fundamental restructuring of American business. Today's business
environment is very complex and competitive. To succeed, you have to be
the best, which means having the highest quality and lowest cost. Whatever your
price point, you must have the best quality and lowest price. To be the
best, you have to concentrate on one thing. You can't be all things to
all people and be the best.
A generation ago, IBM used to make every part of
their computer. Now Intel makes the chips, Microsoft makes the software,
and someone else makes the modems, hard drives, monitors, etc. IBM even
out sources their call center. Because IBM has all these companies
supplying goods and services cheaper and better than they could do it
themselves, they can make a better computer at a lower cost. This is
called a fracturing of business. When one company can make a better
product by relying on others to perform functions the business used to
do itself, it creates a complex pyramid of companies that serve and
support each other.
This fracturing of American business is now in
its second generation. The companies who supply IBM are now doing the
same thing - outsourcing many of their core services and production
process. As a result, they can make cheaper, better products. Over time,
this pyramid continues to get bigger and bigger. Just when you think it
can't fracture again, it does.
Even very small businesses can have a large
pyramid of corporate entities that perform many of its important
functions. One aspect of this trend is that companies end up with fewer
employees and more independent contractors. This trend has also created
two new words in business, integrator and complementor. At the top of
the pyramid, IBM is the integrator. As you go down the pyramid,
Microsoft, Intel and the other companies that support IBM are the
complementors. However, each of the complementors is itself an
integrator for the complementors underneath it.
This has several implications, the first of
which is that we are now getting false readings on the economy. People
who used to be employees are now independent contractors launching their
own businesses. There are many people working whose work is not listed
as a job. As a result, the economy is perking along better than the
numbers are telling us.
Outsourcing also confused the numbers. Suppose a
company like General Motors decides to outsource all its employee
cafeteria functions to Marriott (which it did). It lays off hundreds of
cafeteria workers, who then get hired right back by Marriott. The only
thing that has changed is that these people work for Marriott rather
than GM. Yet, the media headlines will scream that America has lost more
manufacturing jobs.
All that really happened is that these workers
are now reclassified as service workers. So the old way of counting jobs
contributes to false economic readings. As yet, we haven't figured out
how to make the numbers catch up with the changing realities of
the business world.
Another implication of this massive
restructuring is that because companies are getting rid of units and
people that used to work for them, the entity is smaller. As the
companies get smaller and more efficient, revenues are going down but profits
are going up. As a result, the old notion that revenues are up and we're
doing great isn't always the case anymore. Companies are getting smaller
but are becoming more efficient and profitable in the process.
IMPLICATIONS OF THE FOUR TRANSFORMATIONS
1. The War in Iraq
In some ways, the war is going very well.
Afghanistan and Iraq have the beginnings of a modern government, which
is a huge step forward. The Saudis are starting to talk about some good
things, while Egypt and Lebanon are beginning to move in a good
direction. A series of revolutions have taken place in countries like
Ukraine and Georgia.
There will be more of these revolutions for an
interesting reason. In every revolution, there comes a point where the
dictator turns to the general and says, Fire into the crowd. If the
general fires into the crowd, it stops the revolution. If the general says No,
the revolution continues. Increasingly, the generals are saying No
because their kids are in the crowd.
Thanks to TV and the Internet, the average
18-year old outside the U.S. is very savvy about what is going on in
the world, especially in terms of popular culture. There is a huge
global consciousness, and young people around the world want to be a
part of it. It is increasingly apparent to them that the miserable
government where they live is the only thing standing in their way. More
and more, it is the well-educated kids, the children of the generals and
the elite, who are leading the revolutions.
At the same time, not all is well with the war.
The level of violence in Iraq is much worse and doesn't appear to be
improving. It's possible that we're asking too much of Islam all at one
time. We're trying to jolt them from the 7th century to the 21st century
all at once, which may be further than they can go. They might make it
and they might not.
Nobody knows for sure. The point is, we don't
know how the war will turn out. Anyone who says they know is just
guessing.
The real place to watch is Iran. If they
actually obtain nuclear weapons it will be a terrible situation. There
are two ways to deal with it. The first is a military strike, which
will be very difficult. The Iranians have dispersed their nuclear
development facilities and put them underground. The U.S. has nuclear
weapons that can go under the earth and take out those facilities, but
we don't want to do that.
The other way is to separate the radical mullahs
from the government, which is the most likely course of action.
Seventy percent of the Iranian population is under 30. They are Moslem
but not Arab. They are mostly pro-Western. Many experts think the U.S.
should have dealt with Iran before going to war with Iraq. The problem
isn't so much the weapons, it's the people who control them. If Iran has
a moderate government, the weapons become less of a concern.
We don't know if we will win the war in Iraq. We
could lose or win. What we're looking for is any indicator that Islam
is moving into the 21st century and stabilizing.
2. China
It may be that pushing 500 million people from
farms and villages into cities is too much too soon. Although it gets
almost no publicity, China is experiencing hundreds of demonstrations
around the country, which is unprecedented. These are not students in
Tiananmen Square. These are average citizens who are angry with the
government for building chemical plants and polluting the water they
drink and the air they breathe.
The Chinese are a smart and industrious people.
They may be able to pull it off and become a very successful economic
and military superpower. If so, we will have to learn to live with it.
If they want to share the responsibility of keeping the world's oil
lanes open, that's a good thing. They currently have eight new nuclear
electric power generators under way and 45 on the books to build. Soon,
they will leave the U.S. way behind in their ability to generate
nuclear power.
What can go wrong with China? For one, you can't
move 550 million people into the cities without major problems. Two,
China really wants Taiwan, not so much for economic reasons, they just
want it. The Chinese know that their system of communism can't survive
much longer in the 21st century. The last thing they want to do before
they morph into some sort of more capitalistic government is to take
over Taiwan.
We may wake up one morning and find they have
launched an attack on Taiwan. If so, it will be a mess, both
economically and militarily. The U.S. has committed to the military
defense of Taiwan. If China attacks Taiwan, will we really go to war against them?
If the Chinese generals believe th e answer is no, they may attack. If
we don't defend Taiwan, every treaty the U.S. has will be worthless.
Hopefully, China won't do anything stupid.
3. Demographics
Europe and Japan are dying because their
populations are aging and shrinking. These trends can be reversed if the
young people start breeding. However, the birth rates in these areas
are so low it will take two generations to turn things around. No
economic model exists that permits 50 years to turn things around. Some
countries are beginning to offer incentives for people to have bigger
families. For example, Italy is offering tax breaks for having children.
However, it's a lifestyle issue versus a tiny amount of money. Europeans
aren't willing to give up their comfortable lifestyles in order to have
more children.
In general, everyone in Europe just wants it to
last a while longer. Europeans have a real talent for living. They
don't want to work very hard. The average European worker gets 400 more
hours of vacation time per year than Americans. They don't want to work
and they don't want to make any of the changes needed to revive their
economies.
The summer after 9/11, France lost 15,000 people
in a heat wave. In August, the country basically shuts down when
everyone goes on vacation.
That year, a severe heat wave struck and 15,000
elderly people living in nursing homes and hospitals died. Their
children didn't even leave the beaches to come back and take care of the
bodies. Institutions had to scramble to find enough refrigeration units to
hold the bodies until people came to claim them. This loss of life was
five times bigger than 9/11 in America, yet it didn't trigger any change
in French society.
When birth rates are so low, it creates a
tremendous tax burden on the young. Under those circumstances, keeping
mom and dad alive is not an attractive option. That's why euthanasia is
becoming so popular in most European countries. The only country that
doesn't permit (and even encourage) euthanasia is Germany, because of
all the baggage from World War II.
The European economy is beginning to fracture.
Countries like Italy are starting to talk about pulling out of the
European Union because it is killing them. When things get bad
economically in Europe, they tend to get very nasty politically. The canary in the
mine is anti-Semitism.
When it goes up, it means trouble is coming.
Current levels of anti-Semitism are higher than ever.
Germany won't launch another war, but Europe
will likely get shabbier, more dangerous and less pleasant to live in.
Japan has a birth rate of 1.3 and has no intention of bringing in
immigrants. By 2020, one out of every five Japanese will be 70 years old.
Property values in Japan have dropped every year for the past 14 years.
The country is simply shutting down. In the U.S. we also have an aging
population. Boomers are starting to retire at a massive rate. These
retirements will have several major impacts:
Possible massive sell off of large four-bedroom
houses and a movement to condos.
An enormous drain on the treasury. Boomers vote,
and they want their benefits, even if it means putting a crushing tax
burden on their kids to get them. Social Security will be a huge
problem. As this generation ages, it will start to drain the system. We are
the only country in the world where there are no age limits on medical
procedures.
An enormous drain on the health care system.
This will also increase the tax burden on the young, which will cause
them to delay marriage and having families, which will drive down the
birth rate even further.
Although scary, these demographics also present
enormous opportunities for products and services tailored to aging
populations. There will be tremendous demand for caring for older
people, especially those who don't need nursing homes but need some level of
care. Some people will have a business where they take care of three or
four people in their homes. The demand for that type of service and for
products to physically care for aging people will be huge.
Make sure the demographics of your business are
attuned to where the action is. For example, you don't want to be a baby
food company in Europe or Japan. Demographics are much underrated as an
indicator of where the opportunities are. Businesses need
customers. Go where the customers are.
4. Restructuring of American Business
The restructuring of American business means we
are coming to the end of the age of the employer and employee. With all
this fracturing of businesses into different and smaller units,
employers can't guarantee jobs anymore because they don't know what their
companies will look like next year. Everyone is on their way to becoming
an independent contractor.
The new workforce contract will be: Show up at
the my office five days a week and do what I want you to do, but you
handle your own insurance, benefits, health care and everything else.
Husbands and wives are becoming economic units. They take different
jobs and work different shifts depending on where they are in their
careers and families. They make tradeoffs to put together a compensation
package to take care of the family.
This used to happen only with highly educated
professionals with high incomes. Now it is happening at the level of the
factory floor worker.
Couples at all levels are designing their
compensation packages based on their individual needs. The only way this
can work is if everything is portable and flexible, which requires a
huge shift in the American economy.
The U.S. is in the process of building the
world's first 21st century model economy. The only other countries doing
this are U. K. and Australia. The model is fast, flexible, highly
productive and unstable in that it is always fracturing and
re-fracturing. This will increase the economic gap between the U.S. and
everybody else, especially Europe and Japan.
At the same time, the military gap is
increasing. Other than China, we are the only country that is continuing
to put money into their military. Plus, we are the only military getting
on-the-ground military experience through our war in Iraq. We know which
high-tech weapons are working and which ones aren't. There is almost no
one who can take us on economically or militarily.
There has never been a superpower in this
position before. On the one hand, this makes the U.S. a magnet for
bright and ambitious people. It also makes us a target. We are becoming
one of the last holdouts of the traditional Judeo-Christian culture. There is no
better place in the world to be in business and raise children. The U.S.
is by far the best place to have an idea, form a business and put it
into the marketplace.
We take it for granted, but it isn't as
available in other countries of the world. Ultimately, it's an issue of
culture. The only people who can hurt us are ourselves, by losing our
culture. If we give up our Judeo-Christian culture, we become just like
the Europeans.
The culture war is the whole ball game. If we
lose it, there isn't another America to pull us out.
--------------------------------------------------------------------------------
- Forums
- General
- what in the world is going on
Please read, it's long but good!! This article succinctly gives...
-
- There are more pages in this discussion • 10 more messages in this thread...
You’re viewing a single post only. To view the entire thread just sign in or Join Now (FREE)