*A GLOBAL INTELLIGENCE BRIEFING FOR CEOs (..Recommend that you read it
all.)
> *
>
>
>
> This is a paper presented several weeks 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 vents. 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, the idea of economic liberty, individual
> rights, human rights - all these are defining points of modern Western
> 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 at $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 increase
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. 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.
>
> 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 it 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 the
> 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 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 ballgame. If we lose it, there isn't another
> America to pull us out.
>
>
>
> --
> Graeme Marsh
> Future Business Concepts Inc.
> "You never change things by fighting the existing reality.
> To change something, build a new model that makes the existing model
> obsolete."
> Buckminster Fuller
