Interesting
view of the worlds geopolitical situation and
demographics with their impact on the future.
Herb 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.
FOUR
MAJOR TRANSFORMATIONS
by Herb
Meyer
Currently, there are four major transformations
that are shaping
political, Economic and world events. These
transformations have
profound implications for American business
owners, our culture and
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. All these are defining points of
modern Western
civilization. Rule of law, idea of economic
liberty, individual
rights, human rights
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. 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. 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.
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
can we play games with
terrorists.
Most of the instability 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 are being brought into the
workforce. 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 that oil is
now at $60 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 post-modern secular state is
that you need a
traditional religious society birth rate to
sustain it. The Europeans
simply don't wish to have children.
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 2000
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 regards 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 post-modern 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, many 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, 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 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 is
over. 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 US. 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 US. 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.
The Euro is down.
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 and 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.
"America will never be destroyed from the
outside. If we falter, or
loose our freedom, it will be because we
destroyed ourselves." -
Abraham Lincoln.