[Rhodes22-list] A Global Intelligence Briefing For CEOs

[Brad Haslett]

Hank,

Good stuff, thanks.  The author certainly did his homework on China. I
couldn't find a single observation to disagree with concerning where the
Chinese are going.

Brad


On 3/26/07, Hank <hnw555 at gmail.com> wrote:
>
> Very interesting reading.  Nothing against either party, just some keen
> observations on the world as it now exists.
>
> Hank
>
>
> A Global Intelligence Briefing For CEOs
>
> Herbert 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. Rule of law, 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 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 workforce 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 $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 l ower 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
> Francedon'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, 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 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 outsources 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
> 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. 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.
>
> ·         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 serv ice 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 ballgame.
> If
> we lose it, there isn't another America to pull us out.
>
>
>
> 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.
> Formerly an associate editor of FORTUNE, he is also the author of several
> books.
>
>
>
> *Herbert Meyer*
>
> *P.O. Box** 2089***
>
> *Friday Harbor**, **WA** **98250***
>
> *(360) * Fax*
>
> *Email: herbmeyer at storkingpress.com*
> __________________________________________________
> Use Rhodes22-list at rhodes22.org, Help? www.rhodes22.org/list
>