Miss Kitty
08-23-2008, 08:45 AM
Herbert Meyer may not yet be that widely known; formerly an associate editor
of FORTUNE, he is an established author and historian, and served as advisor
to the Director of the Central Intelligence Agency during the Reagan
Administration. As such, he was responsible for the creation of the annual
National Intelligence Estimate.
Meyer was also the first man in the United States Government to predict the
collapse of the Soviet Union, for which he later was awarded the National
Intelligence Distinguished Service Medal, one of the intelligence
community's high honors.
WHAT IN THE WORLD IS GOING ON?
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 Ameri can 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 att ack 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 fin d 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 t he 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 protec ting 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 abandonme nt 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 Soci al 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 h ave 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< /st1:country-region> 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 b est.
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 pyram id 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 no t 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 implic ation 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.
of FORTUNE, he is an established author and historian, and served as advisor
to the Director of the Central Intelligence Agency during the Reagan
Administration. As such, he was responsible for the creation of the annual
National Intelligence Estimate.
Meyer was also the first man in the United States Government to predict the
collapse of the Soviet Union, for which he later was awarded the National
Intelligence Distinguished Service Medal, one of the intelligence
community's high honors.
WHAT IN THE WORLD IS GOING ON?
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 Ameri can 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 att ack 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 fin d 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 t he 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 protec ting 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 abandonme nt 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 Soci al 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 h ave 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< /st1:country-region> 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 b est.
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 pyram id 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 no t 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 implic ation 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.