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 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 ballgame. If we lose it, there isn’t another America to pull us out.
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About Herbert Meyer
Herbert 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 Unions 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 alsothe author of several books.
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