Monday, January 12, 2009

Economic trends; Western Civilization under siege

An interesting summary of economic trends was presented earlier this year by Herb Meyer who served during the Reagan administration as special assistant to the Director of Central  Intelligence and Vice Chairman of the CIA's National Intelligence Council. According to Mr. Meyer, who lectures on this topic there are four major global transformations on the horizon which will have profound implications for our economy, culture and our way of life.

The first trend is that Islam is on its way to reconciliation with the modern world.  On September 11, 1683 Muslims lost a battle in Vienna which represented the end of Islamic expansion in modern times. It resulted in the Western Civilization moving forward, and Islam moving backward.  Since that time radical leadership has been constraining Islam, some say propagating hatred and war.  Our hope is that moderates will find a way to bring Islam forward into the 21st century.  Any signs of modernization are good; for instance educating women in Afghanistan, and creating a Constitution in Iraq.   Educated masses are more likely to want to advance and thus spark a revolution against radical leaders.

The second trend is the emergence of China.  China’s plans are to move 300 million of its people out of farms and villages and into the major cities; creating a manufacturing boom in order to provide jobs for all of those relocated citizens.  This results in a codependency between the United States and China; we need goods at cheap prices, and China needs to make those goods.  This also results in China driving up the price of raw materials and diverting oil in order to fuel its manufacturing economy.

The third trend is the shifting of demographics in Western Civilization.  A county needs a birth rate of 2.1 in order to maintain a steady population.  The birth rate of Western Europe is now 1.5.  Russia is declining so quickly that its population will be less then Yemen by 2050.  Japan’s birth rate is 1.3, which will result in it losing 60 million people over the next 30 years. Europe is subsidizing its declining workforce with immigrants, which often causes problems when there is no integration with the existing culture.  Japan has refused to go this route and is instead closing down; shutting over 2000 schools with 300 more schools per year expected to close.  With aging populations, a downward spiral is created, where the younger generation is saddled with a higher tax burden and delays having children.

In the United States, our Anglo birth rate is 1.6 and our Hispanic birth rate is 2.7.  If U.S. birth rates in the past 30 years had been the same as post-WWII we would not have the Social Security or Medicare problems that we have today.   Our government gave families an incentive to have four children post WWII by implementing a $600 per child tax credit.  This resulted in a baby boom of 22 million and a huge future tax base.  Today that incentive would equal $12,000 per child.

Two countries without declining population basis are China and India.  However gender preference has resulted in 70 million boys in each of those countries who will grow up without a spouse.  Historically civilizations with more males kept their boys busy with wars.  Unpopulated Russia adjacent to 70 million pent up youths in China is a concern.

The fourth trend is a restructuring of American business.  In order to be competitive businesses must sell the highest quality goods at the lowest price. This results in fracturing: companies outsourcing key business processes in order to lower expenses.  We’ve now entered the second level of fracturing; the companies awarded the outsourced processes in turn outsource a portion of their manufacturing or services.  Companies are getting smaller but becoming more efficient and more profitable.  With smaller companies and economic uncertainty comes a shift in employment models.  It is now the individual employee who must provide his or her own health insurance, benefits and plans for retirement.  This will result in more portable and flexible offerings and define the new economy, which will be far ahead of Europe and Japan.

Mr. Meyer's lecture is available on YouTube.

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