INTELLIGENCE BRIEFING FOR CEOs. Europe is to become a superstate against the wishes of its peoples and is to be ruled by a police force above THE LAW.

Interesting but omits one or two extremely important factors -

they are: 

the advent of an idiotic centralising regime in Europe which is 
hell bent on fosteringa bureauracy that exists without restraint and 
only for its own purposes. It has a philosophy and an organisation 
which rejoices in the name of common purpose.

A second fact asssociated with the above 

is the movement away from a society in which the individual is a sovereign being whose freedom to live and think as he likes is being eroded constantly - 

for example it 
was  revealed this week that over 100 inspectors, police and so on can 
force entry into any home in this country for a myriad of reasons - 
even believe it or not - as rabbit inspectors! 

The political elite are using their positions , collectively, in Europe to make themselves remote from the people they are supposed to represent and are 
developing into an autocracy concerned only with its own well being - 
for example  

Europe is to become a superstate against the wishes of its 
peoples and is to be ruled by a police force which is above the law in 
every possible respect. Hugh J.

INTELLIGENCE BRIEFING FOR CEOs

By HERBERT MEYER

This is a paper presented some weeks ago by Herb Meyer at a Davos, 
Switzerland meeting which was attended by most of the CEOs from all 
the major international corporations -- a very good summary of today's
key trends and a perspective one seldom sees. Herbert E.  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.

WHAT IN THE WORLD IS GOING ON? A GLOBAL INTELLIGENCE BRIEFING FOR CEOs

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 American 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, idea of economic liberty, individual rights, human Rights-all
these are defining point 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 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 find a way to bring Islam forward into
the 21st century. That's what our involvement inIraq 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 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 hina 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 over $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 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 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 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 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 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, 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 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 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
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 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
continues. 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 Iranhas 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 isGermany, because of all the baggage from World
War II.

The European economy is beginning to fracture. 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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