Is Your World Too Small?
February 1, 2008
As you are reading this, the news of presidential-primary victories (or defeats) is likely to still be resounding. Sometimes it’s hard to step out of our work-a-day world and consider the implications of things happening around us. For this reason we will look at a few key “economic” issues that may affect our industry. As the candidates – and their campaign promises – become better known, consider how their views might shape future policy in these key areas.
A gentleman by the name of Herbert Meyer presented a paper at the World Economic Forum in Switzerland last August that helps to identify what is happening in the world and why it is important to us. Meyer – formerly an associate editor of Fortune magazine – also served as the vice chairman of the CIA’s National Intelligence Council.
Meyer indicates that there are “four major transformations that are shaping political, economic and world events.” The first is the war in Iraq. Military action in Afghanistan and Iraq, in addition to units of our armed forces hunting down terrorists in 30 countries around the world, is intended to remove radicals from power and give moderates a chance. The “hope is that, over time, the moderates will find a way to bring Islam forward into the 21st century.” As you evaluate this effort, “anything that suggests Islam is finding its way forward (modernizing) is good.”
The second major transformation is the emergence of China. One of the key impacts China will have on our industry and our economy in general is that they are hungry for raw materials. This is driving up prices worldwide, which is one reason oil is flirting with $100 per barrel. By 2020, China will produce more cars than the U.S. They are buying their way into the oil infrastructure around the world. As a result, millions of barrels that could have come to the U.S. are now going to China. Even if your products may not be competing in their markets, you are competing for available natural resources.
The third transformation is the shifting population demographics of Western civilization. Rapid economic development has been found to be the quickest way to drop the birth rate. The trend worldwide is to decreasing birthrates well below the replacement rate of 2.1. In Japan, for instance, the birthrate is 1.3, and this is resulting in major industrial changes in this country.
The bottom line is that “Europe and Japan are dying because their populations are aging and shrinking.” We are feeling the results of this in our own economy as we experience and anticipate Social Security and Medicare problems. While these demographics are scary, they also present opportunities for certain products in specific markets. “Make sure the demographics of your business are attuned to where the action is. Businesses need customers. Go where the customers are.”
The final transformation is the restructuring of American business. Meyer indicates what you already know – in today’s business environment you have to be the best to succeed. To be the best, you need to concentrate on one thing. This has resulted in the “fracturing of American business,” now in its second generation. “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.”
As a result of businesses fracturing into different and smaller units, everyone is on their way to becoming an independent contractor. The only way this can happen, however, is if compensation packages are portable and flexible, which requires a huge shift in the American economy.
Meyer says that “the U.S. is in the process of building the world’s first 21st-century model economy. The only other countries doing this are the 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.”
As you evaluate candidates this election season, reflect on their understanding of the transformations we are experiencing. If a candidate wants us to look like the European model, they may not understand. If there are those who look despairingly on the benefit of people on a healthy society, they may not understand. Meyer sums it up as follows: “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.” IH