10 Global Trends

[Annie]

Effecting security/investments:

http://cbs.marketwatch.com/news/sto...ED6-4864-B285-760A43ABB873}&garden=&minisite=

10 global trends to ponder

By Marshall Loeb, CBS.MarketWatch.com
Last Update: 5:23 PM ET Oct. 1, 2004


NEW YORK (CBS.MW) -- "The world is a more dangerous place than ever before. There are many desperate people prepared to do whatever they must do to achieve their destructive ends. How matters are handled by the next president, and over the next 12 to 18 months, could define the shape of our lives for generations to come."

So begins the latest semi-annual Trends Letter published by Robert Dilenschneider, author of 10 books on topics from leadership to career advancement and head of an international public relations agency headquartered in Manhattan that carries his name.

Dilenschneider's letter has a commendable record of accuracy and prescience, largely because of its wide range of sources. It is based on 135 interviews with leading bankers, economists, academics, politicians, journalists and important people in the arts and religion. Dilenschneider supplements them with information he picks up at the annual Ambrosetti Conference in Cernobbio, Italy, which brings together Nobel laureates, prime ministers, foreign ministers and people such as World Bank President James Wolfenson, U.S. Attorney General John Ashcroft, U.S. Sen. Joseph Biden, and many others.

Here are some of the provocative points from the latest Trends Letter:

Terrorism grows worse
Don't think al-Qaida and its allied jihadist groups are receding. Far from it. On September 10, 2004, Ayman al-Zawahiri pledged that al-Qaida would launch more suicide attacks against the United States. Osama bin Laden's lieutenant said it was just a matter of time before the United States is defeated. He said that in Iraq the mujahedeen have turned America's plan head over heels. In recent days, another tape of bin Laden's deputy surfaced, in which he urged young jihadists to action.

The Islamic world is a boiling cauldron of discontent and, within it, al-Qaida is forming new and smaller cells and many recruits are coming from the middle class.

Pakistan has become a central staging ground, with about 20 al-Qaida cells operating in Karachi alone. Al-Qaida cells are also multiplying in Indonesia -- site of the recent bombing of the Australian Embassy -- as well as in most parts of the Middle East.

Key to this has been a multi-year, multi-billion dollar effort (in excess of $75 billion) to spread "Wahhabism." It is a marginal and puritanical breed of Islam that began in Saudi Arabia. Disciples are working zealously to turn it into the dominant doctrine in the Islamic world.

Wahhabism began in the mid-18th century when Mohammad ibn Abdul Wahab sought to purify Islam and return it to its 7th century roots. He preached doctrines based on a strict adherence to the literal word of the Koran.

Of the 6 million to 7 million Muslims in the United States, 2 million are "associated" with a mosque and 70 percent of mosque leaders are generally favorable to fundamentalist teachings, while 21 percent follow even stricter Wahhabi practices.

Iran moves closer to nukes
The theocracy in Iran, led by the Islamic Revolutionary Guard, is in full control. Iran is on a path to creating its own technology for a nuclear bomb. Many people in Iran wish to eliminate the West in a focused jihad.

The International Atomic Energy Agency has again demanded that Iran suspend its efforts. Expect Iran, no matter what is said publicly, to continue.

The Saudi royal family is deeply concerned about Iran. This is a hot spot that could negatively affect the United States and the European Union -- and soon.

China overheats
Since 1978 China's GNP has grown at an average annual rate of 9.4 percent, and its share of the world economy has grown from 1 percent to 4 percent. It is now the world's third largest economy.

There are 296 million mobile phone subscribers in China, more than anywhere else in the world. In all, 87 million people have access to the Internet, and more than 36 million computers are connected to the Web.

Many experts are concerned about China's overheating economy and particularly its strategy to develop into a manufacturing colossus. There should be concern. But there are also serious problems in agriculture, energy, the environment, investment and more that have to be addressed soon.

America's No. 1 ally
Prime Minister Tony Blair, America's No. 1 ally, seems sure to retain his post in the next British general election, which will probably take place in 2005. Blair has been in office since 1997.

Despite its involvement in Iraq, Britain is enjoying low unemployment and solid economic growth.

Blair clearly appears to understand and respond to the needs and aspirations of the United Kingdom's vast middle class.

The U.S. still leads the world

For all of our problems, consider:

*Since 1995 the United States has outpaced Europe and Japan in gross
domestic product growth.
*U.S. productivity gains since 1995 are far larger than in other parts of the
world.
*The U.S. worker is on the job 1,792 hours a year, third behind Japan at
1,801 and Spain at 1,800. The average French worker is clocking 1,453
hours per year and the average German, 1,466.
*After all social charges, pension and payroll taxes, employees in the United
States retain about 61 percent of their compensation. In Germany, they
retain 34 percent and in France 36 percent.
*The U.S. government is spending far more (nearly $350 per worker), than
Europe and Japan (less than $250 each) on research and development.
*Roughly 78 percent of European-born Ph.D. candidates plan to stay in the
United States.

U.S. fails to face energy problems

It's not just that we don't have enough domestic oil and natural gas. Indeed, there is no shortage of oil today. We don't have enough ports of entry for imported energy products, and we don't have enough refineries to process crude oil when it gets here.

Countries around the world have proved that nuclear facilities can be operated successfully and safely -- Japan, France, etc. Yet no new nuclear plant has been built in the United States for decades.

The cost of imported oil is the largest component of our massive trade deficit. This, in itself, is a threat to our national security.

Moreover, there is a view that much of the "new" oil produced in the next decade will come from unstable areas such as Angola, Kazakhstan, Azerbaijan and Russia.

The impact? If prices stay above $40 a barrel, Standard & Poor's estimates the cost to American consumers will be on the order of $36 billion annually. Merrill Lynch estimates a drop of 0.5 percent in our GDP.

Outsourcing moves up

The trend to outsourcing will continue no matter who wins the 2004 presidential sweepstakes and no matter what federal and state legislative constraints are imposed.

Originally confined to nonskilled or semiskilled manufacturing, outsourcing has moved up the value chain to focus increasingly on higher-skilled white collar jobs -- not just call center workers, but also film animators, medical specialists, accountants, financial analysts, etc.

Poor grades on poverty

There has been a dramatic drop in global poverty levels in the past three decades or so.

In 1970, 35 percent of the people in all developing nations were starving. In 1996, the figure was 18 percent, and the United Nations predicts it will fall to 12 percent by 2010.

But on the domestic front, the number of Americans living in poverty is 35.9 million. According to Census Bureau statistics, 2003 was the third consecutive year that poverty levels rose.

The U.S. poverty rate climbed to 12.5 percent of the population from 12.1 percent in 2002, adding 1.3 million people. The median household income stayed at $43,318. This in large part reflects a job market that failed to match otherwise strong economic growth.

Americans lacking health care coverage also jumped for the third consecutive year to a record 45 million in 2003; that's up 3.2 percent from 2002. White adults, primarily in the South, accounted for most of the increase.

A number of swing states have seen a rise in the poverty rate, in the percentage of uninsured, or both. They include Iowa, Michigan, Missouri, New Hampshire, New Mexico, Ohio, Oregon, Pennsylvania, Washington, West Virginia and Wisconsin.

What U.S. young people think

In the United States last month, 31.4 million students returned to high school and college campuses.

Among people 13 to 18 years old, 13 percent have their own credit cards; 16 percent own stock; 49 percent believe Social Security will not be available when they reach 65; 70 percent think taxes are too high; 68 percent influence household buying decisions; 35 percent receive allowances, for which 74 percent of them work.

Polls show the hot topics of concern to young people are: unemployment, education, national security, abortion and gay marriage. Indeed, 18- to 29-year-olds' political interests appear remarkably similar to those of older voters.

Voters under 30 appear remarkably uninterested in the environment, with only 6 percent saying they think the environment is the most important issue facing America today. Abortion, one of the fiercely controversial issues that have defined the differences between Republicans and Democrats in the last three decades, is barely registering among the young voters. Only 3 percent call abortion the most important issue America faces.

Boards of directors under fire

Expect zealous U.S. attorneys, upset whistleblowers, angry shareholders, self-appointed watchdogs, pension funds, the media and other factions to start pursuing directors who ignore their duties. And expect some of the most prominent figures in America and around the world to be singled out for criticism.

Expect many -- who are at an age when they might seek board memberships as a flattering cap to their career -- deciding instead to spend more time at leisure and turning down corporate directorships.

Message to business:

Companies will have a more difficult time than ever attracting qualified candidates for their boards, even if they offer strong compensation.

Boards will seek to retire nonproductive directors and directors with material relationships to the company.

The pool of eligible candidates will shrink as more decline to serve. Boards will turn to the second tier: presidents of major divisions and managers with significant international experience. Qualified women and minorities will get more chances to be directors -- if they accept the risks.

Corporate directors will have to work harder than ever before. The work load has been growing since the Sarbanes-Oxley bill regulating corporations was passed, and now stands at upwards of 300 hours a year per board per director; more for audit and compensation committee members and for directors of a complex company in crisis.

Directors will be forced to pare down the number of boards on which they serve. Four of five big boards used to be the outer limit; now it's probably two or three. Seated CEOs are often advised to accept no more than one outside board appointment. Expect more chief executives to resign from multiple board assignments.

Younger candidates -- individuals in their 30s and 40s -- will become corporate directors, indicating that they can serve on a board for decades. This suggests a challenge for boards: Should age limits be set? They eliminate long-serving directors who outlive their usefulness, but they also eliminate older, wise, productive board members. Will term limits force contributing members to retire early?

More and more corporations will require their board members to attest in writing annually that they have read and understood the code of ethics and that they swear to uphold it.

Boards will hire more outside advisers, including independent attorneys. They won't wait until a crisis explodes; they'll seek impartial advice as soon as a possible problem comes to light. Emulating mutual fund boards, some corporate boards have already hired full-time independent counsel.
Ideally, boards will require tougher succession planning, management development and CEO performance metrics. Where chief executives might have balked at too much oversight before, now boards will demand more accountability. Look for boards to take a more hands-on approach -- particularly in financial and audit matters, CEO selection, and the setting of defensible CEO pay standards.