1 The Old World vs. The New World Reversals: Old World>>>New World Government PowerUnlimited >>>Limited  Declaration of Independence (Jefferson) – Rights from our Creator  US Constitution (Madison)- Limited Sovereignty Wealth CreationFinite: Land>>>Infinite: Capital  Landed Aristocracy Experience Led To “Zero-Sum” Thinking  1776 – Wealth of Nations (Adam Smith): “Win-Win” Attitudes:  Wealth Comes From “Capitalism, i.e. “The Head”

The West & The Rest in Global Trade Strategic Heritage  The Industrial Revolution of the 18 th Century began in Great Britain and quickly spread across Europe and across the Atlantic to North America.  In the 2 centuries following 1800, the world's average per capita income increased over 10-fold, while the world's population increased over 6-fold.  Indeed, Europe's population doubled during the 19th century, from roughly 200 million to more than 400 million!  In the words of Nobel Prize winner Robert Lucas, "For the first time in world history, the living standards of the masses of ordinary people began to undergo sustained growth... Nothing remotely like this economic behavior had happened before."  In the wake of the Industrial Revolution, the West was to change almost everything, and dominate virtually everything. This included models of self- government, as well as the industrial welfare state. By 2000 – with 11% of the world’s people - the US & Europe were producing 60% of the world’s GDP! 2

The West & The Rest in Global Trade 4 Strategic Mega-Trends I.By the 1990s Bismarck’s Wealth Re-Distribution Model of the 1890s Finally Overwhelmed the Western Wealth Creation Machine.  We see this stark reality across the Western landscape today - from Greece to Portugal to Spain to Italy to California. Just As This Is Happening We Witness 3 Other Powerful Mega-Trends… II.The Decline of Western Populations, Combined With Rising Health Care Costs Due to Aging Populations & Medical Advancements Achieved To Keep Us Alive. III.The Machine Age Has Been Eclipsed By the Information Age &, Ironically, the “Horizontal” Tools of the Western ICT Revolution Are Now Used By Our Competitors To Finally Even the Commercial Playing Field. IV.Finally, the Fall of the Soviet Union Has Convinced 1.3 Billion Chinese to Embrace Capitalism, Which Has Led 1 Billion Indians to Compete Globally, As Well. 3

The West & The Rest in Global Trade 3 Strategic Challenges  FACT: For the 1 st time in 200+ years, Western economic & military leadership of the planet is in question. The West Has 3 Strategic Challenges Before Us: I.Europe & the United States Must Re-Invent Welfare Models That Fit Our Demographics & Our Economics. The Current Social Models Are As Dead As the Steam Engine & the Incandescent Light Bulb. This Includes Our Public School Models. We Must Face This Fact. II.European & Now American Governments Have Been Consuming Almost 50% of GDP. In the Information Age, in an Age of Laser-Fast Change & Fierce Global Competition, This Is a Failing Investment Portfolio. Western Governments That Decide To Consume 30% of Their GDP Will Flourish. Those That Do Not Change Will Decline. The Evidence Is All Around Us. The US Dollar Is Down 20% In This Decade & We Now Have $14 T In Debt! III.The Challenge of China Is Upon Us. The US & Europe Must Stop Talking Endlessly About An “Atlantic Market” & Create It! The West Will Either Set the Standards & Set the Pace Together, or China Corporate Statism Will Dominate the Next 50+ Years. You Are In Washington Today Because You Know This. 4