Booz, Allen & Hamilton: Crystal Ball

September 25, 2007

For a paltry $50,000 you and your multinational corporation
can peek into the crystal ball of the future. Or, at least, you can get a sense of what might be happening in the world over the next five years. Booz, Allen & Hamilton, one of the oldest and largest management consulting firms in the country, is preparing a series of scenarios using "state of the art" econometric models in order to help management adapt its business strategy to the environment of the future.

Specifically, they are preparing a study designed to "provide
participating firms with a better means of analyzing the uncertainties and formulating practical management responses" to the current shaky world economic situation. It is geared to help the multinational managers plan strategies in the face of "embargos, boycotts, quotas, expropriations, price controls and the emergence of governmentally subsidized cartels [which] all reflect [a] growing economic nationalism."

By selecting ten key capitalist nations for detailed analysis, the Booz Allen report will construct an "economic system" to forecast how economic, political or social changes in any one
country will affect the nine others and the world as a whole.
The ten countries, which together are responsible for 80% of
the capitalist world's Gross National Product, include Australia, Brazil, Canada, France, Germany, Italy, Japan, Mexico, the United Kingdom and the United States. Booz Allen researchers will also prepare a series of studies on Africa, Latin America, the Middle East, the Pacific Basin, the Soviet Union and other non-capitalist nations, other Western European countries and the OPEC nations.

High-cost econometric forecasting studies are not new to the corporate world. A number of leading U.S. banks, such as Chase Manhattan, have provided such services to corporate clients for years. The interest of the Booz Allen study, however, lies in the importance which it gives to Latin America and in the team of "experts" it has assembled to undertake the project.

Founded in 1914, Booz Allen has increasingly concentrated its international consulting work on Europe, the Middle East and
Latin America. In early 1973, in the midst of a sharp swing to the right throughout Latin America, Booz Allen chairperson Charles P. Bowen noted that "our biggest growth has been in the Middle East, but now the best growth area is South America."


"Managing the Multinational Corporation," Booz Allen's study, is to be led by William Simon, a former senior partner of the Salomon Brothers investment bank, who joined the Nixon
Administration as "energy czar" and then as Secretary of the
Treasury. Currently, Simon is the up-and-coming hope of the
Republican Party's most conservative sectors. Many analysts have predicted that he will take over from aging Ronald Reagan as the standard-bearer of the Right in national politics.

Simon's heroes include Adam Smith and, naturally, Milton
Friedman. Following his mentors, Simon believes that the only good regulations are those which favor the rich. He argues, for example, that the problem underlying the current tax system is not its bias toward the wealthy. Rather, the problem is that corporations are not provided with enough loopholes
and therefore savings are discouraged. Internationally, Simon
favors strict monetary and fiscal controls designed to reduce
demand and thereby cut inflation. Such a policy-applied via Milton Friedman in Chile and by the International Monetary Fund in Peru and other countries - invariably reduces demand by slashing wages while letting prices rise.

The other participants in Booz Allen's study complement Simon
ideologically. Most notable on the panel of participating academics are Daniel Bell, the out-spoken right-wing Harvard
sociologist who will examine social change in the United States, Canada and Europe; Edwin Reischauer, former ambassador to Japan, military intelligence officer and senior research analyst at the State Department, who will focus on political developments in Japan and Korea; Arnold Harberger, one of the "Chicago Boys" responsible for designing the current Chilean economic model, who will prepare economic scenarios for Latin America; and Robert Moss, an editor of Foreign Policy London). Moss recently wrote a vicious attack on the government of Chilean President Salvador Allende which justified the brutal military coup. The New York Times has since reported that the book was published by a CIA-supported firm.

Booz Allen officials have noted that "initial response to the
project confirms our belief that executives of multinational
corporations recognize the increasing risk of operating internationally and are anxious to find new ways to deal with uncertainty in their decision making." At $50,000 a shot, they must be fairly anxious.

Tags: Booz Allen Hamilton, management consulting, econometrics, Latin American growth

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