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October 12, 2007

News & Opinion: Excerpt from The Elephant and the Dragon

By: 800-CEO-READ @ 1:00 PM – Filed under: Management & Workplace Culture



The following excerpt is the introduction to The Elephant and the Dragon: The Rise of India and China and What It Means for All of Us by Robyn Meredith.

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In June 2003, Prime Minister Atal Bihari Vajpayee of India boarded a plane bound for Beijing. It was to be an historic trip. The last time India's leader had visited Beijing, nearly a decade before, China was a nation of countless bicycles and drab buildings struggling to propel its economy into the twentieth century before the twenty-first arrived. But even as his plane descended, Mr. Vajpayee could see what must have looked like a mirage: thousands of factories surrounding Beijing, almost all built in the previous decade, each offering steady paychecks and, with them, the long-absent dream of a better life. China had gone from the past straight to the future.

He stepped into a new ultramodern airport, only one of China's many. As the prime minister and his delegation drove into Beijing on a smooth new highway, shiny cars zoomed past endless construction sites as the silhouettes of hundreds of cranes loomed over the cityscape. Beijing featured wide boulevards flanked by shimmering new skyscrapers, most built over the preceding ten years as the Chinese economy took off faster than any other in modern history. The view from Mr. Vajpayee's car conveyed what mere statistics could not: China had left India behind.

For decades, the Indian and Chinese economies had plodded along, isolated from and ignored by the rest of the world. Their peoples were poor, with little hope for a better life. But in 1978 China opened its door to the outside world and India did not, and then their fortunes began to change.

By the time the Vajpayee delegation visited China, a quarter century after China began its transformation, hundreds of millions of Chinese had seen their prospects dramatically improve as the Chinese economy blasted off. Foreign companies had poured more than $600 billion into China since 1978--far eclipsing what the United States spent on the Marshall Plan, which helped rebuild post--World War II Europe--and the foreigners had built hundreds of thousands of factories nationwide and hired tens of millions of people. The average Chinese worker now earned nearly five times more than before the reforms began, and millions had bought cell phones, computers, and even cars and apartments.

India, by contrast, seemed stranded in the past. Its airports were decades old and crumbling. There were no new expressways--the nation's potholed, gridlocked streets were lined with squalid shacks. The poor in India's cities lived in slums, bathing and washing dishes in filthy canals that also served as toilets. India had grudgingly begun allowing foreign investment in 1991, thirteen years after China opened its economy, and then followed up with on-again, off-again economic reforms. True, the average Indian was better off than before economic reforms began, but not by nearly as much as the average Chinese.

Twenty-five years after China launched its reforms, the contrast was vast. Chinese incomes had grown to twice the level of Indian wages. Both were still poor nations, but by 2003, 87 percent of Chinese were above the desperate, dollar-a-day poverty line, as compared with just 69 percent of Indians. Foreign companies invested just $7.5 billion in India in the fiscal year ending in March 2006; they invested the same amount in China every six weeks. India's economy was lumbering along, while China's was flying into the future.

How could this be? India had democracy, a vast English-speaking population, an established court system, and plenty of ties to the West. China had authoritarianism, few English-speakers, and no consistent rule of law. Yet Mr. Vajpayee could see it plainly from his car: China had raced ahead of India, and, for the most part, its people were better off for it.

This is the story of how India and China are changing their destinies and, with that, changing the world's. As they move from the ranks of developing-world countries toward superpower status, India's slow-but-steady approach contrasts with China's rocketlike rise. In plenty of other ways, India and China are as opposite as Gandhi and Mao. India is democratic, and China is authoritarian. Capitalist India is often antibusiness, and communist China is usually probusiness. Chaotic India is a riot of bright colors, a cacophonous nation with thirty different languages. Even India's nationwide time zone mystifies: it is a half-hour off from those elsewhere in the world, so at noon in New York it is nine-thirty at night in Bombay. China seems more straightforward: the national language is Mandarin Chinese, clocks line up with the rest of the world's, and--no doubt about it--the Communist Party runs the country.

While China's strengths are on display to Mr. Vajpayee and the rest of the world, many of India's are less visible. When China closed its colleges during the Cultural Revolution, India nurtured its universities, educating a generation of doctors, scholars, scientists, and engineers. While China persecuted capitalists, Indian managers gained experience by battling it out in local markets, and its businesses are better run than China's today. India's invisible human infrastructure is the nation's mighty resource now that it has reconnected to the global economy.

The two countries have one thing in common: their transformations--and the way they will transform the globe--are as stunning as any the world has seen since America itself emerged onto the world economic stage. The impact can be seen from the falling prices on Wal-Mart's shelves, the rising prices at local gas stations, the shrinking size of many American paychecks, even in the air we breathe. It can be heard in the voices on the end of tech-support phone calls. It is noticeable from the way freighters float low in the waters of the South China Sea because they are so heavily loaded with goods flowing out of new Chinese factories. Most plainly, it can be seen in the raw numbers: India and China have become the fastest-growing big economies on the planet. They look set to stay that way for decades and are on their way to becoming economic giants within a generation.

Suddenly, both India and China have become a source of employees, co-workers, customers, and competitors. In boardrooms from New York to Tokyo and from London to Frankfurt, executives have now contracted India fever in the same way they caught China fever a decade ago. Business leaders who don't know the difference between a curry and a stir-fry have been checking into freshly built Asian fivestar hotels, glamorous but for the fact that the visitors must brush their teeth with bottled water to avoid getting sick. They have been shuttling halfway around the world because the two up-and-coming nations are growing so rapidly that they make the economies in the United States, Europe, and Japan seem as if they are standing still. Suddenly, doing business in India and China has become the only hope for Western companies determined to quickly add new customers--the only way for Western executives to make stockholders happy.

Perhaps the most overwhelming changes are being felt in the newly global job market. As recently as the 1990s, activists worried that globalization would hurt the poor. They have been proved wrong resoundingly when it comes to India and China.6 Capitalists from corporate America and elsewhere surely did not set out to help Asia's downtrodden, but they did. Call them accidental activists: in the past decade, hundreds of millions of Indians and Chinese have been lifted out of abject poverty as globalization has brought jobs their way--even jobs that pay what in the West would amount to appallingly low wages. Surprising for those concerned about the world's poor, just as it surely would have startled Gandhi, Nehru, Mao, and other twentieth-century politicians who tried to protect the poor from big business, the movement of jobs overseas has pulled hundreds of millions of people out of poverty's quicksand. It turns out that developed nations like the United States, Japan, and the United Kingdom are facing big job losses, while developing countries are winning jobs. Globalization has proved good for the poor even as it puts the American and European middle class under pressure.

This book explores how the ability to connect with those Asian workers with the click of a computer mouse has changed the way the world does business. Millions of jobs are moving across the world to Indian and Chinese workers who are willing to do the same work as Westerners--even specialized, white-collar work--for drastically lower pay. Westerners in many professions are suddenly finding they can no longer expect to be paid ten times more than those in the developing world for the same work. College graduates in India are happy to land a job answering 800-number customer service calls to listen to Americans complain. Meanwhile, tens of millions of young Chinese move from their villages to factory dorms in big cities to make clothes and digital cameras and computers for foreigners. Even highly paid U.S. and European workers now face long-distance competition for jobs: India and China each add more college graduates to their workforces annually than are produced by the United States and Europe combined.

For the American and European middle class, this is the terrifying dark side of globalization. With more than a billion workers suddenly thrown into the world's labor pool, many unlucky Westerners will lose their jobs, and many will see their standards of living fall unless they take action to make themselves better contenders in the worldwide labor market. Farmers were displaced by the Industrial Revolution in the nineteenth century. Sweatshop workers lost their livelihoods to assembly lines in the twentieth, and just a generation ago American factories closed because blue-collar work began moving to Mexico. History is about to repeat itself, sending a spasm through the world's job markets.

Yet the rise of India and China is about much more than jobs moving overseas: it is about a major shift in post-Cold War geopolitics, about quenching a growing thirst for oil, and about massive environmental change. This is tectonic economics: the rise of India and China has caused the entire earth's economic and political landscape to shift before our eyes.

Because the strands of the global economy are now knitted together more than ever, the changes in India and China are shaping the future for the rest of the world--fast, and in some surprising ways. Never before has the global market been so hyperconnected: imagine if the massive trade flowing over the Silk Road were combined with that of the Spice Route and this mix of global commerce were supercharged with modern technology. Today what India and China sell to the West is no longer carried on camels or in galleons, but on cargo flights, in container ships, or over the Internet.

This book strives to help readers make sense of how our world is being shaped by the rise of India and China--the countries whose potential impact over the coming decades is both feared and underestimated. The Elephant and the Dragon will show that the rest of the world can adjust to the rise of India and China--and even thrive. But first we must understand the two giant nations that have opened their doors and walked into the twenty-first century.