Tuesday, February 17, 2009
China & India : Billions Of Entrepreneurs
I am reading Tarun Khanna's Billions of Entrepreneurs, a study of the economic opportunity in China and India. Obviously, there are scores of books on the subject. We have seen a massive body of literature on BRICs - about the emerging opportunities in Brazil, Russia, India and China - and of late, on CHINDIA. In fact, these things do get people excited - I have been told by at least two entrepreneurs that they are looking to invest in India after reading Businessweek's compilation of articles on Chindia.
There is indeed a lot of merit in these studies, though the current recession has taken some shine off the emerging economies. Like Tolstoy observed that happy families are like one another, but each unhappy one is unhappy in its own unique way, it is easier to label developed nation economics under one broad study, but the developing nations need a far more nuanced understanding if the economic opportunity is to be fully realized. To this end, Dr. Khanna provides an excellent presentation comparing and contrasting China and India in a McKinsey video interview.
The question, however, remains whether the party is already over as we talk about it. The strains on the Chinese economy is already visible. Indian service sector, particularly Outsourcing, is taking a massive hit, and the white collar job losses are mounting. The governments in both the countries appear somewhat lost, they are more or less waiting for the United States to take the lead in the recovery process, and so far, not done enough to focus on domestic demand generation at all.
Many economists, including Paul Krugman, firmly believes in the continuing US leadership of the world economy. Despite the emergence of Japan in 1980s, the Asian Tigers in 1990s, and Chindia in the new millennium, thinkers like Krugman put their faith on the US providing the key impetus - in terms of innovation and enterprise - to the global economy. On the other hand, scores of others, including Dr' Khanna, see a rise in the relative power of the Asian Giants, even if within a collaborative framework led by the United States. This recession, indeed, is the testing ground for both the views, and also an opportunity to reflect on economic history and draw some lessons.
Lessons, such as ones from the last century, when another industrial superpower emerged, which could match the United States in innovation and entrepreneurship. I am talking about Germany, indeed. We must remember how it all ended - how the creative spirit of entrepreneurial competition soon degenerated in the destruction of political ill-will. And, it all started, if we accept a slightly generalized version of history, with the scramble for oil, and as policy makers started worrying about the sustainability of their national progress as the domestic resources start running out.
Those themes are still very familiar today, and more real. This is where the current competition is very different from the one provided by Japan and Asian tigers. These were small countries with limited population, and their stunning economic achievements were largely based on sophisticated technologies. In fact, their development came hand in hand with a focus on energy efficiency, as Japan particularly was always very aware about its resource constraints. The developments in India and China are far more like Germany, as they follow the path of natural resource-intensive path of development.
Oil prices, at this time, are as low as ever. This may be due to a combination of recessionary pressures, low demand for auto fuel, and a number of other things. It already seems that the last summer's extraordinary high was unusual, driven by strategic reserve building by the United States and some speculative profit taking. But it is also true that the oil prices are unlikely to stay where they are now - as the demand will soon grow and oil is a scarce natural resource. One would expect them to start moving up soon - may be by April - and that is surely going to bite the emerging economies even further, and impact the collective psyche.
I don't think we have politically progressed much though our economic and industrial achievements, over last 50 years or so, are stunning. The world still seems to be driven by nation states, with a bright exception of Europe. The economic nationalism remains the dominant political ideology of international relations. National Self-Interest is still considered a good thing. Spread of democracy, which is essentially a good thing, without the sobering of national sentiments, lead us to an uniquely short term world, right at the threshold of an environmental crunch time when we should be thinking more long term than ever. So, we are exposed to a similar, self-destructive era of economic nationalism and political conflict soon, much like what we did a century ago.
There is also this enduring faith that democracies do not go to war against one another. China isn't a democracy, by the way. But, more than that, we do not have enough history to make such an assertion, and more wars than most, in last two hundred years, were started by the two Anglo-Saxon countries which consider themselves the fountainhead of democracy. Besides, recession makes democracies behave in an unexpected way. I am real worried about the outcome of the forthcoming Indian election, and hope that this will not become one like the watershed German election of 1933. May be not, as the Indian electorate has always behaved in a matured manner, and our economic competitiveness made us stake-holders in the global world. But there is a very real danger, as the recession bites and economic nationalism gains ground - that's exactly where it all started last time.
A friend has recently forwarded me a quote from Lord Macaulay's speech in the British Parliament on 2nd February 1835. I reproduce the...
Introduction : The Business of Gift Giving Business gift giving has always been common and contentious at the same time. Business gifts are ...
Even when the limitations of an education system are quite obvious, innovations are hard to come by. This is a lesson many well-meaning in...
It has become a commonplace to say that, with globalisation and automation transforming the world of work, we need more 'soft skills...
When someone asks what I do, I like to say I work on Education Innovation. This sounds vague enough to give me two advantages: Most conver...
Apprenticeships seem like one idea whose time never comes. Or, its time may have come and gone, long time ago. Its past makes it appea...
'Neo-Liberalism' has come to eat the world. The term pops up every now and then, sometimes in unexpected places. Usually dero...
In most societies today, making profits are accepted as moral, if not especially praiseworthy. This was not as obvious as it appears today –...
The Idea of India, as conceived just after the country's independence, is facing an existential challenge, but that may not be a bad t...
Italy recently apologised to Libya for its occupation of the country between 1911 and the Second Word War and offered an investment deal of...
How To Live
"Far better it is to dare mighty things, to win glorious triumphs even though checkered by failure, than to rank with those poor spirits who neither enjoy nor suffer much because they live in the grey twilight that knows neither victory nor defeat."
- Theodore Roosevelt
- Theodore Roosevelt
We shall not cease from exploration
And the end of all our exploring
Will be to arrive where we started
And know the place for the first time.
- T S Eliot
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.