Posted on 02/22/2007 9:07:02 PM PST by grey_whiskers
This is the next-to-last in a series on geopolitics, considering the decline of the West (primarily the United States and Europe), and possible successor powers. In the (Vanity) As the World Turns, or The Wild, Wild, East , the issue was introduced; in (Vanity) As the World Turns, Part II, or Back to the Future , I considered the threat posed by resurgent Islam;(Vanity) As the World Turns, Part III, or, The Year of Lipstick on a Pig the strengths of mainland China were considered; and this article will consider some of the possible challenges facing India. The last part will revisit the strengths and internal weaknesses of the West.
To begin with, it should be noted for the record that India is (at least for now) the most Western-friendly of the three emerging Eastern powers. And much of India’s rise into grace has resulted from their decision to try their hand at a capitalistic economy, rather than Soviet-style command-and-control. For this reason, I see India’s relation with the West as more of either ally or (later) economic rival, rather than foe. The fact that India is also a democracy rather than an oligarchy or Communist state is also a good thing.
However, I say “for now” because history has clearly shown that geopolitical alliances can shift back and forth, from allies to rivalry or worse, within a single lifetime; consider that while Russia fought against Germany in both World War I and World War II, Germany was split during the Cold War, and one half was a staunch Western ally. On the other hand, the United States and Japan have gone from “a day which shall live in infamy” and the only instance of atomic weapons being dropped on civilians, to a condition in which the greatest grievance of the United States against Japan is the insourcing of automotive manufacturing, thereby undercutting unions with…other Americans! (Really, some folks are hard to please.)
What are India’s greatest strengths? There are three of them. First, the fact that India has been under the influence of Great Britain during the days of the Empire. This has given both a cultural introduction to Western Thought, as well as a large number of people with a good command of English. Since English remains the preferred language of international commerce, India has a leg up on things. Second, India has been something of a pluralistic society for a long time: a mixture of Hindus, Sikhs, Muslims, Christians, and a hodgepodge of others. Thirdly, India shares with China a vast number of potential workers. And under the influence of the British (who in their heyday conquered one-quarter of the Earth’s surface based on an educational diet of classical languages and plane geometry) India has a very good educational system for an emerging country.
However, not all is as rosy, or as inevitable, as some in the business press make things out to be. First, let us consider the educational system. While it is true that the India Institute of Technology puts out graduates who can hold their own against most anyone, let us not forget that India is a country of over a billion people. Part of the reason that the top schools in India are such powerhouses, is that they do not pick up the cream of the crop…rather, they have their pick of the cream of the cream. There are two disadvantages to this. First, the system is rather wasteful: many people who would be perfectly ready and able to get a degree and to excel, are rejected. So while there are a great number of people with talent, the “bench strength” of the team is lacking. And there simply are not too many other good opportunities compared to those afforded by a degree. Secondly, with such enormous pressure to excel, and the stakes so high, the temptation to plagiarize, to cut corners, is enormous. (There are certain similarities here with the role of C-level executive in the United States, but I digress.) One of the consequences of the oversupply is given by the discussion of the number of knowledge workers available in India. For example, I used Google to look up “400,000 engineers india” and came up with a boatload of articles, all of which are confidently predicting that India may overtake China, since it graduates 2.3 million college graduates per year, and 400,000 of them are engineers. However, digging a bit deeper, you find that only 10-25% of these engineers are of sufficient quality to be useful to an international company. In fact, according to this article from Business Week,
Corporate recruiters say the process used to be a simple matter of flying to the top colleges and meeting with grads who had the best grade-point averages. Not anymore. "Now we travel by train and rickety three-wheelers to way-out destinations to unearth talent," says a human resource manager at an IT company…fewer than 8 million of the country's 200 million students make it through high school, and even fewer finish college. At the nation's 1,200 technical colleges, just 400,000 engineers graduate each year, estimates the National Association of Software & Services Companies, an industry trade body. Among those, only a fourth have the skills to immediately start work at a multinational or major Indian IT firm. Contrast that to 35% of engineers in Malaysia and 50% in Poland and Hungary who can perform the offshore IT jobs that are now migrating to countries where labor costs are low…
Clearly, there are some issues with the educational infrastructure which still need to ironed out.
Speaking of infrastructure, that is another concern within India which has not been widely addressed amid the PR pieces. According to some sources I have read, the Indian government is spending about 3 or 4 % of GDP on infrastructure (roads, electricity, railways, and the like). This is well short of the amount spent by China. And this may be a “chicken and the egg” problem—without infrastructure, it is hard to support logistics necessary for business. But without business, there is no money to support the development of infrastructure. This is one of the reasons direct foreign investment into China (particularly in manufacturing) has surpassed that in India; and after the outsourcing of so many software and back-office jobs into India (following the repeated calls for investment in Firms such as Level Three and Global Crossing), many people will be reluctant to finance the preparations for the nextround of outsourcing. And the bureaucratic glacier which constitutes the government in India is not expected to move quickly enough to solve the problem for the foreseeable future. This problem is slowly working itself out over time, particularly as the latest generation of “nouveau riche” invest their own money in order to improve conditions.
But this leads directly to the other two issues which I see as blocking India’s emergence into a true world power. The first is the government itself: it is true that the current government has enacted a number of structural reforms which make business and foreign investment possible, leading to a very impressive 8% annual growth rate. And this growth has been done without the widespread environmental calamities which have marked the growth in China. But the government is not monolithic, it is a democracy: and there are those who have been left behind by the progress—300 million or so of India’s population still live on less than $1 / day. This represents a political opportunity – either for those who oppose growth because their cushy state-controlled jobs are threatened, or even for Communists. (Yes, I said Communists, despite my earlier disclaimer. For more on the Communists in power in West Bengal and Kerala, see below.) It is ironic that the most socialist US president, FDR, used “The New Deal” to push his programs, while “The New Dealhi” of India is relying on moving away from Socialism in order to advance the economic fortunes of the poor. There is a controversy in the state of West Bengal over the government evicting farmers in favor of industry; was this done to increase the standard of living, or to invite a backlash? And the state of Kerala has (no doubt related to their literacy initiative) decided to kick out Microsoft and go exclusively with open-source software. If *that* takes hold, the entire raison d’être of the multinationals’ flight to India-seeding new markets- will be called into question.) The second threat to India’s emergence is paradoxically, the success rate which it has had so far. A lot of the growth has not been organic, aimed at internal markets; it has in fact been created by outsourcing, by taking jobs from higher-wage countries. For example, one finds the footprints of the consulting group McKinsey & Co. all over many of the studies and recommendations about outsourcing to India. According to The India Times some of the regional governments have been paying McKinsey & Co. to create jobs in India—and by creating buzz, this has been done. The drawback is that with wages rising in India, they are losing the draw of being the low-cost locale; other countries are now muscling in on the territory, from Viet Nam to Eastern Europe. What will happen if the large companies, ever in search of lower costs, decide to move on from India, before the economic growth has become self-sustaining?
Cheers!
One more reason
to worry about what will happen to India--one of these on the right outsourcing hub would really discourage a lot foreign investment, and take out at a stroke many of the experienced programmers and the like....Not to mention piss off a lot of US companies.
Cheers!
I've enjoyed the series, g_w. Nice work...
Good, unbiased and very informed look at both India (in this article) and China (in the last). Very hard-nosed and factual and very, very well researched. You should be in a think-tank.
...but that was an OLD vanity. How did you stumble across it?
Cheers!
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