Posted on 11/14/2004 6:48:12 AM PST by CarrotAndStick
Last week I was joined at lunch by an Indian gentleman who had recently retired from a senior position at a semiconductor company of national repute in the United States. Much of his work in the last decade was in establishing production facilities for his company in China; not surprisingly, he displayed very intimate knowledge of the government and the industry in China, and how the two work in tandem to make China prosperous. Of Indian descent that he is, he kept bringing comparisons with the subcontinent into his conversation, and seemed to a have reached a conclusion, like most Americans, that China was indeed a better bet than India.
Unwittingly, we had ventured into an area that is usually the exclusive domain of either the armchair economists, or the vociferous political lobbyists depending on which side of the battle they want to take.
The argument in favour of the Chinese is most commonly cast in either one of two ways: first, that they have an almost endless supply of cheap labour that is ready, willing and able to poach industries from the rest of the world; and second, provided that the government is sensitive to market signals, as the Chinese began to be after the reforms of the later seventies, growth is more easily driven in a top down system of government than in the more complicated, problematic, messy, choose-your-own-adjective, democratic system. Reforms help, however the path to prosperity in the long term is not without its problems in the short and medium terms; winning support for change, hence, is much easier in a system where the will of the state is free to function without the shackles of democratic freedom.
This thesis is, admittedly, very seductive on the surface. However, as we’ve discussed before, focus on the details and things start to fall apart. The growth in China is coupled with great risks. For one, today’s benign autocracy can quite easily become tomorrow’s tyranny – much more easily than in a democracy where different ideologies must necessarily compete against each other. Secondly, the pillars of China’s economic system are remarkably brittle. The banking system, for example, is one where nearly half the loans it makes cannot pay any interest. As Hamish McRae, the Independents’ economics commentator noted quite recently, "straight line development is not a natural condition". And weak foundations will cause the Chinese miracle to falter more suddenly than anyone might expect.
What of India then? After the reforms of 1991, when our reserves stretched to cover only two weeks of imports, government has generally managed to maintain a program of reform and development. Our banking system has relatively few underperforming assets, and our capital markets perform with greater efficiency than China’s. Writing in last months Prospect magazine, Jonathan Power summed it all up quite neatly: India has changed profoundly in the last 30 years. The number of poor has been halved. The middle class is as big as the population of "old Europe," and is growing fast. India could be the power that dominates the second half of the century.
But of course, this comparison, and the salient hope for India, will bear out only if the dragon up north somehow stumbles and falls. Instead of wishing ill upon the Chinese, India is better off making up the gap by focusing on its failings.
The Chinese, unlike ourselves, are perhaps history’s most prolific industrial innovators; the Tang’s pioneered printing, and the Taoist alchemists invented gunpowder, and of course, their greatest contribution was the production of silk: legend has it that Lei Zu, the wife of the Yellow Emperor, was sitting under the mulberry trees in the garden of her palace when she suddenly heard a rustling in the leaves. As she looked up, she saw silkworms spinning their cocoons. And when she took one in her hand she found the silken thread, soft and shining.
The fact, then, that these people are leaders in manufacturing today should come as no surprise – after all, they have been at it for centuries! India on the other hand has always been more inclined to intellectual finesse. From the number system to the idea of infinity, our ancestors were more interested in the abstract world of the mind, than the world at large. Here again it should not be a surprise to learn that our strength lies in high technology, where innovators are necessarily academic.
The next step in our development must focus on bridging this gap and building our manufacturing base. I am hoping that I can persuade my retired technocrat friend to rededicate his energies - and believe me he has plenty of it left - in giving back to his motherland what he could not do with his former employers.
(Binay Kumar is a resident of California, in the US. His column appears every Thursday.)
This article is probably old, but sure is worth a read. Inform me if you found this useless.
Sigh. Demonstrably wrong. Let's ascribe to them inventing fire, the wheel, printing, paper, and gun-powder and bottle rockets. Totally ignores the history of the last two hundred years. 99.9999% of the technology we depend on today was invented rather recently by the West, principally U.S., Britain, Germany, and now the "neo-Western" Japan.
The biggest problem in China is the one-child policy. They will soon have a massively unbalanced population, with half of them over 50. India has more young people in its population.
India does have a lead in the information-technology/service sector.
However, India does not have the infrastructure to compete with China in the manufacture sector.
I find these comments the most interesting...
The article notes there are some advantages to the state-controlled economy when it comes to deciding overall strategy, but points out the stifling influence inherent in the system..
Then it points out the above financial problems..
If anything goes wrong and the government can't fix it, the entire structure falls, like a house of cards..
Man, that's gotta be a load of stress..
Vs. our system where the government works against those who would make the country prosperous.
India's problem is that the caste system precludes most of the population from moving into non-traditional fields of employment.
& due to the democratic political system in India,the caste system as a whole has been significantly & steadily weakened over the past 50 years.The lower castes have by virtue of their growing political clout(they constitute around 25%of the population) freed themselves from oppression & also turned the tables economically & educationally-this is especially true in Southern & Central India,though North India remains backward.
Everyone of yesterday's tyrannies (murders of tens of millions of the Chi-coms' own citizens) was a contemporary news event for me -- beginning with our left wing "progressive" pukes insisting that Mao was just an "agrarian" reformer.
It was a good read and an informative article. It matches everything Prof. Google has told me. I added a little that I remember John Cameron Swayze and the kids that followed him on TV network news reporting.
"Sigh. Demonstrably wrong. Let's ascribe to them inventing fire, the wheel, printing, paper, and gun-powder and bottle rockets. Totally ignores the history of the last two hundred years. 99.9999% of the technology we depend on today was invented rather recently by the West, principally U.S., Britain, Germany, and now the "neo-Western" Japan."
I agree with you general assessment that most of today's technology was invented by the West (though I'm not so sure about the reference to "99.9999%"), I believe the author was referencing to the amount of time in history in which China was the innovator rather than referencing the absolute amount of inventions.
However, the final chapter of history hasn't been written yet. A "neo-Western" China may very well emerge and wholly participate (and possibly lead) in this very inventive period that we live in now and prove the author right.
Not to mention that the one child policy has created a self-absorbed, spoiled generation like none the world has ever seen. To put it in perspective a generation of people with the same demeanor as someone like Kim Jong-il in Korea.
Without years of one-child policy, china might have more than 2 billion people today with most of them low educated, it would not be a delighted perspective. china needs a better solution to restrict the growing of population, but the government did not find it.
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