This book by Robyn Meredith, with has the subtitle, “The Rise of India and China and What it Means for All of Us,” is fascinating. I keep notes as I read a book I intend to review, and my list of interesting facts was too lengthy to be able to include many of them in this review. The description of how China has become the world’s factory and India has become the knowledge and call center and how that is affecting the U.S. is important reading. One flaw that is not the fault of the book is that it was published in 2007. Some companies have taken back call centers and computer development work. Quality of product produced in India suffered from communication problems, and sometimes the cost of workers making a fifth of what was paid to American workers came to a higher final cost because of continual requirements for corrections and rework. That is the subject of a blog post on that link of this web site.
The book begins with the description of the Prime Minister of India visiting China in 2003 and being astonished at the ultramodern Beijing airport, the new highways with new cars, and countless construction sites with hundreds of cranes looming over the city. China had opened its doors to the world in 1978 and India did not. The outcome was that foreign companies had poured $600 billion dollars into China by 2003, which eclipsed the amount the U.S. spent on the Marshall plan in Europe after World War II. India remained stranded in the past with crumbling infrastructure and oppressing poverty while China was marching toward being a world economic (and military) power.
The book has fascinating summaries of recent Chinese and Indian histories. Gandhi and latter Nehru had frozen development in India. Gandhi had been so committed to his policies that his wife died from an infection when he deemed that an injection with an antibiotic was a violation of his “non-violence policy.” The Socialist policies combined with refusal to join the global economy made Indian companies lazy and uncompetitive and locked millions of Indians into poverty. Oppressive bureaucracies controlled everything to the point of absurdity. Procter and Gamble was worried they would be punished for breaking antimonopoly rules if they made too much Vicks VapoRub during a flu epidemic.
Mao destroyed China’s capacity to produce enough food to prevent famine with the Communist Great Leap Forward. Collectivized farming imposed in1955 and caused a 40 percent reduction in food production. People resorted to trading children so that they did not have to cannibalize their own child. Everything steel was taken from the peasants. Even cooking pots and bicycle frames were melted down for the purpose of meeting Mao’s steel production goals. Grain rotted in the fields because the peasants were told to focus on operating backyard furnaces to produce steel. The universities were closed, and the only education allowed was study of Communist propaganda and Mao’s Little Red Book.
The recent changes in both China and India have lifted millions of people out of the poverty that Socialism and Communism had produced. “We got more done for the poor by pursuing the competitive agenda for a few years than we got done by pursuing a poverty agenda for decades.” “Capitalists from corporate America and elsewhere surely did not set out to help Asia’s downtrodden, but they did.” Highly “…paid U.S. and European workers now face long-distant completion for jobs: India and China each added more college graduates to their workforces annually than are produced by the United States and Europe combined.”
There is an interesting story that may or may not be factual that villagers of Xiaogang broke China’s collective farming rules to illegally divide the collective into individual plots and production increased by 35 percent. China now celebrates Xiaogang as the birthplace of rural reforms. Deng Xiaoping came to power when Mao died, and he immediately shifted from the planned economy to a market economy. That was the beginning of successful capitalism under authoritarian control. Deng visited Singapore in 1978 for three days and was impressed with the results of a free market. The People’s Daily stopped referring to Singapore’s leaders as lackeys of the west and touted the achievements in affordable housing. Deng sent four hundred delegations to Singapore in just the year 1992. Deng also had new roads built, a quadrupled electric power generation, and modernized the power grid. China is also committing to nuclear power, and intends to triple the amount of energy produced by 2020. State-owned enterprises have dropped significantly to be replaced by private companies.
Building China into the world’s factory did not come without challenges. Workers who were supposed to build billfolds had never needed one and no idea what they were supposed to look like. The workers also did not understand that they were expected to continue to work after the boss left the factory floor. However, China one billion people experienced rising prosperity without a shot being fired. Political stability is demanded by the State at a cost to individuals who protest or are caught in the rampant corruption that results in execution. The Tiananmen Square protests in 1989 and the young people who disappeared afterward remain fresh in the minds of the free world. There also continue to be coerced abortions and sterilizations to meet the population control requirements.
The recent history of India is just as fascinating as that of China. In 1991 after the Socialism of Gandhi and Nehru India was broke. Forty percent of Indians were below the poverty line. Planeloads of Indian gold were being delivered to the west to meet financial obligations. P.V. Narasimha Rao was the prime minister dealing with the crisis, and he turned to the “…utterly uncharismatic economist Manmohan Singh.” Singh began the economic transformation of India by lowering income taxes, cutting bureaucratic red tape and licensing, and allowing investors to buy shares in Indian companies. The economy began to grow.
There are several interesting stories of individuals who developed successful businesses in both India and China. Most of the American business powerhouses have large operations in both countries. China is currently more successful than India thanks to the authoritarian control maintained by the Communist central government. Indian businesses have to deal with less stability since the poor people in that country vote while the middle class doesn’t. The result is relatively frequent changes in government. Some but not all of the bureaucracies that had suppressed economic growth have been discarded. An example of how the country lurches forward a bit and then stops is the beginning of construction of new highways toward in Bangalore. “The new overpasses stop in midair, as if waiting for Infosys (the Indian version of Microsoft) to invent technology that allows cars to fly.” Indians recognize that the control by the Chinese government gives that country an advantage. They tell a joke that the Chinese premier is being driven and the driver stops at a sign that says turn left for communism or right for capitalism. When the driver inquires what to do he is told, “Just signal left and turn right.”
There are interesting discussions of outsourcing that are pertinent to the political dialogue still prevalent today. There have been U.S. jobs lost from outsourcing, but it is difficult to count because the rise of China and India has created jobs. The concern is that the jobs being outsourced are now including the white collar jobs instead of mostly factory jobs. There is a hidden warning to American politicians. It is mentioned that John Kerry’s frequent berating CEOs who had sent jobs overseas during his presidential campaign inspired more American companies to outsource.