All the boom and the gloom

All the boom and the gloom
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First Published: Fri, Aug 03 2007. 11 54 PM IST

The Elephant and the Dragon
The Elephant and the Dragon
Updated: Fri, Aug 03 2007. 11 54 PM IST
Anyone interested in the marvel of modern-day China and India routinely encounters a host of “gee whiz” factoids that illustrate each country’s growth. Shanghai, for example, had 15 skyscrapers in 1978; by last year, it had about 3,800, more than Los Angeles and Chicago combined. India, meanwhile, is home to three of the world’s 10 biggest information technology firms, and IBM employs 53,000 people there—an increase since 1992 of…53,000.
Yet it is just as easy to uncover bad news. Sixteen of the world’s 20 most-polluted cities are in China. And even if the country survives an environmental catastrophe, say the pessimists, it will be hit by an economic one: Its banking system is carrying close to $1 trillion (Rs1,00,000 crore) in bad loans. China’s premier, Wen Jiabao, has even admitted that the economy is “unstable, unbalanced, uncoordinated, and unstable”.
The Elephant and the Dragon
Cassandras do not lack for alarming material about India, either: Close to 40% of the population is illiterate and 60% remains dependent on agriculture—much of it at the subsistence level—while an antiquated infrastructure stifles the country’s ability to grow. “Whatever you can rightly say about India,” the Nobel Prize-winning economist Amartya Sen has written, “the opposite is also true.” Ditto for China.
In The Elephant and the Dragon, Robyn Meredith, a Hong Kong-based correspondent for Forbes magazine, neatly navigates between the boom and the gloom. Her account of India and China today is accessible to the general reader, but also brimming with enough data and first-person reporting to get the attention of even those jaded by the recent breathless coverage of Bangalore and Beijing.
As Meredith shows, comprehensive, market-oriented reforms—China’s began in 1978, India’s in 1991—have sparked a new dynamism and remarkable economic growth. In the 1990s alone, more than 200 million people escaped poverty in the two countries, lifting the per-capita standard of living beyond the wildest dreams of previous generations.
In The Elephant and the Dragon, we see the average citizen enjoying unprecedented opportunities, but also the effort of businesses to capitalize on them. “I look at apartments at night,” says a general manager from Philips, a Dutch company that manufactures light bulbs (among much else). He measures China’s economic progress by its growing illumination. He observes, for instance, that China’s rural homes have an average of three light bulbs now, but had none before the economy opened up. Helping a nation of 1.3 billion people to “see the light” is, for Philips, big business.
Meredith reminds us of just how far both countries have travelled in the past half-century or so. In China, 30-40 million people starved to death from 1959 to 1962 because of Mao’s collectivizing farm policies, and nearly all of the country’s universities were shuttered for more than a decade during the Cultural Revolution. In India, the post-independence experience with socialism and central planning subjected the economy to what became known, derisively, as “the Hindu rate of growth”. Cumbersome, inefficient, patronage-laden enterprises sustained poverty rather than alleviating it. Over time, the irresistible logic of capitalism coincided with a juggernaut of globalizing technology to overturn the old paradigm and usher in reform. Meredith acknowledges that, as a result of such changes, the US has lost jobs to China- and India-based outsourcing and “offshoring”, but she notes that American consumers have gained all the more, with a range of products and services at lower prices.
Both countries also need a more basic deregulation of everyday commerce. According to the World Bank’s Doing Business report—which measures the effect of government regulations—entrepreneurs in India and China suffer from high taxes and intrusive bureaucrats. They also have trouble enforcing contracts and getting licences to operate. For all the progress, in short, the elephant and the dragon still have a long way to go.
Write to wsj@livemint.com
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First Published: Fri, Aug 03 2007. 11 54 PM IST
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