Other side of success

Chindia: How China and India Are Revolutionizing Global Business edited by Pete Engardio; Tata McGraw-Hill; Price: Rs.395; 384 ppGoldman Sachs (GS) started a shindig when they came out with their first BRIC (Brazil, Russia, India, China) report in 2003. The conclusions of the report were astounding: by 2050, of the six largest economies in the world, only two top spots would be occupied by non-BRIC countries, forecast Goldman Sachs. China would be the largest economy, having overtaken the US by 2041, while India would be close behind the US, but bigger than everyone else, including Japan and Germany. This book is a collection of features, reports and comment articles published by the popular international business magazine, BusinessWeek, over the past several years about China and India, and the social, political, economic and environmental changes that have facilitated their growth. It is also a compendium that deals with the Western, and in particular the American experience of dealing with the shifting balance of power — the huge influx of cheap goods that have benefited American consumers while robbing workers of their jobs, of enormous increases in productivity in the wake of outsourcing, and of opportunities presented to American corporations following the opening up of Asian markets. Pete Engardio, editor of this book, is a prize winning journalist with BusinessWeek, and an old Asia hand who has covered the region since 1990. Therefore the compilation is fairly thorough, spanning a wide range of China and India stories. And since it is essentially a collection of articles from a popular business magazine, the style is quick and easy. Most people in India witness Chinas growth with envy, and occasional worry. We are bewildered by reports of a government that builds new highways, dams, airports, and power plants every month while ours, with much cooing, lays an egg every once in a decade. Our smaller manufacturers, like American industry, are also rapidly coming to terms with ‘the China price — a price for products so low, that it is often below the cost of raw materials. So are Indian consumers, who are lapping up the sticker prices on their toys and electronics. Nevertheless we can derive comfort in the fact that we are ‘better at IT than the Chinese. Ask our IT folks to define ‘better, and they usually fall back on our proficiency in English. Is this a sustainable comparative advantage? In that case what is our advantage over the software developers in America and the UK? What finally, is a competitive, comparative or absolute ‘advantage? Classic trade theory states that a country has a comparative advantage in manufacturing products in which it is relatively well-endowed with inputs that are intensively used in producing the product. Thus countries like India and China should focus on labour intensive industries where they have a comparative advantage, export these goods or services to labour scarce markets like America and Europe, and import products or services from those countries that require scarce skills or high capital investment.…