Editorial»
India versus China: Too close to call?
JAN 16 - P eter Drucker, the father of modern management theory, thinks that China, the crown prince of the world economy, could miss its coronation. In a faxed response to questions put to him recently by Bloomberg News - Drucker, 94, prefers to correspond by fax - he paints a rather bleak picture of the most-populous nation. “The state-planned factories in China are a major social and economic threat,” Drucker said. “Many - most? - are in the wrong place turning out the wrong product and are greatly overstaffed. Maintaining them threatens bankruptcy; closing them threatens social revolution.”
Overall, “the chances of very serious social unrest in China in the next 10 years are greater than 50 percent,” Drucker said. This is Drucker’s second alert on China in a month. That country, Drucker argued in a recent Fortune magazine interview, may not be able to absorb its vast army of rural poor into cities without social upheaval. At the same time, the country’s existing base of educated professionals is too small, he said. On both the counts, “India’s progress is far more impressive than China’s,” Drucker concluded.
Drucker’s verdict on the hopeless situation of China’s 300,000 state-owned companies, and their 75 million workers shouldn’t be taken lightly at a time when it is becoming increasingly important to consider a global economic landscape, where, in Drucker’s words, “the dominance of the U.S. is already over.” China and India, with a third of the world’s population between them, are both capable candidates to become the world’s future engine of growth, especially as Japanese society, with all its advances in technology, is simply too old to fill the void.
Therefore, from automakers and cellular phone operators to consumer banks and credit card companies, it is crucial for businessmen to ask: Who is more likely to make it - China or India? To be sure, China’s economic march since it started opening its economy in 1978 has been rapid. In comparison, India’s progress in shedding the baggage of its socialist past has been tardy, and often marred by the hurdles put up by its democratic decision-making process. In 2002, China exported eight times as many goods as India and its gross domestic product grew twice as fast as India’s 4.3 percent. China also got 12 times more foreign investment than India. Now, as Drucker told Fortune magazine, India, with its numerous engineers and specialist doctors, “is becoming a powerhouse very fast.” Whereas, “the greatest weakness of China is its incredibly small proportion of educated people.” While the substance of Drucker’s argument is valid - India does indeed have a bigger talent pool - China may not be quite the backwater of education that Drucker is making it out to be. For one, the actual number of Chinese college students, if official media reports are to be believed, is probably closer to 8 million, not 1.5 million, as Drucker argues.
Also, just as India now has aspirations to become more China-like in its “hard” infrastructure - roads, ports and telecommunications - China too is emulating India and building a reservoir of “soft” skills. In his comments to Bloomberg News, Drucker conceded the point that China is “building its knowledge infrastructure very fast” and he said he was “impressed by the number and quality of executive management programs in China.” That said, India does have a more enduring advantage that China can’t match by simply scaling up college enrollments.
Unlike China, which has depended on foreign capital and technology to pave the road to progress, India has allowed far greater leeway to local entrepreneurs, such as N. R. Narayana Murthy, the founder of the software services company Infosys Technologies, and K. Anji Reddy, chairman of the drug maker Dr. Reddy’s Laboratories. As a result, India now has a number of indigenous companies that rank among the world’s best, whereas in China, “you would be hard-pressed to find a single homegrown Chinese firm that operates on a global scale and markets its own products abroad,” Yasheng Huang, an economist at the Massachusetts Institute of Technology, and Tarun Khanna, a professor at Harvard Business School, wrote in an August article in Foreign Policy magazine.Posted on: 2004-01-17 04:12
Headlines
Advertisements
