The economies of Asia have seen a phenomenal resurgence since the 80s. Now, into the second decade of the new millennia, behemoths of the likes of China and India are challenging the powerful position of the west. In this respect I want to talk about the two of the countries that interest me the most.
India is growing fast, surpassed only by China in terms of growth rate. In fact, India’s story to preeminence has been vastly different from China’s. India liberalized much after the red nation, as late as 1990s (compared to China’s 1970’s). India’s growth has been one driven by private individuals and domestic consumption. China has succeeded due to government involvement and competitive export strength. This has spurred high infrastructure growth and enormous wealth creation. Yet China faces enormous problems too. The wealth created has one of the most unequal distributions amongst nations. Large Chinese corporations which were for so long government controlled have suffered losses and as a result their privatization has been far from equitable. The Chinese entrepreneurial environment is still lackluster at best. Companies pay thrice the wages they used to a decade ago to be “Made in China”. Crucially, China still lacks the ability to offer a networked IT-manufacturing combo; that will be vital to the next generation of logistics and networked pipeline manufacturing. India faces its share of gigantic problems but only a few post serious threats to its potential of growth.
Therefore if we shift focus to the “Indian condition” an intriguing picture comes up. In the urbanized centers of India the evidence of a globalized economy is vibrant. Most street literature is in English, malls abound and commerce conducted is both intensive and quick. Yet rural India is plagued by the most common problems that afflict nations like Somalia and Congo. The challenge therefore is to utilize this untapped potential as a strategic competitor to the Chinese manufacturing industry. India’s growth has been long driven by intrinsic growth, characterized by reliance on domestic market, domestic entrepreneurship and industry. When India first entered the global economy it was using the service of IT. Consequently, the country created an effective educated middle class who generated wealth, consumption and as a result spurred economic growth. Now, the inflated demand for products has put enormous stress on the supply chain over heating the economy. Bubble formation remains a relatively low possibility due to the tight fiscal policies in India. In this juncture spurring the manufacturing sector remains a lucrative option to not only address the supply demand deficit but also employ millions, reduce poverty and create vast numbers of new consumers. The average wage in India is still a third of China’s favoring this strategy. Poor infrastructure and labor laws remain a significant hindrance.
Enter, the United States. As the position of the west changes, the USA will seek better association with Asia for its own benefit and derivatives. The United States already has a deep economic relation with the PRC. The question that now remains to be answered, is can this relation be expanded further to other spheres. Culturally, there remains an extensive interaction through university education and yet has this interaction resulted in more open and trusty relations? The reality is that the United States cannot afford to be placid with China because it and quite correctly sees china as competition. So given a relatively status quo with China, where can America effect a dynamic relation? If it is to be India, why it and what are the implications of the relationship.
Ever since President Clinton feted the first meeting of the largest democracies, Indo-US relations have never looked back. A large part of it is strategic and economic. India’s recent deals with the Boeing Company will keep its C-17 plant operational for a year and feed 5000 American jobs. A lot of it is also cultural. As two democracies with significant diversity, both states find something common to build on. The economic reality is far different. While the United States is the richest, India is by capita one of the poorest. Yet faced with burgeoning economic power: a new dynamic finds India contesting American economic prowess. In this regard an important problem is how America reinvents itself to create employment for both its own people as well as new products to sell to rapidly developing markets. India and China are both coming to the stage where even hi-tech products can be produced by local companies in a local environment. If America is to implement a new technology, will it be able to beat the Indian and Chinese researchers to the race. Will America become a specialized zone for innovation and good creation, thus creating a niche in the global job market for its citizens? Or will America succumb to the pressure and speed of the growing east.
How will this triangle change with time?
