Title: The Elphant and the Dragon: The Rise of India and China and what it Means for All of Us.
Author: Robyn Meredith
ISB: 978-0-393-33193-6
Publisher: W. W. Norton ltd.

13th Annual Asia LSD Symposium, 15 – 17 April 2011, Hong Kong

This book tells the tale of two nations who came from some of the worst conditions and had revelations about themselves, putting them on the fast track to building their nations into economic world forces. Robyn Meredith is a journalist, well known enough that she even has a TED talk episode. Here’s a link to the TED talk: https://www.youtube.com/watch?v=TQl8TrxCSvk . In The Elephant and the Dragon, Robyn tells the stories of China and India’s rise through excerpts of how their politicians slowly brought the rest of their nation to see what they saw, and more. She tells the tale of notable companies that got their start during these countries’ revolutionary leaps in the forward thinking relative to what they knew in their closed off countries. She even tells tales of how automobile parts that were once made in Detroit now are made in different parts of the world and before they come together to produce the cars we drive today. The point of this book is that there are nations on the rise and soon they will be competing with us for jobs. It is mostly a documentary of China and India’s rise. China in this case is the Dragon, coming down on their people strong and without needing permission to make changes, while India is the Elephant: Slow (due to a democratically elected government) but a force to be reckoned with nonetheless.

The focus of the book flips back and forth between China and India, devoting every other chapter to these countries, while telling about the different steps that were taken and how they developed. So instead of summarizing by chapter, I will be giving an overview of the book, while trying to describe the happenings side by side to make it easy to keep up with (as opposed to constantly changing from the present to the past).

So why should anyone read this book, or even my summary? It takes historical facts about China and India and turns it into a story. Robyn puts you right there in the year at the meetings that took place and through words she paints a picture of what the politicians and business makers saw. Its more than just a story with an indefinite ending; it’s a story that shows how the world has responded to hard times. It shows the modesty in other parts of the world and how to properly turn an over populated country into a place where people want to do business. It gives an idea of how we can expect to watch the world develop for a while, and possibly use this information to help our own economy grow. If you the reader have ever wondered why we are facing outsourcing that came out of nowhere, well this book tells you where it came from and what you are up against. For more of the class rubric answers, skip to the end of the overview.

To keep your attention and not turn this into a fifteen page summary, I need to leave out the majority of the details. On chapter one alone I was able to type up around 2 bullet point pages, single spaced, line after line of just numbers and changes that occurred politically and socially. I can’t stress enough how well Robyn can turn economic policies and numbers into a story that will keep a person engaged. I cannot do this book justice, and neither could the reviews I found. Keeping that in mind, here is the overview/summary.

The book starts by putting us in the pre-liberalization period of China during Mao Zedong’s rule. She begins by telling the tale of the Xiaogang revolution. Families were so poor that in this village there was cannibalism due to scarce food resources. Some families would practice what was called “yi zi er shi”. This was a practice done by families, in which they would trade their kid for their neighbors kid, kill them and eat them, all while knowing that the neighbor was doing the same to their child. The government put caps on how much families were allowed to grow, and they were punished for either not making their quota or for producing too much. The average national income was around $16 annually at this time, and so the average person couldn’t even afford to eat. So as the story goes, a group of farmers made a blood pact to start producing more then their government would allow them to so they could start feeding their families. The next year they produced four times as much as the year previous, which symbolized the iconic start of their revolution. In India, the circumstances were not as bad, but the country had no money left and were months away from being completely bankrupt. Both countries decided that it was time to change.

China was plagued by their government’s control over aggregate output and their traditional views, and India was plagued by the values of Mahatma Gandhi and the idea of self sufficiency by Jawaharlal Nehru. Both countries had been set in their ways of being self reliant for so long that they did not know how the outside world worked anymore. Part of their coming into economic power was learning from the West and other countries how manual labor and other parts of production were accomplished, while finding their own niche.

In 1978 Deng Xiaoping became the leader of China, as an elderly man who knew his country couldn’t survive the way it was. He left and visited Singapore among other countries, and when he saw the buildings and the ways of life the people had in other parts of Europe, he came back with a vision in mind for China. He would speak out against capitalism because he knew the people of China wouldn’t stand for it, while he started changing things to work more like a capitalistic society. He began to create economic zones, where taxes for business were cut and incentives were given for foreign investment to come in and make products. University of Michigan’s Kenneth Lieberthal called it bureaucratic capitalism, while John Grittings, another scholar, deemed it state capitalism. In India, there were such hefty rules for foreign businesses that most decided it wasn’t worth it. One notable law was that foreign companies could not own the majority of their own company inside of India; they would have to sell it to people within India. Another problem was the position of license raj. These license rajs would be the sole deciders for each industry of who could produce and how much they could produce all while mostly stopping imports of products. For example, it was possible to buy a computer from Microsoft, but a $100 computer would take upwards of two years to get approval from the license raj and then there were hefty import fees. This would take the price of that $100 computer and turn it into a $250 dollar purchase, and by the time the company or person who originally bought it would be able to use it, it was already two years out of date. This likewise made it near impossible to compete with outside companies. It could also be noted that it would take years to get permission just to leave the country, if someone were so lucky to get approval. Around 1990 many of these practices were abolished in India due to changes the International Monetary Fund forced on the country of India as a requirement to get the loans necessary to turn their bankruptcy around, and through the forward thinking of Rajiv Gandhi.

Both markets became open to foreign investment, as well as foreign competition. The foreign investment and the building of infrastructure allowed these countries to raise the standard of living, which in turn allowed the people of their country to afford more. This meant that there was a need for universities, since families wanted better for their children and could now begin to pay for college. The prices were drastically less than what we see here in America though.

With foreign businesses coming into the country, there was plenty of room for corruption, as well as lots of money to be made. Foreign companies would pay pennies on the dollar for outsourcing work to India and China, but the majority of the money would come back to the companies. One general example was for a product that would sell for $100, that was produced in China, the Chinese factories would see around $15 of that and the rest left the country. One of the downsides to doing business with China was that there were quotes of around 40% of the total cost of a project were bribe monies. The upside to this is that businesses that were placed in these economic zones were streamlined into production and things ran smoothly. Accounts were saying that it was worth paying these bribes to jump start production. In India, there was a man by the name of Narayana Murthy, who became the Bill Gates of India. He started his company Infosys and at first had trouble once the doors were open to foreign competition, but then got down on his managers and within a couple years got ahead of most foreign competition, making his company a competitor on the world stage.

Culturally, the people of India and China were not ready for the doors to be opened, but the training wheels had to be pulled off sometime. In China the people didn’t originally understand that once a manager left the room, they were supposed to continue working, while in India the people had grown lazy due to lack of competition because of how sheltered they were. Through exposure to the outside world, production in these countries became much more competitive because there was money to be made. Most companies had to originally train their employees to get them up to speed, but fast forwarding to today, they have taken the money that they were able to make and reinvest it into education and production of their own. China encouraged the foreign companies who would come into the country to not only set up their factories, but to also set up research labs and other facilities, and teach them the different method’s of production used by the different companies of the world.

This is not to say that there wasn’t any cost to China and India other than amending laws. They have each spent hundreds of billions of dollars on infrastructure, including highways, airports and skyscrapers, and invested money into building universities. Their national average incomes are significantly lower than The United State’s but they now have people in all economic classes just as we have, and they are getting closer to our national standard of living every year. Pollution still runs rampant in these countries (China specifically) and even though they have attempted to put a stop to these corrupt politicians, it still exists. There are still problems with trade mark infringement and knock offs in China because companies have been producing their products there for a while now.

Robyn goes on to speculate about the future for America. We see that we have competition rising across the ocean, and we will lose jobs, but India and China are good at reproducing what they have learned, which means that there may possibly be more jobs in nanotechnologies and green efforts to help clean up the pollution all of this low cost high quantity production has caused.

What I have taken from this book that could relate to our course is that we are losing jobs and there are other countries with specialized workers that can compete with us, and every day that pool of workers that will do the same job for a lower price grows. It could be some explanation for why our wages are stagnant In the U.S. There is a much bigger pool of specialized workers than there ever has been before, which we know in economics lowers the wage rate because of competition.

This book has changed my thinking, because in all honesty, I used to believe that the working conditions in China were terrible and a tragedy, but this book has opened my eyes to the living conditions before they had foreign companies making products in their country. I am very much pro safety but I see what has happened less as companies abusing people and more as companies giving people a chance at a better life.