In the latest issue of Newsweek, Fareed Zakaria examines what many Americans have recently been wondering: “How Long Will America Lead the World?”
…Americans have replaced Britons atop the world, and we are now worried that history is happening to us. History has arrived in the form of “Three Billion New Capitalists,” as Clyde Prestowitz’s recent book puts it, people from countries like China, India and the former Soviet Union, which all once scorned the global market economy but are now enthusiastic and increasingly sophisticated participants in it. They are poorer, hungrier and in some cases well trained, and will inevitably compete with Americans and America for a slice of the pie. A Goldman Sachs study concludes that by 2045, China will be the largest economy in the world, replacing the United States.
It is not just writers like Prestowitz who are sounding alarms. Jeffrey Immelt, CEO of GE, reflects on the growing competence and cost advantage of countries like China and even Mexico and says, “It’s unclear how many manufacturers will choose to keep their businesses in the United States.” Intel’s Andy Grove is more blunt. “America … [is going] down the tubes,” he says, “and the worst part is nobody knows it. They’re all in denial, patting themselves on the back, as the Titanic heads for the iceberg full speed ahead…” [Link]
I find many parallels between this and the long denied facts surrounding global warming. I saw Gore’s fantastic powerpoint presentation/movie two weekends ago and it struck me how slow to react people can be even when they know they are on the losing side of time. Zakaria goes on to point out the same thing that I mentioned in an earlier post and that Vinod tried to push back on a bit:
The national academies’ report points out that China and India combined graduate 950,000 engineers every year, compared with 70,000 in America; that for the cost of one chemist or engineer in the U.S. a company could hire five chemists in China or 11 engineers in India; that of the 120 $1 billion-plus chemical plants being built around the world one is in the United States and 50 are in China.
There are some who see the decline of science and technology as part of a larger cultural decay. A country that once adhered to a Puritan ethic of delayed gratification has become one that revels in instant pleasures. We’re losing interest in the basics–math, manufacturing, hard work, savings–and becoming a postindustrial society that specializes in consumption and leisure. “More people will graduate in the United States in 2006 with sports-exercise degrees than electrical-engineering degrees,” says Immelt. “So, if we want to be the massage capital of the world, we’re well on our way…” [Link]
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p>Just this morning IBM made a related announcement as reported in the NYTimes:
I.B.M. announced Tuesday that it would triple its investment in India to $6 billion over the next three years — underlining the country’s growing importance as a market for technology products and a source of high-technology workers…“I’m here today to say that I.B.M. is not going to miss this opportunity,” Mr. Palmisano said. “If you are not in India making the right investments and finding and developing the best employees and business partners, then you won’t be able to combine the skills and expertise here with the skills and expertise from around the world, in ways that can help our clients be successful…” [Link]
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p>So is it all doom and gloom? Does America have anything going for it? Zakaria does list a whole host of reasons why America is still on top for the time being. I found one reason particularly interesting. The population of the U.S., unlike many European countries, is growing because of immigration:
The United States is the only industrialized country that will not experience a work-force or population loss in the coming decades, thanks to immigration. Germany and Japan are expected to see their populations drop by 5 and 12 percent, respectively, between now and 2050. China will also face a demographic crunch. By 2040, it will have a larger percentage of elderly people than the United States. The one-child policy has led to something that China’s demographers call the “4-2-1 problem”– four grandparents and two parents will have to be supported by one worker. [Link]
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p>I think (of course I am highly biased) that the coming Space Race with China and India will be a huge boon for America. Historically it has been proven that America is at its best when it rises to meet a challenge.
So what should the United States do? What has it done in the past? First, be scared, be very scared. The United States has a history of worrying that it is losing its edge. This is at least the fourth wave of such concerns since 1945. The first was in the late 1950s, produced by the Soviet Union’s launch of the Sputnik satellite…America’s problem right now is that it is not really that scared. There is an intelligent debate about these issues among corporate executives, writers and the thin sliver of the public than is informed on these issues. But mainstream America is still unconcerned. Partly this is because these trends are operating at an early stage and somewhat under the surface.[Link]
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Again, another parallel to global warming. Take a look at Zakaria’s full article. It is a good read.
At the most basic, the problem is this: Americans are slowly but surely morphing into under-educated consumers, while Asians (Chinese, Indians, Thai, etc.) are morphing slowly but surely into educated producers. Over time, the dominance achieved by the West in general and America in particular will dissipate as the greatest pool of labor and capital ever assembled concentrates in the East.
The mountain of Capital in the West seems daunting. But 10% growth rates have a magical ability to climb mountains.
Asia faces monstrous costs (pollution, clean water, infrastructure in general, social safety net). But these are the same problems faces and tackled by the West in the past 100 years.
Now that the Capitalism genie has been let out of the bottle in India and China, there is no turning back.
i think the case against US is grossly overstated. India and China have a great future for sure, but the US is not likely to go down the european path. for one, the source of US dominance rests not on simple military dominance as was the case with europe of the last century, but a genuine strength in almost every aspect of human activity.
abt losing scientific and technological edge: things could have been better for sure. but in higher education, irrespective of the numbers of students churned out, the US is miles ahead of almost any other country. the reasons could be anything: immigrants, aliens or even abhi. who cares? so long as the system can keep attracting them, all is good.
the real lesson as zakaria points out is not to run for cover with protectionist, anti immigration measures.
Good post.
I was watching Space Race: The Untold Story on the National Geographic Channel and found it compelling (I’ll be picking th e book up soon). It was interesting to see some old clips replayed in the mini-series showing Americans of the day (1950s) reacting to initial Soviet acheivements. Once people get a jolt, they’ll push foward. Hopefully. I’m sure there are future leaders like Korolev and Von Braun sitting around somewhere, just waiting for a chance to share their vision with others.
I’m taking a training class and one of the instructors is a former aerospace industry insider (A former CEO and figher pilot) who was very critical of the Shuttle in general and felt that too many resources were diverted to the Shuttle (in terms of cost efficiency) rather than furthering booster technology. Doesn’t the Atlas rocket family by Lockeed Martin use the Russian RD-180 engine? The Energia rocket system which was developed to launch the Russian shuttle Buran and regular paylod is arguably the most powerful rocket system ever conceived along with Apollo, though the version launched wasn’t the top model. That one never saw the light of day. Doesn’t Sea-Launch also use the Zenit rocket to launch stuff?
Is this guy just a bit old and salty or is there credit in his arugment that we’ve (Americans) forsaken incremental improvements in boosters and more cost efficient technology over something with a massive budget like the Shuttle (that has its own merits), but would require several more launches per year to make it as efficient as what the Russians, French, and now Chinese and Indians have going?
in 1950 fewer than 1/2 of the american population had a high school education. so, the reason more people graduate with “sports-exercise” degrees than EE today is because 1/2 of our high school graduates go to college, and a large % of that 1/2 is simply not capable of an EE degree…so voila, sports-exercise degrees to make sure they get that gentlemen’s bachelors.
Edit: I meant the Saturn V rocket.
American has every reason to be scared of the Chinese – who I am sure will be the world’s #1 country in no more than 20-25 years. But no reason to worry about India. You can never overestimate the natural Indian tendency to self-destruct, particularly when things look good.
You know about the extreme case of affirmative action already in place, where 50% of the seats in colleges in India are reserved on basis of a person’s caste ? More is to follow. Soon 50% of the jobs in the private sector will be reserved for Indians lucky enough to have a lower caste dad.
So listen up all MNCs – Microsoft, GE, IBM etc. looking to hire Indian talent – make sure they have the right caste credentials…
Raj Mehta,”You can never overestimate the natural Indian….”
Raj, I’ll assume your tag was on in your post.
It is critical to remember that India was a socialist country for decades after Independence. This dramatically stunted both infrastructure growth and institutional growth. Although it will take a few more decades for India to shed its socialist past, shed it it will.
The magic of capitalism (when it is well regulated and refereed) is that it aggregates the desires and actions of individuals for the greater good. Take basic infrastructure. Businessmen in India now have a massive self-interest in the development of roads, power plants, sewage treatment systems, etc. They will support political candidates who agree.
India may very well follow the path of Brazil or Italy — where capitalism’s success has been smothered by endemic corruption or governmental waste. I do not think it will. And here is why: India speaks English and has an American and British educated diaspora. The pollination between America/UK and India will ensure that India follows their lead.
I am hugely optimistic about India’s economic future.
:7: Meant to say Sarcasm tag.
Mr.Econintraining,
You have no idea what I am talking about do you ?
A law to ensure implementation of caste based reservation in private sector jobs in India is going to be a reality very soon. This should ensure a big time comeback of socialism and the license-quota raj in India.
Do you think the MNCs will put up with this ?’Capitalism’ and ‘Caste Based Reservations’ do not mix. Capital will just fly away. MNCs will say goodbye. Indian companies will stop hiring, slumber, decay and ultimately get nationalised and eventually die.
The India Story is over my friends. It was good while it lasted. But it is now over. As I said, nobody can quite self-destruct like the Indians. Its an art.
But then what else can one expect ? When the people vote for socialists and communists and put them in power – you get socialism and communism. Ideologies that have failed all over the world, are ‘cool’ and ‘sexy’ in India.
I would love to be a leftist in a country like USA, where the issue is more of wealth distribution than wealth creation. But in a country like India, all talk of wealth distribution is funny when there is hardly any wealth that is to be distributed.All talk of inequities of income is fine in US…but in India where everybody is uniformly poor, (or will be made uniformly poor if leftists have their full say) such talk is painfully hilarious.
And now, just because India has had 10 years of prosperity, we have forces from all sides wanting to kill the golden goose even before the said goose reaches puberty – if you understand what I mean…
9: Your fatalism is just sad.
There are many, many obstacles in the way of capitalistic growth. India isn’t going to cross the chasm in one leap.
Private sector reservations, though limiting may very well serve an important political end. Indian politicians will need to find creative ways to redistribute wealth and satisfy constituencies over the next few decades of growth. Social dislocation is inevitable. Those dislocated will need to be satisfied that there is some good to come for them.
Sure, MNCs will be put-off. But they aren’t going to turn tail and run away.
In China, MNCs have been fighting for the past 15 years to end piracy, drop tariffs, change investment rules, buy banks, etc. They are slowly gaining ground.
So what if India throws up yet another cumbersome labor law. It is just another obstacle.
Raj #10: It is now impossible to kill the golden goose. The capitalism genie is out of the bottle. India now has billionaires (in USD no less). These guys fly around in Gulfstream V jets. The largest Indian companies are now listed on American exchanges.
The mythical Indian middle class is awakening to a consumer oriented lifestyle. They are demanding a higher standard of living. They will never, ever return to the days of full on socialism.
Et tu, Abhi? Alas…
These stories of America’s “alleged decline” have been popping up periodically for the last fifty+ years — the only thing that keeps changing is the “cause” of the decline .
It was Japan Inc in the 1970s and 1980s, and now it’s the three billion Indians and Chinese….
Prestowitz was ringing the alarm bells about Japan back in the 1980s. All falthoo bakwaas! I’m amazed that people still take his guff seriously
India and China are rising but their ascendancy is by no means inevitable. For more, read any of the articles linked to here – http://indianeconomy.org/2005/10/29/the-long-and-winding-road/
Goldman Sachs’ prediction about China in 2045 doesn’t count for much. 40 yrs is a long, long time out in the future. Read what pundits were saying about the Soviet Union in the 1950s. Or rewind to the 1970s and 1980s, when the experts were warning us of the imminent Japanese takeover.
The declinistas’ laments about America’s alleged loss of engineering/ technology graduates aren’t backed up by the actual facts — http://indianeconomy.org/2005/12/19/dont-try-kicking-sand-in-americas-face/
Arrey EconinTraining Bhaiyya………….. I totally admire you for trying so hard to put a +ve spin on this private sector reservation thing – but let me assure you. Nobody can put up with it. It will be the single step that will herald the beginning of the eventual rapid decline of India into a Rwanda or Somalia.
Do you even understand what private sector reservations mean ? Allow me to illustrate the practicalities of this. It means that if and when Microsoft(or forget Microsoft, consider a small Indian start-up with limited resources like say RelQ) wants to hire a couple of programmers in India, it has to make sure that atleast one of those hired belongs to a backward caste or lower caste. So if you have 10 candidates appearing for the interview and if 9 of them are unfortunately upper castes, only one of them will be hired even though all 9 have passed their BE with distinction. The other guy to be hired will be backward caste guy even though he comes with a BE 2nd class.
After the initial hiring, the government will expect equal representation of all castes at all levels. So as it is happening in the public sector, a lower caste employee gets promoted time and again, merely because he is a lower caste employee, not necessarily because of performance. If an employee messes up so badly that the company has to fire him, and is that employee happens to belong to a lower caste, the company will have no choice but to wait for a replacement from the same caste before they can go ahead with the firing. Otherwise, the representation of his caste in the company will be affected. Meanwhile, government servants will be keeping a strict eye on the company to make sure that the company fulfills its obligations towards ‘social justice’. Any negligence shown by the company towards this lofty goal will be pounced upon and punished heavily with huge fines – unless of course, the company allows the said government official a share into some of its profits – stock options, perhaps…
This is how private sector resevations will work out. Why on earth would anybody will put up with that ?
The educated middle classes dont have a say in the elections. Otherwise a pro-market BJP would have been in power. People of India vote for the candidate who promises them that their son will be given a job or a seat in a college just because he happens to be their son….The focus of people in power or those who want to get into power is winning the next elections. And all measures taken and promises made by them are in accordance with that goal.
They do not care what is good or bad for the country.If announcing reservations in private sector will get them a victory in the elections, they will certainly go for it. Regardless of the consequences of such a step. Which – trust me – will be severe.
There are no free lunches in life. But politicians in India win elections by precisely promising that – freebies like free power, free water, free housing, free food, and now in Tamil Nadu, free color tv sets.
The means to achieve success in life – whether for an individual, for a company or even for a nation – are hardwork, discipline, intelligence and sacrifice.
The politicians tell you you dont need any of that. They aim to win elections by promising the public that they can achieve success the easy way – no need to work hard or compete…just belonging to certain ‘disadvantaged’ caste or creed by birth is good enough. And crucially this ‘disadvantaged’ community happens to constitute 50% of the voting population. Just like another disadvantaged community, which constitutes 70% of the working population – and therefore has to pay no tax. The farmers. If you have the numbers on your side, freebies will be doled out to you.Even if you dont have the numbers on your side, but form a solid, united and reliable voting block, appeasements, exemptions and exceptions will be made for you.
Nobody wants to struggle, everybody wants things the easy way. And people who promise you the ‘easy way’ win elections, hold on to power and make the decisions.
But ultimately, there will be hell to pay. For temporary benefits or ephermal gains the people of India are willingly and whole heartedly digging their own collective grave.
We live in an integrated global world. A world ruled by a being called the ‘Market’. The Market does not care for the petty concerns of the Indian people or their leaders. The Market only cares for one thing – Profits. Return on investments. If that is not coming, the Market will forsake India and bid ta-ta, sayonara.
Have to agree with Raj Mehta here. Despite Mr. EconInTraining’s assertion about ‘Indian politicians will need to find creative ways to redistribute wealth and satisfy constituencies over the next few decades of growth’ I wonder if he realizes the full implication of something as heinous as private sector caste quotas. Indian politicians are not concerned about distributing wealth, their aims and purposes are acurately summed up here here. As long as this mentality pervades India (remember that the majority of the Indian populace actually WANTS private sector quotas to be implemented) it can never pose a serious threat.
Just having numerical superiority in graduates or engineers does not automatically translate into an advantage. Those graduates have to be of a certain quality, which only a grassroots level reform in the Indian education sector will bring about. Which of course the Indian politician has no incentive to attempt, better instead to just create an impression that they are striving for ‘social justice’ by enabling a few thousand people, at a net negative cost to society, rather than empowering hundreds of millions.
The article seems interesting and thought provoking. But as the Post #14 says, I largely agree. Equations will keep changing. I sometimes get the feeling that, India shining, will become world power etc etc. Are these for real or are they taking us to some fool’s paradise. Are we really shining or are we just enjoying like in a theme park to return to reality? These questions trouble me. Materially ofcourse we have grown in the last decade or so. But so has our reliance on external factors. Globalization benefits in growth, so it takes down also. Your economy is no more insulated to external ups and downs. US I feel is miles ahead. They have grown, technologically are advanced and scientifically have their institutions in place. So I think in another 50 years the story will still remain the same. We will have invented more ways for our downfall. More money does not translate to more progress, but surely to more avenues of corruption.
how many of those 3 billion allegedly charging at america like crazed multi-millionaires are too weak to even walk?
its nice that we have lots of techies who make lots of money, but that money hasn’t really helped raise the living standards of the majority of india’s population.
i think growth and research and development are absolutely essential, but india needs to make sure that everyone shares in the benefits. we cannot afford to follow the usa’s pure trickle-down system because we have our own ‘history’ to catch up: colonisation. till just around 60 years ago, which isn’t even one lifetime.
is running up to catch up with america with a few of our smartest and brightest really the best thing for india as a country? or is it just a way of congratulating ourselves on how much we’ve all contributed by going to grad school to get professions for ourselves.
I am not in a position to comment on the American decline or validate if this is indeed true or not. However, Mr. Raj has a valid point: the leftist slant in Indian politics is beginning to take a turn for the worse. We are opposing everything that makes a successful economy. Meritocracy is being replaced with the archaic reservations system, foreign investment is being blocked on the pretext that Indian manufacturers will suffer & outdated labour laws are being kept in place to ensure industries continue to run unproductively. This doesn’t look like its going to change anytime soon. It only looks like it will get worse. I don’t see India competing in the global economy if this continues for a few more years. In fact there is only regression & unrest in India’s future if the left parties aren’t driven back to their hovels; sadly the only people who can do that is the electorate and the electorate seems to want short term gains to long term stability & prosperity. Ironic considering the situation in America right now.
Hello Guys, America might indeed hold on to its position as the leader in contemporary space technology. But, this will not make it successful as per the ancient Indian or Chinese Philosophies. The governments in both these emerging economies are funding secretive research into discovering the Ultimate Happiness Capsule. The pseudo space race with USA is a classic decoy bigger than Michael Jordan. Once UHC comes into mass production, India will nationalize Pepsi and use the distribution network to ensure that UHC is delivered to even the remotest village. Meanwhile China will utilize its existing mass sterilization network for the distribution of the drug and the existing employees will be retrained to smile. UHC will ensure that a population of 3 billion lives in bliss and harmony, whilst the rest of the world queues outside the therapist. Meanwhile, don’t say a word to anyone, Shhhh…
can’t really see what all the worry is about. obviously the bloke who wrote the piece didn’t bother to check the demographic of most US universities – ( international students, and the engineering departments with majority Indian and Chinese students) otherwise he may be even more freaked out or less freaked out.
I wonder which? Perhaps someone ought to tell him.
after all one could argue – that a large no. of those educated in the US stick around to work, then get green cards..then you get the picture.
i mean i didn’t stick around – but then as the US embassy guy tried to tell me when i was wrangling with him about visas who kept saying – ..but no one ever leaves! they just stay and get work permits..they don’t go back to their country of origin i was like ..erm im sure it doesn’t apply to all of us. hey..what can you do with immigration officers who’ve made up their minds. i still consider myself lucky to have managed to get that visa. phew.
I think tashie has a good point here. When I heard slogans like ‘India Shining’ (a bit dated now I know), it was natural to feel a sense of pride. But the problem is that India is shining very brightly, but only for say 30% of the population. When you have 700,000,000 people who still are struggling with the burden of Indian history, I hesitate in saying that free markets and globalisation is the right or the only way forward. Sure, it grants economic progress, but better trade, a better GDP, and shinier cars of the ‘buoyant middle class’ are not the only indications of progress is general. Social (for want of a better word) progress is necessary is as well. Is reservation in the private sector an appropriate path? Probably not. But something has to be done. A positive sign amid all the recent hoopla is that atleast in India most people have the right and freedom to elect their own representatives to parliament. They might not be to the taste of people on this forum, but they are the elected representatives and their policies are designed to appease the people that have elected them. Only when people’s basic needs are met can India (IMO) move towards a more market centric economy. Until then a flavour of
socialismor perhaps more appropriately populism is inevitable.I don’t hold much stock in economic growth projections out to 2045, because they are all predicated on the continued increasing production of fossil fuels. According to most credible geologists’ estimates, fossil fuel production will decline much sooner than that, putting an end to rapid economic growth in both developing and developed nations. Add to that the mounting climate disasters caused by global warming, and the future doesn’t look too bright for the masses anywhere — not in the U.S., not in India, not in China.
10 years ago..you would say that India is shining brightly only for 5%-10% of India’s population.
Globalisation is a reality, whether you like it or not. The only way to enrich your people and take advantage of globalisation is to accept capitalism,free market in their totality , open up the financial markets, full capital convertabilty and for heaven’s sake – strike off the obscurantist labor laws (thats what India needs to end poverty – flexible hire and fire labor laws, not reservations). That is the only way.
But India being a democracy, such a step will not be taken, and India’s parasitic politicians,bureacrats and trade unioins will continue to throw road blocks to economic liberalisation process and satisfy the people with freebies and reservations – all of which will lead to the eventual tranformation of India into Somalia , leaving the country ripe for a ‘People’s Revolution’ and the emergence of an Indian Pol Pot ….
Future for India is extremely bleak…..and attitudes like those of some of the posters here – wary of capitalism, receptive to socialism – which is reflective of the thinking of majority of the Indian people, will be responsible for that.
Forget the stupid whining about ‘India Shining for 30% and not so for the others’ , very soon, whole of India apart from politicians and bureacrats and their kin, will be characterised by various shades of poverty. That is what socialism will do to you. Indeed Indians should know better having gone through 44 years of stagnation enforced by Nehruvian Socialism and India’s Gandhi’s Nationalisation and systematic destruction of private enterprise.
If you do not learn from your mistakes, and repeat them again and again, not even the Lord Ganapati can save you.
i personally am interested in the underlying assumptions behind this kind of thinking. why is it a problem if the rest of the world is ‘catching up’? i mean surely the kind of competitive spirit expressed in that sentiment is problematic in a globalized world. or not? the fact that people don’t think that’s a problem is worrying.
collaboration – not competition is the only way forward.
Raj Mehta wrote (#16):
Sounds alot like the Indian version of Affirmative Action, which had many pros and cons but never destroyed growth in the US Economy. Oh, and please explain how the lower castes are “backward”. Curious at your response.
Great line with bad logic– easier majors always attract more students. You wouldn’t want all of those sports-exercise majors as your electrical engineers.
be scared….be very scared
surely this zakaria guy ought to be warning people about being in denial about the budget deficit..now that’s something to worry about.
“Only when people’s basic needs are met can India (IMO) move towards a more market centric economy.”
This is kind of like the chicken and an egg problem, isn’t it? It is a paradox.
You can not satisfy the basic needs of the people without increasing the total wealth and productivity of the nation and investing more in the social sectors like health and education. Don’t tell me that people have no idea where the extra money needed to satisfy the basic needs of the people is going to come from? You can not get this extra money without resorting to a market friendly economy that encourages transparency in economic activities, entrepreneurship, and innovation. As Raj Mehta argues, without a net increase in the total wealth and productivity of a region, distribution of wealth is nothing but equitable distribution of poverty. That is where socialism flounders.
How many people of India had access to their basic needs before the current growth phase, spurred on by liberalisation of the ecnomy, started? It seemed pretty miniscule to me as compared to the numbers of today. We have made substantial progress in the last ten years. However, the task at hand is so massive that no matter what progress we make, it will not satisfy the collective souls of people who have a socialistic mindset. The socialists have had their chance to prove their point from independence to 1991. They did fail quite miserably in providing basic needs of the people. It is time they stand aside and let the economic reformers work for similar number of years. They can play the role of guardians in order to ensure that the government spends the money generated by the new economic activity in the social sectors and not waste it. Comparison of results will show which policies work in a diverse country like India.
I completely agree with Raj Mehta that reservations in the private sector will kill the golden goose and we will never make it out of the tag of a third world, underdeveloped country.
Raj Mehta:
Western economic development didn’t exactly follow a trajectory of unhindered wealth creation and then suddenly one day switch to redistributive policies. These policies have always worked in tandem with each other, simply because of the demands of the laboring poor had to be taken seriously if the middle class wanted to stay in power. In other words, the rise of labor movements meant that middle class liberalism couldn’t remain too wedded to an orthodoxy of economic laizzez-faire. In fact they had to make room in the theory of free markets for the free collective bargaining of workers, which meant supporting policies of social reform, including redistributive measures to accommodate the fluctuations of private investment.
A similar process is at work in India. I agree that India must create conditions for growth. However, growth produced by unaimed liberalization will only widen the social opportunities available to the rich and poor. It will take us down the Brazilian Path where they have seen impressive growth rates but little reduction in poverty. Any sensible vision of economic development in a country like India (plagued as it is by poverty, illiteracy, ill health, social inequalities) must take redistributive measures. So the real question is of the Indian State’s capacity to manage public finances…..which unfortunately has been disappointing thus far.
I agree with you Sonia. The real problem is that we live in a world of limited resources but 6BN+ people consumers want an American-esque TV lifestyle. It’s unsustainable.
That the US loses its eminence in the world, our relative economic or military strength, is not necessarily a bad thing. The real tragedy is that, as clearly evidenced by the comments, so few understand that wealth is not happiness.
A few months ago, investing this concept the Economist published a piece where they adjusted per capita GDP for leisure time, and suprise, the Netherlands ranked much higher than the United States. Meanwhile other studies have shown that above a certain threshold income (I think it was around 28K USD/year), additional wealth yields little increased happiness unless that income is relative to your peers.
Why do Indians think that American style capitalism and consumerism is such a great thing? The damage to the global environment alone is horrifying enough, but to know that it really doesn’t make people better off is the last nail in the coffin. Dig a little deeper…
I completely agree with Raj Mehta that reservations in the private sector will kill the golden goose and we will never make it out of the tag of a third world, underdeveloped country.
Its not just about economics, its about social cohesion. If the so-called forwards (and here we must include the South Indian non-Brahmin forwards who still get the OBC tag) are really dominating industry, academia and the professions, and if the disparity continue to grow (which can happen, even with 10% growth), then its only a matter of time before things start getting ugly. And if history is any guide, growth has always been accompanied by violence. I found that many members of the urban middle class in India are clueless about caste dynamics, some pig-headedly refuse to even recognize it; they are far more interested in cricket and bollywood.
What happens to a dream deferred?
Does it dry up like a raisin in the sun? Or fester like a sore– And then run? Does it stink like rotten meat? Or crust and sugar over– like a syrupy sweet?
Maybe it just sags like a heavy load.
Or does it explode?
-Langston Hughes
Hopefully, the Indian government can steer a prudent middle course between elitism and populism. (Yes, this is probably wishful thinking.)
I don’t even think the Asian century has begun. China in particular is heavily dependent upon selling its cheap goods to the West – it still hasnt built a strong internal market, and it must finance America’s deficit to sustain its cost advantage. If America implodes, so will China. If America implodes, its deficit will disappear and we will become used to a lower but still wealthy standard of living. China will starve. This will likely continue to be America’s century yet.
Vij, I think the point is that not many WANT to become engineers in the US, as opposed to the multitudes that want to graduate with a gentleman’s bachelors.
Anindo:
Actually, the results have been at best mixed. The creditworthiness and reserves of the state were restored, tariffs had been lowered and trade liberalized, foreign investment has risen and productivity has shown improvement. But borrowing has remained high, mostly to subsidize and placate farming lobbies, not for infrastructural or productive purposes. Inflation hovered around 10%, high by pre 1991 standards, and this despite external shocks and a sequence of record harvests. Also, liberalization seems to nourish still more magnificent scales of corruption, ie. mutually beneficial transactions on the stock exchange have left the wardrobes of cabinet ministers bursting with cash.
“Why do Indians think that American style capitalism and consumerism is such a great thing? The damage to the global environment alone is horrifying enough, but to know that it really doesn’t make people better off is the last nail in the coffin. Dig a little deeper…”
That is the most superficial argument that I have ever come across to justify poverty. Clearly, you do not understand what poverty is and what it can do to human beings. When millions of children die or grow up stunted because their parents can not afford proper diet for them, your solution is to tell them to go to Himalayas and shun materialism. Thank you very much!
Maybe it is time that you get out of your priviledged background and start understanding what it means to go hungry for two or three days. It will take away all the hoity-toity notions of spiritualisn and happiness out of you and make you quite glad to be materialistic.
I apologize for the ad-hominem attack but could not resist after going through your argument.
Regards,
A relative decline of American power is inevitable as other nations shred outmoded and often oppressive economic systems and embrace US style capitalism, or other styles for that matter. It’s just a matter of increased competition, which we all should embrace. Is this really a sign of American decline, or its ultimate triumph?
I work in the VC industry and I can tell you it will be a long time before any country supplants the US. The level of financial sophistication, entrepreneurial industriousness, and scientific knowledge is simply unmatched–with London being the closest competitor.
A more interesting question is when the Pacific Rim or India will surpass Europe. Outside of the UK, Germany, and perhaps the Netherlands (for Biotech VC), much of Europe is financially unsophisticated when it comes to financing the most cutting edge technologies. If the trend keeps up (and assuming Raj Mehta is wrong in his theory that India will resort to socialism again) I wonder when India or China will surpass France or Spain. Then we can talk about the US…but that will be a long way off.
Raj Mehta wrote:
Surely this is a bit of a generalisation. I don’t believe there is a single country that has completely embraced globalisation, has completely open markets (free market in their totality), completely open financial markets, etc. Every country, including the United States, or Great Britain, or France exhibits a degree of protectionism, and favouritism as well. And that depends to a certain degree on the socio-economic status of that country. I agree that India does need to move towards liberalisation of labour laws, but what might work in the United States might not necessarily work in India. There have been programs in India (guaranteeing certain days of employment to each family in a number of the most deprived districts) that will actually work, but may be viewed as a flagrant populist handout. There is no single magic bullet that works across all countries, environments and economies. Be it Globalisation, Communism, Socialism, or Jedi-ism.
Raj Mehta
You keep forgetting that India has a billion people! Any generalisation as those above is (again, in my opinion) very unfair. Just look at the Indian parliament, just the general economic policies of the parties.. The majority view still will be towards liberalisation and being more integrated with the global economy. The communist or protectionist view is also represented, but it would be in the minority. It might be unfortunate that the demographics of the current elected house have resulted them in having a disproportional say in current economic policy. That surely does not mean that the future as a whole is bleak!
By no means is the current system perfect. There is a lot of work to be done, but there is no definite path. It is going to be a tentative and collaboritive process rather than a ballsy blazing guns economic liberalisation process. I firmly agree with what Anuja says on this matter:
Let us not conflate one ism with the other. It is perfectly possible to be one without the other. And since when did capitalism become ‘American-style’? You mean Adam-Smith-ishtyle…right?
Manju wrote:
I agree. I work in an American Financial services company (behemonth more like) and am based in the UK. The technology used and the sophistication of financial trades / strategies used by American banks cannot be matched by most (barring a couple of big banks in Germany and Switzerland) European institutions. Not directly related to engineering or technology perhaps; but since so many of us geeks/techies end up working in the financial services industry anyway, it counts for a little bit 🙂 It will take a lot of investment, education and effort for any competitors to match up to their American rivals. This would not be helped by the fact that most of these will be bought outright by American companies anyway..
Raj Mehta and others : Althought you do have a point and I am totally against the private sector reservations….I also give a lot of credit to India and the way it is governed. 1) We are still young only 56 years old. We are still trying to learn to figure out the best way to govern this country. What was the US doing when it was 56 years old? Still importing africans to wash and cook for them! 2) India, according to me is the most difficult country to govern. I mean look at the array of religions we have and we are a still a secular country…we celebrate each and every of our religions. I was deeply offended when one american comedian (looking for comedy in the muslim world) referred to india as a hindu country. I wrote my complaint to NPR saying India is as much a hindu country as the US is a christain country. India is a secular country and does not have any official state religion. Does the common westerner even know that the Indian prime minister is a sikh and the president a muslim! Coming back to my point, with so many different religions not to forget thousands of languages and having given each and every religion their own freedom (in the tru sense) it becomes difficult to implement a uniform system. Every reform, every step that the government takes has to be taiolored to fit the different groups. The commom westerner does not know that Inida offers every religion to be governed by their own personal laws. So we have hindu laws governing hindus when it comes to marraige, succession, and inheritance. We have muslim law, parsi law, christian law and so on. When th eindian government wanted to introduce a uniform system, there was huge opposition from the muslim front because then they will not be able to practice the shariya law 3) And amongst all these differences India still survives as a DEMOCRACY! When people compare India with China, its funny, there is no comparison…..we are a democracy, china is not! The chinese government decides to introduce 1 child policy….they do it the very next day….because there is no opposition, you cannot protest the governments decision! The indian government obviously cannot do that…. With so many differences, I am proud that my country has still maintained its democratic regime in a true way. I dont think america or any other country for that matter can even come close to doing that! And with that I mean maintaining the right balance bbetween such diverse religious sects!
Anindo:
That’s a leap of logic that I didn’t, and wouldn’t make. Take a deep breath and try reading what I wrote again.
DesiDude, It is possible to have one without the other. But the modern misinterpretation and myth of the Free Hand in American Capitalism is an entirely different subject. When I wrote “American style capitalism and consumerism”, I’m was talking about a society that (rightly) makes private capital available for enterprises but wrongly fuels rampant consumerism with very loose credit to individuals.
The American savings rate is below zero because we are refinancing our homes, loading up on credit card debt, and not saving anything for the future as we rush out to buy a bunch of cheap plastic crap we don’t really need. If the rest of the world uses mindless consumption as the barometer of well being, we’re truly sunk. The planet can’t sustain 6+BN people consuming as Americans do now.
Perhaps I shouldn’t have stuff capitalism together with consumerism, but for most people they are indistinguisable in common usage. Sorry for adding to the confusion.
One thing I hate about Fareed Zakaria is his being so Americanized that he is almost in denial about his Indian-ness. He keeps referring to India as “they” and the US as “we”. Also as a Muslim, his article in “why they hate us” seems so contrived – the question is who is “they”, and who is “us”. His background is the same as the one that produced al-qaeda.
I wish he were to write in 3rd person, rather than trying to look “American”
Just finished reading Zacharia’s article, and I cannot help but wonder: Is this guy for real? Is Newsweek weak on news? Do these guys actually consult budding industrialists for their articles(instead of lifting quotes from established CEO’s) or do they just hire interns from humanities departments in colleges to research via Google?
American kids are not studying Math/Science… They are over-indulgent in pleasures/pastimes. American businesses are not competing. American finance is not having many IPO’s.
No shit, Einstien. The question is: Why is that happening? What are the root causes? What’s the cure?
Some of the main reasons for the American decline are (not necessarily in order of importance):
Question in Indian/Chinese 1st grade classroom: “There is a nest with mama bird and papa bird. They have three baby birds. After some time, two of the babies grow up and fly off. How many birds are remaining in the nest?”
Question in an American 1st grade classroom: “There is a nest with mama bird and papa bird. They have three baby birds. After some time, two of the babies grow up and fly off. Discuss the feelings of the remaining birds. Do you think the birds flew off because the others were mean to them? What could the birds have done to be more inclusive, nice and toleranti>?”
Now tell me, which of the children are more likely to be ruthlessly competitive in a globalised economy?
American kids are being brought up in a stifling environment where any challenge to the leftist, tenured cabal’s ideas in academia is ruthlessly suppressed. This is a new phenomena – less than 15 years old. We have hordes of brainwashed kids who simply do not have the guts or the brains to challenge authority – a uniquely American tradition (at least in the 20th century). The kids have low tolerance to risk, and are taught that they are entitled to a whole shitload of freebies, all at the expense of the taxpayer.
Companies have to spend so much money on employee’s insurance that large ones are on the brink of collapse. The Insurance industry is at the edge of a cliff: something will give very soon. A person does not smoke, exercises well, is a vegetarian, has a moral lifestyle is in a minority – he/she is supporting a majority which consists of smokers, red-meat eaters who are obese , fuck around like rabbits getting all kinds of diseases in the process. It cannot continue for long. This is compounded by archaic privacy rules where a company cannot even inquire about a person’s health issues which hiring him/her.
Insurance was supposed to be only for sudden, life-threatening events – like a car accident or a tornado attack. Today, it means that Medicare has to provide Viagra for 75 years old horny adulterers.
Something will give. Or else companies will relocate to countries where there is no Government mandate on health insurance.
When I worked for a software company in India, a wife of a colleague of mine was overdue with her baby. On the same day the doctors decided that she needed to undergo a c-section, there was a production crisis at the client-site, and the senior manager told my colleague that he had to attend to the crisis. The colleague, pleaded and eventually refused because he wanted to be next to his wife. He received his pink slip outside the operating room.
Most American companies used to operate like this from the 1920’s upto 1970’s – the golden era of American growth. Nowadays, the company in question would be so mired in lawsuits that it would have to wrap up operations.
Now tell me: Which kind of company will be ruthlessly competitive in a globalised information economy? Which country will see a flight of capital and which country would be it’s recipient?
None of these prime causes were covered in the Newsweek article. No wonder the print media is dying out slowly. Blogs rule.
RajMehta,
Good points. There is a new class of jealous looters active in India. If something is not done soon, the goose will be killed off.
M. Nam
MIT guy – good points
Chicago became a great city only after the great fire of 1871. Americans see disasters and mistakes as peripetia, ie opportunities for change. But the issue of consumer culture has gone unquestioned thus far and just might get back at them.
MIT Guy:
Last time I checked, Fareed Zakaria didn’t look like a Saudi to me so not sure how he shares a “background” with al- Queda. And as for the whole “us” or “them” mentality, hasn’t this already been stomped to death? It’s up to an individual to decide their allegiance, whether to religion, state, or philosophy. Who the hell are you to tell someone else, based on their brownness (or whatever) that they should identify themselves in a particular way.
Zakaria can spew gansta (c)rap while wearing a lungi, no problem with me. It’s the attitude that he shouldn’t that I have a take issue with.
Anuja, Eddie, and brownDelicious, Great points. If ‘free market’ and ‘capitalism’ are so great, then how come America is in decline?? Yes, we are in a time of globalization, and yes the market is here to stay, but it also needs to be regulated and controlled. No one is saying people should starve. In fact capitalism and privatization have created greater disparities between people. Since when did socialism become such a bad word? Isn’t it only so in the US? What about European and Scandinavian countries? The reality in India and other nations at that stage of development is that the state should have a strong regulatory and developmental role (that it doesn’t is another story). (And not just in India. What happened during Katrina?). And the costs of globalization to the environment and to local industries are terrible. Are we going to wait another fifty years and realize the harm it has caused? This is why voices that are critical, that specialize in interrogating the state, globalization, and the unthinking march of capital are ESSENTIAL (Think A Roy with all her faults and shrillness etc). There isn’t much scope for making serious developmental mistakes in India, and yet we just hurtle headlong saying ‘globalization vah vah.’
Oops, where’s my editor? Damn it!
I meant to write: It’s the attitude that he shouldn’t that I take issue with.
THANK YOU MANJU.
Economics, unlike politics, is almost never a zero sum game. Increasing economic output from India / China / etc. improves our quality of life (engineers and masseuses alike), rather than erode it. Sure, someone will write a sensationalist headline about China / India’s faster growth rates (almost a tautology given where they are coming from) but aside from some wealth-apologetic loonies, the world will be better off if they achieve first world incomes…