Robyn Meredith - The Elephant and the Dragon: The Rise of India and China and What It Means for All of Us

TECTONIC ECONOMICS

I n June 2003, Prime Minister Atal Bihari Vajpayee of India boarded a plane bound for Beijing. It was to be an historic trip. The last time Indias leader had visited Beijing, nearly a decade before, China was a nation of countless bicycles and drab buildings struggling to propel its economy into the twentieth century before the twenty-first arrived. But even as his plane descended, Mr. Vajpayee could see what must have looked like a mirage: thousands of factories surrounding Beijing, almost all built in the previous decade, each offering steady paychecks and, with them, the long-absent dream of a better life. China had gone from the past straight to the future.

He stepped into a new ultramodern airport, only one of Chinas many. As the prime minister and his delegation drove into Beijing on a smooth new highway, shiny cars zoomed past endless construction sites as the silhouettes of hundreds of cranes loomed over the cityscape. Beijing featured wide boulevards flanked by shimmering new skyscrapers, most built over the preceding ten years as the Chinese economy took off faster than any other in modern history. The view from Mr. Vajpayees car conveyed what mere statistics could not: China had left India behind.

For decades, the Indian and Chinese economies had plodded along, isolated from and ignored by the rest of the world. Their peoples were poor, with little hope for a better life. But in 1978 China opened its door to the outside world and India did not, and then their fortunes began to change.

By the time the Vajpayee delegation visited China, a quarter century after China began its transformation, hundreds of millions of Chinese had seen their prospects dramatically improve as the Chinese economy blasted off. Foreign companies had poured more than $600 billion into China since 1978far eclipsing what the United States spent on the Marshall Plan, which helped rebuild postWorld War II Europe and hired tens of millions of people. The average Chinese worker now earned nearly five times more than before the reforms began, and millions had bought cell phones, computers, and even cars and apartments.

India, by contrast, seemed stranded in the past. Its airports were decades old and crumbling. There were no new expresswaysthe nations potholed, gridlocked streets were lined with squalid shacks. The poor in Indias cities lived in slums, bathing and washing dishes in filthy canals that also served as toilets. India had grudgingly begun allowing foreign investment in 1991, thirteen years after China opened its economy, and then followed up with on-again, off-again economic reforms. True, the average Indian was better off than before economic reforms began, but not by nearly as much as the average Chinese.

Twenty-five years after China launched its reforms, the contrast was vast. Chinese incomes had grown to twice the level of Indian wages. Both were still poor nations, but by 2003, 87 percent of Chinese were above the desperate, dollar-a-day poverty line, as compared with just 69 percent of Indians. they invested the same amount in China every six weeks. Indias economy was lumbering along, while Chinas was flying into the future.

How could this be? India had democracy, a vast English-speaking population, an established court system, and plenty of ties to the West. China had authoritarianism, few English-speakers, and no consistent rule of law. Yet Mr. Vajpayee could see it plainly from his car: China had raced ahead of India, and, for the most part, its people were better off for it.

T HIS IS THE STORY of how India and China are changing their destinies and, with that, changing the worlds. As they move from the ranks of developing-world countries toward superpower status, Indias slow-but-steady approach contrasts with Chinas rocketlike rise. In plenty of other ways, India and China are as opposite as Gandhi and Mao. India is democratic, and China is authoritarian. Capitalist India is often antibusiness, and communist China is usually probusiness. Chaotic India is a riot of bright colors, a cacophonous nation with thirty different languages. Even Indias nationwide time zone mystifies: it is a half-hour off from those elsewhere in the world, so at noon in New York it is nine-thirty at night in Bombay. China seems more straightforward: the national language is Mandarin Chinese, clocks line up with the rest of the worlds, andno doubt about itthe Communist Party runs the country.

While Chinas strengths are on display to Mr. Vajpayee and the rest of the world, many of Indias are less visible. When China closed its colleges during the Cultural Revolution, India nurtured its universities, educating a generation of doctors, scholars, scientists, and engineers. While China persecuted capitalists, Indian managers gained experience by battling it out in local markets, and its businesses are better run than Chinas today. Indias invisible human infrastructure is the nations mighty resource now that it has reconnected to the global economy.

The two countries have one thing in common: their transformationsand the way they will transform the globeare as stunning as any the world has seen since America itself emerged onto the world economic stage. The impact can be seen from the falling prices on Wal-Marts shelves, the rising prices at local gas stations, the shrinking size of many American paychecks, even in the air we breathe. It can be heard in the voices on the end of tech-support phone calls. It is noticeable from the way freighters float low in the waters of the South China Sea because they are so heavily loaded with goods flowing out of new Chinese factories. Most plainly, it can be seen in the raw numbers: India and China have become the fastest-growing big economies on the planet. They look set to stay that way for decades and are on their way to becoming economic giants within a generation.

Suddenly, both India and China have become a source of employees, co-workers, customers, and competitors. In boardrooms from New York to Tokyo and from London to Frankfurt, executives have now contracted India fever in the same way they caught China fever a decade ago. Business leaders who dont know the difference between a curry and a stir-fry have been checking into freshly built Asian five-star hotels, glamorous but for the fact that the visitors must brush their teeth with bottled water to avoid getting sick. They have been shuttling halfway around the world because the two up-and-coming nations are growing so rapidly that they make the economies in the United States, Europe, and Japan seem as if they are standing still. Suddenly, doing business in India and China has become the only hope for Western companies determined to quickly add new customersthe only way for Western executives to make stockholders happy.