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Excerpt: 'Billions of Entrepreneurs'

by Tarun Khanna
Jun 16, 2008

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Tarun Khanna

Americans' ideas about India are even more striking given that the United States had long-standing commercial and cultural links with India. By some estimates, between 1795 and 1805 the United States traded more with India than with all continental European nations put together. Despite these links, Americans interpreted the art and curios they bought from India as the work of heathens, so that India was ensconced in the American mind as the oncegreat civilization in terminal decline.

I chose to write a comparative book because I believe that we can better understand China's choices when juxtaposed against India's, and vice versa. There are historical similarities—they each underwent their first significant unifications in approximately 200 B.C.E., under the Mauryas in India and the Han dynasty in China. The British humiliated India for two centuries, and China endured its own century of humiliation. Both countries were scarred deeply. Both countries underwent radical political shifts at roughly the same time: China became a modern state in 1949, when Mao Zedong took power. This was just two years after Jawaharlal Nehru assumed leadership of independent India in 1947. Mao and Nehru were the architects of visionary plans for their respective new countries; two enormously influential leaders whose very different choices had very different consequences, despite many similarities in size, proximity, and antiquity. These surface similarities, yet starkly different paths, make the past five decades represent a kind of petri dish for social scientists, where we can learn something profound about how societies develop.

Mine is an attempt to illuminate contemporary vagueness about what's happening in China and India. I argue that despite the flux and largely positive economic changes in each of the two countries in the last decades, the "iron frames" that gird these changes are radically different. China features a top-down model of development, with an omniscient Communist Party articulating a central direction and circumscribing all but marginal dissent. Local Party officials have increasing economic autonomy, which they have used to amazing effect, but only within a context of more severely constrained political centralization. The Party political line simply must be toed. India exhibits greater heterogeneity and pluralism, manifesting itself to the outsider as chaos, but also enabling productive ferment on the ground. An inefficient market, but a market nonetheless, results from competition at multiple levels in providing services, competing for talent, political horse-trading, as the media jostles for attention in undisciplined fashion. While China courts foreign capital and has only recently and reluctantly acknowledged the private sector, its internal opacity and lack of private property rights emasculate its internal markets in comparison to the parts of India where competition is allowed to run amuck. On the other hand, its unconstrained fiat allows it to override coalitions that might block material progress in a way that India just cannot. The pros and cons of the two countries' approaches differ.

In this book, I uncover China and India—Hangzhou and Hyderabad, Qingdao and Bangalore, Dalian and Chennai—to show the radical underlying differences between China and India. Westerners might be able to reimagine these two vibrant contemporaries and interpret their current events in the context of their respective rich, ancient, and varied histories. I hope to answer, among other things, many questions that naturally occur to a curious modern observer of these countries, such as these:

Why can China build cities overnight while Indians have trouble building roads?

Why does China prohibit free elections while Indians, in free and fair elections, vote in officials with criminal records?

Why do the Chinese like their brethren who settle overseas while Indians apparently do not?

Why are many Chinese so unhealthy, but healthier than Indians?

Why are there so few world-class indigenous private companies from mainland China despite the creation of a juggernaut of an economy?

Why has China out-muscled India in their common backyard?

Why was China "Indianized" in the past while India shunned China?

Why do the Chinese welcome Indians to China but Indians do not reciprocate?

The different paths taken by the two countries have another profound implication, only now becoming manifest: China and India together could have a stronger impact on each other and the world than either country could alone. What China is good at, India is not, and vice versa. The countries are inverted mirror images of each other. This complementarity creates grounds for an economic cooperation that has already begun, as native entrepreneurs tap into each other's backyards in a reprise of their long-term historical cooperation rather than their recent four decades of hostility. This mutualism is there for the world to benefit from, not only for native Chinese and Indians.

Given India's official ascendance to the nuclear club and China's massive deployment of resources to build a navy, security analysts and political scientists rightly emphasize the wariness with which the Himalayan giants glance at each other. But these analysts and academics wrongly ignore the potential of mutually beneficial economic ties, especially when each country is more squarely focused on feeding its poor than on building military muscle. Certainly, the pundits' favorite issue, of who "wins," China or India, misses the point. I say this despite having co-authored "Can India Overtake China?" some years ago, an article that triggered this present intellectual odyssey. I have come to realize that the real issue is that the differences between the two have created a jointness in new riches to be enjoyed by the countries and by those anywhere in the world who care to profit from their advent.

More than a century ago, Rudyard Kipling famously wrote,

Take up the White Man's burden
Send forth the best ye breed
Go bind your sons to exile
To serve your captives' need

There remains controversy about whether Kipling intended this to be racist or altruistic; nonetheless, "the white man's burden" rationalized Britain's right and need to govern the "heathens" of India. Perhaps because India was the jewel in Britain's empire, India fell out of America's orbit. But this image of the hapless Easterner, as well as the milder image of irrelevance that Isaacs reaffirmed, are outdated and counterproductive. Nor is the other extreme, hysteria, warranted or sensible. Journalist Lou Dobbs' program on CNN excoriates outsourcing to China and India as taking away jobs from Americans even though objective data suggest that the effect of outsourcing on Western employment is still tiny. You know that hysteria is in the air when editorial cartoonists get into the act—locally, Harvard Business School students jokingly suggested, in an April Fools issue of the student run daily, The Harbus, that the search for the new Dean of the school be outsourced to India.

From Billions Of Entrepreneurs: How China and India are Reshaping Their Futures and Yours (Harvard Business School Press 2008) by Tarun Khanna.

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