The Elephant and the Dragon by Meredith

Ref: Robyn Meredith (2008). The Elephant and the Dragon: the rise of India and China. New York: W.W. Norton.

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Summary­

  • The Economic Rise of India and China in the Modern World.

  • In 1600, India and China combined accounted for more than half the globe's economic output, sending everything from silk, porcelain, tea, furniture, spices, and wallpaper- a Chinese invention- overland via the Silk Road or via ship on the Spice Route. Until the late 19th century, China and India remained the world’s two largest economies, according to Angus Maddison, the distinguished economic historian. But protectionism and world wars intervened, then India and China shut themselves off from the world, and by 2003 India and China together accounted for only 20% of the global economy, despite their vast populations.

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China

  • The Chinese government still places the perceived needs of the state well ahead of individual liberties. China tries to preserve stability by tamping down political dissent, censoring the Internet, newspapers, magazines, and tv. Even 18 years after Tiananmen, the government does not allow discussion of the Tiananmen Square massacre in mainland China.

  • Chinese call it the 1:2:4 problem: China’s soon to be-retirees tend to have one working age person supporting two parents and four grandparents.

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India

  • What China accomplishes by fiat, India must accomplish partly through persuasion.

  • India has been haunted by two lingering ghosts of the postcolonial period- Mahatma Gandhi's anti-industrialization tenets and Jawaharlal Nehru’s socialism, which together caused India to withdraw from the world economy after winning its freedom from Britain in 1947.

  • The single Mumbai slum, Dharavi, has about 600,000 residents.

  • On behalf of Foreign companies, India's answer phone calls, write computer code, and increasingly take on far more sophisticated tasks- from accounting to investment banking.

  • In 2005, about 36% of the Indian population still lived on less than one dollar a day and 81% on less than $2 a day, according to the Asian development Bank.

  • India’s biggest potential military problem is Pakistan, the majority Muslim territory cleaved from India and created by the British when India won its independence in 1947.

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USA

  • Viewed from abroad, America shows breathtaking inconsistencies:

    • Consuming far more oil than any other nation while complaining about China’s and India’s increasing consumption.

    • Pushing free trade while grumbling about job losses.

    • Decrying human rights abuses in China even as it defies the UN by holding terror suspects without trial for years in its offshore prison in Guantanamo Bay.

    • Complaining about China’s arms buildup, yet has by far the world’s most powerful Army, with greater military spending than almost all other nations combined.

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Energy

  • Coal: Half of India’s and 2/3 of China’s energy comes from Coal.

  • Oil

    • Both India and China have been making deals with pariah states- from Sudan to Iran to Myanmar- to secure supplies of oil and other resources they desperately need to ensure growth. As a result, the foreign policies of India and China are increasingly dictated by their energy needs.

    • China’s state-controlled oil companies spent more than $15B between 2000 and 2005 to buy stakes in 100 foreign oil companies and exploration rights in foreign oil fields.

    • 60% of Sudan’s oil is exported to China with the proceeds helping pay for Sudanese terror. Not only has China, with Russia, blocked any UN action to stop a genocide that has killed 300K Sudanese; China has built arms factories in Sudan and sold the war-torn nation guns, RPGs, tanks, helicopters, and ammo.

    • Angola was China’s largest oil supplier during the first half of 2006, followed by Saudi Arabia, Iran, and Russia.

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Economics

  • Trade

    • Economists calculate that international trade adds about $1T a year in benefits to the US economy.

  • Jobs

    • China’s modernization drive has combined its developing world, low-cost labor with nearly state of the art technology and an export-friendly infrastructure. Meanwhile, China’s huge population has provided companies with a giant pool of low wage workers in the same place where they have found a potentially large set of new customers, enabling mass-market factories to produce both for the export market and for the growing Chinese market.

    • ~300K jobs each year will move overseas (from the USA) for the next 30 years (9M jobs in all).

    • Of the world's 500 largest companies, 400 send middle class work to India.

    • India’s entire nation’s IT and call-center market has mushroomed, accounting for 5.4% of the country’s GDP and employing 1.6M Indians.

  • Production

    • China excels at building Western inventions cheaper than Westerner’s can build them at home. China has shifted from a hub of invention to one of rote production.

    • Developing countries without high-technology capabilities have made themselves the origins of supply chains- doing the first, simplest few steps, such as weaving cloth for blouses or making a car’s wiring harness- before the goods move on to the next step in the production process.

    • The disassembly line has let companies become extremely efficient, by building each piece of a finished good in the country where it is cheapest, then moving the part on to the next factory in line.

  • Business

    • Foreign companies and their Chinese joint-venture partners produce 88% of China’s high-tech exports in 2005. In practice, “Made in China” often really means “Made by America (or Europe) in China.”

  • GDP

    • More than half of China’s incredible 10% GDP growth comes from government and foreign direct investment.

    • China’s extremely high savings rate gave its government an advantage. It allowed the government to fund expensive infrastructure projects that most developing nations cannot afford.

    • Over the past quarter century, China’s GDP has grown an average of 9.6% a year. By contrast, over the same 25 years, India’s GDP has grown by 5.7% and the far larger and more mature US economy by 3%.

  • Because American’s buy more from China than China buys from the US, the Chinese government has the world's largest dollar reserves. It buys those dollars, largely in the form of US Treasury bond, to keep its exchange rate steady against the dollar. At the end of 2006, China held $1.1T in foreign currency reserves, more than any other nation. China’s total dollar reserves have more than quadrupled since 2002. Because bond prices move in the opposite direction of interest rates, when Chinese bond purchases drive up demand- and thus prices- for the bonds, they also put pressure on interest rates to stay low.

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Education

  • Federal, State, and Local governments- and the individuals who elect them- will be catastrophically irresponsible unless they insist on dramatically improved education, starting with elementary school.

  • China was much better educated by the time it began reforms. In 1979, China’s literacy rate was nearly 70% and rising. By 1982, China’s literacy rate for girls aged 15-19 was 85%, and for boys aged 15-19 it was 96%. By contrast, half of Indian was illiterate until the 1990’s, and 35% of Indians remain illiterate today.

  • 35% of Indians are illiterate.

  • Just 15% of India’s students reach high school, and only 7% graduate.

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Environment

  • About 200 Chinese cities fail to meet WHO standards for airborne particulates that cause respiratory diseases. All but three of the world's 20 most polluted cities are in India or China (World Bank).

  • China has 8% of the world's freshwater but 22% of the people.

  • Nearly a third of China’s rivers are so polluted that they aren’t even fit for agricultural or industrial use.

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Misc Quotes

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Chronology

  • 2006: The Bush Administration shares civilian nuclear fuel and technology with India.-Elephant & Dragon by Meredith.

  • 4 Jun, 1989: Tiananmen Square Incident; thousands are killed by Chinese soldiers after weeks of pro-democracy protests led by students in Beijing’s Tiananmen Square spread across the country.-Elephant & Dragon by Meredith.

  • 1979: The One Child Policy is implemented in China.-Elephant & Dragon by Meredith.

  • 1978: Chinese President Deng visits Singapore, finding a modern, technologically advanced nation suitable as a model for China’s development. On his return to China, he formed “special economic zones,” limited areas where China suspended its usual anti-business laws in favor of low taxes and streamlined business rules for goods that would be sold overseas (Capitalism). Foreign companies faced huge hurdles doing business in most of China but were encouraged to build factories in the zones and to hire thousands of Chinese workers to produce goods for the outside world. Early special economic zones were set up in Fujian Province, across the straight from Taiwan, and un Guangdong province (low wage Chinese workers), near Hong Kong.-Elephant & Dragon by Meredith.

  • 1976: Death of Mao Zedong; Deng assumes the presidency and begins reforms in the countryside, distributing land from the collectives to households with farmers being paid on the basis of how much they produced and permitted to choose which crops to grow. Later, farmers were allowed to keep whatever extra crops they could grow after meeting their grain quota, and eventually farmers paid taxes rather than turning over their quota to the collective.-Elephant & Dragon by Meredith.

  • 1966: The Cultural Revolution in Mao’s China, a bloody purge of potential political rivals and those labeled intellectuals or “capitalist roaders.” Millions die, books are burned, Chinese art is destroyed, temples and monasteries smashed, and contact with much of the outside world severed. The nation’s universities closed their doors, a move that would cripple China for decades.-Elephant & Dragon by Meredith.

  • 1959-1962: 30-40M people starve to death from famine under Mao’s Great Leap Forward.-Elephant & Dragon by Meredith.

  • 1958: Mao’s Great Leap Forward combines rural collectives into communes of about 10K people in which party leaders instructed farmers as to which crops to plant, promising that the commune would provide workers with food, medical care, and other necessities.-Elephant & Dragon by Meredith.

  • 1955: Collectivization of Farms by Mao in China; farmers were no longer allowed to own land or privately to buy and sell what they produced unless they had grown it on small, private plots.-Elephant & Dragon by Meredith.

  • 1664: The Dutch East India Company (VOC) imports 45,000 pieces of blue and white porcelain from China. The dishes were originally carried as ballast for ships bringing tea to Europe, but proved so popular that they came to be known as “China.”-Elephant & Dragon by Meredith.

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