Their rise on the world stage signals return to an era of more equitable wealth distribution
Comment
Nish Kotecha
Last week, at the annual conference of the Confederation of British Industry (CBI) held in London, the delegates, comprising UK business leaders and captains of industry, were asked to vote on the question: Is India a threat or an opportunity to the UK?
Over 70% felt India was an opportunity. Yet, when asked the same about China, over 60% felt it was a threat. China is clearly having a greater impact on the mindsets of UK businesses through its cost-competitive manufacturing as compared to India, which predominately exports services today.
To the question, which country is likely to have a greater influence in the global economy in 10 years’ time? Over 80% voted for China. However, most accepted that while China may win the 10-year race given its current lead in infrastructure, India will ultimately win the marathon through its attractive demographics and growing infrastructure spend.
The true question is not which one will succeed, but whether the West will allow the emerging tigers to continue to grow and achieve their place in the top three global economic powerhouses sitting either side of the US.
Steven Green, CEO, HSBC, remarked that “the balance of influence is tipping; and the world will move from an era of economic domination by a small group of wealthy nations, mostly in the West, to one where power is more evenly shared, as the East takes its place on the world stage.” India should play a central role in this changing landscape, provided the west practices what it preaches on the principals of open markets, free trade and globalisation.
“In almost every developed country, with the notable exception of the genuinely free-trading UK, orthodoxy is being replaced with lip service,” said Richard Lambert, president, CBI, and chairman of Cadbury Schweppes.
When the delegates at conference were asked if they felt UK companies were ready for the competitive challenge from Chinese and Indian companies, over 80% felt they were not.
The social and political opposition to free markets is strong. The fear tends to be driven at the local level around the risk to their current standards of living; missing the point that globalisation would increase the size of the overall pot available. Ben Bernanke, chairman of the US Federal Reserve, recently noted the need to ensure that benefits of integration (globalisation) were sufficiently widely shared.
The number of industries and jobs which cannot be easily moved elsewhere are diminishing at a faster pace. At current growth rates, you have to believe that the labour surpluses in the emerging countries will be used up and competition for workers will drive costs up. The question that faces the West is, how long will this take?
Chinese wages are estimated to have doubled in the 1990s and, at that rate, would approach western levels in about 30 years. India is already experiencing significant wage price inflation, while in the West, many kinds of industries and wage earners will continue to decline. To buck this trend, those in the West must seek to out-innovate and outperform the emerging tigers and in so doing, upgrade the skills of their workforce. This challenge must not be underestimated. The West has got used to its economic supremacy.
The rise of India and China today, put simply, is a return towards a more equitable distribution of wealth. It is justifiable that 40% of the world’s people have a similar share of the world’s income. For companies in the UK and other developed countries to succeed in the rebalancing of economic power to the emerging stars, they need to focus on building relationships and trust with their counterparts and combine talents; in the end this will be the secret of their success.
“Consolidation and globalisation must continue to be the dominant industry trends of the future. Against a good economic backdrop, the (steel) industry now has a real opportunity to demonstrate that it can build a healthy and sustainable model, with considerable benefits for all stakeholders. Clearly, there are challenges ahead, but we have a much larger chance today of achieving this than was the situation ten years ago,” LN Mittal, CEO of ArcelorMittal, said at the conference.
The writer is founder of Sphere Partners and is the president of TiE, UK and member of the TiE Board of Trustees.
Tigers roaring
Between India and China, opinion is divided on which country will succeed more
It is more pertinent to ask whether the West will allow these emerging tigers to continue to grow
Much as they may want not to, the success of firms in the West will hinge on their relationship with Asian counterparts
