79 of 80 people found the following review helpful:
4.0 out of 5 stars
4.5 stars.... The economic threats from China and India... and what to do about it, July 20, 2007
This review is from: The Elephant and the Dragon: The Rise of India and China and What It Means for All of Us (Hardcover)
I have read a number of books in the last 6-9 months that deal specifically with the economic rise by China and correlating threat for the US ("China Shakes the World" comes to mind). "The World Is Flat" also is in the same vein.
In "The Elephant and the Dragon" (245 pages), Robyn Meredith, a Hong Kong-based journalist for Forbes magazine, does an excellent job setting the table of what is going on these days in China (some of it was a repeat for me) and also in India, which I am less familiar with, and hence that peaked my interest. Meredith makes the point that "It is easy to see why India has not yet attracted many new factories. India's developing-world infrastructure prevents companies from exporting their goods cheaply and quickly." The author also demonstrates how "Creating vast numbers of jobs for India's poor is critical, literally a matter of life and death". The environmental problems of China (but also India) are well documented. Observes the author: "China already has environmental regulations on its books. But it is less zealous about protecting its air and water than about protecting economic growth."
The real pay-off for this book, however, comes in the lsat chapter, "A Catalyst for Competitiveness", in which the author addresses the challenges for the US head-on, and then makes a number of suggestions. The author demonstrates in a clear fashion how disastrous it would be for China to reevaluate its currency by 20-40 percent (or for the US to slap an import duty on that magnitude on Chinese imports), and that even if it happened, it would have little impact on the US job market, and furthermore how Americans are directly benefitting from the cheaper Chinese currency. Meredith dryly observes that of course we wouldn't be dealing with this, if consumers simply stopped shopping at Walmart (which, incidentally, as a single company imports more from China than all of Canada COMBINED.) Here is the author's bottom line: "[W]hat the United States must do is clear: it must strengthen its educational and economic foundations and foster the innovation that will keep the United Staes ahead in the technology that underpins so many parts of the nation's culture and the global economy". The author then expands on that in the book's final pages. Must-read!
I can only hope our policy makers in Washington and elsewhere are reading this book, and start acting in the best economic interest of our country, rather than acting out of short term elections-driven positioning! Because of the impending impact all of this will have on today's youth, this book should be required reading for all high school seniors and for college kids. Highly recommended!
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56 of 60 people found the following review helpful:
5.0 out of 5 stars
Great Job of Communicating the Problem, July 22, 2007
This review is from: The Elephant and the Dragon: The Rise of India and China and What It Means for All of Us (Hardcover)
"The Elephant and the Dragon" provides excellent information that allows readers to understand the impact of India and China's recent economic transformations. The bad news, however, is that its recommendations are the same old silly nostrums that have little, if any value. However, given the importance of simply helping Americans become more informed on the topic, the fact that the book exploded at least two popular myths, and the difficulty of correcting the problems India and China pose for the U.S., I still rate the book with 5 stars.
China's economic reforms began in 1978 when 18 rural families met in secret and decided to break up their collective farm (contradicting the communist system) and almost quadrupled their output. (Production had originally fallen 40% when the farms were collectivized.) The government then released most food price controls, and 80% of farmers then repaired and/or improved their homes. Deng (Mao's successor) then toured Singapore, was greatly impressed, and sent hundreds of others. "Special economic zones" suspended anti-business laws, taxes were lowered, and rules streamlined for factories making goods for export. In addition, local officials' promotions were pegged to the number of jobs created - thus, they were quick to build required roads and utilities. In addition, government officials insisted foreign companies use, and teach local workers their latest techniques.
A key dimension of our trade deficit with Asia (especially China) is the ESCALATING rate at which it is increasing. For example, in 2000, 30% of the world's toys came from China; only 5 years later it was 75%. It exported $1.3 billion in auto parts in 2001, and nearly $9 billion 4 years later. In 1996, $20 billion of computers and other technical products were exported from China, vs. $180 billion in 2004 - leading all other nations. China now exports more/day (over one 40 ft. container/second) than it sold abroad during all of 1978 - the year it began opening up its economy.
There's more. A McKinsey '05 survey of U.S. companies in China found they bought just 30% of what they could buy in China, and planned to increase that to 50% by '08. Finally, in '05, only 14% of Chinese companies designed their export products in China; by '08 half expect to do so. (Only about 10-20% of a product's U.S. retail value stays in China - the bulk goes to the designer - eg. Intels and Microsofts, and brand-name retailers; when these areas become subject to Chinese competition the sales of U.S. McMansions, BMWs, etc. will plummet.)
Perhaps U.S. efforts will convince China to revalue its currency by about 40%, making U.S. products more attractive. Not likely - the author reports that Chinese leaders estimate an 8% annual GDP growth rate is required to absorb the frustrations of its increasingly discontented interior population (earn only one-fourth that of their coastal brethren) - as well as the slightly more than 50% still employed in state- or collective-owned enterprises. In addition, only 25% of Chinese have health insurance, 14% have pensions, parents must pay an increasing proportion (now 25%) of education costs, enormous pollution and safety costs must be funded, roads and utilities require massive expansion, and Chinese banks are estimated to have $911 billion in bad loans (6X the American S&L crisis). Chinese officials are also well aware that cheaper labor is available in other areas of S.E. Asia, India, Africa, and South America - they cannot afford to push their luck too far. Finally, the U.S. should be careful what it wishes for - revaluing China's currency would put ENORMOUS pressure on those holding large amounts of U.S. dollars, risking a run of inflation for us.
India began allowing foreign investment 13 years after China, and in a begrudging and erratic manner after a new government was confronted with the reality of near bankruptcy. It devalued the currency 20%, lifted restrictions on imports, raised interest rates to 11% to encourage deposits, and eliminated export subsidies. State-owned banking, airline, and oil entities were opened to private investors, and important antimonopoly limits were eliminated for most companies while red tape and corruption and taxes were reduced. In '96, a corruption scandal brought a return of the left-leaning leaders. Sending government leaders to China helped break the resulting impasse.
Offshoring computer programming to India began as a result of Y2K needs. Today, newspaper ads bring 250 applicants/call-center job. Manufacturing, however, suffers from India's lack of good roads, stable electricity sources, and infrequent sailings.
The two popular myths exploded by the book? 1)Democracy is key to success - China's progress (9.6% GDP growth/year) has greatly outpaced that of India's (5.7%/year, over a shorter period), and at least one Indian leader attributes that to China's ability to move more quickly through its authoritarian leadership. 2)China's small steps to economic improvement (eg. try improvements out on a limited basis before going nationwide) worked far better than the "total immersion" recommended by U.S. advisors and attempted by Russia.
Finally, "The Elephant and the Dragon" attempts to offer suggestions for Americans - improve our education system, and invest more in basic research. These suggestions, however, are superficial (at best) because the real problem is that Asians are smart (IQ tests generally show about a ten-point lead vs. Caucasions), more are college-educated than in the U.S., and WILLING TO WORK FOR ONE-TENTH THAT OF AMERICANS! Improving our education (been tried for over three decades, with little or nothing to show for it except vastly increased spending) will do nothing to address this fundamental overall problem. (There still remains another problem regarding the need for improved technical leadership - addressed in the final paragraph.) Focusing on services delivered on site (incapable of outsourcing) is another recommendation offered by some - however, this forgets that this opportunity has already been largely taken over by illegal Mexican immigrants.
I don't have a solid solution either. However, Meredith's material allows some preditions. Since at best only half the savings of Chinese manufacturing now goes to American consumers, and American firms plan to considerably expand their outsourcing of manufacturing and service jobs, it seems likely that the economic spread between American "winners" and "losers" will first increase and then hold steady; at the same time the stock market will continue to rise (18,000?). Eventually, however, fewer Americans will be able to afford current prices for Chinese goods while the Chinese move into design and branding (eg. Korea's Samsung, LG Group, Kia, and Hyundai) - then prices, profits, stock levels, and executive pay will all slide.
"American content" laws enacted under President Reagan to save the American auto industry offer a ray of hope for American workers. They haven't "saved" G.M., Ford, and Chrysler, but they have led to considerable foreign investment in the U.S. and thousands of high-paying jobs from Toyota, Honda, Nissan, Mercedes, BMW, etc.
Two final points. 1)China and India's thirst for raw materials and energy make both more willing to deal with countries verboten to the U.S. - Iran, Venezuela, Sudan, etc. Thus, the U.S. is going to find itself with less and less international influence in the coming years. 2)Top caliber Indians and Chinese are already finding the U.S. less attractive as opportunities quickly grow in their own nations. Many of their expatriates are choosing to return. Thus, the U.S. is going to increasingly need to rely on its own talent, and we sorely need to improve our education for this segment.
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23 of 24 people found the following review helpful:
3.0 out of 5 stars
Very Interesting View From 30,000 Feet, June 3, 2008
I very much enjoyed the opening chapters as Meredith spewed out statistics and opinions and history of how China and India have come to be in their current economic situations. This was very well written and extremely easy to read as well as quite engaging. Reading these two chapters is worth the trip to the library for this book as they provide a fascinating expose of why socialistic ideals, while bred from trying to do well, provide the opposite in practice. Capitalism and democracy when put in place with the least amount of lawmaker interference will bring out the best in people and the land on which they are living.
However, in the chapters explaining the outsourcing of service jobs to India and factory jobs to China, I began to look at the footnotes. Many footnotes reference the same work over and over and over again. This isn't necessarily bad, but the viewpoint from the author is somewhat simplified and with only a limited number of sources, there isn't the in depth look at the statistics or the line of reasoning. For instance, on page 85, the author mentions that economists are locked in arguments about how vast the changes will be due to "offshoring". However, Meredith only quotes one source and therefore one side of the argument and the source is one that has been quoted previously in the same debate. This is common throughout the book.
The chapter on "disassembly lines" was very good as a beginning look at Supply Chain economics. But again, it didn't go far enough with comparisons on how long things take to manufacture from start to finish as compared to before China and after China. Maybe I'm too tough on comparisons, but in telling this type of information, I like to see more of both sides of the equation.
The last chapter is interesting and brings up some discussion points, but some of it is pretty far out there. Going on and on about how China affects our housing pricing due to their holding of dollars is quite a stretch. After all, they were still holding dollars as interest rates went up and then down. There are many external factors that are closer to the United States and have a more immediate impact. And again, she is rambling in opinion without any reference points. Complaining that China is over-polluting and should be using Ethanol while pointing out that China has a water/irrigation problem and is gobbling up farmland for manufacturing just doesn't make any sense - going to Ethanol will only make the food supply more scarce.
I could go on chapter by chapter, but you get my point. There isn't enough of the thoughtful interplay that I would expect in this type of book. Where are both sides of the story? Where is the depth? In Chapter Three about China financing its growth of infrastructure, Meredith begins to scratch the surface about the banking problems that might arise from the demands of the Chinese government to hand out loans to whomever they (the government) see fit. This would have been a wonderful place to explore the differences of how various governments finance infrastructure and to do a compare and contrast with China, India and maybe the U.S. or Great Britain.
I guess I'm looking for the next step. This book is a very good start of this topic, but it doesn't go far enough for me. I wanted more of the details. Maybe that isn't what the author was attempting. I did notice that much of the reference material was on-line website information or magazine articles. Some were direct interviews and that always leaves me wondering. Meredith is a good magazine article writer and wrote this book in a similar manner. The subject material is such a current interest; I hope that someone writes something with more substance. If it's out there, I'd appreciate a comment with some other readings that have more depth.
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