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  • Ian Ritchie : Scottish Business Insider

Learning from two contrasting big growth economies

THIS IS A TALE of two countries: China and India. Both are nations of well over one billion people each and both have been growing strongly at over eight per cent per year for the last 10 years or so and each has been creating huge new business opportunities and a substantial new middle class.

The transformation of what was a rural economy where people lived mostly off the land to an urban economy where the people provide the goods and services to service the global economy has been remarkable. It’s as if 200 years of their industrial revolution is being compressed into a few decades.

I’ve had the opportunity to look at both of those countries this year. In China I visited Chendu, Chongking, Shanghai, Xian and Beijing, amongst other cities. In India I went to Delhi, Bangalore and Mumbai.

I discovered that, although the growth rates may be similar, the two economies were developing in dramatically different ways.

In China, the growth is coming from the development of manufacturing, where huge quantities of effective people can very quickly be hired for production jobs. Whereas in India, the growth is coming from the fact that many educated Indians have excellent English skills, having been taught in English from primary school onwards. As a result, the main developments are in the service industries, where call centres and back office processing prevail.

And, of course, India is a democracy and China isn’t. As a result, the Chinese don’t really have to worry about planning regulations or even whether the people agree with the actions being taken — they just do it anyway. The Three Gorges Dam, completed earlier this year, is currently raising the Yangtse by 185m, drowning 1300 archaeological sites and displacing 1.3 million people. I saw several completely new cities which have been built ‘up the hill’ from the former dwellings which are now being flooded.

Everywhere I went in China I saw massive infrastructure projects, with new bridges and roads being built, and everybody I saw was relatively prosperous and well dressed. The contrast with India could not be more startling. The infrastructure in India is completely failing, the roads are in terrible condition and are often taken over by bullock carts, even wandering ‘sacred’ cows. It takes hours and hours to get anywhere.

The modem economy is not embedded across Indian society, but confined to specific, separate business ‘campuses’ with finely kept lawns, fountains and everything that the workers could require, like in-house branches of Pizza Hut.

Outside of these islands of western-style economy is an ocean of third-world poverty. There are more people living in shanty town accommodation without access to running water, sewerage, or electricity in Mumbai than there are total inhabitants in the whole of Scotland — over six million of them.

It does make you wonder about the basis of democracy. There is no doubt that the average Chinese citizen is getting much more prosperous without democracy and the average Indian is stuck largely in poverty with a democratic system in place. It would be difficult to argue for democratic development in China under the circumstances.

And what are the lessons for Scotland?

Routine processing work will continue to transfer to India and manufacturing will continue to switch to China. In comparison, our tiny country will have to become a much more educated, more creative and more innovative place to survive in the new global economy.

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