The Asian Century

Last week, Dr Surinder Pruthi, eminent economist, educationist, management guru, mentor, author and institution builder, spoke on ‘The Asian Century’.

Dr Pruthi did his Ph.D from London School of Economics and Business Administration from Harvard Business School. He was one of the founder professors of IIM Ahmedabad and has been a visiting faculty to Harvard Business School, international senior advisor to United Nations, consultant to World Bank, Central and State Governments of India, and an economic and management advisor to a Tata corporate. He has authored several books and technical papers, was a Ph.D. guide and nominated to the Reserve Bank of India Chair at the Institute of Social and Economic Change. Dr Pruthi has served on the Boards of Directors of several private and public corporations and Banks, besides climaxing his career as a Vice-Chancellor of Mumbai University. Dr Pruthi has been the recipient of several prestigious awards, fellowships and distinctions.

Excerpts of Dr Surinder P S Pruthi’s speech at Rotary Club of Bombay on 19th June ‘07

LET me start off by saying that the pendulum of global power has shifted throughout history. The most reliable work that I find on the conditions of the middle ages is Marco Polo’s Book of Travels. Marco Polo was an Italian who wrote a book on Description of the World in 1298 from a prison cell, in Genova, Italy. While describing the East he said: it was draping with gold; had flourishing trade and transport, abundance of food and fruits and vibrant people fond of bathing, boating and banqueting. These were the characteristic features of the times. Marco Polo’s Europe of the time was merely a primitive promontory on the edge of Asia. It had inept and corrupt leaders, misguided crusaders pedalling Christian fundamentalism, bland food, basic clothing, poor hygiene, so much so that the black rats created the most dreadful beubonic plague of the mid-ages known as the Black Death. This, among other things, might have led Gandhi a politiciansaint who transcended the contradictions of both, when asked what did he think of the European Civilisation quipped: “I think it would be a good idea”.

By 15th Century the writings of Marco Polo were freely available in European countries. Triggered by imperialistic ambition and with a view to finding riches and prosperity elsewhere, European emperors & kings induced explorers & adventures to set sail for new lands.

The first notable name that comes to mind is that of Christopher Columbus (1451-1560) who blundered into America thinking it was India. Then came Vasco Da Gama in 1498, who bypassed Middle East and reached Calicut, India. Then followed the Dutch, the English and several centuries of loot and scoot during which we lost our virginity, our valuables and our voice.

Future historians would wonder as to how China and India could remain condemned to eternal poverty for so long. Why did the Asian civilizational values and cultural confidence take so long to assert itself to bounce back to the centrestage of the globe? I shall tackle these issues as I go along.

Twentieth Century

18th Century was dominated by Spain, 19th by Britain and 20th clearly belonged to America. The 20th Century was half confrontation & half cooperation. The first half of the 20th century was characterised by the First World War, the horrific inflation of the 20s, the mind boggling protectionism of the late 20s, daunting depression of the thirties which, in turn, gave rise to dictatorship in country after country in Europe, culminating in the Second World War and the holocaust at Hiroshima that destroyed the global edifice to pieces.

The second half of the 20th century was that of cooperation, thanks to the benign leadership provided by America: Unfortunately, the perceived sense of grief against America is unjustified and untenable, more a reaction to its motive and manner rather than the substantive contribution made by America in rebuilding the world after the second world war.

The second half of 20th century started with the Marshal plan and the Truman Doctrine, World Bank, IMF, IFC, GATT leading upto WTO which brings us to the new world. The world which was being so assiduously constructed in the 50s and the 60s all but crumbled in the 70s. Those of us who are old enough would remember that 70s began with the most unprecedented crop failure in Russia which, in turn, led to a speculative rush on commodities which resulted in double digit inflation.

By an ironical coincidence, early 70’s also witnessed the oil crisis when prices soared. This resulted in two devaluations of the invincible dollar in the early 70’s and the subsequent period of carefree commercial lending nearly rocked the whole system.

What did it do? It destroyed the three-legged stool on which the post second world war edifice had been built, namely, the abandonment of the official price of gold, fixed exchange rates and elimination of currency convertibility. Slowly but surely, this led to the demise of the old world which was characterised by colonies, bipolar world, cold war, iron curtain, Warsaw Pact, Cancun and so on. Fascism died in the 40s and Communism came apart in the 90s.

Khruschev was banging the UN table with his shoe anticipating the demise of capitalist America, not realizing that he would not live long enough to see Communism collapse and his son become a US citizen. That is how the second half of the 20th century ended.

New World

Now we are living in a new world altogether with the onset of the 21st century. The new world that we now live in has several new features. For example, the old geographical framework is obliterated. We do not live in 190 odd countries but in ten clusters or groupings: two Americas, two Europes, sub-Sahara Africa, OPEC, SAARC, ASEAN, Australasia, China and Japan. Alvin Toffler in his book called ‘Future Shock’, says that the documented history of mankind is available for fifty thousand years and if one were to divide it by 62 which is the average age span, the history is available for 800 lifetimes.

It gives a horrifying sense of disbelief to know that out of 800 lifetimes, for 650 lifetimes man has lived in caves. It is only in the last 6 lifetimes that the printed word has become a reality. It is only in the last four lifetimes that we have been able to measure time precisely. It is only in the last two lifetimes that anyone anywhere has seen an electric motor.

It is only in this lifetime that almost all the gorgeous and grand things have happened to us. Tom Friedman says that ‘The world is flat.’ Paraphrased briefly it means that more and more people today have more and more tools to connect, to collaborate and to compete. It is important to understand this backdrop of global realities in order to grasp the contention that the 21st century belongs to Asia.

Some features of the new world:

First feature is that we are all living today in one global system of monetary and trade relations on the success of which the future depends, whether it is food or famine, trade or technology, energy or ecology, payments, prices or pollution. In this world, mutual help is mandatory and one cannot afford to laugh in one’s sleeves as the modern world is too interdependent.

The second important feature is the avalanche of technology. The fall of The Wall and the rise of Windows, the fall of the typewriter and the rise of “cut and paste” has brought us face to face to computing, cloning digitising, downloading and networking as contemporary imperatives.

On the social front technology advancement has made parents helpless in that what the child today sees, hears or views is beyond parental control. State has become helpless in that what happens in the stock market and when a self proclaimed voice of the clergy issues a Fatwa against Salman Rushdie or Taslima Nasreen, the State can do precious little.

Another feature of the technological revolution is that, brawn has been supplanted by brain. No more the developed world would be able to get the drivers and mine workers from the third world.

Today Chinese and Indian workers are parading around the world occupying hi-tech positions e.g. 38 % of doctors in the US are Indians, 34% of Microsoft employees are Indians and Bill Gates says, next to Chinese, South Indians are the smartest people. Likewise 36% of NASA scientists are Indians. 15 largest car manufacturers of the world depend upon India for importing components. This opportunity which has become possible because of globalization augers well for 21st century to be that of Asia.

TCS, Wipro, Infosys are giving a run for their money to their counterparts elsewhere. Korea and Japan have taught a few lessons in manufacturing automobiles to the west. The story is flattering and an endless one.

Yet another feature of technology penetration is that intellectual property has become a legacy for all, whether it is a car or a camera or a computer. This has brought about a level playing field and hence a nation which has technology and talent will for sure eclipse others like East outperformed Europe for millenniums.

The fourth feature of this new world is globalization. In very simple terms, globalization means the magic of the marketplace, which again in very simple terms means bye bye to ideology as a guide to policy, as order book becomes the most dominant factor. That being so, intelligent pragmatism has to substitute dogma in governing relations between nations and trading partners. For example, look at the fact that while after the second world war, America never recognized China for years, today Chinese goods are ubiquitous in American stores.

France and Germany were enemies for years, today they share a common platform and England is sitting aside. Having shattered the Japanese society by one nasty bomb, America and Japan are great trading friends. Look at America and India for that matter who have had a love hate relationship over the years.

We offended the norms of the nuclear club by not joining the Non- Proliferation Treaty. What is more, we exploded the bomb and yet a year ago, our Prime Minister and the President of America signed a nuclear pact. Such are the intricate implications of modern day open, borderless interdependent world .

Globalisation has changed perceptions. Let me give you some examples: money used to be the lubricant of trade, today money is more freely traded than goods and services. Factors of production were land, labour, capital, enterprise and later on, exchange rates. Today talent is the key factor of production in the world. The concept of sovereignty has changed. The sovereign right to inflate, deflate or devalue has been transferred by a treaty to a Central Bank by European Countries. Could you imagine this 10 or 15 years ago? The key element in bringing about a change in thinking is to bring a change in the way we think i.e. soch.

“Soch ko badlo to sitare badal jayenge, nazar ko badlo to nazare badal jayenge, kyun har roz kashtiyaan badalte ho, dishaon ko badlo to kinare badal jayenge.”

Where does Asia stand in this new world? The scoreboard is something like this: Asia has huge markets. Asia produces 50% of the world’s GDP, measured in purchasing power parity terms. Asia consumes 48% of the world’s oil. Asia holds two-thirds of the currency reserves of the world. Both China and India have three times as many people as Euro. Look at our favorable demographics; 23 to 33 percent of the people in Japan, America and Europe are on the wrong side of 60, fifty percent of one billion people of India are under 25 years of age. Translated into workforce terms, this pool of vibrant, non-stoppable, buoyant, well equipped and optimistic youth offer a great hope.

Asia is excellently positioned today because the G-7 countries which comprises of the US, UK, Canada, France, Italy, Japan have shrinking population, low growth rates and high costs. In contrast the emerging 7, China, India, Brazil, Russia, Indonesia, Mexico, Turkey have huge markets, high growth rates and high spending power. Add to this the four tigers viz Hong Kong, Singapore, Taiwan and South Korea, who have attended the status of the dynamos not dominoes of the new world. So the forces that matter point to the fact that Asia has the century for the grabs providing it plays its card well. Those who play cards know very well that holding winning cards is no guarantee to win the game, unless one plays well the cards one holds.

Divinity does not deliver one more Ganges to a country each year nor do angels transform lands. Statemanship rather than sloganeering helps for just as it is not virtuosity of language but authenticity of feeling that justifies literature, it is the ineluctable consequences of economic policy that determine its efficacy .

While Asia is bursting with enterprise and experiencing galloping growth rates, Europe is exhausted. Europe is tired under the weight of two World wars, cold war and ethnic strife, with 250 million lives lost in Bosnia leave alone grave historical mistakes of crushing of polish identity, elimination of several million jews, alienation of Russian Orthodox church and suppression of Black consciousness,( Apartheid).

Emperical research shows that even accidents cited below have helped Asia’s resurgence. We can call it Karma.

There was the rise of the US as the most philanthropist economic power in human history, creating a new world order that allowed potential rivals to emerge. Pressures of cold war competition forced the US to encourage the economic success of its allies, especially Japan and the four Asian tigers. Then there were accidents with profound consequencies like the Sino-Soviet split, which drove China into the US camp and facilitated Deng Xiaoping’s fateful decision to explain why China needed the “Four Modernizations” and a debate on “Asian values”. And financial accidents played their part like the Plaza Accord of 1985, which caused a rush of Japanese investments into East Asia. Asians who studied in the US provided the yeast for a new cultural confidence in their own societies on return. Finally, there was globalization, which provided a tremendous boost to Asian economies, especially to China’s and India’s.

In paradoxical ways wars too contributed to Asia’s rise. Korean War led to a strategic American decision to encourage the rebuilding of Japan’s economy and society. Japan’s economic success in turn inspired the four Tigers. The Vietnam War was no less painful. But the US decision to hold the line in Indochina allowed Southeast Asian countries to emerge as economic giants.

The Vietnamese decision to invade Cambodia in December 1978 ended genocide of Pol Pot and solidified the Sino-American relationship and gave ASEAN new political resolve. One of the least appreciated contributions to the rise of Asia has been the magic provided by ASEAN in delivering political stability and harmony to Southeast Asia. Despite having greater ethnic, religious, linguistic and cultural diversity than Southeast Europe, the region remained an oasis of peace in the 1990s while the Balkans erupted into a frenzy of ethnic and religious killings. ASEAN saved Southeast Asia, especially during the 1997 Asian financial crisis, which could have led to political havoc in the region. And it is at the heart of the alphabet soup of regional processes that have provided the foundations for even wider regional cooperation.

Cultural confidence is a necessary but not sufficient condition for development.

Centuries of European colonial rule had progressively reduced Asian self confidence. Future generations of Indian citizens will be wondering how 300 million Indians – allowed themselves to be passively ruled by fewer than 100,000 Britons. Those as yet unborn will not understand how deeply the myth of European cultural superiority had been embedded into the Indian psyche. Jawaharlal Nehru, the first Indian Prime Minister, once said the defeat of Russia in 1905 by Japan first triggered the idea of independence for India in his mind. That was a remarkable admission; it implied that intelligent Indians could not conceive of governing themselves before Japan, an Asian power, defeated a European one (Timesasia 09.07.2005).

As Asia rises as an economic powerhouse gaining political and economic maturity, global attention and international funds have both found China and India as attractive investment destinations. Consequently, India and China are sitting over heaps of investible funds today scratching their heads as to how best to use this money. All this would have remained elusive if Asia had not consolidated its position to the present level. Further more it was unachievable if America had not helped. And this is where America should get full credit for its attempt at balancing the world.

What did America do? America restructured the world after Second World War by (i) the strength of the American economy, (ii) the strength of the American dollar and (iii) the willingness of American people to run balance of payment deficit year after year.

There were good national interest reasons for America to do all it did but it would be ignoble to deny America the credit it deserves for putting the world back on its feet. But for America, globalisation would never have been pushed to the hilt and the world would never have been so open. Access to world markets has pushed Asia to the forefront. Asia has been the maximum beneficiary of opening up of the world.

Another important aspect of globalization has been a significant change in corporate scene. Outsourcing has become a normal thing and you can imagine the kind of companies we have in India today; GE, IBM, Hewlett Packard, American Express, Dell, Intel, Suzuki, Hyundai and what have you. Likewise is the case in China. Acquisitions and mergers have become quite the done thing. Not only Standard Chartered acquired Grindlays or Deutsche Bank married Banker’s Trust or Chase Manhattan joined hands with J P Morgan or UBS with Painewebber but we also have Tatas, Ambanis and Birlas, Mallyas, Mittals and Ranbaxy on the prowl. Altogether Indians have acquired 34 companies internationally this year for 11 billion dollars, something hard to imagine before globalisation became the norm.

Service has become more important than the product and I won’t be surprised if in years to come you get many products for free and pay for them when you receive service. General Motors for example offers ONSTAR service which combines a cellular phone with global positioning system. You put your car on line with General Motors and you get all the services that you can think of.

Much the most intangible gain has been the removal of psychological barriers. For years we were caught up with the fear of foreign investment. Once bitten twice shy, so to speak. Now we do not dread but solicit foreign investment. Because today opportunities are there for people to grab and we are not impervious to aid flowing in and it is pouring, believe me. We recognise today that foreign investment is no loss of sovereignty any more than accepting a birth pill is a loss of morality. Foreign investment comes with foreign technology and foreign talent. Think its impact on Asian economies in the future, especially when we realize that London and the Silicon Valley are nothing but the creation of migrants: Rothschild, Schroeder, Holdbran, Lazard, Morgan, Merrill Lynch and others have made London what it is. Likewise, 35 percent of the new start-up business in Silicon Valley is attributable to Indians.

For various global and regional reasons, Asia is likely to be a dominant factor in the 21st century. Two questions arise; why did it take so long for India and China to resurface? Secondly, would we stay the course?

Take the first question. One reason is that the superiority of the western power was deeply embedded into the psyche of the Orient that it took quite a while to come to terms with it. Second reason is that industrial revolutions bypassed us, being a colony. In other words, industrial revolutions of 1770, 1840, 1940, 1975 escaped us which ushered breakthroughs in iron, steam, railways, steel, engineering, electricity, chemicals and microchip. We fully embraced the revolution of 1995 and 2002 apropos genetics, laser, robots, globalization, interdependence and governance. Yet another reason was: Pressure of population, of colonization, nuclearisation, cold war and others which added to our discomfort. Till America became the super power, the world never got an opportunity to open up. Now since the world is open and technology is truly floating and has become the prime mover of contemporary world, Asia seems to have best of both the worlds to get the most out of it.

We are indebted to the English for giving us the language which makes us today the largest English speaking country in the world, a link language to keep ourselves together. Excepting Ashoka and Akbar’s reign , we were never one country. We are also grateful to England for giving us the institutional framework without which we can’t move from food shortages to food gluts, from war to peace and from emergency to normalcy. Having said that, I think that India and China are coming into their own now.

Some Lessons

If Asia is the economic powerhouse of the 21st century, then India is its crown jewel. Unfortunately, we lost 40 years on the wrong assumption that since colonization had condemned us to agriculture, our strategy should be to industrialise. Having decided to industrialise, we followed the Russian model which had three planks viz basic industry, central planning and commanding heights for the state. And that did us in. We won the independence on the slogan of “swadeshi” or self-relliance. We followed exactly the same recipe after independence i.e. import substitution. The pride of the pre- Independence India became the prejudice of Independent India.

India became a caged tiger, as it were, a cat in the corner, so to speak. Overregulation, overspending and overtaxation gave rise to a parallel economy and sluggish growth rates, thus perpetuating problems of unemployment, poverty and inequity. Frequent clemency offers of 1965, 1976, 1985 and 1997 were of no avail in getting the economy get rid of black money. No U turns were in sight.

If a happily married woman wants to add to her family, she can’t spend her life rolling over her tummy, can she? She has to change sides. Unfortunately for us without changing sides, we were rolling out one Australia each year without knowing from where to feed them. So in 1991 we went broke. Russia started in 1917 and came apart up in 1990s.

We learnt many lessons. We learnt that chastity and poverty cannot share the same bed. We also learnt that enduring traditions of one time can become fading memories of another. We also learnt that poverty cannot be levelled by robbing the rich and redistributing to the poor. We grasped Vivekananda’s message: “I don’t believe in a God who cannot give me bread here but gives me eternal bliss in heaven”. And there this was a paradigm shift in our attitude. Our

leaders used to say what hands can do, technology should never be allowed to do. We realised that an ICU for an ailing heart is better than a hand massage. Boeing takes less time than a bicycle and cow dung is no substitute for fertilizer.

Now the second question. Would Asia stay the course? Yes. Firstly, US is today the only economic power to ensure that balance is not upset. Although the world is full of continuing conflicts, proliferation of weapons and ideological divisions, yet the compulsion to cooperate is compelling .

Second, simultaneous rise of China and India is fortuitous. And since capital movements, credit flows and exchange rates have become the fly wheels of the world economy, we have everything going for Asia. We in India have investible resources, we have talent, we have sound macro management and our entrepreneurs are top class. India is today a laughing elephant.

Thirdly, we are proud of our knowledge base. Albert Einstein said that mankind owes a lot to India, for it taught it how to count. The first ever written book of mankind is the Vedas. The first two universities ever, Takshila and Nalanda were in India (700 BC and 400 AD).

The first problem solving was posed by Bhaskara in 1298 in his magnumopus on mathematics which goes as follows: The necklace broke in a love quarrel and the question arose, “How many beads there were in the necklace?” One third fell on the floor, one fifth he recovered, one sixth she retrieved, 1/10th were scattered all over the place, three were lying on the unmade bed and six were around her neck. How many beads there were?” This was the question posed in thirteenth century by Bhaskara. The answer is 30 beads. It is not for nothing that we are one of the three countries in the world which has produced a Super Computer. Earlier we did not have the knowledge, the technology and the wherewithal, so we languished.

Major Issues

With ideology essentially dead, the world today faces issue-based situations. Some of the most important issues the world is facing today are:

1. Climate change: a refreshing legislation by Europe early this month called REACH to curb the harmful effect of chemicals
2. . Ethnic strife: 190 countries with 862 ethnic groups and ethnic convergence and divergence being the order of the day. Russia, Czechkoslovakia, Yugoslavia belong to the latter category whereas two Yemens, two Germans, two Vietnams belong to the former. Two Irelands, two Koreas and two Chinas are moving in the direction of convergence.
3. Social exclusion: You can’t have a world peace with one third of humanity overfed and two thirds underfed.
4. Palestine: Oldest country without a nationhood? Is bloodshed avoidable?
5. Terrorism: It requires synthesizing religion & science. Religion deals with the inner conflicts and science copes with the outer world.
6. Kiss or kill. Two futures : Cooperate and get vibrant growth or conflict and collapse

Mr President, we have benefited enormously by riding the western train of globalization for which we are grateful to the west. We have also gained heavily by borrowing from western political and economic thought — from Locke and Adam Smith to Marx and Keynes. Now we have to rise to the occasion. If this century belongs to us, we must be able to solve the problems the world faces in an Asian way or may I say an Indian way.

Spiritual Recession

The world is in a state of spiritual recession, the education system is obsolete to meet contemporary needs. The world in which we live today, we seek peace and quiet in three ways

i.one religious states

ii. by suspending individual liberties

iii. economic abundance

This is not a durable solution. Vedas provide the answers “The Vedas are the oldest written text on our planet today. They date back to the beginning of Indian civilization and are the earliest literary records of the human mind. They have been passed through oral tradition for over 10,000 years, and first appeared in form between 2500 - 5,000 years ago. Veda means ‘knowledge’ in Sanskrit.” Five principles of Vedas are:

i. Unity and all pervasiveness of the divine.

ii. Each individual contains a spirit of the divine.

iii. Ultimate unity of human race

iv. Harmony of religions

v. Welfare of all sections of society

Life is eternal and it has to be so recognized. The opposite of life is not death, the opposite of birth is death.

Man’s intelligence can soar to great heights by synthesing religion and science. If we fly on the wings of science alone we will end up in the slough of materialism. If we fly on the wings of religion alone we will degenerate into a quagmire of superstition.The best way would be to synthesise the two. Let us not forget when Rome was burning Giordano Bruno, Akbar was proclaiming that no man should be interfered with on grounds of religion. Amartya Sen has in his latest book “Argumentative Indian” proved that Akbar laid the foundations of modern day secularism and democracy, tolerance and integration.

Asia in general and India in particular have the credentials to provide the answer to contemporary ills. Only, we need to talk to the world in our own words. For that we need to develop cultural tools through which we talk to the world as to who we are and not seen through western media alone. Our history of music, theatre, art, drama, films, literature and folklore is deep, long and rich. We need to develop expertises like the BBC and CNN to relay the full measure of our cultural heritage. Economic development is usually followed by cultural renaissance. Once this happens Vedas will be easily grasped around the world. If the essence of Vedas is adopted around the world, future would be vibrant, trade would expand and social inclusion would be achievable with west and east fusing into a holy alliance. If not, stagnation, protectionism, poverty, war and destruction shall follow. Let me remind you of the views of some of the celebrated authorities of the world as to what Vedas can do.

J. Robert Oppenheimer (father of Atom Bomb):

“Access to the Vedas is the greatest privilege this century may claim over all previous centuries. “

Hu Shih:

“India conquered and dominated China culturally for 20 centuries without ever having to send a single soldier across her border.”

Dr. Arnold Joseph Toynbee:

“It is already becoming clear that a chapter which had a Western beginning will have to have an Indian ending, if it is not to end in the self-destruction of the human race. At this supremely dangerous moment in human history, the only way of salvation for mankind is the Indian way.”

Albert Einstein:

“When I read the Bhagavad- Gita and reflect about how God created this universe everything else seems so superfluous.”

Will Durant:

“Perhaps in return for conquest, arrogance and spoilation, India will teach us the tolerance and gentleness of the mature mind, the quiet content of the unacquisitive soul, the calm of the understanding spirit, and a unifying, a pacifying love for all living things.”

The Encyclopaedia Britannica says:

“If there is a country on earth which can justly claim the honour of having been the cradle of the Human race or at least the scene of primitive civilization, the successive developments of which carried into all parts of the ancient world and even beyond, the blessings of knowledge which is the second life of man, that country is assuredly India.”

Friedrich Mejer:

“It will no longer remain to be doubted that the priests of Egypt and the sages of Greece have drawn directly from the original well of India, that it is to the banks of the Ganges and the Indus that our hearts feel drawn as [if] by some hidden urge.”

George Bernard Shaw:

“The Indian way of life provides the vision of the natural, real way of life. We veil ourselves with unnatural masks.

On the face of India are the tender expressions which carry the mark of the Creator’s hand.”

Guru Tegh Bahadur:

“All men are created by God and therefore must be free to worship in any manner they like. I neither convert others by force, nor submit to force, to change my faith.”