Friday, March 22, 2013

Book Review: The Elephant and the Dragon

Book Review: The Elephant and the Dragon

Author: Robyn Meredith

What the rise of India and China means for all of us?

By Bryan deRegt

In The Elephant and the Dragon¸ Robyn Meredith paints a concerning future for American workers. As an MBA student, it made me wonder a little bit how much my degree will help me stand out as I enter the job market. The book focuses on the repercussions of a global job market especially as India and China have emerged as economic powers.  She uses the analysis of India as an Elephant and China as the Dragon. India is the elephant that has been slowly gaining economic strength. China is the dragon that has emerged with a fast rise to power. Meredith explains how both emerged in more detail throughout the book. The most interesting part of her explanation to me is her discussing the differences in work that college graduate look for between countries and how the job market is affected. She mentions at one point that college graduates in India are happy to take a job answering an 800-number to listen to American's complain. This is example is meant to demonstrate that China and India are willing to do jobs for cheaper than Americans even as they may be just as highly qualified as the United States. Overall, the book does a good job explaining the situation but does not do very much to offer solutions for America.

The difference between job desires among individuals in the United States versus China and India. Americans have an attitude that if we go to college we should be able to find a good job with a good salary and begin our work experience. This has not been the case in recent years as unemployment rates have been high and recent college graduates are having trouble finding work. From my own experience, I am completing my MBA and it is a difficult job market. An MBA now just makes me one of many versus twenty years ago when an MBA would make workers stand out from the crowd. India and China do not have this same attitude. College graduates are happy to take jobs for salaries that Americans would not consider working for that little. A graduate with a degree in computer science in America used to be looking at some top jobs in Silicon Valley that pay as much as $120,000 per year. This is obviously a top job that anyone would be happy to have. Meanwhile, in India, a similar job will attract a college graduate as well but to be the same IT professional, the salary in India may be only $5,000 per year. That is a $115,000 difference. It is easy to see why IT work has seen a mass exodus from the United States to India.

The question for us as American workers is how we are going to react to this change. I think the biggest area that Americans need to adapt is in our attitude. I know growing up that I always thought that I would go to college, get my degree, and have multiple job opportunities to do what I wanted. When the time came after I finished my undergraduate degree, this was not a reality. The job market is difficult and just having a college degree doesn't mean that I have the right to a high paying job. As I entered the MBA program, I knew this would help in the job search but again it is not a golden ticket to a six figure salary. Americans need to adopt the attitude that there are now people who are just as skilled as us all over the world who work for much cheaper so this is going to bring down salaries and job availability in the United States. There are no longer job markets for each specific country but instead there is a global job market. 

Meredith discusses many more issues but one particular that she brings up is that China and India are very different. We tend to group them together in America because they are emerging powers in the east but they are not very similar at all. India has major infrastructure problems. A few of Meredith comments on India's infrastructure are:

 "India doesn’t have enough power plants and electricity supplies are so unreliable that lights--and computer screens--regularly flicker in downtown business districts."  

"Indian airports are so shabby they have become a national embarrassment."  

"Companies must navigate antiquated customs processing, variations in taxes and byzantine rules for transporting goods between Indian states in addition to the crumbling highways, decrepit airports, and what-me-hurry ports."

These quotes give a great idea of the infrastructure problems that companies still face when doing business in India. China on the other hand has some of the best infrastructure in the world. In an interview, she asks the question if you landed at an airport in Shanghai or at JFK in New York if you would be able to look around and tell which is the developing country. This affects what type of jobs are moving to each country. 

China has become the world's factory. They have the infrastructure and ability to build the large factories. Combined with a large base of workers it is not surprising that anytime you buy a toy in America it is no surprise to see it have "Made in China" on it. Meredith explains this shift, "Instead of doing the inventing as the West watches on with envy, China excels at building Western inventions cheaper than Westerners can build them at home.  China has shifted from a hub of invention to one of rote production." For Americans, it means that there is still room for the innovators but the factory workers are going to have more difficulty finding work as it can be done just as well for much cheaper in China.

Since China is the world's factory, Meredith describes India as becoming the world's back office. As I have already mentioned, IT jobs have been a big mover to India because of the qualified labor and cheaper salaries. The IT and call market industry in India now represents 5% of the countries GDP. America has in a way accepted the loss of these jobs as most of us know that when we call an American company, we will be talking to someone in India. This hurts the lower skilled workers in the US, but saves companies money. Unless Americans are willing to take much lower salaries, these jobs will not be coming back but new jobs can take their place.

Overall, Meredith does a good job describing the emergence of China and India and how it relates to the United States job market. The book is a good read for anyone interested in globalization but I would have liked to have read more about solutions. I had already known about the emergence of China and India but did not know how I could take advantage of this situation. I think this is the big question and I still do not know the answer.