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August 15th, 2006
1-800-INDIA
Interview: Michael Elliott

August 15, 2006: Michael Elliott, Editor of Time International, discusses social, political, and economic development in India with anchor, Daljit Dhaliwal.

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DALJIT DHALIWAL: Michael Elliott, welcome to WIDE ANGLE.

MICHAEL ELLIOTT: Thanks very much.

DALJIT DHALIWAL: Now, you’ve written that China and India’s economic success and growing global importance is the great story of our time. How come? What do you mean by that?

MICHAEL ELLIOTT: Well, if you leave aside the little business of the European discovery of the Americas in 1492 and thereafter, it’s hard to think of anything over the last 500 years that is quite as significant as having these two enormous civilizations — with 40 percent of the world’s population — who for five or six hundred years had been to one side of the global mainstream, reconnect with it.

A Chinese friend of mine explains the re-emergence of China in the following way: he says “Well, you know, think of the stock of human capital just being increased by 25 percent. Twenty-five percent more geniuses; 25 percent more fools; 25 percent more villains; 25 percent more madmen. Essentially what we think of as humankind has been expanded by 25 percent.”

Now you add India and China to that, and you have 40 percent of the world’s population that to some extent has been outside what we think of as global trends, for half a millennium, and now they’re in there. Well that’s pretty big, expanding, as it were, what we understand to be the known world by 40 percent. That’s pretty big.

DALJIT DHALIWAL: And you’ve called India the “un-China” — talk about that.

MICHAEL ELLIOTT: Well, India and China are different in so many ways. I mean India is a democracy; China’s not a democracy. China’s an authoritarian, one-party state run by a communist party; India is the world’s largest democracy. A loud, raucous, messy, noisy democracy in which periodically, as happened just two years ago, a massive election sees the removal of one party and the peaceful introduction of another party in the government.

China has an extremely strong central government — not as strong as people assume it is, but strong, and one that gets things done. India has a very weak central government. It’s chaotic. Edicts from the central government take an awful long time to take effect — everywhere from the Himalayas down to Tamil Nadu.

China has a relatively weak, I would say weaker than people think, private sector. Very few Chinese branded companies. Very few Chinese companies that have managed to kind of move from entrepreneurial germ to a worldwide global brand. India by contrast, is brimming with private sector businessmen who are ambitious, who have global goals and dreams and who go out and achieve them. So the patterns are very different in interesting ways.

DALJIT DHALIWAL: And how important is the outsourcing that we just saw in the film to India, to its future, to its economic rise?

MICHAEL ELLIOTT: In the grand scheme of things, it’s not important at all. I mean the number of workers who work in classic outsourcing businesses in India — you’re talking about a population of more than a billion, right? The number of people who work in classic outsourcing businesses are relatively small.

You could argue actually, that outsourcing is more important as a story in the United States — and increasingly in Europe, too — than it is in India. Although one says that, it probably overstates the case because one of the things that I think the outsourcing industry is crucial for in India, is a sort of an incubation laboratory, as it were.

It’s where really impressive private sector entrepreneurs and business people develop the skills that enable them to kind of grow into global brands and global presences that then have a demonstration effect for the whole society.

So, though in comparison with a population of a billion people, the outsourcing industry is not that significant, its small size sort of understates its influence because it has a demonstration effect throughout the whole society.

DALJIT DHALIWAL: And outsourcing has proved to be very controversial in the United States. Have we gotten beyond that point of Americans feeling that Indians and Chinese are literally taking their jobs, or is it still a cause for concern?

MICHAEL ELLIOTT: I think it’s still a cause of concern. I think we may have kind of gotten over a little hump. I think there was a particularly vehement, particular nervousness a year, eighteen months ago that we may have gotten over. The key thing actually in terms of that reaction was not about India, it was much more about China and the attempt by CNOOC — the Chinese national oil company — to take over Unocal, which if you remember was nixed in Congress.

But I mean obviously, 18 months ago there was a lot of concern about outsourcing. I think we’ve probably gotten over a little hump, but I think it’ll come back. I think it’ll come back because there are certain things that India and China can do 25-40 percent cheaper that no economy in Western Europe or North America can do. In fact, there’s a lot that India and China can do.

DALJIT DHALIWAL: But how does it benefit the U.S. economy?

MICHAEL ELLIOTT: Well, you’re wearing clothes now that I would like to bet if not made in Guangdong province, China…

DALJIT DHALIWAL: No, actually it’s French.

MICHAEL ELLIOTT: …have at least, been influenced by the prices that exist in Guangdong province, China. Similarly, technology services that we use every day, if not directly provided by India — and we know many are — are affected by the price that Indian technology services can be supplied at.

So, this is having a deflationary effect on prices for technology and for goods — technology in India, goods in China — across the world. And that is expanding people’s purchasing power, and hence increasing their life chances immeasurably.

That’s the classic argument for free trade. That free trade operates to enable economies to specialize in what they do best. The United States does not do best at making garments — I’m sure yours was made in France rather than China — nor does it do best at call centers. So if the United States can take from what it learns in India and China and do what it does best, which is high-value added product, everyone wins.

DALJIT DHALIWAL: You’ve been to India, you’ve…

MICHAEL ELLIOTT: Sure.

DALJIT DHALIWAL: …written about India.

MICHAEL ELLIOTT: Sure.

DALJIT DHALIWAL: What do you think are the most striking changes that are underway right now?

MICHAEL ELLIOTT: Well the most striking changes in India are incredibly different to describe because, if you go there at a couple of months’ gap, you don’t recognize the place. The speed of change in the cities is extraordinary — cities which a few years ago didn’t have great restaurants, and didn’t have nightclubs, and didn’t have shopping malls, and didn’t have a sophisticated middle class are visibly getting one that is growing in size every week.

At the same time, it is vital for people to remember that India especially — but India and China — remain poor countries. And in India in particular, there is an enormous chunk of the population — I don’t know how you would measure it — 500 million, 600 million, something like that.

DALJIT DHALIWAL: Eighty percent earns less than two dollars a day.

MICHAEL ELLIOTT: Exactly. That is still very poor.

DALJIT DHALIWAL: Is it trickling down, though, that fabulous wealth? Is that trickling down to India’s poor?

MICHAEL ELLIOTT: Sure. Wealth trickles down — to kind of use a very unfortunate metaphor — wealth trickles down in a lumpy fashion. In other words, it’s not evenly distributed, and great wealth at the top of the society does not translate into a little bit more wealth in an even distribution across a whole society. So some people get rich, and some people don’t get as rich so quickly, and some people remain very poor.

But in both India and China you can plainly see, uneven though it may be, a trickle down of new prosperity, yes.

DALJIT DHALIWAL: The United States a couple of years ago noticed India. The Bush administration has made India its strategic partner. Where did that come from?

MICHAEL ELLIOTT: Well, you know, to an extent it gets back to the phrase that “India is the un-China.” China’s a difficult interlocutor. There are always things that are problems when you’re talking with China. There’s always …

DALJIT DHALIWAL: I think you wrote that it was a breathtaking shift in policy.

MICHAEL ELLIOTT: It was a breathtaking shift in policy because the United States and India traditionally have not had a particularly close relationship. To go back to the days of the Cold War, India was historically sort of an ally of the Soviet Union. The Indian elite very suspicious …

DALJIT DHALIWAL: How come?

MICHAEL ELLIOTT: … of the United States. The Indian elite — not particularly Americo-centric in any of its cultural indicators, if you like. If they were educated outside India, they were more likely to be educated in the U.K. than the U.S. The Indian Diaspora stronger in places like Canada and Western Canada and the U.K. than in the U.S., traditionally.

But all that’s changed very dramatically in the last 20 years and so you’ve got this very dramatic decision by the Bush administration to try — let’s be friends with India. Slightly, simple the way it was done, but never mind.

DALJIT DHALIWAL: Well, what’s in it for the United States then?

MICHAEL ELLIOTT: Well, I think what’s in it for the United States is recognizing that over the next 20 to 50 years, India is going to be an enormously more significant part of international affairs than it is now, so you might as well be friendly with it.

And it’s sort of easy-talking to India is never easy because there are prickly points of national pride, but it’s easier to talk to a democracy than to an authoritarian state, which is what China is.

DALJIT DHALIWAL: And how would India benefit from this new relationship, this new partnership?

MICHAEL ELLIOTT: For a start, because India needs — I mean the United States is the world’s economic locomotive, so India will rapidly move into a position where its economy isn’t just about call centers and outsourcing, but where its economy is making manufactured goods, just like China is.

You see that happening already with things like agricultural produce, food produce, automobile parts — where India is not just about call centers and outsourcing, but it’s about making primary goods. And the principal market for the world’s manufactured primary goods is the United States. So, for a start, India wants a kind of close with the U.S.

But India may be a giant, but it’s a giant in a rough neighborhood. It has a kind of nearly failed state to its northwest in Pakistan. It has to its northeast a state that is kind of rocky — Bangladesh — and extremely poor. India has a kind of Maoist insurgency to its north in Nepal. It has a ghastly low-level civil war to its south in Sri Lanka. So…

DALJIT DHALIWAL: How is that impacting India’s democracy?

MICHAEL ELLIOTT: It doesn’t impact India’s democracy at all, except to remind the Indians that they live in a dangerous neighborhood and that some of these local insurgencies or what have you, can occasionally slip into India. So India likes friends too. India likes having friends, too.

DALJIT DHALIWAL: And just to get back to the politics again, why do you think that the United States is helping India become a power for the 21st century?

MICHAEL ELLIOTT: I think you should not underestimate the extent to which the fact that India is a democracy appeals to the United States, and makes it possible for the United States to have discussions with India that it finds it almost impossible to have with China.

DALJIT DHALIWAL: So we’ve heard about the Asian tigers — is there a name for India’s boom?

MICHAEL ELLIOTT: Of course, the great irony is that India is tiger territory. You’ll find more tigers…

DALJIT DHALIWAL: Not very many Bengali tigers left!

MICHAEL ELLIOTT: Not many left, actually. Traditionally, that whole swath of northern India was of course, tiger country, so you could say that it’s rather unfair of the Southeast Asian nations to kind of steal the tiger as an emblem of success.

But I suppose India’s the elephant. It’s going a little slower, but it’s going with great determination, and with great strength.

DALJIT DHALIWAL: And doing a good dance?

MICHAEL ELLIOTT: And this elephant can dance, sure.

DALJIT DHALIWAL: Michael Elliott, thank you very much for joining us on WIDE ANGLE.

MICHAEL ELLIOTT: Thanks a lot.

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