If you are a believer in the broader idea of a global recession that enveloped the world in 2009, it can probably now be argued that we are near the end of the downturn and possibly at the cusp of a recovery, even if it is a supposedly mute one that is characterized by continuous joblessness in many countries. Technically a recession is a period, when the economy contracts and is judged by the lack of growth, the easiest barometer of which is a declining Gross Domestic product (GDP) compared with an equivalent prior period i.e negative GDP year over year or quarter of over quarter. Considering this, it is worthwhile to note that though economies like United States of America and Great Britain experienced recession in the last year, emerging economies like China and India while experiencing subdued growth were technically not in a recession. This also led to the emerging economies to be better equipped to take advantage of the recovery. This position of strength that the emerging economies seem to enjoy at the moment, has brought out very interesting reactions from the western world, particularly the US.
During the mid of January, Google, the epitome of American innovation and new world capitalism announced its intention of pulling out of China, considered by many the most important market in the world citing a sophisticated cyber attack enabled from within the communist government. At the heart of the matter was also the blatant censorship of the internet. At first instance, it would seem the right thing to do ethically. After all, is it not the idea of freedom of expression that made the internet what it is today? However, digging deeper, one may find the relationship between governments and the internet is best an uneasy one, even in the most democratic of countries. Issues of censorship, access, security and control have surfaced time and again in many countries. So, it begs the question, why now? Why is Google making a fuss about these issues when a few years ago, they seemed to be perfectly happy subjecting themselves to these very same policies when they started their China operations.
Cut towards the end of January. The US President, Barrack Obama in his first state of the Union address announced his intentions to slash tax breaks to American firms moving jobs abroad, considering many to wonder its impact on the forty odd billion dollar Indian Outsourcing industry. The President also mentioned, in no uncertain terms, the need for America to pull up its socks to compete against emerging countries, explicitly referring to India multiple times. It’s a time of crisis and some opine that the address was as much to appease the political constituency as much as treading towards a new economic direction.
If we leave aside the politicking in both the cases above, there is also a strong underlying economic message coming out of them. Economies like China and India are seen to be in a period of transformation and from being just new exciting markets in the globalization blitzkrieg unleashed by developing countries to real competition, one vying for the same piece of the global pie. Though the transformation is in no means even near a desired end state, it is entirely possible that the emerging economies will be as much about innovation and leadership as about cost arbitrage, in the years to come. Coming back to the case of Google, will China really miss Google? For one, it is not its most popular search engine, not even the second. We, normal Google charmed fellows, will have to admit, that beating Google is indeed a feat, be it any country in the world and that does speak about the competitive innovation that is seeping into China. The same may happen sometime in India, where out of the all the service oriented outsourcers, we may be finally find an innovative company, that will transform our world, much like the Apple’s of the developed world routinely do.
There is still a lot of catch up to do. Without the innovation in the west and specifically in the US, we will have no airplanes to fly, no computers and smart phones to take for granted or maybe not even credits card to swipe in fancy malls. Most inventions of any significance in the last century have happened in the west, with the exception of Japan and the world has benefited immensely from ideas generated in the west. While the west innovated, we were more than happy to play a peripheral role, provide manufacturing support and human services that helped grow our economy and lifted millions out of poverty. However, now with the west in a position of macroeconomic weakness looking at the not so previously attractive periphery with renewed interest, it is upon countries like ours to step up to the challenge and play a more central role and imbibe the very economic values that propelled the west to where it is today – innovation, entrepreneurship and meritocracy. Being a working democracy, India is in a unique position to leverage this opportunity and transform from being a low cost services powerhouse to a truly global economic power.