Monday, 28 March 2011

‘Billions of Entrepreneurs’



Columnists27 March 2011, Sunday







MELİH ARAT
m.arat@todayszaman.com
India and China had been evaluated from an “Orientalist” point of view for a very long time. However, with their dramatic economic performance, they have started to be viewed as the leading economies of the 21st century.

Tarun Khanna from Harvard Business School in his recent book “Billions of Entrepreneurs: How China and India are Reshaping Their Futures -- and Yours” assesses the two countries comparatively. “In some sense people in these societies are running faster than their rules and laws can keep up. So they are creating the rules as they go along. And entrepreneurship is, after all, doing things in new ways, ahead of social norms and customs and establishing the rules and laws. In both countries, these processes are unfolding not just in the mainstream business sector but in society writ large and even in politics and civil society,” writes Khanna.

However, even though there are some common factors between both countries like entrepreneurial structure, there are more factors that are not held in common. For example, there is democracy in India and there is a single-ruling party in China, the Chinese Communist Party. For Western societies, it is very difficult to understand what is happening in these countries.

If you think about the 1.1-billion-strong population of India, you can conclude that to run a democracy and election in a country that big should be too difficult. Communicating with potential voters, as you may guess, must be very hard and require a tight budget for politicians. The case in China is more complex, because every official in the state is assigned. China is the second biggest economy in the world, and this huge success is provided for through the efforts of assigned officials.

Democracy, elections and freedom of speech and thought are fundamental and indispensable concepts for the Western world, but then there is a country called China where these concepts are not central and it’s still successful.

Khanna mentions that in China, the government is often the entrepreneur. It is in many instances a very efficient entrepreneur. Of course, there are bankrupt state-owned enterprises, but there are equally dynamic companies starting out in villages, small towns and major cities, often with a sizable amount of investment or involvement by local government authorities. It is hard to find any reasonably sized Chinese company in which government authorities do not have any input.

In India, some islands of excellence notwithstanding, the government remains inefficient for the most part, and most pockets of entrepreneurship -- with interesting, vibrant new ways of doing things -- are in the private sector or civil society, staying far away from government intervention. So here, the private sector leads many significant initiatives; in China, the lead is often provided in a top-down manner.

The major problems in both countries are the lack of reliability of information and unreliable laws. When the population gets too large and spread out, and when there are not many institutionalized information collecting organizations, it is difficult to maintain reliable statistical data and information. Together with this, the information in both countries is open to manipulation, especially in China.

China as a country of one ruling party is not transparent, and it is very difficult to check the reliability of any information. For example, in spite of announcements of increasing growth in the country, energy consumption numbers are stable. However, the energy consumption numbers and growth rates should increase correspondingly. Not only macro-data and information, but also data and information about the companies are problematic. The balance sheets or income statements of companies might not reflect the reality.

The other problem is unreliable and changing laws, especially the legislation on private property. Your factory tomorrow might be the subject of expropriation. The governments or local governments in both countries can change the legislation that might easily affect your business. The juridical process takes a long time. So going to court may not solve your problems.

Both China and India are evaluated in detail from different perspectives in “Billions of Entrepreneurs,” and it can be described as the best book providing comparative information about these two countries.