Death by China?

“We will follow two simple rules – buy American, hire American”, said a defiant Donald Trump to a cheering public & an uncomfortable Washington Establishment, as he was sworn in as the 54^th President of the United States of America earlier this month. In his election victory, Trump smashed most expert forecasts, election pundits, opinion polls and the mainstream media narrative that had consistently projected his opponent as the favorite to win.

For those surprised by Trump’s victory, go no further than videos such as this, which might have played a major role in influencing public opinion during the U.S. Presidential elections. Claiming to be one of the most watched documentaries on Netflix for 3 years, the film narrates the story of an “increasingly destructive trade relationship” with China, which has led to the closure of over 50,000 American factories since China entered the WTO in 2001. The film blames China for causing loss of millions of jobs and accumulation of over $ 3 Trillion of U.S. debt to the “world’s largest totalitarian nation”. You can watch the full video here:

Loaded with terms such as “illegally subsidized exports” or “stealing jobs”, the import of the film is clear: Over the past decade and more, America has lost its ‘trade battle’ with China, and this loss is the result of an ‘unfair’ advantage the Chinese businesses get vis-à-vis their American counterparts. The film makes five basic allegations to corroborate its claims:

1. Polluting for Profits: Stringent environmental norms on U.S. manufacturing levy a heavy financial burden on U.S. businesses, but their Chinese competitors follow no such norms, giving them a cost advantage. 

2. Worker Abuse: China exploits its workers, forcing them to work for long hours often in inhuman conditions. This raises productivity per worker.

3. Currency manipulation: China pegs the value of the Yuan to the Dollar much below what it should be, which benefits its exporters.

4. Counterfeiting & Piracy: The Chinese are cheating on Patents, Trademarks and other such intellectual property.

5. Illegal Export Subsidies: The Chinese Government grants illegal export subsidies to its exporters

Due to all this, says the film, "they are cheating monumentally” by producing - sometimes even at 1/10^th the price of what it costs to produce in the United States. This has led to the death of American manufacturing. Almost 90% of all products sold at Wal-Mart are made in China. From garments to chopsticks, Christmas decorations to computers, and from printers to shoes – often it is almost impossible to find anything in an American store that is NOT made in China.

Really?

The “unfair” Chinese advantage is easy to "see" - and hence to blame, but things become complicated as the film moves on to discuss the role of American Multinational Corporations, who have themselves been at the forefront of outsourcing their manufacturing. From Apple to Caterpillar and IBM to GE and Cisco to Ford, every large American corporate worth its name has shifted it’s manufacturing to China to cut costs and improve profitability. Is it right for a Corporate Entity to cut domestic jobs to maximize profits? The film admits “profits Vs.jobs is at the root of America’s offshoring problem”. Sure corporate CEOs are focused on shareholder value, but isn’t this exactly the way it should be?

From time to time, I have seen the “blame China” narrative make its way into public sentiment. But most such narratives tell only one side of the story. Ask someone who bought his first big screen TV or furniture 50% cheaper, cheap imports have given their buyers a standard of living that was not possible earlier. When a foreign government pays you to buy toys or coffee making machines, is there really a cause to complain? As corporate America offshored jobs, profits got a boost, and despite the Wall Street engineered financial crisis of 2008, stock markets today are at an all time high, boosting the 401(k)s and mutual funds of ordinary Americans.

The documentary also erroneously links the $ 3 T U.S. government debt that the Chinese hold with cheap imports. Contrary to what is shown (and even otherwise believed); the large government debt actually represents a huge advantage the United States enjoys over other nations on account of the U.S. Dollar being the currency of international trade. Most exports worldwide are invoiced in U.S. Dollars, and the exporting country has no alternative but to park them in U.S. Government debt. The money thus represents a virtually free source of financing for the U.S. government. And as Jack Ma, founder of Alibaba pointed out recently, what the U.S. did with this money may tell the true story of why the jobs went where they went.

What about human rights? The film also mentions several human rights violations by China, such as the repression of the Falun Gong or Tibet, or its role in human organ trade or nuclear proliferation and aggressive military build-up. These are non-economic arguments that should not be used to color our judgment over cheap imports. 

It is also a contradiction to state that China’s lack of concern for the environment gives them an “unfair advantage”. Indeed, the documentary itself shows China paying the price for its monumental environmental neglect. It is well known that Chinese cities are now considered to be among the most polluted in the world.

Where are the solutions?

The ‘blame China’ rhetoric is a fallacy, and it best stands exposed when its time to offer solutions. While the documentary ends recommending “trade reform with China” and says that China should be held “accountable for human rights abuses”, it fails to come up with specifics. While pitching for ‘a strong manufacturing base for a prosperous future’, the film fails to tell you exactly how it can be achieved.

And this is no surprise.

For, China is just the symptom, the cause lies elsewhere. And this is pointed out in the film itself by Ralph Gomory, President Emeritus, Alfred P. Sloan foundation, when he says, “we are living beyond our means, we have artificially high standards of living”. Fix that, and everything will fall in place.

And that’s what President Donald Trump will need to do, to “Make America Great Again”.

Reforming the education system

The only thing that interferes with my learning is my education – Albert Einstein

Make no mistake. India is heading into an education and employment crisis.

At more than 127 crore people, India is home to world’s 2^nd largest population. Nearly 1/3^rd of this is in the age group of 0-14 years, who are / will be entering primary & secondary schooling in the coming years. An estimated 40 thousand colleges in the country enroll more than 2 crore students under various courses every year, a majority of them in the 3 year B.A. / B.Com. / B.Sc. courses. There is no way any government scheme or programme can create gainful employment for these aspirants in such large numbers. The task before the country’s education system is to prepare this generation for the humongous challenges that lie ahead.

India’s current education system traces its origins to Thomas Macaulay’s English Education Act of 1835. The Act introduced English as the principal medium of instruction, and sought to create a neo-intellectual class who held English in high esteem and contempt towards the traditional. “We must at present do our best to form a class who may be interpreters between us and the millions whom we govern; a class of persons, Indian in blood and colour, but English in taste, in opinions, in morals, and in intellect”, Macaulay wrote. The Act created a system which produced a useful workforce of English speaking clerks and officers, loyal and ready to serve the Raj.

To this day, the basic character of the system Macaulay framed remains the same. Our education holds conservatism and obedience as big virtues, discourages daring & risk taking, and challenge to established conventions are held in contempt. Deference to authority becomes a ‘good habit’, discipline is demanded and rewarded. Creating such a mindset among the people suited the Imperial administration subjugate a large population, who could otherwise rebel and throw the outsiders out.

But is that what we need to teach our children today? We need a system which abolishes this slave mentality, and creates employers, not employees.

At a fundamental level, the purpose of education is to cause mental, physical and spiritual development of an individual. These qualities form in the early years of a child’s life. To start with therefore, we need a much larger focus on soft skills in primary education than is given at present. Risk taking needs to be encouraged. Failure should be taught as a stepping stone to success, rather than something to be ashamed of. Qualities such as hard work, perseverance, team spirit, motivation and determination need to be tested and assessed for each child. We need to teach our children that long term gain often involves short term pain. A mindset which embraces change needs to be consciously cultivated.

I don’t even ask whether we are doing it today, I first want to know whether there is a way to do this today, formally and methodically. Most probably – the answer is ‘no’. So this is where we need to start. We need to find ways how these qualities can be inculcated in our children. What are the teaching methodologies we should use, and how it can be done effectively & consistently. I have no straightforward answers for these questions.

On a more practical level, our education needs to prepare our children to make a gainful living. They need to create ‘value’, in the economic sense of the term. Where are we on this paradigm?

Rajabhai Tower, University of Mumbai

Like in many other fields, the internet has completely changed the playground for education. Information on nearly everything is available at our fingertips. Accessing knowledge has become easy. But using this knowledge in ways that benefits humanity, creates value, is what will differentiate tomorrow’s winners from the rest. The graduates our universities churn out year after year are little capable of doing this. Industry complains that they are unemployable. The lucky few who find jobs get trained by their employers after joining. They find little use in their day to day work for what they learnt in college. After spending 15 years of life and lacs of rupees, for a majority of our graduates the return on investment in education is zero.

To address this problem, the present government has focused heavily on “skill development". The initiatives under various skill development programmes recognize deficiencies of the current system to impart job oriented skills to students and make them ‘employment ready’ with the industry. While these initiatives are welcome, it is still too little when confronted with the enormity of the task of making our children ‘life ready’.

In the last 15 – 20 years, new technologies and business models have completely altered the global business landscape.  At the risk of using a much clichéd term, change has become the only constant, and at a pace that is simply mind boggling. We have no clue how the business world & industry will look ten years from now. The ‘skills’ we train our children today may become redundant in a few years from now, while those which dominate tomorrow have not even been developed today. This is what the focus on skill development leaves out. It is not to say that skill development is not useful, but it is just not sufficient. Skills come much later in life; it is training the mind where we are failing miserably.

A paradigm shift is needed in the way we look at education itself. Periodic revision of curricula does little to address these concerns. TV Mohandas Pai points out that education has now moved to a technology platform. A student in India can get a U.S. degree sitting at home, while our Universities are not allowed to offer courses outside the state. He foresees “many students will soon move away from the formal system of education and would get a degree through MOOCs (massive open online courses) and online courses, and these degrees will be recognized by the world”.

There is little recognition of this disruption in government circles. The system seems to be unable to move beyond minor tinkering of the mandated curricula, exam patterns and Nehruvian regulation. For example, a recent committee appointed by the HRD Ministry was tasked ‘to review’ the JEE system for admission to IITs. The committee viewed the private ‘coaching industry’ as a menace rather than a partner in imparting education to willing students. But before we reform the 'entrance tests', the important question to ask is - do we even need entrance tests and selection processes at all, when we can digitize our books and lectures, opening them up to every single aspirant? Professors can concentrate on solving queries and answering questions online, while holding webinars which can be attended by thousands of students from their homes. My guess is that even if 80% of a course can be ‘delivered’ in this way, it can bring manifold economic benefits, because access has been given to every single aspirant at no extra cost & effort, and not just to select few who pass the entrance tests. In fact, a scenario where the universities concentrate only on conducting certifications while giving students the freedom to learn from wherever they want, will dramatically improve the effectiveness of education. Unfortunately, such changes are not even on the agenda.

If we don’t fix our education urgently, we are heading for a job crisis of mammoth proportions.