Peter Drucker on China and India

[Update: Drucker’s statistics have been disputed and are probably incorrect. (See Adam’s post about this.) The problem is, it’s out in Fortune and now mainstreamers like Josh Marshall plan to write about it as a matter of fact. Marshall ends his post by saying he’s going to write more about Drucker’s observations soon. Problem is, they apparently weren’t observations, but mistakes.]

Josh Marshall today quotes from an unlinkable interview with Peter Drucker, author of all those management books clogging up the bookstore shelves (though Drucker’s are better than most). The topic is essentially how China and India stand in the world economy, especially relation to the US. Drucker seems to think India may have the upper hand.

DRUCKER: In contrast [to India], the greatest weakness of China is its incredibly small proportion of educated people. China has only 1.5 million college students, out of a total population of over 1.3 billion. If they had the American proportion, they’d have 12 million or more in college. Those who are educated are well trained, but there are so few of them. And then there is the enormous undeveloped hinterland with excess rural population. Yes, that means there is enormous manufacturing potential. In China, however, the likelihood of the absorption of rural workers into the cities without upheaval seems very dubious. You don’t have that problem in India because they have already done an amazing job of absorbing excess rural population into the cities–its rural population has gone from 90% to 54% without any upheaval.

Everybody says China has 8% growth and India only 3%, but that is a total misconception. We don’t really know. I think India’s progress is far more impressive than China’s.

Marshall comments:

If Drucker is right (and I’ve always been in the camp that agrees with his general point with regards to India and China), that has vast and in most cases positive implications for America’s posture across the globe. With respect to China. With respect to Pakistan. And in many other places as well.

Think how much of our broad, long-range foreign policy thinking rests on the premise that China is the rising economic and military power? What if the premise is wrong? Or what if India, nearly as large a country in population terms, is another rising behemoth? Then consider too that India is a democracy, albeit an imperfect one. It’s also a rule of law based society — again, if an imperfect one. And it’s a country with hundreds of millions of English speakers and, according to Drucker, 150 million speak it as their primary language. (Update: As this page shows, Drucker’s statement in this case is certainly incorrect. Only about 20 million Indians speak English as their native language. A number between 150 and 200 million properly refers to fluent English speakers.)

This is not a partisan issue in American politics, or needn’t be. President Clinton began an opening to India in the 1990s and it’s been continued under President Bush.

This is an intriguing discussion, and I won’t be able to offer any viewpoint on it until the end of the day today. No matter; I’m sure this is already stirring up debate in the China-India blog communities.

The Discussion: 14 Comments

Peter Drucker is a genius but he knows nothing about China.
China’s college enrollment is now almost 14 millions and will be approaching 20 millions in 3 years. The 1.5 million
figure was 15 years ago.

January 6, 2004 @ 8:31 am | Comment

Peter’s comment is here:,15114,565912,00.html

Peter’s number is wrong. Well, he is 94. Can not expect too much.

It is interesting that he gives such high marks to India. It will be interesting to know what exactly he has in mind.

January 6, 2004 @ 10:09 am | Comment

Same comment for the college enrollment. Master’s degree holders sometimes have troubles finding a job in today’s China, I don’t see the scarcity.

As for the India potential, the “rule of law” stops where contracts are concerned (the problem is far worse than what you can expect in China), and many foreign companies have given up their hopes of developing there. Oddly enough, when you talk with Indian people, they advocate a more self-relient model based on local companies. I don’t know if that’s they are convinced about it, o r use it to play down the fact that the foreigners don’t want to come in.

That may be ok, but it is simply losing the opportunity of benefiting from foreign capitals to develop faster.

As for population, I know birth control is tough on Chinese, but India growth is reduced every year by their unability to fix this problem. And packing people in overcrowded cities is certainly no magic solution (just imagine SARS in Mumbai and you will be scared).

Seen from South East Asia, there is no doubt as to where everyone’s eyes are turned now. Companies have tried India before, but they have been disappointed more often than not, to the point that they don’t even want to try again.

January 6, 2004 @ 10:19 am | Comment

Drucker seems to be more optimistic than most of the Indians I’ve met.

An Indian colleague of mine once mentioned that it is his impression that overseas Chinese are more willing to invest money and expertise in China than overseas Indians are to invest in India.
This relative lack of confidence in India by the people who ought to be best placed to help it is the reason my Indian colleague was pessimistic about India.

January 6, 2004 @ 1:07 pm | Comment

yeah, Peter is genius at western management, but he is nothing here in asia, as far as i know the difinite true number, there will be 2.5 million students gradute from colleges this sinlge year, i am quite surprise how people could be so judgemental with the second information he gets out of date, and also who cited this useless piece of shit, in a matter of fact, why not work for India instead of working for chinese clients, stupid conclusion! not India, but those who pretend they know everything about china!

January 6, 2004 @ 6:42 pm | Comment

It’ll be interesting to see if this is addressed by Fortune magazine. A pretty serious error, apparently.

January 6, 2004 @ 6:56 pm | Comment

geez, I wasn’t aware that it was International Crap on India Day! Give the place a break.

I’m no India expert (living in China and all), but I get the feeling that the country gets a bad rap in the whole “China vs. India” nonsense. Does the number of students really tell the story regarding education and development? The real question should be: What are these students learning?

January 7, 2004 @ 2:45 am | Comment

I know some Singaporeans of Indian origin who go to India to do business not because they love motherland but simply because things are cheaper there and thus money can be made. Singaporeans of Chinese origin also does the same in China but are often ripped off. I have not heard of any Indian scams so far. Perhaps the rule of law is better there. I think the “Kaiser” favours the Indians rather than the Chinese because the former speak better English albeit machine-gun style and do not give him MSG syndrome. If he had given a more objective view, I would be more inclined to believe him.

January 16, 2004 @ 7:48 pm | Comment

The issue is NOT China vs. India but the importance of educating one’s people, English being but one mark of that “global-oriented” education (I disagree with David about the Indian accent. I as an Indian American would love to talk to him and introduce him to others here or in India who speak as intelligibly as any white person).

China has taken a shortcut to success (capitalism without democracy and economic power without education of the masses). The shortcut may or may not work. In the case of India, us Indophiles want India’s development to be based on a sound foundation, not shortcuts.

Although I agree with Josh Marshall’s general thesis that India is underrated, I disgree that its democracy and rule-of-law are imperfect. They are not any more imperfect than in the US, where we have a President who didn’t have the majority vote, a President who’s appointing like-minded judges in great numbers. Democracy? Rule of law? Let’s not be self-righteous.

January 22, 2004 @ 12:19 am | Comment

I don’t think China is taking a shortcut to success. There CAN be capitalism without democracy. South Korea and Japan were not democratic states when they started market-oriented capitalist economies. The same was true with Taiwan. Yet they were able to grow significantly. It was only over the last recent decades that Taiwan and South Korea held free elections.

I think China will eventualy be more democratic in the Western sense, but it will take time. It might not be in our life-time, but they will slowly but surely grow more democratic. Elections have been initiated for the lower level officials. This democratization will continue while their economy continues to grow.

I think it is India that is trying to take a shortcut to success. How can you develop your economy without developing your infrastructure? How can businesses function when even the basic necessities are not met? For instance, there is always electrical blackouts in India, how can a manufacturing business or even an IT business function if there are power outages for hours at a time, several times a day, every day? How can goods be delivered in a timely manner when good roads are lacking? How can business communications remain when there is lack of infrastucture for it? Software development is in the head, but you need real development in the real world as well. That takes time, effort, and successful implementation of plans. Real world development.

March 7, 2004 @ 2:39 pm | Comment


April 23, 2004 @ 11:44 am | Comment

off lately i came across this page , while i was looking for some information on indian banking sector. I really bemused by the knowledge of people who have commented , i am quite sure they neither have any financial back ground nor any management thoughts. Any way most of you have come to a conclusion that Indian economy will not perform or outcast chinese. Inspite of being indian , i agere with your views but at the same time think over the instability of chinese banking sectors , land reforms , energy reverses (oil prices will cross 80/barrel in near future) and many more issues. We are educated to solve problems the make this world a worth living. If either china wins or india wins it is win-win situation.

Try to be humble ,humane and have some respect of drucker he has taught us a lot.

Ahmed Khan.India.

August 29, 2005 @ 1:14 pm | Comment

What’s also missing here is the concept of a single country and a single culture. China has it, India doesn’t. India is almost a confederation of subnationalities with ethnic/religious rivalries. Think of Jammu-Kashmir vs Tamil Nadu, are they even in the same country?

Drucker, being an old timer, assumes that if the British empire was around then the whole country is egalitarian in educational opportunities, ability to find work, and to learn English. This is simply not the case, China has more opportunities for its citizens to get the proper high school education to become effective workers overall due to communism whereas Indian high schools are separatists, in nature, and mainly offer the elites the opportunities to attend. This will then hamper the ability to increase the number of skilled workers as industries grow and mature. China, however, won’t have this problem. When China’s industrial base matures, it’s service sectors will follow suit very nicely.

May 31, 2006 @ 11:43 am | Comment

William: “concept of a single country and a single culture.”

Sieg Heil my friend.

Back to the topic.

1. Infrastructure in India is not a problem as there are alternative solutions being used to every issue.

2. Terror bombings don’t deter investments, MUMBAI sensex recovered quickly.

3. Companies are frustrated by sales in both India/China. What China has is a plus on is the FDI by its own people.

4. In short the banking system is so weak in China that we could see a repeat of the ’97 asian crisis. That doesn’t help considering that they’ve had over 80,000 riots last year and its increasing.

5. Labour prices are going up, factories are shifting inland or to India/Vietnam. In any case cheap labour cannot compete with robotics in the near future.

6. India/China have same issues with red tape, corruption, power politics etc. There are more regional conflicts with local governments undermining effective Peking rule.

7. Japan was a democracy after WWII when the economy recovered. South Korea had a corrupt dictatorship if I’m not mistaken.

8. China opened the economy in 1979, India in 1991. Howcan you make such ridiculous comparisons. It’s like comparing the tortise with the hare.

July 24, 2006 @ 3:12 am | Comment

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