The Hindu Business Line : Time to redraw `the wealth maps'

There is a future for wealth, assure Alvin and Heidi Toffler in Revolutionary Wealth, promising countless opportunities for entrepreneurs. Riding on that wealth revolution is India, the subject of Aaron Chaze's An Investor's Guide to the Next Economic Superpower. Both books offer a wealth of information to wallow in over the weekend, says D. MURALI.

At the end of a week that has seen waves of erosion on the charts, it may be natural to wonder if prosperity is, after all, a distant dream. Wait. There is a future for wealth, assure Alvin and Heidi Toffler in Revolutionary Wealth, from Alfred A. Knopf (www.aaknopf.com).

"Today's wealth revolution will unlock countless opportunities and new life trajectories, not only for creative business entrepreneurs but for social, cultural educational entrepreneurs as well," is their message for the Sensex-stunned and the stock-shocked. But there is a caveat: "Risks are not merely multiplying but escalating. The future is not for the fainthearted."

Defining wealth

That may hold a key to Monday, but what is wealth? According to the authors, it is any possession, shared or not, that has utility. "It provides us with some form of well-being or can be traded for some other form of wealth that does." Can you guess how and who started `the first true wealth system,' and when? The Tofflers postulate that the event would have happened ten millennia ago, when `probably a woman planted the first seed somewhere near the Karacadag mountains in what is now Turkey, and thereby introduced a way to create wealth.'

What's now blowing on is `the third and latest wealth wave', de-massifying production, markets and society. However, in countries such as China, Brazil and India, all the three waves are concurrently in action, one learns. "Vestigial hunters and gatherers dying away as First Wave peasants take over their land; peasants moving to cities for jobs in Second Wave factories; and Internet cafés and software start-ups cropping up as the Third Wave arrives." Wealth that the Third Wave promises can make what the forerunner systems produced minute in comparison, say the Tofflers.

`Deep fundamentals' are visible. Such as, more people working, but fewer, holding jobs. Division of labour is evolving so fast that you'd hear of `metallurgy and failure analysis litigation consultant' or `post harvest horticulturist.' "The latter is the super-specialist who determines such things as how many microscopic holes are needed to admit oxygen into the plastic bags that hold vegetables in the supermarket."

Economic advance can be hamstrung by laggard institutions, is an alert, in a chapter titled `The clash of speeds.' The authors cite the example of the SEC (Securities and Exchange Commission) of the US, which finds it difficult to cope with the pace of `complexity of the private-sector financial institutions it is supposed to regulate.' Similar millstones around the neck of `a hyperspeed, twenty-first century info-biological economy' can be `bureaucracy, clogged courts, legislative myopia, regulatory gridlock and pathological incrementalism.'

A chapter on `The arrhythmic economy' tells the story of how in Japan banks were not in rhythm with the economy. When retail stores there were operating around the clock, ATMs shut down at 5 pm. "Every new computer, software operating system, application or change in a network inescapably changes the tempo, rhythms and synchronisation levels in the organisation," note the authors. "Disparities in rates of change open countless opportunities for entrepreneurial synchronisers who, by synchronising some functions or organisations, create new disparities elsewhere."

Stretch `space' in part four of the book, which begins with `the great circle,' a chapter that marks 2003 as a watershed year: Six Asian nations, viz. China, India, Japan, Singapore, South Korea, and Taiwan overtook the EU or the US, with a combined GDP of more than $3 trillion. What you see is "monumental transfer of wealth and wealth creation across the world map."

If you, therefore, redraw `the wealth maps' of the world, you'd find that Cleveland is `the poorest big city in the US,' because it is "a victim of its past industrial success and its failure to move on as the Third Wave carried other parts of America toward the future." And Guangdong in south eastern China is a study in contrast. "Water buffalo pulled plows across paddy fields; now there are rows of factories producing computer chips, radios, toys and clothes," reads a quote from Industry Week, dated a decade ago.

A chapter titled `Twin tracks of tomorrow' looks at India `awakened' by the knowledge economy and technologies associated with it. The authors mention three factors as contributing to progress: "First, the wide prevalence of English makes contact and communication with the Anglophone world easier. Second, India is less export-dependent than China, thus less vulnerable to currency and other risks. And third, its less authoritarian, relatively open society is more likely to promote innovation."

Welcome to a young country

On that happy note, let me take you on a tour of India: An Investor's Guide to the Next Economic Superpower, by Aaron Chaze, from Wiley (www.wiley.com). "The rise of China has been a blessing for India since investors across the world, having seen the Chinese miracle unfold, now increasingly accept India as the next and probably last miracle mega-economy," starts the intro. The author first identifies the drivers of the opportunity surge. Foremost is the median age of the population, at a sub-25 level; a third of the numbers is less than 14 years old. "This youthful population — increasingly educated, entrepreneurial, and with rising disposable incomes — is the fulcrum of the opportunity in India, driving demand for everything from cars, brand-name clothing, cell phones and consumer electronics to real estate and a host of other goods and services, including insurance, health care and travel."

Studying the intellectual framework of our economy, Chaze notes that India's path to economic growth has `emphasised developing high-quality manpower and building a very strong service economy.' Success in these spheres "is beginning to provide the momentum and confidence to expand the manufacturing base." The author points out: "This is the reverse of what has happened in the rest of the developing world, and is worth emulating."

An interesting message at the end of a discussion of the political landscape is that India's economic destiny has been divorced from its political destiny. "And the political class now realises that they can mess around with the country's investment and growth potential only at their own peril." How heart-warming!

Section 2 of the book is `a guide to wealth creation in India,', with chapters on privatisation, commodities, and liberalisation. Chaze finds that commodity companies in India have high calibre managements, which have invested heavily in modernisation. "The amazing thing about the larger and well-run Indian commodity companies is that despite being constrained by capital cost, environment and labour cost considerations they are very often more profitable than most of their global competitors, and even more so when compared to their Chinese competitors that do not have the same constraints."

The book sees `opportunity unbound' in sectors such as automotive, chemicals, retail, real estate, entertainment and so on. Defence sector can be `the dark horse', says Chaze, referring to the many companies created by ex-scientific personnel. These cater to the Indian military establishment and could be the fastest growing, he hints. Insurance industry is `the only genuine virgin industry in the country,' he'd add, because "five years after opening up the insurance industry, the penetration rate is between 2 and 3 per cent."

Chaze counsels that India and China can create a sustainable advantage, by helping each other. This is how: "China by helping India build up its physical infrastructure quickly, and India by helping China build its systems and knowledge-based economy."

Both books offer a wealth of information to wallow in over the weekend, after a Friday that seemed to have played out fairly well on the bourses.

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Time to redraw `the wealth maps'