Amy Chua (professor at Yale University) investigated how countries become so called ‘hyper powers’ and than fall. She investigated the rise and fall of the Roman empire, Persian empire, Tang empire in China, Mongolian empire, Dutch empire and the English empire. The main finding of her is that tolerance towards people with other believes and culture is one of the main preconditions to become a hyperpower. One of the reasons the United States was/is a hyperpower is their tolerance towards its inhabitants and importing well educated foreigners to boost its capabilities to innovate.
She points out that the lack of tolerance within China for non-Chinese will be a reason why China cannot become a hyperpower like the U.S. The Chinese are too nationalistic to exceed the U.S. in terms of innovation, dynamics, creativity and technology. And these characteristics are required to dominate from an economic or military perspective.
After staying in India for a year I can say that Indians are a very proud people, but that I never felt left out or being looked down on. On the contrary, the typical Indian is open minded and wants to learn as much as possible from Western countries. The ‘disadvantage’ India has over China is its very complex and slow democratic system which limits the speed the infrastructure, government and education system is changed.
So what does this mean for offshore outsourcing and setting up a captive? In the near term there are no effects as the main reasons to outsource to China is the low cost of labour. But low cost is not a sustainable competitive advantage as other countries are or will be cheaper as China develops itself further. Retaining the position of an attractive outsource and captive destination requires them thus to innovate and that requires a dynamic and open economy. The question is thus whether the strong national sentiments will be replaced for a more open and tolerant society enabling them to become at par at Western societies.
From the perspective described above am I a bit more positive on the outlook for India even though it still uses the cast system to suppress large numbers of fellow Indians and its nationalism. It is however much more tolerant towards other religions (Buddhism, Jainism, Sikhism, Christianity, Zoroastrianism, Judaism and Islam) than China. I believe that this tolerance is one of the pro’s India has over China. Question is how important this factor turns out to be in their race to become a dominant global BPO player.