Ruchir Sharma has been a regular contributor of long and detailed articles in the Economic Times. I do read those, but a lot of times skip them for my lack of interest in macro economics and for the lack of time. Nevertheless, his articles are good and always have something new for me to learn. Given that this book got published only some months ago, I issued it immediately upon spotting it in the library. After reading Taleb’s Black Swan, my view has become more critical of predictions and the sub-title ‘In the Pursuit of the Next Economic Miracles’ stood out as an eyesore. I picked up this book, after a quick read up of the contents and few pages, not for any predictions but only for gaining a precursory understanding of the economic situation prevailing in various countries. I read this one as a reference to the past than as a crystal ball.
He begins with an experience of attending a swanky ‘farmhouse’ party in Delhi, where the “valets were juggling black Bentleys and red Porsches” and Kobe beef had been flown in from Japan and white truffles from Italy. Ruchir rattles off lots of facts – “over the course of any decade since 1950, on average only one-third of emerging markets have been able to grow at an annual average of 5 percent of more“, “only four companies – P&G, GE, AT&T and DuPont – have survived on the Dow Jones index of the top-thirty U.S. industrial stocks since 1960s“, “a Bellini costs a fortune in Rio” and many more (all of these, to remind you, are all facts based on what has happened and that is what I was more interested in when I picked up this book). By the term ‘Breakout Nations’ he means “the nations that can sustain rapid growth, beating or at least matching high expectations and the average growth rates of their income class“. He predicts a slowdown in China’s growth in the next 2-3 years, because China has become so large now that to maintain the same momentum of growth it needs greater absolute increase. He also gives a peek into problems in China: of exorbitant real estate prices, of crumbling rail networks (especially during holiday season), aging demography and rising wages.
The author also uncovers some interesting points about a forever favourite debate amongst the superpowers – about economic growth and political system. Ruchir states: “in 1980s, 32 nations were growing at a rate faster than 5 percent, and 59 percent of them were democracies; in the 1990s, 59 percent of the thirty nine high-growth nations were democracies; and in the 2000s, 43 percent of the fifty three were democracies. The total for the three decades: 52 percent of the 124 high growth countries were democracies“. And with this sword he cuts the imaginary umbilical cord between political systems and economic success – though not completely, because the rest, the 48 percent, were democracies. He calls this the 50/50 rule.
On India, he writes: “lot of young people and favourable demographics – but they are in the rural countryside which doesn’t mean anything for growth; corruption is high; points to the growth in South India owing due to technology and in North because of corrective actions; compares India and Brazil culturally and cites the example of why Orkut did better in both these countries (that’s the most ridiculous reason you would ever hear!); MGNREGA is pushing rural wage inflation upwards; points to hereditary politics (I loved the facts here); compares performance of Congress and others (this also I loved); how aspirational goods are being bought even in small towns but has only 6 cities in the explosive growth category compared to 23 in China“.
In the subsequent chapters he covers various nations – Brazil, Mexico, Russia, Hungary, Poland Czech Republic, Turkey, Thailand, South Korea, Vietnam, Taiwan, Indonesia, Philippines, Malaysia, South Africa, Nigeria, Qatar, Ghana, Sri Lanka, Ukraine, Singapore, Saudi Arabia, UAE, Oman and a couple more (some of the nations are covered only briefly). For Brazil, he says: its economy is one of the most costly and over hyped, restaurants in Sao Paulo are pricier than in Paris; it is world’s leading exporter of many raw materials; is a trade partner of China (the leading importer); spends too little on roads, seeks a secure ‘stability at any cost’ philosophy; productivity is very low; invests too little (again) in schools resulting in poor labour quality, shortage of engineers and technical workers and even high end hotels struggle to get hotel rooms cleaned. In Russia, he writes, there is no organized taxi service; millions of tons of meat and poultry is imported for consumption; the government spends very little – around 20 percent; roads are falling apart; more than half of Russians now depend on the state for a living; small and middle sized enterprises form a much lower percentage than in other emerging nations; has no global brand despite so many Nobel Prize winners; is home to 100 billionaires, the third in the world and does not make it even to the top 15 of BCG’s list of maximum millionaires’ countries – that’s a huge gap – no middle ground!; most of the billionaires are a result of crony capitalism. On Turkey, he writes: it has broken away from radical Islamists and offered a much moderate vision of Islam; debt and inflation have fallen and that Turkish exports are increasing in the Middle East. I feel for Turkey the author has been unnecessarily exuberant just based on cultural openness. And on South Korea he writes: the economy is very well balanced with a diverse set of industries (but so does India); services sector is missing there; research and development is very high on priority (which shows from Samsung, LG, Hyundai and Kia); exports in large numbers to China; has high school enrollment; banking sector is not innovative. The gold medal, finally, does go to South Korea though.
The Breakout Nations identified by Ruchir Sharma are: South Korea, Czech Republic, Indonesia, Poland and Turkey. My suggestion is that for people who are interested in economics, working in financial markets and those wanting to get the basics of economic scenario in various countries should read this. Treat this as a record of past performances and it will surely impress you. For the general reader, this book will not do because lot of technicalities of economics is discussed and I myself wasn’t able to comprehend some of them. Combining Pax Indica with this will be a good thing to do as it will result in a holistic view of diplomacy (as a tool for betterment of one’s own country). This has been less of a review and more of a brief of what is covered in the book – owing to the facts mentioned earlier.
Withered Papyrus 