The economics has become the vehicle of growth, prosperity, and development of countries in the world in the era of globalization. In fact, the question here is why we are more worried about economic growth, economic development, and prosperity? What is the need to talk about emerging nations? Why should we care about “Breakout Nations”? And why will some countries be emerging as breakout nations, some will be frontier countries[i] and some will remain insignificant with respect to economic growth and development.
Ruchir Sharma, an investment banker and keen watcher of economic happenings around the world in this book takes us on a journey where he picks the countries who will be the next economic miracles of the world. Finding reasons, causes and set formulas for economic growth and subsequent economic development of the nations was a never-ending quest by the authors of various milieus because everyone wants to step up the ladder of the success of economic growth.
The author discusses his experiences and nuances of more than twenty countries in 280 pages of this book with stimulating details incorporating the flavor of colloquial language and examples. The most important argument of the author is that we need to understand and analyze the emerging markets as ‘individual nations’ and he is wary of the ‘idea of emerging nations as a group’. In this context, he is skeptical of the sustainability of the BRICS[ii] group because the countries have competing political interests and there are stark differences between these countries in terms of commodity importers (India and China) and commodity exporters (Russia and Brazil).
The author is more interested in studying the individual countries by traveling to those places and trying to understand, “whether the political regime gets the connection between good economics and good politics” than commenting as academicians without getting the feel of the ground reality. In the whole book, the author has come out with various “Rules of the Road” to recognize the potentiality of the real breakout nations.
The author also gives his insights regarding the great debate of the impact of the political system and institutions on the economic growth and development. In fact, his latest book, The Rise, and Fall of Nations: Ten Rules of Change in the Post-crisis world is a further development of the same idea where he tries to give ten rules which need to be considered to evaluate the rise and fall of the nations. He rubbishes the idea that political system or the institutions are responsible for growth and development of the economy and their subsequent achievement of prosperity and remaining poor. “It’s’ not the type of the system that matters, it is the stability of the system and, even more important, whether the leaders running it understand the basics of economic reform”, says Ruchir.
He compares the country of China which has surpassed all the growth expectation and emerged as the successful example of command-and-control capitalism with the economy of Vietnam, which is not growing despite being a command economy. As per the author, any particular system has an only fifty-fifty chance on its economic growth and successes. In this context, he criticizes the grand theories on the ground of their emphasis on one factor in terms of institutions, geography, or culture to explain the rise and fall of the nations. He also finds faults in their building of narratives with historical facts as well as giving long-term predictions about these countries as a foolish approach. In fact, the book “Why Nations Fail: The Origins of Power, Prosperity, and Poverty” [iii]by the authors Acemoglu and Robinson provide a comprehensive analysis of various hypothesis for the rise and fall of nations. In this book, they argue that the “institutions”- political as well as economical act as deciding factor in the growth and development of any country. However, Sharma does not agree with this hypothesis and focuses more on the role of political leadership which is responsible for steering the economy towards growth and prosperity and also towards disaster if they don’t get the basics right.
In this book, Sharma starts with China, India, Brazil, Mexico, Russia, going to Eastern Europe, talking about Czech Republic, Poland, Hungary, coming to Turkey for which he is bullish, shifting towards South-East Asian countries, Indonesia, Malaysia, and turning towards the African continent with billion opportunities and finally talking about gold-medalist countries of South Korea and Taiwan. He also gives an interesting perspective that breakout nations can also emerge in the Western world in the USA, Germany, Spain, and Ireland.
The whole narrative of the author is based on his personal travel experiences to these countries and anecdotal evidence but if we compare in general the views given by the author are very much similar to the book “Why Nations Fail”. This book says that institutions matter but Sharma says, “No, Individual leaders who are at the helm matter”. There is a question: Who came first: Institutions or Individuals? Individuals are part of the institutions or they are the one who created, sustaining and influencing the system of institutions. Both the books talk about Mexico, Russia, North Korea countries in a negative perspective because of their institutions and leaders respectively. In all the countries discussed by the author, he names the different leaders of the respective countries to emphasize their role in the economic growth and development.
In fact, if we deeply introspect, institutions as well as the leaders who are the decision makers both responsible for the growth, development, prosperity as well as bringing doom and poverty for any nations of the world. It is very complex and humanly impossible to factor all the causes and reasons behind the rise and fall of nations. In fact, many things are at play at the same time. It is a full bucket of things which will turn the nations towards prosperity as well as poverty.
Regarding his criticism of the BRICS grouping, now there is enough evidence to refute his proposition. For instance, these countries have announced “New Development Bank”[iv] in 2012 and other institutions which are going to challenge the erstwhile Bretton Woods System[v]. BRICS grouping led by China and India will emerge as a formidable force[vi] in the world in recent years. Though the countries of the group have different potentials, they can also find common grounds to collaborate with each other in the coming future.
This book was written in 2011 when there was lot of chaos in the Middle East due to ‘Arab Spring’[vii], In India, the India Against Corruption[vii] movement led by Anna Hazare was going on in the wake of spate of scams in the UPA II government, emergence of Turkey as a successful Muslim model for growth etc. Similarly, there were various other developments in other parts of the world. These things have influenced the writer in creating his perspective.
The author paints a bleak picture of China because of its heavy debt, increasing labor costs, and overcapacity in the infrastructure sector. He is also not bullish about India. In the last seven years, many things have changed in India. The new government came into power at Centre and they brought various radical and forward-looking changes to create a conducive climate for growth and development. So, we can’t judge the country just by looking the few days experiences and few years performances.
It is very complex and unimaginable to predict various economic parameters for any country and especially for a diverse country like India with a subcontinental dimension and federal structure where the states are also acting dynamically to attract investment in the spirit of cooperative and competitive federalism. However, he looks Turkey under the leadership of Recep Tayyip Erdogan[ix] as a breakout nation and a role model for the Muslim countries in the Middle East. However, in just seven years, things have changed much in Turkey after the emergence of ISIS[x] and the last year coup[xi] in Turkey. In fact, author himself agrees that it is very difficult to forecast for the future growth in these complex societies and these days things are changing very fast, which cannot be ignored in the context of providing an explanation for the future economic growth in various countries of the world.
However, the author conveys the economic concepts, nuances, and intricacies of the investment and forecasting in a very easy-going story-line to make his points that the nations need to be studied and analyzed on an individual basis and there should not be any grand narratives and club different states into same groups. The book was interesting in terms of knowing smallest details of various countries in terms of high charges of hotel rooms in Brazil as compared to the USA etc. and how they can be related to their economic fundamentals and future growth story.
[i] https://en.wikipedia.org/wiki/Frontier_markets
[ii] https://en.wikipedia.org/wiki/BRICS
[iii] https://ritambharachaitanya.wordpress.com/2017/05/02/review-of-the-book-why-nations-fail/
[v] https://www.thebalance.com/bretton-woods-system-and-1944-agreement-3306133
[vi] http://www.indrastra.com/2017/06/PAPER-The-Emerging-Role-of-BRICS-in-the-Changing-World-Order-003-06-2017-0054.html
[vii] https://www.sourcewatch.org/index.php/Arab_Spring
[vii] http://www.indiaagainstcorruption.info/
[ix] https://www.theguardian.com/world/recep-tayyip-erdogan
[x] https://www.nytimes.com/topic/organization/islamic-state
[xi] http://www.aljazeera.com/news/2016/12/turkey-failed-coup-attempt-161217032345594.html
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