Book : The Rise and Fall Of Nations: Ten Rules of Change In The Post-Crisis World
Author : Ruchir Sharma
Publisher : Penguin Random House
Pages : 401
Price : Rs 799
Author Ruchir Sharma has endeavoured to put in perspective the prospects of predicting which nations are most likely to rise and fall in an impermanent world. After the crisis of 2008 ended the illusion of the golden era, many people imagined that prosperity and political calm would continue to spread indefinitely.
With the world now witnessing slowing growth and mounting unrest, Sharma’s latest book – The Rise and fall of nations – Ten Rules Of Change In the Post-Crisis World – looks at a country’s political, economic and social conditions in real time to filter out the hype and noise. Having been on the road for a quarter century and travelling the world, Sharma believes slow population growth is eroding economic growth and ranks nations by how well they respond. By narrowing down the thousands of factors that can shape a country’s future, he outlines ten rules for identifying the next big winners and losers in the global economy.
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His rules are based on data collected over the years and analysing them at Morgan Stanley Investment Management where he is currently head of Emerging Markets and Chief Global Strategist. He has studied cycles of political complacency and revolt fuelling economic booms and busts. Of the original BRICs group, only India has hope of growing anywhere near as fast in the 2010s as it did in the 2000s.
When a country like Japan, China or India puts together a decade of strong growth, analysts should be looking not for reasons if the streak will continue but for the moment when the cycle turns. As a whole the world has a larger debt burden now than it did in 2008 which is the real issue.
In sum total it is all about people and population which could have a bigger impact going forward. There are no sweeping forecasts for the year 2050, only an objective effort to identify the most plausible outlook for the next five to ten years. The aim is having a practical person’s guide for spotting the rise and fall of nations in real time.
In 2010 China became the world’s second largest economy surpassing Japan which has since mobilised much more aggressively to restart economic growth and respond to the challenge of its political and military presence in Asia. In a world facing growing labour shortages, its all hands — human or automated – on deck. In a crisis a nation often demands for a change in leadership. They are looking for promising performers among the newcomers: the crises is likely to give them a strong mandate for change.
The Congress party government of Manmohan Singh, which ruled India for much of the 2000s came to believe the hype that the country was towering above other emerging nations. The national conversation shifted away from the reforms required to keep the growth strong and instead focus on how to spend the riches that Indians expected to flow indefinitely from a growth of 8-9 per cent. That shift was a clear harbinger of the sharp slump in growth in the 2010s. The occasional successes and frequent failures of political leaders are central to the rise and fall of nations and the circle of life offers a few guidelines for spotting which countries are about to enter a period of rapid growth and which are about to fall off the growth map.
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A good crisis raises the probability that a nation will embrace change and new leaders, but it is very hard to say which new leaders will be successful reformers. They are a rare breed and their efforts always face innumerable challenges.
The unusual thing about the Reagan, Thatcher and Deng generation was how in wildly different economic settings they settled on similar reforms to address their crises. As the United States and Britain started to recover in the 1980s, and particularly as China’s economy took off, these role models helped to inspire a new generation of reformers.
Indira Gandhi capitalised on the nationalist mood to rule India. For close to a decade she nationalised banks and strategic industries like coal and produced India’s worst decade of growth in the post-independence era. The evolving challenge for countries like India is that it is tougher and tougher to get into manufacturing and stay in it.
Since China launched its manufacturing drive three decades ago, the number of manufacturing powers has mushroomed and now includes Vietnam and Bangladesh. It has become harder for exporters to hold on to their customers because the entire sector has been shrinking worldwide.
The Asian Financial Crisis reached its height in 1998. It was criticised for vain glorious over spending by certain leaders including the then Malaysian Prime Minister, Mahathir Mohamad for meeting his unnecessary grand visions. Although a case can be made that services will come to rival manufacturing as catalyst for sustained growth; that day has yet to arrive. For now the rule is still factories first.
But in Manmohan Singh’s last five years, inflation was twice as high as the emerging world average and India’s ranking had fallen from the low 60s to 144th. The polls showed inflation along with scams and corruption played a major role in the government’s downfall. Inflation is now widely seen as an inevitable part of life, like death and taxes.
With two years into his term Prime Minister Narendra Modi has moved with surprising caution on economic matters. South Asia has been hampered by extremely low level of trade within the region. Modi has been bolder in dealing with neighbours than he has been at home. In the next five years the global economy will start giving way to a new set of circumstances entirely. Every nation is
destined to go through periods of expansion and decline, and none is destined to rise or fall forever.
In an impermanent world, the only constant is the turning of the economic and political cycles that govern the future. An interesting book despite some repetitions, it provides an overview of the vagaries of the global economy where the cycle of growth interspersed with periods of decline are inevitable.
