How can you not take to a book that begins with a charming description of the massive animal migrations of the Serengeti plateau of East Africa, considered to be among the 10 natural wonders of the wo
How can you not take to a book that begins with a charming description of the massive animal migrations of the Serengeti plateau of East Africa, considered to be among the 10 natural wonders of the world And that is not withstanding a title that is ponderous, a sub-title that belongs to the genre of self-help books abundantly displayed at airport kiosks, and a subject that is best left to the pinks and business channels. So you read, and quickly at that, for Ruchir Sharma is nothing if not an engaging writer, sure-footed in his chosen terrain with a commendable mastery of facts and tidbits which liven up his narrative of the otherwise arcane economic and financial details that are essential to serve his purpose.
Sharma is the head of emerging markets and chief global strategist for Morgan Stanley Investment Management at New York, a firm where he has worked for over 25 years. He is an acclaimed writer on economic matters. His first book, Break-out Nations, published in 2012, traced the history of nations that stood on the threshold of major economic success in the first decade of the century. Reviewing it in these pages, I had found it useful, in a tourist guide sort of way (Lonely Planet guide to economic growth, May 2012).
His new book, The Rise and Fall of Nations: Ten Rules of Change in the Post-Crisis World, is written much the same way, follows much the same approach, that of deftly combining hard economic data with interesting personal observations and insights the peripatetic Sharma collects by the sackful. This time I am tempted to compare it to the long articles that appear in the eminently readable Vanity Fair, in a manner aggressively pushed by the formidable Tina Brown, its former editor. That has its own limitations, some of which also apply to Sharma’s books, but more about that later.
The period of Sharma’s earlier inquiry in Break-out was when “the world enjoyed an unprecedented economic boom that extended from Chicago to Chongqing. Though the boom ran for only four years and its foundations were thin, many observers saw it as the beginning of a golden age of globalisation.” He calls this period BC: before the crisis. Post 2008 and the global recession, we are now in the AC years: after the crisis.
The world has changed immensely in the eight years of AC: “The new era is defined by slower economic growth in every region The world economy has been disrupted by forces of depopulation, the deglobalisation of trade and money flows, and looming need to cut back debt burden, or ‘deleverage’”. And that is without even considering the long dark shadows cast on the world by the Islamic State and the jihadists on the one hand and the looming spectre of Donald Trump as a possible occupant of the White House next year on the other hand. The earlier buoyant outlook in his circle of associates and colleagues is replaced by deep pessimism. Sharma does not subscribe to it and feels that: “Even with a lower baseline growth everywhere, we can still identify which nations are rising or falling relative to their peers. That is what (the) 10 rules try to do.”
And hence the aforementioned allusion to the Serengeti migration. The big cats are not the swiftest or the most successful hunters, the much despised hyenas are.
Multitudes of wildebeests survive in their teeming millions, depending on advance warnings of birds and monkeys, but lose their ilk to crocodiles while crossing the Mara. The elephants and rhinos are left unmolested (except by the poachers, but Sharma does not say this). The parallel to the comity of nations is apt, perhaps even a bit overstated.
How do animals and nations survive the dangers and flourish, or fail, to do so Sharma takes recourse to the fundamental trait that distinguishes human beings from other animals, i.e. finding patterns, which are not necessarily cause-and-effect related. That leads to his discovery of the 10 rules, much in the manner of long-run weather forecasts. Why 10, why not six or 13 There are no answers. I suppose the round number is the favourite of authors of self-help books.
Some of these rules have been common currency in a world constantly bombarded by 24x7 news channels: low deficits (both budgetary and balance-of-payments), less inequalities, a generally hands-off state, sustained low inflation and low debt are all indicators of a rising economy, and their absence portends decline. These norms are well-known and widely accepted, but Sharma uses a novel approach in their pursuit. How many billionaires and how many of them of a rent-seeking kind — those who grow rich from extraction or real-estate enterprises — are a good stand-in for determining equality
Whether people are buying more gold signifies their trust in the economy and willingness to invest And so on. Sharma has imposed his own, admittedly arbitrary, numerical limits on what is good and what is ugly. These ratios (inflation under four per cent, deficits in the low single digits), too, are well accepted and form the staples of budgets of most economies.
Sharma proposes his own growth rate criteria for judging whether a nation is rising, depending upon the starting point. Countries with average per capita annual incomes of under $5,000 would do well if they grew at five per cent a year; low-to-mid range countries ($5,000-$10,000) should aspire to three to four per cent, middle income countries (up to $25,000) should strive for at least 2.5 per cent, while the developed ones would be doing well with just 1.5 per cent. Only six countries now post a rate of growth of seven per cent (as against 60 in 2007), India leading the pack, albeit with “dodgy national statistics,” the only large country in the list.
So who would be the stars of the AC era Not many, according to Sharma. The United States, Peru, Argentina, Germany, the Czech Republic, Poland, Hungary, Romania, India, Vietnam, and Taiwan. Those stars of the BC period, identified in Break-out , China and Turkey, have now slipped into the ugly category and the break-out champion, South Korea, is now merely average.
Arguably, none of Sharma’s insights or conclusions is path-breaking. If one wanted original understanding of the events leading to the 2008 crisis, one would be advised to read outgoing RBI governor Raghuram Rajan’s Fault Lines or Nassim Taleb’s The Black Swan. Daron Acemoglu and James Robinson’s Why Nations Fail is a masterly analysis of the same subject as Sharma’s. On contemporary India, T.N. Ninan (The Turn of the Tortoise) and Vijay Joshi (India’s Long Road) offer far more depth.
One reads Sharma more for the approach and manner of presentation and not conceptual breakthroughs, much as one reads Vanity Fair for its verve and not its literary value.
That is what makes Sharma a genuine media star in the realm of the dismal science, lionised and toasted by editors and the commentariat.
So go ahead and enjoy the book, especially before a long journey. As a reviewer put it, perhaps a tad unjustly, you can start it anywhere. The fare offered will be more rewarding than the railway food or the airline cocktails. Whether you will arrive more refreshed depends entirely on your mood to start with.
Shreekant Sambrani is an economist and loves to read
