Book Review: The Rise and fall of Nations

The crisis of 2008 ended the illusion of a golden era in which many people imagined that prosperity and political calm would continue to spread indefinitely. The Rise and Fall of Nations rethinks economics as a practical art. By narrowing down the thousands of factors that might shape a country’s future, it spells out ten clear rules for identifying the next big winners and losers in the global economy.

Author’s ten indicators get a chapter each – Demography, scope for reform, inequality, quality of government regulations, geographical location as a source for trade, investment, especially in manufacturing, inflation, high rates of exchange (expensive country) or too low (inexpensive country), the rate of change in the debt – GDP ratio and the media hype that a country receives. Each chapter illustrates the relevance of the specific indicator by citing data from across the world. In some cases, there are precise quantitative guides.

Each rule looks at a nation’s political, economic and social conditions in real time to filter out the hype and noise. Author shows how, for example, slow population growth is eroding economic growth, and ranks nations by how well they respond. He describes the way cycles of political complacency and revolt fuel economic booms and busts. Amid growing tensions over wealth inequality, Sharma demonstrates How Billionaire lists yield clues to which economies are most or least threatened by social revolt.

In a period when the world is struggling with trillions of dollars of new debt, author explains which nations are most likely to avert this threat or buckle under it. He shows how to read political headlines, black markets, the price of onions, and billionaire rankings as signals of booms, bursts and protests. Set in a post-crisis age that has turned the world upside down, replacing fast growth with slow growth and political calm with revolt, this book is an entertaining field guide to understanding change in this era or any era.

The concluding chapter classifies the economies around the world into the Good, the Average and the ugly using the ten indicators grid. Author is bullish about South Asia – Pakistan and Bangladesh as well as India – but has some reservations about the quality of government intervention. China is ugly, that is, on its way down. Brazil, Canada, Australia, Russia all end up in the Ugly camp as they are at the mercy of the commodity price cycle. They overspend during the price rise and struggle when commodity prices slump. It is a pioneering field guide to understanding our impermanent world.