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.

Breakout Nations

Ruchir Sharma is a head of Emerging Markets and Global Macro at Morgan Stanley Investment Management. He generally spends one week per month in a developing country. He has been a contributing editor with Newsweek and has penned essays for publications such as Wall Street Journal, Financial Times, New York Times, Foreign Affairs, and Economic Times. He is the writer of Best International Economic Book “Breakout Nations.” Recently, I finished reading this book and it is the most interesting book on economic landscape.

The book takes on a life of its own as it delves in depth into each country and its economic drivers. China, India, Brazil, Russia, Mexico, Europe, Turkey, South Korea, Japan, Taiwan, USA etc all find a mention and an analysis. This book tells the in depth economic conditions of every country. It also covers past crisis of Asia, USA, Europe, and ASEAN countries. This book is also a revelation as well as treasure trove of information and ideas. In this book, Country Specific notions, are challenged and disproved such as in the section of consumer demand in China. Country specific problems that can hold it back are analysed in short and power pack sections like welfare, investments of Indian Businesses abroad in a time when the home country is in urgent need of capital.

It also contains graphs and numerical which tells comparisons and analytic view of each country. Each nation’s problems as well as enablers find adequate mentions giving a nice balance and flow to the analysis, as well depth and convincing power. Economic, political, crimes, as well as other problems find adequate coverage. Some problems like crony capitalism in India, welfare state in Brazil, political situation in Russia, olipolistic nature of Mexico, and rising inflationary trends in India are covered in depth. Each factor that can affects growth are looked at.

The objective of this book is to identify Breakout Nations- the nations most likely to succeed. Both conventional factors and unconventional factors approach in this book is right. For example, the analysis of number of Billionaires in a nation is a revelation. Overall, this book first, teaches one how to properly analyse a market or a nation. Second, it is a handbook of emerging markets. It gives a perspective of entire emerging market in a short.

A word on writing style, it is simple and easy to understand. One does not need to be a professional economist to understand the book. This is perhaps the most powerful plus point of this book. It makes the entire pitch in very simple, easy to understand and comprehend prose. It avoids needless details and voluminous analysis. The analysis is short and up to the point. This makes for a fast read and it makes for easy absorption of the material presented in the book.

As the Breakout Nations identified, be prepared for a surprise. Read the book to learn more, and open your mind to new ideas and thoughts.