Ruchir Sharma is an investor, and has written widely on global economics and politics. As Chief Global Strategist and head of the Emerging Markets Equity team at Morgan Stanley Investment Management, he manages over $25 billion in assets under management. A long-time columnist for newspapers and magazines around the world, Sharma is the author of The Rise and Fall of Nations: Forces of Change in a Post-Crisis World (Norton/Allen Lane, June 2016) and Breakout Nations: In Pursuit of the Next Economic Miracles.
The Rise and Fall of Nations is my third book in the genre of finance and economics. The book takes us through ten rules of changes in the post crisis world. The factors that play a very important role in growth and development of a nation and prevent any downfall. I feel the author takes through all of these factors with detailed research and facts to make us understand their importance.
People play very important role not only in each other’s life and also contribute to growth of the economy and indirectly /directly the development of the nations. For four years of BC i.e before the crisis of 2008, the world was growing at higher phase and there was boom in the economy. But the situation turned around vice versa post BC and entered a period of AC i.e After the crisis.It is in the AC period the reality stuck the entire world. Hype surrounding globalization has led to a vice versa situation “deglobalization”. He also talk about countries that rapid growth and expected to have such continual growth and saw a rapid decline and also vice. He widely talks about how population growth, availability of talent tool and efficient talent pool have direct impact on the GDP. The impact on decline in population will have direct impact in the labor force and thereby effecting the economic growth. In many countries people entering the workforce is lesser than the population leaving out of workforce. These mainly due reducing fertility rates and early retirement age. Also its observed that many women are restricted from entering the work force as there is at least one rule restricting them from pursuing a career.
Also another way to add the work force and increase the talent pool is by welcoming immigrants. In countries like US, most of the workforce of engineers, tech professionals are represented by the immigrants. Refugee act as major source or addition to the workforce. They also add to the population, and hence impact on economic growth and GDP of any country. The book also talks about how countries can exploit and benefit from immigrants and also to attract more of them entering into their country.
With the advancement in technology, has always contributed to the development of any nation directly or indirectly. But it has also has significant impact on lives of individuals as well. But pros also comes the cons of advancement in technology as well. With advent of robot, and use of it in workplace in place of humans has caused fear of losing jobs and also of robots dominating us. The high density of robot are mostly found in countries like South Korea, Germany, Japan and China, to name a few.
The next factor the author talks about is how political scenario, type of governance, crisis prevailing in any country can also affect the economic growth. The author has given has given a detailed analysis to each point he talks about in the book. It makes understanding of factors, and it’s impact as he not only provides us deeper analysis, but also is support with appropriate data to support his point. He compares political cycle of any country to circle of life, where there are always going to huge growth and also downfall. There is never going to smooth for both economic growth as well the political temperament of any country. In life any crisis moment or downfall bring out best in the personal and him/her more stronger than before. Same applies in crisis in any nation. Any crisis or downfall inn economic growth in any nation, pushes the leaders to bring out the best reforms, cost cutting and bring about the stability in the economic growth. But also it has been observed, more the political leaders stay in power, they become stale and make growth becomes stagnant. He also about the monarchy, autocratic and democratic rule and how countries who fall into the mentioned category of rule have progressed in terms of economic growth. He also takes through the pros and cons of each rule to convey the none of them came be considered to best rule. It is one better over other some aspects and not better various other factors.
I have always heard rich getting richer and poor getting poorer. Living in a country like India, they is wide gap and inequality between wealthy billionaire’s and poor people. But I understood the complete impact of this inequality can impede the growth of any country. There few examples of countries which tried to bring out the balance in these gap, but at the cost of the growth. A country should concentrate on bringing in growth to the country and spreading out the wealth thereby minimizing the gap. But many countries fail to keep balance between the both. Also from the side of businessman it is important not only to create wealth for themselves and but also contribute to the growth of the countries. Achieving growth in business using political ties only benefit the business at the behest of nation’s growth.
Government spending on development of country, level of interference or meddling with the running of government offices and the also how privatization or development of entrepreneurial skill also are some factors which determine either growth or deterioration of the economic growth of the country. One important check to a certain whether the government is overspending is to check percentage of spending in correlation with GDP and how effective has it been in the growth. It is important not to just spend the money, but also to put to use in productive investments that accelerate the growth. For any nation it is also important to encourage the growth of new entrepreneurs, innovative ideas and technology to come up rather than cutting deals with the existing wealthy businessmen based in political benefits
He also takes through how geographic location, trade routes and strategies if adopted and implemented along with the trade policies can help any country grow. Also development of infrastructure facilities like strengthening of trade routes through road, efficient use of port makes is one factor which increases the visibility of any country and more friendly to trade with.
Investing in manufacturing and commodity and its growth as a part of GDP of a country is important for development and economy growth. This investment binge also leads development of other sectors such the road, supply network and other infrastructure facilities of the country. Concentrating on development of services industries may not and will not contribute most to economic growth and GDP of the any country. Only in country like India where service industry like IT has grown to huge extent and contributed to GDP and development other other relevant sectors.But the growth is not significant enough. Hence investment in manufacture sector is a good binge and lead to a strong growth of any country.
Inflation and deflation of prices plays a important role in development of any country and to decide on any investment decision. Inflation has become significant part of our lives and there is has rise in prices of goods and commodities and hence no incidence of deflation at all. The data suggest us that before 1930’s there has no incidence of high inflation that we see today. Both inflation and deflation has been under control and hence have strong economic growth. The general rule is lower is the inflation rate, is good for the growth of any country. But at same there both bad and good side of deflation as well. When the supply is more and demand is less, price reduces and leads deflation and that is not a good sign. Both of them have balance out and should be maintain at appropriate level for the development and accelerate the growth of any nation.
Usually the instinct is the that anything is cheap is good. But not necessarily it needs to be good. There many factors that needs to considered especially with respect to currency and economic growth of any country. The general rule is that cheap currency along with healthy and positive economic growth is always good. It also proves best to invest in those countries. High value in currency, obviously indicates fall of the economy which may due inflation. In many countries, they devaluate the currency rather than letting market to decide the price. This is done to artificially show growth and attract investment. But this is bad signal, despite cheaper price, there are no signs of healthy and stable economic growth. Any bad sign due to impact bad deflation or too much inflation, the locals are first to get the intuition and big players in the economy follow the them
Debt of any country as significant part of country GDP is also not a good sign and leads to fall of a nation. If the rise of debt is 5% for consecutive five years is followed by the slow economic growth and Fall of nation. It is hence important for a country to keep country and take measures to prevent the fall. These can understood by analyzing the current account of any country. If the trade deficit are more, so are the debt. Piling of debt and investing them in places which does not contribute to the development, increase in import of luxurious goods and lesser exports leads lower or no economic growth as well. The another rule is that if banks have deposits upto 80% then they are enough to lend money to borrowers.
The relation between the media and nation is of love and hatred. The more hype the nation gets that the growth of the country is good, then it is a clear indication that the growth is reached the peak and it falling down and vice versa. Most of the headlines published in TIMES is proved wrong in reality. There is no research that goes into or any integrity shown before publishing these headlines. When the economic growth reaches its peak and that is hyped about it as going good and expected even better growth to be posted by the country. But they are on the verge of downfall and they do. When they do downfall, the love for the country turns to hatred and then the existence of the region and country is forgotten about. It is at this time of negligence, the corrective measures are taken to rectify the mistakes and strong economic reforms are brought into leading to stable growth and back into the limelight. The book ends with based on the ten rules that are discussed in the book, the countries to look forward for growth, countries that were developed and have down to average and yet stable enough. Countries like Africa despite the current state and history with corruption, still show hope and signs of recovery and have economic growth if proper measures are taken.
For me as a reader, I felt that as progressed, it draggy and boring enough. Though he has given good enough examples and data to validate his statements, it way too much information too grasp for any person. And this is book i took longest to finish it off(2.5 months). That’s not usual time that I take finish off a book. Hence I would rate the book 3 on 5