- Hardcover: 464 pages
- Publisher: Penguin UK; Latest edition (11 June 2016)
- Language: English
- ISBN-10: 0241188512
- ISBN-13: 978-0241188514
- Product Dimensions: 16.2 x 4.1 x 24 cm
- Average Customer Review: 118 customer reviews
- Amazon Bestsellers Rank: #977 in Books (See Top 100 in Books)
The Rise and Fall of Nations: Ten Rules of Change in the Post-Crisis World Hardcover – 11 Jun 2016
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Filled with amazing data ... fascinating insights and revealing anecdotes, this is quite simply the best guide to the global economy today. Whether you are an observer or an investor, you cannot afford to ignore it. -- Fareed Zakaria
There is nothing theoretical or abstract about this work. [Sharma's] new book adopts the same approach that served him well in his 2012 survey of emerging markets, Breakout Nations, considering the views of village barbers alongside those of presidents as he works out whether the fundamentals of the countries he considers suggest a more bearish or bullish stance. ... All of these views are not meant to be written in stone: Sharma believes long-term forecasting is a fool's game. But for insights into the forces operating in our world today, The Rise and Fall of Nations is a stimulating and useful guide. -- Henry Sender Financial Times
The Rise and Fall of Nations has three aims: to assess the crash; to dismantle the analysis that led investors and economists to get overexcited; and to offer a new framework for thinking about emerging countries. The result is ambitious. It covers four-fifths of the world's population and 40% of its GDP ... it is also entertaining, acute and disarmingly honest. Instead of pious statements about poverty, or portentous mutterings on the importance of American leadership, Mr Sharma sees the world from the ruthless and restless perspective of an investor ... He has a knack for sharp comparisons between countries. ... If Mr Sharma is right that global capital flows will remain depressed, and that developing economies face a pedestrian future, then the hot money chasing them will recede-as, perhaps, will the influence of famous fund managers. Until then, Mr Sharma's book is a fine guide to the great emerging market boom and bust. -- The Economist
Ruchir Sharma is a shrewd and thoughtful observer of emerging markets. His insights deserve the attention of all who care about the future of the global economy. -- Lawrence H. Summers
This efficient, positive guide for the practical observer and investor shows how to choose healthy emerging markets. ... Evenhanded, measured, sage advice on the global economy. -- Kirkus Reviews
Articulate ... Highly recommended to all readers interested in global economics ... Sharma presents a wealth of data and insights into the economic condition of the post-2008 world ... Some of his conclusions may seem jarring but are always thought provoking --Library Journal
Sharma's wealth of knowledge ... and ample experience on the ground are strong foundations for his exploration of what makes economies break out, or break down. --Reuters
For sheer readability and insight on the developing world drama, I dare say you won't find a better choice. --Wall Street Journal
A vital guide to the new economic order. It's a new world, and investors are looking for a roadmap to help them capture whatever return they can. Ruchir Sharma's new book, The Rise and Fall of Nations: Forces of Change in the Post-Crisis World, provides a guide. ... Sharma's new book is ambitious in positing new rules that investors should take into consideration as they think about the growth prospect of all nations, developed and developing, in the coming economic era of bifurcation, political populism, growing inequality, and uncertain technological disruption. ... One thing that sets Sharma's take on the new world apart straight away: He isn't making 20, 30 or 50 year predictions about who will fare well or poorly as many banks like Goldman Sachs, or consulting groups like McKinsey have lately been wont to do. He points out sharply that even when all the economic vectors seem to be leading in a certain direction, unexpected human behaviour, usually in the form of political change, can shift everything in a heartbeat ... Rather he looks to help readers navigate this turbulent world with rules that can help them identify which countries might, over 5 to 10 year time horizons, rise, fall, or muddle through. -- Rana Foroohar, Times
He writes interestingly and well. ... The nub of the book is ... how to spot which countries are likely to succeed, and which to fail, in this impermanent world. Sharma offers a framework of 10 rules. The more of these rules countries achieve, the more they are likely to rise rather than fall. It is a good approach... The book is rich in example and anecdote, which lifts it above the usual airport business book. And it may just help you avoid picking losers. -- David Smith, The Sunday Times
About the Author
Ruchir Sharma is Head of Emerging Markets and Chief Global Strategist at Morgan Stanley Investment Management. With more than $20 billion of assets under management, Ruchir is one of the world's largest global investors. He typically spends one week every month in a different emerging market where he meets leading politicians, top CEOs and other local characters. He has been with the firm for 19 years and is currently a member of the Executive Committee of the Investment Management division.
Ruchir has been a writer for even longer than he has been an investor. He started writing at the age of 17 for India's largest economic daily, The Economic Times and is now a frequent contributor to the op-ed pages of The Wall Street Journal, The Financial Times, Foreign Affairs and The Times of India. His essays have also appeared in, Time, The New York Times, Foreign Policy, Forbes and Bloomberg View. For much of the last decade he had been a contributing editor and regular columnist for Newsweek International.
Ruchir may be most well-known for his 2012 book, Breakout Nations: In Pursuit of the Next Economic Miracles. Breakout Nations debuted as the number one bestseller in India and earned Sharma the Tata Literature Live! First Book Award for 2012. Breakout Nations also made the Wall Street Journal hardcover business bestseller list and was chosen by Foreign Policy as one of its “21 Books to Read in 2012”. Ruchir’s next book, The Rise and Fall of Nations: Forces of Change in the Post-Crisis World will be released in June 2016.
Bloomberg named Ruchir one of the top 50 Most Influential people in the world in October 2015. In 2012, Sharma was selected as one of the top global thinkers by Foreign Policy magazine and in June 2013, India's premier weekly magazine Outlook chose Ruchir as one of The World's 25 Smartest Indians. The World Economic Forum in Davos selected Ruchir as one of the world’s “Top Young Leaders” in 2007.
Ruchir is especially passionate about politics and has formed an informal group of senior Indian editors and writers with whom he travels extensively before major state and national elections; usually logging in over 1,000 miles over 4-5 days, meeting with the nation’s top leaders and getting a first-hand feel of local politics. Ruchir's other interests include athletics and a serious commitment to running. Despite his extensive travels, he tries not to miss a single day of training no matter where he is in the world. He regularly trains with a former Olympics coach and competes in sprinting events. In 2011, he represented India in the World Masters Athletic championship in Sacramento. Ruchir is a movie buff and makes it a point to attend major film festivals anytime he can take a moment away from his investing, writing and running. He also has a fascination with wildlife and his annual safaris inform the prologue to The Rise and Fall of Nations, a meditation on how witnessing predator-prey behavior on the African plains has shaped his rules for national survival and success in the global economy.
From the Publisher
A Conversation with Ruchir Sharma
Ruchir Sharma is Head of Emerging Markets and Chief Global Strategist at Morgan Stanley Investment Management. With more than $20 billion of assets under management, he is one of the world's largest global investors. He is also the bestselling author of “Breakout Nations”, which came out in 2012. His second book The Rise and Fall of Nations: Ten Rules of Change in the Post-Crisis World serves as a practical guide on how to read political headlines, world billionaire rankings, the price of onions and popular news magazine covers to determine signs of booms, busts and protests in the coming era of political populism, growing inequality, and technological disruption. This book is a must read for those who wish to understand the rules that investors should take into consideration when accessing the growth prospect of all nations, developed and developing, in the new economic order. Excerpts from an interview with the author.
Q: On the road in 2013, interviewing locals in Madhya Pradesh and Rajasthan about the forthcoming election, you found that inflation was the foremost issue on voter’s minds, foreshadowing the fall of the national government. Why was this such a pivotal issue?
A: Ruchir Sharma: India was caught in one of the worst bouts of inflation in its post-independence history. The Manmohan Singh government was in its second five-year term, with prices rising at an average pace of about 10 percent, but top officials kept downplaying the problem, saying high inflation is normal in fast growing economy. That claim is not only historically inaccurate—high inflation tends to kill rapid growth—it also ignores how painful rising food prices are for ordinary people. Like many technocrats, Singh was out of touch with public opinion, even though the public anger was obvious on the campaign trail. From Bindh to Pushkar, barbers, carpenters, even farmers would angrily reel off to the exact rupee the increase in prices for potatoes, ghee, and onions over the last five years. Congress lost those state elections, and went on to suffer a landslide defeat six months later in the national elections. The polls showed that inflation played a major role in its downfall.
Q: “The Price of Onions” is one of 10 rules you use to anticipate the rise and fall of nations. Why is inflation such a big problem?
A: Ruchir Sharma: The problem of inflation is well known, what I emphasize its usefulness as a warning sign. The miracle economies like South Korea, Taiwan, Singapore, and China, which saw booms lasting three decades or more, rarely saw inflation accelerate to a pace faster than the emerging-world average, because they were investing heavily in supply networks. On the other hand, if a country has not invested enough in these networks—factories, roads, schools to provide a supply of talent—then when the economy is picking up speed, supply will quickly fall short of demand, and prices will rise. At the point, the central bank will have to act, raising interest rates to contain inflation, which will also nip growth in the bud. Rising inflation is thus a sign that the economic engine is weak, incapable of sustaining rapid growth—a longstanding problem in inflation prone countries like Brazil and India.
Q: In 2007, the year before the global financial crisis, you write, more than 60 nations were growing at rates of at least 7 per cent a year; today, only nine countries can make that claim. What is happening?
A: Ruchir Sharma: A return to normal. The boom last decade was uniquely broad and strong, driven by a combination of forces including easy money, growing trade and capital flows, and rising commodity prices. Now, as those forces recede, the world is returning to its usual conditions, in which booms, busts and protests are normal.
Q: You build your chapter on “the Kiss of Debt” in part around China, which by 2013 had rung up “the worst debt binge” ever in the emerging world. Why did China embark on this binge, and does it matter for the rest of the world?
A: Ruchir Sharma: China’s debt boom was a deliberate choice. Before the global financial crisis in 2008, Beijing appeared ready to accept the fact that China was entering the middle income, middle age stage of development, in which growth slows naturally. After the crisis hit, Beijing seemed to panic, thinking that if the global recession reached China, it would stir up social unrest. So it unleashed government spending and lending that kept growth high for a while, but that emergency stimulus has turned into a permanent campaign. Now, China is indeed in the midst of biggest debt binge ever in the emerging world. Its debt burden is slowing economic growth, and threatens to trigger a financial crisis. The worldwide impact would be significant, because China’s economy, artificially bloated by debt, is now the single largest contributor to global growth.
Q: You write about “good billionaires” like the tech tycoons of China and Silicon Valley; why are they good and what impact do they have on the global economy?
A: Ruchir Sharma: I track billionaires because it is increasingly clear that rising wealth inequality undermines economic growth both directly, and by fueling the rise of angry populists more focused on redistributing than creating wealth. I reserve the label of “good billionaire” for tycoons in industries that are known to make the most productive contributions to economic growth or that make popular consumer products like smartphones or cars. These “good” industries range from technology, to pharmaceuticals and entertainment, and they are least likely to generate popular national backlashes against wealth creation. The rise of good billionaires is a sign of stable growth, and it is now visible from China to India and the United States.
Q: You write of “the rise of angry populism” in the United States. How serious is that threat?
A: Ruchir Sharma: Just look at the presidential candidates, including a billionaire who is threatening to deport Mexicans, bar entry to Muslims, bully journalists, all while promising to “make America great again.” The rise of angry populists goes well beyond the United States. Frustrated by the economic stresses of a slow growth world, including weak wage growth and rising inequality, voters are turning to strongmen in the hope that they can force through quick relief. My research offers a stark warning, however, to any country tempted to put its trust in an autocrat. The historic pattern is clear: steady growth is more common under democratic governments, erratic boom and bust periods are more common under autocratic governments. So electing a strongman is likely to backfire against people yearning for stability.
Q: You name Russia as the capital of the “bad billionaires”. Who are the bad billionaires, and why is Russia home to so many?
A: Ruchir Sharma: Bad billionaires arise in “rent-seeking industries,” ranging from construction to real estate, mining, oil and other commodity industries that mainly involve digging natural resources out of the ground. Competition in these sectors is often focused on securing access to a greater share of the national wealth in natural resources, not on growing the wealth in fresh, innovative ways. Major players spend a lot of time trying to win over regulators and politicians to secure ownership of a limited resource and the right to extract the maximum possible rent from that resource, by bribery if necessary. Even in nations where these industries are relatively uncorrupt, they tend to make weak contributions to steady economic growth, either because they are relatively unproductive or because they tie a nation’s growth to the volatile swings of commodity prices. Russia is the capital of bad billionaires because it has done little to diversify away from commodity industries, which are increasingly tied to and controlled by the Kremlin.
Q: Japan on the other hand seems to have relatively little billionaire wealth, and you suggest this too is a bad sign. Why?
A: Ruchir Sharma: Japan is an anomaly. Billionaire wealth amounts to only 2 percent of GDP, well below the 10 percent average for developed countries, and one cannot help but suspect this is a symptom of the economy’s chronic incapacity to create significant wealth. While it seems a bit odd to argue that any billionaire class is too small for a nation’s good, that may be the case in Japan, and some Japanese seem to realize this. They have a word, akubyodo, which translates as “bad egalitarianism” and is used by critics to describe a corporate and political culture that rewards seniority more than merit and risk-taking, and depresses growth.
Q: You say the rules are all about balance, but when it comes to the government role in the economy, you argue in the “perils of the state” chapter that right now less is better. Why?
A: Ruchir Sharma: The question of how much government spending is too much is always tricky, especially so amid today’s ideological wars. The reality is that the state is the only investor large enough to build infrastructure like roads and bridges, but the size of government needs to be manageable so that it can be focused on a few key tasks. When the state is spending too lavishly on free food or subsidized gas or on running loss-making hotels and airlines, the whole economy will be poorer in the long run. In recent years, many governments have been intervening heavily in an effort to fight the global slowdown, and most would indeed gain by backing off now.
I have to admit, however, that my own views have been shaped by growing up in India, a country where the lingering socialist influence still creates many glaring examples of government intervention gone wrong: for example, a public school system in which teacher absenteeism runs as high as 45 percent in some states, because candidates often pay to obtain tenured positions, then don’t bother showing up, taking a second job in private schools instead.
Q: You are especially critical of state banks in India, what’s the problem there?
A: Ruchir Sharma: One advantage of a system that compares countries across ten key rules is that the outliers, the nations that are most out of balance, will always stand out. In India one of the biggest obstacles to faster growth is a state banking system that controls 75 percent of all loans, more than double the emerging-world average. A striking 15 percent of state bank loans have gone bad. Credit growth is held back by the sclerotic banking system, and Indian businesses remain very wary of investing at home. The state banks are a ripe target for reform, but in a country with deep socialist roots, privatizing even some loss-making state banks is seen as too heretical a step, despite the clear superiority of the private banks.
The private banks in India tend to be independent not only of the state but also of control by large tycoons or conglomerates, which is quite unusual in the emerging world. By 2014, less than 4 percent of private bank loans had gone bad. The superior performance of private banks was no secret, certainly not to the stock markets: Between 2010 and 2014 the total market value of private banks rose by about $30 billion, while the total value of state banks fell by about $30 billion. This was the markets’ way of voting on which banks are well run and which are not.
Q: You are optimistic on countries such as the US, Germany, Czech Republic and Romania. Why do they rank well on your rules?
A: Ruchir Sharma: An essential principle of my system is to avoid getting too focused on any one storyline or explanatory theory; use a wide lens, and surprises are less likely to hit you from the side. There is no one explanation for why these countries rank well—they each score reasonably well on a selection of my ten rules. I would note, however, that at a time when the world economy has been disrupted by slower population growth, weakening trade and capital flows, rising debts in the emerging world, and more meddlesome governments, everyone needs to rethink the math of success. For rich nations like the United States and Germany, the benchmark should fall from 3 percent to 1.5 percent. For poorer countries like India, the old definition of fast growth used to be roughly seven percent or better, but the new definition needs to come to around 5 percent. A more reasonable definition of success will prevent countries from wasting money trying to hit growth rates that are no longer attainable, in the post crisis era.
Q: You argue in passages on “the myth of the long term” that any forecast looking more than five to ten years into the future makes no sense. Why?
A: Ruchir Sharma: Trends in globalization have ebbed and flowed ever since Genghis Khan secured commerce along the Silk Road in the twelfth century, and the cycles of business, technology, and politics that shape economic growth are short, typically about five years. The election cycle, too, runs for around five years on average, and it can usher in reform-minded leaders with the potential to shake up stagnant economies. As a result, any forecast that looks beyond the next cycle or two—five to ten years at most—is likely to be upended. It also makes nonsense of recent talk of the coming Asian or even African century.
One aim of my book is to nudge our discussion of the world economy away from the indeterminate future to a more practical focus on the urgent job of spotting the next booms, busts, and protests. Predictions for the next twenty to one hundred years cannot possibly be fulfilled when new economic competitors can arise within five years, as China did in the early 1980s, as Eastern Europe did in the 1990s. In any five-year period, a new technology can spring seemingly from nowhere, as the Internet did in the 1990s and as new digital manufacturing techniques like 3-D printing are doing now. In the postwar period, even the longest periods of “super-rapid” growth have lasted less than a decade on average. So the longer a streak lasts, the less likely it is to continue as excesses build up in the country and the politicians turn complacent. When a country like China or India puts together a decade of strong growth, analysts should be looking not for reasons the streak will last a century, but for the moment when the cycle will turn.
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