Reviewing Ruchir Sharma’s Breakout Nations
(Rs. 419 on Flipkart, published by Penguin, released in April 2012)
Over the last six months, I’ve read about half a dozen books on comparative studies of economies and their policies to wrap my head around a few key questions:
- What makes certain economies prosper while others continue to languish?
- Why can’t those who languish simply borrow the recipes of those countries who’ve managed to turn their fortunes around?
- Is a certain form of government (democracy vs dictatorship for instance) a pre-requisite for rapid advancement of countries?
My verdict: Ruchir Sharma’s Breakout Nations manages to answer each of these questions in a nuanced and insightful manner, and I would hence rate this book 4/5 (i.e. “I strongly recommend”).
Mr. Sharma’s approach is novel in many ways (vs many academics/researchers who write similar books) – he doesn’t entirely depend on mind-numbing data crunching of macroeconomic metrics to arrive at his conclusions. Instead, he follows some peculiar “rules of the road” – a little unconventional yet utterly practical set of axioms for appreciating contexts of various economies and their present conditions. While you could argue he’s been more anecdotal than data-driven in some parts, I’d say it’s a matter of style. The best way to appreciate this book would perhaps be to think of each chapter (on a country) as a long-form op-ed and not a thesis. My hypothesis is – he was a business section columnist at Newsweek and WSJ earlier, and the book largely draws from that style of prose. Another noteworthy aspect of this book that struck a chord with me was that he doesn’t romanticize poverty or the poor.
This book aims to give the reader a primer on several “emerging” countries and tries to answer why they are the way they are and where are they likely headed within the next decade or so. Each chapter talks about one country. Luckily he doesn’t templatize his narrative for each chapter but he relies on his own experience within those countries, humanizes characters and weaves a story together. I particularly enjoyed going over his anecdotes for each country – which might delight you, infuriate you or quite often, lead you onto unstoppable bouts of laughter. Sample these:
- My team’s security details in Pakistan offer useful tips— like where to sit in a hotel lobby: always choose a small chair, not a couch, so you can quickly pull the furniture over you in case of an explosion
- Among increasingly brand-conscious young men in northern India it is popular to flaunt the red band of Jockey underwear over low-waisted denim jeans. In rural Bihar, where the Jockey brand is still out of reach, discount knockoffs with labels such as “Obama” enjoy brisk sales.
- In São Paulo traffic is so bad that the CEOs of major Brazilian businesses developed an alternative transport system: a network of landing pads on the rooftops of office skyscrapers, so that top executives can hopscotch from one corporate headquarters to another by helicopter
But the central theme of his book is – economic development is like a game of snakes & ladders and one truly has to have one’s ears to the ground to understand economic realities. He says locals always know first therefore measuring their levels of confidence and more importantly, their fund-flow probably serve as key precursors to what lies ahead.
Having said that, he lays out various examples of how different countries flourished – China for instance did so the old fashioned way – building roads to connect factories to ports, by developing telecommunication networks to connect business to business and putting unemployed peasants to work in better jobs at urban factories. It also went onto launch “big bang” reform every 4-5 years, and each new opening – first to private farming, then to private businesses, then to foreign businesses – set off a new spurt of growth. But that cycle has run its course.
Mr. Sharma is slightly guarded on his exuberance on India. He says: No other large economy has so many stars aligned in its favor, from its demographic profile to its entrepreneurial energy and, perhaps most important, an annual per capita income that is only one-fourth of China’s. But destiny can never be taken for granted… In a recent analysis Credit Suisse showed that over the last twenty years many Indian states have undergone rapid growth spurts, but only once under a Congress Party chief minister.
He continues to pick on unusual red-flags to judge the fate of economies instead of judging all countries with a standard set of macroeconomic metrics (other chapters include Indonesia, Brazil, Czech Republic, Poland, Turkey, South Korea and Taiwan):
- Mexico – a third of stock market value across several businesses is held by 10 families
- Russia – commodity price driven growth and rent-seeking behavior by cronies close to oligarchs leading lives resembling those of Roman kings
- South Africa – spends more on welfare than on education – cushioning current citizens from joblessness than preparing them for future jobs; also Gini coefficient of 0.7!
Mr. Sharma tries creating his own BigMac index equivalent for PPP via standard rates for Four Seasons Hotels, but I’m not entirely sure if this is the right metric to use. If quality hotel rooms are in short supply, prices will get bid up but that doesn’t necessarily mean the economy as a whole is more expensive on a relative basis. Also, this is less representative a proxy for measuring overall purchasing power of the economy than the BigMac for instance (the effect of inequality in a country could be masked in a product such as Four Seasons hotel room)
Overall, I’d highly recommend the book for its novel story telling approach and “rules of the road”, the nuanced perspectives on each economy (without Matrix like sequences of numbers on each page) and structure (if you wouldn’t want to read about Turkey for instance, you can simply skip the chapter and move on). Well done, Mr. Sharma — more power to your pen!
If you’ve read the book, I’m happy to discuss it with you. You can reach me @UtsavMitra on Twitter.