Book Review Exercise

Presented by:
1. Shubham Jagtap (20252)
2. Abhijeet Raut (20254)
3. Ishwar Maheshwaram (20255)
4. Prajwal Tembhare (20256)
5. Febin Thomas (20258)

Breakout Nations- In Pursuit of the Next Economic Miracles

-Ruchir Sharma

About the Author: Ruchir Sharma is an Indian- investor and fund manager who 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 $20 billion in assets under
management. A long-time columnist for newspapers and magazines around the world, Sharma is
the author of ‘The 10 Rules of Successful Nations’, ‘The Rise and Fall of Nations: Forces of
Change in a Post-Crisis World’ and ‘Breakout Nations’.
The author has done his early schooling from Mumbai, Delhi and Singapore and his under-
graduation from Sri Ram college of Commerce, Delhi. After that in he joined a securities trading
company. Author has been writer from early age at the age of 17 he started writing for ‘The
Economic Times’. After graduation in 1991 he launched his column called ‘For Ex’ first for ‘The
Observer’ and later for ‘The Economic Times of India’. His commentary has been in several news
daily and magazines like ‘Wall Street Journal’, ‘The Financial Times’, ‘The Washington
Post’, ‘Foreign Affairs’, ‘Foreign Policy’, ‘Bloomberg’ and ‘The Guardian’. He is currently a
contributing editor at Financial Times.
Ruchir is passionate about politics and has covered every national election in India, and many major
state contests, going back to 1998. He led the first trip with three journalist friends, and the pack has
since grown to 20 regulars and a few guest travellers. They typically travel a 1,000 miles over a
week, and have interviewed everyone from local voters to national leaders, including Narendra
Modi and the Gandhis.
The author has been awarded with several awards and titles; Ruchir Sharma was selected for the
MIT Global Entrepreneur in year 2017, GQ India named Ruchir the Global Indian of the Year in
2016. In 2015 Bloomberg Markets named Sharma to be one of the Most Influential people in the
world. In June 2013, Outlook magazine named author one of the World’s 25 Smartest Indians. In
2012 he was selected as one of the top global thinkers by Foreign Policy magazine. In 2012 he was
awarded with Tata Literature Live! First Book Award. The World Economic Forum in Davos
selected him as one of the world’s “Top Young Leaders” in 2007.

About the Book: The book ‘Breakout Nations’, is Ruchir Sharma’s debut book, the author being
writer and head of emerging markets at Morgan Stanley, draws the knowledge of two decade of
touring, meeting world leaders, top company officials, around the world in search of top emerging
market pours the insights on how a nation can be a breakout nation and how it can not be a breakout
nation. In this book he reveals his rules for spotting success stories and lays out a compelling
argument for which nations will thrive, and which will falter, in a global economy reshaped by the
crisis of 2008. In the epilogue written, author extends his rules for spotting success to the developed
world, and offers a captivating picture of the shifting balance of global economic power. The
argument of this book is that the astonishingly rapid growth over the last decade of the world’s
celebrated emerging markets is coming to an end. The era of easy money and easy growth is over.
In this book we can see the snippets of the conversation that author had with senior
government officials, multinational bank managers, ultra-rich and ultra-influential business people
and several presidents and prime ministers around the world.
Breakout Nations – In pursuit of the Next Economic Miracles when it was released it
quickly became the national bestseller then in some time international bestseller. For this book
author has been awarded Tata Literature First Book Award in 2012. Breakout Nations 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".
After the huge success of this book author brought more book in area of Macroeconomics and
politics, of that some names are
1. The Rise and Fall of Nations: Ten rules of change in the post crisis world (2016)
2. Democracy on the Road (2019)
3. The 10 Rules of Successful Nations
This book is a sub 300 pages spread across 14 chapter each chapter describing about a particular
nation or a particular region in the world. All the information about what had happened and what
can be predicted is efficiently condensed in the book and the chapter are independent and does not
relate to any other chapter for its understanding. Want to know about Brazil how the economic
condition has been and what factors made Brazil of what is now, then read ‘Is God Brazilian?’ and
you will know about how traditional and technological development hurdled and then helped in
prosperity of people. interested in understanding how Erdoğan came to power, then read the
‘Monophonic Voice of Turkey’; interested in knowing Eurozone crisis, then read ‘The sweet spot of
Europe’ and so on. With this book the author gives a world tour of global emerging market.

The Myth of Long Run: Author begins his tour of the emerging world with ‘The Myth of the Long
Run’, where he considers the myth of super-long forecasting, meaning that virtually any emerging
nation can potentially claim economic stardom in the future: ‘the new rule is to forecast so far into
the future that no one will know you got it wrong’. He suggest that forecasting should be done for
5-10 years max so that there must be some one to evaluate if you went wrong or you succeeded.
Also this argument done on the basis of business cycles which typically lasts for 5 years from one
downturn to next downturn, and business people care about one or two business cycles.
The nations that have revealed in the global commodity boom driven by mainly China, will “face a
disheartening return to the mundane ordeals of a normal life”
China: He is not bearish, but not overly bullish either. Growth will slow down dramatically, but the
country still has so much going for it, that it will not collapse. Expect the new normal for GDP
growth in China to be around 6-7% instead of 8-10%. This will feel like a mild recession to those in
that economy and a major recession for investors who have bet on 8-10% growth, but even at a 6%
growth rate, China will remain the largest single contributor to global growth in the coming years.

India: Sharma puts the probability of India’s continuing status as a breakout nation as closer to
50%, because of a whole host of risks that Indian and foreign elites leave out of the picture: bloated
government, crony capitalism, falling turnover among the rich and powerful, and a disturbing
tendency of farmers to stay on the farm. Also: the complexity of regionalization in India is a big
reason why the future economic growth of the country is so tough to call.

Brazil: Brazilian growth rates have oscillated around an average of 2.5 % since the early 1980’s,
spiking only in concert with increased prices for Brazil’s key commodity exports. “This is not the
profile of a rising economic power”. Brazil is still one of the most closed economies in the
emerging world–total imports and exports account for only 15% of GDP. Brazil’s tax burden, at
38% of GDP, is similar to established European welfare states such as France and Norway. When a
relatively poor country like Brazil taxes this much, it means its businesses don’t have the money to
invest in new technology or training. Finally, infrastructure is famously poor. The cost of capital
with high interest rates makes it very difficult to build anything quickly. On a positive note, the high
cost of borrowing (and everything else) has made public companies highly disciplined. As a result,
they are highly profitable which should be good for the Brazilian stock market again.
Canada: The Canadian economy is one of the largest and most highly developed market economies
in the world. With the majority of Canadian people constantly investing in the stock market,
Canada’s stock market has begun to strengthen. With multiple opportunities for people to buy
stocks, Canada’s stock market seems to be one of the best places to invest lately.

Russia: Poor leadership, institutionalized corruption and reliance on one main commodity (Oil),
make the country an extremely risky investment. To regain its momentum, Russia needs a new non-
oil economic model and a new non-Czarist mindset.

Mexico: Oligarch and Tycoon economy. Because they control everything, the tycoons can extract
premium pricing, which create huge profits and a stock market that went up 200% more than the
US’s S&P 500–even with about the same growth levels as the United States. The manufacturing
sector and proximity to the US’s more stable and slowly improving economy is also a plus. Overall,
Mexico should see a bit better than average growth, even with it’s awful security and drug business
problem.

South Korea: “The Gold Medallist”. Samsung, Hyundai and LG are world-beaters. They have
taken Japan’s place as the world’s best manufacturers. In addition, the KOSPI is a highly efficient
stock exchange with foreigners owning more than 1/3 of listed stocks. Finally, Sharma believes that
it’s just a matter of time before the two Koreas unify, which will create an even larger and more
dynamic economy.

Taiwan: Solid but doesn’t have great global brands like Korea and , therefore, doesn’t have a major
stock market.

Poland and The Czech Republic: “The Sweet Spot of Europe”, going strong and going good, took
the hard way to comeback, the darling states of Europe, crossing their t’s and dotting their i’s the
right way, stalling on the Euro & waiting for things to settle down. Could be a breakout nation.
Germany: A large stock market that is beginning to grow is in cryptocurrency investment. This is
things like trading Bitcoins or other currencies with the intention of making large profits. There are
many different tools to help with these investments such as Beste Crypto Exchange to look for the
most profitable cryptocurrency exchange option.

Turkey: Great leadership in Recep Tayyip Erdogan, who continues to build out the rest of
primarily Muslim Anatolia in addition to the traditionally strong Istanbul-Ankara-Izmir triangle. As
a result, business is booming in the Middle East along with Europe and the Caucuses.

Indonesia: Very bullish; investment as a share of GDP is 32%. What Indonesia has not reinvested,
it has saved by paying down public debt, which has fallen from 97% of GDP to 27% now.

Philippines: Improving; good current leadership under Aquino III and a well-educated English-
speaking population which is challenging India for BPO (Business Process Outsourcing)
supremacy. But on the other hand, Corruption, low savings, high consumption is a threat.

Malaysia and Thailand: not as good; leadership and societal unrest problems, but still have great
potential.

The Fourth World: The are countries that have better growth potential, but also much greater risk
than their emerging counterparts preceded here. Some countries that have a better shot than the
others include Sri Lanka because of its peace dividend, Nigeria with its current, at least, solid
leadership, Uganda, Mozambique and yes, Iraq. He’s bearish on Vietnam due to poor economic
leadership, very poor investment and infrastructure; believes it’s been overhyped.

The Gulf:  Gulf countries “a world unto itself”. Petrodollars are keeping autocratic rulers in power,
but to their credit, they are investing into education and health, and working hard, if not effectively,
to improve the future. They just have so much wealth. Estimates put the total financial wealth in the
region at over $3 trillion, which is compounding at over 20% a year as oil revenues continue to spill
over! The problems will eventually surface when the petrodollars start to run out. The only country
where this won’t be a problem has the world’s highest income at $100, 000 per person: Qatar. Says
Sharma, “Qatar is unique, a world unto itself, hidden within a world to itself”. The bliss of black
Gold propping up the whole region, has to find alternative sources for the economy as well, Oman
still has enough oil to last a century. The gulf countries are still secure in the oil cocoon, the
competition from ‘Shale’ gas could hurt them.

The Third Coming: The USA still has the advantage of technology, strong R&D and Dollar as the
global reserve currency. Particularly the commodity bust, will encourage the revival of the West.
Investment in alternative energy use and vehicles will pay off, as will less dependence on foreign
oil, particularly for the U.S. In addition, the maturation of the fully wired and mobile economy, the
dream of the 1990s, is becoming a reality, and American companies are at the forefront of making it
work. Software is finally reaching critical mass, spreading to new industries such as defense,
agriculture, education. “All the hottest new things, from tablet PCs to cloud computing to social
networking, are emerging largely from the United States. America is the leader in Internet search, in
business networking, in online commerce. All of these services are attracting millions of users,
revolutionizing the way we interact with the Web–and one another. These Web services find their
commonality in their US origins, even if final demand is increasingly from emerging markets. This
is likely to keep the United States well up to speed in the global growth game”.
The third coming of the emerging markets, the economies will grow but detached and more isolated
than before, the same wind of globalization won’t carry all the counties like in the past, no global
tailwind, everyone has to ‘Row’.

Recommendation and my View

The book is well researched and well written. The reasoning is logical and easy to follow
but the book is now ‘Outdated’, in 2020, many of the predictions and assumptions of the author
didn’t pan out precisely because of his initial argument, it’s been more than 10 years, the world
dynamics has changed, The political scenarios are totally different now in big countries like the US
also ‘Protectionism’ is seen and recent outbreak of pandemic has brought the global supply chain to
nearly halt for a sufficient amount of time which disrupted many industries small, large even service
section was also one of the worst hit. Now it is clear why forecasting too long in future is futile as
pandemic showed us all. Also, as author rightly stated the nations excessive dependence on may
bring them an uncertain future which in this time each and every nation can relate to.

Now to understand the nuances and arguments of how to actually judge an economy or a
breakout country more accurately, I most definitely recommend this to anyone remotely interested
in economics. The process followed by Ruchir Sharma is to be studied and studied well, his ‘Rules
of the road’  noted, Politics and Economy are not as isolated as people think, how a capable leader
could breakout Nigeria or an inept management doom a previously bright star like Vietnam is to be
really understood, one has to look at a lot of aspects and for going that distance , and explaining it in
marvellous simplicity I respect the author greatly.

This is a great work though a bit out of sync with the current time but we could hardly fault the
author, because as he states in the first chapter itself that: -

“As much as we all love the speculative titillation of futurology, no one can forecast the next
century with any credibility and, more important, be held accountable for it.”