The Rise and Fall of Nations: Forces of Change in the Post-Crisis World Author Ruchir Sharma

“The Rise and Fall of Nations: Forces of Change in the Post-Crisis World” Author Ruchir Sharma

Book review

Dr. Valbona Nathanaili


In this book, Ruchir Sharma, writer and head of emerging markets at Morgan Stanley, aims to explain, through examples and facts, extended in time and space that the prosperity of nations goes forward through economic cycles, with rises and falls, with financial periods of prosperities and difficulties, altered with each-other. For this, it is very important to be aware of the forces that feed and those that hinder the ups and downs of the economy, the policies that we have to design and implement, for the bills we have to pay; it is very important to be more prepare, and more smart. And to forecast! But Sharma suggests that the precision of forecasting, in this world that more than globalism, is characterized by deglobalism, can’t go beyond a period of time longer than ten years.

The book is published originally by W.W. Norton (2016); 466 pages.

 General considerations

The book reviews some of the most powerful financial crises that have hit the world in recent decades, with a special focus on the year 2008. For each case, ranging from China, Russia, Turkey, Brazil, Asian financial wonders, The United States and many Eastern European countries, the author assesses the conditions before and after the crisis and draws conclusions. Debt-mania, inflation and currency deflation, capital inflows and outflows, exports, manufacturing economics or the economy of exploitation and export of natural resources are concepts that are constantly elaborated by the author, in a simple and understandable language for all. It is an excellent lecture on economics and development, from which the equations have been removed, while the remains ones, are the social dimension and accountability that are needed in the development of the country.

Throughout the book, the developed countries are analyzed parallel with the developing countries, where in the first ones, thanks to consolidated democracy, an important role in the timing of an economic cycle plays bank, while in the latter, because of a more than fragile democracy, this role is often taken by politicians, because banks are generally dependent. According to Sharma, banks CEO most of the time take order by phone, in order to implement the directives that give leadership, who are often corrupted, populists and in power for many mandates.

Far from the tough statistics, countless figures, and easy indexes, which Sharma largely criticizes as manipulable, if not corrupted by the power of money and connections, the book must be read for the simple language used to explain some difficult phenomena, often very unclear for the most of population.

An important message of the book is that transition from one state of development to another, is made only according to certain stages, or certain ladder, and from which no country has no exception. This message is particularly important for emerging countries if they want to enter at the technology era, not only as consumers but also as producers, – empathises the author. So, they should go through the same phases of those of developed countries and for this reason the author emphasizes that the factories are the first.

  • Today many developing countries have come to recognize how important it is for them to boost productivity by investing in factories first, if they want growth without the crippling side effects of inflation. (p. 204)

Good and bad billionaires

Sharma uses the concept of good and bad billionaires, and lists as the main reason for that classification, the way how these billionaires have made their wealth, so by the contribution they make in the progress of country, or by the exploitation of its assets thanks to family connections or corrupt ties with leaders Politics.

  • I am wary of countries where crony capitalism and bad billionaires are on the rise because they can reflect a deeper dysfunction: a business culture in which entrepreneurs become brazen after a run of success, a political culture in which officials grow complacent after a long period in power, a system in which cumbersome or nonexistent rules virtually invite corrupt behavior. (p. 130)

Two new concepts

Based on the way Sharma, it can define the state of a boom and the factors that make easier the corruption. Below are two new formulations of these concepts: The instability equilibrium & The Acid of Corruption H2SN

  1. The instability equilibrium

According to the author, any economic situation, especially booms, can’t last in time.

Said differently, the state of a boom can be described as a state of instability equilibrium, like for example an object that stay at the top of a high mountain, which even the easiest force can remove from that position. Further it doesn’t need any push, because the fall continue to the next stop – that is at the equilibrium state; while the return at the top state, – at the same level, or a new one, – again, is possible only under the action of forces with a completely opposite effect. Like the train at the Russian mountain, only that the fun dimension is missing during the fall.

  1. The Acid of Corruption H2SN

According to the author, in India, many of the top tycoons command sprawling empires that often include at least one but often all four of the following businesses: a local hospital, a hotel, a school, and a local newspaper. The same is in Albania. For the author, the reason is simple:

  • Most people understand it is wrong to take cash bribes, but few in India (read, also, Albania) see much of a problem in accepting gifts in kind, even one as valuable as free medical treatment for a family member, free schooling for a child, free hotel banquet facilities for a niece’s wedding, or favorable coverage for one’s business or political ambitions in the local rag. (p. 129)

Said these, those four factors: hospital, hotel, school, and newspaper, could be seen as the components of the acid of corruption H2SN, able to erode and breakdown the progress of a nation, able to upside down the dreams of a nation, on behalf of a handful group of people without principles.

The book is an appeal to understand the game played at the expense of the people’s prosperity by a corrupting class of politicians, a class that try to prolong its political and economic power with any cost.

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