The 10 Rules Of Successful Nations, by Ruchir Sharma

One of the goals that many economic prognosticators and would-be prophets have is to be able to divine the rules that will ensure a nation has prolonged economic growth. Not only is this immensely profitable for investors, but there are a great many people with a vested interest in seeing a convergence of wealth so that wealthy nations are not so far above other nations. This book suggests that such a task is a difficult and perhaps even futile one. That is not to say that there are not ways that a nation can be successful for a prolonged period of time–this book offers a statistics-based approach to showing periods of growth as well as what correlations can be drawn between large groups of nations that have achieved success for at least a few years at a time. Far from demonstrating that prognosticating is easy, the author demonstrates, with a firm basis in numbers, that it is very hard for nations to sustain growth over the long term, that this is helped by strong fundamentals and that there are barriers at every step to nations moving up a level in development. If the author seems a bit over-inclined to accept Chinese official statistics, the authors also point out that China’s remarkable rise is attempting to do something that has never been done before, and we will see how it turns out here.

One of the unfortunate aspects of nations, even those which have had long periods of growth to reach relatively high levels of economic progress, is that mistakes as well as economic crises can lead to a reversal of gains that puts a nation where it started, or even behind. Venezuela had a strong period of growth thanks to its petroleum reserves, but corruption and leftist politics has left it poorer than it began. Indeed, one of the issues that nations often face is that wealth brings with it inequality and political demands for nationalization and redistribution of wealth tend to lead to immense economic suffering that destroy the well-being of nations. Only those nations which are able to avoid the siren songs of leftist politics are able to succeed long enough to see economic growth pay off in long-term investments in education, industrial factories, and research and development and infrastructure improvements, all of which offer genuine potential for growth and increased well-being, so long as governments are able to maintain a steady growth that is not inhibited by corruption or other issues. This is by no means an easy task, though, as extractive wealth–one of the most notable ways that nations seek to gain wealth–are among the worst forms of wealth in terms of encouraging sustainable long-term development, alas.

This book is a short one that comes out to right around 200 pages and does not waste its time getting to the point. The author begins with a discussion of how the rise of nations is marked by nothing so frequently as impermanence, such that very few nations move into (or out of) the rank of the most developed nations–the last nation to rise into that rank was South Korea some 20 years ago, and the last one to fall out of that rank was Greece some fifteen years ago or so. This introduction is followed by ten keys in the author’s mind that can lead to remarkable success, at least over the span of five or ten years perhaps. These keys include: having a growing population (1), having a responsible and not particularly divided political scene (2), having inequality that is not too outrageous so that economic gains are relatively widespread (3), having state power that is strong enough to avoid anarchy but does not veer into tyranny (4), having leaders that make the most of their ties to the world and their geographic position (5), making sound investments in factories and infrastructure (6), keeping inflation low (7), having a currency that feels cheap and is not overvalued (8) so that it hurts exports, having neither too much nor too little debt (9), and not being hyped, as hype tends to come just before an economic success story sours (10). This is followed by acknowledgements, a statistical appendix, notes, and an index that close the book.