The 10 Rules of Successful Nations , outlines 10 rules for spotting whether a country is on the rise , on the decline , or just muddling through . Together , the rules work as a system for spotting change.
1.POPULATION :-
- Due to China’s strict birth control and women in developed countries started to delay or avoid childbirth to pursue careers , suddenly around 1990 population growth started to dry . https://en.wikipedia.org/wiki/One-child_policy
- Today , successful nations are taking aggressive steps to combat working age population decline . A 1% decline in working age population growth will shave about 1% point off economic growth.
- As the European Commission warned in 2005 . ” Never in history has there been economic growth without population growth”
- According to United Nations . 70 % of developed countries today have implemented policies to boost their fertility rate. Many developed nations are offering women “baby bonuses”.https://en.wikipedia.org/wiki/Baby_bonus
- South Korea , another raging nation , after the crisis of 1997-98 , began extending work permits to foreigners in industries facing labor shortages.
- Developed nations are taking steps to keep older people working and out of the “dependent” population. Germany increased the retirement age from 65 to 67 for both men and women . Others are debating a retirement age of 70 or more .
- In Japan , prime minister Abe had incorporated “womenomics” into his plan to revive the economy , and female labor force participation has risen from 65 to 72 % during his 5 years in office.https://www.ny.us.emb-japan.go.jp/en/c/2015/04-Apr/japaninfo-2015-04/03.html .
2. POLITICS:-
- While politics can shape the economy of developed nations , it matters even more in emerging countries , where institutions tend to be weaker , and one man or woman at the top can make all the difference.
- Running a country and being scholar are two different things . During the euro crisis of 2010 , several nations turned to technocrat leaders . Greece brought in former central bank chief Lucas Papademos https://en.wikipedia.org/wiki/Lucas_Papademos ; Italy puts its hopes in Mario Monti , a former university president and European commissioner . None lasted much more than a year . In 2011 , Italy’s stock market rose on reports that Monti would be prime minister , but typically, he made necessary austeritymoves and failed to sell them to public . He lost the next election , taking just 10% of the vote. https://en.wikipedia.org/wiki/Mario_Monti .
- As they say ” ballots are more powerful than bullets” . Every large economy that has seen average income grow to more than $10,000 is a democracy. China , with an average income approaching $10,000 , is trying to become a large , rich autocracy , but it would be the first. Anyone looking for nations that can grow steadily into the wealthy class should not be on autocrats .
3.GOOD BILLIONAIRES:-
- Between 2009 and 2019 , despite the weak global economy , the number of billionaires worldwide more than doubled , from 1011 to 2153 and their combined fortunes rose from $3.6 trillion to $8.7 trillion . https://www.statista.com/statistics/323821/number-of-high-net-worth-individuals-in-the-united-kingdom-uk-and-europe/ .
- In a thriving nation , the number of good billionaires ( softwares , cars , metal , phones , textiles , hotels , restaurants , jewellery , luxury wear , pharmaceuticals ) should be a lot more than bad billionaires ( oil , mining , real estate ).https://bigthink.com/videos/ruchir-sharma-on-good-and-bad-billionaires-2/
- Growth is particularly at risk in countries where bad billionaires are on the rise . Due to crony capitalism and their influence inside government offices , they create rising wealth inequality which is a threat to social stability and economic growth.
- Tracking billionaires wealth can provide insight into whether an economy is creating the kind of wealth that will help it grow or trigger revolt. a healthy economy needs an evolving cast of productive industrialists , not corrupt tycoons.
4.MINIMUM GOVERNMENT MAXIMUM GOVERNANCE:-
- The conventional wisdom is still that less government involvement in the economy is better for growth . https://pib.gov.in/PressReleasePage.aspx?PRID=1696267.
- The government should be potent enough to maintain conditions essential to civilised commerce , basin infrastructure and mechanism to contain corruption , monopolies and crime .
- Taxes are the backbone of economy in any country ( should contribute more than 40% in GDP ). In Mexico , the state collects taxes equal to 16% of GDP, which is quite low for a middle class country . There are less than 4 million registered tax payers in Pakistan which is a country of 180 million people .
- Energy subsidies play a major role in draining national treasure . In the middle east , North Africa and Central Asia , governments spend more on cheap fuel than on schools or healthcare. Energy subsidies keep fuel prices irrationally cheap , encouraging people to burn too much fuel, accelerating climate change and discouraging investment , which leads to shortages and inflation.
5. Successful Nations make the most of their Locations.
- Physical goods make up the bulk of global trade about $18 trillion a year , compared to $4trillion for services. So geography of a country is of utmost importance for trade and business purposes.
- Export sales of a country are critical to steady growth , earning the foreign income that allows a nation to invest in new factories and roads , and to import consumer goods , without building up foreign debt and sparking currency crisis.
- Manufacturers are choosing countries like Vietnam , Cambodia and Bangladesh that combine lower wages with a location on pacific trade routes and open doors to outsiders.
- Geography is never enough to produce strong growth on its own , unless a country takes steps tp turn its ports and cities into commercially attractive magnets . advantages and disadvantages of location can be reshaped by good policies. Not so long ago China was seen as hopelessly poor and isolated , before it took the steps necessary to carve out a new geographic sweet spot and put itself at the centre of global trade.
6.Successful Nations invest heavily and wisely.
- When investment is rising , economic growth is much more likely to accelerate. , generally between 25 and 35 % of GDP .
- There are two kinds of investments i.e good and bad . Good investment is when government pump money in projects that fuel growth in the future: new technology , new roads , ports and new factories.
- Bad investment is when it goes into real estate , which is often financed by heavy debts that can drag down the economy . Other is commodities like oil , which tends to chase rising prices and evaporates without a trace as price collapse.
- The best funding source is foreign direct investment , because when foreigners buy direct stakes in business , they tie themselves to these projects as owners . This financing can’t flee easily in a crisis .
- If investment is too low as a share of GDP , around 20% or less and stays low for a long period , it is likely to leave the economy full of holes , unpaved roads , drafty schools , ill equipped police etc. Weak investments tend to degrade both the supply network and respect for the government.
7. Successful Nations control the real inflation threats.
- High inflation tends to be volatile , and its swings make it impossible for businesses to plan and invest for the future. Over the long term , inflation erodes the value of money sitting in the bank or in bonds , thus discouraging saving and shrinking the pool of money available to invest in future growth.
- Victory over inflation can win by opening to global trade . If local wages rise , producers can shift operations to countries with lower wages . If a local supplier raises prices , wholesalers can just find a cheaper supplier overseas. Opening to these global markets maintains a permanent check on inflation.
8. Successful Nations feel cheap.
- According to the Bank of International Settlements , close to 90% of all global financial transactions conducted through banks use the dollar on one side , even if the deal does not involve an American party . A South Korean company that sells smartphones to Brazil will likely request payment in USD , because most people still prefer to hold the world’s leading reserve currency. In a world still dominated by the USD , the most important perspective on any currency is how cheap it feels in USD. https://www.bis.org .
- Successful nations feel cheap , particularly to foreigners . Their currencies are inexpensive , making local prices attractive to international tourists and investors. The best test is how cheap a cup of coffee or other local goods “feel” to outsiders.
9. Successful Nations Avoid Debt mania (and phobia).
- In recent decades , every new crisis seemed to hatch a new way of thinking about debt . Mexico’s “tequila crisis ” of 1990s started with short term bonds . https://economics.rabobank.com/publications/2013/september/the-tequila-crisis-in-1994/ . The Asian financial crisis started with debt to foreigners , so foreigners loans became the new obsession.
- When debt is growing significantly faster than the economy, even well run banks start making mistakes , doling out loans too fast. The errors grow as dodgy private lenders get in the game , extending credit to increasingly ill qualified borrowers .
10. Hype :
- The way to avoid falling for the hype is to monitor the ten rules outlined in this book. Wise national leaders try not to let hype go to their heads and keep pushing reform even when the economy is roaring and the world is applauding..
- Every nation will go through periods of expansion and decline , and none are destined to rise or fall forever . https://letsreadtogetrich.com/book-review-the-psychology-of-money/
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