Charles Goodhart famously argued that economic or social indicators lose their value once they become too popular.
Acknowledging this rule, Ruchir Sharma, an investment banker at Morgan Stanley, identifies ‘rules of the road’ in his search of the next decades’ economic stars in his book Breakout Nations: In Pursuit of the Next Economic Miracle.
In the last two decades, developing countries witnessed unprecedented economic growth. Ruchir, points out that the average growth rates for most emerging markets doubled in the last decade.
He, however, tempers the sanguine feeling by offering the blunt reminder that economic growth closely resembles a game of snakes and ladders and that there are more snakes than ladders.
South Korea and Taiwan are the only countries that have managed to sustain an economic growth of above five per cent for five decades.
Most countries only embark on political and economic reforms when in dire straits. India achieved remarkable growth in the last decade largely due to the economic reforms of the 1990s, which were necessitated by the severe crises of the previous decade.
Unfortunately, the pace of reforms has slowed. Potential break-out nations, however, carry on with reforms with similar zeal into boom periods and to good effect. Indonesia grew more in 2008 than the boom period between 2003 and 2007.
The author takes great exception to Brazil noting that it may have ridden its luck too far — Brazil is the leading exporter of almost all commodities that have witnessed soaring prices in the last decade.
The commodity boom certainly has produced a ‘golden age of growth.’ However, it has also led to a welfare state and, more poignantly, it has made the country’s currency and cost of living exorbitant.
It is trite that firms, rather that nations, compete. However, the author cautions that strong companies and stock markets do not necessarily make for strong economies.
The Mexican economy portrays this paradox largely borne out of the power of the oligopolies and their influence in the political sphere.
The fact that more than half of the profits accruing to South African firms are made from abroad may denote a strong economy, yet as the author points out, closer scrutiny of the make-up of Africa’s largest economy tells a different story — a tale of national weakness rather than corporate strength.
That’s how one will describe a society that spends more on welfare than on education: ‘More people are being cushioned from joblessness than being prepared for jobs’.
Throughout the book, Ruchir explicitly portrays the fact that economic growth is a process with a long list of ingredients and no recipe.
South Korea, for instance, continues to have a dominant manufacturing base with a comparably minuscule service industry, a unique feat for any country with a per capita income of above US$10,000 (Sh850,000), a mark it attained some 15 years ago.
Coming home begets the question, which country closely resembles Kenya? Certainly, Brazil with its sky-high real estate prices and exorbitant cost of doing business due to poor infrastructure and systemic inefficiency.
Perhaps, the Philippines and Mexico with the crony capitalism, or Malaysia, given our obsession with acronyms, central planning and poor execution. Malaysia certainly has numerous “grand schemes that do not get built and grand corridors that appear only on paper.”
The writer is the chief executive of Brain Trust Strategies, a Boutique Research and Advisory firm that runs the ’26 Book Club’ – A book club for business leaders within the country.