Breakout Nations

Breakout Nations

Global economic growth has been a chimera, according to Ruchir Sharma. Lots of it are driven by debt; indeed, credit cards. Within the last decade, as opposed to the last thirty, the US economy has required USD 5 to drive the growth of USD 1. It used to be USD 1 and USD 2 respectively in the 1970s and 1980s. But things began to change in 1990s due to the emergence of a tech bubble, which subsequently, led to its very burst too. The global credit crisis in 2008, as occasioned by the housing credit crisis in the US, did not make matters any better.

In fact, despite the Mexico peso crisis in 1994, and the Asian financial currency crisis in 1997-1998, these events continue to unfold with some regularity. Almost all of them are triggered by large borrowings and debts. Be it Spain, Ireland, Portugal, or, Greece, their one undoing has been debt and more debt due to bad public finance. Ruchir Sharma put all of the above into context: that emerging nations that used to rely on exports to the developed world are at wit's end on how to foster the next cycle of growth. Invariably, countries like Mexico, Taiwan and Malaysia, are caught in a middle income trap.

Ruchir Sharma did not provide any nifty prescriptions. The solutions, to a large degree, depends on the willing-ness to understand the imperfections of the capitalism. By this token, this is an unvarnished account of how global capitalism has gone wrong, even as proponents of globalization have extolled the virtues of free trade, time and again. Ruchir Sharma is a deep and serious economic thinker, and deserves a serious read.