The Rise And Fall Of Nations by Ruchir Sharma Penguin Books; Price: Rs.799; Pages: 464
For the Indian economy with its pathetic 2 percent share of international trade, the global financial crisis of 2008 triggered by the subprime mortgages investment boom in the US, wasn’t a big deal. The economy recorded 8.4 percent GDP growth in the year 2008-09 under the watch of the Congress-led UPA government. But according to Ruchir Sharma, chief global strategist and head of emerging markets at the US-based Morgan Stanley Investment Management which manages $272 billion on behalf of cash-rich pension funds, investment banks and high net worth individuals in the US in high-returns emerging nations, it marked the end of an era of sustained optimism which spurred huge transnational capital flows.
“After surging for more than three decades, flows of capital reached a historic peak of $9 trillion and a 16 percent share of the global economy in 2007, then declined to $1.2 trillion or 2 percent of the global economy — the same share as they represented in 1980,” writes Sharma in his engaging second global bestseller after Breakout Nations: In Pursuit of the Next Economic Miracles (2012) which was highly recommended on these pages (EW August 2012).
The basic proposition of this well-researched and engagingly narrated oeuvre is that the era of 7 percent plus annual GDP growth rates in hitherto highly-fancied emerging countries (China, India, Brazil) is over for the foreseeable future (defined as five years), and that in the developed OECD countries 2.5 percent annual economic growth will be a good achievement. The skill of the serious mega-bucks investor is to read tell-tale signs to identify well-managed rising economies which will yield high returns to foreign (and domestic) investors and lead global recovery.
In this book Sharma presents his ten rules of diagnosing whether a nation is on the rise or decline. (i) Is its talent pool growing? (ii) Is the nation ready to back economic reforms/reformers? (iii) Is income and wealth inequality threatening growth? (iv) Is the government meddling more or less? (v) Is the country making the most of its geographic location? (vi) Is investment as share of the economy rising or falling? (vii) Is inflation high or low? (viii) Does the country ‘feel’ cheap or expensive? (ix) Is debt growing faster or slower than the economy? (x) How is the country portrayed by global opinion makers? These are the metrics which the author — a practising investor in emerging economies — applies to determine whether a country is on the road to growth and prosperity, or going downhill.
The BJP-led NDA coalition government in Delhi and governments in all state capitals are desperate to attract foreign investment to increase manufacturing output and create jobs for the 12 million youth entering the jobs market countrywide every year. This brilliantly argued book replete with statistical and exemplary evidence is an excellent assessment metric to ascertain whether they have positioned themselves to inspire confidence in big bucks foreign — and domestic — investors.
The auguries are not good. On the first metric, although India hosts the world’s largest working age population, because of a weak education system, its talent pool of highly-productive skilled youth is static, if not shrinking.
Secondly, despite its loud pre-election proclamations, the BJP government at the Centre has displayed no appetite for pursuing economic reforms. It’s shown no hurry to privatise bleeding public sector enterprises, denationalise banking, slash red tape and ramp up investment in public education and health. Simultaneously income inequalities are worsening with the share of the national wealth of the country’s billionaire class estimated at 16 percent of GDP as against the 10 percent recommended as safe by the author.
On the fourth metric of ascertaining whether government is more or less meddlesome, under the professedly pro free enterprise and free markets BJP government at the Centre and in several major states (Maharashtra, Gujarat, MP), the stranglehold of the neta-babu brotherhood over the economy shows no signs of loosening. And on the ease of doing business and corruption indices of the World Bank and Transparency International, BJP-ruled India is not showing significant upward movement. Neither is the nation leveraging its geographical location. The SAARC nations together account for a mere 5 percent of international trade.
Moreover with defence, subsidies and government expenditure rising sharply even as tax evasion is rampant, investment in manufacturing (vital for employment generation) and in human capital development (education and health) is palpably insufficient. Little wonder with fiscal deficits the rule rather than the exception in Central and state government budgets, inflation (the seventh metric) is obstinately high.
Does the country ‘feel’ cheap to investors as Sharma says it should? Undoubtedly to foreigners, consumer goods and especially services feel very cheap. But paradoxically real estate in Mumbai and Delhi is as expensive as in London and New York. Moreover if the transactional cost of doing business in India — excessive paperwork, dysfunctional legal system and negotiating bribes with government officials — is factored in, India doesn’t feel cheap (ninth rule). And Sharma’s parting advice (rules 9 & 10) to investors and investee nations is to assess the quantum of total credit (debt) to GDP (150-175 percent of GDP is acceptable) and also to assess the media hype surrounding a country (less is better and total indifference is best).
Assessed against these diagnostic rules prescribed by Sharma, it’s clear that the BJP-led NDA government needs to shake off the country’s post-1991 liberalisation complacency and take the reforms of that landmark year to their logical conclusion. That’s the great value of this excellent book: while it is a diagnostic checklist for serious investors looking for best returns on capital, it also suggests ways and means for national governments to clean up their act to stimulate foreign — and domestic — investment.
Dilip Thakore
Extraordinary pacifist
The Two Gandhis — Non-Violent Soldiers by Eknath Easwaran Jaico Publishing House; Price: Rs.375; Pages: 240
Given how endemic violence seems to be among the Pathans of Pakistan’s north-western frontier and neighbouring Afghanistan, it seems incredible that less than a century ago a totally non-violent movement for personal, social and political transformation became hugely popular among these very people.
In this book, well-known spiritual teacher Eknath Easwaran (d.1999) provides a fascinating account of how Khan Abdul Ghaffar Khan (1890-1988) aka the Frontier Gandhi and Badshah Khan (‘King of the Khans’) engineered — even if for a brief while — the mental and attitudinal transformation of militant and fiercely independent tribesmen of the region. That Easwaran, one of the most well-known and loved spiritual writers of our times, should write this book is a testimony to Badshah Khan’s deep spiritualism and the enduring message of his life.
Easwaran chronicles rich details of Badshah Khan’s life, tracing his incremental involvement with social, political and education reform and women’s rights. Quite obviously, the rulers of British India didn’t take kindly to his efforts even though he was committed to entirely peaceful protest. This earned him long spells in jail, often in solitary confinement. As he continued to work among his people, he joined the Congress party which was leading the struggle for India’s freedom from British rule, and became a close companion of Mahatma Gandhi.
Badshah Khan’s contribution to the freedom struggle was the Khudai Khidmatgars (‘Servants of God’), a pacifist movement of Pathan volunteers. Under Khan, the Khudai Khidmatgars became what Easwaran calls “history’s first professional non-violent army — and its most improbable”. Any Pathan could join and members were required to take an oath eschewing violence and revenge, forgiving those who oppressed or treated them cruelly and committing to at least two hours daily to social work. “Non-violence was at the heart of the oath — it was directed not only against the violence of British rule, but against the pervasive violence of Pathan life,” writes Easwaran.
The Khudai Khidmatgars was an entirely Muslim movement, based on “the ancient Islamic principles of universal brotherhood, submission to God, and the service of God through the service of His creatures,” writes Easwaran. In a short while, it transformed into the most popular anti-imperial movement of the Frontier Province. Its brave men and women suffered savage repression — even brutal killings of large numbers of their people — but refused to renounce their commitment to non-violent resistance.
Badshah Khan’s political activism was linked to his spiritualism. According to the author, Khan believed that true Islam is based on amal (selfless service), yaqeen (faith, or “an unwavering belief in the spiritual laws that underlie all life”) and muhabbat (the transformative power of love). “The world might come to recognise that the highest religious values of Islam are deeply compatible with non-violence that has the power to resolve conflicts even against heavy odds,” writes Easwaran in a tribute to Badshah Khan.
Inevitably, their pacifist beliefs in the face of imperial repression drew the “two Gandhis” closer, and Easwaran devotes several pages to describe their relationship. The Mahatma travelled extensively in the Frontier Province with Badshah Khan, lending support to the Khudai Khidmatgars. Easwaran tells us that Gandhi referred to him as “unquestionably a man of God,” and often remarked that the friendship of Badshah Khan and his brothers seemed to him “to be a gift from God”.
An individual who was fully committed to Hindu-Muslim harmony, Badshah Khan was strongly opposed to the Muslim League, particularly to its demand for the vivisection of India. Even when many Congressmen finally agreed to Partition, he remained firmly opposed to it. And when following Partition of the subcontinent in 1947, the Frontier Province became part of Pakistan despite Badshah Khan’s opposition, in the new theocratic state he was repeatedly jailed by the government. In all, says Easwaran, Badshah Khan spent 30 years in jail — every third day of his life.
Given the horrific violence that continues to wreck the region where Badshah Khan lived and worked, as well as in much of the ‘Muslim world’, Badshah Khan’s legacy is of immense contemporary relevance. “Wherever civil war or ethnic violence rages, but especially in the Middle East, Badshah Khan offers a path to peace. A devout Muslim, he showed in his life a face of Islam which non-Islamic countries seldom see, proving that within the scope of Islam exists a noble alternative to violence,” writes Easwaran.
Badshah Khan’s message is not limited to Muslims. It can also help people of other faiths to understand and appreciate the spiritual values of Islam as Badshah Khan understood and practised them. But more than that, it could help all nations and people to understand their own potential for love in action. If Badshah Khan could raise a large group of non-violent volunteers out of a people as deeply steeped in violence as the Frontier Pathans, there is no country on earth where it cannot be done.
Roshan Shah