Breakout Nations: In Pursuit of the Next Economic Miracles.

• Author: Erbagci, Selim
• Position: Book review

Breakout Nations: In Pursuit of the Next Economic Miracles

By Ruchir Sharma

New York: W.W. Norton & Company, 2012, 292 pages, ISBN 9780393080261.

IN THE LAST DECADE, the world has witnessed an unprecedented development of many countries. The speed of this process has not only caused surprise but also has generated questions: How did these countries manage such significant improvements? Why have some other countries failed to reach a similar level of success during the same period? How long could this rapid development last? Ruchir Sharma answers these issues, explaining the common reason for rapid development during the last decade and also the country-specific internal dynamics behind the rapid development of countries such as China, India, Brazil, Turkey, Russia, Mexico, and South Korea. Finally, He also identifies the potential breakout nations for the next decade.

At the beginning of the book, to present the whole picture, the author combines different factors that he distilled from his analyses of different countries:

"There is no magic formula, only a long list of known ingredients: allow the free-market flow of goods, money, and people; encourage savings, and make sure banks are funneling the money into the productive investments; impose the rule of law and protect property rights; stabilize the economy with low budget and trade deficit; keep inflation in check; open doors to foreign capital, particularly when the capital comes with technology as part of the bargain; build better roads and schools; feed the children; and so on"(p x).

According to Sharma, starting from 2003, the harsh interest rate reduction of the US, which aimed to alleviate the effect of the tech bubble that burst in 2001, has been the common factor that has triggered the rapid development in developing countries through the high levels of money flowing into these economies. Between the 1990s and 2007, the money flow to emerging markets increased from 2% to 6% of the emerging market GDP. The author further emphasizes that in addition to having a common development dynamic, each country has its own individual development dynamic as well.

China is Sharma's first example for rapid development. One of the main drivers for its rapid development is that China's export increased 20% per year over the last decade and the investment share of GDP increased from 35% to 50%. However, Sharma is not optimistic about the persistence of this level of improvement for several reasons. First, China's...