Revisiting ‘Breakout Nations’

The dramatic economic slowdown of China may have come as a surprise to most of the world. But in 2012, Ruchir Sharma had written a book – BREAKOUT NATIONS: In Pursuit of the Next Economic Miracles – which already predicted the cooling down of China’s growth.

Sharma projected that as the era of easy money and easy growth comes to a close, other major emerging economies like Brazil, Russia and India will “face their own daunting challenges and factual expectations.” However,  there would be some legitimate breakout nations. He wrote:

“There are, however, many legitimate nations in the under $5,000 income class: Indonesia, the commodity economy that works; the Philippines, with a new Aquino in charge; Sri Lanka, riding its peace dividend; Nigeria, where an honest leader has ended a string of spectacularly corrupt ones.”

There was also a warning that economic growth must be linked with political stability and good governance:

“ Meanwhile, scores of emerging nations have been emerging for many decades now. They have failed to gain any momentum for sustained growth or their progress has begun to stall since they became middle-income countries. Malaysia and Thailand appeared to be on course to emerge as rich nations until the crony capitalism at the heart of the system caused a financial meltdown in the crisis of 1998. Their growth has disappointed since then.

In the 1960s, the Philippines, Sri Lanka, and Burma (Myanmar) were billed as the next East Asian tigers, only to see their growth falter badly, well before they could reach middle class average income of about $4,000. Failure to sustain growth is the general rule, and the rule is likely to reassert itself in the coming decade.”

So what happened to these three potential Tiger economies in the 1960s that led to a crash in their economies?

Burma was once the richest nation in Southeast Asia. Then in 1962, General Ne Win became the military ruler until 1988 when he was forced to resign because of antigovernment riots. In 1989, the military under General Saw Maung again seized power. In the 1990 elections, the opposition won a decisive victory but the military refused to give up power. Opposition leaders, including Aung San Suu Kyi, were arrested and detained.

Sri Lanka, had a flourishing economy and a democratic system but Prime Minister Bandaranaike was assassinated in 1955. His wife took over and eventually their daughter became president. In the 1970s, thousands of leftists were executed. In the 1980s, a 20-year war between the Sinhalese majority and the Tamils erupted. The Tamils who were only around 10% of the population, wanted their own state. Around 80,000 people, mostly Tamils, were either killed or disappeared.

In the 1960s the Philippines had the second highest per capita income  in Asia, next only to Japan. Then in 1965, Marcos took power and in 1972 declared martial law. The economy became nearly bankrupt as crony capitalism and systemic corruption became the rule. Armed struggles with the New People’s Army and the Muslim Liberation Front grew more severe.

In 1986, People Power, inspired by the martyrdom of Ninoy Aquino, toppled the Marcos dictatorship. Cory Aquino became president and was able to restore a democratic system in spite of several coup attempts including some led by Honasan.

In Thailand, a democratic government has been replaced by a military dictatorship. But its most  pressing issue  is the need to heal the social and political rift between the Bangkok-based elite and the poorer rural population in  the countryside which is the political bailiwick of the Thaksin family.

The story of the emergence of China as a world economic power is not really accurate. As Sharma points out, in 1600 China accounted for more than one fourth of the world’s Gross Domestic Product (GDP).  In Europe, every ruler and merchant dreamt of establishing a trade route to China, a country well advanced, in terms of civilization and technology, compared to the European nations.

The China story in the last three to four centuries has been one of steady decline in terms of economic and political power. The country that invented gunpowder, irrigation and porcelain became a backward nation. The nation that built the Great Wall became the economy colony of foreign Western powers.

Can China regain the world stature it had three centuries ago? That is the “China Dream” which is driving Xi Jinping’s territorial aggression and military show of force. What about China’s economic future? Will there be a China collapse or will China continue its trajectory to become the largest economic power in the world?

Sharma takes the middle ground. In this book he published in 2012, he has some predictions worth reviewing. He wrote:

“The most likely path for China is the trajectory Japan followed in the early 1970s when its hot post war economy begun to slow sharply but still grow  at a rapid clip, an entirely expected course for any maturing ‘ miracle’ economy. China is on the verge of a natural slowdown that will change the global balance of power, from finance to politics, and take the wind out of many economies that are riding in its draft. The signs of the coming slowdown are already clear and it is likely to begin in earnest within the next two to three years, cutting China’s growth from 10% to 6% or 8%. “  

In Sharma’s book, the Philippines is on the road to becoming the next tiger economy as long as it continues the good governance practices  and economic reforms of the PNoy administration.

Where the Write Things Are’s Classes for Kids and Teens

Write Away! Weekend: Getting started on your comic book on September 26 (1-4pm) with popular cartoonist and writer Manix Abrera at the Canadian American School Alphaland Makati Place.

Young Writers’ Hangout on October 3 (1:30-3pm)at Fully Booked Bonifacio High Street.

For registration and fee details contact 0917-6240196 / [email protected].

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