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Economic and Financial Market Views

Sharma’s first book, Breakout Nations: In Pursuit of the next Economic Miracles (Norton 2012) chronicled his travels through emerging countries trying to spot the next big economic winners—and losers. He defined “breakout nations” as those poised to grow faster than rivals in their own income class. The book broke the nonfiction sales record in India and became an international bestseller.

In 2012 Foreign Policy magazine cited Sharma as one of its top 100 Global Thinkers "for dusting the gold off the term ‘emerging markets’, and refocusing the global discussion on "the real breakout nations to watch."

Sharma used his travels as the basis for many of his opinion columns, first published in The Economic Times, later in Newsweek International, The Wall Street Journal and other global media. Sharma’s work has appeared in Foreign Affairs, The Washington Post, Time, Foreign Policy, Forbes, and The Bloomberg View, among others. A 2017 profile in the Financial Times described Sharma’s style as a mix of stories picked up through his wanderings in bazaars and political rallies with “simple rubrics to explain distant economies… think Anthony Bourdain’s inquisitiveness combined with Warren Buffet’s folksiness.”

From 2016 to early 2021 Sharma was a contributing opinion writer on global economics and politics for the New York Times, and as of 2022 he is a is currently a contributing editor at the Financial Times.

In June 2016, W. W. Norton & Company released The Rise and Fall of Nations: Forces of Change in the Post-Crisis World. It explained the key principles and rules he uses to identify nations that are poised to rise or decline in coming years, starting with the principle of impermanence. Rapid economic growth is difficult to achieve, much less sustain. Analysts typically make forecasts in a straight line, assuming current booms and busts will continue, when the opposite is more often true. Hot economies rarely stay hot, and cold economies rarely stay cold, indefinitely. Economies move in cycles, not straight lines [Rise and Fall p 7-11]. Thus the next stars of the global economy are often found in the shadows, outside the glare of media and analyst hype. “I prefer to look closely at countries that are so disdained by media that they are virtually ignored,” he has said. [Barron’s “Ruchir Sharma: Wall Street’s New Global Thinker” July 30 2016].

In a 2012 piece for Foreign Affairs, “Broken BRICs,” Sharma had argued that the broad boom that lifted up virtually all emerging economies in the 2000s was freakishly unusual, and unlikely to be repeated. The hype over the BRICs—Brazil, Russia, India and China—was unlikely to be borne out. Forecasters who saw these rapidly catching up with rich ones would be disappointing. Instead, he said, the more likely outcome was a return to the normal historical pattern, with a few emerging economies catching up rapidly, and many struggling. Fairly to sustain growth has been the general rule, and that rule is likely to reassert itself in the coming decade (2020's),” he wrote. [“Broken BRICS: Why the Rest Stopped Rising” Foreign Affairs Nov/Dec 2012].

The United States

At the same time, in articles for The Atlantic and others magazines, Sharma argued that the star of the 2020's was more likely to be the United States, which had seen its global reputation battered by the global financial crisis of 2008. He cited five key factors pointing to a US comeback, all related to the superior flexibility of the US system, compared to its peers. The US was paying down its private debts faster than European rivals or Japan. The dollar was at its most competitive level in three decades (in real terms). The US remained the hub of technological innovation. The revolution in US shale oil and gas was greatly lowering energy costs. All these factors were helping to spur a US renaissance in manufacturing, putting the US in position to be the "breakout nation of the developed world," if it can address its Achilles heel: rising government debt.

By 2020, Sharma was arguing that the cycles were shifting again, bringing a new set of potential winners and losers to the fore. In “The Comeback Nation,” a long essay for Foreign Affairs in March that year [“The Comeback Nation,” Foreign Affairs March 31, 2020], Sharma pointed out that the United States had seen its share of global GDP expand over the previous decade, restoring its reputation as an economic superpower. It had also emerged more influential than ever as a financial superpower, with a greatly expanded share of global financial markets, and the dollar more dominant than ever as the world’s most popular currency.

His message remained the same: don’t believe the rosy straight-line forecasts, don’t expect another golden decade for America. The United States was starting to show signs of the complacency and excess—particularly in the form of rising debt--that often develop in the course of a long boom. The next stars were still likely to come from outside the circle of hype.

The Emerging Market Comeback

Sharma elaborated the following April, in another Foreign Affairs essay, “The Resurgence of the Rest,” [“The Resurgence of the Rest; Can Emerging Markets Find New Paths to Growth?” Foreign Affairs April 20, 2021] which argued that now the nations poised for a strong run would be found outside the United States, particularly in the emerging world. The previous decade had seen the emerging nations’ share of global GDP stagnate, combined with the worst decade on record for emerging stock market returns.

Now, forces were turning in favor of emerging economies: hard times had forced many to push tough reform and pare back debt. Commodity prices, which drive the many emerging economies that depend on commodity exports for growth, were ready to rebound after a weak decade. A select few emerging countries were also likely to gain the old-fashioned way, via manufacturing exports, as producers looked for cheaper wages outside of China. Most intriguingly, wrote Sharma, the digital revolution was by many measures unfolding faster in poor countries than rich ones, with potentially huge payoffs for productivity and growth. The likely result he predicted would be a strong decade, not for emerging markets as a faceless mass, but at least for a few stars among them.

China

Throughout, Sharma has been seen as something of a pessimist on the biggest economy story of the century, the rise of China. As early as Breakout Nations [Breakout p 17-18], he was arguing that both bullish forecasts of continued double digit growth, and bearish predictions of a coming collapse, were overwrought. Fundamental historic patterns were however pointing to a likely slowdown in China, including its aging population, its mounting debts, and its entry into the middle class of nations, which has always made it near impossible for countries to sustain a double digit growth rate.

By 2016, Sharma was warning in the pages of the NY Times [“How China Fell Off the Miracle Path”, NYT June 3 2016] that China was in the midst of the biggest debt binge every indulged by an emerging economy, and that binges of that scale had always, in the past, led to a severe recession, a financial crisis or both. Four years later, also in the NY Times [“How Technology Saved China’s Economy” Jan 20, 2020] Sharma pointed out that growth had in fact slowed sharply, from double digits to 6 percent (officially) and even slower by private estimates, weighed down as he had expected by demographics, debt, and economic maturity.

But there still had been no major recession and no crisis. China had been “saved” by the emergence of a new growth driver: its booming tech sector, and the giant internet companies it is generating. In the summer of 2021, asked on CNBC about the widening crackdown Beijing had launched against multibillionaire internet tycoons, Sharma pointed out the risk and irony of the moment: China was targeting its economic saviors [“Didi crackdown appears part of China’s reaction to ‘unbridled capitalism’; Youtube June 7, 2021].

India

Sharma argued as early as 2012 that India had the best chance among the BRICs to become a breakout nation (one that grows faster than rivals in the same income class) but its chance at only 50/50. That provoked debate in India, where many said he was too pessimistic (link to “50-50 India” Shreyashi Singh, The Diplomat, April 26 2012.) Sharma argued for some time that India’s growth shows a clear pattern, rising and falling with the tides of the global economy, never getting ahead of the pack. He has written that to break out, India needs to develop a stronger, more sustained will to reform, as East Asian success stories have in the past.

Sharma has also made the case that India is less a country than a continent, with more different states, communities and languages than the European Union [India’s States of Excellence, Time, May 20, 2013]. Thus he has argued that India is best governed as a federation, allowing each distinct wide latitude to control its own destiny, rather than trying to centralize power in Delhi—as prime minister Narendra Modi has done [“As Modi discovered, India’s economy will never look like China’s” Washington Post April 25 2019].

In his 2019-book about India, Democracy on the Road, Sharma chronicled his quarter century of travels through his homeland, putting in thousands of mile covering major state and national elections. He writes that while he grew up hoping for a Ronald Reagan-type reformer, he has grown to accept that India’s political DNA is fundamentally socialist and statist, and that this basic outlook defines the worldview of all the leading parties.

The Four D’s

In his 2020 book The Ten Rules of Successful Nations, an abridged update of “Rise and Fall,’ Sharma emphasized anew that success is always relative to the competition and to global conditions. Analysts need to compare nations against rivals in the same per capita income class. Less developed nations naturally grow at a faster rate, because it is easier to grow rapidly from a low base. And the challenges of generating rapid growth get more complex as a nation gets richer, and needs to make more sophisticated products to thrive. So India should be compared to rivals in the class of emerging nations with average per capita income below $2500, China should be compared to those with per capita incomes between $10,000 and $15,000, the United States should be compared to Germany, Japan and other developed economies, and so on.

Even more important, in the current era, all nations need to recalibrate their expectations and moderate their definitions of success. One fundamental problem in today’s global economy is that policymakers have hopes grounded in the unusually high growth rates of the post-World War II era, when a population and productivity boom, juiced by rapid globalization, doubled the global GDP growth—historically around 2 percent—to 4 percent. But since the global financial crisis of 2008, growth has slowed worldwide, weighed down by the “Four Ds”: depopulation as labor forces shrink; declining productivity; the deglobalization of trade and capital flows, and a growing debt burden. (10 Rules p 197]

Sharma has argued that slowing global growth requires nations at all income levels to rethink their economic ambitions, in part to avoid inflating popular expectations, and setting up voters for anger and disappointment. The benchmark definition of rapid growth should come down from 3 percent to between 1 and 2 percent for developed economies; from 5 percent to between 3 and 4 percent for middle income countries such as China; and from 7 percent to 5 percent for poorer countries such as India. [10 Rules p 197]