Implementing Sharma Rules in Lebanon (Part One)

Book Reviews | | 23-07-2018, 10:15

The Rise and Fall of Nations by Ruchir Sharma (2016) looks at 10 key factors that make a positive change in economies. Shaped by his 25 years traveling the world and enlivened by his encounters with presidents, tycoons and villagers from Rio to Beijing, Sharma spells out ten rules for identifying the next big winners in the global economy. Each rule looks at a nation's political, economic, and social conditions in real time to filter out the hype and noise. In this series of articles, I will try to summarize the book and explain how these rules can be implemented in Lebanon.

1. Geographic Location: For Sharma, Dubai is a perfect example of a geographic sweet spot, a place that makes the most of its geographic location. Geography matters for the economic growth. Currently, several countries such as Poland, Vietnam, and Mexico enjoy a big potential advantage in the global competition thanks to their location on the border of the vast markets of Western Europe and the United States. Lebanon sits at the intersection of Europe, Asia, and Africa. This location can provide companies with an easy access to regional and global markets. Unfortunately, for a number of reasons, the Lebanese governments are not benefitting from this location. The first factor related to the political problems between some parties and movements with regional power countries prevented good commercial relationships between countries: for instance, the case of Hezbollah with GCC countries. Unlike Lebanon, the UAE could also have fallen victim to the political and economic dysfunctions that plague the Middle East, but instead it has managed to turn itself into the commercial hub of the region. The second factor is linked with the fact that has been very little investment in infrastructure in Lebanon since the mid-1990s. A good infrastructure offers investors, wantrepreneurs, traders and international companies the opportunity to own the facilities that give services and help drive economic growth.

2. Population: Sharma claims if the rate of increase for the productive population is less than 2%, this should be considered as a negative sign because it will result in the future in an increase in the financial burdens. Thus, Sharma suggests increasing the productivity of the population by upgrading the skills of the entrants to the labor market, as well as the workers, with the integration of women, the opening of employment opportunities for the elderly and foreigners, and the attraction of migrants with special competence. Lebanese workforce is known for its skills, talent, and knowledge. But sadly, the dream of any graduate becomes the immigration. The Lebanese governments and companies, in my humble opinion, do not appreciate and value the capacities of the local population, despite the fact that the talented Lebanese were able to help GCC countries to grow in the 1960s-1970s. Now, the authorities should promote the elevated educational level and linguistic capabilities of Lebanese citizens in order to attract high-technology firms that require skilled human resources familiar with technology. Also, the Lebanese government should do a better linking between local companies and the international Lebanese companies. Being honest and realistic, not every Lebanese outside Lebanon will want to move back to the home country. But, the Lebanese government should try to benefit from these people and offer them the Lebanese market as a “kitchen” for their businesses. 

3. Life cycle: The important question to ask about the effect of politics on the prospects for any economy is this one: Is the country ready to back a reformer? To answer it, the first step is to figure out which position the nation occupies on the circle of life. Nations are most likely to change for the better when they are suffering to recover from crises. When a country’s back is against the wall, citizens and political elites have to accept tough economic reform.  The second step is to identify whether the nation has a political leader capable of rallying the popular will behind the economic changes. The life cycle captures broad, cyclical swings in the popular will, which have their greatest impact when new leaders have the charisma and good sense to translate a popular desire for change into a concrete reform agenda. We will not exaggerate if we say that members of future generations in Lebanon will become good political leaders. No matter what the new reformers get right on the policy front, they need many other factors to fall into place to produce a run of strong growth. Lebanon would be extremely lucky if a new political generation comes to take over the authority. Actually, Lebanon is in a need for fresh, democratic, and qualified leaders rather than stale leaders. According to Sharma, the probability of successful, sustained reform is higher under fresh leaders rather than stale leaders, under leaders with a mass base rather than well-credentialed technocrats, and under democratic leaders rather than autocrats.