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This review is from: Breakout Nations: In Pursuit of the Next Economic Miracles (Hardcover)
The book is poorly sourced and wrong in so many areas. For example:
Page 41: "In 2002 Google purchased a California-based social networking site called Orkut, to compete with Myspace and Facebook in forty-eight languages..."
FACT: In 2002, Facebook and Myspace did not exist. Facebook, founded in Feb. 2004, and Myspace, founded in Aug. 2003, came between Google's in-house launch of Orkut in June 2004. Yup, Google didn't even buy a "California-based social networking" company called Orkut. Orkut Büyükkökte, an employee at Google, built the site while working for the company during his free time in 2004 (not 2002).
Page 109: "In the early years of the Depression the United States followed the advice not of Keynes but of the then-more fashionable Austrian economist Friedrich Hayek, who counseled that the job of government in the face of a downturn was to stay out of the way and let market forces liquidate the deadbeats and deadwood in the economy. The result was a severe U.S. contraction and 25 percent unemployment rate, but by 1950 the economy had nearly doubled in size compared with the 1929 peak. The pain had unleashed a boom, just as Hayek said it would. Contrast that to Japan, which responded to its severe recession in 1990 with every possible stimulus and bailout known to Keynesians (and then some), and today has an economy only 20 percent larger than it was in 1990."
FACT: He's a Hayek apologist! Where he gets it so wrong: "...but by 1950 the economy had nearly doubled." Sharma credits this "doubling" to Hayek counseling the government to stay out of the way, but in reality, the economy recovered after the government increased spending (a Keynesian idea) to support World War II between 1939 to 1945. It was government spending from World War II, not Hayek who spurred the economy after the Great Depression.
FACT: Japan followed the economic advice of Milton Friedman, not John Maynard Keynes, to solve the nation's imbalances in the 90s. It's important to understand the difference between monetary stimulus and fiscal stimulus in order to catch the lie in this case. In the 90s, as Japan's economy started to tank, the government, instead of boosting government spending, resorted to lowering the interest rates and using other monetary stimulus (not more spending) to control the supply of money. This failed. As a result, Japan's government proposed irrelevant Thatcherite supply-side changes, including privatizing the post office. This also failed. In fact, Japan is only now starting to grow, at a rate of 4.1 percent as of May, after the nation ignored Friedman and listed to Keynes by boosting fiscal spending.
These discrepancies, in some cases small (like Orkut) and others large, make me not trust the author one bit. The entire book is poorly sourced, and misinformed. It makes me question his credentials to work for Morgan Stanley because he's clearly and poetically dumb.
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Showing 1-10 of 14 posts in this discussion
Initial post: May 20, 2012 6:23:39 PM PDT
Z. Ge says:
you have a point. I have also found many factual errors in the book which make me doubtful of its major points.
In reply to an earlier post on Jun 7, 2012 2:32:07 AM PDT
Paul A. Renaud says:
The book author is also a bit off stating how Thai consumers are overall lame -because as I surely know Thailand consumer stocks here have more then doubled and tripled in value over the past 2-3 years. Surely broadely speaking the consumer is very alive in Thailand! He may also miss the point a bit as Bangkok has largely grown to the north and east, to now very large outskirts, and so is far more then just one big city. Yet this last point is largely correct.
In reply to an earlier post on Jun 7, 2012 2:50:20 AM PDT
Paul A. Renaud says:
The author is also a bit off on the Thai consumer. Thai consumer stocks have more then doubled in and trippled in the past 2-3 years! He also misses the point a bit on mega- Bangkok which has largely grown to the north and east to now very large outskirts, and so is far more then just one big city. Yet the point is largely correct in that Thailand is too dominated by its capital city. On the other hand, if you read recent major books like "Triumph of the City" the convincing argument there is made how large cities contribute enormously to a country's productivity.
Posted on Jul 5, 2012 11:01:19 PM PDT
Besides the factual errors (very lame), this guy needs to do a little math. No surprise he's a wonk working for a living and touting a book - if he knew what he blathered about, he'd be retired on his own private island somewhere.
He was just on BNN saying that "real growth" in commodities might go to zero because of slowing growth in China/India. That's simply ludicrous. His handwringing about the decline in growth in China from 8% to 6% is a bit much - for someone who is presumably good with numbers, he's shockingly bad wrt the implications of those numbers. 6% growth today generates about the same aggregate growth as when the Chinese were growing 8% a few years ago due to effects of compounding growth. 8% was plenty strong to drive commodity demand a few years ago, but that same aggregate demand today is going to cause commodity prices to drop? Get real.
What this nitwit fails to understand is there has been a structural shift in commodity supply - the easy-to-find/develop supplies have been consumed - that's why oil is $100 and Copper is $3.50 - not because Chindia was growing at 8% - all Chindia did was accelerate the pace at which easy/cheap to produce commodities ran out. And while prices may decline (or rise) temporarily due to economic factors, prices have to stay high (based on historic prices) as marginal costs are rising much faster than demand growth is slowing in "most" commodities (exceptions to every rule, such as domestic natgas where new technology has revolutionized the business).
Since this guy gets the "big picture" so wrong, it's no surprise he's sloppy/wrong with many of the details - it's "story" over substance - which is what WS thrives on...
Posted on Aug 8, 2012 10:55:01 AM PDT
Thank you for this review....spending my money on a Hayek apologist is not a good idea...I appreciate it...
Posted on Jan 9, 2013 7:26:46 AM PST
sorry but these things that you mentioned, aside from Orkut, are not facts, these are your, or shall i say Keynesian, interpretations of what happened.
In reply to an earlier post on Jan 9, 2013 11:07:00 AM PST
Nah, I think it might be your Hayekian interpretations that are throwing you off
Posted on Feb 26, 2013 2:41:12 PM PST
[Deleted by the author on Feb 26, 2013 2:49:41 PM PST]
Posted on Jun 26, 2013 10:54:46 AM PDT
Graham M. Flower says:
What Hoover followed was what the mainstream economic consensus of the day was. Hoover likely didnt know who Hayak was as Hayak was getting his Phd in the 1920s. The severity of the depression was due to the large number of small and medium bank failures and the unintended consequences of the Federal Reserve trying to ensure bank safety by raising bank reserve requirements substantially and in the process contracting the money supply by 60%. Bernake, for one, and one who has spent the bulk of his academic career studying the great depression, has flatly stated that the Federal reserve created the great depression.
Posted on Jun 26, 2013 11:08:24 AM PDT
Graham M. Flower says:
I just noticed the claim the Japan's deficit spending was a Milton Friedman recommendation. This is simply nonsense. Although the pattern of running deficits over the longer term has often been justified by politicians as being a Keynesian prescription in fact Keynes would without question reject it. What Keynes recommended was short term bursts during downturns. So I'm sure that both Friedman and Keynes would have rejected Japanese policy over the last 20 years, though people calling themselves (falsely in my view) Keynesians would have been most likely to have supported the policy.