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Book review

April 2018


Title: The New Wealth of Nations

Author: Surjit S. Bhalla

Publisher: S&S India



If French economist Thomas Piketty is a poster boy for pessimism, the antidote is surely Surjit S. Bhalla, a former World Bank economist and statistician who has written The New Wealth of Nations, a reappraisal of the global economic system with an emphasis on data.

The author takes the reader on a journey through the global economy over the past 35 or so years. “[Since] around 1980, the transformation in the world, and in the lives of the poor, has been nothing short of radical, huge, and unprecedented,” he declares.

Bhalla’s bugbear is what he believes to be the selective interpretation of statistics. He takes issue with Piketty’s assertions in his 2013 bestseller, Capital in the 21st Century, on income inequality – dismissed here as “fear-mongering” – and what he believes to be politicization by Oxfam’s now-famous 2017 report, “An Economy for the 99%.”

“The Oxfam assertions don’t seem right, even from a cursory glance,” he writes. “Incomes of the bottom 50 percent increased by 23 percent, not 0 percent. The top 1 percent increased their share from 12.7 percent to 22 percent, but their mean incomes did not increase by 300 percent. Rather, that increase was considerably less, at 184 percent.”

The way data have been used by prominent opinion-makers, Bhalla argues, has resulted in a neglect of emphasis on education as a driver of economic growth. “I regard education as the most transformative force in human history,” he writes. “Greater equality in incomes, a democratization of the elite, economic growth and better standards of living, the elimination of poverty, and the equality of sexes. All made possible by the force of education, the new wealth of nations.”

Another target of Bhalla’s ire is the United Nations Human Development Index (HDI). “The noteworthy feature about this index was that it offered to measure education and health as non-monetary indices of wellbeing,” he writes.

Bhalla believes that one of the great advantages of improving education is its monetization. “The acquisition of education is the road to welfare,” he notes in the book. “This emphasis on the non-monetary aspect of education is one reason why the HDI index of welfare missed out on the transformation of China and India.”

The author used his own research to estimate the wealth embodied in education, using the distribution of earnings according to the various stages of education sourced from a landmark 2015 publication, A New Data Set of Educational Attainment in the World, 1950-2010 by Robert J. Barro and Jong-Wha Lee. The Barro-Lee data set, as it is known, ranked seven educational stages: illiterate, primary school attended, primary school completed, and the same for secondary and tertiary education.

Bhalla refers to Hong Kong only briefly, as “the first developing economy to experience a growth acceleration in 1962; India was the last developing economy to do so in 1994.” But China and India feature prominently in The New Wealth of Nations. Bhalla considers them “twins separated at birth” but with an important caveat: “The twins are not identical and have chosen distinctly different paths to development.”

He notes how China eventually led the economic transformation of Asia. “For a long time it was believed that East Asian economies grew faster because they did not have democracies to shackle them,” he writes. “That ‘wisdom’ was soon withdrawn, when it was documented that most of the African and Latin American economies were growing very slowly owing to the fact that these two continents had the largest share of dictatorships.”

Bhalla argues that authoritarianism is not a growth driver per se but can be used to harness educational development. “Strong leadership matters a great deal – witness communist China under Mao Zedong and authoritarian China under Deng Xiaoping (and his successors).”

While Bhalla paints hopeful futures for both China and India, he believes their future success will not necessarily come at the expense of advanced economies, despite their stagnating growth. “The first lesson in the study of political economy is that there are winners and losers,” he notes. “Noise-making is almost the exclusive domain of the losers, naturally.”

U.S. President Donald Trump’s “make America great again” argument is an example of that noise. But Bhalla believes Trump is addressing a problem that doesn’t exist. “[A]rtificial intelligence, 3D printing, and technology yet unseen are on their way – factors that are bound to keep America great for a long time.”


Author interview: Surjit S. Bhalla

Although Surjit S. Bhalla adapts the title of Adam Smith’s seminal work The Wealth of Nations for his book, the Indian economist is the antithesis of the dour Scotsman. His enthusiasm for education is matched only by his belief in the power of  data to enable us to understand the changing state of the world.

Now Chairman of Oxus Research and Investments, a Delhi-based economic research, asset management, and emerging-markets advisory firm, Bhalla wrote The New Wealth of Nations because he didn’t believe the importance of education had been stressed enough by economists.

The premise of the book is that education increases incomes, creates wealth, reduces inequality and empowers women. Bhalla says his heroes are Gary Becker (1930-2014), the University of Chicago economist who studied the effects of education on society, and Sir Arthur Lewis (1915-1991), the St. Lucian economist who studied patterns in the growth of developing economies after World War II.

The two men helped overturn “the conventional wisdom at that time, which was that natural resources determine incomes,” Bhalla says on a recent visit to Hong Kong to promote his new book.

Two of his works, Imagine There’s No Country: Poverty, Inequality and Growth in the Era of Globalization (2002) and Devaluing to Prosperity: Misaligned Currencies and Their Growth Consequences (2012) examined flaws in the global economic structure. A third, Criconomics: Everything You Wanted to Know about ODI Cricket and More (2014), was more of a musing about statistics as told through his favourite sport.

Bhalla notes that not only is education the unifying factor behind the decline of poverty and rise of  income equality – it has immeasurable benefits for women. Oxford University, he points out, admitted more women as undergraduates than men for the first time in 2017. “And you see... Saudi Arabia has suddenly woken up, and the women can now go and watch a soccer match [and] can now drive.”

To be sure, Bhalla’s optimism can be runaway. The effect of women’s  empowerment, he says, will end practices such as gender-specific infanticide in India. “We kill the girl child in India... That is going to end,” Bhalla said. Yet the data available suggests the practice remains rampant across South Asia and beyond.


Bhalla remains irrepressible. “This,” he says of the economic revolution sweeping China and the rest of Asia, “is really the greatest transformation that the world has ever seen and as I hope to show. It’s very unlikely that the world will ever see this transformation again.”