A few weeks ago this blog reported on Ms Carike Claassen’s seminar presentation on the BRICs countries and now we have her first post:
More about the BRICs:
Just about a decade ago, if someone asked you what you thought about “the BRICs”, you’d be forgiven for complimenting them on their choice of building material. Today, “BRICs” is a buzzword of a whole different kind. But who are they and why is everyone so concerned about them? This post will serve to introduce you to the BRICs very shortly.
BRICs is an acronym invented in 2001 by Goldman Sachs economist, Jim O’Neil. He was, at the time, scrutinizing emerging markets to determine which countries he thought had the potential to grow big enough to provide some serious competition for the current G-7 group, and he thought the BRICs (Brazil, Russia, India and China) were it.
These economies are indeed very large and influential, accounting for 40% of the world’s population, and about 70% of global economic growth in the past decade. What is important to remember about these countries from the outset though, is that BRICs is not a homogenous group of countries at all. In fact, the economic and political goals of individual BRICs nations are often in direct opposition to each other, such as Brazil who would like to see freer agricultural markets, and China who wants more regulation.
These countries are generally economies that had been dominated by high levels of state intervention, but who have become more open to trade with other countries in recent years, and whose domestic markets have also seen greater levels of liberalization. They face very different challenges in maintaining their impressive levels of growth, though.
Brazil, though it is a very attractive destination for foreign investors, suffers from high levels of income inequality and is also in need of quite significant infrastructure upgrades in order to ensure that trade can continue efficiently. Russia is still very dependent on commodity exports, which means that the economy is very vulnerable to changes in commodity prices. The Russian economy also struggles with high levels of corruption and infrastructure that is often inadequate. India, the second most populous BRIC, still faces the challenge of educating large parts of its population and creating more jobs outside of its agricultural sector. China is probably the most influential BRIC at this stage, and it is certainly also the largest in terms of population and GDP. The Chinese economy has grown its GDP at an average annual rate of 10% in the past decade, and recently overtook Japan to become the world’s second largest economy. This doesn’t mean that China doesn’t face economic obstacles. Though China performs well at exports, it still needs to stimulate its own domestic economy in order to ensure higher levels of domestic demand. China’s huge population also poses several demographic challenges, such as a rapidly ageing population, which will pose serious economic challenges in future.
These four diverse economies are busy changing the way things have always worked in the global economy, stepping forward as leaders both economically and politically, where previously the world has largely been dominated by America and Britain. It is estimated that, by 2050, China will be the world’s largest economy, with India in third place. This has implications for future trade and investment patterns and means that the world we will live in by 2050 will probably look much different than the one we now know.
BRICs at a glance:
The GDP growth of the BRICs has been very strong in the past decade, and withstood the 2008 credit crisis particularly well.
BRICs countries are some of the most populous in the world, with China and India each having populations of over a billion (Figures on the vertical axis are in millions).
As the BRICs continue to grow, their consumption patterns change. This means that trade and investment patterns in the global economy also changes, and different products become more important than before.
If you want to know more, have a look at the full presentation: