The BRIC Road to Growth

Jim O'Neill

• Publisher: London Publishing Partnership
• Year: 2013
• ISBN:
  9781907994234
• Edition: 1
• Topic: Economics
• Subtopic: Development Economics
• Index: Economics

The idea that Brazil, Russia, India and China (the "BRICs") are the rising stars of the world economy is now widely accepted. However, the "old" developed nations have not adjusted to the new world order as they struggle with the legacy of the financial crisis. The BRICs and others (especially Korea) have already 'emerged' as economic powers. This requires rapid adjustment in economic policies and especially global economic institutions. This book makes a strong case for a radical overhaul of global economic governance to put these powerful new economies at the heart of decision-making. The author argues that, while the new growth economies still have significant policy adjustments to make, it is also essential for old-world economies to learn from them too and to accept the new order. He looks at the roles of China, Korea and Africa and at the scale of South-South trade. What does all this mean for the EU and for the UK in particular? How should the world engage with the new economic powerhouses?

Chapter 1

What’s been happening in the BRIC countries?

It is nearly twelve years since I first coined the acronym BRIC to highlight the remarkable impact these rapidly growing countries were starting to have on the rest of the world, as well as the changes they were experiencing for themselves. The first decade of that period, as I have described elsewhere,1 turned out to be even more dramatic than I had anticipated, but as we move further into the second decade, there is evidence of slower economic growth in each of Brazil, Russia, India and China. Some observers are now suggesting that the tailing off of BRIC growth means that the whole phenomenon was overhyped2 and was never a great investment proposition anyway.3 It is true that the BRIC economies are currently growing by less than in the past decade, but it is not clear whether this is a structural slowdown or just a cyclical one. For reasons I outline below, it was highly unlikely that they would have continued to see GDP growth at the same rapid pace.

Moreover, while it is interesting to look at their collective economic performance, it is also clear that there are big differences between the four economies. China is of particular importance, as the next chapter will discuss in more detail.

Table 1.1 shows GDP growth for each of the BRIC countries by decade, going back to the 1980s, along with my 2010 forecast for the ten years to 2020, and actual growth rates in 2011 and 2012. The figures tell the story of a decade of unusually strong growth, followed by a return to a less astounding, but hardly disappointing, growth performance. It is clear that the decade 2001–10 was a particularly good one for the BRIC economies. In some ways, it may have been unusually fortunate, maybe even a ‘perfect storm’ for rapid growth. In particular, nothing went badly wrong in any of the four countries, which was spectacularly lucky given their diversity in terms of their economies, societies and vulnerabilities to external influences. This is one of the main reasons (as I explained in The Growth Map1) that real GDP growth during that decade far exceeded expectations.

Table 1.1. BRIC real GDP growth by decade.

	1981–90	1991–2000	2001–10	2011	2012	2011–20
China	9.3	10.5	10.5	9.3	7.8	7.5
India	5.6	5.6	7.5	6.3	3.9	7.5
Brazil	1.6	2.6	3.6	2.7	0.9	5.2
Russia	–	–2.1	4.9	4.3	3.6	5.4
BRICs	5.3	5.5	8.1	7.7	5.8	6.6

Source: IMF and Goldman Sachs Asset Management (GSAM).

Perhaps to the casual observer a further acceleration in growth after the 2000s might have seemed inevitable. To those of us with experience in these economies, and in studying long-term growth trajectories in general, it seemed highly likely that the growth of the BRIC economies would slow down. The Goldman Sachs (GS) forecast for this decade was 6.6% on average, which would seem to be a more sensible benchmark than the extremely rapid growth of ...