BRICS still solid building blocks of global growth
by John Ross, Global Times, 23 February 2012
Illustration: Liu Rui
Next month leaders of the BRICS nations will meet in Delhi for the fourth summit of their economies, which have dominated world growth in the last period. A few commentators argue that BRICS role will decrease in global dynamics, as early mover advantage for investing in these economies has long gone, and the CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) have been dubbed as the so-called next generation of tiger economies. But the facts show the opposite. The role of BRICS economies will grow further.
The term BRIC (Brazil, Russia, India, China), coined by Goldman Sachs in 2001, entered the world's vocabulary for a good reason. It described a key international development: the existence of very large and rapidly growing developing economies. The "S" (South Africa) was added by BRIC countries themselves in 2010 to include a representative of Africa.
Like all summaries, a few definitions can be argued around the edges. The most obvious candidate for inclusion is Indonesia, with the world's fourth largest population and relatively rapid growth. But overall Goldman Sachs captured the key point and so no attempt to displace the term has succeeded.
The reality which BRIC demarcated was that traditionally a distinction was made solely between "developed" and "developing" economies. Many have noted developing economies' increased role. In 2005-10, for which the latest full data exists, developing economies accounted for 59 percent of world growth in dollar terms.
But while, from a social or political perspective, the "developed/developing" counter position is crucial, from the point of view of the reshaping of the world economy, it concealed a key process. The share of very low-income countries in the world economy has scarcely changed. They accounted for only 1 percent of world growth in 2005-10.
The big change is that 58 percent of world growth was from "middle-income" countries. In the rise of the global middle, developed economies are losing dominance in world growth, and low-income economies are not gaining much, but middle-income economies increase their weight spectacularly. The BRICS are significant precisely as the largest "middle-income" economies.
Therefore commentators who challenge the relevance of BRICS on the grounds that other developing economies are growing rapidly, or offering high returns on financial markets, miss the point. The practical question is that the BRIC economies are not only rapidly growing but also large: China is the world's second largest economy, Brazil the seventh, India the ninth, and Russia the 11th. Their growth therefore has a major impact on the world economy in a way rapidly growing smaller economies do not.
This role has increased further since the international financial crisis. If we look at the period around the crisis, World Bank data shows that in 2007-10 global GDP grew by $7,250 billion. BRIC economies expanded by $3,819 billion - 53 percent of this. In contrast the US grew by $592 billion, one sixth that of BRIC.
This trend will continue in 2012. The EU and Japan will be fortunate to grow at all. The US has relaunched slow economic growth through borrowing, but its GDP increase will be only half of China's alone, even before counting other BRICS.
It is argued that BRICS countries take divergent positions. On some issues they do. China and Russia voted the same way on Syria in the UN, but not India. But this is not the point. BRICS is not a NATO type political/military bloc. It coordinates the economic interests of the world's largest developing economies.
Their trade, particularly with China, is growing rapidly and they have many common economic interests, such as reform of the international monetary system and the IMF. In trade, China is aided by the majority of its trade now being outside the developed economies.
Some small economies may continue to grow even more rapidly than some BRICS. But with developed countries expanding weakly, and the "rising middle" powering world growth, BRICS countries will continue to reinforce their role as a driving force in the world economy.
The author is a visiting professor at Antai College of Economics and Management, Shanghai Jiao Tong University. Johnross43@gmail.com
選擇“Disable on www.wenxuecity.com”
選擇“don't run on pages on this domain”
