BRIC: Encyclopedia II - BRIC - The BRIC thesis

BRIC - The BRIC thesis

The four countries whose economic potential is such that they may become among the four most dominant economies by the year 2050. The thesis was proposed by Jim O'Neil, global economist at Goldman Sachs. The coalition would encompass over forty percent of the world's population and hold a combined GDP [PPP] of 12.14 trillion dollars. On almost every scale, it would be the largest entity on the global stage. These four countries are not a political alliance (such as the European Union) or any formal trading association, like ASEAN. Nevertheless, these countries signed a trade and cooperation agreement in 2002.

BRIC - Dreaming with BRICs: The Path to 2050 2003

The BRIC thesis (defended in the paper Dreaming with BRICs: The Path to 2050) recognises that Brazil, Russia, India and China have changed their political systems to embrace global capitalism. China and India are predicted to be, one can argue that they are, dominant in the field of manufacturing and also in services (India in particular) while Brazil and Russia would be dominant countries to supply these countries with commodities (soy and iron ore for Brazil, oil from Russia). In this process, commodities, work, technology, and companies have diffused outward from the United States across the world. Following the end of the Cold War or even before, the governments comprising BRIC all initiated economic or political reforms to allow their countries to enter the world economy. In order to compete, these countries have simultaneously stressed education, foreign investment, domestic consumption, and domestic entrepreneurship. According to the study, India has the potential to grow the fastest among the four BRIC countries over the next 30 to 50 years. A major reason for this is that the decline in working age population will happen later for India and Brazil than for Russia and China.

BRIC - Follow-up report 2004

The Goldman Sachs global economics team released a follow-up report to its initial BRIC study in 2004. [1] This new report takes the analysis one step forward and focuses on the impact the growth of these four economies will have on global markets. In this report it is estimated that the BRIC economies' share of world growth could rise from 20 % in 2003 to more than 40 % in 2025. Also, their total weight in the world economy would rise from approximately 10 % in 2004 to more than 20 % in 2025. Furthermore, between 2005 and 2015 over 800 million people in these countries will have crossed the annual income threshold of $3,000. In 2025, it is calculated that approximately 200 million people in these economies will have annual incomes above $15,000. Therefore, the huge pickup in demand will not be restricted to basic goods but impact higher-priced branded goods as well. First China and a decade later India would overtake the US as the world's largest car market. Despite the balance of growth swinging so decisively towards the BRIC economies, the average wealth level of individuals in the more advanced economies will continue to far outstrip the BRIC economy average. Goldman Sachs estimates that by 2025 the income/capita in the G6 will exceed $35,000, only about 24 million people in the BRIC economies will have similar income levels. The report also highlights India's great inefficiency in energy use and mentions the dramatic under-representation of these economies in the global capital markets.

BRIC - Criticism

There are many uncertainties and assumptions in the BRIC thesis that could mean that any or all of these four countries will not live up to their promise. The preeminence of China and India as major manufacturing countries with unrealised potential has been widely recognised, but some commentators state that China's and Russia's lack of full democracy could be a problem in the future, as is the possibility of conflict over Taiwan in the case of China. Likewise, the population of Russia is steadily declining, and this may have implications for its future. The potential of Brazil has been speculated upon for many decades without amounting to fulfilling this potential. Factors such as international conflict, civil unrest, political policy, outbreaks of disease and terrorism are all factors that are difficult to predict and that could have an effect on the destiny of any country. India, China and Russia are all in dispute regarding territory for example.

Adapted from the Wikipedia article "The BRIC thesis", under the G.N U Free Docmentation License. Please also see http://en.wikipedia.org/wiki