It seems every week there is a new acronym for a group of nations cooperating economically–from the G7 or is that G8, and the G20 to ASEAN, APEC, CAFTA and CONCACAF, not to mention NAFTA and the EU. While most of these groupings are logical from a geographic, political, or economic synergy sense, another national grouping getting significant press is the BRIC, which makes no sense.
The BRIC is comprised of Brazil, Russia, India, and China–the so called major developing nations. They are a significant grouping of countries, which combined account for more than 40% of world’s population and about one quarter of the world’s land. On the surface, this grouping makes sense, but deeper inspection shows the group to look like a picture of three young athletes with one old, fat guy.
While most national alliances are put together by the county’s themselves, the BRIC group and acronym was created by Jim O’Neill at the investment bank Goldman Sachs. The grouping came about based on his thesis that these countries would become among the four most dominant economies by the year 2050. That being said, the four countries seem to have embraced the union, though the real purpose and goal of the union has yet to be defined. Based on their media statements so far, their only goal so far is to try to dethrone the dollar as the world’s reserve currency.
There are a of couple serious flaws with O’Neill thesis. First, for the BRIC to become the largest economies in the world by 2050, we have to assume all four countries will continue to grow at historic rates. As any capitalist can tell you, market economies are going to have up and down economic cycles, and as the recent global recession reminds us, the faster the growth, generally the harder the recession from a bubble bursting. Additionally, all of the BRIC nations have serious political and social hurdles to deal with on their way to becoming long-term economic powerhouses.
Besides the aforementioned issues, my real issue with this grouping is Russia. While Brazil, India, and China (BIC) are all fast growing economies with extensive potential based on young and/or growing populations among other factors, Russia is not. Russia’s population is aging fast and expected to decline by 20% by 2050. This contrasts with the young and growing/stable populations of Brazil, India, and China. These three countries also have governments and cultures that are evolving towards free market economies, albeit slowly. Russia’s government is moving in reverse away from a free market.
Russia, post Soviet era, is only in the economic major league because of its oil and natural gas resources. While these are valuable economic resources, by 2050 oil and natural gas production in Russia is projected to be less than 20% its current levels. This fact plus a drastically smaller, older population, not to mention the political issues, means Russia is not much more than a large Saudi Arabia economically. Ok, maybe long-term Russia has a little more to offer economically than an Arab nation, but it doesn’t offer anything near what Brazil, India, and China bring to the table.
While Brazil, India, and China deserve a seat at the world economic table influencing the future of the global economy, Russia does not. It’s like have an aging, stubborn, bitter board member who doesn’t want to let go. It’s time we let the BRIC go away into media purgatory and focus on real economic alliances that can make the global economy stronger.