BRIC by brick to the future, by Jim O'Neill
Reviewed by Benjamin Shobert
* [See below]: The biggest challenge facing the Zioconned USA today is its utter corruption, Hubris and barbaric criminality of its political class and the coming demise of the US Dollar and how to prevent it from happening....
Against the backdrop of all that has happened in the United States and now Europe since the 2008 financial crisis, it has been easy to criticize modern economics for its inability to predict downside risks or negative trends that would come to define the world.
While this may be a perfectly understandable frustration, it overlooks one of the most important and accurate economic predictions that professional economists have made in the past 20 years: how the rise of the world's emerging economies would happen, and what this would mean for the developed world.
Jim O'Neill, now chairman of Goldman Sachs Asset Management, not only coined the term "BRIC", which stands for both what he saw as the four most important emerging economies of Brazil, Russia, India and China, as well as the larger set of opportunities and challenges that would be faced as these countries developed their respective economies. (South Africa has subsequently become a member of what is now known as BRICS.)
His new book, The Growth Map: Economic Opportunity in the BRICs and Beyond builds on the successful predictions made 10 years ago when he asserted that these four countries would surpass the six biggest economies of the West in 40 years.
O'Neill's predictions a decade ago were, as he now puts it, "rather conservative". His quick rundown of how BRICs actually performed during the period in question lays the foundation for the bold predictions in his new book.
O'Neill writes of his original projections that the aggregate gross domestic product (GDP) of the BRIC countries "has close to quadrupled since 2001, from around $3 trillion to between $11 and $12 trillion. The world economy has doubled in size since 2001, and a third of that growth has come from the BRICs."
To put this into perspective, O'Neill states, "Their combined GDP increase was more than twice that of the United States and it was the equivalent to the creation of another new Japan plus one Germany, or five United Kingdoms, in the space of a single decade." (Emphasis the reviewer's.)
Much of this economic growth comes at the hands of the resurgent BRIC countries, which is something Westerners take for granted today; but O'Neill is right not only to point back at this growth as reason to believe in what he is about to write in his new book, but equally to remind the reader of the enormous economic good that has been set in motion by the entrance of the BRIC economies to the world order. During a period where Americans in particular have grown cynical about whether China's presence has been for their betterment or detriment, O'Neill's reminder is much needed.
Thankfully, in The Growth Map, O'Neill takes the time to explain briefly to readers the original methodology he and his team used when their original bold predictions about the BRIC countries were made. Built largely on what O'Neill calls a "global environment score" or "GES Index", this approach takes into account a total of 13 variables, some obviously economic (inflation, government deficit, external debt, and so forth) and others more intangible (use of computers, education, corruption, stability of government).
O'Neill splits these into "macroeconomic" and "microeconomic" variables, a distinction that is perhaps more clear on the macro side than the micro. His large point is that the methodology used to originally predict the growth of the BRIC countries proved to be accurate because of this approach, one that blends both hard quantitative factors with more soft determinations about a country's current situation.
Anticipating those who will read his book and argue that a particular country should not be included in the BRIC formulation - India as one of the more recent and common examples - O'Neill spends time going over the downside risks he sees in these countries. But, his review of these concerns always goes back to the predictive value of the GES Index.
The larger point he makes is worth reflecting on: during a period when prognosticating about the future of the BRIC countries is as much about Western insecurities as it is a grounded analysis in what drives economies forward, the latter is the right approach. Unwilling to simply overlook trouble in any of the BRIC economies, he is equally unwilling to let these problems obscure the reality of where they have come from, and where they are likely going.
With his history of properly predicting the rise of the BRIC economies firmly established, O'Neill turns his attention to what he calls the "Next Eleven" or "N-11". Originally a group he identified in 2005, this list includes Mexico, Turkey, Egypt, Iran, Nigeria, Bangladesh, Indonesia, South Korea, Pakistan, the Philippines and Vietnam. As O'Neill admits, this group is not only much larger, but more diverse than the original BRIC formulation.
Within this group, as O'Neill admits, is more volatility and instability than existed when he originally constructed the BRIC idea using the GES Index. Consequently, his predictions about the Next Eleven are couched a little more carefully. Where O'Neill's previous predictions were more discrete, namely, that the BRIC economies would surpass the developed West in 40 years, his predictions about the Next Eleven show confidence, but come short of the bold certainty of previous predictions.
O'Neill compartmentalizes the Next Eleven into what he calls "three different tracks". Respectively these are first, "South Korea, Mexico and Turkey, where incomes and development levels are reasonably high, growth conditions are decent and the challenge will be to sustain and improve those conditions in order to converge with the world's richest economies."
His second group includes Indonesia and the Philippines, where he believes each needs "to advance further to get closer to the first group". The final group includes Egypt, Nigeria, Pakistan, Bangladesh, Iran and Vietnam. As O'Neill notes, "The countries in this final group ... are quite different."
Aware that The Growth Map comes at a different moment in the world's economic development than when he made his original BRIC predictions, O'Neill is careful to evaluate how issues like China's consumption of natural resources and its growing role in Asian affairs might be potential sources of tension and unrest. He also appreciates that China's rise, once something Washington believed it should encourage, is currently being interpreted by many Americans as having been at their expense.
O'Neill notes that "At a time when the US economy is struggling, it is easy to blame others, and especially China." He penetratingly writes "It is highly fashionable for US politicians to blame China for America's economic problems." Yet, as O'Neill knows, this sort of response is precisely what many American policy makers and the public at large believe would be best suited to get back what they feel they have lost to the rising BRIC economies.
Towards the end of his book, O'Neill turns his attention towards what he believes the world must do in response to the BRIC nations having, as he puts it, "gone from emerging to emerged". The established order, whether evidenced by non-governmental organizations like the World Trade Organization or the International Monetary Fund, will have to change in ways that developed nations like the United States and the eurozone may want to resist.
O'Neill cautions that "Those countries that ran the world for the latter half of the twentieth century cannot afford to be squeamish or judgmental about countries that now rival them economically, just because of their different social and political systems."
The Growth Map contains its share of predictions, admittedly more carefully couched than those O'Neill was originally made famous for, but ones that are no less potentially impactful. Whether the Next Eleven will in fact emerge like the BRIC nations have is certainly a pregnant question he labors to answer, the more weighty question may be whether the developed West has the willpower and leadership necessary to find their way forward without conflict in a world where they no longer have the unquestioned upper hand.
The Growth Map: Economic Opportunity in the BRICs and Beyond, by Jim O'Neill. Portfolio Hardcover (Dec 2011), ISBN-10: 1591844819. US$29.95, 256 pages.
Benjamin A Shobert is the managing director of Rubicon Strategy Group, a consulting firm specialized in strategy analysis for companies looking to enter emerging economies.
By Robert M Cutler
MONTREAL - Both Indonesia and Malaysia, two countries that export more to the dynamic Asian markets than they sell to the lethargic countries of Europe and America, surprised consensus growth estimates to the upside for the fourth quarter of 2011.
Indonesia grew 6.5% year-on-year, marking the fifth consecutive quarter where growth exceeded 6.4%. Growth for the whole year 2011 also came in at 6.5%, up three-tenths of a point over 2010 and significantly above the 5.7% average for the second half of the last decade.
A month ago, Moody's increased its credit rating of Indonesia's sovereign debt to "Baa3", which is the lowest investment-grade rung. This came a month after Fitch raised Indonesia to its own lowest investment-grade rating of "BBB-". Standard & Poor's will likely follow suit in the near future.
In Malaysia, industrial production in December rose 3% year-on-year, driven by manufacturing and the electricity sector. The 5.2% growth in Malaysia's economy in the fourth quarter was down from 5.8% in the third quarter and 7.2% in the second, but still robust due to still strong domestic demand.
Malaysia's economic growth for the whole year 2011 was 5.1% as the first quarter had registered only a 4.8% figure. According to CIMB economic research head Lee Heng Guie, the principal drag on Malaysian growth in the fourth quarter was stagnant external demand for consumer electronics, as quoted by the Kuala Lumpur-based newspaper The Star.
The economy is generally expected to limp along in the first half of 2011, strengthening only in the second half, when questions around the eurozone sovereign debt crisis are better clarified.
Household and business spending continued to accelerate in the fourth quarter, driving a 10.5% expansion in domestic demand, but Malaysia looks to be more affected than Indonesia by the drop in external demand due to slowing global growth.
Indonesia is better placed than Malaysia to continue with some momentum, however diminished, because its population of 237.6 million (2010 census) is the fourth-largest in the world after China, India, and the US. Two thirds of the population is between the ages of 15 and 64, while a quarter is between 0 and 14.
This very dynamic population structure has produced a relatively young emerging middle class that is an excellent market for such goods as electronics and automobiles. Consumption of consumer goods by this population cohort represents as much as half of the Indonesian economy.
The Indonesian equities bellwether Jakarta Composite Index (JCI) has been oscillating around the high 3,900s for over two months, trying to see whether it has the power to break through the medium-term double top (August-September 2011) at 4,000. Above that level lies the all-time high of 4,193. Short-term technical indicators have been on-again, off-again; at present, they are weakening.
At the end of January and beginning of February, the Kuala Lumpur Composite Index (KLCI) in Malaysia successfully, perhaps surprisingly, filled a gap-up from early August late year between 1,497 and 1,545. Congruently to the JCI's structure, the KLCI is up against an intermediate high in its mid-1,500s that is surmounted by the all-time high at 1,595.
The short-term technical indicators for the KCLI are actually more favorable than for the JCI, and the short-term (since the end of last September) is more definitely monotonic. It has recovered 18.2% to its present level from an intra-day low of 1,311 on September 26 last year.
One of the reasons why Malaysia surprised observers was the strength in its foreign direct investment (FDI), which was up 12.3% in 2011 over 2010. This strength derives in part from the fact that most FDI in Malaysia comes from Asia and not from developed economies that would be more susceptible to drawing back.
According to the Malaysian Investment Development Authority, Japan, South Korea, and Singapore alone account for 53% of all FDI in the country, with Japan representing nearly one-third of the total. (Other countries in the top five are the US and Saudi Arabia.) Among the 10 members of the Association of Southeast Asian Nations, Malaysia was outpaced only by Singapore and Indonesia in the race for FDI inflows.
The five largest FDI contributors to the Indonesian economy in 2011 were, in order, Singapore, the US, Netherlands, South Korea, and Japan. Overall FDI in Indonesia rose 20% in 2011 over 2010. There is a good deal of ink being spilt over the prospect of Indonesia, already a member of the Group of 20 nations, this year becoming the 15th country with a gross domestic product (GDP) exceeding $1 trillion.
The biggest potential weakness is the country's export reliance upon resource-based products; industries in this area do not create jobs as prolifically as do services and manufacturing....
Imagine, a world the Dollar is no longer commonly accepted as a trading currency and the US has to pay for all its import using other currencies.What will happen to their standard of living? At the moment, any deficit in trade can simply be offset just by printing more Dollars out of thin air and using these imaginary, ghost Dollars to pay for these imports.So the day, the Dollar tanked is Armageddon for the USA....
They know this and are watching what is happening to the Dollar, carefully and nervously.
A number of countries, nations has started moving away from using the Dollar in their international trade dealing through currency swaps and the promotion of using their own currencies.This trend has not gone unnoticed by the money printing USA and seriously threaten their monopoly on printing the Dollar at their whim and fancy.It is a foregone conclusion that if nations around the world started to move away from using the Dollar, the USA will no longer has the mean to support their living standard and will revert back to a poor nation status!
So this has to be prevented at all cost and hegemony is a useful tool to use, to prevent the Dollar demise.Historically, they have noticed that in time of strive and trouble, nations gravitate towards the Dollar and the Dollar strengthen.
Hence the USA has become a nation that thrives on creating hegemony, wars, killings, torture, extra-judicial assassinations by the infamous White House Murder INC, in the Levant and Worldwide, ever since the Barbaric inside Job of 9/11 and big trouble around the world...
A strong Russia is not in the USA interest, as Russia is one of the Nation in front, that is actively promoting not using the US Dollar. So, it is in the US interest that Russia and Japan remains at logger head, so to speak.Japan will then remains dependent on the USA and will behave as told, like not to join in using Yen and Roubles in their trade.
As History has shown, nothing will prevent the demise of a bloated empire, living and acting beyond its mean....
The willingness of peoples around the world to be Washington’s puppets instead of loyal citizens of their own countries is why the West has been able to dominate the world during the modern era. There seems to be an infinite supply of foreign leaders who prefer Washington’s money and favor to loyalty to their own countries’ interests.
As Karl Marx said, money turns everything into a commodity that can be bought and sold. All other values are defeated–honor, integrity, truth, justice, loyalty, even blood kin. Nothing remains but filthy lucre. Money certainly turned UK prime minister Tony Blair into a political commodity.
The power of money was brought home to me many years ago. My Ph.D. dissertation chairman found himself in the Nixon administration as Assistant Secretary of Defense for International Security affairs. He asked if I would go to Vietnam to administer the aid programs. I was flattered that he thought I had the strength of character to stand up to the corruption that usually defeats the purpose of aid programs, but I declined the assignment.
The conversation was one I will never forget. Warren Nutter was an intelligent person of integrity. He thought regardless of whether the war was necessary that we had been led into it by deception. He thought democracy could not live with deception, and he objected to government officials who were not honest with the American people. Nutter’s position was that a democratic government had to rely on persuasion, not on trickery. Otherwise, the outcomes were not democratic.
As Nutter saw it, we were in a war, and we had involved the South Vietnamese. Therefore, we had obligations to them. If we proved to be feckless, the consequence would be to undermine commitments we had made to other countries in our effort to contain the Soviet Empire. The Soviet Union, unlike the “terrorist threat” had the potential of being a real threat. People who have come of age after the collapse of the Soviet Union don’t understand the cold war era.
In the course of the conversation I asked how Washington got so many other governments to do its bidding. He answered, “Money.”
I asked, “You mean foreign aid?”
He said, “No, bags of money. We buy the leaders.”
He didn’t approve of it, but there was nothing he could do about it.
Purchasing the leadership of their enemies or of potential threats was the Roman way. Timothy H. Parsons in his book, The Rule of Empires, describes the Romans as “deft practitioners of soft power.” Rome preferred to rule the conquered and the potentially hostile through “semi-autonomous client kings which the Senate euphemistically termed ‘friends of the Roman people.’ Romans helped cooperative monarchs remain in power with direct payments of coins and material goods. Acceptance of these subsidies signified that an ally deferred to imperial authority, and the Romans interpreted any defiance of their will as an overt revolt. They also intervened freely in local succession disputes to replace unsuitable clients.”
This is the way Washington rules. Washington’s way of ruling other countries is why there is no “Egyptian Spring,” but a military dictatorship as a replacement for Washington’s discarded puppet Hosni Mubarak, and why European puppet states are fighting Washington’s wars of hegemony in the Middle East, North Africa and Central Asia.
Washington’s National Endowment for Democracy funds non-governmental organizations (NGOs) that interfere in the internal affairs of other countries. It is through the operations of NGOs that Washington added the former Soviet Republic of Georgia to Washington’s empire, along with the Baltic States, and Eastern European countries.
Because of the hostility of many Russians to their Soviet past, Russia is vulnerable to Washington’s machinations.
As long as the dollar rules, Washington’s power will rule.
As Rome debased its silver denarius into lead, Rome’s power to purchase compliance faded away. If “Helicopter Ben” Bernanke inflates away the purchasing power of the dollar, Washington’s power will melt away also....
PAUL CRAIG ROBERTS