“ The trouble with our times is that the future is not what it used to be.”
– Paul Valéry
At the end of a year, it is good sports to discuss which predictions hit the bull’s eye – or at least came close. But this time I will look back as much as ten years and announce the winner of “the highest impact prediction of the decade”. The prediction has to both be accurate and of very high impact.
And the winner is Jim O’Neill, then head of global economic research and commodities and strategy research at Goldman Sachs.
Ten years ago, O’Neill introduced the acronym “BRIC” for Brazil, Russia, India and China, and analysed their increasing economical importance in the world for several decades into the future. His main point was that the BRIC countries would see a fantastic economical growth. And they’ve had nine fantastic years, and in 2011, the 11th year, the growth slowed significantly. Does that mean that Jim O’Neill was wrong? Does that mean that we could go on ignoring the BRICs? Absolutely no, and there is at least five reasons for that.
The first reason is just in terms of potential from large numbers. BRICS have almost half of the population in the world and hold more than a quarter of the world’s land area. China has 780 million workers, India 478 million. Brazil is a world leader in four strategic energy sectors: nuclear, hydropower, biofuels and oil, and has five of the world’s 25 largest hydro dams.
The second reason is that even if the financial growth decreased in 2011, the countries are far from through their expected growth cycle. O’Neill’s prediction is not refuted, only adjusted. Goldman Sachs believes the BRICs are about halfway through a strong growth cycle – and they have already redefined the political and economical realities on the planet.
The third reason is that even if the BRIC’s financial growth slowed in absolute terms in 2011, it is different if we look at it in relative terms. If anything, the financial crisis and the European sovereign debt crisis have accelerated the shift in the world economy towards developing economies. The BRICs will continue to become increasingly important for the West. In 2011, measured in GDP, China overtook Japan and Brazil overtook Britain. Or as chief executive of Centre for Economics and Business Research Douglas McWilliams said to Daily Telegraph, “Brazil has beaten the European countries at soccer for a long time, but beating them at economics is a new phenomenon.”
The fourth reason is found in the record of the first ten years. In the years since the report, the BRIC countries have gradually developed their political systems to more open international trade and global capitalism, and increased their global political influence considerably. The BRICs had a considerable financial growth, increased foreign investments, enormous investments in infrastructure, development of large raw material sources, and a massive increase in their middle class and its purchasing power. Since 1998, their GDP has doubled to become a quarter of the world’s. The GDPs of China and India have tripled in the same period. Foreign investments doubled in Brazil, Russia and India from 2006 to 2008. In a reverse of roles, in 2009 did the BRICs loan the IMF a considerable amount of money, and this year they are offering to help out the Eurozone with further loans via IMF.
These numbers don’t show that some regions in the BRIC countries are comparable to industrialized nations in terms of economic development. The Chinese bought 40 million computers last year, and used the decade developing their own computer chip, Loongson, which will reduce their dependency on the USA.
The fifth reason that we cannot and should not ignore the BRICs is that they are planting the seeds for the future harvest. The BRICs have, in step with their economical and political development, invested enormously on education and research, established large research programs in aerospace, renewable energy, computer science and life sciences. India has 12 million people with university degrees in science or technology. India’s 11th five year plan represents a 400 % increase in investments on higher education in science and technology. China recently finished their 11th five year plan, which was focused on “strengthening the nation through science, technology and education”. Today, China has 870.000 university teachers, 1.4 million researchers and an annual investment in research and technological development of about 50 billion dollars, or 1.5% of their GDP. China educates more Physics in science and technology than USA. Lately, the BRIC countries have developed comprehensive collaborations with Asian, European and American research institutions. Chinas 12th five year plan, which started this year, has budgeted for 6.000 new PhD stipends every year for Chinese students wanting to do their PhD at a foreign university.
The BRICs continued long-term investments in infrastructure, higher education and research means that they will continue to ascend in the world, also in shifting financial times. There acceptance in the past year of South Africa to the club will further increase their importance in the world.
