8 March Tuesday, 2011

Back in 2001, Jim O’Neill, a senior economist working for the London office of Goldman Sachs coined the term BRIC to designate a group of large developing economies- Brazil, Russia, India and China- that he believed could have a combined GDP as big as the G7 by the year 2041- later revised to 2039, then 2032 (1).  To make that prediction, Mr. O’Neill used econometric forecasting methods (in essence compounding expected GDP growth rates) similar to those used by US futurologists Herman Kahn and Anthony J. Wiener in their seminal 1967 article The Year 2000: A Framework for Speculation on the Next Thirty-Five Years (2). O’Neill also used a similar timeframe (approximately 35 years) and, just like Kahn and Wiener, thought it important to consider less developed countries with large populations such as China, Russia, and India

This is where the similarity stops, however: unlike Kahn and Wiener, who thought that Asian countries couldn’t grow as fast as the US, Canada and the European countries, be they capitalist or communist, O’Neill believed that the time was ripe for China and India to enter a sustainably high growth cycle, and that Russia and Brazil could be lumped into the same category. It might be too early to judge, but, as of today, O’Neill’s predictions have materialized as far as China, India and Brazil are concerned- if anything, his numbers proved to be too conservative as Beijing, Delhi and Sao Paulo surpassed all the predictions that were made by Western economists a decade ago, even the most optimistic ones- Jim O’Neill had to revise upward his economic forecasts several times for these nations.

As far as Russia (the only White country in the BRIC category) is concerned, O’Neill’s economic predictions proved to be too rosy, the gap between his excessively optimistic predictions and the real world having been limited so far by the rise in price of oil and other commodities of which Russia is one of the largest exporters.  Futurologists seem to have no luck with Moscow: Kahn and Wiener were also way off the mark on that front, believing that (Soviet) Russia could catch up easily with the US by the year 2000- a macroeconomic argument that was then used by Herman Kahn to justify massive increases in defense spending under various Republican administrations (Nixon, Ford and Reagan). 

Tellingly, China alone accounts for more than 70% of the combined GDP growth generated by the BRIC countries in the past 12 years: if there is a BRIC miracle it’s first and foremost a Chinese one. Equally tellingly, government economists working for the State Council Research Center and the Central Politburo of the Chinese Communist party have been more apt at predicting long-term growth patterns than Jim O’Neill and his Goldman Sachs colleagues: back in the early 1990s when China wasn’t among the world’s six largest economies, experts in the entourage of Chairman Deng Xiaoping thought it possible for China to overtake Japan as the world’s second-largest economy by 2010, a prediction which proved to be spot-on (3).  The Chinese way combining structured central planning and free market forces has emerged as a powerful role model emulated successfully by many emerging countries across Asia (India, Vietnam ), Latin America (Brazil, Bolivia) and the MENA area (4) (most notably Turkey and Syria).


*This article is published simultaneously in the Journal of Turkish Weekly (Ankara) and An-Nahar (Beirut).
 
*M. Nicolas J. Firzli is Director of the World Pensions Council (WPC), a Paris-based think-tank dedicated to pension research, and a member of the International Commission of the French Society of Financial Analysts (SFAF)

(1) Gillian Tett, The Story of the BRICs, Financial Times/FT.com, January 15 2010
http://www.ft.com/cms/s/2/112ca932-00ab-11df-ae8d-00144feabdc0.html

(2) H. Kahn and A.J. Wiener, The Year 2000:  A Framework for Speculation on the Next Thirty-Five Years, Daedalus, vol. 96, no. 3, Summer 1967
 
(3) Caution as China’s economy overtakes Japan’s, Xinhua, Feb. 15 2011
http://news.xinhuanet.com/english2010/china/2011-02/15/c_13732101.htm

(4) Mustafa Kutlay and Salih Dogan ,Turkey and Central Asia: Modern Economic Linkages along the ’Silk Road, Revue Analyse Financire, Q1 2011
http://www.turkishweekly.net/op-ed/2786/turkey-and-central-asia-modern-economic-linkages-along-the-39-silk-road-39-.html