Mostly Economics

It has been 20 years since Jim O’Neil coined the term BRIC – Brazil, Russia, India and China. In this IMF piece, He reflects on the acronym BRIC and way forward for emerging markets:

My primary goal in my first paper, “The World Needs Better Economic BRICs,” was to make a case for changing the framework for global economic governance, not necessarily the inevitable future growth of these countries.

In subsequent papers I laid out what the world could look like, in the highly unlikely event that the countries we studied reached their potential. We defined this potential using the standard methodology for macroeconomics, in which real economic growth is determined by two variables: the size of a nation’s workforce and the economy’s productivity. Because of their population size, the associated size of their workforce, and the scope for productivity catch-up, it was quite easy to show that the potential growth rates of BRICs were higher than those of most advanced economies. What our analysis was not meant to show was that all these countries would persistently grow at their potential. That frankly is not realistic, and not what we intended as our message. 

In this context, the second decade of this century has been quite a contrast to the first decade, which for all four countries turned out even better than in the scenarios I outlined in 2001. While India has notably disappointed in recent years, it is broadly developing along the path we envisioned. For both Brazil and Russia, however, 2010–20 economic performance was very disappointing, which has occasionally led me to joke that perhaps I should have called the “BRICs” the “ICs.” Brazil and Russia have both suffered from the well-known commodity curse and, as evidence suggests, are far too dependent on the world commodity cycle for their own sustainable development. Each of these countries has considerable differences, but they both need to diversify their economies away from commodities and grow the role of the private sector.

In contrast, the ongoing strength of the Chinese economy suggests that it is fully achieving its potential. China’s GDP, in excess of $14 trillion (as of 2019), is more than twice that of the other BRICs in aggregate. The sheer scale of China means that the BRIC economies combined are now larger than that of the European Union and are approaching the size of the United States.