Will Goldman’s new BRICwork stand up?
Jim O’Neill, the Goldman Sachs economist who coined the term BRICs back in 2001, is adding four new countries to the elite club of emerging market economies. But does his new edifice have the same solid foundations?
In future, the BRIC economies of Brazil, Russia, China and India will be merged with those of Mexico, Indonesia, Turkey and South Korea under the banner “growth markets,” O’Neill told the Financial Times.
Hmmm. Doesn’t quite grab you like BRICs, does it? The Guardian helpfully offers an amended branding banner of “Bric ‘n Mitsk” (geddit?). But which ever way you cut it, it’s hard to see a flood of investment conferences and funds floating off under the new moniker.
Ten years ago, Goldman had this field to itself. Now more and more acronyms are being bandied around by banks seeking to pique investors’ appetite for higher returns.
Goldman has already launched the N-11, or Next Eleven countries, and other contenders include the VISTA economies (Vietnam, Indonesia, South Africa, Turkey and Argentina), the CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) and the EAGLES (Emerging and Growth-Leading Economies).
So far, none of them have really caught on. One thing you can bank on: the term BRIC will still score highly in any tally of the millions of words that will issue forth from Davos next week.
Of confidence and coconut trees
“Confidence grows at the rate that a coconut tree grows, but confidence falls at the rate that the coconut falls,” Montek Singh Ahluwalia, deputy chairman of India’s Planning Commission, told a panel in Davos.
He also indicated that India’s decision not to float its currency and to build up massive reserves was correct, noting that this gave it a cushion during the downturn.
“Floating (currencies) would be fine, if that was what was meant, but what they mean by floating is crashing upwards and crashing downwards.”
John Lipsky of the IMF said the answer was a better international liquidity facility to give surplus producing nations the confidence that cash would be there if they did float and were hit by volatility.
He’s right though it would have to be a very big fund indeed. But if the lesson of the last five years is that everyone should export like heck and build up reserves we are going to have a battle on our hands and a long, deep downturn.
James Saft is a Reuters columnist. The opinions expressed are his own.
good going so far.
only let good sense prevail and do not plllllllleeeeeeeeeaaaaaaasssssssssseeeee eeeee for the sake of the greedy builders, give them any sops. we buy stocks at high prices and when they fall we have to live with it. same should be with the builders. if they bought land banks at high prices, let them face loss and sell properly at reasonable prices, not at the inflated high proces that they want to. these high prices are what are hurting the common man the most.
The shift in power from West to East
One news theme I’ve asked our journalists to be alert to this year is the shift in power and emphasis from est to East.
The rise of China’s economic power during 30 years of reform and opening to the world is just one manifestation of this; the knowledge and service powerhouse that India has come in a globalised world is another. At Davos this year I’m moderating a panel on Asian innovation that will surely highlight software advances in Japan, Korea and Thailand as well.
I’m convinced the current global economic crisis must lead to a fundamental reassessment of how power and influence is expressed through the world, from manufacturing and service oriented Asia through the oil-rich Gulf.
This isn’t because of “decoupling” – that notion so prominent in discussion circles a year or so ago that said things like China’s economic boom could make up for any economic weakness in the U.S. That idea has been well and truly discredited as trade and money flows have caused bank after bank, nation after nation and economy after economy to buckle and bend in the current crisis.
No, it’s precisely because of “coupling” that the world will have to rethink radically its governance and regulatory and influence structures.
I see today’s opening session at the World Economic Forum as emblematic of this shift. The two world leaders taking centre stage at Davos today are not from the United States or from the United Kingdom or from France or Germany or Italy or Japan or Canada.
The only power shift of any meaning and consequences is between US and China. Because of size and the nature of that shift.
While many East-West countries have traded during the past 20 years, these trades have benefited all fairly equitably when summed over this period. Except US-China.
The so-called globalized trades between US-China have benefited the principally the big corporations (i.e. their balance sheets and executives) in the US, and the state in China. Because that’s the way each country wanted.
When you sum up 20 years of massive US-China trade, the balance sheet shows:
a) Giant net benefits to major US corporations. US consumers also benefited, in the short term. But over a 20 year period, they actually lost much of value, except perhaps a very good time.
b) The Chinese state has gained tremendous net benefits, and since the state dominates so much, Chinese infrastructure, consumer and industries have also shared the very large net gain.
In short, globalization has produced reasonably good net gains to world countries. But the US comes out a loser and China the winner over the long term.
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Resident Davos Expert
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