Accelerating economic shift towards the BRICs?

Are things starting to go faster when it comes to the economic shift from the western economies towards the new BRIC countries (Brazil, Russia, India and China) or is it just a temporary dip?

Frances Cairncross, economist and journalist summarized the current situation concerning the BRICs real good when she for one program took over Peter Day’s Global Business program on the BBC. (BBC are really crappy at keeping their shows available on the web afterwards, but I think the links below lives until it’s your turn).

One indication could be that according to IMF 2007 is the year when China (and according to the BBC program India) have surpassed US as the top contributors of world growth.

Yet another indication could be found in Gwynne Dyers article in Arab News, when he wonders if the dollar have started it’s way down as the global currency.

In the BBC show a number of interesting conclusions and opinions are heard. I will try to summarize what I heard.

  • Many companies find the business situation difficult in US and Europe so they increase their sales in the BRICs (Brazil, Russia, India and China). At the same time trade between the BRICs are beginning to soar. Chinas global export increase rate is about 20% a year, but the export increase rate to e g Russia and Brazil are between 40 and 50% a year.
  • The industrializing economies with their enormous amount of cheap labour keeps the economic engines of the world at full steam but keep at the same time wages for semi-skilled workers down. This results in a economic polarization with radically increased wealth at the top.
  • What is going on because of the BRICs development and huge numbers of people is that we are in for a restructuring of the global economy – the price clothes and economics goes down while the prices of energy and food goes up

Effects on the rest of the developing world

  • BRICs growth (together with the new agenda for fight the global warming) cause a really complex situation for the rest of the developing world. The resulting prices increase of food and fuel is undoubtably having a negative effect on many countries in the developing world. At the same time, the increasing prices of commodities give commodity producing countries short term benefits. In the longer run they are in fact in for a rough period since the traditional industrialization path going over a textile industry is basically blocked by the huge textile industries in India and China
  • More and more developing countries are, because of this strategically complex situation, importing ideas and strategies from successful industrialized and emerging nations and apply different strategies in order to find their own ways. This will probably have a wide range of effects. A few of them will hopefully strike gold, while others will continue struggle to establish stability with inherited tools of the wrong size and shape. A situation which in many places probably will turn out to be a fertile ground for both fanaticism, terrorism as well as strong dictators promising to solve the problems of the situation.

China is playing the game alone

  • The Chinese are all over the developing world making mutually beneficial deals. But unlike the western approach they don’t ask questions or add conditionals in their business deals concerning e g democracy, human rights and environmental impact. This signals an exclusive view which is against what the industrialized world have strived for since the WWII.
  • G7 have members like Italy and Canada, but not e g China who already is a major player on the global scene and whose exclusive world view threatens to create a huge imbalance. At least from the perspective of the western world.
  • An increasingly globalized and uncertain world requires more cooperation between all nations if we are going to withstand the shocks and other difficulties which lies ahead in the future. One of the major uncertainties then seems to to be if there will be a global cooperation or not, where Chinas exclusive world view seems to be the biggest obstacle.

The discussion about the BRICs isn’t new but maybe this is the time to start to recognize this development in a broader and more serious perspective.

World Economic Forum have also created a number of scenarios about the future of among others Russia, India and China which could be good complementary read.

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