Get ready � the BRICs are rebuilding the world By Gary Duncan
THE big events that grab the headlines, and that shake the world, erupt suddenly and noisily. But the even larger trends that shape the world�s fate over the longer term tend to take place much more slowly and quietly.
Huge changes that transform the face of the future evolve with an almost geological slowness. The earth moves, though we scarcely notice as the ground shifts inexorably under our feet.
As the interplay between these two different sorts of events determines our destinies, the risk is that we pay too much heed to the clash, bang, wallop of daily events; too little attention to the larger, seismic shifts that happen on too great a scale for us easily to bring them into sharp focus.
The recent course of world events has been more than usually distracting, with war and terror gripping the imaginations of politicians and electorates. But this only makes it more important than ever to pause to consider the world-changing trends that continue, ineluctably, in the background.
In the economic arena, the most powerful of these trends is the steady rise of four developing economies, Brazil, Russia, India, and China � �the BRICs�. The enormous consequences of the emergence of these four big states as leading economic powers over the next 50 years is examined in a compelling new paper by Dominic Wilson and Roopa Purushothaman, of Goldman Sachs. Their analysis charts how the four emerging economies are poised to become a potent, perhaps dominant, force in the world economy and to eclipse the present developed economies � including Britain.
The results of Goldman�s economic modelling are startling. By 2040, if things go right, the study concludes that the BRIC countries� economies will be larger in US dollar terms than those of the six existing developed economies that have GDP of more than $1 trillion (�588 billion) � the US, Japan, UK, Germany, France, and Italy (the G6).
Based on the projected patterns for growth, incomes, currency movements, and population, even by 2025 � little more than two decades away � the BRICs could account for half the size of the G6, compared with just 15 per cent now. Over five decades, two-thirds of the estimated increase in the BRICs� GDP comes from higher real growth, with one third flowing from an eventual threefold rise in the four nations� real exchange rates reflecting their emergence as big economic players.
This fundamental realignment of financial power will redraw the map of the world economy, and reorder the global economic league table. Of the present G6, Goldman�s scenario leaves only the US and Japan among the six largest economies in dollar terms by the middle of the century.
Even the US is set to be overhauled by China by 2040. Britain�s economy is set to become smaller than China�s within just a few years. India will be a bigger economic power than Italy by 2015, and bigger than Japan by around 2030. By the same year, Russia is set to overtake Germany, and Brazil will outstrip France.
We are already starting to feel the tremors from these tectonic transformations � and the shockwaves can only become greater.
In the developed nations, anxieties are rising over the flow of skilled, knowledge-based jobs to India and other emerging countries whose cost advantage once counted only in the realm of manufacturing as they turned out cheap textiles, toys, and other goods. In the US, protectionist pressures are intensifying amid fears over the challenge from China�s rapidly expanding economic capacity.
Of course, there is much that could go wrong to mean that the future does not turn out quite as Goldman predicts. Each of the BRICs faces its own challenges if it is to maintain its present pace of development and fulfil its huge potential. Russia is confronted by continuing political uncertainty and the need to underpin stable political and financial institutions and root out corruption. Brazil�s state finances remain precarious. China faces huge questions over human rights and democracy as its citizens� aspirations rise with their wealth. India�s challenges include raising educational standards and opening up an economy much of which remains closed to the outside world.
It is inevitable that the outcomes will be different in some dimensions from what can be predicted by a model, however sophisticated. But the overall trends seen by Goldman�s study look like a fair sketch of the world�s future. It is not a future that we can or run away from. It must be confronted, and its consequences grappled with.
For all of the present developed G6 nations, but most of all the smaller ones such as Britain, the imminent dwindling of our economic power raises the stakes for those who need to manage the process, as well as those who must live with it. The premium on raising productivity, preserving competitiveness and fostering innovation is even bigger in this new world. The UK will need to create new kinds of jobs in new kinds of industries if it is to remain a significant economic force.
For Britain, the premium on constructive engagement in Europe will be higher, too. We need to work hard on the vital reforms to forge the sort of European economy that can run faster to keep pace with its emerging rivals � and the sort of EU institutions that will bolster that effort, rather than hinder it.
For companies, the new world will be a demanding one, but one rich in opportunities. Many of these will still be in the present developed countries. Their economies will no longer be the world�s largest, but their smaller populations mean that they will still be home to the richest of the planet�s people, whose incomes per head will remain higher than those in the BRICs. Still, the shift in economic gravity will mean that the big emerging nations, and the spending power of their people, will become a key engine for growth � and profits.
For policymakers and corporate leaders, the big question is put simply by Goldman: �Are you ready?�
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PS: india economy is set too get a 12.5% boost in dollar terms this year. from 6.5% economy growth
and 6% currency appreciation which shows no signs of abating. 550 bil --> 620 bil .. which is
about 30 bil less than mexico and spain.
if this rate be maintained in 2008, India will scrape past the $1 trillion mark like crossing mexico,
spain and canada.
italy, china, france, uk and germany are strung out between $1 trillion to $2 trillion with china moving
much faster than the rest , and will get more boost if they revalue the Yuan.
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