The Rise of the Big Emerging Markets of Brazil, Russia, India, and China - Essay Example

Introduction: This composition discusses the hypothesis that ‘rise of the BRICs (Brasil, Russia, India and China) portend to ‎significantly change the international order in the next 50 years’. The essay gives a brief overview of the economic profile of the BRIC countries and discusses the predictions that have been made by different analysts. Finally a conclusion of the analysis is presented. Body: History of world is tarnished with bloody struggles for power and dominance. The strong have overpowered the poor and have established their rule over them. If we divide the history in to different eras, then we shall see that each era is dominated by a super power, a civilization that has proved itself better than the others. From the dominance of Egyptians to Greeks, Romans to Arabs, we see the same pattern in which a strong group of people who are militarily, economically and politically advanced from others have civilized themselves as nations and then exerted their influence over the entire world. Their lifestyle became the culture of the world and their political and economic system defined the world politics and economy. In other words they created a ‘world order’ of their era. The term was first coined in 2001 by Jim O’Neil, the then Chief Economist of Goldman Sachs, (Kowitt, 2009) who wrote a paper discussing the future economic progress and hence the influence of the developing countries specifically Brasil, Russia, India and China. The reason why the role of these countries came under discussion is explained by the creator of the term itself. He says in an interview with CNN that world is rapidly moving towards complete globalization but this does not necessarily means Americanization of the world. The emerging economic powers are going to have their say and the west cannot take the lead on its own without involving these emerging economic giants (Kowitt, 2009). The economic progress of all the four countries has been really tremendous in the past few decades. Their GDPs have risen to be at par with USA, Japan and Germany. All the countries are rich with natural resources and are also one of the most populous countries in the world. The governments have increasingly adopted capitalist and investor-friendly stances and depicted a good deal of stability over the years. They have increased consideration of social and human rights situation in their countries. Brazil is the world’s eighth largest economy on the basis of GDP (‘The World Fact Book’, n.d.). It has a growth rate of 5 % and it was one of the first economies to come out of the global economic recession. It is very rich in mineral resources and oil and gas. Its major exports include iron ore, soya bean, automobiles and coffee etc. The stability of its economy can be estimated from the fact that, once been one of the major borrowers from IMF, Brazil offered a $10b to IMF in January 2010 (‘IMF Signs US$10 Billion Note Purchase Agreement with Brazil’, 2010). Russia is the largest country of the world on the basis of covered area. Russian economy has drastically changed its structure from communist to moderately capitalist in the past two decades. The Russian leadership is making the market more investor and business friendly. However, still the backbone of Russian economy remains its exports of oil and natural gas. In 2009, Russia was world’s largest exporter of natural gas. A good portion of exports also comprises of defense equipment and heavy machinery. Russian economy is largely dependent on the commodities that it sells, and hence it is vulnerable to price fluctuations in the international market. However government is investing a huge amount on technological up gradation and expects good results in future. India is the second most populous country in the world. Indian governments switched to the economic liberalization in the last decade of twentieth century which has boosted the growth of Indian economy since then. The growth rate of GDP is around 7% which is one of the highest in the world. India has used its large population as a source of strength to its economy by becoming one of the largest man power and services exporter to the world. As the labor is cheap, Indian industries are becoming more and more competitive in the manufactured goods markets all round the world (‘The World Fact Book’, n.d.). China is the world’s most populous country and its economic growth in the past few decades has amazed the economic experts and public in general. China started economic reforms in late 1970s and changed its economic policies to become more investor friendly. Currently China is one of the largest exporters of manufactured goods with largest growth rate of GDP amongst big economic powers. China is increasingly becoming more influential in the international politics with USA dealing with China exclusively on the major issues like environment etc. hence establishing China’s status as another super power in the world. In 2007, Goldman Sachs published their research called ‘BRICs and beyond’. In that document the researchers analyzed the prospects of BRICs to become the major economic powers in the future. According their predictions by the end of 2030, China will surpass USA and become the country with highest GDP in the world. The paper further predicts that by the end of 2050, the five countries with highest GDP will include China, India, Brazil, USA and Mexico (‘BRICs and beyond’, 2007). A brief analysis of the above mentioned figures tells us that the BRICs actually have the potential to significantly shift the global balance of power which is towards the USA and EU at present. And it is not just the analysts that think this way; the leaders of these countries have the consciousness of their potential and the possibilities of their economic association. The first public exhibition of this consciousness came in June 2009 when the leaders of BRICs met for their first official summit. The summit was called for discussing the then global economic conditions and future prospects of economic co-operation among the countries. The leaders clearly showed to the world what the alliance of these countries can potentially do by calling for a new global reserve currency that can replace US Dollar (‘BRIC wants more influence’, 2009). The second BRIC summit took place in Brasilia, Brazil on April 26, 2010. Indian media claimed that the summit was an “answer to the G7 platform of top industrialized countries” (Varadarajan, 2010). Clearly, the leaders of these countries are all set to claim their share of international economic power and dominance. However, not everyone is convinced of the future dominance of BRIC. People criticize that the projections of BRIC economic growth are largely over rated and that they are based on assumptions that are unrealistic. The resources that are available to the countries are likely to dry out in the future. There are a lot of other social and political factors that will play their role when it comes to sustaining long term economic growth. India and Russia both suffer from the problem of poor infrastructure which they have to overcome by investing more money in the infrastructure development. Their high values of debt have so far prevented them from doing so. India also has border disputes with its neighboring country, Pakistan, which are not likely to solve in the near future and can pose serious problems for it. Same is true for both China (Taiwan) and Russia (Georgia, Abkhazia). No doubt all of these countries have developed strong militaries but military disputes, no matter how much smaller in scale, bring bad affect on the economy of a country. Environmental issues also threaten the future economic progress of these countries. China and India have one of the largest Green House Gas (GHG) emissions in the world. These have to be contained in order to sustain the economic growth. This definitely implies moving towards renewable energy resources for electricity generation from coal and heavy fuel oil. This in turn requires more investment in research in these fields about which these countries are reluctant so far. The most important point to consider is that the economic profiles of these countries are very diverse and the likelihood of a long lasting economic co-operation is little. The bloc can clearly be divided in to two separate groups, one being Russia and Brazil who are large exporter of oil, natural gas and commodities and which forms the basis of their economic strength. Other being India and China which are big exporters of products and services and the back bone of their economic power is the enormous human recourse they possess. The two have different economic interests which may not always be in agreement with each other. China and India also have a history of troubling relations and have engaged each other militarily in the past. As the border disputes between the countries still remain unresolved, the two countries can become hostile with each other once they start competing for the same markets around the world. That is why Henry Kissinger, former foreign secretary of USA, replied that he “would be surprised if they (the BRIC) could achieve a coherent political position on the international scene” when he was asked about the future prospects of a BRIC economic and political alliance (Katcher, 2010). Conclusion: The bottom line is that the economic progress of the BRICs has been awesome in the past few decades but in order to sustain a long term economic growth, there are a lot of issues that are needed to be addressed. At present the BRICs are not in a position to challenge the influence of G7 but they may in future, only by sustaining the growth rates and achieving the economic marvel everyone is anticipating. References: ‘Another BRIC in the wall’ (2008), The Economist, 21 April BRICs and Beyond (2007) Goldman Sachs Inc. ‘BRIC wants more influence’, Euronews, (16 June 2009) Bull, H. (2002) The Anarchical Society: a study of order in world politics, USA: Columbia University Press IMF Signs US$10 Billion Note Purchase Agreement with Brazil (2010), [Online], Available: http://www.imf.org/external/np/sec/pr/2010/pr1014.htm [6 Dec 2010] Katcher, B. (2010) The Washington Note, 23 April Kennel, J., S., Salmi, A. (2010) The Rise of the Big Emerging Markets of Brazil, Russia, India, and China: Implications for International Business Teaching in the Next Decade, Journal of Teaching in International Business, 19:2 , p.p. 142-166 Kowitt, B. (2009) For Mr. BRIC, nations meeting a milestone, [Online] Available: http://money.cnn.com/2009/06/17/news/economy/goldman_sachs_jim_oneill_interview.fortune/index.htm [6 Dec 2010] The World Fact Book, [Online] Available: https://www.cia.gov/library/publications/the-world-factbook/ [6 Dec 2010] Varadarajan, S. (2010), The Hindu, 16 April Read More