Problems Brewing for the BRICs

For the past 15 years, if you wanted to sound smart about the world, you talked about the rising power of the BRICs.

Today, it’s the struggles of the BRICs that are making news. But those weaknesses were there all along. The rise of the BRICs, as a term, was a triumph of slick marketing.

The BRICs are the nations of Brazil, Russia, India, China, and, since 2010, South Africa. The term was coined by Jim O’Neill, the then-chairman of Goldman Sachs, in a 2001 paper on “Building Better Global Economic BRICs.” That punning acronym was a genius piece of salesmanship.

That’s because, if you want to be a great marketer, you can’t just make stuff up. No one will believe you if you offer to sell a car as fine as a Bentley for the price of a Hyundai. Advertising, like propaganda, needs to bear some relationship to reality if it’s going to click.

And there’s just enough truth in the BRICs tag to make it appealing. China is much richer, more powerful, and more important than it was 30 years ago. India is, too. Both nations have prospered because they took steps to liberalize their economies.

But much of the hullabaloo about the BRICs was merely profitable nonsense. Goldman Sachs had a lot to gain by coining a cute term that flatters nations like China: The more you can sell yourself as a visionary who sees a future shaped by the BRICs, the more deals you can do with the BRICs.

Today, though, the BRICs aren’t building. South Africa likely would never have been included in the BRICs if it didn’t begin with the letter “S.” Its economy has grown an average of less than 2 percent a year for the last five years, and its unemployment rate is 25 percent.

Brazil is a mess. Its debt rating was cut to “junk” in September. Its growth, at a five-year average of 2.6 percent, is desperately low for a supposedly emerging economy. The joke that “Brazil is the country of the future — and always will be” has rarely been more relevant.

Russia makes Brazil look good. Russia’s economy is shrinking by 4 percent a year, inflation is more than 15 percent, and the low birthrates of the 1990s foretell a new demographic collapse.

These disasters have a lot in common. South Africa, Brazil, and Russia are all deeply corrupt. And all of them boomed because they produced a lot of oil and minerals. They rode a bubble in commodity prices up, and most borrowed heavily along the way. Now they’re riding that bubble back down.

There’s nothing new about this: nations that rely on commodities like oil often boom and bust. But a boom-bust cycle won’t make them economic superpowers.

And China? Well, the BRICs are doing poorly partly because China’s growth is slowing. On Thursday, China scrapped its one-child policy, belatedly acknowledging that it has a shrinking workforce.

China’s not going away. Nor is India. And Russia matters, too, not least because of Vladimir Putin’s penchant for bullying his neighbors. But the idea that the BRICs are a set of steadily-rising powers was always a marketer’s fantasy. What they have in common, above all, is their problems.

The developing world does matter more than it used to. The appeal of the BRICs concept, though, was that it supposedly offered a profound, easy to remember, catchy insight into a post-American future. There’s always a ready market in America, and the world, for pseudo-sophisticated arguments that predict American decline.

But today, it’s the BRICs that are breaking.

Source: The Heritage Foundation

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