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Disclaimer: I am not an economist, neither an analyst nor a business journalist, not even a research scholar. And I think you need not be any of the above to understand or track the way the world is changing. In fact you are better off if you are not, as you can form your own opinion without having the baggage of details.
Anybody who is a follower of global events can sense ‘the change in the air’. Even the IMF, inspite of its best efforts, can no longer ignore the saga of the emerging giants. It castigated the US and EU in the harshest terms it could garner at the 2012 Tokyo meet, recognising the shift. It seems, just like technology, institutions also serve their masters, not their creators.
The world, which was divided into two super powers for a long time, before its metamorphosed into a unipolar one, does not seem to rest easy in its current position. The reason is very simple – the one per cent sitting on the top of the pole left the rest in a scramble for the dwindling earth’s resources. And hence the shift to a multi polar world. BRICS is the pole to watch out for, as they are keen to make the economic world more equitable.
Will that happen? One doesn’t have to dig deep, just look at the macro parameters.
BRICS are not the ‘reason’ for change (to use a much abused word for lack of options), BRICS is ‘because’ of the change.
BRICS is not about geographical divisions, the traditional way of looking at the world. Cynics will tell you that the partner countries are talking in different voices. They will also argue that the partner nations have huge bilateral issues to address before they become a group.
But that precisely is their strength not weakness. For those who use even the UN to suit their politics need to understand that BRICS is using their economics (read markets) to suit their economies not politics
A quick check on a few recent barometers would unveil the trend I am arguing for — Who is growing at what rate, who has the bandwidth to grow? Who has traditionally been resisting opening of markets and who is currently favouring protectionism?
Most crucially, one needs to understand the basic instinct of money – MONEY GOES WHERE IT GROWS. I leave it to the economists to figure out the ‘when’ and ‘how’ of the shift.
The two most important drivers of wealth creation and re-distribution are INNOVATION and NATURAL RESOURCES. Innovation has led the US rally for a long time, the re-distribution of that wealth has started already.
The next rally will be led by exploitation of Natural Resources. BRICS have their eyes on that. China has been strategically investing its capital in natural resource rich pockets. South Africa has become the gateway to Africa and will be the biggest arbiter of the resource rich African continent. Russia, a traditional energy giant, is also focusing strongly on its resource exploitation.
Lifting their people out of poverty is a big challenge staring at all the BRICS economies. Redistribution of wealth is critical. Brazil has led the way by bringing in over 20 million people out of poverty. This also expands their market. India is currently implementing the same model of direct cash transfers to its poor.
There was a time not too long ago, when India and China were off the world watchers’ map; despite the fact that one third of the world’s population resided there. They were happy to visualise India as the land of snake-charmers and China as a ‘walled country’. Now, it seems they can’t have enough of them. While talking about their growth and potential, a lot of discourse centers around ‘corruption’ and ‘lack of freedom’.
But what we must realise is that ‘corruption’ is because of the growth. The high decibel corruption narrative however should not be allowed to result in policy paralysis as that can seriously hamper growth. Among the many side-effects of liberalisation in the India growth story, quick money poured in, causing pilferage.
Systems take time in countering ‘greed’ and registering a ‘collective conscience’ takes even longer.
Former US secretary of state, Hillary Clinton had her eyes on China in 2012 when she said: “We need to make the 21st century a time in which people across Asia don’t only become more wealthy, they must also become more free.”
Was that concern for the Chinese people, or was Washington jostling with Beijing for strategic and economic advantages across the continent. With China’s economy booming and America’s struggling, President Barack Obama has tried to pivot US power to the region, in part to reverse a slide toward China in recent years.
Those who lecture and taunt China about ‘lack of freedom’ forget the fact that not such distant history tells us that America was build by ‘imprisoned slaves’ enjoyed by free birds.
Sure, China is moving in a uniform, one direction, one way ahead, but it is towards a future which will not just strengthen the Chinese economy but will also eventually bring them an array of choices. China’s architect of modern reforms Deng Xiaoping provocatively said, “Stability overrides everything.”
Amid all the trade-offs between the current superpower and the emerging giants, there is need for truce.
Its time for the world’s two biggest economies (US and China) to understand each other better and it’s time for the world’s two biggest democracies (US and India) to engage in a larger canvass.
Peace is the pre-requisite for an essentially capitalist order and it cannot be achieved through military might; it has to be worked on with soft powers.
There are two pre-dominant conversations happening in the world we live in today. One is the political conversation, which just went through a much-telecast ‘Spring’. The other is the ‘economic’ conversation, which is slowly but surely getting hotter. BRICS is at the centre-stage of the latter.
Between the lines will become headlines; studies, research, surveys etc will find and define the contours of a new emerging economic world order. For example, the UNDP in it’s latest report says, by 2020, the combined economic output of the three BRICS countries – Brazil, China and India – will surpass the aggregate production of Canada, France, Germany, Italy, the United Kingdom and the United States. The report also singled out Latin America’s biggest economy for more praise saying, “Brazil has lifted its living standards and created anti-poverty programmes that have been emulated across the world.”
To sum it up, MONEY managers know its nature and are looking at deploying it where it can grow the fastest. The ball is rolling, and BRICS are likely the biggest beneficiaries of the shift.