5 Lessons From the Rise of the BRICs - 5 Lessons From the...

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5 Lessons From the Rise of theBRICsLearning from the successes and stumbles of the world's great rising economies.Learning from the successes and stumbles of the world's greatrising economies.In 2001, Jim O'Neill, the chairman of Goldman Sachs assetmanagement, famously predicted the four fastest-growingemerging markets for the decade. We know that foursome by theacronym BRIC: Brazil, Russia, India, and China. That the economicworld remembers his prediction owes as much to the handiness ofthe acronym as it does to the accuracy of his forecast. China, India,and Brazil are among the most dynamic and exciting emergingpowers in the world. Indeed, to call them "emerging" feels like aslight. India is the world's largest county, China the world's largestmanufacturer, and Brazil the Western Hemisphere's most vibrantexpanding consumer economy. (Russia, the runt of the group, isbeset by awful demographics and a weak private sector outside ofits natural resources.)As investors and economic analysts cast about for the next batch ofhigh-growth markets, let's pause to recall the lessons from theBRICs: (1) Work on the middle-income transition plan; (2) Trade,trade, trade; (3) state capitalism can work; (4) corruption kills; (5)strong civil society matters.(1) THE RISE OF THE MIDDLE CLASSPerhaps the broadest lesson from the emergence of the BRICs isthat no rise is complete without the triumph of the middle class.The record across these four countries is exceptional, but there isstill considerable room for growth. In Brazil, credit card balancesgrew by a whopping 30 percent in 2008, the worst year of theGreat Recession, reflecting the country's considerable appetite forconsumer credit. Even in Russia, real incomes rose 142 per cent
between 1999-2009. In China and India, the middle class has beenbuoyed by a kind of 21st-century Industrial Revolution. By2050,half of the global middle classas defined by OECD will live inthose two countries. But there are still considerable risks. Foodinflation in India and a precarious housing market in Chinathreaten to destabilize both country's fantastic ascents.(2) TRADE IS EVERYTHINGFor any economy, growing is all about selling. And when you're asmall economy, growing is about selling to somebody bigger. Inother words, there is no such thing as extraordinary growth withoutextraordinary growth in trade. We see this maxim playing outacross the BRICs. As the world knows, China is the great tradesuccess story of the last 20 years thanks to cheap labor and smartgovernment planning to coordinate supply chains and streamlinethe manufacturing of electronics, textiles, and more. India's shareof global trade tripled between 1993 and 2010. The country hasalso diversified. In 2000, one in five export dollars came from theU.S. Today it's one in seven. Russia, overly reliant on commoditiesand underdeveloped in technology, somewhat lucked out in the lasthalf of the 2000s, as oil prices surged to record highs. The GreatRecession took a particularly nasty toll, as the stock market fell a

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