BRICKS: Reshaping the new global economy

Dr. Dharma De Silva

Dr. Dharma De Silva

The postulation of *BRICKS extends Goldman Sachs thesis of *BRIC (Brazil, Russia, India and China) by adding Korea (K) and South Africa (S), as emerging markets that are a growing force challenging the TRIAD - anchored by Japan, USA, Germany (JUG) - dominance in the world trading system.

Backed by BRICKS the global landscape, economic contours and paradigms, are moving from an era of geographically concentrated economic power to one characterized by multiple centers of economic and business activity across cultures and continents.

The collective economic and trade dominance of the TRIAD is giving way to a greater dispersal of competitive economic-trade-political power among rapidly growing emerging markets of BRICKS.

At the same time they join TRIAD nations to share an ever-increasing share of world output, trade, investment, mergers and acquisitions. BRICKS then, join TRIAD's JUG to form a competitive fortress in the new global economy.

Introduction

In this paper BRICKS thesis is postulated by adding Korea (K) an industrial leader in electronics, ship-building and global trading and South Africa (S), the economic force of the African continent, more than as emerging markets in the classical sense, adding that they are a 'critical part of the new globalised economy' and just as central to its functioning as of the G7 Group of developed nations.

BRICKS nations and TRIAD anchors Japan, Germany and USA are countries primarily used in the economic, trade, financial as well as in academia research spheres. These countries are forecast to encompass over 44 percent of the world's population and hold a combined GDP (PPP) of nearly $18 trillion.

The study of BRICKS specifically focuses on the most populous countries, and their combined economies, which are likely to be the world's six most influential economies outside of the G7. In the debate of reshaping the Global Economy, India and China are the two biggest emerging markets, and are becoming the new engines of the global economy.

Economics apart, the term 'new world order' has been used also to referred to a new period of history evidencing a dramatic change in world political thought and the balance of power, and decisions at multilateral negotiation that impact on business. One recent illustration:

The standoff between China and India, the world's two fastest growing economies, and the United States not only buried the last attempt to save the World Trade Organization Doha Round, but also demonstrated changes in global governance and the balance of power in the 21st Century.

BRIC Origin and BRICKS Enlargement

Beyond BRIC, the emergence of BRICKS countries in international business has already begun to change the global economy in many ways, by competitive markets, the use and cost of resources, and reallocation of economic power. However, on almost every scale, BRICKS with TRIAD anchors, JUG nations, would be the largest entity on the global stage contributing to the new global economy and new world trade order, as identified below, where:

1. The economies of the BRIC now in the 2000s and BRICKS next in the 2010s are rapidly developing and likely to accelerate faster and gradually be able to eclipse most of the advanced economies dominated by the TRIAD.

2. The economic potential of Brazil, Russia, India, China, Korea and SAfrica [BRICKS] is such that they are predicted to be among the most dominant economies as they approach 2050 benchmark established by Goldman Sachs, Grant Thornton, Morgan Stanley and others.

3. These BRICKS countries have nearly 44 percent of the world's population and hold a combined GDP (PPP) of about $18 trillion in 2008, and estimated to be $28 trillion in 2015.

4. BRICKS are neither a political alliance, nor a global or regional formal trading conglomerate but represent the key country of each continent and are among the most populated nations with emerging markets.

5. Goldman Sachs predicts China and India, respectively, to be the dominant global suppliers of manufactured goods and business services respectively while resource rich Brazil, Russia and SAfrica would be similarly dominant as suppliers of raw materials and Korea remains an industrial exporter.

6. Among the BRICKS, India has the potential to grow the fastest during 2040-2050 years and a larger aging group.

7. Decline in working age population is in the horizon for India, Brazil and Korea than for Russia, China and SAfrica.

8. In BRICKS the number of people with an annual income of over $9000 PPP will double within 5 years to reach 1 billion within a decade. That means a massive rise in the size of the middle class

9. In 2025, it is calculated that the number of people earning over $15,000 may reach over 2 billion.

10. By 2035, first China and a decade later India are expected to be dominant players in the global economy along with US, followed by G-6 nations.

11. By 2025 the per capita income in the G6 will exceed $35000, whereas only about 24 million people in the BRICKSs will have similar income levels

12. The average wealth level of individuals in more advanced economies of TRIAD will continue to outstrip the BRICKS average during the 1st half of 21st C.

13. India's influence on the world economy will be bigger and quicker than implied earlier by forecasters with the pre-eminent technological advantage and domestic consumption orientation for economic growth.

14. According to recent projections, China's economy will move ahead of the US by 2027, India will catch up with the US by 2050 and the BRICs (Brazil, Russia, India and China) as a group will surpass the G7 by 2032.

15. India has 10 of the 30 fastest-growing urban areas in the world, and 700 million people are estimated to live in cities by 2050, adding to the labourforce in key growth zones.

16. From 2010 to 2020 India's GDP per capita will quadruple, and the Indian economy's sustained growth will meet the levels of the US by 2043.

17. China and Russia will expand their economies based on market principles backed by trade reforms and liberalization but remain centrally planned economies with state owned and operated enterprises in banking, trading, telecommunications and energy.

18. BRICKS largest partners, India and China trade is a partnership for success, resources' integration and Industry collaboration. As a result India and China expected to be the driving forces behind the global economic growth. For example vast potential for collaboration between India and China's semiconductor industries, win-win situation via successful partnerships

The writer is a Professor and Director, Centre for International Business Advancement Chair, World Trade Council of Wichita, Barton School of Business, Wichita State University

To be continued