The world has long been ruled by the capitalists – developed economies of the likes of the US, UK, Japan, Italy, Germany and France. It is now time for a paradigm shift and the emergence of the new age economies.
The last decade or so has seen the rise of quite a few countries – economies which had for long, shown potential but for some reason or the other, had not quite been able to come to grips with the world economic order. I am talking about countries like India, China, Vietnam from Asia, South Africa from Africa, Brazil from the Latin Americas and Russia from Europe.
Goldman Sachs had a few years back taken out a roadmap for who they thought would be the economies to watch out for in the years leading up to 2050. BRIC (Brazil, Russia, India, China) they called it. These were 4 of the largest growing economies of the world with a potential to upturn the G6 countries.
The report had gone on to say that China with its large populace and abundant resources will offset USA as the world’s largest economy. Moreover, India could actually become the world’s 3rd largest economy come 2040. The demand from the BRIC countries could rival the current G6 and dwarf it in the next 40-50 years! All the BRIC countries have posted consistent economic growth since 2001, despite the global economic downturn of 2001-2002. In 2007, economic growth registered 4.4%, 7.0%, 8.9% and 11.5% for Brazil, Russia, India and China respectively.
Coming to the fore now are a group of countries called the Next 11 or the N-11 for short which include Bangladesh, Egypt, Indonesia, Iran, Korea, Mexico, Nigeria, Pakistan, Philippines, Turkey and Vietnam.
These are the new age economies which are following on behind the BRIC countries. Those countries following the BRIC path will typically experience high rates of population growth, creating a growing pool of potential consumers, at the same time as rising disposable incomes. They all share characteristics of rapidly growing populations combined with significant industrial capacity or potential.
I found a few points from the most loved Euromonitor archive – the lifeline of most data-based IIT research work and I quote:
· All of these countries have large and growing populations. Between 1980 and 2008, population growth was highest in Pakistan at 110.8%, with the lowest being in South Korea, with 28.4% period growth;
· Of the N11 countries, Indonesia had the largest population as of January 2008, with 228.9 million people, while South Korea had the smallest at 47.6 million;
· In 2006, Mexico had the highest sum of private final consumption expenditure, totaling US$567 billion. Vietnam had the lowest, at US$36.8 billion;
· All 11 countries demonstrate population growth rates above those of Western developed economies, indicating greater consumer market potential over the medium term. Large populations represent a wide potential pool of consumers for businesses to target; while high growth rates mean that this market will expand rapidly, providing proportionally more potential customers.
It is also important to note that while the emerging nations all exhibit similar characteristics, the actual absolute values are quite dissimilar. While China is well on its way to becoming a world power, Brazil has not progressed at the same rate – in fact Brazil has fallen behind the rate , so to speak! Critical issues that Brazil faces are Foreign and public debt constraints, Infrastructure and Openness to trade. It also faces a whole plethora of challenges like lack of openness, lower education levels, lower savings and investment, higher public and foreign debt.
Ok! So what can the world expect as a result of this new world order?
1. A shift in economic power towards Asia.
2. The rise and reshaping of regional networks.
3. Changing consumption and production patterns.
4. A flow of capital back to the BRICs as the world rebalances.
5. Appreciation – through exchange rates or through prices?
6. The need to reshape international institutions.
7. A large income pool can emerge in these countries
8. There could be a dramatic rise in the middle class of these countries
A reality check on what the rise of emerging economies mean to the word!
· The economic expansion of the emerging economies will contribute to an increased pressure on the global resource base especially of oil and coal as also basic necessities like food.
· The growing need for oil across these countries would mean that the oil prices are going to go up further.
· Inflation is going to increase and so are the commodity prices.
· There is a smaller global income inequality than it used to be but in some countries, the internal income inequality might have increased! This could trigger domestic political pressures and encourage protectionist policymaking rather than measures aimed at enhancing aggregate economic growth. It could also lead to volatility in incomes.
· There is a change in the mindset of the people in terms of where they seek employment now. Just came upon this survey which quotes that 70% of all respondents (643 in number) now want to go to the BRIC countries for employment.
So which “future-power” will outpace all others?
Well it is easy to see that China has taken a head-start. What India is today is what China was 20-30 years back. But the rate of growth of China is slowly beginning to dwindle and will stabilize around the 3-3.5% mark. Russia has long been threatening to be an economic world power. During and post the Cold War, Russia has showed glimpses of almost tipping over to a developed economy. But internal politics and a West-facing world curbed its growth. The increase in the number of Russian billionaires recently is a result of Russians now being allowed to invest outside their country. That Roman Abrahamovic is such a popular figure in English football now is a testimony to the growing popularity of Russians abroad. Russian company Gaz taking over LDV based in UK was also a landmark in popularizing Russia’s growing ascendancies. Korea is a developed economy but owing to the lack of resources, it will never be able to ensure a constant rate of growth. South Africa has one of the highest per capita incomes but nothing in the economy to boost the growth. They have a stagnant population and hence the per capita income will go up further. Pakistan, Bangladesh and Vietnam are on the right track but internal turmoil and frequent change in governments will hinder their quest for economic excellence.
But the nationalist in me still seems to vouch for India to be the world’s biggest superpower in the years to come. With an abundant, young population which is beaming with energy and talent, we can surely make a difference. There are more Indians in the World’s Richest list than ever before. There is a steady growth and moderately growing inflation. We need a credible fiscal policy and liberalized financial markets, we need to improve infrastructure and increase quality and efficiency and that will pave the way for economic superiority.
Dabbings of a veritable 'Me' 