Many investors saw the BRICS as the next big economic project that would never fall to the same boom and bust cycles that are at the heart of Western economic models.
• A version of this post ran on the Foreign Policy Association blog. The views expressed are the author's own.
Last week, The Economist in their article “The Great Deceleration” discussed the slowdown in the BRICS [Brazil, Russia, India, China, and South Africa] economies in recent months. The assumption was that countries such as China, India, Russia, and Brazil were to grow indefinitely as a reflection of a new world economy, showing their clout during the 2008 great recession by saving the US and Europe from complete economic collapse. The BRICS were taken as economic champions as their economic models kept the world economy puttering along. The impressive level of growth and rapid influence the BRICS would have in the world economy was something that was predicted to occur within 15-20 years, but with the downward spiraling of the US and Europe after 2008, it was logical for many investors to see the end of the West’s domination of all things money.
The question that must be raised is whether or not emerging economies should always be seen as economic saviors? Many investors saw the BRICS as the next big economic project that would never fall to the same boom and bust cycles that are at the heart of Western economic models. When those BRICS economies came to be injured by slowdowns in the world economy and the loss of investment due to lower prices on their commodities and waning demand on their manufactured goods, the slowdown of the economic champions brought them into the same growth level as their western counterparts. Mega projects such as Brazil’s PAC-2 and the funding of international sporting events showed Brazilians that the government might spend themselves into debt for the sake of a few great parties, mega projects, and corrupt practices. Democracy exploded in Brazil when the growth rate took a dive as many of the most ambitious projects shifted into high gear. The assumption from investors that the money would not stop did not come to pass, and Brazilians took to reminding their government to build Brazil for its citizens, and not anyone else.
Everyone remembers the excitement and paranoia in the 1980s of Japan as the next economic giant, a giant that would usurp the US via research, development, and technology. Japan did build up its economy since the 1960s to a point of being one of the most innovative economies in the world, but the paranoia of indefinite growth coming from Japan did not come to pass. Today, Japanese goods are some of the best in the world and are a benefit to those consumers in the world’s largest markets. Western citizens consume Japanese products while still maintaining their own positions of influence. Was it logical to assume that the BRICS would also dominate the global economy to the detriment of the US and Europe?
The US is slowly regaining its traditional economic position and is displacing the missing investments into those formerly strong BRICS nations. Development in formerly developing countries is a positive outcome for all BRICS nations, and will continue with measured growth on the same level as all Western nations. Growth in China at seven percent, in Brazil at three percent and the US at 3.5 percent is a positive outcome for all economies, moreover a realistic one as citizens in all nations expect rational spending and growth over a long economic period. As with Japan, the development of the BRICS may have slowed, but logically they are exactly where they should be, growing at a normal pace, and hopefully responsibly with accountability to their citizenry.
– Rich Basas is a Latin America blogger and Europe blogger at the Foreign Policy Association. Read the blogs here for Latin America and here for Europe.