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BRICS Keep Falling Back to Earth


The rise of the BRICS at the expense of the developed world has been a dominant refrain in global economics, but there are signs that the pendulum has swung back to the West. The New York Times reports:

Just as economists have begun lowering their forecasts for China and many other developing economies, the American economy is bouncing back. Japan appears to have turned a corner and is ending almost two decades of grinding deflation. Economic data out of Europe on Wednesday provided the first solid indication that many countries in the euro zone may be escaping the clutches of recession. […]

Jim O’Neill, the Goldman Sachs economist who coined the term BRIC more than a decade ago, thinks one of the new beneficiaries of the shift in the global economy is most likely to be the United States. “I find myself thinking the U.S. is going to be one of the biggest winners,” said Mr. O’Neill.

China’s rapid growth is coming back down to earth. India’s growth is being hamstrung by widespread corruption and inefficiency, and the Indian rupee is “one of the worst performing currencies in the world this year.” Brazil’s growth this year is expected to be roughly one third of what it was two years ago, as its economy struggles with falling iron and soybean prices. The commodity price bust is going to hit Russia hard as well. Moscow is already feeling the pressure from new sources of oil and gas that threaten its stranglehold on the European energy market.

Meanwhile American industry is booming, thanks in no small part to cheap shale gas, and America’s exports to China are up while its imports and overall trade deficit are down. Europe’s economy is showing signs of recovery, though it still needs to make some serious structural reforms. Japan is on the mend, as Abe’s three arrows seem to be flying true.

GDP growth in the BRICS is still predicted to outpace that of the US, Japan, and Europe over the next few years, and the developing world will continue to be an important driver of global economic growth. But the chattering classes who predicted the demise of the West are finding out how premature that prediction was.

[BRICS leaders image courtesy of Blog do Planalto]

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  • dankingbooks
  • lukelea

    GDP growth in the BRICS is still predicted to outpace that of the US, Japan, and Europe over the next few years

    I’ve just been re-reading my copy of Oskar Morgenstern’s On the Accuracy of Economic Observations, wherein he points out that GDP statistics in even the most advanced economies have an error of plus or minus five-to-ten percent. The situation is bound to be much worse in a place like China, where state bureaucrats have a much larger incentive to lie about local and regional performance.

    The upshot is that reports of a country’s GDP and GDP growth rates need to be taken with a grain of salt. Certainly year-to-year comparisons, let alone quarter-to-quarter, are complete nonsense, as are reports of changes measured in tenths of a percent. There are many other problems as well involving economic statistics — even something as straightforward as a population census can be off by several percentage points — so beware.

  • Atanu Maulik

    The BRICS leaders are realizing that bluffing combined with misrule can take them only so far and not further.

  • Jacksonian_Libertarian

    I don’t buy it, the BRIC’s are too dependent on exports for growth to recover until the west recovers, and the west isn’t in recovery. The west has in fact joined Japan in full deflation mode, and hasn’t done anything to cut the burden of Government which would allow for faster economic growth. The US is in the process of destroying full time work with Obamacare, and the one bright spot of shale gas was created despite Government, not because Government was doing anything to improve the economy.

    • bpuharic

      Nonsense. This year’s deficit is 660B vs 1.2T a few years ago. You paranoid, panicky right wing extremists have no credibility

      • Clayton Holbrook

        Because of the sequester, right? Which did basically nothing about the the longer term financial challenges of unsustainable entitlements. Structural economic problems still exist in the US. Hopefully short term deficit numbers don’t blind us from that.

        • bpuharic

          So you guys shaved a point of GDP growth in a weak economy and you’re PROUD of that failure?

          Only the American right puts ideology ahead of national interest for the sake of Walll street.

          • Clayton Holbrook

            Huh?! The sequester was a poor plan for needed spending cuts. Cutting short term discretionary spending while ignoring the longer term mandatory entitlement obligations amounts to kicking the can down the road…again.

          • bpuharic

            Correct. It was a poor plan sponsored by radical right wing Republicans who wrongly assumed, based on their “Austrian’ economics, that the country was on the verge of collapse. It was the victory of a panicky right wing paranoia over logic…pretty typical of the right.

          • Thirdsyphon

            Long-term entitlement reform is a political nonstarter, because the current retirees who make up the GOP base will never agree to give up a penny in benefits and the rest of us will never agree to keep paying high taxes to fund generous programs that only they will have access to.

          • bpuharic

            The GOP right wingers have convinced their base that only ‘darkies’, courtesy of Obama, get entitlements, notably welfare and food stamps. The right doesn’t mention that Medicare and SS are part of this. By the time they notice, it will be too late

  • bpuharic

    Jeffrey Sachs a few years ago pointed out that for developing countries, a few parameters would tell you alot about how fast they’ll grow. Factors such as natural resources, access to the sea and CORRUPTION figured heavily. I think the BRICS have picked off the low hanging fruit for growth and now have to do the heavy slogging like advanced countries do for growth

  • Bruce

    During some alleged periods of growth in China, power consumption has been down. Did they find a magic energy machine or are they lying?

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