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In the January issue of the “Foreign Affairs” journal, the essay “The Great Crash” by Roger C. Altman, Chair and CEO of Evercore Partners and the former U.S. Deputy Treasury Secretary, the author draws a dark picture of the economic development of the US, Europe and Japan, outlining that the developed world is going through an intensive recession, which surpasses in its depth the crisis of the eighties (Altman, 2009). Additionally, in a speech by top White House economic adviser Lawrence H. Summers at the Council on Foreign Relations, Summers believes that the current recession will be prolonged because of the created “downward spiral” through which the financial sector has entered (WSJ Staff, 2009). In no less harsh times are going through European and other developed countries, including Japan, where the global financial system became on the verge of collapsing. In general, it is quite apparent that the crisis has struck the strongest blow on the financial and economic situation of the industrially developed countries, or in other words, most OECD countries (Organization for Economic Co-operation and Development).
In that context, particular hopes were set on the BRIC (Brazil, Russia, India and China) countries, in maintaining a relatively high economic growth, which would speed up the recovery of the world economy. Specifically, in Altman’s essay, it was predicted that the crisis will facilitate “the rapid rise of other economies, especially China and India.” (Altman, 2009). In such a matter, it can be assumed that with OECD countries recovering that the growth might stop. Nevertheless, this paper takes the position that the economic growth of BRIC countries will continue their fast growth past the recovery of Developed countries.
The first factor that should be mentioned in support of the continuous growth of the BRIC countries is the fact that in the current decade, prior to the occurrence of the crisis, all BRIC countries demonstrated a persistently high rate of economic growth. Taking a look at the indicators of economic growth of BRIC countries, the consistent growth can be seen through the following outlines:
- Brazil – a record trade surplus in 2003, the first since 1992, with GDP growth of 4.9 in 2004 (Kumar and Fodea, 2009)
- Russia – as of the end of 2007, Russia “experienced nine straight years of growth that averaged 7% annually” (2008)
- India – an average economic growth of 7% since 1997, with the country’s poverty decreasing by 10% through the same period (2008)
- China – a tenfold GDP increase since 1978, and as of December, the foreign exchange reserves and gold of China was estimated at $2 trillion (2008)
In that regard, it can be seen that the main indicators of the growth in BRIC countries are not related to the crisis, with major developments and reforms taking place in these countries in periods up to 25-30 years. At the same time, it should be mentioned that many other indicators of economic growth were taking place at the time OECD countries were experiencing growth, although at different rates.
Additionally, it should be stated that the global financial crisis, which substantially impacted the world economy, to a considerable degree influenced the economy of BRIC countries as well, which will definitely make corrections in assessing the economic transformations taking place in these countries. One thing that might be giving credit to the crisis in the position of BRIC countries, as outlined by Goldman Sachs Global ECS Research, is the acceleration of the rebalance of global activity, due to an increase in savings increase in developed countries, with a simultaneous rise in consumption in BRIC countries (GOLDMAN SACHS GLOBAL ECS RESEARCH, 2009). Goldman Sachs has focused on BRIC countries since 2001, and in that regard, it can be assumed that taking their stance, BRIC countries’ positions in the global economy was just a matter of time, which was reduced due to the financial crisis. Goldman Sachs even goes further, stating that such countries as the US, Japan, and Western European countries having economic leadership were an anomaly, where according to long-term data published by OECD, BRIC countries “made up more than 50% of world GDP back in 1800”, and in that regard, the position of BRIC related to the aforementioned countries will be reversed, reaching the same position as in 1800 by 2050 (GOLDMAN SACHS GLOBAL ECS RESEARCH, 2009).
It can be seen that analyzing the indicators of BRIC countries’ growth, their current position is unlikely to be largely affected by the recovery of OECD economies. It is expected that the growth experienced by BRIC countries, although slowed down due to the crisis, to continue in the future.
References
ALTMAN, R. C. 2009. The Great Crash, 2008. Foreign Affairs. Web.
CLAYMORE. 2008. Four Unique Countries, a Collective History of Economic Growth and Progress. Web.
GOLDMAN SACHS GLOBAL ECS RESEARCH. 2009. The BRICs Nifty 50: The EM & DM winners. Web.
KUMAR, N. & FODEA, A. 2009. Perspective on Economic Growth of BRIC Countries: A Case of Brazil and India. SSRN. Web.
WSJ STAFF. 2009. Summers Remarks at Council on Foreign Relations. The Wall Street Journal. Web.
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