By MoneyMorning.com.au
Ed Note: David Thomas, BRIC expert and entrepreneur, gave a great presentation at ‘After America’, Port Phillip Publishing’s first investing conference. You can order the DVD now to see for yourself. Over the next three days, he will share some of his thoughts on the BRICS…and how you can take advantage.
All over the world, and particularly in the debt-laden economies of the USA and Western Europe, we are now acknowledging the importance of China as the new economic engine of investment, trade and growth. This has happened very quickly, and probably before China was completely ready, but there is little doubt that we are now witnessing a major and historical event.
The passing of the economic baton to a group of large, ambitious and rapidly industrialising countries who have become collectively known as the “BRIC countries” (Brazil, Russia, India and China), the four economies that will dominate the global scene in the 21st century.
The BRIC acronym, first invented in late 2001 by Jim O’Neill, then Head of Economic Research at Goldman Sachs, has proved to be prophetic and been acknowledged as the “call of the century” by leading investment commentators. However, many investors, entrepreneurs and business leaders are still grappling with it as a guide for future investment and business opportunities.
So, in order to understand why BRIC is so important as a guide to future economic growth let’s start by examining the three traditional drivers of economic growth, land, people and capital, and see how each BRIC country ranks against themselves and others under these three criteria:
Firstly, let’s begin with the largest countries in terms of size:
Russia is the largest country in the world (17.1m km²), by a long way followed by China (9.6m km²), Brazil (8.5m km²) and India (3.3m km²) in 4th, 5th & 7th place respectively. If all you needed was land, Russia would be the world’s largest economy.
But it’s more than just land. You also need people to generate growth and productivity. Here follows the ten countries in the world today with the largest populations:
China and India’s combined population of over 2.5 billion dominates this picture.
Whilst the availability of land and people was enough to dominate the global economy prior to the 19th Century, the Industrial Revolution changed everything by introducing machinery, technology and energy as the new drivers of productivity and growth. This all had to be paid for, and the availability of capital became a vital differentiator between booming and lagging economies. So which were the largest economies in 2010?
Whilst the US economy (GDP $14.72 trillion) is still the largest in the world by some margin, the rapid growth in the emerging economies means that this position will be challenged and overtaken within the next decade.
In fact, the Chinese economy (now $5.89 trillion and growing at an average of 8.5% p.a.) is predicted to overtake the US as the largest in the world by 2025, or sooner. The graph below forecasts the size of the world’s largest economies in 2050. As can be seen, the picture is dominated by China ($70.7tr) which is predicted to be almost double the size of the US ($38.5tr)
When you combine the three economic drivers of land, people and capital, and plot some of the world’s leading countries against each of these measures, an interesting picture emerges (see below). The defining characteristics that set the BRIC countries (and the US) apart from the rest of the world is just that – the abundance of land, people and capital.
So, where are the opportunities for you, your clients and your business networks?
David Thomas
Contributing Writer, Money Morning
Ed Note: David will look at China specifically tomorrow…Stay tuned.
The “After America” Archives…
‘After America’: The World Reset
2012-03-17 – Callum Newman
‘After America’: Threats and Opportunities
2012-03-16 – Callum Newman
China and The Revolution
2012-03-15 – Callum Newman
Cocktails and Central Banks
2012-03-14 – Callum Newman
Prelude to ‘After America’
2012-03-13 – Callum Newman
Why You Should Build Your Wealth Using the Biggest BRICS Possible