Tuesday, April 22, 2014

Time to Hit the BRICs?

Fascinating article by Michael Mandelbaum at The American Interest on the BRIC Bust?:

Whether or not the BRICs realize their potential for economic growth, that potential exceeds that of the world’s wealthiest countries because of what some economists call convergence. Rich countries already have in abundance what produces growth: the most advanced technology and techniques of production. For them, further growth requires inventing new techniques and technologies, a slow, unpredictable process. The BRICs, by contrast, can expand their economies simply by incorporating the technologies and techniques the rich have already invented. Incorporation is a much easier and faster way than invention to mobilize existing but underutilized economic resources—hence the buoyant optimism of recent years. All things being equal, the BRICs should lead the world in growth until they, too, reach the technological frontier.

All other things are not, however, equal. That is the reason for the outgoing tide and the uncertainty over the BRICs’ long-term economic prospects, and the political consequences of their growth rates. While certainty about their economic future is not possible, the range of uncertainty can be narrowed with a single observation: The extent to which the BRICs fulfill their considerable economic potential in the years ahead will depend, as do all economic matters, on politics.

Specifically, the economic growth rate for the four BRICs will depend on how well each copes with a feature of its politics that once served to spur economic advance but now hinders it. For Brazil that feature is the political tradition known as populism. For Russia it is the distorting impact of its large reserves of energy. For India and China it is their political systems: democratic and authoritarian, respectively.

Mandelbaum goes on to detail the particular challenges that each country faces and what they need to do to overcome them. If I had to pick one country with the best chance of turning things around it would be the one that has probably least realized its potential up until now: India.