Brazil Outshines Other BRIC Economies
RENEE MONTAGNE, HOST:
One of the most powerful forces of change in the world has been the dramatic economic growth of Brazil, Russia, India and China. Jim O'Neill, an economist at Goldman Sachs, zeroed in on those particular countries 10 years ago when he coined the term BRIC, an acronym for the four. O'Neill has a new book now called "The Growth Map." It looks again at the BRICs a decade on, and he says their success has surpassed even his predictions. He joined us from London to talk about it. Good morning.
JIM O'NEILL: Good morning. Thank you very much for having me.
MONTAGNE: Let's begin. You write that the BRIC countries all have done much better than you originally predicted, although you seemed possibly most impressed by Brazil.
O'NEILL: Well, at the time when I created the acronym 10 years ago, Brazil was regarded as the most controversial. One of my favorite BRIC anecdotes was on a trip to Brazil soon afterwards. One of the key people inviting me to this event whispered in my ear as I was going to the podium to speak: We all know that the only reason the B is in the acronym is because without it there would be no BRIC, which reflected a widespread mood that Brazil didn't really deserve to be there. But in fact, as you say, all four have done better than I thought, but Brazil especially, actually. You could already see some tiny signs of it. I know on Madison Avenue in New York, for example, one or two of the luxury goods shops have Brazilian or Portuguese-speaking assistants to deal with high-net-worth businesses from Brazil.
MONTAGNE: Well, one thing, you called Brazil's former president, Luiz Inacio Lula da Silva, Lula, the greatest G20 policymaker of the last decade. Why him more than, say, China's leaders, given China's explosive growth?
O'NEILL: Well, because I think Brazil's done it as a democracy and against the background of a pretty chaotic three decades or so of economic life before. And most importantly, he kept in place the best class of Western economic stability policies but (unintelligible) also had it accepted by lower income groups and through that process spread wealth significantly to those less well-off. And compared with the other BRIC countries, there's evidence that in Brazil income differentials actually narrowed. So remarkably successful.
MONTAGNE: Let's turn to China, which, you know, is so much talked about, had so much impact in the world, if only because of its size it would. There are key challenges for China, which you point out. There are people talking about doomsday scenarios in a way that China has an unsustainable debt, what happens when there's a slowdown in economic growth. What do you feel about those concerns?
O'NEILL: Well, for as long as I've been closely following China, which is now about 21 years, many of these things have been suggested before, but I think the first part of answering this question is to say that you cannot look at China through just a purely Western-orientated lens. It's a very different society and whilst it is a Communist Party leadership, one-party state, it's almost more like a Chamber of Commerce than a political party. One of the things that I've found to really respect about the Chinese leadership is that they worry about a lot of the so-called major problems that they face as much as us foreign observers and investors. And I generally find from my career that countries where the policymakers worry is usually a better place in terms of investing. You want to be really worried about places where they don't worry.
MONTAGNE: And certainly one problem, though, that China doesn't have is population and population growth. That sort of growth is a key part of your analysis of BRIC economies. And one thing you point out when it comes to Russia is that country has a dire problem with that. It's got a shrinking population. What else is there about Russia that might be concerning?
O'NEILL: Well, just on the demographics with Russia, halfway through the first decade of BRICs, when I used to talk to people about it, male life expectancy was less than 60, which is astonishing at this day and age around the world. But most of the signs I get today is it's crept up by three or four years, which is obviously a very important positive. But you know, there's a lot Russia has to do to deal with that problem. Beyond that, I'd say the other two major problems that Russia has, one is far too excessive dependency on oil and gas, and then secondly the whole rule of law, especially as it relates to doing business, as many people talk about frequently, is highly questionable.
MONTAGNE: It may be too soon to have worked this one out, but how do you think the demonstrations of quite prosperous middle-class people in Russia who benefitted from the decisions in the Kremlin about the economy in recent years and the oil, how do you think that might affect how this economy goes?
O'NEILL: Yes. It's a fascinating thing and I haven't worked it out 'cause it is so recent. But I've spent a lot of time thinking about it and I have been talking to quite a few Russian experts and Moscow-based friends of mine. And just as you can't look at China through a Western lens, you have to be really careful, perhaps even more so, when it comes to Russia. I think one has to distinguish between general angst about the apparent election results and popularity of Putin. What is really interesting is despite this huge protest, Putin himself appears to be rather popular.
MONTAGNE: Does the debt crisis in Europe and the - sounds like a very real possibility of a recession - does that change your outlook at all for the BRICs?
O'NEILL: Well, I would say unfortunately the signs that I follow suggests that Europe might already be in some form of a recession. So the question is highly pertinent. I think the crisis in Europe, as the crisis we had in the U.S. three years ago, are arguably good for these countries because it makes them realize they can't depend on exporting to the rest of the developed world for their success and future. And so they've got to do things more and more to stand on their own two feet. And I think that's particularly applicable to China but to a lesser degree for the others as well. And there are some signs of that happening. So coming to the exact question you asked me, on the contrary, the intermittent crisis we've had across the developed world since '08 is actually accelerating the relative speed by which the growth economies and the BRICs are becoming a bigger share of the world.
MONTAGNE: Thank you very much for joining us.
O'NEILL: My pleasure. Thank you very much for having me on.
MONTAGNE: Jim O'Neill is the chairman of Goldman Sachs Asset Management and his new book is "The Growth Map." He spoke to us from the London Stock Exchange.
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