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Sunday, 1 September 2013

Is this the end of the BRIC’s as we know them?! Or was it all just a dream anyway?! Pt I

Suddenly, the BRIC’s were there.

Jim O’Neill, a former chairman of Goldman Sachs Asset Management invented the acronym in 2001 and – in the process – identified the countries behind it as the international heroes of economic growth: Brazil, Russia, India and China. The legend of the BRIC’s was born.

These four became the countries with the sometimes double-digit economic growth y-o-y (year on year) and – even better – they all seemed to have the stamina to maintain this growth for years and years to come.

All were countries with large, but still quite poor populations, which had only just found the way towards more prosperity:
  • Russia has 143 million inhabitants and this population only just started to recover from 70 years of socialism/communism and 12 years of cowboy capitalism, with the organized robbery of state-property in the nineties and the stock exchange meltdown of 1997 as rock-bottom.

    In general, Russia is definitely the most “Western” country within the BRIC’s, with nation-wide satellite television, one ubiquitously spoken language and well-developed transportation networks between the most important economic hubs in the country.

    Nevertheless, the differences in wealth between the inhabitants of Moscow and St-Petersburg at one side and the inhabitants of the other cities and incredibly large rural areas in Russia at the other are staggering. ‘Piter’ and Moscow, the two leading cities, almost seem like spunges that suck up all wealth before it can pour into the other cities and areas. 

    Politicians from all over the country, who enter the State Duma of Russia (i.e. national parliament), seem to spontaneously forget their origin and who they are representing as soon as they see the Kremlin at the Red Square. Instead, they start to live and arrange things for themselves only, infected as they are with the power and wealth of Moscow;

  • Brazil has 201 million inhabitants, of which a small minority is extremely wealthy and owns enormous parts of the rural country. The large majority of the population is very poor indeed, with still widespread analphabetism, and suffers from poverty, prostitution, organized crime and drug abuse. On top of that, there are the approximately 300,000 remaining indians, who go through a daily battle for survival for them and their lifestyle.

    Brazil is the promised land for forestry, production of soy and other cereals and cattle-breeding, as it has an enormous size and lies close to the equator. Its vast rain-forests always made that the country was called the ‘lung of the world’, but unfortunately these rainforests are still used for the deployment and exploitation of agricultural terrain and the non-environmentally friendly production of hardwood, in spite of all initiatives to save them;

  • India, with a population of 1233 million, is the second largest country in the world. India’s largest cities partially host an extremely well-educated population, which is developing state-of-the-art computer technology for almost the whole western world. Besides that, many people are working in very modern and innovative manufacturing industries. 

    Nevertheless, the rest of India’s population is still extremely poor and you could argue that especially the rural parts of the country still live in medieval times, with old-fashioned and sometimes even cruel habits towards women and poor peasants. 

    Archenemy Pakistan is always the elephant in the room for India, especially when it comes to conflict zone Kashmir. Although both countries belonged to British India only 66 years ago, muslim-Pakistan and hindu-India are water and fire and have lived at the edge of (atomic) war for a long time.
  • China is champion of the world with 1359 million inhabitants. The country is still very much communist and centrally organized, but with a undisputable capitalist touch. The country positioned itself as the second-strongest industrial nation in the world and supplies labour opportunities to millions and millions of diligent and studious Chinese workers, who want to flee their past of poverty as a peasant on the rice-fields. 

    Nevertheless, the Chinese Communist Party still has an iron grip on the country and makes sure that the largest share of the newly-found Chinese wealth is distributed among themselves and their peers. The state-control against the obstinate people in the society is ubiquitous and failure in any kind of way can be deadly for people, who are not among the highest ranks in the country.
These are the BRIC’s: countries that seem to offer great opportunities for the future, but which are only in their childhood years, when it comes to subjects like democracy, justice, development, education, freedom and equality among the population. In my opinion, this goes for India too, due to the enormous economic and societal differences between the rich population in the cities and the poor, rural population.

Still, the growing wealth of the general population within the BRIC's, their generally high and/or rising level of education and their nearly unlimited production potential, based upon relatively cheap and well-educated labour, would shake the old, economic heroes to their foundations, was the 'communio opinis': the Western World, Japan and South-Korea.

The BRIC’s were the countries that could easily beat the lazy and drowsy ‘old world’ (i.e. Europe) with its overrated social security systems, its indolent and indecisive politicians and its much too strong labour unions.

The Japanese would also be without a chance against the BRIC’s, due to their never-ending deflation, their unbelieveable level of private and state debt, their long-term faltering economy and their additional demographic problems, due to the aging of the Japanese population.

Even the United States with their failing political system, their massive private and public debt-explosion and their consume-until-you-drop attitude would be cannon fodder for the status and power-hungry BRIC’s.

When the credit crisis started in 2008, the world thought that the BRIC’s would be immune for it: 
  • Russia pumped up oil and gas like water and at moments the country played powerplay against its unwilling neighbours Ukrain and Belarus, as an unspoken, but clear message to the Western world: “Don’t mess with us, or you can kiss your gas and oil goodbye”.

    Especially the Russian oil and gas generated so much income and wealth to the large groups of insiders in this business, that these days, no expensive shop in Western Europe could survive without rich Russians, who combine an expensive, often over-the-top taste with a very loose creditcard hand.

  • Well-educated Indian ICT-workers were flooding the western world and gathered a firm position in almost every services industry (Finance and Assurances, Government, Commercial services and other ICT-intensive industries) all over Europe and the US. Indian workers are smart and intelligent, well-educated and very hard-working people, who offer ­– as an extra trump card in their sleeve – the unlimited ‘firepower’ of ICT companies, with 30,000+ ICT-workers on the payroll. “Whether you want 20 or 2000 knowledge workers, we have ’em for your company”.

    The intelligence of the Indian workers and the sheer size of their companies became an unbeatable combination for large European and American services companies. In the steel industry the Indian-owned companies ArcelorMittal and Aperam became household names.

  • China has become like the famous  A.C.M.E.-corporation from the old Roadrunner and Tweety cartoons: ‘a country manufacturing everything’.

    Nowadays, China is – to put it bluntly – the manufacturing plant of the world: if you don’t want your products to become too expensive for exports and sales, you have to manufacture your products there.

    In spite of the fact that top-secret business processes and many patented products are often ruthlessly copied, reproduced and sold for half the price, reputedly by the same Chinese factories which produce your own goods, many Western companies still have no other alternative than manufacturing in China.

    Besides that, it are especially China’s own companies which have been prospering too during the last decade. It became quite normal to walk in Li-Ning shoes and clothing, while holding your Huawei telephone and Lenovo Notebook. The days are even coming that you step into your Chinese car to go to work. The quality of Chinese products is improving rapidly and some of their best products can effortlessly compete with hi-tech products from elsewhere.
  • For European people Brazil is relatively unknown: of course all European football-addicts know at least 10 Brazilian football players by heart and Brazil itself is a dream-destination for nature-lovers, sun-seekers and beach-addicts. Nevertheless, there is hardly any influx of Brazilian workers and products in Europe, except for agricultural products, like wood, soy and beef. Not very sophisticated and hi-tech, but still indispensable.

    Besides that, Brazil with its developing population and increasing wealth seemed like the promised land for many western companies for opening branches and setting up new business.

So, while the credit crisis was creating havoc in the US and Europe between 2008 and 2013, the success story of the BRIC’s continued…

Or, are there now some cracks emerging in the picture-perfect image of the BRIC’s?! It seems to be that the luster of the BRIC’s is fading a little bit.


Russia is the BRIC-country that I know best, as it is the motherland of my beloved wife.

At this moment, Russia is in the spotlights of the western world, due the organization of the Olympic Wintergames of Sochi, 2014 and to its approach of gay-rights, which alienates many would-be visitors and athletes of the Olympic Games.

I said on a number of occasions that I symphatize with the fighters for gay-rights. In my opinion, everybody should have the opportunity to lead the life and live the love that he or she would, as long as both partners are consenting, mentally independent adults.

Still, I regret that this question is distracting from the real issues in Russia:
  • The lack of basic political and economic stability for everybody and the lack of a rock-hard, democratic foundation in this country still pushes many Russians in the wide-open arms of Vladimir Putin.

    For many Russians, he seems the least of all evils in Russia, as he brought many Russians economic stability and safety and also a certain amount of wealth, after the wild Yeltsin-years, which shocked the trust of many middle-class people.

  • The ubiquitous corruption at all levels of the Russian society, which restrains the development of a basically honest civil society:
    • Why would people at the bottom of society change for the better, when the people at the summit of society are wheeling, dealing and stealing?
    • Why would small citizens believe in honesty, when they see that the important positions in society are taken by people, who know people that know other people?
    • Why should you pay a $100 fine, when ‘uncle agent’ looks the other way for $30 in cash, in order for him to earn a decent income?
    • Why wait for six weeks for an official document, when a small gift to the right person can enable the delivery of this document within one week?!
    • It is this widespread corruption, which makes that many Russian high-profile projects turn into exhibitionistic symbols of self-enrichment for a happy, corrupted few. Money and materials are stolen or embezzled at an unprecedented scale. This causes building expenses, which are up to five times higher than originally planned.

      Thus Sochi became a symbol of everything that is wrong and depraved in Russia AND in the International Olympic Committee.
Tomorrow, the second part of this article will be printed.

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