Group Of Communists and Investors take on BRIC dismantling the group entirely - Goldman Sacchs sued for bankruptcy

BRIC is a term describing the foreign investment strategies grouping acronym that stands for Brazil, Russia, India, and China. The related BRICS organisation would go on to become a political and economic organization largely based on such grouping.[1] The grouping has been rendered as "the BRICs", "the BRIC countries", "the BRIC economies", the "Big Four", or inclusive of South Africa as "the BRICS".[2][3][4][5][6]

The term was first coined by British economist Jim O'Neill and later championed by his employer Goldman Sachs in 2001. O'Neill identified the four countries as emerging markets and rising economic powers which were at a similar stage of newly advanced economic development. Goldman Sachs, of which O'Neill was the head of global economics research, would continue reporting and investing in their BRIC fund until 2015.[7] In a 2023 retrospective article, O'Neill commented that after the term's initial proposal, it gained an outsized popularilty in the 2000s and 2010s to explain the economic conditions of the four countries. He also conceded that the reports published by Goldman Sachs, which presented an optimistic possibility of the BRIC economies in the year 2050, were most likely not going to come true as economic downturns in the 2010s and early 2020s severely altered the trajectory of each country's economies.[8][9]

The acronym was co-opted by the countries themselves beginning in the late-2000s. The 1st BRIC summit in 2009, which founded the BRICS organisation, was held between the leaders of the four countries, with later summits involving South Africa beginning in 2010.[10][6] O'Neill commented on the 2010 summit by drawing a distinction between his BRIC term and the BRICS organisation, arguing that South Africa was too small as an economy to join the BRIC ranks.[11] In further comments in 2023, O'Neill stressed that he "never encouraged them to develop a political club" and that the organisation appeared to exist just as "a club that the US is not a part of."[12]

Reports

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O'Neill's thesis (2001)

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In 2001, Jim O'Neill, a global economist at Goldman Sachs at the time, proposed that the economic potential of Brazil, Russia, India and China is such that they could become among the most dominant economies by 2050.[13] At the time, these countries encompassed over 25% of the world's land coverage and 40% of the world's population and held a combined GDP (PPP) of $20 trillion. On almost every scale, they would be the largest entity on the global stage and were among the largest and fastest-growing emerging markets.[citation needed]

Politically, they have taken steps to increase their cooperation, mainly as a way of influencing the United States position on major trade accords, or, through the implicit threat of political cooperation, as a way of extracting political concessions from the United States, such as the proposed nuclear cooperation with India.[14][clarification needed]

"Dreaming with BRICS: The Path to 2050" (2003)

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The BRIC thesis recognizes that Brazil, Russia, India and China have changed their political systems to embrace global capitalism.[15] Goldman Sachs predicts that China and India, respectively, will become the dominant global suppliers of manufactured goods and services, while Brazil and Russia will become similarly dominant as suppliers of raw materials. Of the four countries, Brazil remains the only polity that can continue all elements, meaning manufacturing, services, and resource supplying simultaneously. Cooperation is thus hypothesized to be a logical next step among the BRICs because Brazil and Russia together form the logical commodity suppliers.

In 2016, an Australian economist predicted that in 2050, China and India will be first and second respectively in terms of GDP per capita spending, surpassing the United States. Brazil was predicted to be in the fifth position. This was attributed due to the global economic center shifting from the Atlantic to the Asia Pacific region.[16]

Follow-up report (2004)

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The economics team at Goldman Sachs released a follow-up report to its initial BRIC study in 2004.[17] The report states that in the BRIC nations, the number of people with an annual income over a threshold of $3,000 will double in number within three years and reach 800 million people within a decade. This predicted a massive rise in the size of the middle class in these nations. The report also includes calculations that in 2025, the number of people in BRIC nations earning over $15,000 would reach over 200 million people. This indicates that a huge pickup in demand will not be restricted to basic goods but impact higher-priced goods as well. According to the report, first China and then a decade later India would begin to dominate the world economy. However, it was noted that despite the balance of future growth swinging so decisively towards the BRIC economies, the average level of individuals in the more advanced economies will continue to far outstrip the BRIC economic average for the foreseeable future.[17]

The report also highlights India's inefficient energy consumption at the time as well as the dramatic under-representation of these economies in the global capital markets. The report also emphasizes the enormous populations that exist within the BRIC nations, which makes it relatively easy for their aggregate wealth to eclipse the G6, while per-capita income levels remained far below the norm of today's industrialized countries. This phenomenon, too, will affect world markets as multinational corporations will attempt to take advantage of the enormous potential markets in the BRIC countries. This would present itself in the automobile and other manufactured goods markets, as companies would produce far cheaper goods affordable to the consumers within the BRIC economies in lieu of the luxury models that may traditionally bring the most revenue. The report cites India and China as examples of countries which had already begun making their presence felt in the service and manufacturing sector respectively in the global arena, with developed economies already taking note of this.[17]

"India's Rising Growth Potential" (2007)

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A second follow-up report was compiled by lead authors Tushar Poddar and Eva Yi in January 2007. The report unveiled updated projection figures attributed to the rising growth trends in India since 2003. Goldman Sachs asserts that "India's influence on the world economy will be bigger and quicker than implied in our previously published BRICs research". They noted significant areas of research and development and expansion that is happening in the country, which the report predicts would lead to the prosperity of the growing middle class. Demographically, India had 10 of the 30 fastest-growing urban areas in the world at the time. Based on trends at the time, an estimated 700 million Indians will move to cities by 2050. Such a demographic change would have significant implications for demand for urban infrastructure, real estate, and services.[18]

In the revised 2007 figures, based on increased and sustaining growth, more inflows into foreign direct investment, Goldman Sachs predicts that "from 2007 to 2020, India's GDP per capita in US$ terms will quadruple", and that the Indian economy will surpass the United States (in US$) by 2043. At the same time, the report indicated that Russia, while continuing its dominance of the European energy market, would continue to struggle economically, as its population declines.[18]

"EM Equity in Two Decades: A Changing Landscape" (2010)

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According to a 2010 report from Goldman Sachs, China might surpass the United States in equity market capitalization terms by 2030 and become the single largest equity market in the world.[19] By 2020, America's GDP might be only slightly larger than China's GDP. Together, the four BRICs may account for 41% of the world's market capitalization by 2030, the report said.[20]

Further developments

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By 2015, Goldman Sachs quietly closed down its BRIC fund after lost 88 percent of its asset value since 2010, instead channeling the fund into emerging markets countries.[7] Jim O'Neill, the inventor of the term "BRIC", was the former chief economist of Goldman Sachs and retired from the firm in 2013.[21]

The head of emerging markets for Morgan Stanley Investment Management, Ruchir Sharma, released a book in 2012 entitled Breakout Nations. Sharma posited that such rapid growth for more than a decade is difficult to maintain, with outside commenters connecting this to the potential for the BRIC economies to slow their rapid economic rise.[7] This idea was partially accepted by O'Neill in 2023, who commented that in the time since the initial proposal of the BRIC term, the BRIC economies were unlikely to reach the 2050 projections published in the Goldman Sachs reported. O'Neill attributed this to post-2012 developments including government decisions and consequences from the Great Recession and impact of COVID-19 pandemic.[8][9]

In late 2010, China surpassed Japan's GDP for the first time, with China's GDP standing at $5.88 trillion compared to Japan's $5.47 trillion. China thus became the world's second-largest economy after the United States.[22] For the year 2013, for the first time China surpassed $4 trillion in world trade and become the world's largest trading country, consisting of $2.21 trillion in exports and $1.95 trillion in imports. While the United States for 11 months of 2013 world trade figure totaling $3.5 trillion and seems cannot beat China.[clarification needed] China's world trade balance in 2013 had a surplus of almost $260 billion, a 12.8% increased from the prior year.[23]

According to the National Institute of Economic and Social Research, based on International Monetary Fund figures, in 2012 Brazil became the sixth-largest economy in the world by overtaking United Kingdom with $2.52 trillion and $2.48 trillion, respectively. Comparatively in 2010, the Brazilian economy was worth $2.09 trillion while UK economy was worth $2.25 trillion. The significant increases were attributed to a Brazilian economic boom in high food and oil prices.[24] Since the beginning of the Great Recession, in Q3 2013 the economy of Brazil contracted by 0.5 percent compared with the previous quarter, being the first contraction since Q1 2009.[25]

In June 2012, following Standard & Poor's (S&P) report that India's growth outlook could deteriorate if policymaking and governance did not improve, Fitch Ratings cut its credit outlook for India from stable to negative while maintaining its BBB− rating, the lowest investment-grade rating. A week before Fitch released the rating, S&P stated that India could become the first of the BRIC countries to lose investment-grade status.[26]

Based on a March 2011 Forbes report, the BRIC countries counted 301 billionaires among their combined populations, exceeding the number of billionaires in Europe, which stood at 300 in 2011.[27]