Through the last 70 years or so, the world has largely been dominated by one overarching superpower – America. However, situations are changing quickly, and most experts agree we’re currently on the threshold of a time when new powers establish themselves at the top of the economic and power hierarchy.
One needs only look back in history to see that empires come and go – sometimes through mismanagement and decline or, as is the case this time, through the increasing power of rivals. Certainly, one thing is sure – America is no longer alone when it comes to global supremacy.
What is BRIC?
Jim O’Neill of Goldman Sachs first coined the term BRIC back in 2001 and it was used to refer to the nations he believed would be the fastest-growing economies in coming years. BRIC is an acronym for Brazil, Russia, India, and China.
In 1990, the combined economies of these so-called BRIC nations made up 11% of global Gross Domestic Product (GDP). However, by 2014 this figure had skyrocketed to 30% and continues to grow today.
Perhaps more importantly, together, the BRIC nations account for almost 3 billion people (or around 40% of the global population) and share one-quarter of the world’s land area over three continents.
In 2010, South Africa was also added to the BRIC(s) list as an emerging potentially dominant nation.
The importance of BRIC nations as suppliers
China and India already dominate the manufactured goods markets – and, in particular, China has an almost unrivaled foothold in the production of the tech gadgets and devices we have grown to know and love in recent years. As a result, even brands that are synonymous with US growth and dominance rely on Chinese technology for manufacturing and parts.
Take, for example, Apple. The Apple brand is championed as one of the world’s most successful and instantly identifiable companies and frequently features in the top ten of the most profitable firms globally. However, on closer inspection, this bastion of US technology has a huge reliance on Chinese production and manufacturing. If you look at the back of a MacBook, you’ll see the words, “Designed by Apple in California – Assembled in China”.
Apple is far from alone in its reliance on Chinese manufacturing – and it goes way beyond just our tech items and gadgets too. By 2050, China is forecast to become the world’s largest supplier of all manufactured goods and services, with India narrowly behind. Likewise, Brazil is predicted to become the largest supplier of raw materials – similarly, with Russia just behind.
The BRIC nations have the natural resources, knowledge, workforce, and (now) money to become a near-unstoppable force. Perhaps most intriguingly, there seems little anyone can do about it.
A question of finances
When a company the size and might of Apple still relies on foreign labor and parts, you know there’s a problem, and many analysts suggest this is just the tip of the iceberg. However, as our almost insatiable thirst for tech items at competitive prices continues to grow apace, manufacturing companies have little choice but to outsource production and find parts and labor in cheaper countries. In turn, higher manufacturing rates also serve to lessen production costs – as can be seen with the tumbling price points of OLED TVs and the like over the last 20 years.
In this model, it seems on the surface like everyone’s a winner – consumers get cheaper goods while manufacturers increase profits – but, in truth, this imbalance of manufacturing and transfer of wealth is serving to make other nations (including the US) increasingly reliant on foreign tech while also making home production unfeasible.
Going back to the Apple MacBook idea – sure, it would undoubtedly be possible for Apple to source parts and produce their range of products in the US. However, as Chinese production and tech have improved and streamlined over the years, it’s now not commercially viable to source homegrown talent, which further compounds the downward spiral we see today where the Chinese dominance continues.
This same philosophy applies equally across many sectors – for example, clothing. However, in recent times the clothing industry has been turned on its head by so-called “fast fashion” that has come to dominate with the idea of wear-once, throwaway culture becoming the norm.
With the retail landscape now so competitive, manufacturers have little choice but to try and find a competitive edge against their rivals – more often than not, focusing more on price rather than quality. So again, step up China and India with the skills and resources to produce clothing far cheaper than any local supplier ever could.
Steps being taken today
Global leaders are more than aware of the predicament the world now faces, and there is growing pressure on governments around the world to invest more in local production and manufacturing to protect their nations and reduce reliance on emerging countries. Also, organizations like the Foundation for Defense of Democracies openly discuss potential issues and provide useful, non-partisan evidence that helps back up the case for greater internal investment. So, the world is aware – but the problems persist.
While governments can try to foster homegrown talent, they can do little to persuade manufacturers to buy locally. Faced with potentially high production or materials costs by using local companies compared to the idea of outsourcing to cheaper foreign firms, most CEOs know exactly where they stand.
The economic growth of the emerging nations is undoubtedly a cause for concern but there is potentially also a more worrying side to China’s and Russia’s emergence as global players – particularly from an American perspective.
Where once the US stood almost invincible against other nations in terms of their huge military power, both China and Russia are expanding their forces quickly. In particular, China is looking to stretch its reach globally, investing in poorer nations around the world.
These economic deals are often struck with one eye on establishing a military foothold in foreign countries, and the Chinese are currently actively trying to set up bases in Cambodia, Tanzania, and the United Arab Emirates.
The possible future for BRICs nations
20 years on from his statement on the potential future of BRICs nations, Jim O’Neill recently wrote on the IMF website that most of his predictions had proven to be correct. While it’s true that Russia and Brazil have been setback by commodity problems and are largely viewed as needing to diversify, China has steamrolled its way through the last 20 years and, as of 2019, had a GDP in excess of $14 trillion. Meanwhile, India remains largely on course with O’Neill’s previous forecasts.
Nonetheless, the increasing dominance of China within the BRIC group makes its GDP more than twice that of all the other members combined – plus has meant that the BRIC group now has a larger economy than the EU and one that’s rapidly catching up with the US.
Are the BRICs nations a political union?
As for working together, there’s little evidence that BRIC nations take a unified approach or have a political alliance compared to the EU. Rather, they have a collective power as an economic force but tend to still operate independently of one another. That said, while there is no formal alliance, there have been countless examples where BRIC nations have agreed on decisions that could be seen to be in the general interest of all members.
Whether Jim O’Neill’s forecasts from 2001 prove to be correct by 2050 remains to be seen, but one thing is utterly beyond question – there has been (and continues to be) a general shift of both economic and military power in the world, and the US would be wise to keep checking over its shoulder as the gap to China continues to shrink.