26.01.2007
Davos: the power of Bric
The concept of economic power shift has created a new buzz word: 'Bric'. This acronym comprises the first letters of those countries considered to be the the forerunners of globalisation: Brazil, Russia, India and China. Those countries currently seem to be the schoolbook examples of economic development with eternally growing currency reserves and perpetual technological innovation.
There is also a simpler way of assessing their force. Take the traditional market value for instance. Two companies from China (Petrochina and the Industrial and Commercial Bank) and the Russian Gasprom have already made it to the top 10 market value giants of the world.
The World Economic Forum (WEF) usually tries to present its annual meeting, which is traditionally held in the Swiss ski resort Davos at the end of January, under a very general motto. But the 2007 motto, namely "The Shifting Power Equation" seems to specifically focus on the Bric states. Participants at the WEF may be faced with questions, such as 'What challenges will these states present to the developed nations? - or - Will the lower and middle classes in Europe and USA suffer from this development? - or - Will countries, such as India und China, be able to solve their social disparities through rapid growth?'.
The growth perspectives of Bric states can still baffle Europeans. Take for instance the analyst figures from DB Research regarding the GDP growth for 2007: China shows a plus of 8.5 percent, India a plus of 6.6 percent, Russia a plus of 6.1 percent and Brazil a plus of 3.5 percent. And this may be just the beginning. Last year in Davos the American investment bank Goldman Sachs (also said to be the inventor of the Bric concept) predicted that in 2050 China, the US and India will be the countries with the biggest economic power subsituting the former top three league of USA, Japan and Germany.
Despite the overwhelming growth figures, Bric states still present a number of unsolved economic and political problems. In China, for instance, the homeland financial system is still underdeveloped and this regardless of the record-high IPOs in the last months. Many government-owned companies are ailing, government keeps l interfering too much in the private sector and corruption is still widespread. In half of the Chinese cities the ground water is poluted and 50 percent of the Chinese population lives on less than two dollars per day.
Therefore, one important factor for the sustainable and successful development of Bric states lies in the development of a larger middle class. The social structure of emerging countries is still made of a minority of super-rich and a majority of people living below the poverty line. A strong middle-class will be an important factor for economic and political stability. These people will be the future entrepreneurs, consumers, tax-payers of these economies and may want a greater say in political affairs one day. The latter will probably pose a problem to some authoritarian regimes.
Source: Frankfurter Allgemeine Zeitung
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