8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
1/37
1
Four Snapshots:
India, China, Brazil, and Russia
Globalization and the EvolvingInternational Economic Order
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
2/37
2
BRIC Country Overview
BRIC COUNTRY OVERVIEW
0.0 BRIC Country Overview
1.0 Brazil
2.0 Russia3.0 India
4.0 China
5.0 Shared BRIC Challenges
6.0 Shared BRIC Opportunities
7.0 Discussion
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
3/37
3 3
0.0 BRIC Overview
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
4/37
4BRIC Consulting, Goldman Sachs Global Economics Paper No. 99
Introduction: BRIC Country Overview
Rise of the BRICs
By 2050, BRIC countries expected to account for over40% ofthe worlds population, and 60% of global GDP
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
5/37
5 5
1.0 BrazilGlobal MarketplaceTrendsChallenges for the Future
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
6/37
6
Brazil: Global Marketplace
Global Marketplace: The uneasy emergence of an
economic leader in Latin America
One of the fastest growing economies in the last century Development driven by trade of natural resources such as coffee and sugar
But over-reliance on agricultural commodity exports resulted in adevelopment marked by boom and bust Political instability caused by fluctuating market prices political violence
Since 1985, Brazil has been developing a representativedemocracy In 1994, Fernando Henrique Cardoso elected president
Cardoso believes economic development dependent upon investment,technology transfer, and market access provided industrialized nations
Succeeded in stopping hyper-inflation, but resulted in swelled debt and highunemployment
Yale Global Online
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
7/37
7
Brazil: Global Marketplace
Global Marketplace: A Refreshed Administrationand Strategy
In 2002, 53 million Brazilians elected former shoeshine boy andleader of the New Unionism movement to chart new course
through globalization Luiz Inacio Lula da Silva established outward-oriented
development strategy to grow the economy Expanded exports of mineral, agricultural, semi-industrialized and high
value-added manufactured goods Targeted traditional markets (US & EU) and new markets in Latin America,
Southern Africa, China, India, and Middle East Established income-support programs to combat social
exclusion and poverty Brought a quarter of Brazils 190m people into the consumer market for the
first time
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
8/37
8
Brazil: Global Marketplace
Global Marketplace: A Refreshed Administrationand Strategy
Results
Export earnings grew from $43.5 billion in 1994 to $90 billion by 2000
2008 estimates put exports over $190 billion
From 2006 to 2007, per capita GDP increased from $4,930 to $6,600
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
9/37
9
Brazil: Trends
Trends Focus on equitable development has resulted in significant poverty
reduction Middle class now comprises 52% of population
Long famous for its unequal distribution of wealth, Brazil has shrunk its income
gap by six percentage points since200
1 Brazilian economy becoming less dependent on exports
Brazil becoming a leader in the effort to bring developing nationsinto the era of globalization Established the IBSA development initiative to promote cooperation among the
developing nations of the southern hemisphere
A global leader in renewable fuels Worlds second largest producer of ethanol, and the largest exporter
90% of Brazilian vehicles can be fueled by ethanol
The Globalist, Brazil: Navigating the Straits of Globalization; The Economist (May 2009)
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
10/37
10
Brazil: Challenges for the Future
Challenges for the Future
Overburdened and ineffective judicial system Supreme Court received 100,781 cases in 2008
69% of Brazilians believe judges lack impartiality
High risk of broken contracts and lack of reliable legal recourse discourages foreign
investment
The Globalist, Brazil: Navigating the Straits of Globalization; The Economist (May 2009)
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
11/37
11 11
2.0 RussiaGlobal MarketplaceChallenges for the Future
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
12/37
12
Russia: Global Marketplace
Global Marketplace: An easy case for globalization After the collapse of the USSR in 1991, a sense of historical
inevitability that Russia would rapidly become a prosperousdemocratic state
World community supported a plan of rapid economic reforms
referred to as shock therapy But beginning in 1992, Russia became plagued by hyperinflation,
political conflict, and desperate poverty Poverty increases ten-fold from Soviet era
Infant mortality 4 times that of US
The Globalist, Brazil: Navigating the Straits of Globalization.
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
13/37
13
Russia: Global Marketplace
Global Marketplace: Less shock, more therapy By end of 1992, world community remains hopeful as Russian
people rapidly disillusioned
Perception grows that Russia is being lectured by othercountries and is quickly losing its superpower status Propensity to offer guidance to Russia quickly became a sore point in the
U.S.-Russian relationship
The Globalist, Brazil: Navigating the Straits of Globalization.
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
14/37
14
Russia: Global Marketplace
Global Marketplace: Why did Russia not transitionsmoothly into the global system?
Undue emphasis on economics over politics Domestic pressures for change not as strong as in other countries
Short-term consequences of shock therapy undermine public perceptionsof linkage between reform and prosperity
Disregard of cultural values Russians did not adopt western lifestyles as a standard by which to judge
their own
Russia can still benefit from a globalized world withoutundertaking painful reform Diversified global firms willing to take risks in Russian energy sector
because of high potential for profit Russias nuclear arsenal renders it too big to fail, attracting foreign
assistance despite lack of democratic reform
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
15/37
15
Global Marketplace Consolidation of federal power
Immediately after inauguration, Putin begins weakening challengers ofKremlins power
Regional governors, Oligarchs, NGOs, Environmental groups
Justice system used to attack political opponents of the regime
Strengthening of ties with former Soviet allies such as North Koreawhile exploiting differences between Washington and Europeancapitals for political leverage Continued provision of nuclear and other sensitive technologies to Iran
Continued popular skepticism of the west
85% of Russians believe the US is trying to dominate the world This makes widespread pressure for economic or political reform unlikely
Use of vast oil and natural gas reserves to exert geopoliticalpressure
Regional instability: Georgia incursion
http://www.nixoncenter.org/publications/articles/Russia%20and%20globalization.htm
Russia: Global Marketplace
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
16/37
16
Russia: Challenges for the Future
Challenges for the Future Labor shortages and poorly developed infrastructure
WTO membership and long-term growth of the manufacturing sector Economic miracle of Russian economic growth driven by natural resource exports,
but manufacturing sector not competitive on global scale
WTO accession will have long-term benefits, but will hurt the majority of domesticmanufacturers which cannot compete with foreign companies
Reconciling ambitions as a major power with reality of current situation "With real democracy in Ukraine, more and more Russians would view the Putin
regime as an anachronism."(Zbigniew Brzezinski, former U.S. national securityadvisor, December2004)
The Globalist, Nixon Center, The Economist, Yale Global Online
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
17/37
17 17
3.0 IndiaGlobal MarketplaceKey AdvantagesTrendsElections of2009
Challenges for the Future
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
18/37
18
India: Global Marketplace
Global Marketplace: The PC Revolution
Seeds of Indian Software industry sown in late 70s and early 80s
Early software training in India centered in universities
Sense that power of software would be unleashed in years to come
American technology firms enter Indian market and use localprogrammers for domestic products
Firms quickly realize Indian software is low-cost and high-quality, begin usingIndian programmers for other markets
Indian industry gains exposure to international programming,
marketing, customer care
Yale Global Online
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
19/37
19
India: Global Marketplace
Global Marketplace: Globalization
Forces of globalization set the stage for rapid rise of Indianeconomy
Sourcing capital from where it is cheapest
Sourcing talent from where is it best available Producing where it is most cost effective
Selling where markets are, without constraints of national borders
Confluence of internal changes and external forces ofglobalization allow India to leverage the power of English-
speaking technical talent to produce powerful software for theglobal market
Yale Global Online
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
20/37
20
India: Key Advantages
Key Advantages
1.15 billion people
2nd largest labor force: 516.3m people
60% employed in agriculture
28% in services
12% in industry
Approximately 2.5 million college graduates per year
Every year India graduates nearly 350,000 engineers, twice the number ofthe US
Those with graduate degrees and above have risen from 20.5million in 1991 to 48.7 million in 2004
Enrollments at grad-plus level rose from 6.6 million in 1995 to 9.84 millionin 2004, with proportion of those doing engineering going from 6% to11.2%
World Bank Group: India Data Profile
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
21/37
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
22/37
22
India: Elections of 2009
Elections of 2009
May 16th parliamentary elections result in stable majority forCongress party Congress and electoral allies win 261 of543 seats
Best result of any party since 1991
Party platform featured education reform, poverty reduction,electrical capacity increase, and agricultural development
Election seen as a sign of the compatibility of democracy anddevelopment, and a validation of equitable globalization
The challenge of rising expectations
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
23/37
23
India: Elections of 2009
Elections of 2009
Congress can no longer blame stagnation on political foes
Expectations of continued high support for impoverished do notaccount for economic downturn Governments budget deficit may exceed 11% of GDP in 2009
Many necessary reforms are politically unpopular Curbing fuel and fertilizer subsidies
Repealing overly-protective labor laws
Lifting cap on foreign direct investment
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
24/37
24
India: Challenges for the Future
Challenges for the Future Improving governance
Indian bureaucracy notoriously prone to leakage
Governance problems overarch all others
Improving basic educational achievement
India is still 40% illiterate
Can take up to 4 years to fill teacher vacancy
Improving infrastructure and electrical capacity in cities
Strain on urban services will rise dramatically as urban population rises from30% to 60% by 2050
Indian companies lose an average of7% of income due to power outages To reach growth goal of 9% per year, India will need to add 25,000MW of
electrical capacity per year
Expanding technology industry
High tech sector still accounts for only one quarter of one percent of the laborforce
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
25/37
25 25
4.0 ChinaGlobal MarketplaceKey AdvantagesTrendsChallenges for the Future
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
26/37
26
China: Global Marketplace
Global Marketplace: Unleashing the Caged Tiger As recently as the late 1970s, China was the worlds most
important opponent of globalization
Though it was a latecomer, China has been extremely aggressive in its
engagement in the globalized system
As a result, China achieved an average GDP growth rate of 9.6%between 1976 to 2004
No large country in human history has experienced such rapidimprovements in living standards and working conditions
Chinas successes are associated with liberalization andglobalization
In 2004, international trade accounted for70% of Chinas GDP, as comparedwith 24% for Japan
RAND Corporation, China and Globalization, Yale Global Online, Goldman Sachs
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
27/37
27
Global Marketplace: How did China do it? China focused not only on opening economy, but also on
institutionalizing globalization
Adopted Western concept of rule of law Established competition as a centrally important economic practice Adopted English as de facto second language for educated population
Assimilation of best practices from across the globe
Sends missions throughout the world seeking best technology and corporatemanagement techniques
Elite youth sent abroad for education Incorporates foreign brands into local culture
China: Global Marketplace
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
28/37
28
Global Marketplace: A Painful Transition State enterprise employment declined from 110 million in 1995 to 66
million in 2005
Manufacturing jobs declined from 54 million in 1994 to under30 million today
Urban-rural income gap is getting wider
Environmental cost of industrialization
70% of Chinese energy from coal
One new coal-burning plant brought online every week on average
China has 20 of the worlds 30 most polluted cities
China: Global Marketplace
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
29/37
29
China: Key Advantages
Key Advantages Broad expansion of educational achievement
Great success in promoting primary, secondary, and university education withinurban and rural populations
One-child policy results in greater parental and national investment on a per-child
basis Rapid economic growth
4th largest economy (behind US, Japan, Germany)
Economy grew by 11.9% in 2007
More than 200 million people lifted out of poverty, with 10% of population belowpoverty line
Resilience to global economic downturn
High savings rate creates economic buffer
Vast untapped potential in domestic consumer goods market may be Chinassecret weapon
RAND Corporation, China and Globalization; WSJ; Goldman Sachs
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
30/37
30
China: Trends
Trends China has been a source of economic growth and stability in the
region
Demonstrated to India advantages of more open economy
Stimulated neighbors trade and foreign investment rather than depriving them
Revived Japans economy
Complex and symbiotic relationship with US
Chinas growth driven largely by demand in US market
Inexpensive products substantially improve living standards of poorer Americans
China top creditor of US (holds nearly $1 trillion in US bonds)
Security of US debt a growing international issue, but China has vested interest instability of US economy
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
31/37
31
China: Challenges for the Future
Challenges for the Future Recognition as a global power requires adherence to internationalnorms Environmental quality Human rights Currency manipulation Intellectual property rights
Continued reform of state-run enterprises Banking system worst in the world, but reforming State control resulted in high proportion of non-performing loans
Demographic shifts threaten sustained growth Rapidly-aging work-force due to one-child policy Every generation, 300 million move to the cities
Eventual result will be high non-working/working ratio in cities Navigating a complex relationship with US and world
Value of US debt depends upon Cooperation on nontraditional threats such as terrorism and disease
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
32/37
32 32
5.0 Shared BRIC Challenges
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
33/37
33
Shared Challenges
Shared Challenges The face of poverty in 20th century was rural children. The face of
poverty in the 21st century will be the urban elderly.
Making the global system more accommodating to diverse cultures andvalues
Globalization vulnerable to backlash from countries or social groups that cannot finda satisfactory place in the global system
Could create coalition of these groups
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
34/37
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
35/37
35
Shared Opportunities
Shared Opportunities Inclusive growth critical for sustained globalization
(politically) in developing countries, because potentiallies in bringing up all
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
36/37
36 36
7.0 Discussion
8/8/2019 bricupdatesfinal-100225161858-phpapp02 (1)
37/37
37
Discussion
Discussion Should more economic power necessarily translate
into more political power?
Should Brazil and India be on the UNSC? Does more
representation allow us to more efficiently addressintractable problems?
How can the US ensure its continued relevance andimportance in the changing game of globalization?