Economic
Research from the
®
GS Financial Workbench
at https://www.gs.com
Global Economics
Paper No: 99
Dreaming With BRICs: The Path to 2050
n Over the next 50 years, Brazil, Russia, India and China—the BRICs
economies—could become a much larger force in the world economy. We
map out GDP growth, income per capita and currency movements in the
BRICs economies until 2050.
n The results are startling. If things go right, in less than 40 years, the BRICs
economies together could be larger than the G6 in US dollar terms. By 2025
they could account for over half the size of the G6. Of the current G6, only the
US and Japan may be among the six largest economies in US dollar terms in
2050.
n The list of the world’s ten largest economies may look quite different in 2050.
The largest economies in the world (by GDP) may no longer be the richest (by
income per capita), making strategic choices for firms more complex.
Many thanks to Jim O’Neill, Paulo Leme, Sandra
Lawson, Warren Pearson and our regional
economists for their contributions to this paper.
Important disclosures appear at the end of this document.
Dominic Wilson
Roopa Purushothaman
1st October 2003
SUMMARY
n Over the next 50 years, Brazil, Russia, India and China—the BRICs economies—could become a much
larger force in the world economy. Using the latest demographic projections and a model of capital
accumulation and productivity growth, we map out GDP growth, income per capita and currency
movements in the BRICs economies until 2050.
n The results are startling. If things go right, in less than 40 years, the BRICs economies together could be
larger than the G6 in US dollar terms. By 2025 they could account for over half the size of the G6. Currently
they are worth less than 15%. Of the current G6, only the US and Japan may be among the six largest
economies in US dollar terms in 2050.
n About two-thirds of the increase in US dollar GDP from the BRICs should come from higher real growth,
with the balance through currency appreciation. The BRICs’ real exchange rates could appreciate by up to
300% over the next 50 years (an average of 2.5% a year).
n The shift in GDP relative to the G6 takes place steadily over the period, but is most dramatic in the first 30
years. Growth for the BRICs is likely to slow significantly toward the end of the period, with only India
seeing growth rates significantly above 3% by 2050. And individuals in the BRICs are still likely to be
poorer on average than individuals in the G6 economies, with the exception of Russia. China’s per capita
income could be roughly what the developed economies are now (about US$30,000 per capita).
n As early as 2009, the annual increase in US dollar spending from the BRICs could be greater than that from
the G6 and more than twice as much in dollar terms as it is now. By 2025 the annual increase in US dollar
spending from the BRICs could be twice that of the G6, and four times higher by 2050.
n The key assumption underlying our projections is that the BRICs maintain policies and develop
institutions that are supportive of growth. Each of the BRICs faces significant challenges in keeping
development on track. This means that there is a good chance that our projections are not met, either
through bad policy or bad luck. But if the BRICs come anywhere close to meeting the projections set out
here, the implications for the pattern of growth and economic activity could be large.
n The relative importance of the BRICs as an engine of new demand growth and spending power may shift
more dramatically and quickly than expected. Higher growth in these economies could offset the impact of
greying populations and slower growth in the advanced economies.
n Higher growth may lead to higher returns and increased demand for capital. The weight of the BRICs in
investment portfolios could rise sharply. Capital flows might move further in their favour, prompting
major currency realignments.
n Rising incomes may also see these economies move through the ‘sweet spot’ of growth for different kinds
of products, as local spending patterns change. This could be an important determinant of demand and
pricing patterns for a range of commodities.
n As today’s advanced economies become a shrinking part of the world economy, the accompanying shifts
in spending could provide significant opportunities for global companies. Being invested in and involved
in the right markets—particularly the right emerging markets—may become an increasingly important
strategic choice.
n The list of the world’s ten largest economies may look quite different in 2050. The largest economies in the
world (by GDP) may no longer be the richest (by income per capita), making strategic choices for firms
more complex.
Global Paper No 99
2
1st October 2003
economy has changed a lot over the past
The50 world
years. Over the next 50, the changes could be at
Using the latest demographic projections and a
model of capital accumulation and productivity
growth, we map out GDP growth, income per capita
and currency movements in the BRICs economies
until 2050. This allows us to paint a picture of how the
world economy might change over the decades
ahead.
least as dramatic.
We have highlighted the importance of thinking
about the developing world in our recent global
research, focusing on key features of development
and globalisation that we think are important to
investors with a long-term perspective. A major
theme of this work has been that, over the next few
decades, the growth generated by the large
developing countries, particularly the BRICs (Brazil,
Russia, India and China) could become a much larger
force in the world economy than it is now—and much
larger than many investors currently expect.
The results of the exercise are startling. They suggest
that if things go right, the BRICs could become a very
important source of new global spending in the not
too distant future. The chart below shows that India’s
economy, for instance, could be larger than Japan’s
by 2032, and China’s larger than the US by 2041 (and
larger than everyone else as early as 2016). The
BRICs economies taken together could be larger than
the G6 by 2039.
In this piece, we gauge just how large a force the
BRICs could become over the next 50 years. We do
this not simply by extrapolating from current growth
rates, but by setting out clear assumptions about how
the process of growth and development works and
applying a formal framework to generate long-term
forecasts. We look at our BRICs projections relative
to long-term projections for the G6 (US, Japan, UK,
Germany, France and Italy)1.
Our projections are optimistic, in the sense that they
assume reasonably successful development. But they
are economically sensible, internally consistent and
provide a clear benchmark against which investors
can set their expectations. There is a good chance that
the right conditions in one or another economy will
not fall into place and the projections will not be
Overtaking the G6: When BRICs' US$GDP Would Exceed G6
UK
Germany
Japan
US
China
Italy
France Germany
Japan
India
Italy
France Germany
Russia
Italy
France
Germany
Brazil
G6
BRICs
*cars indicate when BRICs US$GDP exceeds US$GDP in the G6
2000
2005
2010
2015
GS BRICs Model Projections. See text for details and assumptions.
1
2020
2025
2030
2035
2040
2045
2050
Any decision to limit the sample of countries is to some extent arbitrary. In focusing on the G6 (rather than the G7 or a broader grouping), we
decided to limit our focus to those developed economies with GDP currently over US$1 trillion. This means that Canada and and some of the
other larger developed economies are not included. Adding these economies to the analysis would not materially change the conclusions.
Global Paper No 99
3
1st October 2003
BRICs Have a Larger US$GDP Than the G6
in Less Than 40 Years
realized. If the BRICs pursue sound policies,
however, the world we envisage here might turn out to
be a reality, not just a dream.
GDP
(2003 US$bn)
100,000
By 2040:
BRICS
overtake
the G6
BRICs
90,000
The projections leave us in no doubt that the progress
of the BRICs will be critical to how the world
economy evolves. If these economies can fulfil their
potential for growth, they could become a dominant
force in generating spending growth over the next few
decades.
G6
80,000
2025: BRICs
economies
over half as
large as the G6
70,000
60,000
50,000
40,000
30,000
A Dramatically Different World
20,000
10,000
We start with some key conclusions that describe the
way the world might change over the next 50 years.
The big assumption underlying all of these
projections is that the BRICs maintain
growth-supportive policy settings. The charts
throughout the text illustrate these points. Our
conclusions fall under five main topics: 1) economic
size; 2) economic growth; 3) incomes and
demographics; 4) global demand patterns; and 5)
currency movements.
0
2000
2010
2020
2030
2040
2050
GS BRICs Model Projections. See text for details and assumptions.
GDP
(2003 US$bn)
BRICs Share of GDP Rises
160,000
G6 share of
combined BRICs
and G6 GDP
140,000
120,000
BRICs share of
combined BRICs
and G6 GDP
100,000
Economic Size
80,000
n In less than 40 years, the BRICs’ economies
together could be larger than the G6 in US dollar
terms. By 2025 they could account for over half
the size of the G6. Currently they are worth less
than 15%.
60,000
60%
56%
40,000
50%
20,000
39%
28% 33%
0
2000
n In US dollar terms, China could overtake
Germany in the next four years, Japan by 2015
and the US by 2039. India’s economy could be
larger than all but the US and China in 30 years.
Russia would overtake Germany, France, Italy
and the UK.
2010
2020
45%
2030
2040
2050
GS BRICs Model Projections. See text for details and assumptions.
GDP
(2003 US$bn) The Largest Economies in 2050
50000
45000
40000
n Of the current G6 (US, Japan, Germany, France,
Italy, UK) only the US and Japan may be among
the six largest economies in US dollar terms in
2050.
35000
30000
25000
20000
Economic Growth
15000
10000
n India has the potential to show the fastest growth
over the next 30 and 50 years. Growth could be
higher than 5% over the next 30 years and close to
5% as late as 2050 if development proceeds
Global Paper No 99
5000
0
Ch
US
In
Jpn
Br
Russ
UK
Ger
Fr
It
GS BRICs Model Projections. See text for details and assumptions.
4
1st October 2003
successfully.
China Overtakes the G3; India Is Close
GDP
(2003 US$bn)
Behind
n Overall, growth for the BRICs is likely to slow
significantly over this time frame. By 2050, only
India on our projections would be recording
growth rates significantly above 3%.
50000
45000
China
40000
India
35000
Japan
US
30000
Incomes and Demographics
Germany
25000
n Despite much faster growth, individuals in the
BRICs are still likely to be poorer on average than
individuals in the G6 economies by 2050. Russia
is the exception, essentially catching up with the
poorer of the G6 in terms of income per capita by
2050. China’s per capita income could be similar
to where the developed economies are now
(about US$30,000 per capita). By 2030, China’s
income per capita could be roughly what Korea’s
is today. In the US, income per capita by 2050
could reach roughly $80,000.
20000
15000
10000
5000
0
2000
2010
2020
2030
2040
2050
GS BRICs Model Projections. See text for details and assumptions.
India Shows Most Rapid Growth Potential
of the BRICS
real GDP
growth (%yoy)
9%
8%
n Demographics play an important role in the way
the world will change. Even within the BRICs,
demographic impacts vary greatly. The decline
in working-age population is generally projected
to take place later than in the developed
economies, but will be steeper in Russia and
China than India and Brazil.
7%
6%
5%
4%
3%
Brazil
2%
China
1%
India
Global Demand Patterns
Russia
0%
n As early as 2009, the annual increase in US dollar
spending from the BRICs could be greater than
that from the G6 and more than twice as much in
dollar terms as it is now. By 2025 the annual
increase in US dollar spending from the BRICs
could be twice that of the G6, and four times
higher by 2050.
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
GS BRICs Model Projections. See text for details and assumptions.
Annual increase Incremental Demand From
the BRICs Could Eventually
in US$GDP
(2003 $USbn)
Be Quadruple G6 Demand
5,000
$4,517
BRICs
4,500
G6
4,000
Currency Movements
3,500
n Rising exchange rates could contribute a
significant amount to the rise in US dollar GDP in
the BRICs. About 1/3 of the increase in US dollar
GDP from the BRICs over the period may come
from rising currencies, with the other 2/3 from
faster growth.
3,000
2,500
2,000
$1,594
1,500
1,000
500
$1,137
$521
$470
$656
n The BRICs’ real exchange rates could appreciate
by up to 300% over the next 50 years (an average
0
2010
2030
2050
GS BRICs Model Projections. See text for details and assumptions.
Global Paper No 99
5
1st October 2003
potential to post higher growth rates as they catch up
with the developed world. This potential comes from
two sources. The first is that developing economies
have less capital (per worker) than developed
economies (in the language of simple growth models
they are further from their ‘steady states’). Returns on
capital are higher and a given investment rate results
in higher growth in the capital stock. The second is
that developing countries may be able to use
technologies available in more developed countries
to ‘catch up’ with developed country techniques.
of 2.5% a year). China’s currency could double in
value in ten years’ time if growth continued and
the exchange rate were allowed to float freely.
How Countries Get Richer
Our predictions may seem dramatic. But over a
period of a few decades, the world economy can
change a lot. Looking back 30 or 50 years illustrates
that point. Fifty years ago, Japan and Germany were
struggling to emerge from reconstruction. Thirty
years ago, Korea was just beginning to emerge from
its position as a low-income nation. And even over the
last decade, China’s importance to the world
economy has increased substantially.
As countries develop, these forces fade and growth
rates tend to slow towards developed country levels.
In Japan and Germany, very rapid growth in the 1960s
and 1970s gave way to more moderate growth in the
1980s and 1990s. This is why simple extrapolation
gives silly answers over long timeframes. As a crude
example, assuming that China’s GDP growth
continued to grow at its current 8% per year over the
next three decades would lead to the prediction that
China’s economy would be three times larger than
the US by 2030 in US dollar terms and 25 times larger
by 2050.
History also illustrates that any kind of long-term
projection is subject to a great deal of uncertainty.
The further ahead into the future you look, the more
uncertain things become. Predictions that the USSR
(or Japan) would overtake the US as the dominant
economic power turned out to be badly off the mark.
While this makes modeling these kinds of shifts
difficult, it is still essential. Over 80% of the value
generated by the world’s major equity markets will
come from earnings delivered more than 10 years
away. Developing strategies to position for growth
may take several years and require significant
forward planning. The best option is to provide a
sensible framework, based on clear assumptions.
Countries also grow richer on the back of
appreciating currencies. Currencies tend to rise as
higher productivity leads economies to converge on
Purchasing Power Parity (PPP) exchange rates.
There is a clear tendency for countries with higher
income per capita to have exchange rates closer to
PPP. The BRICs economies all have exchange rates
that are a long way below PPP rates. These large
As developing economies grow, they have the
BRICs Exchange Rates Could Appreciate
By Close to 300%
Brazil
Average
yoy% growth
12.0%
129%
Japanese GDP Growth Declined As the
EconomyDeveloped
10.4%
10.0%
Russia
208%
8.0%
6.0%
India
5.0%
281%
4.0%
4.0%
China
289%
0%
50%
100%
0.0%
150% 200% 250% 300% 350%
Real exchange rate appreciation (%)
1960-70
GS BRICs Model Projections. See text for details and assumptions.
Global Paper No 99
1.8%
2.0%
6
1970-80
1980-90
1990-00
1st October 2003
forecast employment growth over the long term,
assuming that the proportion of the working age
population that works stays roughly stable. We use
assumptions about the investment rate to map out the
path that the capital stock will take over time. And we
model TFP growth as a process of catch-up on the
developed economies, by assuming that the larger the
income gap between the BRICs and the developed
economies, the greater the potential for catch-up and
stronger TFP growth.
Higher Income Per Capita Moves Exchange Rates
Closer to PPP
Deviation from purchasing power parity*
-6
-4
-2
0
2
0.5
0.0
-0.5
-1.0
-1.5
We then use the projections of productivity growth
from this exercise to map out the path of the real
exchange rate. As in our GSDEER framework, we
assume that if an economy experiences higher
productivity growth than the US, its equilibrium
exchange rate will tend to appreciate.
-2.0
*expressed in logs
-2.5
GDP per capita relative to the US*
differences between PPP and actual exchange rates
come about because productivity levels are much
lower in developing economies. As they develop and
productivity rises, there will be a tendency for their
currencies to rise towards PPP. The idea that
countries experiencing higher productivity growth
tend to appreciate is an important part of both our
GSDEER and GSDEEMER models of equilibrium
exchange rates.
By varying the assumptions about investment,
demographics or the speed of catch-up, we can
generate different paths for annual GDP, GDP
growth, GDP per capita (in local currency or US
dollars), productivity growth and the real exchange
rate.
Because both the growth and currency projections are
long-term projections, we ignore the impact of the
economic cycle. Effectively, the projections can be
interpreted as growth in the trend (or potential
growth) of the economy and the currencies’ path as an
equililibrium path. Where economies peg their
exchange rates (as in China), it is even more
important to view the exchange rate projections as an
equilibrium real rate. In practice, real exchange rate
appreciation might come about through a
combination of nominal appreciation and higher
inflation, with different mixes having different
implications. We abstract from inflation, expressing
all of our projections in real terms (either 2003 local
currency or 2003 US dollars).3
Breaking Down Growth
To translate these two processes into actual
projections, we need to develop a model. The model
we use is described in more detail in the Appendix but
the intuition behind it is quite simple. Growth
accounting divides GDP growth into three
components:
n Growth in employment
n Growth in the capital stock
n Technical progress (or total-factor productivity
(TFP) growth).2
Generally speaking, the structure of the models is
identical across the four economies. We make two
minor alterations. We assume that the ‘convergence
speed’ of TFP in Brazil and India is slower than in
We model each component explicitly. We use the US
Census Bureau’s demographic projections to
2
We do not explicitly allow for increases in human capital (education), which are implicitly picked up in the technical progress/TFP term in
our model.
3
Higher inflation in the BRICs would raise nominal GDP forecasts in local currencies and nominal exchange rates, but would not change the
forecasts of real GDP or of US dollar GDP under the standard assumption that higher inflation would translate into an offsetting depreciation
in the currency.
Global Paper No 99
7
1st October 2003
BRICs Real GDP Growth: 5-Year Period Averages
Russia and China for the first twenty years, largely
because of lower education levels and poorer
infrastructure (more on these factors below), but
gradually rises from 2020 onwards (as these
structural problems are addressed) so that all of the
BRICs are ‘running’ at the same convergence speed.
We also assume that China’s investment rate
gradually declines from its current levels of around
36% to 30% (close to the Asian average) by 2015.
We use GS forecasts until 2004 and begin the
simulations in 2005.
The impact of demographics varies, with labour force
growth contributing relatively more to growth in
working age population = share
of population aged 15-60
66
64
62
60
56
Russia
54
India
52
50
2000-2005
2.7
8.0
5.3
5.9
2005-2010
4.2
7.2
6.1
4.8
2010-2015
4.1
5.9
5.9
3.8
2015-2020
3.8
5.0
5.7
3.4
2020-2025
3.7
4.6
5.7
3.4
2025-2030
3.8
4.1
5.9
3.5
2030-2035
3.9
3.9
6.1
3.1
2035-2040
3.8
3.9
6.0
2.6
2040-2045
3.6
3.5
5.6
2.2
2045-2050
3.4
2.9
5.2
1.9
We also look explicitly at where new demand growth
in the world will come from. While it takes some time
for the level of GDP in the BRICs to approach the G6,
their share of new demand growth rises much more
rapidly. Because it is incremental demand that
generally drives returns, this measure may be
China
G6
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Global Paper No 99
Russia
Our G6 projections allow us to compare the paths of
GDP and GDP per capita in the BRICs with that of the
more advanced economies in a common currency.
The shift in GDP relative to the G6 takes place
steadily over the period, but is most dramatic in the
first 30 years. The BRICs overtake the G6 through
higher real growth and through the appreciation of
BRICs’ currencies. About 1/3 of the increase in US
dollar GDP from the BRICs over the period may
come from rising currencies, with the other 2/3 from
faster growth.
Working Age Population Projected To
% of total
Decline
Brazil
India
To illustrate the shift in economic gravity, we also make
comparisons with the G6. To do that, we use a less
sophisticated version of the same model to project G6
growth. We assume a common 2% labour productivity
growth rate across the G6, so differences in projected
GDP growth are purely a function of demographics
(and real exchange rates remain roughly stable). A
shrinking working age population appears to be the
biggest issue in Japan and Italy, whose growth rates are
lower than the others, and the smallest issue in the US,
which maintains the fastest growth.
In each economy, as development occurs, growth
tends to slow and the exchange rate appreciates. Both
rising currencies and faster growth raise US dollar
GDP per capita gradually and the gap between the
BRICs and developed economies narrows slowly.
58
China
India and Brazil and detracting from growth in
Russia, where the US Census projections show the
labour force shrinking quite rapidly. Where labour
force and population growth is rapid, income per
capita tends to rise more slowly as higher investment
is needed just to keep up with population growth.
We have already highlighted some of the most
striking results, though there are many other
intriguing aspects. The tables and charts set out the
key features of the projections, summarising them in
5-year blocks. They show average GDP growth rates,
income per capita in US dollars, the real exchange
rate and the main demographic trends.
68
Brazil
GS BRICs Model Projections. See text for details and assumptions.
A More Detailed Look at the BRICs’ Potential
population
70
%
8
1st October 2003
ProjectedUS$GDP
2003$USbn
BRICs
G6
Brazil
China
India
Russia
France
Germany
Italy
Japan
UK
US
BRICs
G6
2000
762
1078
469
391
1,311
1,875
1,078
4,176
1,437
9,825
2,700
19,702
2005
468
1724
604
534
1,489
2,011
1,236
4,427
1,688
11,697
3,330
22,548
2010
668
2998
929
847
1,622
2,212
1,337
4,601
1,876
13,271
5,441
24,919
2015
952
4754
1411
1232
1,767
2,386
1,447
4,858
2,089
14,786
8,349
27,332
2020
1333
7070
2104
1741
1,930
2,524
1,553
5,221
2,285
16,415
12,248
29,928
2025
1695
10213
3174
2264
2,095
2,604
1,625
5,567
2,456
18,340
17,345
32,687
2030
2189
14312
4935
2980
2,267
2,697
1,671
5,810
2,649
20,833
24,415
35,927
2035
2871
19605
7854
3734
2,445
2,903
1,708
5,882
2,901
23,828
34,064
39,668
2040
3740
26439
12367
4467
2,668
3,147
1,788
6,039
3,201
27,229
47,013
44,072
2045
4794
34799
18847
5156
2,898
3,381
1,912
6,297
3,496
30,956
63,596
48,940
2050
6074
44453
27803
5870
3,148
3,603
2,061
6,673
3,782
35,165
84,201
54,433
GSBRICs Model Projections. Seetext for details andassumptions.
Projected US$GDP Per Capita
2003 US$
BRICs
G6
Brazil
China
India
Russia
France
Germany
Italy
Japan
UK
US
2000
4,338
854
468
2,675
22,078
22,814
18,677
32,960
24,142
34,797
2005
2,512
1,324
559
3,718
24,547
24,402
21,277
34,744
27,920
39,552
2010
3,417
2,233
804
5,948
26,314
26,877
23,018
36,172
30,611
42,926
2015
4,664
3,428
1,149
8,736
28,338
29,111
25,086
38,626
33,594
45,835
2020
6,302
4,965
1,622
12,527
30,723
31,000
27,239
42,359
36,234
48,849
2025
7,781
7,051
2,331
16,652
33,203
32,299
28,894
46,391
38,479
52,450
2030
9,823
9,809
3,473
22,427
35,876
33,898
30,177
49,944
41,194
57,263
2035
12,682
13,434
5,327
28,749
38,779
37,087
31,402
52,313
44,985
63,017
2040
16,370
18,209
8,124
35,314
42,601
40,966
33,583
55,721
49,658
69,431
2045
20,926
24,192
12,046
42,081
46,795
44,940
36,859
60,454
54,386
76,228
2050
26,592
31,357
17,366
49,646
51,594
48,952
40,901
66,805
59,122
83,710
GS BRICs Model Projections. See text for details and assumptions.
Projected US$ GDP Per Capita Growth: 5-Year Averages
Average
%yoy
Brazil
2000-2005
2005-2010
BRICs
G6
China
India
Russia
France
Germany
Italy
Japan
UK
US
-9.8
9.2
6.3
11.2
3.7
7.0
2.2
1.4
2.7
1.1
3.0
2.6
7.5
10.3
1.5
2.0
1.6
0.9
1.9
1.7
2010-2015
6.4
2015-2020
6.2
9.2
7.4
8.1
1.5
1.6
1.7
1.2
1.9
1.3
7.8
7.2
7.5
1.6
1.3
1.7
1.8
1.6
1.3
2020-2025
2025-2030
4.6
7.3
7.4
6.1
1.6
0.9
1.2
1.8
1.2
1.4
4.7
6.9
8.2
6.2
1.6
0.9
0.9
1.5
1.3
1.7
2030-2035
5.2
6.5
8.9
5.2
1.6
1.7
0.8
1.0
1.7
1.9
2035-2040
5.3
6.3
8.9
4.3
1.9
2.0
1.3
1.2
2.0
2.0
2040-2045
5.0
5.9
8.3
3.6
1.9
1.9
1.8
1.6
1.8
1.9
2045-2050
4.9
5.4
7.6
3.4
2.0
1.8
2.1
2.0
1.7
1.9
GSBRICs Model Projections. See text for details and assumptions.
Global Paper No 99
9
1st October 2003
particularly useful to assess the extent of
opportunities in these markets. We measure that new
demand growth as the change in US dollar spending
power in the various economies, so again it
incorporates both growth and currency effects. On
these measures, the BRICs come to dominate the G6
as a source of growth in spending power within 10
years.
Projected Population Growth Rates
%
2.0
Brazil
China
1.5
India
Russia
1.0
G6
0.5
Taking each of the economies in brief:
0.0
n Brazil. Over the next 50 years, Brazil’s GDP
growth rate averages 3.6%. The size of Brazil’s
economy overtakes Italy by 2025; France by
2031; UK and Germany by 2036.
-0.5
-1.0
2001
n China. China’s GDP growth rate falls to 5% in
2020 from its 8.1% growth rate projected for
2003. By the mid-2040s, growth slows to around
3.5%. Even so, high investment rates, a large
labor force and steady convergence would mean
China becomes the world’s largest economy by
2041.
2008
2015
2022
2029
2036
2043
2050
potential to raise its US dollar income per capita
in 2050 to 35 times current levels. Still, India’s
income per capita will be significantly lower than
any of the countries we look at.
n Russia. Russia’s growth projections are
hampered by a shrinking population (an
assumption that may be too negative). But strong
convergence rates work to Russia’s benefit, and by
2050, the country’s GDP per capita is by far the
highest in the group, and comparable to the G6.
Russia’s economy overtakes Italy in 2018; France
in 2024; UK in 2027 and Germany in 2028.
n India. While growth in the G6, Brazil, Russia
and China is expected to slow significantly over
the next 50 years, India’s growth rate remains
above 5% throughout the period. India’s GDP
outstrips that of Japan by 2032. With the only
population out of the BRICS that continues to
grow throughout the next 50 years, India has the
120,000
US GDP Per
Capita (US$bn)
Although we focus on the BRICs, as the four largest
developing economies, we do not mean to suggest
that development elsewhere is not important. In the
box on p11, we look at what our approach says for
South Africa and the African region and other larger
developing economies could also become important.
100,000
China GDP Per
Capita (US$bn)
Are the Results Plausible?
2003
US$bn
140,000
China's Income Per Capita Growing
Share of US Income Per Capita
80,000
The projection of a substantial shift in the generation
of growth towards the BRICs is dramatic. Is it
plausible?
60,000
40,000
20,000
26%
17% 21%
0
2000
2010
2020
2030
2040
32%
GS BRICs Model Projections. See text for details and assumptions.
Global Paper No 99
We have looked at three main ways to cross check the
forecasts, all of which give us broad comfort with the
results.
37%
First, the forecasts for GDP growth in the next 10
years are not out of line with the IMF’s assumptions
2050
10
1st October 2003
South Africa and the Challenge for the African Continent
With Asia, Europe and Latin America represented
in the BRICs profile, some readers will notice
Africa’s absence. The BRICs are chosen because
they are the four largest developing economies
currently. Still, it is interesting and important to
look beyond at the potential for Africa, and
particularly South Africa, the largest economy in
the region, to play a part in the same kind of process.
We have already published a 10-year outlook on
South Africa using detailed econometric work to
project the same components of growth
(employment growth, capital stock growth and
technical progress) that underpin our methodology
here (see Global Economics Paper #93, South
Africa Growth and Unemployment: A Ten-Year
Outlook). The study showed that South Africa
could achieve 5% growth over the next decade if the
right policies were put in place. The emphasis on
getting the conditions for growth right is one that is
important for the BRICs also.
To provide comparison, we applied our projection
methods for the BRICs to South Africa. The
method is simpler than that in our paper on South
Africa, but does provide a longer-term outlook. The
table sets out the main results in terms of growth.
Projected growth over the next decade is a little
lower than the 5% projected in our more detailed
study (around 4% here), but the main thrust of the
outlook is similar. The differences arise largely
because the demographic projections we assume much
sharper shrinkage in the labour force (around 1% per
year) than did the more detailed exercise. Both in
South Africa, and in the region more generally, the
challenge of AIDS and the impact it will have on
labour force and population dynamics is an important
risk and challenge that has no direct counterpart
elsewhere.
Our longer-term projections show South Africa
growing at an average rate of around 3.5% over the
next 50 years, comparable to our predictions for Russia
and Brazil. With declining population growth rates,
per capita incomes under these projections would rise
significantly more rapidly. We find under these
projections that South Africa’s economy would be
significantly smaller than the BRICs in 2050 (around
US$1.2bn compared to US$5.9bn for Russia, the
smallest of the BRICs economies), though its
projected GDP per capita would actually be higher.
ProjectedUS$GDPLevels
2003US$bn South Africa
3.5%
3.4%
3.6%
3.3%
3.1%
India
762
1078
469
391
2010
147
668
2998
929
847
2020
267
1333
7070
2104
1741
2030
447
2189
14312
4935
2980
2040
739
3740
26439
12367
4467
2050
1174
6074
44453
27803
5870
GDPper capita
(2003US$)
Russia
ProjectedIncome Per Capita
60,000
50,000
3.3% 3.3% 3.3% 3.3%
40,000
3.0%
2.5%
30,000
2.0%
India
Brazil
China
SouthAfrica
Russia
20,000
1.5%
1.0%
10,000
0.5%
0.0%
0
2000- 2005- 2010- 2015- 2025- 2030- 2035- 2040- 20452005 2010 2015 2020 2030 2035 2040 2045 2050
GS BRICs Model Projections. See text for details and assumptions.
Global Paper No 99
China
83
GSBRICs Model Projections. Seetext for details andassumptions.
Average yoy%
growth
South Africa Projected Real GDP Growth
5.0%
4.4%
4.5%
4.0%
Brazil
2000
2000
2010
2020
2030
2040
2050
GSBRICs Model Projections. Seetext for details andassumptions.
11
1st October 2003
of potential growth in these economies (roughly 5%
for Russia, 4% for Brazil, 8% for China, 5-6% for
India). With the exception of Brazil, our projected
growth rates are also close to recent performance.
Brazil’s performance would have to improve quite
significantly relative to the past.
determine the speed of convergence. Projections
using the LR equation are not identical to our own, but
close enough to reassure us that we are making
sensible assumptions. Our own models are a bit more
optimistic about growth prospects in general, but not
by much.
Second, although the implied changes in GDP and
currencies may look dramatic on an absolute basis,
they are significantly less spectacular than what some
economies actually achieved over the last few
decades. In Japan, between 1955 and 1985 real GDP
increased by nearly 8 times (from initial levels of
income per capita not unlike some of the BRICs) and
real industrial production increased tenfold. Between
1970 and 1995—the yen appreciated by over 300% in
nominal terms against the US dollar. In the more
recent past, Korea’s GDP in 2000 increased by nearly
9 times between 1970 and 2000. Next to these
experiences our projections look quite tame.
Although the projections assume that economies
remain on a steady development track, they do not
assume ‘miracle-economy’ growth.
A Look Back In Time—What Would We Have
Said in 1960
We mentioned earlier that the world has changed a lot
in the last fifty years. One further check on the
plausibility of our projections is to go back in time,
apply the same methods that we have used here and
look at how our projections of GDP growth then
would have compared with subsequent reality.
To do that, we looked at a set of 11 developed and
developing countries (US, UK, Germany, France,
Italy, Japan, Brazil, Argentina, India, Korea and
Hong Kong) starting in 1960 and projecting their
GDP growth for the following 40 years (data
availability meant we could not easily do a full 50
year projection).
As a final check on our estimates, we applied an
entirely different approach to generate long-term
growth projections based on cross-country
econometric research. We took a well-known
existing econometric model from Levine and Renelt
(LR) that explains average GDP growth over the next
thirty years as a function of initial income per capita,
investment rates, population growth and secondary
school enrollments4.
We applied the same methodology, modeling capital
stock growth as a function of the starting level of
capital and investment and technical progress as a
catch-up process on the US. Because we did not have
demographic projections for 1960 (as we do now for
the next fifty years), we used actual population data
for the period as the basis for our labour force growth
assumptions (effectively assuming that this part of
the exercise was predicted perfectly).
Although the technique employed is very different
and a year-by-year path cannot be generated, the
model has close parallels to our own approach. Initial
income per capita drives our productivity catch-up,
investment drives capital accumumulation, and the
level of education can be thought of as helping to
The results of that exercise are generally
encouraging. In general, the projected average
growth rates over the period are surprisingly close to
the actual outcomes. For the more developed
countries, where the growth path has been steadier
(France, Germany, UK, US, Italy) the differences
between projected and actual growth rates are small.
Comparing Our Projections With the Levine-Renelt Model
4
30 year average
real GDPgrowth
Our Projections
Levine-Renelt Model
Brazil
3.7
3.3
Russia
3.9
3.5
India
5.8
5.3
China
5.6
5.8
For the developing countries (and Japan, which in
1960 was a developing country that was significantly
poorer than Argentina) the range of outcomes is
wider. For those countries where policy settings were
not particularly growth-supportive—India, Brazil
Levine, Ross & Renelt, David, 1992. “A Sensitivity Analysis of Cross-Country Growth Regressions,” American Economic Review, Vol. 82
(4) p942-63.
Global Paper No 99
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1st October 2003
The Conditions for Growth
of reasoning that could help explain the disappointing
results of developing countries‘ adoption of
macroeconomic policy reforms in the 1990s.
A set of core factors—macroeconomic stability,
institutional capacity, openness and education—can
set the stage for growth. Robert Barro’s influential
work on the determinants of growth found that growth
is enhanced by higher schooling and life expectancy,
lower fertility, lower government consumption, better
maintenance of the rule of law, lower inflation and
improvements in the terms of trade. These core
policies are linked: institutional capacity is required
to implement stable macroeconomic policies, macro
stability is crucial to trade, and without price stability
a country rarely has much success in liberalizing and
expanding trade. We briefly view some of the most
recent findings on these ingredients here:
Openness. Openness to trade and FDI can provide
access to imported inputs, new technology and larger
markets. Empirical studies of trade and growth fall
into three buckets. First, country studies document
the economic and political consequences of
import-substitution policies and export promoting
policies. Second, much work uses cross-section or
panel data to examine the cross-country relationship
between openness and growth. This has produced
mixed evidence, but in general it demonstrates a
positive relationship between openness and growth.
Third, sector, industry and plant-level studies
investigate the effects of trade policy on employment,
profits, productivity and output at a micro-economic
level. There appears to be a greater consensus here
than in the cross-country work about the
productivity-enhancing
effects
of
trade
liberalization.
Macro Stability. An unstable macro environment
can hamper growth by distorting prices and
incentives. Inflation hinders growth by discouraging
saving and investment. Accordingly, a key focus is
price stability, achieved through fiscal deficit
reduction, tighter monetary policy and exchange-rate
realignment. Within the BRICs, macroeconomic
indicators reflecting policy divergence show wide
swings: through the 1990s, Brazil averaged an
inflation rate of 548% and a government deficit of
21.2% of GDP, against China’s average inflation rate
of 8% and government deficit of 2.3% of GDP.
Education. As economies grow rapidly, they may
face shortages of skilled workers, meaning that more
years of schooling are a prerequisite for the next stage
of economic development. Enrolment rates have
increased dramatically over the past 30 years, on
average over 5% per year, particularly in higher
education (around 14%). Among the BRICs, India
receives low marks for education indicators,
particularly at the primary and secondary levels.
Many cross-country studies have found positive and
statistically significant correlations between
schooling and growth rates of per capita GDP—on
the order of 0.3% faster annual growth over a 30-year
period from an additional one year of schooling.
Institutions. Institutions affect the ‘efficiency’ of an
economy much in the same way as technology does:
more efficient institutions allow an economy to
produce the same output with fewer inputs: Bad
institutions lower incentives to invest, to work and to
save. ‘Institutions’ in this broad sense include the
legal system, functioning markets, health and
education systems, financial institutions and the
government bureaucracy. Recent research argues that
poor political and economic policies are only
symptoms of longer-run institutional factors—a line
Global Paper No 99
13
1st October 2003
Research points to a wide range of conditions that are
critical to ensuring solid growth performance and
increasingly recognises that getting the right
insitutions as well as the right policies is important.5
These are the things that the BRICs must get right (or
keep getting right) if the kinds of paths we describe
are to be close to the truth. The main ingredients
(more detailed discussion of the evidence is provided
in the box) are:
and Argentina—actual growth fell below what we
would have projected. But for the Asian economies
that had an unusually favourable growth experience,
our method would have underpredicted actual growth
performance in some cases quite significantly.
Overall, the results highlight that our method of
projection seems broadly sensible. For the BRICs to
meet our projections over the next fifty years, they do
not need ‘miracle’ performance—though it is
important that they stay on the right track in
maintaining broadly favourable conditions for
growth.
n Sound macroeconomic policies and a stable
macroeconomic background. Low inflation,
supportive government policy, sound public
finances and a well-managed exchange rate can
all help to promote growth. Each of the BRICs
has been through periods of macroeconomic
instability in the last few decades and some face
significant macroeconomic challenges still.
Brazil for instance has suffered greatly from the
precariousness of the public finances and the
foreign borrowing that it brought about.
Ensuring the Conditions For Growth
This historical exercise highlights a critical point.
For our projections to be close to the truth it is
important that the BRICs remain on a steady growth
track and keep the conditions in place that will allow
that to happen. That is harder than it sounds and is the
main reason why there is a good chance that the
projections might not be realised. Of the BRICs,
Brazil has not been growing in line with projections
and may have the most immediate obstacles to this
kind of growth. It provides a good illustration of the
importance of getting the necessary conditions in
place (see box on p.15).
n Strong and stable political institutions.
Political uncertainty and instability discourages
investment and damages growth. Each of the
BRICs is likely to face considerable (and
different) challenges in political development
over the next few decades. For some (Russia
most obviously), the task of institution-building
has been a major issue in recent growth
performance.
How Our Model Fares in Gauging Growth 1960-2000
n Openness. Openness to trade and foreign direct
investment has generally been an important part
of successful development. The openness of the
BRICs varies, but India is still relatively closed
on many measures.
Projected average annual GDP growth, 1960-2000 (%)
8
Actual
7
Predicted
6
5
n High levels of education. Higher levels of
education are generally helpful in contributing to
more rapid growth and catch-up. The LR growth
estimates above are based on a strong connection
between secondary schooling and growth
potential. Of the BRICs, India has the most work
to do in expanding education.
4
3
2
1
0
Arg
Br
Fr
Ger
HK
In
It
Jp
Ko
UK
US
GS BRICs Model Projections. See text for details and assumptions.
5
Because of this, the catch-up process is often described as a process of ‘conditional convergence’ where the tendency for less developed
economies to grow more rapidly is only evident after controlling for these conditions.
Global Paper No 99
14
1st October 2003
Brazil: Challenges in Setting the Conditions For Sustained Growth
this paper. If that goal is to be achieved, substantial
structural reforms will also be needed.
Of the BRICs, Brazil is the only one where recent
growth experience has been significantly lower than
our projected growth rates. This suggests that more
needs to be done to unlock sustained higher growth in
Brazil than is the case elsewhere and that our
convergence assumptions for Brazil (though already
lower than in China and Russia) may still prove too
optimistic without deeper structural reforms.
Comparing Brazil with China and the other Asian
economies gives a sense of the relatively larger
obstacles that Brazil currently faces.
n Brazil is much less open to trade. The tradable
goods sector in China is almost eight times larger
than in Brazil, when measured by imports plus
exports.
Over the last 50 years, Brazil’s real GDP growth rate
amounted to 5.3%, but the chart below shows that
growth has been declining sharply since the debt
crisis of the 1980s. Following a growth surge between
the late 1960s and the early-1970s on the back of
economic liberalization, growth rates fell—in part
because of a series of external shocks combined with
poor policy response amidst of a political transition
from a military regime to a democracy.
n Investment and savings are lower. Savings and
investment ratios are around 18-19% of GDP
compared to an investment rate of 36% of GDP in
China and an Asian average of around 30%.
n Public and foreign debt are much higher.
Without a deeper fiscal adjustment and lower
debt to GDP ratio (currently at 57.7% of GDP on
a net basis and 78.2% of GDP on a gross basis),
the private sector is almost completely crowded
out from credit markets. China’s net foreign debt
and public debt are both significantly smaller.
Over the last decade, real GDP growth amounted to
2.9%, compared to an average of 5.3% since 1950.
The excessive reliance on external financing and
domestic public debt during the oil crisis and during
the Real plan has rendered this adjustment effort
particularly difficult, in part explaining the marked
drop in growth rates.
Unless significant progress is made in removing or
reducing these obstacles, the projections set out here
(which still show much lower growth than Brazil’s
post-war average) are unlikely to be achievable and
the slide in trend growth could continue.
The adjustment process has also reduced investment,
which contributed to a depreciation of the capital
stock, particularly in infrastructure, with important
consequences for productivity. Even so, temporary
surges in external financing or statistical rebounds
may push growth higher temporarily, but for Brazil to
break the historical downward trend in GDP growth
and attain the kind of path set out in our projections
here will take more.
Real GDP Brazil's Trend GDP Growth Rate Is
growth
Declining
15
10
5
The Lula Administration is making some progress.
Macro stabilization is a key precondition of
successful reform and is now clearly underway. The
result of that stabilization is likely to be an
improvement in growth over the next year or two that
is reflected in our current forecasts of about 3.5% a
year. On its own, though, stabilization will be
insufficient to raise and sustain Brazil’s growth rate to
the kinds of levels that are set out in the projections in
Global Paper No 99
Real GDPGrowth Trend
0
-5
Real GDPGrowth
Growth (%yoy)
-10
1948
1958
1968
1978
1988
1998
GSBRICs Model Projections. See text for details and assumptions.
15
1st October 2003
How Different Assumptions Would Change
Things
Russia’s demographics might not turn out to be
as negative as the US census projections, and
declining fertility and rising mortality may turn
out to have been a temporary feature of the
transition
from
communism.
Shifting
demographic trends might also be partly offset
by attempts to raise participation or to extend
working ages, neither of which we currently
capture.
In our models, the effect of these conditions for
growth can be thought of as operating through our
assumptions about the investment rate and the rate of
catch-up in TFP with the developed economies. If the
BRICs economies fail to deliver the kinds of
conditions that are broadly necessary for sustained
growth, our assumptions about investment and
convergence will prove too optimistic. For Brazil and
India, in particular, if they succeed more quickly than
we expect, investment rates might actually be higher
than our projections and convergence more rapid.
Sensitivity to these kinds of assumptions clearly
means that there is significant uncertainty around our
projections. The advantage of the framework that we
have developed is that we now have the tools to look at
these and other questions in much more detail. We also
have a clear baseline against which to measure them.
To illustrate in a simple way the point that the
assumptions that we have made—and the underlying
conditions that determine them—are important, we
show briefly what happens if we change them:
Implications of the BRICs’ Ascendancy
Each of the BRICs faces very significant challenges
in keeping development on track. This means that
there is a good chance that our projections are not
met, either through bad policy or bad luck.
n Catch-up. Because the convergence rate
captures a broad range of factors that determine
the ability to ‘catch up’, altering it can make a
significant difference to projections. For
example, if we lower China’s ‘convergence rate’
by a third, our projections of average GDP
growth rate over the 50-year period fall to 4.3%
from 4.8% and our projected 2050 US$GDP
level drops by 39%. In our baseline model, rates
of convergence are generally slower for India and
Brazil than for China and Russia. If we raised our
convergence rates in India and Brazil to those of
China and Russia, India’s 2000-2030 average
GDP growth rate would rise to 7.4%, against
5.8% originally. Brazil’s GDP growth rate would
rise as well: to 4.3% from 3.7%.
Despite the challenges, we think the prospect is worth
taking seriously. After all, three of these
markets—China, India and Russia—have already
been at the top of the growth charts in recent years.
They may stay there.
If the BRICs do come anywhere close to meeting the
projections set out here, the implications for the
pattern of growth and economic activity could be
very large indeed. Parts of this story—the
opportunities in China, for instance—are well
understood. But we suspect that many other
parts—the potential for India and the other markets
and the interplay of aging in the developed
economies with growth in the developing ones—may
not be.
n Investment. The assumed investment rates are
less important, but substantial differences from
our assumptions would certainly alter the main
conclusions. Lowering our assumptions of
China’s investment rate by 5 percentage points
slightly lowers China’s average 2000-2030 GDP
growth rate to 5.5% from 5.7%. Cutting 5
percentage points off of investment rates across
the BRICS would reduce their GDP levels on
average by around 13% by 2050.
We will be using the tools developed here to look in
detail at different kinds of scenarios and to flesh out
the links between our growth projections and
investment opportunities, but we set out some brief
conclusions here:
n The relative importance of the BRICs as an
engine of new demand growth and spending
power may shift more dramatically and quickly
n Demographics. The demographic assumptions
may also turn out to be incorrect. For instance,
Global Paper No 99
16
1st October 2003
than expected under the right conditions. Higher
growth in these economies could offset the
impact of greying populations and slower growth
in today’s advanced economies.
also no longer be the richest (by income per
capita) making strategic choices for firms more
complex.
n Regional neighbours could benefit from the
growth opportunities from the BRICs. With three
out of the four largest economies in 2050
potentially residing in Asia, we could see
important geopolitical shifts towards the Asian
region. China’s growth is already having a
significant impact on the opportunities for the
rest of Asia. Sustained strong growth in the other
BRICs economies might have similar impacts on
their major trading partners.
n Higher growth may lead to higher returns and
increased demand for capital in these
markets—and for the means to finance it. The
weight of the BRICs in investment portfolios
could rise sharply. The pattern of capital flows
might move further in their favour and major
currency realignments would take place.
n Rising incomes may also see these economies
move through the ‘sweet spot’ of growth for
different kinds of products, as local spending
patterns change. This could be an important
determinant of demand and pricing patterns for a
range of commodities.
Are you ready?
Dominic Wilson and Roopa Purushothaman
n As the advanced economies become a shrinking
part of the world economy, the accompanying
shifts in spending could provide significant
opportunities for many of today’s global
companies. Being invested in and involved in the
right markets—and particularly the right
emerging
markets—may
become
an
increasingly important strategic choice for many
firms.
n The list of the world’s ten largest economies may
look quite different in fifty years time. The
largest economies in the world (by GDP) may
GDP Size and Relative Income Per Capita
2003 US$
2003 US$bn Levels Will Diverge Over Time
50,000
90,000
45,000
40,000
80,000
US$GDP
US$GDPper capita
35,000
30,000
25,000
20,000
15,000
70,000
60,000
50,000
40,000
30,000
10,000
20,000
5,000
10,000
0
0
Ch US In Jp Br Russ UK Ger Fr
It
GSBRICs Model Projections. See text for details and assumptions.
Global Paper No 99
17
1st October 2003
Appendix I: A Long-Term Model of Growth
and Exchange Rates
Growth Model
rate for the US.
We provide detail on the underlying assumptions of
our models. The model relies on a simple formulation
of the overall level of GDP (Y) in terms of a) labour
(L) b) the capital stock (K) and c) the level of
“technical progress” (A) or Total Factor Productivity
(TFP).
The assumptions needed to generate the forecasts are
summarised below:
n Labour force and population, from the US
Census Bureau projections
n Depreciation rate (d) assumed to be 4% as in the
World Bank capital stock estimates
We assume that GDP is a simple (Cobb-Douglas)
function of these three ingredients:
where a is the share of income that accrues to capital.
n Investment rate assumptions based on recent
history, for Brazil (19%), for India (22%) for
Russia (25%) for China (36% until 2010,
declining to 30% thereafter).
We then need to describe the process by which each of
the different components (labour, the capital stock
and TFP) change over time.
n Income share of capital assumed to be 1/3, a
standard assumption (a) from historical
evidence
n For, L, we simply use the projections of the
working age population (15-60) from the US
Census Bureau.
n US long-run TFP growth assumed to be 1.33%,
implying steady-state labour productivity
growth of 2% - our long-run estimate.
n For K, we take the initial capital stock, assume an
investment rate (investment as a % of GDP) and a
depreciation rate to calculate the growth in the
capital stock:
n Convergence speed for TFP (b) assumed to be
1.5%, within the range of estimates from
academic research.
Y = AK a L1-a
Exchange Rate Model
æI ö
K t +1 = K t (1 - d ) + çç t ÷÷.Yt
è Yt ø
Our model of real exchange rates is then calculated
from the predictions of labour productivity growth.
Specifically, we assume that a 1% productivity
differential in favour of economy A relative to the US
will raise its equilibrium real exchange rate against
the US dollar by 1%, where our long-run assumption
for US productivity growth is again 2%.
n For A, the description of technical progress, we
assume that technology changes as part of a
process of catch-up with the most developed
countries. The speed of convergence is assumed
to depend on income per capita, with the
assumption that as the developing economies get
closer to the income levels of the more developed
economies, their TFP growth rate slows.
Developing countries can have faster growth in
this area because there is room to ‘catch up’ with
developed countries:
æY ö
D ln(e) = D lnç ÷ - 0.02
è Lø
This assumption that the relationship is one-for-one
underpins our GSDEER models and the coefficient
on relative productivity terms in our GSDEEMER
models is generally also clustered around 1. We make
the simplifying assumption that over the long term,
only productivity differentials play a large role in
determining real exchange rates.
æ Incomepercapita DC ö
At
÷÷
= 1.3% - b lnçç
At -1
è IncomepercapitaUS ø
where b is a measure of how fast convergence takes
place and 1.3% is our assumed long-term TFP growth
Global Paper No 99
18
1st October 2003
Appendix II: Our Projections In Detail
Projected US$GDP
2003 US$bn
BRICs
G6
Brazil
China
India
Russia
France
Germany
Italy
Japan
UK
US
BRICs
G6
2000
762
1,078
469
391
1,311
1,875
1,078
4,176
1,437
9,825
2,700
19,702
2001
601
1,157
466
383
1,321
1,855
1,093
4,032
1,425
10,082
2,607
19,808
2002
491
1,252
474
379
1,346
1,866
1,114
4,358
1,498
10,446
2,595
20,628
2003
461
1,353
511
430
1,387
1,900
1,155
4,366
1,565
10,879
2,754
21,253
2004
435
1,529
554
476
1,455
1,966
1,212
4,366
1,647
11,351
2,994
21,998
2005
468
1,724
604
534
1,489
2,011
1,236
4,427
1,688
11,697
3,330
22,548
2006
502
1,936
659
594
1,520
2,059
1,257
4,498
1,728
12,041
3,691
23,104
2007
539
2,169
718
654
1,547
2,102
1,277
4,536
1,762
12,348
4,079
23,572
2008
579
2,422
782
716
1,572
2,141
1,297
4,556
1,797
12,656
4,499
24,019
2009
622
2,699
853
780
1,597
2,178
1,317
4,573
1,836
12,966
4,953
24,466
2010
668
2,998
929
847
1,622
2,212
1,337
4,601
1,876
13,271
5,441
24,919
2011
718
3,316
1,011
917
1,649
2,246
1,358
4,638
1,918
13,580
5,962
25,389
2012
771
3,650
1,100
990
1,677
2,282
1,381
4,683
1,960
13,883
6,512
25,866
2013
828
4,002
1,196
1,068
1,706
2,317
1,403
4,736
2,004
14,184
7,094
26,349
2014
888
4,371
1,299
1,149
1,736
2,352
1,425
4,795
2,046
14,486
7,707
26,840
2015
952
4,754
1,411
1,232
1,767
2,386
1,447
4,858
2,089
14,786
8,349
27,332
2016
1,019
5,156
1,531
1,322
1,799
2,418
1,469
4,925
2,130
15,106
9,028
27,847
2017
1,091
5,585
1,659
1,417
1,832
2,448
1,492
4,999
2,170
15,427
9,752
28,367
2018
1,167
6,041
1,797
1,518
1,865
2,476
1,513
5,074
2,209
15,750
10,524
28,887
2019
1,248
6,538
1,945
1,626
1,897
2,502
1,534
5,146
2,247
16,083
11,357
29,410
2020
1,333
7,070
2,104
1,741
1,930
2,524
1,553
5,221
2,285
16,415
12,248
29,928
2021
1,397
7,646
2,278
1,829
1,963
2,544
1,571
5,297
2,321
16,765
13,150
30,462
2022
1,465
8,250
2,470
1,924
1,996
2,562
1,588
5,372
2,355
17,133
14,109
31,006
2023
1,537
8,863
2,682
2,028
2,029
2,577
1,603
5,443
2,389
17,518
15,110
31,559
2024
1,613
9,517
2,916
2,141
2,062
2,591
1,615
5,509
2,422
17,918
16,187
32,117
2025
1,695
10,213
3,174
2,264
2,095
2,604
1,625
5,567
2,456
18,340
17,345
32,687
2026
1,781
10,947
3,459
2,395
2,128
2,619
1,634
5,641
2,491
18,803
18,582
33,316
2027
1,873
11,732
3,774
2,533
2,163
2,634
1,644
5,696
2,528
19,293
19,913
33,958
2028
1,971
12,555
4,123
2,679
2,198
2,652
1,653
5,740
2,567
19,801
21,327
34,611
2029
2,076
13,409
4,508
2,828
2,233
2,672
1,662
5,778
2,607
20,319
22,821
35,271
2030
2,189
14,312
4,935
2,980
2,267
2,697
1,671
5,810
2,649
20,833
24,415
35,927
2031
2,308
15,260
5,407
3,131
2,300
2,727
1,678
5,835
2,692
21,371
26,107
36,603
2032
2,436
16,264
5,930
3,283
2,333
2,763
1,686
5,851
2,740
21,946
27,911
37,319
2033
2,572
17,317
6,508
3,434
2,367
2,806
1,692
5,861
2,791
22,554
29,830
38,072
2034
2,716
18,428
7,147
3,585
2,404
2,854
1,699
5,869
2,845
23,187
31,877
38,858
2035
2,871
19,605
7,854
3,734
2,445
2,903
1,708
5,882
2,901
23,828
34,064
39,668
2036
3,033
20,845
8,621
3,881
2,490
2,953
1,719
5,902
2,961
24,492
36,380
40,516
2037
3,201
22,152
9,453
4,028
2,535
3,002
1,733
5,930
3,023
25,168
38,833
41,389
2038
3,374
23,522
10,352
4,175
2,580
3,051
1,748
5,961
3,085
25,852
41,423
42,276
2039
3,554
24,949
11,322
4,321
2,625
3,100
1,767
5,998
3,144
26,542
44,147
43,175
2040
3,740
26,439
12,367
4,467
2,668
3,147
1,788
6,039
3,201
27,229
47,013
44,072
2041
3,932
28,003
13,490
4,613
2,711
3,192
1,810
6,086
3,258
27,929
50,038
44,987
2042
4,128
29,589
14,696
4,756
2,754
3,238
1,834
6,136
3,317
28,654
53,171
45,933
2043
4,336
31,257
15,989
4,891
2,801
3,285
1,859
6,187
3,377
29,399
56,473
46,908
2044
4,560
33,003
17,371
5,022
2,849
3,333
1,885
6,239
3,437
30,170
59,955
47,913
2045
4,794
34,799
18,847
5,156
2,898
3,381
1,912
6,297
3,496
30,956
63,596
48,940
2046
5,031
36,636
20,421
5,289
2,946
3,428
1,941
6,362
3,554
31,761
67,378
49,993
2047
5,276
38,490
22,099
5,417
2,995
3,473
1,971
6,431
3,611
32,592
71,281
51,074
2048
5,527
40,420
23,886
5,552
3,045
3,516
2,001
6,506
3,668
33,437
75,385
52,173
2049
5,789
42,408
25,785
5,701
3,097
3,559
2,031
6,586
3,725
34,297
79,684
53,296
2050
6,074
44,453
27,803
5,870
3,148
3,603
2,061
6,673
3,782
35,165
84,201
54,433
GSBRICs Model Projections. See text for details and assumptions.
Global Paper No 99
19
1st October 2003
Projected US$GDP Per Capita
2003 US$
BRICs
G6
Brazil
China
India
Russia
France
Germany
Italy
Japan
UK
US
2000
4,338
854
468
2,675
22,078
22,814
18,677
32,960
24,142
34,797
2001
3,381
910
457
2,633
22,143
22,545
18,895
31,775
23,860
35,373
2002
2,726
979
458
2,611
22,461
22,659
19,224
34,297
25,003
36,312
2003
2,530
1,051
486
2,976
23,047
23,059
19,920
34,322
26,042
37,470
2004
2,364
1,181
520
3,305
24,080
23,856
20,881
34,290
27,333
38,735
2005
2,512
1,324
559
3,718
24,547
24,402
21,277
34,744
27,920
39,552
2006
2,668
1,478
602
4,142
24,968
24,986
21,629
35,292
28,509
40,346
2007
2,835
1,646
647
4,570
25,321
25,512
21,960
35,587
28,986
41,004
2008
3,015
1,827
695
5,013
25,650
25,998
22,300
35,751
29,492
41,655
2009
3,209
2,023
748
5,470
25,975
26,452
22,649
35,917
30,043
42,304
2010
3,417
2,233
804
5,948
26,314
26,877
23,018
36,172
30,611
42,926
2011
3,640
2,453
864
6,453
26,682
27,312
23,407
36,516
31,201
43,550
2012
3,875
2,682
929
6,981
27,069
27,767
23,816
36,942
31,808
44,142
2013
4,124
2,922
998
7,540
27,470
28,224
24,234
37,442
32,413
44,715
2014
4,387
3,171
1,071
8,126
27,892
28,674
24,656
38,016
33,007
45,283
2015
4,664
3,428
1,149
8,736
28,338
29,111
25,086
38,626
33,594
45,835
2016
4,957
3,696
1,233
9,389
28,807
29,534
25,522
39,292
34,161
46,440
2017
5,266
3,981
1,321
10,092
29,282
29,936
25,964
40,032
34,700
47,035
2018
5,594
4,283
1,416
10,845
29,762
30,321
26,407
40,795
35,218
47,630
2019
5,939
4,613
1,516
11,655
30,242
30,678
26,833
41,561
35,731
48,247
2020
6,302
4,965
1,622
12,527
30,723
31,000
27,239
42,359
36,234
48,849
2021
6,562
5,346
1,739
13,212
31,211
31,296
27,628
43,186
36,709
49,496
2022
6,838
5,747
1,867
13,959
31,709
31,572
27,995
44,023
37,154
50,182
2023
7,133
6,153
2,007
14,777
32,208
31,824
28,335
44,845
37,593
50,902
2024
7,447
6,587
2,161
15,674
32,701
32,058
28,628
45,648
38,031
51,652
2025
7,781
7,051
2,331
16,652
33,203
32,299
28,894
46,391
38,479
52,450
2026
8,136
7,542
2,517
17,697
33,718
32,555
29,152
47,287
38,958
53,348
2027
8,514
8,068
2,723
18,809
34,251
32,830
29,413
48,037
39,466
54,306
2028
8,919
8,621
2,949
19,983
34,796
33,135
29,671
48,709
40,013
55,297
2029
9,352
9,198
3,199
21,194
35,339
33,483
29,922
49,350
40,585
56,294
2030
9,823
9,809
3,473
22,427
35,876
33,898
30,177
49,944
41,194
57,263
2031
10,320
10,454
3,776
23,674
36,406
34,378
30,417
50,483
41,823
58,281
2032
10,852
11,138
4,110
24,926
36,938
34,938
30,657
50,966
42,534
59,384
2033
11,421
11,859
4,477
26,191
37,493
35,605
30,884
51,400
43,301
60,560
2034
12,030
12,623
4,882
27,470
38,101
36,332
31,126
51,826
44,124
61,786
2035
12,682
13,434
5,327
28,749
38,779
37,087
31,402
52,313
44,985
63,017
2036
13,364
14,293
5,808
30,030
39,518
37,857
31,730
52,868
45,898
64,292
2037
14,075
15,201
6,326
31,323
40,278
38,628
32,116
53,499
46,858
65,581
2038
14,813
16,157
6,884
32,636
41,049
39,408
32,548
54,180
47,827
66,875
2039
15,576
17,159
7,482
33,966
41,834
40,195
33,036
54,924
48,758
68,165
2040
16,370
18,209
8,124
35,314
42,601
40,966
33,583
55,721
49,658
69,431
2041
17,191
19,315
8,810
36,684
43,363
41,727
34,169
56,591
50,569
70,713
2042
18,037
20,443
9,544
38,057
44,151
42,499
34,787
57,507
51,509
72,040
2043
18,935
21,635
10,326
39,386
44,998
43,291
35,442
58,448
52,470
73,401
2044
19,904
22,892
11,160
40,706
45,893
44,110
36,133
59,419
53,434
74,805
2045
20,926
24,192
12,046
42,081
46,795
44,940
36,859
60,454
54,386
76,228
2046
21,964
25,530
12,988
43,463
47,706
45,759
37,627
61,583
55,331
77,680
2047
23,040
26,891
13,988
44,832
48,640
46,559
38,430
62,774
56,275
79,171
2048
24,152
28,321
15,050
46,280
49,601
47,346
39,237
64,035
57,211
80,677
2049
25,318
29,810
16,174
47,871
50,589
48,142
40,061
65,376
58,169
82,196
2050
26,592
31,357
17,366
49,646
51,594
48,952
40,901
66,805
59,122
83,710
GS BRICs Model Projections. See text for details and assumptions.
Global Paper No 99
20
1st October 2003
Projected Real GDP Growth
%yoy
BRICs
G6*
Brazil
China
India
Russia
France
Germany
Italy
Japan
UK
US
2000
4.2
8.0
5.4
10.0
4.2
2.9
3.3
2.8
3.1
3.8
2001
1.5
7.3
4.2
5.0
2.1
0.6
1.7
0.4
2.1
0.3
2002
1.5
8.2
4.7
4.3
1.2
0.2
0.4
0.1
1.9
2.4
2003
1.1
8.1
5.6
6.1
0.5
0.0
0.6
2.7
1.8
2.7
2004
3.5
8.4
5.9
4.4
2.9
1.9
2.4
1.7
2.9
3.5
2005
4.2
7.9
6.2
5.8
2.3
2.3
2.0
1.4
2.4
3.1
2006
4.1
7.6
6.2
5.3
2.1
2.4
1.7
1.6
2.4
2.9
2007
4.1
7.3
6.1
4.8
1.8
2.1
1.6
0.8
2.0
2.6
2008
4.1
7.1
6.1
4.5
1.6
1.9
1.5
0.4
2.0
2.5
2009
4.2
6.9
6.1
4.3
1.6
1.7
1.5
0.4
2.2
2.5
2010
4.2
6.6
6.1
4.1
1.6
1.5
1.6
0.6
2.2
2.4
2011
4.1
6.4
6.0
4.0
1.7
1.6
1.6
0.8
2.2
2.3
2012
4.1
6.0
6.0
3.8
1.7
1.6
1.6
1.0
2.2
2.2
2013
4.0
5.8
5.9
3.7
1.7
1.6
1.6
1.1
2.2
2.2
2014
4.0
5.5
5.9
3.6
1.8
1.5
1.6
1.3
2.1
2.1
2015
3.9
5.2
5.8
3.5
1.8
1.4
1.6
1.3
2.1
2.1
2016
3.9
5.1
5.8
3.4
1.8
1.3
1.5
1.4
2.0
2.2
2017
3.8
4.9
5.7
3.4
1.8
1.2
1.5
1.5
1.9
2.1
2018
3.8
4.8
5.7
3.3
1.8
1.2
1.5
1.5
1.8
2.1
2019
3.7
5.1
5.6
3.3
1.8
1.0
1.4
1.4
1.7
2.1
2020
3.7
5.0
5.5
3.3
1.7
0.9
1.3
1.4
1.7
2.1
2021
3.7
5.2
5.6
3.3
1.7
0.8
1.2
1.5
1.6
2.1
2022
3.7
4.9
5.7
3.3
1.7
0.7
1.0
1.4
1.5
2.2
2023
3.7
4.1
5.7
3.4
1.7
0.6
0.9
1.3
1.4
2.2
2024
3.8
4.2
5.8
3.5
1.6
0.5
0.7
1.2
1.4
2.3
2025
3.8
4.2
5.8
3.6
1.6
0.5
0.6
1.0
1.4
2.4
2026
3.8
4.1
5.9
3.6
1.6
0.6
0.6
1.3
1.4
2.5
2027
3.8
4.3
5.9
3.6
1.6
0.6
0.6
1.0
1.5
2.6
2028
3.8
4.1
6.0
3.6
1.6
0.7
0.6
0.8
1.5
2.6
2029
3.8
3.9
6.0
3.5
1.6
0.8
0.5
0.7
1.6
2.6
2030
3.9
3.9
6.1
3.4
1.5
0.9
0.5
0.6
1.6
2.5
2031
3.9
3.8
6.1
3.3
1.5
1.1
0.5
0.4
1.6
2.6
2032
3.9
3.9
6.1
3.1
1.4
1.3
0.4
0.3
1.8
2.7
2033
3.9
3.8
6.2
3.0
1.5
1.6
0.4
0.2
1.9
2.8
2034
3.9
3.8
6.2
2.9
1.6
1.7
0.4
0.1
1.9
2.8
2035
3.9
3.9
6.2
2.8
1.7
1.7
0.5
0.2
2.0
2.8
2036
3.9
3.9
6.1
2.7
1.8
1.7
0.6
0.3
2.0
2.8
2037
3.8
3.9
6.1
2.6
1.8
1.7
0.8
0.5
2.1
2.8
2038
3.8
3.9
6.0
2.5
1.8
1.6
0.9
0.5
2.1
2.7
2039
3.7
3.8
5.9
2.5
1.8
1.6
1.0
0.6
1.9
2.7
2040
3.6
3.7
5.8
2.4
1.7
1.5
1.2
0.7
1.8
2.6
2041
3.6
3.8
5.8
2.3
1.6
1.4
1.3
0.8
1.8
2.6
2042
3.5
3.4
5.7
2.2
1.6
1.4
1.3
0.8
1.8
2.6
2043
3.5
3.5
5.6
2.1
1.7
1.4
1.4
0.8
1.8
2.6
2044
3.6
3.5
5.5
2.0
1.7
1.5
1.4
0.8
1.8
2.6
2045
3.5
3.3
5.4
2.0
1.7
1.4
1.5
0.9
1.7
2.6
2046
3.4
3.1
5.4
1.9
1.7
1.4
1.5
1.0
1.7
2.6
2047
3.4
2.8
5.3
1.8
1.7
1.3
1.5
1.1
1.6
2.6
2048
3.3
2.9
5.2
1.9
1.7
1.2
1.5
1.2
1.6
2.6
2049
3.3
2.8
5.1
2.0
1.7
1.2
1.5
1.2
1.6
2.6
2050
3.4
2.7
5.1
2.1
1.7
1.2
1.5
1.3
1.5
2.5
*indicative projections made only on the model assumptions described in the text. Not GS official forecasts.
GS BRICs Model Projections. See text for details and assumptions.
Global Paper No 99
21
1st October 2003
Appendix III:Demographic Projections:
The Cohort Component Method
We have used the US census’ population estimates,
which are based on the cohort component population
projection method, which follows each cohort of
people of the same age throughout its lifetime
according to mortality, fertility and migration.
First, fertility rates are projected and applied to the
female population in childbearing ages to estimate
the number of births every year (see chart). Second,
each cohort of children born is also followed through
time by exposing it to projected mortality rates.
Finally, the component method takes into account
any in-migrants who are incorporated into the
population and out-migrants who leave the
population. Migrants are added to or subtracted from
the population at each specific age.
In setting levels for mortality and fertility, available
data on past trends provide guidance. For mortality,
information concerning programs of public health
are taken into account. For fertility, factors such as
trends in age at marriage; the proportion of women
using contraception; the strength of family planning
programs; and any foreseen changes in women’s
educational attainment or in their labor force
participation are factored into the analysis.
Assumptions about future migration are more
speculative than assumptions about fertility and
mortality. The future path of international migration
is set on the basis of past international migration
estimates as well as the policy stance of countries
regarding future international migration flows.
%
Total Fertility Rate
3.5
Brazil
3
China
India
Russia
2.5
2
1.5
1
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 205
Global Paper No 99
22
1st October 2003
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Final version in ASIAN PERSPECTIVE, Vol. 31, No. 4, 2007, pp. 7­42.
The BRICs Countries (Brazil, Russia, India, and China) as Analytical Category:
Mirage or Insight?*
Leslie Elliott Armijo
Portland State University
leslie.armijo@cal.berkeley.edu
Revision of November 1, 2007*
American hegemony has passed its peak. The twenty-first century will see a more multipolar international system. Yet Western European countries may not be the United
States’ main foils in decades to come. Four new poles of the international system are now
widely known in the business and financial press as the “BRICs economies” (Brazil,
Russia, India, and China). Does the concept of “the BRICs” have meaning within a
rigorous political science framing? From the perspective of an economic liberal
employing neoclassical assumptions to understand the world economy, the category’s
justification is surprisingly weak. In contrast, a political or economic realist’s framing
instructs us to focus on states that are increasing their relative material capabilities—as
each of the four is. Finally, within a liberal institutionalist’s mental model, the BRICs
countries are a compelling set, yet one with a deep cleavage between two sub-groups:
large emerging powers likely to remain authoritarian or revert to that state, and those that
are securely democratic.
* This version presented at the Annual Meeting of the International Studies Association,
San Francisco, March 25-29, 2008.
The BRICs Countries (Brazil, Russia, India, and China) as Analytical Category:
Mirage or Insight?
In 2003 the institutional investment firm Goldman Sachs issued a research report
that coined a catchy acronym: the “BRICs economies,” or Brazil, Russia, India, and
China.1 At the time of writing the four large emerging economies collectively represented
only 15 percent of the gross national production (GDP) of the six major advanced
industrial economies: the United States, Japan, Germany, Britain, France, and Italy.
Economists Dominic Wilson and Roopa Purushothaman, however, predicted that “in less
than 40 years” the BRICs were likely to catch up to the six, providing the world’s
principal “engine of new demand growth and spending power,” which could “offset the
impact of graying populations and slower growth in the advanced economies.” 2 Since
then the international financial press has run with the label, which has caught the
imagination of investors much as the term emerging markets did a few years back. This
paper critically examines the “BRICs countries” concept.
These four countries are not an obvious set. Their internal politics and economics
are dissimilar. Although all are federal states, only India and Brazil are wellinstitutionalized democracies, one of which is parliamentary and the other presidential.
Russia is a declared democracy moving toward authoritarianism, while China is a
Marxist people’s republic. Each of the four embodies distinct cultural and linguistic
traditions, though they share the characteristic of having been recognizable political
entities for centuries. All four possess modern industrial sectors, with ever deepening
links to the global capitalist economy, along with large areas of the economy that operate
informally, outside the reach of regulators and tax collectors. Their stock market
capitalization to gross national product (GDP) ratio varies from 35 percent for China
(mainly in Hong Kong and Shanghai), to 60, 69, and 72 percent for Brazil, India, and
Russia, respectively.3 Russia and China are significantly globalized, with trade/GDP
ratios of 48 and 64 percent respectively, the latter quite extraordinary given China’s large
absolute economic size.4 India and Brazil are less globally integrated, with trade/GDP
ratios in 2005 of 29 and 25 percent respectively. Although three of the four BRICs
countries have substantial and reasonably secure trade surpluses, India has a persistent
trade deficit. The three trade surplus BRICs--Brazil, Russia, and China--each have
external debts with net present values in the $200 billion range, while India’s foreign debt
is about half this. Russia’s exports are extraordinarily concentrated in natural gas and
other energy products, while the other three have more diversified export profiles.
Finally, each of the quartet faces looming challenges that could choke its economic
progress: corruption, pollution, and shortages of natural resources in China; India’s
woeful physical infrastructure and contained yet nasty communal conflicts; Brazil’s
1
I thank Vinod Aggarwal, Melvin Gurtov, Christine Kearney, Karthika Sasikumar, Aseema Sinha, and
Anthony Spanakos for helpful comments. Remaining mistakes are of course mine.
2
Dominic Wilson and Roopa Purushothaman, “Dreaming with BRICs: The Path to 2050,” Global
Economics Paper No. 99, New York: Goldman Sachs, October 1, 2003, p. 2.
3
Unless otherwise noted, all figures in this paragraph and the next are from The Little Data Book 20O7,
Washington, DC: The World Bank.
4
For comparison, the United States’ trade/GDP in 2005 was 21 percent.
inability to grow rapidly despite today’s favorable international environment of high
commodity prices; and Russia’s corruption and vulnerability to the “natural resource
curse” of ample public funds even sans good government for its citizens and firms.
These are neither the same strengths nor extremely similar development
challenges across the group of four countries. Examined from the perspective of either
domestic politics or economic structure, it would seem more sensible to group Brazil with
Argentina, Mexico, Chile, Colombia, or Venezuela; India with Pakistan and Bangladesh;
and so forth. The notion of the BRICs countries as a set thus appears forced. However, an
alternative and equally valid way to approach the question might be to ask whether the
BRICs countries form a set because they have a similar type of influence in, or equivalent
implications for, the international political or economic system. Do they alter the
conditions of international interactions for other players—whether states, firms, or
international organizations—in parallel ways? It is in this latter sense that the set of the
“BRICs economies” or “BRICs countries” may have merit as an analytical category. The
remainder of the paper explores the concept with the aid of three alternative frameworks
for conceptualizing the workings of the global economy: economic liberalism, realism,
and liberal institutionalism.5
I. Economic Liberalism and the BRICs
Capitalist investment firms writing research reports and newsletters for clients
generally operate within an economic liberal’s view of the international political
economy. The mental model of economic liberalism assumes that the international
economy operates roughly as modeled by neoclassical economics. World markets are
mostly globalized, decentralized, and competitive; capitalist firms are the key actors; and
governments are important only insofar as they provide good or bad economic
institutions, which can help or hinder the firms that invest and produce within their
borders. Firms decide whether to participate in the global economy based on their
expectations of profit. State boundaries are significant principally because states possess
unlike endowments of human, physical, and financial capital, as well as natural resources.
National governments also provide national frameworks for economic governance, some
of which are more friendly to the private sector than others. However, within the
economically liberal worldview, governments cannot materially affect the competitive
position of home country firms, for example, by enacting economically nationalist
regulations such as tariffs, subsidies, or intentionally undervalued exchange rates.
The BRICs category is significant within the economic liberal’s framing if these
four countries offer unique or exceptional opportunities for foreign investors. This might
be the case were they all exceptionally high growth economies, and many have assumed
5
For a fuller analysis of the ways in which these three framings yield alternative yet convincing visions of
the international political economy see Leslie Elliott Armijo and John Echeverri-Gent, “The Politics of
Global Markets: Mental Models of Trade and Finance in an Unequal World,” Chapter in Report of the
APSA Task Force on Inequality and Difference in the Developing World, Washington, D.C.: American
Political Science Association, September. Available at: http://www.apsanet.org/section_557.cfm.
that this is what the BRICs category implies.6 Instead their 2000-2006 growth rates vary
widely, from Brazil’s modest 3.1 percent, below the world growth rate of 3.3 percent, to
the 6.7 percent logged by both India and Russia, to China’s astonishing 9.4 percent. In
any case, high national growth rates do not necessarily result in high returns to private
investors. William J. Berstein observes that, “[J]ust as growth stocks have lower returns
than value stocks, so do growth nations have lower returns than value nations—and they
similarly get overbought … Between January 1988 and April 2006, the returns for
emerging-markets equity and the S&P 500 were 18.78% and 12.07%, respectively.
However, … the lion’s share of the emerging-markets return was earned before 1994,
when there was little international interest in them. Begin the analysis on January 1994
and numbers change to 7.76% for emerging markets and 10.72% for the S&P 500.”7
Bernstein attributes disappointing returns in emerging markets to problems with
corporate governance, such as unwarranted share dilution.
The Goldman Sachs team called the four prospective “engines of growth,”
suggesting that there were excellent investment opportunities within the four economies,
perhaps because of their large domestic markets, expected to grow rapidly as the growth
of the middle class created new consumers, and thus rapid demand growth, for example,
in automobiles, electricity, and local capital markets.8 Risks to investors also should be
lower in larger as contrasted to smaller emerging market economies because, other
dimensions being equal, larger economies will be less trade dependent and globally
integrated than smaller economies, and thus less exposed to exogenous economic shocks.
However as noted above both China and Russia are heavily trade dependent. The four
also are seen as future competitors of the US and other advanced industrial countries.
Subhash C. Jain writes, “After the collapse of the Soviet Union, the US became the lone
superpower of the world. But it may not be able to hold this dominant position for
long. ..US companies must train their current and future managers to compete with firms
in the BRICs.”9 In the end, the core argument in the business and financial literature
about why the BRICs countries are significant or important rests on the relative economic
size of the four countries, both at present and in the near future, and the implicit (and
possibly dubious) assumption that large size implies economic dynamism. The central
organizing principle for the BRICs category is not growth rates, nor opportunities for
investor profits, but rather sheer economic size. In a recent edited volume on the BRICs,
the only one of the nineteen papers, almost all written by business school faculty, that
explicitly makes the case for why we should investigate these countries as a set is the
original paper by the two Goldman Sachs economists, which has been included in the
volume.10
6
For example, “High-growth economies make a siren call to multinationals,” Financial Times, February 8,
2006, p. 10 of London edition.
7
William J. Bernstein, “Thick as a BRIC,” Efficient Frontier Online Journal, August, 2006. At
www.efficientfrontier.com
8
Jim O’Neill, Sandra Lawson, and Roopa Purushothaman, “The BRICs and Global Markets: Crude, Cars
and Capital,” CEO Confidential, October 2004.
9
Subhash C. Jain, ed., Emerging Economies and the Transformation of International Business,
Cheltenham, UK: Edward Elgar, 2006, p. xv.
10
Jain, Op. Cit.
This leads to two observations. The first is that the growth predictions are
plausible if not assured. As shown in Table 1, China has grown very rapidly since 1980,
while the other three BRICs have steadily if incrementally increased their share of the
global economy, such that the four together represent about 12 percent of world output.
In fact, if we use the purchasing power parity (PPP) measure of gross domestic product
(GDP), arguably more appropriate for comparisons of advanced industrial with
developing economies, then China’s economy already is three-quarters the size of that of
the US, and the world’s four largest economies are the US, China, India, and Japan.
Moreover, Brazil and Russia already are similarly-sized economies to Germany, Britain,
France, and Italy. Table 2 projects future growth. According to the Wilson and
Purushothaman model, the BRICs countries could account for a share of world
production equivalent to that of the six industrialized democracies (referred to as the
Group of Six or G6) by 2040.11 Their predictions of future growth are reasonable though
unverifiable. Interestingly, they anticipate steady, cumulative growth in Brazil and India
of just under 4 and 6 percent respectively through mid-century, but steadily declining
rates of expansion in China and Russia, falling to about 3 percent in the former and 2
percent in the latter by 2050.12 They do not explicitly consider the possible political
consequences in China or Russia were growth to slow dramatically.
Table 1. Economic Power Today
(percent of world production)
US
Japan
Germany
Britain
France
Italy
G6
China
India
Brazil
Russia
BRICs
GDP at Market Exchange
1980
1990
2000
2006
25.2
26.4
30.7
27.4
9.6
13.8
14.6
9.0
8.3
7.8
6.0
6.0
4.9
4.5
4.5
4.9
6.3
5.9
4.2
4.6
4.2
5.2
3.5
3.8
58.5
63.5
63.5
55.7
1.7
1.6
3.8
5.5
1.7
1.5
1.5
1.9
2.4
2.6
2.2
2.6
..
2.4
0.8
2.0
..
7.8
8.1
11.7
1980
21.3
8.1
6.0
4.0
4.2
4.1
47.4
3.1
3.3
3.4
..
..
GDP in PPP
1990
2000
21.3
21.5
8.7
7.2
5.2
4.7
3.7
3.5
4.0
3.5
3.8
3.3
46.6
43.7
5.6
11.0
4.3
5.3
2.9
2.7
4.6
2.3
17.3
21.3
2006
19.8
6.2
3.9
3.2
4.1
2.7
38.8
15.0
6.4
2.6
2.6
26.5
Calculated from World Bank, World Development Indicators (WDI), accessed online September 2007.
11
Adding Canada to include the full membership of the Group of Seven (G7) delays the BRICs countries’
catch up date only by a few years. The Goldman Sachs’ team of Wilson and Purushothaman may have
thought 2040 a more memorable date or six an easier number to work with.
12
Wilson and Purshothaman 2003, p. 21.
Table 2. Projected Economic Power
(percent of combined production of US, Japan, Germany, Britain, France, and Italy, plus
the four BRICs)
G6
BRICs
1990
89
11
2006
83
17
2020
72
28
2030
61
39
2040
50
50
2050
40
60
Years 1990 and 2006 calculated from WDI, GDP at market rate. Years 2020 to 2050 from estimates of
Wilson and Purushothaman 2003, p. 4.
A second observation is that the large or small size of an economy is not really a
core concept within neoclassical economics. That is, the economic liberal’s framing on
the essential nature of the international economy provides no compelling reason for
concluding that any economic advantages possibly inherent in larger size ought to trump
those of a faster growth rate or good property rights protection or other economic or
financial ratios of interest to private investors. It is not clear within this framing why a
rational investor might prefer slower-growing Brazil to faster-growing Korea or
Malaysia. And yet the BRICs concept has proven to have legs—it has been repeated
often and enthusiastically, both within the investor community and in international policy
circles.13 Perhaps the concept’s intuitive appeal cannot be encompassed or understood
within the mental model of decentralized global free markets. We may need to look
elsewhere to understand why it has resonated so widely.
II. Political “Realism” and the BRICs
The problem may lie in the economic liberal’s mental model, which offers few
insights into the role of the relative size of a country. As noted, there are some reasons to
believe that the latter proposition might sometimes be true, as with the expected
advantages from having a good-sized domestic market. But sheer economic size is far
from the only determinant of profitability, and thus “the BRICs economies” is an odd and
illogical set. Size also might be important when we consider firms in a market, because of
concerns over oligopoly or oligopsony. But this is not normally how we think about
countries, with the partial exception of natural resource producers. So what is behind the
intuitive appeal of the BRICs category? Perhaps the answer is that even economic liberals
recognize that cross-border trade and investment transactions occur within an
international political economy.
13
For an example of each, see Grant Thornton International, “Emerging Markets: Brazil, Russia, India, and
China,” International Business Report 2007, No. 1; GTZ and German Council for Sustainable
Development, “BRICS + G: Sustainability and Growth: A Conference Report,” 2005, available at:
www.bricsg.net. The United Nations University’s World Institute for Development Economics Research
(WIDER), also recently has funded a large research initiative on the set of countries it optimistically
designates “Engines of Growth for the 21st Century” and calls the “CIBS group”: China, India, Brazil, and
South Africa.
From the perspective of those who would describe themselves as realist analysts
of international relations, the relative size of economies is of fundamental importance,
because economic size is an essential clue to the relative capabilities—in other words, the
“power”--of countries. Can we make sense of the BRICs concept through a political
realist’s framing? Realists see a world of sovereign states, none of whose governments
happily yield to the dominance of the others. The essence of international politics is
“anarchy,” meaning the absence of a legitimate, effective central authority whose
decisions carry the weight of law and are ultimately backed by force. In other words there
is no world government. Even when sovereign states agree upon international laws and
rules of civilized conduct among them, the lack of international enforcement machinery
implies that each sovereign state must look to its own protection and interests. In such a
self-help system mutual distrust, the only rational stance for a responsible national
government, sadly but inevitably leads to large defense expenditures, arms races, and the
potential for instability and even war, as insecure states may be tempted to attack
preemptively.14
We have now moved our reference framework dramatically. The economic
liberal’s world is one in which transnational investment flows freely across borders.
Economic growth requires new technologies and the spread of an open, nondiscriminatory, and above all peaceful global political economy. The international
relations analog of economic liberalism may be found in the various versions of the
“trade brings peace” hypothesis.15 The realist mental model is quite different. Realists
understand trade and investment flows as occurring within—and subordinate to—the
more significant and enduring structure of interstate relations. It is international peace
that permits and enables trade, not the reverse. Moreover, rational and responsible
national leaders never lose sight of the fundamentally anarchic nature of the global
system. Consequently, where economic liberals stress mutual absolute gains from trade,
realists are primed to notice relative gains, in which one party, or one country, benefits
more than the other. It is likely that much of the interest generated in the US and Europe
by the notion of the BRICs derives from underlying realist fears sparked by the prospect
of an ascendant group of mostly non-traditional and non-European major powers. From a
realist viewpoint, two questions about the BRICs are paramount. First, are the relative
material capabilities of any or all of these four countries significant enough today, or in a
plausible near future, to consider them as major powers at the global level? Second, if so,
then what might this mean for the interstate system?
We begin with the question of the relative power of the BRICs countries,
considered here as independent entities, not as a group. We assume an essentially
realist/neorealist world in which the primary players in international affairs are sovereign
states. Of course the conceptualization of Russia—a traditional major power in the
14
See Kenneth N. Waltz, Theory of International Politics, New York: McGraw-Hill, 1979; A.F. K.
Organski, A.F.K. and Jacek Kugler, The War Ledger. Chicago: University of Chicago Press, 1981; John
Mearsheimer, The Tragedy of Great Power Politics. W.W. Norton, 2001.
15
See John R. Oneal, Bruce Russett, and Michael L. Berbaum. 2003. “Causes of Peace: Democracy,
Interdependence, and International Organizations,” International Studies Quarterly 47, pp. 371-393. See
also this volume’s contribution by Rusko and Sasikumar.
nineteenth century and presumed superpower between 1945 and as recently as 1990—as
an emerging power is distinctly odd from a realist perspective. Is Russia a declining
major power or a rising BRIC? While this is a legitimate question, we leave it aside here,
and treat Russia as a emerging power, assuming the early 1990s as our implicit baseline.
In this section of the paper, I therefore introduce a variety of mostly quantitative
evidence in order to evaluate whether any or all of the BRICs are on their way toward
becoming major powers. Rather than comparing the six largest members of the Group of
Seven industrial countries, as done by the Goldman Sachs economists, I compare the five
largest industrial democracies to the four BRICs. As is traditional, I begin with military
might. Although there are currently 192 member states in the United Nations, in 2006 the
US alone accounted for an astonishing 45.7 percent of world defense spending. Britain,
with the next largest share, contributed only 5.1 percent.16 The only other countries that
account for 2 percent or more of total world military expenditures are the remaining
members of the G5, France, Japan, and Germany, plus three of the four BRIC countries:
China, Russia, and India, the latter with 4.3, 3.0, and 2.1 percent, respectively. 17 Together
the shares of these seven countries total only 26.1 percent of world military expenditure.
Militarily, the world is unequivocally unipolar.
Next we turn to the economy. Even analysts explicitly concerned with the security
balance pragmatically observe that wealth can be used to purchase or produce weapons.
Power transition theorists A.F.K. Organski and Jacek Kugler, for example, have preferred
GDP as the single best proxy for national power.18 As discussed above, the four BRICs
already figure among the top ten to fifteen economies, depending on the measure
employed, and will likely move up this ranking in the coming decades. If economic size
is the sine qua non of state power, then the BRICs are a likely set of new major powers
by the early mid twenty-first century.
Alternatively, one might construct an index combining several different types of
power capabilities. The University of Michigan’s Correlates of War (COW) Project has
produced a long time series for their Composite Index of National Capabilities (CINC),
whose six components are total population, urban population, iron and steel production,
energy consumption, military personnel, and military expenditure. The index takes each
country’s share of the world in each of the six categories, then averages them to compute
the country’s estimated share of total world material capabilities, as shown in Table 3.
The table suggests several trends. First the distribution of national material capabilities
relevant to national power has become notably more diffuse and decentralized over the
postwar period. While the countries represented in the table accounted for 75 percent of
total world capabilities in 1955, their share had fallen to only 56 percent by 2001, more
than half of which corresponds to the fall in estimated US capabilities in the first three
postwar decades. The dissolution of the Soviet Union also has a dramatic effect, causing
that country’s share of global capabilities to fall from 18 to only 10 percent. Nonetheless
the US’ supposed “unipolar moment” doesn’t really show up as such: in 1991, the US
16
Economist, “The Hobbled Hegemon,” June 28, 2007, accessed online.
Brazil, overwhelming dominant in its neighborhood, has no need for a large military. See Sotero and
Armijo in this Special Issue.
18
Op.Cit., p. 45.
17
receives a score of 14 percent of total world capabilities, as compared to 11 for China and
10 for Russia. By this index, the BRIC’s total material capabilities were roughly
equivalent to those of the G5 as early as 1991. In 2001, the US and China each code as
great powers, with all other states far behind.
Table 3. Composite Index of National Capabilities
(percent of world total)
United States
Japan
Britain
Germany
France
G5
China
India
USSR/Russia
Brazil
BRICs
G5 + BRICs
1955
27
5
5
4
3
42
9
5
18
1
33
75
1978
14
5
3
3
2
27
12
5
18
2
37
64
1991
14
5
3
3
2
27
11
6
10
2
29
56
2001
15
5
2
3
2
27
13
7
6
3
29
56
Data from Singer, J. David, Stuart Bremer, and John Stuckey. (1972). "Capability Distribution,
Uncertainty, and Major Power War, 1820-1965." in Bruce Russett (ed) Peace, War, and Numbers, Beverly
Hills: Sage, 19-48. As updated in the National Material Capabilities Dataset, Version 3.02, accessed at
www.correlatesofwar.org
on August 2, 2007.
One could object that the COW Index, intentionally created to incorporate data
series’ available back to the early nineteenth century, is anachronistic and
unrepresentative of important dimensions of national capability at the turn of the twentyfirst century. For example, there is no component measuring economic size, and the index
includes only indirect measures of industrialization or technological sophistication.
Income per capita, also excluded, could be an easy and fairly reliable proxy for
technological development. All of the G5 are of course high income, while Brazil and
Russia are usually classed as middle income states, and China and India as low income
ones. Collecting data on scientific patents applied for, cell phone or internet use per
capita, or similar measures would yield results similar to the income per capita ranking.
Another arguably significant omission in the relative power index just presented is any
mention of natural resource endowments. For example, access to water for both drinking
and industrial uses could may prove to be one of the defining issues of the twenty-first
century. In this, the G5 possibly excepting Japan, Russia, and Brazil would all seem to be
adequately to well endowed, while China and India will confront acute shortages,
especially as global warming continues.
Energy capabilities are more difficult to compute, though Table 4 reproduces
some relevant indicators. All the G5 are vulnerable, though Britain least so. Although the
US, China, and Russia are all large energy producers, Japan, Germany, and France import
more than half their domestic requirements. The US, because it is so energy inefficient,
also imports a third of its consumption. It can expect dramatically increased pressure
from other countries, including the BRICs, to cut both its consumption and its carbon
emissions, both of which are wildly disproportionate to its share of world population.
Table 4. Energy Capabilities and Vulnerabilities
US
Japan
Britain
German
y
France
G5
China
India
Russia
Brazil
BRICs
G5 +
BRICs
% World
Energy
Productio
n
15
1
2
1
Imports as
% Energy
Consume
d
31
83
5
62
Populatio
n as %
World
Consumptio
n as %
World
Emissions/
Population
24
6
2
4
CO2
Emission
s
% World
22
4
2
3
5
2
1
1
1
20
14
4
10
2
30
50
51
..
6
18
-80
15
..
..
1
10
21
17
2
3
43
53
3
39
13
3
10
2
28
67
1
32
18
4
6
1
29
61
1.0
3.2w
0.8
0.3
3.0
0.3
0.7w
0.9w
4.4
2.0
2.0
3.0
Sources: IEA, Key World Energy Statistics 2006, Paris: International Energy Agency, 2006; and IMF,
World Economic Outlook 2006, Washington, DC: International Monetary Fund, April 2006.
The four BRIC countries have extremely varied energy profiles. Although China
currently has low energy imports as a share of energy consumption, its government
worries greatly about its future energy needs. This imperative drives much of China’s
foreign economic policy, as its rulers seeks natural resource leases and long term supply
contracts from the Sudan to Venezuela. China’s energy production and use is also
profoundly dirty and inefficient; with 13 percent of world consumption, China accounts
for 18 percent of emissions. China’s total carbon emissions are only exceeded by those of
the US. Among the BRICs, India is the most energy-vulnerable, lacking both large fossil
fuel reserves and the comparatively abundant land and water resources that make biofuel
production attractive for Brazil. It is also the country among the four with the lowest
electricity use given its population size, and thus the greatest pent-up demand. Russia is a
very significant energy exporter, accounting for 12 percent of world crude oil production
and 22 percent of natural gas production, and exporting energy from all sources
equivalent to 80 percent of its home consumption. Russia’s energy challenges have to do
with avoiding the classic institutional problems of natural resource management, ranging
from exchange rate overvaluation leading to de-industrialization via a scenario known as
the ‘Dutch disease,’ to incentives for corruption and unsustainable economic populism.19
Russia, like the US, consumes five times as much energy as its share of global population
would predict. Some portion of Russia’s energy consumption is related to its large-scale
production of energy-related exports. But its overall energy profile suggests that engaging
Russia in future energy conservation efforts could be problematic. Finally, Brazil is
relatively fortunate. Brazil receives an astonishing 83 percent of its energy from
hydroelectric power, although it imports both petroleum and natural gas.20 Brazil is also
the world’s major producer of both sugar and ethanol, and its comparative efficiency in
biofuel production suggest major expansion possibilities for biofuel exports. Biofuels and
combustible wastes currently account for about 11 percent of world energy use, as
compared to 34 percent for oil, 25 percent coal, and 21 percent natural gas. 21 As
international publics become more worried about global warming, interest in biofuels
should rise, possibly to Brazil’s advantage.22 In general, to the degree that we incorporate
an energy vulnerability dimension into a relative power calculation, Russia and Brazil
look stronger, and China and India weaker.
Another way to compare the G5 and the BRIC countries is through their
international financial power. By several significant measures, the US’ world financial
hegemony has diminished in recent decades. We look first at the currency composition of
total foreign exchange (FX) holdings. The US dollar no longer dominates central banks’
holdings of official reserves to the extent that it once did. The US dollar, which
accounted for almost all FX reserves held by central banks in the early post Second
World War period, by 1989 had fallen to only about 55 percent of allocated official
reserves. In the 1990s the US dollar share of official FX reserves rose briefly, probably
because of a “flight to quality” associated with global financial crises, by 1998
accounting for about 70 percent of the total. But from the turn of the century its structural
decline began again. The US dollar share in official FX reserves had fallen to 66 percent
by the third quarter of 2005, while euro holdings rose to 24 percent, causing concern in
Washington, D.C.23 In addition, central banks today are a great deal more secretive about
their foreign exchange holdings: in 1989 only 7 percent of reserves were reported as
“unallocated” reserves, while by 2005 over 32 percent were.
19
On the natural resource “curse,” see Xavier Sala-I-Martin and Arvind Subramanian, “Addressing the
Natural Resource Curse: An Illustration from Nigeria,” IMF Working Paper 03/139, Washington, DC: The
International Monetary Fund.
20
World Bank, World Development Indicators Online, consulted September, 2007. Available at
www.worldbank.org. On Brazil’s energy profile and promise see also Sotero and Armijo in this issue.
21
International Energy Agency, Op. Cit., 2006, p. 6.
22
Not all biofuels are clean to produce or use, but Brazil’s profile is relatively good on this dimension. See
Sotero and Armijo in this Special Issue.
23
Barry Eichengreen and Donald J. Matthieson, “The Currency Composition of Foreign Exchange
Reserves: Retrospect and Prospect,” IMF Working Paper 00/131, Washington, D.C.: International
Monetary Fund, 2000, p. 20; Ewe-Ghee Lim, “The Euro’s Challenge to the Dollar: Different Views from
Economists and Evidence from COFER (Composition of Official Foreign Exchange Reserves) and Other
Data,” IMF Working Paper 06/153, Washington, D.C.: International Monetary Fund, 2000, p. 17.
A second indicator of global financial power is who has a large hoard of cash and
liquid financial assets, useful for protecting one’s home currency and economy against
attack, intervening to staunch financial crises abroad--or for threatening disinvestment or
lack of access to one’s home financial markets as a quid pro quo in interstate political
negotiations. In recent decades, US official holdings of other countries’ currencies—the
foreign exchange reserves held by the central bank—have diminished dramatically. At
the end of the Second World War the US held by far the largest share of global FX
reserves, mainly the British pound and other Western European currencies, plus monetary
gold. But there has been an enormous structural shift since about 1980. Today, although
the US economy accounts for 28 percent of world production, US government holdings
of official FX reserves represent only 1 percent of global reserves, as shown in Table 5. If
FX reserves plus monetary gold are calculated instead, the US share rises to 4 percent,
still far inferior to that of either China or Japan at 21 and 18 percent, respectively; slightly
less than either Taiwan and Korea with 6 and 5 percent each; and close to the shares of
Russia, India, Singapore, and Germany, at 4, 3, 3, and 2 percent each. 24 This share is
hardly enough, one might imagine, to backstop the US’ accustomed role as global
financial leader through its dominant positions in world markets, the G7, the International
Monetary Fund, the World Bank, and other fora for global financial governance.25
In fact, all of the G5 together hold only 21 percent of global FX reserves, while
the BRICs control 35 percent. Stocks of foreign direct investment (FDI), also shown in
Table 5, are a third indicator of financial attractiveness (inward) and clout (outward).
Though the G5 continue to be the most attractive destinations for FDI, the BRICs’ share
has been increasing; China, Russia, and Brazil each have larger stocks of inward FDI
than Japan. Outward FDI from multinational firms based in the BRICs economies also
has been growing, although the 52 percent of global FDI owned by the five wealthy
democracies still dwarfs the 2 percent owned by the four BRICs. However, as FDI stocks
cumulate slowly over time they are lagging indicators of power. Annual flows, not
shown, reveal faster convergence.
24
World Bank, World Development Indicators, consulted August 2007.
On the political economy of global financial governance see Leslie Elliott Armijo, “The Terms of the
Debate: What’s Democracy Got to Do with It?,” in L.E. Armijo, ed., Debating the Global Financial
Architecture, Albany, NY: SUNY Press, 2001.
25
Table 5. Financial Power, 2005
(percent of world)
United States
Japan
Britain
Germany
France
G5
China
India
Russia
Brazil
BRICs
G5 + BRICs
Foreign Exchange
Reserves
1.1
17.3
0.8
0.8
0.8
20.8
23.8
3.4
5.8
1.7
34.7
55.5
Inward FDI, Stock
Outward FDI, Stock
16.0
1.0
8.0
5.0
5.9
35.9
2.0
0.4
1.3
2.0
9.7
45.6
19.2
3.6
11.6
9.1
8.0
51.5
0.4
0.0
1.1
0.7
2.2
53.7
* FDI from UNCTAD, World Investment Report 2006. Figures for 2005.
* FX reserves from IMF Statistics Online, “Total Reserves Minus Gold.” Figures for 2006.
* Memo: Eurozone FX reserves: 3.9; Developing Asia: 44.6.
Not surprisingly, there is an active debate over whether these structural global
financial shifts matter. For example, one reason for the steady shrinking in US foreign
exchange holdings is American use of the seiniorage privilege enjoyed by the key
currency country. When a country’s home currency is in demand abroad as a store of
value and for international transactions purposes, then that country can issue larger
amounts than are demanded for domestic use. So long as foreigners are prepared to
absorb dollars, the US government can print, and spend, without any automatic restraint.
Moreover, given the enormous investment of virtually all foreign central banks, not to
mention their private business communities, in dollar-denominated assets, a dramatic
dollar devaluation is feared by all sovereign players--though not perhaps by terrorists.
Essentially freed from foreign exchange constraints by its control of dollar seiniorage, the
US has become a major international debtor country. The US’ enormous trade deficits are
matched by equivalently large inflows of foreign capital, as foreign central banks
typically invest their dollars in US Treasury securities. Harvard economists Ricardo
Hausmann and Federico Sturzenegger assert that US international accounts have been
misunderstood and miscalculated and actually reflect great productivity and strength.26
But if the shift in measured holdings of foreign exchange reserves matters, then
the new power holders are Japan, developing nations in Asia, and oil exporters. In early
August 2007 brief but real global market turmoil followed China’s announcement that it
26
Ricardo Hausmann and Federico Sturzenegger, “Global Imbalances or Bad Accounting? The Missing
Dark Matter in the Wealth of Nations,” Unpublished paper, Cambridge, MA: Kennedy School of
Government, December 2005.
might begin to invest a small portion of its massive dollar reserves not in US government
securities, but rather in higher-yielding though riskier private securities, including
corporate equity and bonds.27 Governments in Asia and the Middle East, prominently
including China, are estimated to control $2.5 trillion in these new investment vehicles,
known as sovereign wealth funds (SWFs).28 Although it was the US Treasury Secretary
and other American financial officials that played leading roles in the financial crises of
the 1990s, could China and other developing countries, along with Japan, hold a
preponderance of the financial cards in years to come? The largest holders of SWFs
include one oil-producing advanced industrial country, Norway; three Middle Eastern
OPEC members, United Arab Emirates, Saudi Arabia, and Kuwait; and three emerging
market economies, Singapore, China, and Russia. Some estimate that sovereign wealth
funds could reach $10 trillion in ten years. “At that size, ‘they are the global financial
system,’ says former IMF chief economist Kenneth Rogoff.”29
This section thus far has examined the category “the BRICs countries” in the light
of a realist framework emphasizing the relative power of individual sovereign states.
China looks quite consequential, India and Russia somewhat less so, and Brazil still less
so, although the order depends significantly on the specific metric employed. We
conclude that it is certain that China is or soon will be a major power, eventually second
only to the US, and reasonable to anticipate that the other three also soon could be major
powers.30 On several relevant dimensions each of the four soon will outstrip the US’
traditional Western European allies—although this judgment would change dramatically
if the Western European countries were to move toward close political union. Though the
US remains overwhelmingly first among equals, multipolarity is increasing.
Our second question for this section concerns the likely systemic consequences of
rising multipolarity, including a new set of challenger countries, from within a realist
understanding. We begin by reminding ourselves of how many realists understand the
status quo. Some propose that the break up of the Soviet Union, and Russia’s economic
and military weakness, generated unipolarity in the international system. In 1990 Charles
Krauthammer wrote, “It has been assumed that the old bipolar world would beget a
multipolar world with power dispersed to new centers in Japan, Germany (and/or
“Europe”), China, and a diminished Soviet Union/Russia. … The immediate post-Cold
War world is not multipolar. It is unipolar. The center of world power is an unchallenged
superpower, the United States, attended by its Western allies.” 31 A decade later he
emphatically reasserted his thesis:
27
Richard McGregor, “China affirms dollar’s global reserve status,” Financial Times, August 13, 2007; see
also Jeffrey Garten, “We need rules for sovereign funds,” Financial Times, August 8, 2007.
28
Tony Barber and George Parker, “EU demands more transparency over sovereign fund investments,”
Financial Times, September 28, 2007.
29
Bob Davis, “How Trade Talks Could Tame Sovereign Wealth Funds,” Wall Street Journal, October 29,
2007, p. A2.
30
For a provocative corrective to worries that China is quickly catching up to the US in overall capabilities,
see Steve Chan, “Is There a Power Transition Between the US and China? The Different Faces of National
Power,” Asian Survey, 45:5, 2005, pp. 687-701.
31
Charles Krauthammer, “The Unipolar Moment,” Foreign Affairs: America and the World, 1990/1991.
When I first proposed the unipolar model in 1990, I suggested … that, if
America did not wreak its economy, unipolarity could last thirty or forty
years. That seemed bold at the time. Today it seems rather modest. The
unipolar moment has become the unipolar era. It remains true, however,
that its durability will be decided at home. It will depend largely on
whether it is welcomed by Americans or seen as a burden to be shed.32
Neoconservative foreign policy analysts including Krauthammer thus announced
the US’ ability and duty to lead, which they expected to last decades into the future. The
initial years of the twenty-first century have been a period of American self-assertion, as
illustrated by the activist foreign policy of President George W. Bush. But if China or
others of the BRICs might be catching up, then the realist perspective gives one reasons
to be concerned—or relieved—at the imminent demise of America’s unipolar moment.
Some realists suggest that a period of particular danger for interstate war occurs when the
former hegemon is declining and a new one rising.33 Tellingly, however, many realist
analysts worry about the emergence of China—and the reemergence of Russia—as major
powers in the current century, but seem unconcerned about Japan, India, and Brazil.
Perhaps this is because China and Russia appear to pose a greater military threat, as both
are long-declared nuclear states with large standing armies. But there is more to the
argument than simply a concern over rising material capabilities among countries that
were weak following the Second World War. What many realist scholars actually fear is
the rise of a powerful anti-Western and anti-liberal-values coalition, led by China but
possibly also including Russia.
What is emerging is a "World Without the West." This world rests on a
rapid deepening of interconnectivity within the developing world--in flows
of goods, money, people and ideas--that is surprisingly autonomous from
Western control, resulting in the development of a new, parallel
international system. …The rising powers have begun to articulate an
alternative institutional architecture …. [that] proposes to manage
international politics through a neo-Westphalian synthesis comprised of
hard-shell states…Inviolable sovereignty in the World Without the West
rejects key tenets of "modern" liberal internationalism and particularly any
notion of global civil society or public opinion justifying political or
military intervention in the affairs of the state.34
China and Russia represent a return of economically successful
authoritarian capitalist powers, which have been absent since the defeat of
Germany and Japan in 1945, but they are much larger than the latter two
32
Charles Krauthammer, “The Unipolar Moment Revisited,” The National Interest, Winter 2002/2003, p.
17. For a counter-argument that nonetheless relies on an essentially realist logic see Layne, Christopher
Layne, “The Unipolar Illusion Revisited: The Coming End of the United States’ Unipolar Moment,”
International Security, 31:2, Fall 2006, pp. 7-41.
33
For example, Ronald L. Tammen, “The Impact of Asia on World Politics: China and India Options for
the United States,” International Studies Review, 6, pp. 563-580.
34
Nazneen Barma, Ely Ratner, and Steven Weber, “A World Without the West,” The National Interest, 90,
July/August 2007.
countries ever were…. As it was during the twentieth century, the US
factor remains the greatest guarantee that liberal democracy will not be
thrown on the defensive.35
The result of the end of America’s unipolar moment, in other words, may be the
opportunity for a China-centered authoritarian yet increasingly capitalist bloc, with
Russia left to decide on pure power-balancing criteria whether it wishes to fortify itself
vis-à-vis the West (thus looking to the East for alliance partners) or China (thus
cautiously turning West).36 But let us return to the mental model of realism. A pure realist
framing suggests that rational alliance choices in a non-hierarchical system are made
solely on the basis of countries seeking to prevent one unit (country) or alliance system
from attaining sufficient capabilities to pose a plausible threat to other units. One may
thus wonder why is China perceived by many analysts throughout the advanced industrial
democracies as unusually threatening, given that any conceivable military threat from
China is at best several decades in the future. What probably has happened is that once
again some analysts’ intuitions about what matters in the international system have
outrun their conscious mental model, a point to which I return below.
This section began with two queries. We asked whether it was reasonable to
imagine that, in purely material capability terms, any or all of Brazil, Russia, India, and
China could by the mid-twentieth century be considered “major powers.” A variety of
evidence suggests that by this criterion first China, then India and Russia, and then
Brazil, all would be indisputable members of the set of top five to seven major powers--at
the latest approximately three decades hence.37 We also questioned how and why a shift
in the identities of the major powers might matter for the conduct of the global political
economy. We identified widespread unease with the relative rise of China, in particular,
but then went on to argue that the reasons for analysts’ discomfort with the image of a
powerful China seemed to spread beyond the confines of the realist mental model. In
other words, the actual concerns appeared to touch on issues of political institutions and
values, and the domestic political characteristics of states. Allowing these analytical
dimensions moves the debate decisively to the terrain of our third mental model.
III. Liberal Institutionalism and the BRICs
Our final perspective on the concept of “the BRICs” is that of liberal
institutionalism, which we here define very broadly to encompass all of the schools and
sub-schools of international relations that assert that institutions, and/or ideas and values
(whether domestic, transnational, or international), may concretely influence international
outcomes.38 The liberal institutionalist mental model begins from a realist, balance of
power framing, but then makes crucial additional assumptions disallowed within a strict
35
Azar Gat, “The Return of Authoritarian Great Powers,” Foreign Affairs, July/August 2007.
The description of China as an emerging “authoritarian capitalist” power is controversial. The Chinese
government describes its economic system as “socialist market.”
37
The analysis also assumes that major countries of Western Europe will not decide to push for tighter
political union, complementing their current monetary and economic integration, in order to preserve their
current level of global influence. On how key non-BRICs countries might react to the rise of the BRICs see
the papers by Brawley; Laurence; and Lee, Ma, and Park in this Special Issue.
36
realist model. For starters, most liberal institutionalists would expand the definition of
“power” to allow for “soft” as well as “hard” capabilities in assessing the relative power
of states.39 If citizens of other countries wish to attend university in your country, speak
your national tongue, watch your movies, emigrate to your country, or identify their
political institutions or cultural values as being like yours, then your country has soft
power. Hard power capabilities ranging from military might to a large domestic market
may enable a country to employ constraints (military threats) or inducements (market
access) to gain the cooperation of others. In contrast the use of soft power relies on
persuasion and the desire for emulation to inspire cooperation. Soft power inheres in a
country’s reputation—for political stability, economic growth, trustworthiness in
diplomacy, or public-spiritedness in managing international institutions. Reputation, or
world public opinion, is a different kind of relative power indicator, and one that arguably
incorporates both hard and soft power components. Germany’s Bertelsmann Foundation
recently queried a wide sample of respondents from nine countries on which countries
and major international organizations they perceived as world powers, both today and in
the near future. Table 6 summarizes their findings. The only two countries that 50 percent
or more of respondents expect to be great powers in 2020 are the US and China.
38
We include within a single paradigm theorists sometimes separated into “neoliberals” (in the
international relations sense), “institutionalists,” and “constructivists.” See Brawley in this volume.
39
See Joseph S. Nye, Soft Power: The Means to Success in World Politics. PublicAffairs Press, 2004.
Table 6. Which Countries or Organizations are/will be World Powers?*
(percent of all respondents who select)
United States
Japan
Britain
Germany
France
European Union
China
India
Russia
Brazil
South Africa
United Nations
Today
81
37
33
26
21
32
45
12
27
5
4
26
In 2020
57
32
30
22
20
26
55
16
24
10
6
23
* Global percentage calculated as unweighted mean of country averages.
* Source: “World Powers in the Twenty-First Century: The Results of a Representative Survey in Brazil,
China, France, Germany, India, Japan, Russia, the United Kingdom, and the United States,” Berlin,
Bertelsmann Foundation, June 2, 2006.
http://www.bertelsmann-stiftung.de/bst/en/media/xcms_bst_dms_19189_19190_2.pdf
But the critical differences of the liberal institutionalist mental model as compared
to the realist framing go beyond simply allowing soft components of power into our
assessment of the relative ranking of states in the global system. First, liberal
institutionalists (sometimes called neoliberal institutionalists, or simply institutionalists)
typically believe that, in addition to states’ relative capabilities, the incentives and
opportunities created by international institutions influence state choices and global
outcomes. States are not the only significant actors in international relations. Under
certain conditions, international governmental organizations (IGOs)--or even lessformalized but well-accepted global “regimes” of shared expectations about norms, rules,
and procedures--may enmesh rationally suspicious sovereign states in mutually beneficial
relations of reciprocity and trust.40 Interstate diplomacy poses countless pressing
problems of collective action, defined as situations in which one party may make itself
vulnerable by acting cooperatively, yet mutual cooperation produces a better outcome for
all. Examples range from pollution control to disarmament. Liberal institutionalists posit
that both formal IGOs, and less formal global regimes mixing state-to-state diplomacy
with transnational private cooperation and monitoring, have measurably and mostly
positively altered international relations, particularly in the six decades following the last
40
Keohane, Robert O., Power and Governance in a Partially Globalized World. London: Routledge, 2002;
Robert O. Keohane, After Hegemony: Cooperation and Discord in the World Political Economy.
Princeton: Princeton University Press, 1983; Andreas Hasenclever, Peter Mayer, and Volker Rittberger,
Theories of International Regimes. Cambridge: Cambridge University Press, 1997.
major power war, World War Two. For example, regular and mutual arms verification
reduces the incentives for arms races, making accidental war less likely. Membership in
international economic organizations such as the World Trade Organization facilitates
trade, contract enforcement, and economic growth.
Second, many liberal institutionalists would take further theoretical steps and
assert that domestic institutions and/or ideas and values also influence state choices and
international outcomes.41 For example, democratic peace theory suggests that pairs or
dyads of democratic states are better able to surmount the barriers to mutual trust and
cooperate voluntarily across borders than are dyads in which at least one state is
authoritarian.42 One proposed mechanism by which democratic dyads build relations of
mutual trust turns on democratic countries’ relatively transparent and slow-moving
domestic policy processes, full of potential veto players, which make sudden policy
reversals extremely unlikely. Democratic leaders also are said to be less capable than
autocrats of initiating an unprovoked surprise attack on an ally, simply because
democratic publics cannot mentally re-categorize an erstwhile friend as a ‘rogue state’
overnight. The costs of breaking international agreements are thus higher for
democracies.43 Other analysts emphasize democracy’s allegedly “dovish” value of
settling disputes peacefully, and related humanitarian and universalistic norms.44
According to this “constructivist” variant of liberal institutionalism, the values held by
citizens and their leaders can alter state choices, thus helping to create or maintain
enduring and consequential international institutions that structure the incentives to and
preferences of future state leaders and democratic publics. The institutionalist mental
model thus asks not only what material capabilities the BRICs possess, but also what they
and their leaders want. A liberal institutionalist asks whether a possible new G7—perhaps
the US, Japan, the four BRICs, and the European Union as a collective voice--in the mid
twenty-first century would be likely to alter the character of international institutions and
global cooperation. This framing reveals that there are two distinct subsets of BRICs: the
mostly authoritarian emerging powers, China and Russia, and the securely if sometimes
chaotically democratic ones, India and Brazil.
China and Russia
We noted above the fears of many ostensibly realist analysts over the possible rise
of an anti-liberal values coalition. Within a strict structural realist framing where only the
interstate balance of power matters, this fear is illogical.45 But once we admit that
domestic institutions and goals might shape international alliance preferences we are in
41
Moravcsik, Andrew, 1997. "Taking Preferences Seriously: A Liberal Theory of International Politics,"
International Organization, 51:4, Autumn; Audie Jeanne Klotz. Norms in International Relations: The
Struggle Against Apartheid. Ithaca, NY: Cornell University Press, 1999.
42
Michael E. Brown, Sean M. Lynn-Jones, and Steven E. Miller, eds. Debating the Democratic Peace.
Cambridge, MA: The MIT Press, 1996 [2001].
43
Brett Ashley Leeds, “Domestic Political Institutions, Credible Commitments, and International
Cooperation,” American Journal of Political Science, 43:4, October, 1999, pp. 979-1002.
44
Zeev Maoz and Bruce Russett. 1993. “Normative and Structural Causes of Democratic Peace,
1946-1986,” American Political Science Review, 87:3, September, pp. 624-638.
45
See Waltz, Op. Cit.
the institutionalist/cognitivist/neoliberal domain. We shall assume that both China and
Russia are accurately described today as authoritarian states. Will such states, once they
become major powers, be likely to respect and expand the existing, and mostly liberal,
network of global governance institutions?
There are two possibilities. Authoritarian leaders might be expected to value
interstate cooperation on practical matters involving non-zero-sum threats to collective
economic and physical security: disease prevention, protection of international shipping
from piracy, and perhaps control of clandestine human, drugs, and weapons trafficking.
But they are unlikely to favor international promotion of democratic values and
processes: human rights, labor rights, and a free press and electronic media. The tenor of
authoritarian countries’ participation in international regimes governing such subjects as
trade, finance, climate change, and arms control should fall somewhere in between the
extremes of willing cooperation and covert obstructionism, with Chinese and Russian
leaders probably supportive of the goals of global economic governance, but much less
willing than democracies to open their domestic institutions to supranational inspection
or oversight, and very suspicious that they will be asked to sacrifice disproportionately. 46
Meanwhile, Western analysts probably have underestimated the soft power of China and
Russia, each of which have long and heroic imperial histories.47 Both China and Russia
have been active in constructing IGOs that they dominate. 48 As authoritarian major
powers arise, the wealthy democracies also may participate less in international regimes,
judging that their counterparts in Beijing and Moscow, as compared to those in London
or Paris, are less constrained by domestic veto players and mass public opinion from
acting capriciously, and therefore cannot fully be trusted. In sum, the inclusion of
authoritarian countries as major powers may not necessarily signal an overt retreat from
intergovernmental cooperation, but it is also unlikely to inspire its rapid expansion.
The other possibility, which many liberal institutionalists believe likely, is that
participation in global governance will promote liberalizing domestic change within
authoritarian polities. This is the political convergence thesis.49 As citizens become
wealthier and better educated, they also will expect more choices and more freedoms;
political democracy will become more attractive. Both case study and econometric
investigations demonstrate a high correlation between high levels of income per capita
and stable democratic politics, although the precise causal link remains contested.50 By a
similar logic, constructive engagement of today’s democratic major powers with rising
46
For example, a recent attempt at US-Chinese bilateral cooperation over manned space satellites ended
abruptly when the US representative was denied access to Chinese human spaceflight training facilities.
Guy Gugliotta, “New Challengers Emerge, Threatening to Take the Lead,” New York Times, September 25,
2007.
47
On the attractiveness of China in Africa today see Liang in this issue.
48
See Hancock and Liang in this Special Issue.
49
On the attractiveness, or even inevitability, of liberal democracy and market capitalism see Frances
Fukuyama, The End of History and the Last Man, Free Press, 1992; Michael Mandelbaum, The Ideas that
Conquered the World: Peace, Democracy, and Free Markets in the Twenty-First Century. New York:
Council on Foreign Relations, 2002. Fukuyama, however, has recently argued that heedless international
behavior by a hegemonic liberal democracy may undermine the attractiveness of its domestic political and
economic systems. See his America at the Crossroads: Democracy, Power, and the Neoconservative
Legacy, New Haven, CT: Yale University Press, 2007.
authoritarian states should promote political convergence on liberal democracy. In 1997
the Group of Seven (G7), sometimes referred to as the rich countries’ club, took the
unprecedented step of expanding its membership to include Russia, arguing that it was a
“major power” with a right to be included. Those who pushed for inclusion of Russia
hoped to support and strengthen liberal, pro-Western political forces within the country.
Whether G8 membership has successfully compensated Russia for the West’s
provocative decision to expand NATO eastwards remains an open question.
More recently the hopes of liberal institutionalists have centered on China.
Hempson-Jones argues that China’s participation in IGOs has softened its practice, if not
yet its official rhetoric, and that the former is a more important clue to its future
behavior.51 China has gradually reduced its resistance to UN Peacekeeping missions. In
August 2007 China backed down from its steadfast opposition in the UN Security
Council to a peacekeeping mission for Darfur, the site of massacres acknowledged by
most observers to be genocide tacitly endorsed by Khartoum. This occurred despite
Beijing’s close ties with the Sudanese government and significant natural resource
investments there. China, though not a formal member of the Association of South East
Asian Countries (ASEAN), is a large presence in its discussions and a participant in
several parallel processes involving its East Asian neighbors. According to some
analysts, China has learned from discussions with its sovereign partners, occasionally
modifying its policy positions. Since 2003 China has found common ground with other
developing countries through its recent, though modest, participation in the G20 group
formed to lobby the advanced industrial countries to liberalize agricultural trade. Li
argues that returned foreign students have brought foreign liberal values home.52 Yet it
would be foolish to conclude that mere willingness to participate in numerous
international agreements means that an autocratic state will allow itself to be constrained
in its behavior by those agreements. China’s neighbors, prominently including India,
struggle to assess the credibility of China as an economic and political partner.53
India and Brazil
A liberal institutionalist also would ask what India and Brazil might want from
global governance. Democratic peace theory predicts greater mutual trust between state
dyads in which both countries are democracies. India and Brazil should be skilled at
peaceful interstate cooperation for the same reasons that the US, France, or Japan are.
The commitments of politicians are relatively credible, since abrupt shifts in policy will
be difficult to explain to voters. Moreover, both India and Brazil have demonstrated
considerable soft power, or attractive and persuasive international capabilities. For
50
See Dietrich Rueschemeyer, Evelyne Huber Stephens, and John D. Stephens, Capitalist Development
and Democracy. Chicago: University of Chicago Press, 1993, especially Chapters 1 & 2; Adam
Przeworski, Michael Alvarez, José Cheibub, and Fernando Limongi. 2000. Democracy and Development,
Cambridge: Cambridge University Press.
51
Hempson-Jones, Justin S., “The Evolution of China’s Engagement with International Governmental
Organizations: Toward a Liberal Foreign Policy?,” Asian Survey, 45:5, 2005, pp. 702-721. See also Liang
in this volume.
52
He Li, “Returned Students and Political Change in China,” Asian Perspective, 30:2, 2006, pp. 5-29.
53
See Rusko and Sasikumar in this volume.
example, India was a leader in both the Non-Aligned Movement of the 1950s through
1970s and the New International Economic Order of the 1970s and early 1980s, each of
which might have found greater long-run success had more of their members been
democracies like India. More recently, Brazil and Argentina have improved their
relations dramatically since both have democratized. If some democracies who are major
powers (the European members of today’s G7) are substituted for by other newlypowerful democracies (such as India and Brazil), then we may expect global governance
institutions, overarching liberal values, and processes to remain much the same.
Nonetheless, some of the content of global governance initiatives could shift in
response to weightier participation from developing country democracies. Like France or
Britain, India and Brazil should value human rights, labor rights, and a free press. But
leaders of India and Brazil may view global redistribution more favorably than leaders of
the wealthy democracies. For example, climate change is an issue on which both Brazil
and India have implemented domestic reforms and could be global leaders, but the
substance of their leadership could make today’s G7 uncomfortable. Both democratic
BRICs will side with other developing countries in demanding much greater conservation
efforts from the US, Japan, and the EU, rather than from countries whose peak industrial
pushes remain ahead of them. Indian and Brazilian politicians and non-governmental
organization (NGO) activists also have been active in South-South diplomacy. Both
countries have played host to the World Social Forum (WSF), the anti-Davos meeting,
the original idea for which came from a Brazilian businessman and social activist, Oded
Grajew.54 Anti-AIDs activists in the two countries have begun transnational
collaboration, sharing ideas and pressuring their governments to insist on their rights to
manufacture generic versions of expensive pharmaceuticals developed in the wealthy
democracies. In 2003 Brazil joined India and South Africa in issuing the Brasília
Declaration, which announced the three democracies’ intent of negotiating jointly within
the WTO. This core became the Group of 20 (G20, also known as the G22) developing
countries, which came to world attention during Cancún Ministerial meeting of the WTO
by its refusal to negotiate over liberalizing the regulation of inward foreign direct
investment) until the advanced industrial countries committed to substantial agricultural
trade liberalization.55 What is particularly interesting in the Brazil-India-South Africa
cooperation is that the three have been able to cooperate despite their lack of closely
parallel interests in agricultural and other commodity trade. Contrast this with the utter
inability of developing country debtor countries in Latin America and elsewhere to form
a united front vis-à-vis creditor country banks and governments in the 1980s, a period
when many were either autocracies or very new and fragile democracies.
This section thus has argued that a liberal institutionalist framing leads us to ask
the most interesting questions about how and why a substitution of countries within the
set of major powers might alter global politics. However and at the same time, the
concept of “the BRICs” as a single useful analytical set shatters. Instead what appears to
be most significant is whether the large emerging powers, whoever they may be, can be
54
See Gilberto Nascimento’s interview with Grajew in Isto E, December 12, 2000.
Marcio Botelho, “The G-20: Aims and Perspectives of a New Trade Alliance,” M.A. Thesis (Berlin:
University of Applied Sciences, 2005); Andrew Hurrell and Amrita Narlikar, “A New Politics of
Confrontation? Brazil and India in Multilateral Trade Negotiations,” Global Society 20:4, 2006.
55
socialized into the hitherto cozy club of large industrial democracies, dominated by the
US, that have more or less cooperatively managed the interlocking global governance
regimes since the last hot conflict among major power combatants, the Second World
War.56 If the large emerging powers become both status quo powers, interested in
preserving existing global governance institutions, and more or less open, liberal
societies, then the world may not miss US hegemony—much. If not, then the
maintenance of mutually beneficial, yet purely voluntary, interstate cooperation founded
on reciprocal trust becomes significantly more problematic.
IV. Conclusions
This paper has asked whether the ”BRICs countries” is a viable analytical
category. The four do not share domestic political institutions, international goals, or
economic structures and challenges. If the category nonetheless provides insight, it must
be because this set of countries holds similar implications for the larger system—the
international political economy—within which it is embedded.
The remainder of the essay considered the concept from three alternative systemic
perspectives. I began with an economic liberal’s framing, a mental model that assumes
the international economy is neither oligopolized nor highly politicized, but rather
functions as a decentralized free market most of the time. From this perspective, the
BRICs economies would be a analytically viable set if they offered usual opportunities
for foreign portfolio and direct investors, or if their multinational firms could be expected
to be ferocious competitors in the future, or if some other economic characteristic
plausibly distinguished the four from the larger set of developing and post-communist
countries known as emerging market economies. I found this claim unconvincing. In fact,
a look at the business literature suggests that the core proposition even among scholars is
simply that the BRICs economies will be large and therefore must be important—as
markets, investment destinations, and competitors. While logically consistent economic
liberals should care about factors such as the quality of national economic governance
within emerging market economies, a concern with relative size—and thus relative
power—implicitly transports us to the cognitive territory of political and economic
realism.
A realist approach suggests that advanced industrial countries whose relative
international position may be slipping are justified in fearing the rise of the BRICs
countries. Moreover, within a pure balance of power mental model for interpreting trends
in the international political economy, the structure of relative material capabilities
among units or countries shapes systemic outcomes: the end of American hegemony may
undermine global stability. Yet there is more to be said. In particular, the realist model is
unclear about why Japan or Germany, enemies of the US (and the liberal democratic
“West”) within living memory, today are universally perceived as reliable Western allies,
56
On the ways in which liberal global governance regimes have also served the parochial interests of the
major powers, see especially Lloyd Gruber, Ruling the Waves: Power Politics and the Rise of
Supranational Institutions, Princeton, NJ: Princeton University Press, 2000; and William K. Tabb,
Economic Governance in an Age of Globalization. New York: Columbia University Press, 2004.
while China and Russia arouse enormous suspicion. To understand, we need a liberal
institutionalist’s perspective, plus the additional proposition that democratic states may
be more supportive of existing institutions of global economic governance, and of
evolving political cooperation around liberal values, than autocracies. Ultimately it is
uncertainties about the likely future balance between democratic and authoritarian major
powers that should make a focus on the relative rise of the BRICs countries compelling
for analysts of both international business and world politics.
If China and Russia become major powers that are authoritarian, albeit
marketized, then the net tenor of global governance will revert to being more
Westphalian, as sovereign states increasingly shy away from even mild criticism of one
another and abjure ‘interference’ within one another’s borders. In contrast, the relative
rise of liberal democratic states such as India and Brazil portends that ideals of secular
universalism, religious and ethnic tolerance, and universal human rights will continue to
spread, however gradually and imperfectly. We also should expect Indian or Brazilian
integration into the club of the powerful to push global negotiations in areas such as
climate change, or the international trade and investment regimes, toward somewhat
more globally redistributive bargains. This does not of course mean that either India or
Brazil will put the interests of the poorest countries, many of which are in sub-Saharan
Africa, above those of their own citizens, any more than today’s wealthy democracies
have been willing to sacrifice their comforts or agricultural subsidies for the sake of
Indians, Chinese, or Brazilians. Ultimately, our expectations of how these four new
players might behave suggest two distinct subsets, one authoritarian and the other
democratic. The category of “the BRICs” is thus, strictu sensu, a mirage—but one that
nonetheless has provided considerable insight. For the present, perhaps we should keep it.
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© 2009 The Association for Asian Studies, Inc. doi:10.1017/S002191180900062X
India and China: Governance Issues and
Development
PRANAB BARDHAN
The world’s two most populous countries each made international headlines in
2008, thanks to the Sichuan earthquake and Beijing Olympics, the Mumbai
terror attacks, and reports of how the global financial crisis affected the Chinese
and Indian economies. However, China and India were also seen in 2008 as
making up, together, one of the ongoing development stories of the twenty-first
century—and there are good reasons to think this trend will continue throughout
2009. Thanks to years of strikingly high growth rates for India and even higher
ones for China, comparisons of the two countries have proliferated. This has
resulted in a slew of books and articles, often aimed at investors, that worry
over or enthuse about the way the “dragon” and the “elephant” have been upending or bringing new energy into the global economic order. Scholars immersed in
the study of Asia often find these publications lacking in depth, but there is no
question that economic shifts in the two countries and surging interest in their
current trajectories are important. With this in mind, we decided this would be
a useful time to revisit a familiar governance issue that has long been associated
with joint discussions of China and India: the relationship between democracy
and development. We invited economist Pranab Bardhan, author of a forthcoming
book on the political economy of India and China titled Awakening Giants, Feet of
Clay, to reflect on the subject, concentrating in particular on issues of governance—
a topic he has explored in plenary and keynote addresses given everywhere from
Montreal to Manchester, Beijing to Bogota, Canberra to Calcutta.
NY COMPARATIVE STUDY OF contemporary China and India inevitably involves
discussion of democracy and development, but most of the standard treatments stay at the level of simplistic clichés and high-minded platitudes. My
goal here is to go beyond this, highlighting some of the complexities in the functioning of democracy in India and authoritarianism in China, and asking what this
contrast tells us about governance and economic management in the context of
development in these two large and still—despite record growth years—poor
countries.
One reason such a consideration matters is that the dramatic economic
success story of China in the last quarter century has revived a hoary myth: that
authoritarianism delivers much more than democracy, particularly early on.
A
Pranab Bardhan (bardhan@econ.berkeley.edu) is Professor of Economics at the University of California,
Berkeley.
348
Pranab Bardhan
This myth is reinforced by the memory of the impressive economic
performances of other East Asian authoritarian regimes, such as South Korea
and Taiwan prior to their democratic turns. The lingering hope of democrats
has been that as the Chinese middle class prospers, its members will demand
what their counterparts in South Korea and Taiwan got: movement toward political democracy.
The relationship between authoritarianism, democracy, and development,
however, is not so simple. Authoritarianism is neither necessary nor sufficient
for development. That it is not necessary is illustrated by today’s industrial
democracies and by scattered cases of development success: Costa Rica, Botswana, and now India. That it is not sufficient is evident from disastrous authoritarian regimes in Africa and elsewhere.
Even if we did not value democracy for its own sake, and looked at it in a
purely instrumental way, it is worth reiterating some basic development-related
advantages of democracy. First of all, democracies are better able to avoid catastrophic mistakes, such as China’s Great Leap Forward (which was accompanied
by a famine that killed nearly 30 million people) and the Cultural Revolution
(which was linked to massive mayhem). Democracies also have greater healing
powers after difficult times. In general, democracy provides a better capacity
for managing conflicts, which in the long run enables a more stable political
environment for development.
India’s democratic pluralism has provided the means of containing many
(though not all) social conflicts, a capacity that China’s homogenizing, monolithic
state does not yet seem to have acquired. Faced with a public crisis or political
shock, the Chinese leadership, which is otherwise so pragmatic, tends to overreact, suppress information, and act heavy-handedly. (One example of this heavyhandedness is that, according to some accounts by human rights organizations,
although both countries have capital punishment, China executes more people
in one week than India has put to death in the sixty-plus years since
independence.)
Some degree of tolerance for diversity and dissent has historically been the
safety valve for India’s extremely heterogeneous society. For many centuries,
on the contrary, Chinese authorities have typically given much less scope to pluralism and diversity; a centralizing, authoritarian Communist Party has carried on
this tradition. Nurtured in this centralizing tradition of control, there is a certain
preoccupation in China (not just in the party) with order and stability and the
importance of avoiding da luan (great turmoil), as well as a quickness to brand
dissenting movements and local autonomy efforts as seditious. This often leads
to unnecessarily harsh repression.
In recent years, China has diffused and contained many conflicts by localizing
them. More positively, the policy of decentralized development and regional
autonomy has encouraged local initiatives and incentives. But in order to keep
these local initiatives under some moderate bounds and to make them serve
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national goals through tournament-like competition in regional economic performance, centralized control has been maintained through the channels of a
promotion and reward system that encourages local officials to depend on
those above them in the party bureaucracy. But centralized control is not
always benign, even though the party leadership has in recent years curbed
some of its arbitrary practices and shown some sensitivity to popular grievances.
As long as checks and balances on the top leadership are not fully institutionalized, the danger of going off the rails in response to unexpected events and exaggeration of dissent always remains.
Democracies in general experience more intense pressure to share the
benefits of development among the people, thus making it more sustainable.
They also provide more scope for popular movements against capitalist excesses
and environmental degradation. In addition, there are more political
opportunities to mitigate social inequalities (especially acute in India) that act
as barriers to socioeconomic mobility and to the full development of individual
potential.
Finally, democratic societies provide better environments for nurturing the
development of information technologies, a matter of importance in the
current knowledge-driven global economy. Intensive cybercensorship in China
may seriously limit future innovation. Censorship (and anticipatory selfcensorship) inhibits imaginativeness and inventiveness. State control of
information also sometimes makes for delay in official recognition, and thus
handling, of an incipient crisis. From the SARS outbreak to last year’s tainted
milk scandal, there are many examples of this. Weeks before the latter scandal
broke, journalists were encouraged to suppress bad news because of the
Olympics, which was being stage-managed as China’s moment of international
glory. Journalists who were fully aware of the tainted milk case avoided writing
about this “in order to be harmonious,” as one editor said later (New York
Times, September 27, 2008). Meanwhile, hundreds of thousands of children
fell sick (a few even died), and the reputation of Chinese products was seriously
damaged.
All that said, India’s experience suggests that democracy can also hinder
development in ways not usually considered by democracy enthusiasts. Competitive populism—short-run pandering and handouts to win elections—may
hurt long-run investment, particularly in physical infrastructure, a key
development-related bottleneck in India. Such political arrangements make it
difficult, for example, to charge user fees for roads, electricity, and irrigation, discouraging investment in these areas. Conversely, in China, infrastructure companies can charge more commercial rates. Competitive populism also makes it
difficult to carry out policy experimentation of the kind that China’s leaders
have excelled in throughout the reform era (“crossing the river, groping for the
stones,” as Deng Xiaoping famously put it). It is harder to cut losses and
retreat from a failed project in India, which, with its inevitable job losses and
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bailout pressures, has electoral consequences that discourage leaders from policy
experimentation in the first place.
In Indian democracy, the legislative process is often relegated to a second
order of importance, giving short shrift to the deliberative process of democracy
that John Stuart Mill and other classical liberal theorists valued so much. Overall,
India’s particular form of democracy relies less on deliberation than on popular
mobilization. This means that issues that could be resolved through the deliberative give-and-take get trapped in rhetorical intransigence and strident divisiveness of street theater. Decision deadlocks are frequent, which has immense
political and economic costs. This is over and above the general case that democracy’s slow decision-making processes can be costly in a world of fast-changing
markets and technology.
Besides, when democracy relies on popular mobilization in a country where
the general education level is low, civic associations relatively weak, and public
debates relatively uninformed, the opposition can get away with being irresponsible (e.g., opposing the government for policies they themselves supported when
in power). It also gives political opportunists leeway in segmenting the electorate
along ethnic, regional, or religious lines; fomenting sectarian fear and anxiety is
often a successful political mobilization device.
The hopes of democrats relying on the middle classes in authoritarian
regimes have not always borne fruit. Latin American and South European
history has been replete with episodes of middle classes hailing a supreme caudillo. The police state in China shows no signs of loosening its grip, despite the
spectacular progress in the opening of the economy. While there has been
some relaxation in controls over individual expression and lifestyle, and more
open middle-class grumbling over pollution and forcible acquisition of property,
the state still never fails to clamp down on political activities that have even a
remote chance of challenging the party’s monopoly on power. Many middle-class
Chinese seem likely to remain complicit in this in the name of preserving social
stability or “harmony,” as long as opportunities for money making and wallowing
in nationalist pride keep on thriving. A kind of preening nationalism has replaced
socialism as the social glue in China, with the state leadership occasionally trying
to stoke and then modulate collective passions about what the West or Japan had
done in the past to China in the “century of humiliation” (sometimes fomented by
frenzy on the Internet among the young) and to turn any external criticism into a
slur on national self-respect.
The Indian urban middle classes also have a prickly nationalism, but more
than harking back to two centuries of direct colonial subordination, it occasionally
turns instead to majoritarian atavism to serve as a unifier in the context of unmanageable social and cultural diversity in society and works itself up questioning
the national loyalty of domestic minority groups (in a context where the violent
partition of the country at independence remains a festering wound). Urban
upper and middle classes in many parts of India are impatient about climbing
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the global ranks of big power and often regard as a hindrance and liability the
numerically large poor outside their gated communities, with their all too
visible squalor and messy democratic politics.
***
Democracy has brought about a kind of social revolution in India. It has
spread out to the remote reaches of this far-flung country in ever-widening
circles of political awareness and self-assertion among socially hitherto
subordinate groups. These groups have increased faith in the efficacy of the political system, and they vigorously participate in larger numbers in the electoral
process.
But the great puzzle of Indian democracy is why the poor, so assertive when
election time comes, often do not punish politicians who are ineffective at resolving the endemic problems of poverty, disease, and illiteracy. It is possible that
endemic poverty is widely regarded among the common people as a complex
phenomenon with multiple causes, and they ascribe only limited responsibility
to the government. The measures of government performance are in any case
rather noisy, particularly so in a world of illiteracy and low levels of civic organization and formal communication on public issues. A perceived slight in the
speech of a political leader felt by a particular ethnic group will usually cause
much more of an uproar than the same leader’s failure to change policies that
help keep thousands of children severely malnourished in the same ethnic
group. The same issue of group dignity comes up in the case of reservation of
public-sector jobs for backward groups, which fervently catches their public
imagination, even though objectively the overwhelming majority of the people
in these groups have no chance of ever landing those jobs, as they and their children largely drop out of school by the fifth grade. Even when these public job
quotas mainly help the tiny elite in backward groups, as a symbol and a possible
object of aspiration for their children, they ostensibly serve a valuable function in
attempts at group upliftment.
While the electorate does not seem to penalize politicians for their endemic
poverty, they are less forgiving when there is a sharp and concentrated deterioration in their economic condition. Amartya Sen has commented on the political
sensitivity of democracies to the threat of famine, but to me, the more commonplace example for this in India is the electorate’s high degree of inflation sensitivity. It is a common presumption that an annual inflation rate at the
double-digit level, if it continues for some time, will be politically intolerable in
India, and politicians universally support a conservative monetary and sometimes
even fiscal policy to avoid this danger. The poor tend to make the government
directly responsible for inflation and expect it to stop it in its tracks, even at
the expense of cutting budgetary programs for infrastructure that would help
the poor in the long run.
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The Indian electorate is often regarded as reflexively anti-incumbent, particularly in contrast with the electorate in the United States. This may have something to do with widespread dissatisfaction with the delivery of social services and
public goods. Because the poor usually get mobilized along caste and ethnic lines,
the modalities of such mobilization are often multidimensional, and poverty alleviation is only one of many issues that get articulated in the public domain. Also,
the process of ethnic mobilization is often easily hijacked by the elite of these
groups, who channel the lion’s share of the benefits toward themselves. The
intended poor beneficiaries are often unorganized and uninformed about their
entitlements, and they also lack the ability to evaluate the quality of the particular
education or health service provided.
Besides, at any given moment in India, an election somewhere is not far off
(national, state, municipal, and village elections are staggered), and, as in election
times everywhere, short-term calculations dominate. Populist quick-fix policies
rather than sustainable improvements in structural conditions become the
order of the day, and because it is usually the case in India’s extremely fractious
society that no disadvantaged group by itself is numerically predominant, the exigencies of electoral alliances with other groups (some of them not so disadvantaged) dilute the need to attend to the poorest. Because the better-off people
(including better-off sections of disadvantaged groups) increasingly turn to
private sources of public services (primary and secondary education, health
care, irrigation, drinking water, child nutrition), the political support structure
for public access to these services or improvement in their quality is rather
weak or eroded in many parts of the country. There are also differential
degrees of public vigilance over (or effectiveness of) different types of antipoverty
programs. Political clientelism prevails, under which the delivery of private and
short-run benefits (in the form of temporary employment projects, subsidies,
loan waivers, etc.) get priority over public services and long-term investment in
infrastructural facilities (roads, public health and sanitation, watershed development, etc.).
The problem of poor delivery of social services involves more than just a lack
of public vigilance or demand. It is a serious governance problem from the supply
side as well (such as inadequate school buildings or health clinics with appropriate facilities and within manageable distance, rampant absenteeism by teachers,
doctors, nurses, etc.).
Decentralization of governance in the sense of devolution of power to
elected local governments was constitutionally adopted in India in the early
1990s. It was supposed to increase the accountability of the service bureaucracy
as well as generate resources to address felt needs at the local level. But this particular governance reform remains largely on paper, except in three or four states,
and in this sense local democracy is still rather weak in India. In most cases, local
government officials are primarily involved in selecting the beneficiaries of programs that are designed and funded from above. A large number of local
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governments simply do not have adequate funds, or the appropriate delegated
functions or competent functionaries, to carry out locally initiated autonomous
projects that could make a significant difference in the lives of the poor; there
is considerable misappropriation of funds and delivery of services to nontarget
groups, sometimes giving decentralization a bad name. Yet there have been
some localized success stories.
In China, decentralization has been successful in providing incentives (and discipline) for rural industrialization. But decentralization has increased regional
inequalities. In spite of the fiscal recentralization of the mid-1990s and a great
deal of central transfers to local areas, there is a widespread rural budget crisis in
China. The system is still sufficiently fiscally decentralized, with large numbers of
unfunded mandates for local governments, that while the better-off regions can
afford superior public services, the lagging regions have to live with large cuts in
community services. These tensions of fiscal federalism are increasing in India,
too. The better-performing state governments are now openly protesting large redistributive transfers to laggard states ordained by the Finance Commission. In the
Indian democratic system, however, some of these laggard populous states (such
as Uttar Pradesh or Bihar) send a very large number of members to Parliament,
and the (shaky) coalition governments at the center can ill afford to alienate them.
***
There are interesting contrasts in the style and content of governance in
China and India. In China, there is more decisive policy initiative and execution
than in India. This is not all attributable to an authoritarian setup. In general, collective action problems in goal formulation and policy enforcement are less
severe in China than in the conflict-ridden, extremely heterogeneous society of
India, where any major controversial decision is preceded by endless discussion,
loud agitation, breast-beating street antics, and sometimes even fistfights and
property damage; ultimately, what gets carried out after considerable delay is a
much fought over, imperfect compromise. But for the same reason, executive
authority in India, while weak, is more legitimate. The same disorderly processes
of fractious pluralistic democracy that make decisiveness on the part of the leadership difficult also make executive authority more legitimate in the eyes of the
people. The Chinese leadership, conversely, has to derive popular legitimacy
from ensuring rapid economic growth and job expansion (which are under
stress in the current recession), and also somewhat from advancing toward “harmonious” goals (i.e., environmentally friendly growth with some rudimentary
social protection and effective political order). Ethnicity-based dignity politics,
group upliftment, and other sectarian issues that crowd the political agenda in
India are less of an encumbrance.
Recently, the Chinese political leadership has been more technocratic and
professional than that in India, which helps in informed, purposive decision
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making. (Even the party membership composition in China has changed substantially lately: In 1978, two-thirds of the members were workers and peasants, but
by 2005, their share had fallen to 29 percent, and by then, 23 percent of members
were professionals, 30 percent college students).
Promotions in the administrative services are more performance based
(instead of being seniority based) in China than in India. “Transfers and postings”
of officials are major preoccupations of (and sometimes a source of illicit income
for) Indian politicians, particularly at the state level. Rotation and temporary
sojourns of Indian bureaucrats in a given job inhibit on-the-job learning of
increasingly complex tasks. Regulatory effectiveness in commercial transactions
is also better in China than in India, even though guanxi and corruption continue
to contaminate the process. Nepotism in state appointments, however, may have
gone further in China than in India: It is reported that many of the senior positions in some of the state-dominated sectors in China are filled by the children
and other relatives of high-ranking party officials. Some Chinese economists have
warned about the dangers of crony capitalism.
Corruption is pervasive in both countries. But corruption in China is, in
general, qualitatively different from that in India in at least three ways: (1) The
lines of authority are more well defined and streamlined, whereas in India,
there is multiple veto power of different authorities (part of the
checks-and-balances system) on a given decision—as a result, even after paying
bribes, one is never sure whether the job will get done. (2) Because the official
rewards and promotions in China are more directly linked to local economic performance, the officials involved do not usually lose sight of the overall performance record, even as they line their own pockets. (3) As elections become more
expensive, politicians in India have to be on the lookout for collecting serious
money to an extent not necessary in China. But at the same time, there are
more institutionalized efforts in India to check the sources of corruption: The
Right to Information Act, for example, which recently came into existence as a
result of an energetic public activist movement in India, is an important step
in that direction.
The social revolution that democracy has brought about has also had some
impact on the nature of governance in India. The diminishing hold of elite
control and the welcome expansion of democracy to the lower rungs of the
social hierarchy have been associated with a loosening of the earlier administrative protocols and a steady erosion of the institutional insulation of the decisionmaking process in public administration and economic management. This has
affected not just the ability to credibly commit to long-term decisions, but the
whole fabric of governance itself. It is now common practice, for example, for
a low-caste chief minister in a state to proceed, immediately upon assuming
office, to transfer away top civil servants belonging to upper castes and to get
pliant bureaucrats from his or her own caste. Some of the new social groups
coming to power are even nonchalant in suggesting that all these years, upper
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classes and castes have looted the state, and now it is their turn. If, in the process,
they trample upon some individual rights or some procedural aspects of democratic administration, the institutions that are supposed to kick in to restrain
them are relatively weak. Highly corrupt politicians are regularly reelected by
their particular ethnic or local constituencies (which they nurse assiduously
even while fleecing the rest of the system). Personal extravagance at state
expense by particular ethnic leaders is often a source of community pride for historically disadvantaged groups.
This is part of a fundamental tension between the participatory and procedural aspects of Indian democracy: The unfolding of the logic of populist
democracy has itself become a threat to democratic governance. The participatory aspects of democracy and the all-consuming emphasis on electoral mobilization, often of whole groups (described by journalists as “vote banks”), have led
the system to look away from politicians’ and their followers’ rampant procedural
violations, generating a “culture of impunity” that the Indian political system will
have to grapple with for quite some time to come. Of course, ultimately, the
checks and balances of the ramshackle but still vibrant legal system kick in to
curb undue excesses, in a way that is rather rare in China. The independent judiciary, the Election Commission, and a few of the regulatory bodies still function
with some degree of insulation from political interference and hold up due
process against great odds.
This institutional insulation is much weaker in China, and the “culture of impunity” among top party officials is more prevalent. But there has been discernible
progress in the legal system: As disputes become more complex, political interference, though still substantial, is declining, particularly in matters of commercial law.
There is greater transparency than before in the corporate governance of state
companies, particularly those listed on overseas stock exchanges. The media and
nongovernmental organizations as watchdogs are more active in India. But corporate ownership of media is a problem for independent investigations in both
countries, just in different ways. There is occasional official clamping down on corruption in China (including even summary execution as punishment), but cynical
people often describe this as mostly targeted at political enemies or at best small
fries, exempting the big fish or cronies of the dominant faction leaders.
The party has also tentatively started to introduce some form of intraparty
democracy at the lower levels, with multiple candidates for positions. It is
ironic that Indian democracy, which in the beginning decades allowed for a
great deal of intraparty democracy, now has largely deviated from this tradition.
In most major national parties, the leaders are often nominated from above.
Young and ambitious local politicians, finding their path of upward mobility
blocked within the larger parties, often are inclined to go out and form their
own parties, thereby acquiring leverage in India’s coalition politics. This is one
source of the country’s increasing political fragmentation, which hinders purposive governance.
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I have already discussed the important role that decentralization of power
combined with central control over personnel and promotion plays in Chinese
governance. In recent years, the central government has recentralized public
finances (as it was facing fiscal erosion by the mid-1990s) and taken on final authority over the personnel and loan decisions of local banks (to check the mounting
“nonperforming loans” that local officials indulged in). But even at the county
level, local government still has a great deal of power (much more than in
India) in privatizing state companies, in making regulatory approvals and distributing patronage, in appointing local oversight committees against financial
and other irregularities, in appointing and fixing the salaries of judges and
public prosecutors, and so on. It is difficult for the central government to
control local officials and to wean them away from the cozy rental havens they
have built in collusion with local business and commercial interests. In its
pursuit of the goals of reducing inequality, stopping land seizures, containing
environmental damages, and preventing the frequent regulatory scandals (relating to food and other consumer product safety), the central government faces at
least the covert opposition of local officials. Even when the local official is not
venal, in an atmosphere of information control, his usual inclination is to suppress
bad news, as it may adversely affect his chances of promotion or his reputation.
Yet over more than a quarter century now, the Chinese central leadership has
shown a remarkable adaptability to changing circumstances and a capacity to
mobilize new support coalitions to protect its political power. Keeping the
main focus on economic growth and national glory as the source of its political
legitimacy, it has moved away from its earlier constituent groups among peasants
and workers, allowing urban–rural disparity to grow and presiding over massive
layoffs of workers; it has accommodated the erstwhile “red-hat capitalists” in symbiotic relation with state officials, and gradually co-opted the new private entrepreneurs and professionals (including much of the intelligentsia); through its
control of bank lending and regulatory approval of investment, it has skillfully
balanced regional and factional interests. It is now trying to move some state
resources away from the government-business groups of coastal China (e.g.,
those connected with what used to be called the “Shanghai coalition”), and has
publicly shown a great deal of empathy for hitherto excluded groups in remote
rural areas and urban migrants, while still being supportive of markets and
general noninterference with thriving private enterprises. By streamlining the
rules of succession and establishing clear procedures for term and age limits
for leaders, it has restructured the rules of authoritarian hierarchy to increase
career predictability and general elite support.
But China is still far from establishing a comprehensive rule-based system
and institutionalizing a credible set of checks and balances. It has installed a
far more decisive and purposive governance structure than India, but its
weaker institutional checks (such as the lack of independent judiciary or other
regulatory authority) and low capacity for conflict management make it more
Asia Beyond the Headlines
357
brittle in the face of a crisis than the messy-looking system in India, for all its
flaws. As the economy becomes more complex and social relations become
more convoluted and intense, the absence of transparent and accountable processes and the attempts by a “control-freak” leadership to force conformity and
lockstep discipline will generate acute tension and informational inefficiency.
Several alternative political scenarios for the future in China have been depicted
by political speculators, none more plausible than the others; some (wistfully)
predict the eventual outbreak of Taiwan- or Korea-style democracy, but only
on a large scale, starting with the big cities; others predict that even if China
manages a soft landing into some form of quasi-democracy, it will be of the
corrupt oligarchic kind under a predominant party like the one that prevailed
in Mexico under the Institutional Revolutionary Party for many decades.
While the Indian system has more institutionalized outlets for letting off
steam, it also has more ethnic and religious tensions and centrifugal forces to
grapple with. Its appalling governance structure for the delivery of social services,
its anomic inability to carry out collective action or to overcome populist hindrances to long-term investment in order to address the infrastructural deficit
that is reaching crisis proportions, its overpoliticized administration and decisionmaking processes, and its clogged courts and corrupt police and patronage politics that make a mockery of the rule of law for the common people—all will continue to hobble the process of economic growth and alleviation of its still massive
poverty. Yet the differential state capacity and governance performance among
different states (better in some South or West Indian states) may generate
over time a bit of healthy competition in investment climate and poverty alleviation performance to set examples for the democratic participants in all states to
demand, overshadowing the salience of ethnicity or religion in politics.
Both China and India have done much better in the last quarter century than
either did in the last 200 years in terms of economic growth. And each country’s
polity has shown remarkable resilience in its own way. Still, we should not underestimate the structural weaknesses in their governance mechanisms and the enormousness of the social and political uncertainties that cloud the horizons for these
two countries.
EUROPE-ASIA STUDIES
Vol. 60, No. 6, August 2008, 899 – 912
Putin’s Legacy and Russia’s Identity
ALFRED B. EVANS, JR
AS A NUMBER OF SCHOLARS HAVE POINTED OUT, POST-SOVIET RUSSIA faces an
identity crisis (Tsygankov 2006a, 2007; Suny 2007). The Soviet regime had promoted
its conception of Russia’s role in a multinational community of people, but after the
break-up of the USSR that interpretation became outdated. With new urgency
Russian intellectuals addressed the question of the identity of their country, as
implicitly all Russians might wonder, ‘Who are we?’ and ‘Where is Russia going?’
Different groups of Russian intellectuals and politicians offered competing answers to
these questions, presenting alternative definitions of Russia’s identity (Tolz 1998, p.
995, 2001; Hopf 2006, p. 700; Legvold 2007). The issues that were debated concerned
not only the choice of strategy for domestic and foreign policy, but also the essential
character and values of the national community and a view of that nation’s place in
the world.
History and ideology
Debate over the question of Russia’s identity was not a new phenomenon, however,
even though it occurred under new conditions in the post-Soviet period. The question
of ‘Who are we?’ had been addressed by Russian intellectuals and political leaders for
hundreds of years. The varying answers to that question in earlier eras have been
echoed in the discussion of the post-Soviet period. One element of continuity was
evident in such debates: in every era in which that issue was raised, the West was the
principal Other that served as the main reference point in defining Russia’s identity
(Tolz 1998, p. 995; Tsygankov 2006a, p. 37). Russia’s relationship with Europe has
been a key question since the time of Peter the Great in the late 1600s and early 1700s
(Stent 2007, p. 397). Since that time it has been apparent that Russia’s rulers have
faced a dilemma in relation to the more modernised societies of Western Europe:
whether to emulate the example of the West in order to advance their country’s
development or to preserve Russia’s separate values and customs at the risk of denying
it the capacity to compete with Europe (Tsygankov 2007, p. 380). A basic division of
opinion in response to that dilemma has been evident in one period after another in
the history of tsarist Russia. Fundamentally the Russian intelligentsia has displayed
ambivalence in its attitude toward Europe, combining feelings of attraction and
aversion in relation to the societies of the West (Stent 2007, pp. 398–99, 435). Vladimir
Putin has offered his answer to the question of Russia’s place in the world, and his
ISSN 0966-8136 print; ISSN 1465-3427 online/08/060899-14 ª 2008 University of Glasgow
DOI: 10.1080/09668130802161140
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ALFRED B. EVANS, JR
statements recognise the crucial importance of his country’s relationship with the
West, now including both the United States and the European Union. In consistency
with Russian tradition, Putin’s attitude toward the West is deeply ambivalent, and the
conflicting tendencies in his assessment of Russia’s relationship with the West are
reflected in the internal tension within the system of values that he has adopted.
It is clear that Putin has given approval to a well-defined set of values and policy
goals. Whether we can speak of the ideas associated with his political leadership as
‘Putin’s ideology’ is not clear, however. On that question the pronouncements of the
political regime are apparently contradictory. Before becoming President of Russia,
Putin’s most basic articulation of his outlook declared that Russia should not have a
state ideology (1999b). Yet by 2006 a prominent member of the presidential
administration insisted that Russian society did need an ideology, and that the
dominant United Russia (Edinaya Rossiya) party should give its approval to the theses
that supposedly could be based on Putin’s speeches (Surkov 2006a). Soon that official,
Vladislav Surkov, welcomed the publication of a book entitled Putin: His Ideology
(Chadaev 2006). Surkov introduced the concept of ‘sovereign democracy’ as the
essence of the ideology associated with the Putin leadership (2006b). Yet before long
Dmitrii Medvedev, a deputy prime minister, expressed some reservations about the
value of the term ‘sovereign democracy’ (2006), and Putin himself voiced similar
thoughts in September 2006 (Putin 2006b) and again seemed to distance himself from
that concept in September 2007 (Putin 2007a). In December 2007 Medvedev, who had
seemed sceptical about the merits of the concept that had been popularised by Surkov,
was chosen to be the presidential nominee of the dominant United Russia party with
Putin’s public approval. So it is not clear that Putin, who was said to be the main
source of the new official ideology, has actually been willing to take responsibility for
the creation of such a package of doctrines. Contrasting statements by high-ranking
officials may imply not only that there is some division in the inner circles of the elite
concerning particular formulations, but also that the Putin administration’s attitude
toward ideology contains contradictory impulses.
As if Putin’s stance did not create enough confusion on that subject, a review of
scholarly writings reveals striking ambiguity in relation to the meaning of ideology.
John Gerring (1997) has documented the use of a great variety of definitions of the
word among different scholars. Mainstream students of that topic in the social sciences
would agree that the term ‘ideology’ pertains to a system or collection of ideas, and
that the ideas should include direct political content, should attempt to motivate
substantial numbers of people to action, and should display some degree of coherence
or integration (Hunt 1987; Freeden 2006). Scholars disagree, however, in relation to
the breadth and internal coherence that may be expected of an ideology. A broader
definition of ideology, as ‘a relatively coherent, emotionally charged, and conceptually
interlocking set of ideas’ (Hunt 1987, p. 15), would easily allow us to conclude that
there is an ideology of the Putin regime in contemporary Russia. A narrower and more
rigorous definition, insisting on a degree of comprehensiveness and internal
integration similar to that possessed by Soviet Marxism–Leninism, would deny the
label of ideology to the outlook associated with the Putin leadership.
For the remainder of this essay we will set aside the question of whether the ideas
associated with the Putin regime should be called an ideology. Yet it is apparent that
PUTIN’S LEGACY AND RUSSIA’S IDENTITY
901
Putin’s statements do indicate the existence of a body of interrelated assumptions and
values that provide a general orientation for decisions that have structured political
institutions and policies. Putin’s major strategic choices should not be seen as having
been merely ad hoc responses to immediate conditions (and indeed it could be argued
that ad hoc decision making has been characteristic of Putin much less than it was for
Boris Yel’tsin in the 1990s). The central thesis of this essay is that Putin’s actions have
been guided by core values and long-term goals whose general outlines were delineated
even before he took office as the President of Russia. Putin has sought to reshape
reality to fit his values and goals, with considerable success so far; and he seeks to
ensure that the orientation for policy that he has chosen will continue to guide
Russia’s political leaders in future decades. It is argued here that in its totality Putin’s
thinking constitutes a distinctive choice of an identity for contemporary Russia.
Russia and the world
As noted earlier, for centuries the West, originally consisting of Western Europe, was
the principal Other for Russia, the main basis of comparison against which Russians
shaped the identity of their society. During the last years of existence of the Soviet
Union, Mikhail Gorbachev looked on Western Europe as providing the model for a
political and economic system (Stent 2007, p. 394) and attempted to Westernise Soviet
institutions. He wanted Russia (and the whole of the USSR) to be accepted as part of
the ‘common European home’, and he affirmed that a commitment to democracy and
individual rights was shared by all nations in Europe. Boris Yel’tsin, as the first
President of the independent Russian Federation, attempted to outdo Gorbachev in
adopting the image of a Westerniser, and though in practice his policies were
profoundly inconsistent, in theory Yel’tsin’s programme of change was justified as
bringing features of Western democracy and capitalism to Russia. Vladimir Putin has
repeatedly said that Russia is a European country, and has asserted that historically
Russia has shared common values and experiences with the other European countries
(Putin 2000a, p. 169, 2005e, 2007a; Tret’yakov 2005a). Putin has even gone so far as to
claim that Russia moved toward the protection of freedom at a pace generally similar
to that of other European nations. ‘On our own historical path, at times falling
behind, at times outstripping our partners, we passed through the same stages of
establishing democratic, legal, and civic institutions’ (Putin 2005d). That statement is
so wildly fictitious that it raises the question of the intentions of the person who
offered it.
In fact, Putin and other officials of the Russian government have emphatically
rejected criticism of the tendency of concentration of power in their country since 2000,
and have angrily repudiated any efforts by Western governments and nongovernmental organisations to verify the implementation of democratic principles by
Russian political institutions. We must conclude that Putin’s repeated assertions that
Russia is a part of Europe are not motivated by a desire to share common political
values with the European democracies. Putin does wish closer institutional linkages
between Russia and Europe (Stent 2007, p. 422) for reasons related to his view of
Russia’s essential national interests. Even before he became President of Russia, Putin’s
written words revealed his conviction that economic growth and modernisation would
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ALFRED B. EVANS, JR
be vital for his country’s security (1999a). Robert Legvold has remarked that Putin’s
view of the international setting reflects a ‘Hobbesian view of the world’ (2007, p. 10),
and this author has reported that ‘persistent statements by Putin reinforce the
impression that he sees the world in which Russia exists as filled with danger resulting
from a relentless, dog-eat-dog struggle’ (Evans 2008, p. 7). In Putin’s opinion, economic
strength is the basis of survival in that harsh competition; to be inferior economically is
to be vulnerable politically and militarily. In his view Russia can preserve its
independence and protect its identity only if its economy becomes one of the most
developed in the world. An article that Putin published in 1999, based on his graduate
dissertation, showed that he already was focused on the goal of making Russia a ‘great
economic power’ on the basis of its vast energy resources (Putin 1999a; Balzer 2005).
While Putin does not show enthusiasm for Russia’s assimilation to the liberal
political values of the West, economic integration with the West can serve the goal of
modernising Russia’s economy (Trenin 2007, p. 96). Angela Stent has argued
persuasively that Putin seeks a closer relationship with Europe because he expects that
‘selective adoption of European institutions will enable Russia to become a stronger,
prosperous, modern society that will participate more fully in a globalised world’
(Stent 2007, p. 421). Putin regards globalisation, primarily in the form of international
economic integration, as a powerful and irresistible force, and he emphasises that
isolation from the world economy is a recipe for underdevelopment (Evans 2008, p.8).
Thus he insists that integration into the international economy is necessary for Russia
to achieve a high level of economic advancement. But as Celeste Wallander puts it, the
Putin leadership is determined ‘to control and manage globalisation’s challenges while
pursuing its opportunities’ (Wallander 2007, p. 459). The leadership is convinced that
to deal with both the challenges and opportunities for Russia’s development that are
posed by globalisation, ‘a greater role for the state’ is imperative (Wallander 2007, p.
490). Wallander points out that historically those in authority in Russia have reacted
to increases in the impact of global trends on their society by prescribing greater state
control to manage the internal consequences of such trends (2007, p. 450). It is clear
that Putin’s approach fits squarely within that tradition of pursuing state-dominant
development.
Defending Russia’s sovereignty
According to Putin, one aspect of globalism is the existence of values that are universal
on a worldwide scale, and a commitment to democracy is among those values that are
universal for all of humanity (Putin 1999b, 2005d). Putin has said many times that
Russia has made its choice in favour of democracy (Evans 2008, p. 6). How has he
reconciled his ostensible support for democracy with the consolidation of a semiauthoritarian political system in Russia under his leadership? Putin argues that while
the basic principles of democracy have universal validity, the implementation of those
principles in any country must fit the conditions that are distinctive for that country
(Putin 2005e). Thus he reasons that ‘the fundamental principles of democracy and the
institutions of democracy should be adapted to the realities of Russian life, to our
traditions and history’ (Putin 2005a). Putin argues that the form of government that
emerges in Russia will be a blend of universal ideals and ‘primordial Russian values
PUTIN’S LEGACY AND RUSSIA’S IDENTITY
903
that have stood the test of time’ (Putin 1999b). In December 1999, before Putin
became President of Russia, he decisively rejected the notion of importing ‘abstract
models and schemes from other countries’ (Putin 1999b). While the status of the term
‘sovereign democracy’ may be uncertain, there is no doubt that protecting Russia’s
sovereignty is vitally important for Putin in order to ensure that his country is
completely independent in choosing its own form of development.
The growing emphasis on the concept of sovereignty by Russia’s leadership after
2005, a trend that was evident in Putin’s speeches, was closely associated with ever
more vehement repudiation of foreign governments’ criticism of changes in Russian
political practices as undemocratic. Putin angrily denies the right of anyone outside
Russia to evaluate his country’s political institutions or to intervene in the affairs of
that nation in order to attempt to correct deviations from democratic principles. He
has complained that such efforts assume a patriarchal relationship between certain
countries (implicitly the USA and Western Europe) and Russia, or in other words a
relationship between superiors and inferiors (Putin 2007b). He charges that efforts
supposedly aimed at spreading democracy are in fact motivated by the self-interest of
the states that finance such programmes, which threaten to compromise the
independence of the countries targeted for such attention. By 2006 Putin evoked the
concept of neocolonialism to attack the notion of democracy promotion, when he
charged that the idea of a ‘civilising role’ that was used to justify European colonialism
in the nineteenth century had been replaced in recent times by the term
‘democratisation’ (Putin 2006a). Vladislav Surkov, a deputy head of the presidential
administration who often is described as the main ideologist of the Putin leadership,
ratcheted up the rhetoric when he appealed to the memory of Ernesto ‘Che’ Guevara
as one from whom contemporary Russians could learn that it is crucial to build an
economic basis for real political sovereignty (Surkov 2006b). One of the principal
implications of the Putin regime’s emphasis on sovereignty is that, as Dmitrii Trenin
has summarised it, Russia no longer should recognise the ‘moral authority’ of the
USA and Europe, the established democracies of the West (Trenin 2007, p. 96).
Combined with Putin’s frequent assertions that Russia is a European nation and that
his country is committed to the principles of democracy, the concept of sovereignty
that the leadership has emphasised in recent years communicates the desire by the
political and economic elite of Russia to enter the Western world on its own terms
(Zagladin et al. 2006, p. 46), not on the basis of conditions that have been determined
by Western governments.
Vladimir Putin has stressed that democracy in Russia must be compatible with
Russian conditions and the traditions of Russian history. One part of Russian tradition
that he has identified is the centralisation of power in a strong state. ‘From the very
beginning, Russia was created as a supercentralised state. That’s practically laid down
in its genetic code, its traditions, and the mentality of its people’ (Putin 2000a, p. 86).
Putin also considers collectivism and paternalism to be among the traditions of the
Russian people (Putin 1999b). Almost as often as he has endorsed the idea of
democracy, Putin has spoken of the need to build a stronger civil society in Russia. In
December 2007, when he admitted the persistence of the problem of corruption in the
Russian state, he acknowledged the absence of ‘social control of the activities of public
institutions’, and described the strengthening of civil society as the most promising
904
ALFRED B. EVANS, JR
means to achieve that goal (Putin 2007b). Western scholars think of civil society as the
sphere of social organisation that involves the efforts of citizens acting largely
independently of the state. The Putin leadership has assumed, however, that in Russia a
strong civil society will not take shape unless the state takes the initiative to make that
happen. That assumption was reflected in Vladislav Surkov’s assertion: ‘If society isn’t
able to put forth initiatives on its own, then we must stimulate it’ (Weir 2005, p. 1).
Vitalii Tret’yakov has remarked astutely that in Putin’s view the state must be called on
to create the conditions for democracy and freedom since Russian society itself is not
capable of coping with that task (Tret’yakov 2005b, p. 77).
One of the recurring themes in Putin’s statements about Russian society is the
urgent need for a fundamental unity of values among all segments of the population of
his country. His assessment of the problems facing Russia has consistently revealed a
fear of disunity in society and a tendency to equate differences on values with
disintegration and weakness. In December 1999 he said that progress was impossible
‘in a society finding itself in a condition of division, internally disintegrated, a society
in which social strata and political forces adhere to different basic values and
fundamental ideological orientations’ (Putin 1999b). In May 2003 he asserted that it
would be difficult to overcome contemporary challenges if society is ‘splintered into
small groups’, each of which is devoted to its own narrow interests, and he called for
consolidation ‘around basic national values and tasks’ (Putin 2003). Thus he saw the
proper response to disunity as a strong consensus of values in Russian society. In an
interview in early 2000, when Putin was asked to identify the main priority for Russia,
he answered that it was the adoption of goals or moral values that all members of the
society could understand, like the ‘Code of the Builder of Communism’ that was
disseminated in the Soviet Union in the 1960s (Putin 2000b). Putin again stressed the
importance of soglasie, meaning agreement, consensus, or harmony in society, in his
first presidential address to the Russian parliament in July 2000, in which he said that
a consensus on goals should come from the unique cultural traditions and shared
historical memory of the Russian nation (Putin 2000b). When interviewed by a
journalist from Time in December 2007 he returned to that theme, urging, ‘We need to
pay the utmost attention to our common moral values and consolidate Russian society
on this basis’, and adding, ‘I think that this is an absolute priority’ (Putin 2007b).
The Putin leadership has stigmatised Russians who stand outside the boundaries of
the supposed consensus as disloyal to the nation. In September 2004 Vladislav Surkov
referred to those on the right and left in his country who were particularly critical of
the regime as a ‘fifth column’ within the society that allegedly sought ‘the defeat of
their own country in the war on terror’.1 Putin has made it clear that he believes that
the most outspoken domestic critics of the state are serving foreign masters, having
sold their loyalty to foreign governments that seek to undermine Russia’s
independence (Putin 2004, 2007b). When speaking at a campaign rally of the United
Russia party shortly before the parliamentary election of December 2007, he poured
contempt on the critics of the regime: ‘Those who oppose us need a weak, sick state, a
disoriented, divided society, so that behind its back they can get up to their dirty deeds
1
RFE/RL Newsline, ‘Putin Senior Staffer Details Proposed Political Reforms’, 8, 185, Part I, 29
September 2004.
PUTIN’S LEGACY AND RUSSIA’S IDENTITY
905
and profit at your and my expense’. Putin charged, ‘unfortunately there are jackals
inside the country who sponge off foreign embassies’.2 Putin’s strong desire for unity
in Russian society leads him to regard any fundamental opposition to the political
regime as reflecting disloyalty to the nation. As President of Russia, Vladimir Putin
has turned that country away from the Westernising direction followed by Mikhail
Gorbachev and Boris Yel’tsin, and instead of advocating a course of development
guided by the values of liberal democracy he has chosen a unique model that he sees as
consistent with the historical tradition distinctive to Russia (Zagladin et al. 2006,
p. 40). Under Putin, ‘sovereignty’ has become the code word for the demand that the
West accept Russia’s right to make its independent choice of political and economic
institutions.
While the fundamental values supported by Putin have not changed since he became
President of Russia in 2000, the theme of non-interference in his nation’s internal
affairs has received growing emphasis among Russia’s political elite during the last few
years (Tsygankov 2007, p. 385). Beginning in 2005, hostility toward the West was also
more openly voiced by the political leadership of Russia, and was even expressed by
Putin himself more directly than ever before in 2007 (Shlapentokh 2007). There may
have been a number of reasons for those trends in the rhetoric of the Putin regime. In
the first place, Russian leaders apparently resented Western criticism of the practices
of that regime, which had intensified as it became increasingly clear that changes
brought by Putin were moving toward a more authoritarian concentration of power
(Shlapentokh 2007). In addition, since Russia had experienced several years of steady
economic growth since the late 1990s (primarily fuelled by rising prices for oil, which
that country exports in large quantities), the leaders of the Russian state seemed to
believe that their power position in the world had improved qualitatively, and felt free
to take a more assertive stance in relation to the West (Tsygankov 2006a, p. 288;
Shlapentokh 2007). In essence, they believed that if Russia was to be accepted as a
major power, as they hoped and expected, other countries should refrain from looking
down on their country and presuming to instruct it on domestic political practices.
The growing stress on the need to protect Russia’s sovereignty appears to have been
most directly a response to the ‘coloured revolutions’ in some other states of the
former Soviet Union, and particularly the ‘Orange Revolution’ in Ukraine in late 2004
that overturned the results of an election that had been widely seen as marred by fraud
(Okara 2007; Krastev 2007, p. 37). As Vladimir Shlapentokh argues, ‘the reemergence
of the foreign threat to the regime as a major political and ideological issue in Moscow
was deeply influenced by the developments in Ukraine in 2004’ (Shlapentokh 2007).
The obsession with ‘orange technology’ in Russian sources in recent years lends
plausibility to Shlapentokh’s conclusion that Putin feared that the same methods used
in Ukraine might be employed to undermine the stability of the regime that he had
consolidated in Russia.
The concept of ‘sovereign democracy’ must be seen in part as a reaction to the goal
of democracy promotion by the USA, which increasingly led the Putin leadership to
worry that the United States might seek to bring about regime change in Russia
(Shlapentokh 2007). But pressure on the government of Russia concerning its
2
The Economist, 2007, p. 640.
906
ALFRED B. EVANS, JR
domestic actions also came from Europe, which may have created a more fundamental
cause for discomfort in the Putin leadership. Europe has come closer to Russia in
recent years with the expansion of the European Union (which now includes most of
formerly communist Eastern Europe and three states that were republics of the Soviet
Union) and the growth of trade between Russia and the EU. Neil Macfarlane notes
that there has been growing dissonance between Russia and the EU, as the
government of Russia seeks cooperation as a means of serving economic needs, while
the European Union has a ‘preoccupation with liberal values’ that is ‘annoying from
the Russian perspective’ (Macfarlane 2006, p. 54). As Angela Stent (2007) has pointed
out, the nations that are members of the EU have given up a significant degree of their
national sovereignty to create a united Europe, which is disturbing for a Russian state
that seeks a closer economic relationship with Europe while attempting to guard the
autonomy of its domestic political structures. Moscow also has resisted the scrutiny
from outside that is embodied in the monitoring of Russian elections by the
Organisation for Security and Cooperation in Europe (OSCE), an organisation of 55
countries to which Russia belongs (Bigg 2008). A series of factors makes it possible to
understand the increasing vehemence of the Putin leadership’s denunciations of
attempts by foreign nations to exert influence on political practices in Russia, leading
the regime to intensify its insistence on the necessity of protecting Russia’s sovereignty.
A new ideological challenge?
As criticism of Western governments by members of the Russian elite has grown
harsher and there have been efforts to create an official ideology for Russia, we may
wonder whether the Putin leadership has decided to present an ideological challenge to
Western democracy. Not long ago it was reasonable to assume that the words and
actions of the Putin regime were intended not to seek changes in the outside world, but
to moderate the impact on Russia of systemic trends in the world (Macfarlane 2006,
p. 8). By 2007, however, it was possible to argue that the Russian state’s goals had
become more ambitious; as Derek Averre reported, statements by ‘leading Russian
officials have represented a clear attempt to challenge the international order’ (Averre
2007, p. 177). From a stance of defence of Russia’s distinctive form of democracy,
the pronouncements of Russian officials and loyal intellectuals shifted to a
counteroffensive against Western governments, pointing out the flaws of Western
political processes and at times even implying that Russian democracy is superior to
Western democracy (Shlapentokh 2007). Leonid Polyakov suggested that there was a
justification for considering ‘sovereign democracy’ as a model that might evoke ‘global
resonance’, appealing to many countries which have experienced substantial economic
development in recent years (Polyakov 2007, p. 67). He asserted that sovereign
democracy represents a ‘universal form of political order of a nation in the conditions
of globalisation’ (2007, p. 68, emphasis in original).
Sergei Lavrov, the Foreign Minister of the Russian Federation, says that recent
trends in international relations have resulted in a situation in which the West is losing
its monopoly of models of development and its control over processes of globalisation
(Lavrov 2007a). Immanuel Wallerstein argues that Vladimir Putin has gained greater
confidence in dealing with the West because of changes in the world economy
PUTIN’S LEGACY AND RUSSIA’S IDENTITY
907
(Wallerstein 2007). Putin contends that economic growth in the ‘emerging nations’ is
bringing a shift in the balance of political power, which will become more pronounced
in the coming decades (Putin 2007b). Some Western scholars have begun to argue that
the growth of ties among the ‘rising powers’ who recently have enjoyed rapid economic
development is creating ‘an alternative system of international politics’ that is
‘surprisingly independent from Western control’ (Barma et al. 2007, pp. 23–24). Russia
is often categorised as one of the BRIC countries (Brazil, Russia, India and China), and
according to Andrew Hurrell, all of those countries believe that they are entitled to ‘a
more influential role in world affairs’ (Hurrell 2006, p. 2). At the very least, the
emerging powers may be said to share dissatisfaction with some aspects of the existing
structuring of power in the world, especially the degree of domination by the USA as
the sole superpower (Macfarlane 2006, p. 41). In particular, the leaders of China and
Russia find a common cause in rejecting the notion that the West should be the source
of ideas about development for the rest of the world (Ferdinand 2007, p. 679). Both
China and Russia may be thought of as examples of ‘developmental states’, or ‘states
where the government still plays a crucial role in determining the direction of
development’ (Ferdinand 2007, p. 663). It would be possible to regard ‘sovereign
democracy’ as Russia’s ideological version of the model of the developmental state, and
it is apparent that there are some in Russia who are eager to take that approach. S. A.
Karaganov asserts that a struggle is being waged between two models of development,
on the one hand ‘the liberal-democratic model of the West’, and on the other, the semiauthoritarian capitalism exemplified by some Asian states. He wants Russia to join on
the side of the latter group in endorsing a model that he expects to be more attractive
for many countries of the former Third World (Karaganov 2007).
So far, however, Russia’s highest leaders have not shown any interest in entering
into a global ideological struggle or packaging any model of development for export to
other countries. According to Sergei Lavrov, the Russian state has renounced ideology
and ‘grand designs’ in its foreign policy in favour of a pragmatic approach (Lavrov
2007b, p. 8). His statement implies that Russia’s actions in relation to the rest of the
world will be guided by the country’s national interests as its leaders perceive them
(Zagladin et al. 2006, p. 44). Putin has said that Russia should renounce the Soviet
legacy of trying to lead a worldwide movement toward communist revolution and
attempting to ‘impose a certain way of life on other countries’ (Putin 2007b). He has
also cautioned against the assumption of any ‘missionary functions’ for Russia,
warning that it would be harmful for the country to be seized by missionary ideas
(Putin 2007a). We should recall that Putin himself, and his successor Dmitrii
Medvedev, have distanced themselves carefully from the concept of ‘sovereign
democracy’, which could have furnished a convenient title for a model to be offered for
export as an alternative to the Western liberal-democratic model.
It is true that the Russian state is opposed to efforts to achieve a unipolar world
dominated by the USA, or even a world dominated by the West (Lavrov 2006, 2007b,
p. 12), because of the fear that such a concentration of power would relegate Russia to
second-class status and make it vulnerable to the designs of the most powerful
countries. But, contrary to the wishes of the more radical Eurasianists in Russia, Putin
has not sought to lead an international coalition in opposition to the main centres of
power in the world. (After all, if such a coalition took shape despite the great diversity
908
ALFRED B. EVANS, JR
of interests of the potential partners in its ranks, it would be unlikely that Russia
would be accepted as its leader on the basis of its population size or economic
weight. In addition, to become part of such a coalition would require Russia to
commit itself to goals that might restrict its freedom to pursue its own interests.)
Instead the Russian state under Putin has pursued a foreign policy that has been
flexible and many-sided, open to forming short-term, limited partnerships with a great
variety of states. V. I. Pantin captures the spirit of the Putin administration when he
urges, ‘the internal and external self-determination of Russia should not be onesidedly pro-Western or anti-Western, liberal or anti-liberal’ (Zagladin et al. 2006,
p. 41). While Putin hopes that Russia will benefit from a shift in power in favour of the
countries with emerging economies, he has avoided making the claim that Russia has
crafted a model of development to be offered to other nations as an alternative to the
liberal-democratic values promoted by the West.
Conclusion
Though Vladimir Putin is often described as a pragmatist, we have seen that before he
came to power as President of Russia he was committed to core values and goals that
would guide him during the next eight years. He evidently hopes that those values and
goals will continue to determine the direction of policy-making by the Russian state in
the years to come. The ideas that have been associated with the Putin regime constitute
a distinctive answer to the question of Russia’s identity that was posed with
heightened urgency after the dissolution of the Soviet Union. A key question for
Russians since the time of Peter the Great has been their society’s relationship with the
West, which originally was equated with Europe. We have noted that the Russian
elite’s attitude toward the West traditionally has been filled with ambivalence, and that
has continued under Putin. On the one hand, he has repeatedly insisted that Russia is a
part of Europe, and shares the same basic aspirations with the nations of Western
Europe, including the goal of implementing the principles of democracy. But on the
other hand, he warns against attempts to import foreign models into his country,
argues that the form of government in Russia must fit the time-honoured traditions of
that nation, and angrily repudiates efforts by outsiders to evaluate the performance of
political institutions in Russia.
Putin wants his country to be accepted in the community of Western democracies on
its own terms, which he sees as necessary to preserve Russia’s distinctive identity.
Putin’s expectations for a consensus of values in Russian society and his view of the
limits of acceptable division within the national political system reflect his response to
the ‘liberal idea’, generally accepted in contemporary Western countries, that
international integration entails not only closer economic cooperation among different
nations but also the lowering of national barriers to the dissemination of democratic
political ideas and institutions (Averre 2007, p. 179). As Derek Averre points out, ‘it is
only in the recent period that Moscow has formulated a coherent and vigorous
response’ to that thinking (2007, p. 180) by articulating a set of ideas that are said to be
grounded in the traditions that have shape Russia’s unique identity. Putin’s position
implies approval for a premise that is accepted by some other late-developing states,
which in opposition to the Western emphasis on individual rights as the basis of self-
PUTIN’S LEGACY AND RUSSIA’S IDENTITY
909
determination argues in favour of ‘state determination’, or the idea that ‘sovereign
states are empowered to set the terms of the relationship inside their borders between
the government and the governed’ (Barma et al. 2007, p. 27). In Putin’s view, a
predominant role by the state is necessary, not only to lead Russia to success in the
economic competition stimulated by globalisation, but also to manage the
consequences of global trends for domestic society. The political orientation that
pervades Putin’s statements seeks to defend deeply conservative values, rather than
calling on Russia to renew the radical challenge to Western democracy and capitalism
that was posed by the Bolsheviks.
While Putin has offered an answer to the question of Russia’s identity, his answer
reveals major elements of ambiguity, and beneath the surface it contains internal
contradictions. Andrei Tsygankov has observed that the contemporary Westernisers
and Eurasianists represent ‘polar opposites’ on the question of Russian identity, and
we might add that those extremes have deep roots in Russian history. Tsygankov
points out that Vladimir Putin’s vision of Russia falls between those polar opposites,
and is a ‘cultural synthesis’ of such competing positions (Tsygankov 2007, p. 381). As
a synthesis, the integrated body of ideas offered by Putin displays contradictory
impulses that are inherent in its values and logic. In the first place, there is a conflict
between the acceptance of international integration and the demand for protection of
Russia’s autonomy. Putin argues that international economic integration is irresistible,
and that it is necessary for Russia to plunge into globalisation in order to become a
great economic power. But at the same time Putin’s statements reveal a deep fear that
international integration will open Russia to control from outside and the erosion of
the independence of action by the Russian state and society. Putin’s position is
fundamentally ambiguous about the political implications of international integration.
He asserts that Russia has joined in the general international consensus in favour of
democracy (Lavrov 2007b, p. 10), but he wants to insulate the political process in
Russia from foreign influence. While he repudiates Western criticism, he does show
sensitivity to the need to satisfy some international standards in following democratic
procedures. The degree of pluralism that is permitted in the political arena in Putin’s
Russia is qualitatively greater than that which was allowed in the Soviet Union before
Gorbachev, but the limits of pluralism have been tightened since Putin came to power,
and the acceptable degree of disagreement is still not entirely clear.
Most obviously, contradictory messages from the Putin leadership reflect the
dilemma posed by the demands of ideology and pragmatism. The effort by Vladislav
Surkov and others within the presidential administration and the dominant political
party to fashion a systematic set of ideas that could be presented as ‘Putin’s ideology’
may have been motivated in part by the desire to ensure continuity in policy during the
periods of leadership transition that will come in future decades. There was also an
evident desire to present the thinking of the leadership in a form suitable for mass
consumption, so that millions of political activists could be indoctrinated in the same
ideas. In addition, even in Putin’s speeches it has been evident that he has felt the need
to offer an articulate answer to the challenge of the ‘liberal idea’ promoted by the
Western democracies that occupy a dominant position in the contemporary world. On
the other hand, Putin has been reluctant to give full approval to the concept of
sovereign democracy that has been presented (with considerable justification) as the
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ALFRED B. EVANS, JR
authoritative summary of his thinking. He has not joined in the call for an ideology
that can be recognised as authoritative for Russia. Putin seems to want to preserve his
flexibility of action in domestic and foreign policies, and he may realise that a
commitment to an explicit and integrated ideology would limit his freedom of choice,
or at least force him to justify his actions in terms of established doctrinal principles.
Also, an entrenched ideology can make it more difficult for leaders to become aware of
key aspects of changing developments, as Putin has ample reason to recall. Further,
for the regime to adopt a full-fledged ideology would invite the resumption of the
ideological struggle with the West, and Putin does not seem to believe that such a
struggle would be necessary or profitable for Russia. Thus while Putin has endorsed a
set of values that offer an answer to the question of Russia’s identity and provide
guidance for long-term strategy, his answer includes substantial ambiguity and
contains contradictory impulses. That ambiguity implies that there is the potential for
the ideational legacy of the Putin presidency to be interpreted in different ways in the
future as new challenges and opportunities arise. Whether the Russian state will yield
to the temptation to mount a more aggressive ideological counterattack against the
West will depend not only on the results of trends within Russia’s political elite, but
also on the choices made by Western governments.
California State University, Fresno
References
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