The Rise of BRIC Economies

In 2001, James O’Neill of Goldman Sachs authored a paper titled “Building Better Global Economic BRICs.” The BRICs acronym in the title referred to:

• Brazil
• Russia
• India
• China

These nations are reshaping the international economy with the potential to transform global trade and capital flows. BRICs are large economies, ranking among the world’s top 10 in population and top 11 in GDP. They have undergone reforms that have transformed them, making them more internationally integrated and central to the future of the world economy.

In 2010, these countries accounted for approximately 41 percent of the world’s population and 25 percent of world GDP when measured in PPP terms.

21st Century Growth

China (Post-1978)

• Prior to 1978, private enterprise did not exist in China.
• All economic decisions were made from the top-down.

India (Post-1980)

• India was best characterized as socialist.
• Heavy industry was state-owned.
• Private industry was heavily regulated.

Russia (Post-1991)

• The Soviet Union dissolved in 1991, replaced by 15 independent states.
• The scope of government was significantly reduced.

Countries transitioning from socialist to capitalist systems implemented a wide range of reform tasks. The most immediate problem in most countries was a sudden collapse of GDP. Property rights had to be defined, and new institutions had to be created to establish rules for businesses and workers.

The Brazilian Miracle

• Brazil’s large domestic market enabled many firms to capture economies of scale.
• Brazil’s economy boomed from the 1950s into the early 1970s.

India's Economic Reforms

• De-nationalization, led by finance minister Manmohan Singh.
• Elimination of a regulatory permitting process.
• Export-led growth policies.

Russia's Transition

• Transition economies: Economies that abandoned socialism or communism in favor of market-based systems.
• Infant mortality increased dramatically, birth rates fell below replacement levels, and wealth became highly concentrated.

China's Reforms

• Led by Deng Xiaoping, who introduced market-oriented reforms.
• Foreign trade under the old system was controlled by 12 foreign trading corporations.
• Creation of Special Economic Zones (SEZs) that gave local provinces authority to establish economic and trade policy.