New economic world order

The acronym of BRIC for the economies of Brazil, Russia, India and China is known to have been first used extensively by Goldman Sachs in a 2003 report.

It might be ironic that a company that could hardly predict its own future managed to speculate that within four decades' time these four economies would be wealthier than most of the current major economic powers.

The general feeling amongst analysts is that China and India will become dominant suppliers of manufactured goods and services respectively, while Brazil and Russia will become similarly dominant as suppliers of raw materials.

No one ever argued that these countries would either emerge into a political alliance or an economic block but it is now becoming more and more evidently clear that we are moving towards a new multi-polar world order with the emerging market economies to the fore.

People might rightly fear globalisation but anyone who thinks one can stand up to it must be dreaming, particularly in the light of this new phenomenon.

A few weeks ago the leaders of the BRIC countries held their first summit.

To my mind it has become even more significant that the emergence of BRIC has gone on to prove that the G8's variable geometry is hardly sustainable any more.

This is not a question of inclusivity or exclusivity but it is sheer common sense that these eight powers can no longer convene effectively without the strong participation of the major emerging economies.

On the other hand one cannot exclude that the G8 and the G20 might somehow co-exist.

The more that the leaders of China, India, Russia and Brazil are put on an equal footing as the traditional economic powers, the more difficult will it become for such a status to be downgraded.

And yet it is somehow difficult to put labels, particularly with Russia being in the G8 and also being a leader in the BRIC group.

The September Pittsburgh G20 Summit might serve to confirm that the writing might soon be on the wall.

It will definitely give us the first solid inklings of the future of global economic governance, although I personally think that the US will still continue to play a predominant role. Brazil, Russia, India and China are known to have increased their holdings of foreign exchange reserves significantly over the last decade but China stands out when it comes to financing the US.

The US might have been the most influential player in the globalisation process but in my opinion China is already the main beneficiary.

China's holdings of US financial assets have increased dramatically since 2000.

Although any European country would definitely live with nine per cent economic growth, some are arguing that these emerging markets are also being linked through converging fears, as their growth rates seem to have abandoned their double digit figures for quite a number of years to come.

But only time will tell if these declines will prove to be a momentary blip or will instead spiral into something more worrisome.

Experts tend to differ among themselves on this issue. On one hand The Economist recently declared that how emerging markets fare, will determine whether the world economy faces a mild recession or something nastier, while the IMF predicts far more optimistically, that despite emerging economies' cooling momentum, they could still act as a source of global economic resilience.

Like a good friend of mine, I might not be one for acronyms, but I would not treat the Chindia title too lightly! But then it is not an acryonym! On the other hand one cannot either ignore Hong Kong, South Korea and Singapore.

Other than that I will not stick my neck out, given the relentless geopolitical risks, the differing economic view from abroad, and even more so the shifting political landscape particularly in the US.

One thing seems certain. Some big emerging countries are already learning faster than others how to become dynamic and modern while the West, deep down knows that it is losing most of its dominance in the process.

Some even think that it has done so. And this does not hail from any anti-Western bias.

brincat.leo@gmail.com, www.leobrincat.com