EXPLORING THE GLOBAL BUSINESS ENVIRONMENT

T
he Brics is a term rst used by economists at the
US bank Goldman Sachs, who highlighted the
large emerging markets for future growth (Goldman
Sachs, ). Looking at trends extending until ,
they concluded that the size and growth of the four
economies Brazil, Russia, India and China were
overshadowing todays developed nations, thus
representing a shift in the balance of power in the
world. 1he banks econonists did not see then
necessarily forning a bloc which would becone
cohesive in itself, like the LU. n fact, apart fron size
and growing inuence, they have little in connon with
each other, but in a twist of ction beconing reality,
the four have begun organizing their own sunnit
neetings to discuss global issues. Do the Brics as a
group represent a new force in the global econony, or
is the tern sinply a way of drawing attention to four
energing narkets
1he four are all large countries and econonies.
1ogether they occupy over z of the worlds land
area, and are hone to (o of the worlds people. 1heir
econonies and political systens are very diherent.
China and Russia are authoritarian states, while ndia
and Brazil are turbulent denocracies. All four
countries have histories of closed econonies and
strong state guidance, and all have put in place
reforns which have nade then nore narket oriented
and nore welconing to foreign investors, to varying
degrees. However, in all, there are tensions between
narket reforns and the role of the state. f the four,
China is the nost authoritarian, but its connunist
leaders have also been highly successful in guiding
liberal narket reforns. ts export-oriented econony
has beneted fron foreign investnent and know-how.
t is noving up the econonic ladder, fron the
low-level, labour-intensive industries that are
prevalent in developing countries, to higher
technology industries. Chinas econony is by far the
largest of the four, and its growth rate is the nost
inpressive. ts ranks of growing niddle-class
consuners are now the fastest growing narkets for
consuner goods. urthernore, the wealthy Chinese
consuner is younger than in Japan or the US (see
igure), splashing out on aspirational lifestyle
purchases, such as luxury hone furnishings and luxury
cars, in contrast to the nore conservative spending
habits of rich Japanese consuners.
ndia, with its billion-plus inhabitants, aspires to
enulate China, but its still predoninantly rural
population, poor infrastructure and lunbering
bureaucracy pose challenges for its denocratically
elected governnent to raise econonic growth above
o; annually. ts exports pale beside Chinas, and it
renains anbivalent about foreign investors in
nunerous sectors, such as retailing. Brazil, like ndia, is
a denocracy, characterized by social and cultural
divisions, in addition to widespread poverty. Brazils
governnent has done nuch in recent years to inprove
the lives of its zoo nillion inhabitants. And Brazil has
been active in international foruns, voicing the
concerns of developing nations and urging rich
countries to bring down trade barriers which keep out
inports fron developing countries like itself.
f the four countries, Russia is arguably the one
which seens out of place. t is ohcially classied as an
industrialized econony under the yoto clinate
change treaty, while the other three are developing
econonies. Historically, Russia was the superpower
rival of the US during the cold-war era following the
Second World War. Cold-war ideology has been
buried, but the legacy of rivalry with the US lives on.
Russia renains one of the worlds heaviest nilitary
spenders, but behind China, and both are far behind
The Brics take the stage
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100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Japan
45 to 66
years
of age
US China
18 to 44
years
of age
10 Business in the global environnent
More online 1he LCDs website is www.oecd.org, which ohers a range of topics and country focus features.
the US, whose nilitary spending is nore than
quadruple that of the other two conbined. Russias
econony has slunped in recent years, and the state
has taken greater control of key industries such as gas,
which had been privatized in a wave of econonic
reforns. Despite hopes that a
new denocratic systen would
take rn root following the
collapse of connunisn in i8,
the state has taken a stronger
grip on political life. Russia
possibly views inclusion anong
the Brics as an opportunity to
revive its global political
anbitions. Russia was happy to
host the rst sunnit neeting of
the Brics in zoo.
Are the four countries likely
to act as a coherent group
1here are conicts and rivalries
anong then. All four are
cultivating trade and investnent
relations with countries in the
developing world, particularly
those rich in natural resources,
such as African nations. Brazil
and ndia aspire to becone
pernanent nenbers of the UN Security Council,
but Russia and China, as existing nenbers, have
resisted. China and ndia fought a war in ioz along
their connon border, which renains tense. f the
three, only Brazil is not a nuclear power, but it is
noving in that direction. All four can be targeted for
poor environnental records. China is the worlds
largest carbon enitter, but ndia and Russia are also
anong top enitters. Brazil is the leader in
deforestation, although it is taking steps to regulate
environnental degradation.
1he Brics represent a shift in global econonic power
away fron the developed world, in which the US was
doninant. With the exception of Russia, their continued
growth has stood out against recession in the rich
world in zoo8, helping to substantiate their clains for
global recognition. Relations with the US and other
developed nations are evolving as the Brics political
leaders forge new roles on the global political stage.
Sources. Barber, L., and Wheatley, J. (zoo) Brazil keeps its econonic
excitenent in check, Financial Times, zo ctober, The Economist (zoio)
1he trillion-dollar club, i; April, Hille, ., Lau, J., and Waldneir, P. (zoo)
Scranble to slake Chinese thirst for high-end brands, Financial Times, io
ctober, Lanont, J. (zoio) A good crisis brings greater inuence,
Financial Times, z January, Clover, C., and Belton, C. (zoo) Crisis could
be a catalyst for change, Financial Times, i ctober, Goldnan Sachs
(zoo) Dreaning with BRCs. 1he Path to zoo, Global Lcononics
Working Paper No. , at http.iiwwwz.goldnansachs.con
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Questions for discussion
Why are the Brics the new forces to be reckoned with in the
world econony
n what ways are the Bric countries diherent fron each other
n your view, are the Bric countries likely to co-ordinate their
action on global policy issues
ntroduction to the business enterprise 11