- Free newsletter
- The Latest
- Topics
-
About
BRICs Throwing the Economic Bathwater out with the Babies
Brazil, Russia, India and China. The BRIC countries. The emerging economic powers who have become more influential in the world over the last decade or so as they begin to displace the United States hegemony. They are countries with large populations, low labour costs and large quantities of natural resources. In the last ten years, these four nations have contributed almost half of the world’s economic growth. They are nations on the rise. However, as reported by the Economic Times, according to Goldman Sachs, demographics are about to strike a telling blow against their (and consequentially, the world’s) expansion.
It is a very familiar story - the labour pool is ageing and shrinking as people in Brazil, Russia, India and China are having fewer children. According to UN projections, in eight years the number of people aged 65 years old and over will increase 46% in those countries, and by 2030 there will be 412 million people over 65 years old in those four countries. While the elderly cohort is expanding significantly, the workforce needed to support that cohort is shrinking. The pool of young workers, 15 to 24 year olds, will decline by 61 million by 2030. In China, for example, the working age population has expanded 2.5% a year for the past three decades, but, according to Richard Jackson of the Global Aging Initiative at the Center for Strategic and International Studies in Washington, this working age population has virtually ceased growing and will be contracting at the rate of 1% a year by the mid 2020s.
This change in the demography of the BRICs will impact on their economies:
“The positive contribution that came from an expanding workforce in China will turn negative in 2013, wiping at least half a percentage point off the potential annual growth rate, according to Wang Feng, a director of the Brookings-Tsinghua Center for Public Policy in Beijing.
"China's shooting itself in the foot" with the one-child policy, said Wang. "It needs to think of ways to encourage young couples to have more children." Goldman Sachs Asset Management Chairman, Jim O’Neill, (the inventor of the BRIC acronym) predicts that:
“...the average annual expansion of the BRIC countries will fall during this decade to 6.9 percent from 7.9 percent in the 10 years to 2009, then drop to 5.3 percent in the 2020s. "In terms of the role of the BRICs in driving global growth, the most dramatic change is behind us," the Goldman analysts, led by Dominic Wilson in London, wrote in a Dec. 7 note.” Now O’Neill is tipping four new emerging economies may be better future investments – namely Egypt, Idonesia, Turkey and Mexico. His reasoning?
"With large young populations, these countries could become powerful growth stories." A declining workforce makes no sense economically. Going forth and multiplying seems to include multiplying wealth. As the twenty-first century progresses, we are going to realise this more clearly.
Join Mercator today for free and get our latest news and analysis
Buck internet censorship and get the news you may not get anywhere else, delivered right to your inbox. It's free and your info is safe with us, we will never share or sell your personal data.
Have your say!
Join Mercator and post your comments.