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The analysis of the article:
«5 Lessons From the Rise of the BRICs»

Veronika Kozachok
4th Group

Kyiv – 2014
5 Lessons From the Rise of the BRICs
DEREK THOMPSON AND MAX FISHER
Learning from the successes and stumbles of the world's great rising economies
In 2001, Jim O'Neill, the chairman of Goldman Sachs asset management, famously predicted the four fastest-growing emerging markets for the decade. We know that foursome by the acronym BRIC: Brazil, Russia, India, and China. That the economic world remembers his prediction owes as much to the handiness of the acronym as it does to the accuracy of his forecast. China, India, and Brazil are among the most dynamic and exciting emerging powers in the world. Indeed, to call them "emerging" feels like a slight. India is the world's largest county, China the world's largest manufacturer, and Brazil the Western Hemisphere's most vibrant expanding consumer economy. (Russia, the runt of the group, is beset by awful demographics and a weak private sector outside of its natural resources).
As investors and economic analysts cast about for the next batch of high-growth markets, let's pause to recall the lessons from the BRICs: (1) Work on the middle-income transition plan; (2) Trade, trade, trade; (3) state capitalism can work; (4) corruption kills; (5) strong civil society matters.
(1) THE RISE OF THE MIDDLE CLASS Perhaps the broadest lesson from the emergence of the BRICs is that no rise is complete without the triumph of the middle class. The record across these four countries is exceptional, but there is still considerable room for growth. In Brazil, credit card balances grew by a whopping 30 percent in 2008, the worst year of the Great Recession, reflecting the country's considerable appetite for consumer credit. Even in Russia, real incomes rose 142 per cent between 1999-2009. In China and India, the middle class has been buoyed by a kind of 21st-century Industrial Revolution. By 2050, half of the global middle class as defined by OECD will live in those two countries. But there are still considerable risks. Food inflation in India and a precarious housing market in China threaten to destabilize both country's fantastic ascents.
(2) TRADE IS EVERYTHING For any economy, growing is all about selling. And when you're a small economy, growing is about selling to somebody bigger. In other words, there is no such thing as extraordinary growth without extraordinary growth in trade. We see this maxim playing out across the BRICs. As the world knows, China is the great trade success story of the last 20 years thanks to cheap labor and smart government planning to coordinate supply chains and streamline the manufacturing of electronics, textiles, and more. India's share of global trade tripled between 1993 and 2010. The country has also diversified. In 2000, one in five export dollars came from the U.S. Today it's one in seven. Russia, overly reliant on commodities and underdeveloped in technology, somewhat lucked out in the last half of the 2000s, as oil prices surged to record highs. The Great Recession took a particularly nasty toll, as the stock market fell a remarkable 70 percent due to the collapse of oil prices. Finally, Brazil has seen considerable growth in both agricultural and industrial exports, but more than any other BRIC country, it has been the beneficiary of significant international investment, which has helped its domestic industries grow -- and made its consumers rich -- at the expense of raising its currency compared to other developing countries.
(3) STATE CAPITALISM WORKS Only one of the four BRIC economies could be considered free: India. The other three are deeply capitalist, sure -- finding success on international markets has been a big part of their rise -- but their version of capitalism includes the strong guidance of the government. State capitalism means state-owned firms like the massive China National Petroleum Corporation or Gazprom, but it also means heavy regulation, frequent intervention, and sometimes a degree of state control over markets and firms that doesn't look so capitalist. It doesn't always work out that way, but their success is hard to ignore, especially as the great free market stalwarts -- the U.S., Europe, Japan -- fall on increasingly hard times. The state capitalist model will be an attractive one for other developing economies. Rising neighbors in Asia, Africa, and Latin America may seek to engage with the global markets but, rather than opening everything overnight and letting Westerners conquer their entire economies, protect and grow domestic firms that can compete internationally and will funnel money back into development. But the West can learn as well. Free markets -- especially financial markets – sometimes fail and fluctuate.
(4) CORRUPTION IS THE KILLER Think about how much of a problem corporate and industrial influence over politics has become in the U.S. Now imagine the companies are bigger, politicians face little or no public accountability, and there's often not a clear line between CEOs and the government bureaucrats who regulate them, who might even share an office or a boss. Add in billions of dollars in exploding growth and you'll get a sense of why corruption could be one of the biggest problems facing BRICs and other developing economies. State capitalism doesn't always work, and sometimes can fail badly. Politicians and party officials aren't always motivated by the selfless devotion to national well-being that is supposed to guide their management of markets and firms. Cronyism, corruption, and industrial capture are always big risks, but they seem to become more likely and more dangerous as the economies grow. After all, it's one thing for a Chinese Communist Party official to remain dispassionate and fair-minded when managing, say, a local bank. But it can't be as easy for the officials who guide the Industrial and Commercial Bank of China, which has $1.9 trillion in assets and a significant interest in guiding public policy. Growing economies sometimes have to make major changes to domestic industries to keep growth from stalling, but the private citizens and state officials who got rich and powerful off those domestic industries will want to resist changes that could hurt them. In China, for example, some analysts wonder if the Communist Party will be able to push through some overdue reforms that would boost domestic consumption but weaken state-controlled exporters, who are entrenched in the economy and political system. In Russia, the needs of Gazprom can seem to occasionally foreign policy, sometimes to the detriment of Russia and even its neighbors, as when Moscow cut off all natural gas to Ukraine as punishment for siphoning some off. Ukrainian officials fessed up and Gazprom got its money, but Russia's relationship with Europe was badly damaged. Free-market India is not immune from corruption's terrible effects, either. In 2008, Indian government officials were bribed to sell cellphone bandwidth rights for far below market rates, effectively robbing the state of the $40 billion dollars by which it under-sold to telecom companies. A national protest movement, led in part by activist Anna Hazare, is channeling the country's collective outrage at corruption. But the movement has so far achieved little.
(5) STRONG ECONOMIES NEED STRONG STATES AND STRONGER SOCIETIES If state capitalism is the BRICs' greatest strength, and corruption their greatest weakness, then the lesson may be that healthy government-led economies require healthy governments. That means a state that will manage the economy responsibly and selflessly, something that's not so easy when the only powerful institutions in a country are the state and the industries it must manage. At some point, the relation gets a little too cozy, and the intended beneficiaries -- the actual population of the country -- get forgotten. The best way to keep that from happening, or at least the best way that anyone has come up with so far, is for civil society to become a player in it's own right, strong enough to assert its interests and to pressure both the state and industry to behave responsibly. A strong civil society can come from a number of things: labor unions, public interest groups, political parties, and most importantly the right to elect and unelect leaders. Civil society is very weak in China and Russia, it is large but struggling in India, and it is relatively successful in Brazil. This may help explain why, of the four BRICs, Brazil seems to enjoy the greatest stability. Compared to China's looming threats from inflation or a transition trap, Russia's demographic crisis, and India's rampant corruption, Brazil is downright boring. Its economy is lightly but competently managed, the hyperinflation crisis of the 1980s is behind it, and both the state and market seem to work in some kind of benign concert. The country has the greatest political rights and civil liberties of the four BRICs, according to the latest rankings from Freedom House, and its civil society actively participate in politics (unlike in India, where citizens vote but often have few other outlets, such as unions, for participation). It's not a cure-all to solve the problems of a developing economy, but a strong and free civil society seems like a good way to at least deter them from getting too bad.

TRANSLATION
5 уроків від економічного зростання БРІК
Дослідження успіху та потрясінь великих світових економік, що розвиваються
В 2001 році, Джим О`ніл, голова з правління активами банку Голдман Сакс, вдало передбачив, які 4 економіки найшвидше розвиватимуться на протязі десятиліття. Нам відомо, що ця четвірка носить назву під абревіатурою БРІК: Бразилія, Росія, Індія та Китай. Світова економіка пам’ятає його передбачення саме завдяки зручності цієї абревіатури та точності його прогнозів. Китай, Індія і Бразилія є одними із тих захоплюючих держав світу, що найбільш динамічно розвиваються. Насправді, назвати їх «економіками, що розвиваються», означає не надати їм належного значення. Індія є найбільшою округою світу, Китай – найбільшим виробником, Бразилія – найяскравішою економікою, що розширяється на західній півкулі (Росія, карлик цієї групи, страждає від жахливого стану демографічної ситуації та слабкого приватного сектору поза її природних ресурсів).
Як інвестори та економічні аналітики шукають наступну партію високо розвинутих ринків, зупинимося та згадаємо уроки БРІК: 1) робота над планом переходу до середнього рівня доходу; 2) торгівля і ще раз торгівля; 3) державний капіталізм може бути дієвим; 4) вбивча корупція; 5) нагальні проблеми громадянського суспільства. (1) Зростання середнього класу
Мабуть, найголовніший урок з процесу еволюції БРІК полягає в тому, що ніяке економічне зростання неможливе без перемоги середнього класу. Звіт про ці чотири країни є винятковим, проте все ще є значні можливості для зростання. В 2008 році, що був найважчим роком Великої рецесії, у Бразилії баланси кредитних карток підвищились до колосальних 30 %, що відображає значний попит у даній країні на споживчий кредит. Навіть в Росії, реальні доходи населення зросли до 142% у період з 1999 – 2009 роки. В Китаї та Індії, середній клас був підтриманий Великою промисловою революцією 21-ого століття. До 2050 року половина світового середнього класу, як це визначила ОЕСР (організація економічного співробітництва та розвитку), буде проживати саме в цих двох країнах. Проте все ще існують вагомі ризики. Продовольча інфляція в Індії та сумнівний ринок нерухомості в Китаї загрожує дестабілізацією фантастичних підйомів обох країн. (2) Торгівля – це все
Для будь-якої країни, економічне зростання пов’язане з торгівлею. В маленькій економіці це зростання пов’язане з торгівлею з більшими економіками. Іншими словами, не існує такого явища, як надзвичайно стрімкий економічний розвиток без надзвичайного зростання торгівлі. Цей принцип можна прослідкувати на прикладі країн БРІК. Всьому світові відомо, що Китай має великий успіх в сфері торгівлі на протязі останніх 20 років завдяки дешевій робочій силі та розумному урядовому плануванні щодо координації системи поставок та оптимізації виробництва електроніки, текстилю тощо. Частка Індії в світовій торгівлі збільшилась втричі в період з 1993 – 2010 роки. Країна також різнобічно розвивається. В 2000 році кожний п’ятий експортний долар прибув із США. Сьогодні – це вже кожен сьомий. Росії, яка занадто покладалась на товари та слаборозвинуті технології, трішки пощастило в другій половині 2000 року, так як ціни на нафту піднялись до рекордного рівня. Велика рецесія потягнула за собою збитки, оскільки фондовий ринок впав на значні 70% через обвал цін на нафту. Нарешті, Бразилія досягнула значного росту як сільськогосподарського, так і промислового експорту, але більше, ніж решта країн БРІК, була бенефіціаром значних міжнародних інвестицій, які допомогли її вітчизняній промисловості зростати – та зробили її споживачів багатими за рахунок підвищення своєї валюти порівняно з іншими країнами, що розвиваються.
(3) Дієвість державного капіталізму
Тільки одна з чотирьох країн БРІК може вважатись вільною – це Індія. Інші три є досить капіталістичними, успіх на світових ринках був великою складовою їхнього зростання, але їх версія капіталізму включає сильне втручання уряду. Державний капіталізм означає належність компаній державі, наприклад, такі як масивна Китайська національна нафтогазова корпорація чи Газпром, а також це означає і надмірне регулювання, часте втручання, іноді і ступінь державного контролю над ринками і фірмами, які не виглядають настільки капіталістичними. Проте не завжди виходить саме так, проте неможливо ігнорувати їх успіх, тим більше, що великі прихильники вільного ринку, такі як США, Європа, Японія – переживають не найкращі часи.
Модель державного капіталізму може бути привабливою для інших країн, що розвиваються. Сусіди Азії, Африки та Латинської Америки можуть прагнути співпрацювати зі світовими ринками, але не відкриваючи при цьому доступ до всього відразу і не дозволяючи Заходу завойовувати всю свою економіку, а навпаки захищати і розвивати вітчизняні фірми, які можуть конкурувати на міжнародному рівні і спрямують гроші назад в економічний розвиток. Але Захід також може цьому навчитись. Вільні ринки – насамперед, фінансові – інколи терплять невдачі та коливання. (4) Вбивча корупція
Подумайте над тим, скільки в США існує корпоративного та промислового впливу на політику. А тепер уявіть, що компанії являються більшими, політичні діячі стикаються з невеликою кількістю суспільної відповідальності, і часто не існує чіткої межі між керівниками та урядовими чиновниками , які їх регулюють, хто міг би навіть розділити офіс чи боса. Додайте мільярди доларів в вибухове зростання, і ви дізнаєтесь, чому корупція може стати однією з найбільших проблем, з якою стикаються країни БРІК та інші країни, що розвиваються.
Державний капіталізм не завжди працює,і іноді може зазнати провалу. Політики і чиновники не завжди вмотивовані безмежною відданістю національному добробуту, яка повинна спрямовувати їхнє управління ринками та фірмами. Кумівство, корупція і промислове поглинання – завжди супроводжуються ризиком, проте вони, здається, стають більш імовірними та більш небезпечними, оскільки економічні системи ростуть. Зрештою, це одна річ для китайського чиновника комуністичної партії залишатись безпристрасним та справедливим, управляючи, скажімо, місцевим банком. Проте не так просто чиновникам, які управляють Промисловим та Комерційним банком Китаю, який має 1,9 трильйонів доларів в активах і значна зацікавленість в управлінні державною політикою.
Економічні системи, що розвиваються іноді повинні вносити суттєві зміни до вітчизняної промисловості, щоб зберегти це зростання від затримок, але приватні особи та державні чиновники, які розбагатіли та підкріплені вітчизняною промисловістю, чинитимуть опір змінам, що можуть їм завдати шкоди. У Китаї, наприклад, деякі аналітики задаються питанням, чи була б в змозі Комуністична партія проштовхнути деякі назрілі реформи, які підвищили б внутрішнє споживання, але при цьому послабили б контрольованих державою експортерів, що вкоренились в економіці та політичній системі. В Росії потреби Газпрому можуть інколи стосуватись зовнішньої політики, іноді навіть на шкоду Росії та її сусідів, наприклад, коли Москва припинила постачання природного газу в Україну в якості покарання. Українські чиновники признались і Газпром отримав свої гроші, проте відносини між Росією та Європою значно погіршились.
Вільний ринок Індії також не застрахований від жахливих наслідків корупції. В 2008 році індійські урядовці були підкуплені при продажі прав на комунікаційний канал за ціною набагато нижче ринкової, фактично грабуючи державу на 40 мільярдів доларів, за які ці канали було перепродано нижче своєї вартості телекомунікаційним компаніям. Національний рух протесту, очолюваний актив скою Анною Хазаре, відображає колективне обурення країни на корупцію. Але цей протест мало що змінив.
(5) Сильним економікам необхідні сильна держава та сильніше суспільство
Якщо державний капіталізм є сильна сторона БРІК, і корупція – є їх найбільшою слабкістю, то урок може полягати в тому, що здорова потребує здорового уряду. Це означає, що державі, яка буде управляти економікою відповідально та самовіддано, досить не легко, коли єдиними впливовими закладами в країні являються лише уряд та галузі промисловості. У якийсь момент відносини стають занадто зручними, і намічені бенефіціарії забувають про фактичне населення країни. Кращий спосіб запобіганню цьому, чи принаймні, кращий спосіб, який до сьогодні придумали, для суспільства, це стати гравцем у своєму власному праві, досить сильним, щоб відстоювати свої інтереси і чинити тиск і на державу, і на промисловість та вести нести відповідальність.
Сильне громадянське суспільство може виходити від ряду речей: профспілки, громадські групи, політичні партії, і найбільш важливе – право обирати невибраних лідерів. Населення дуже слабке в Китаї та Росії, в Індії - велике, проте бореться з рядом проблем, та відносно успішне в Бразилії. Це може допомогти у поясненні, чому з чотирьох країн БРІК, здається, що в Бразилії панує найбільша стабільність. У порівнянні з Китаєм, який потерпає від інфляції, демографічна криза в Росії, і корупція в Індії, для Бразилії являється абсолютно нудними темами. Її економіка легко, проте розумно організована, криза гіперінфляції 1980-х років уже позаду, а держава і ринок, здається функціонують в безпеці. Відповідно до останніх рейтингів з «Фрідом Хауз», серед 4 країн БРІК, Бразилія має найбільше політичних прав та свобод, її населення бере активну участь у політичному житті (на відміну від Індії, де суспільство голосує, на маючи іншого виходу та різних спілок для участі). Це не є панацеєю для вирішення проблем економіки країни, що розвивається, проте сильне та вільне громадянське суспільство – є хорошим варіантом, принаймні для утримання від погіршення ситуації.

SUMMARY
Developed economies have many advantages, but the author of the article “5 Lessons From the Rise of the BRICs” founds out there are some areas where we can learn from the experience of emerging economies, especially from growing BRIC countries.
The term “BRIC” is an acronym formed with the initial letters of the four major emerging market countries: Brazil, Russia, India, and China. It was coined in 2011 by Jim O’Neill, chief economist at Goldman Sachs, and has been widely used ever since.
The BRIC are both the fastest growing and largest emerging markets economies. They account for almost three billion people, or just under half of the total population of the world. In recent times, the BRIC have also contributed to the majority of world GDP growth.
The economic potential of Brazil, Russia, India and China is such that they could become among the four most dominant economies by the year 2050. The thesis was proposed by Jim O'Neill. On almost every scale, they would be the largest entity on the global stage. These four countries are among the biggest and fastest growing emerging markets.
So, there such key lessons of the BRICs success:
1. Supporting of the middle class (By 2050, half of the global middle class as defined by OECD will live in China and India).
2. Developing trade (We don't have everything we need so we get it from another country. And if we have something another country wants, we can make money off it).
3. State capitalism (State capitalism is characterized by the dominance of state-owned business enterprises in the economy. State capitalism is the ownership and control of corporations by a sovereign government. It occurs frequently in energy, natural resource, and military technology markets. Common examples include the national oil companies of Russia).
4. Struggling with the corruption in the country.
5. Strong economies need strong states and stronger societies.

VOCABULARY 1. emerging markets – ринки, що розвиваються 2. accuracy rate – показник точності 3. vibrant – яскравий 4. batch of high-growth markets – партія, група швидкозросаючих ринків 5. precarious housing market – нестійкий ринок житла 6. reliant – впевнений 7. funnel - прогалина 8. public accountability – відповідальність перед суспільством 9. overdue reforms – прострочені реформи 10. entrenched in the economy – вкоренились в економіці 11. bandwidth – ширина смуги 12. rampant corruption – розгул корупції 13. public interest groups – суспільні групи

SUMMARY
Developed economies have many advantages, but the author of the article “5 Lessons From the Rise of the BRICs” founds out there are some areas where we can learn from the experience of emerging economies, especially from growing BRIC countries.
The term “BRIC” is an acronym formed with the initial letters of the four major emerging market countries: Brazil, Russia, India, and China. It was coined in 2011 by Jim O’Neill, chief economist at Goldman Sachs, and has been widely used ever since.
The BRIC are both the fastest growing and largest emerging markets economies. They account for almost three billion people, or just under half of the total population of the world. In recent times, the BRIC have also contributed to the majority of world GDP growth.
The economic potential of Brazil, Russia, India and China is such that they could become among the four most dominant economies by the year 2050. The thesis was proposed by Jim O'Neill. On almost every scale, they would be the largest entity on the global stage. These four countries are among the biggest and fastest growing emerging markets.
So, there such key lessons of the BRICs success:
1. Supporting of the middle class (By 2050, half of the global middle class as defined by OECD will live in China and India).
2. Developing trade (We don't have everything we need so we get it from another country. And if we have something another country wants, we can make money off it).
3. State capitalism (State capitalism is characterized by the dominance of state-owned business enterprises in the economy. State capitalism is the ownership and control of corporations by a sovereign government. It occurs frequently in energy, natural resource, and military technology markets. Common examples include the national oil companies of Russia).
4. Struggling with the corruption in the country.
5. Strong economies need strong states and stronger societies.

VOCABULARY 1. emerging markets – ринки, що розвиваються 2. accuracy rate – показник точності 3. vibrant – яскравий 4. batch of high-growth markets – партія, група швидкозросаючих ринків 5. precarious housing market – нестійкий ринок житла 6. reliant – впевнений 7. funnel - прогалина 8. public accountability – відповідальність перед суспільством 9. overdue reforms – прострочені реформи 10. entrenched in the economy – вкоренились в економіці 11. bandwidth – ширина смуги 12. rampant corruption – розгул корупції 13. public interest groups – суспільні групи

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