Report and Retort: A Second Look. . . .

Excerpts from Ian Bremmer's analysis of the BRIC countries and their futures in the July/August issue of The National Interest.

Editor's note: The following are excerpts from Ian Bremmer's article "A Second Look. . . ." in the July/August issue of The National Interest. It is part of The National Interest's ongoing feature "Report and Retort", in which commentators respond to Naazneen Barma, Ely Ratner and Steven Weber's article "A World Without the West", also in the July/August issue. Bremmer's complete article is available here.

Additional commentary on "A World Without the West":

Devin Stewart, "Alternative Leadership Still Requires Ethics."

Chas Freeman, "China and the Global Resource Balance."

Weber responds, "Facing the Reality of the 21st Century."

SINCE A team of Goldman Sachs economists popularized the term "BRICs" (Brazil, Russia, India and China) in October 2003, this group of emerging-market countries has assumed ever-greater importance in the international investment community's collective imagination. The Goldman Sachs analysts argued that, with sound political leadership and a bit of luck, these four economies could outpace the original G-6 industrialized nations in dollar terms by 2040-a profound shift in the world's economic balance of power. . . .

Brazil has come a long way over the last half decade. The variables that now determine how fast Brazil's economy will grow and how much foreign investors can earn there have more to do with economic reforms, inflation, growth forecasts and fiscal policy than with risks of serious political instability or debt default. In these ways Brazil is unlike Argentina in the 1990s in that it has acknowledged the importance of not just paying its debt but also paying it on schedule. In that sense Brazil is well on its way to graduating from emerging-market status. It is no longer simply an eternally promising Latin American economy. . . .

CHINA MUST manage a much broader range of domestic and international challenges than those facing Brazil. The country's demand for secure and reliable long-term supplies of oil, natural gas and other commodities needed to fuel its blistering economic growth exposes China to the tangle of international politics as never before. The Communist Party leadership has relatively little experience managing political risk in the Middle East, Africa and Latin America, as well as protectionist threats from Europe and the United States. For years to come, the need to import raw materials and to export finished products, not domestic demand, will define China's growth prospects.

But China's greatest challenge is in managing the growing risks generated at home by globalization-the various processes by which ideas, information, people, money, and goods and services cross international borders at unprecedented speed. Globalization bolsters longer-term stability in emerging markets that are democracies (such as Brazil or India) by making their opening economies and societies more dynamic. This is true to some extent in China as well, where the leadership has embraced public- and private-sector entrepreneurship as a risk it must accept. But globalization has also brought China severe environmental damage, widening gaps between rich and poor, large-scale social dislocations via urbanization and the social unrest that bubbles up whenever an authoritarian government provides its citizens with so few opportunities to openly vent their anger over all these changes. Tens of thousands of large-scale public protests-over land expropriation, pollution, corruption and other complaints-roil China every year. The state, which fears that public recognition of the legitimacy of these grievances will undermine Communist Party authority, is left to contain the threats these protests pose with ever-increasing numbers of riot police. . . .

Clearly, it is premature to argue that the BRICs will inevitably sweep aside the G-7 economies as the primary engine of global growth. More to the point, differences in the political factors that drive the development of their economies suggest that these four countries do not form a coherent economic bloc. In particular, Russia's petro-wealth limits its need for foreign investment, pushing the country into a separate category.

Finally, growth in Brazil, India and China will depend on expanding commercial relations with more developed states. Their growing economies profit from stability in the global economy, giving them powerful incentives to work within existing international institutions, rather than trying to forge new ones. More to the point, differences in their political systems may well send their economies in different directions over the next two decades. The Goldman Sachs analysts who made the BRICs idea famous wisely hedged their bets on its future. Those who have since adopted the idea would do well to follow their lead.

Ian Bremmer is the president of Eurasia Group and author of The J-Curve: A New Way to Understand Why Nations Rise and Fall. He is also a contributing editor to The National Interest.