Brazil, Russia, India, and China—otherwise known as the BRIC nations—are enjoying a new and, in ways, unprecedented role on the international stage. The four emerging markets maintained an average growth rate of 10.7 percent from 2006 to 2008, according to the International Monetary Fund. With this outstanding performance, they are creating a new economic miracle.
In an article recently published in the Beijing-based newspaper Guangming Daily, experts in a research team of the Hunan Provincial Planning Office of Philosophy and Social Science pointed to a trend known as the "big country effect" as a determining factor in their rapid, sustainable growth.
Excerpts from this article follow:
Some scholars say the rapid economic growth of the BRIC countries stemmed from their wise choices in comparative advantage strategies—which have allowed them considerable room to maneuver with regards to their resources.
Others say their brilliant performance emanated from their advantages in terms of being latecomers. In other words, having been so economically dormant for so long, the BRIC countries have enjoyed advances in development via technological improvements, human resource development, as well as economic restructuring.
None of these arguments are fully convincing.
As the BRIC countries are all emerging powers, they share significant commonalities: They are large in both area and population, with great quantities of resources and huge market potential. These, naturally, create favorable conditions for economic growth.
The numbers tell the story. For example, the geographic areas of Russia, China, Brazil and India rank first, fourth, fifth and seventh worldwide, respectively, while in terms of population, China and India rank first and second. Meanwhile, Brazil ranks number five and Russia, number seven.
In terms of the overall scale of natural resources, China ranks number three, India number eight, Russia number two and Brazil number nine. In terms of market scale, China comes in at number eight, India number 12, Russia number 16 and Brazil number seven.
These economic characteristics have formed the so-called "big country effect." It is this effect that has given rise to an inherently strengthened market potential, coupled with copious resource abundance—two factors that boost diversity and economic stability. This is the true reason for the rise of the BRIC countries.
Features of 'big country effect'
—Huge domestic demand has boosted economic growth in the BRIC nations. The BRIC nations originally stemmed from a proposal by the international investment and securities firm Goldman Sachs seeking strategic counterbalances against the United States in the future market. What Goldman Sachs valued is the four countries' significant status in the world market. In terms of household consumption expenditures, Brazil, China, India and Russia are all world leaders. Their massive market potential forms an important advantage for economic development.
—Large quantities of resources have helped the BRIC economies rev up. Natural resources, of course, can be fundamental agents of economic growth. The BRIC countries are all positively endowed in this respect—something that portends for rapid, and sustainable economic expansion.
According to the World Bank, the gross reserves of mineral resources of India, China and Brazil now stand at $3.57 trillion, $3.18 trillion and $1.11 trillion respectively—far more than the $290 billion of Britain and Japan, and the $340 billion of Germany.
BRIC countries enjoy the benefits of large-scale industries thanks to their vast resource reserves. China and India, for instance, have become the world's top textile producers owing to their abundant textile raw materials. Russia, in turn, has ascended as an energy power thanks to its rich energy resources, including vast amounts of oil.
—The large size of their economies has enabled the BRIC nations to develop a reasonable division of labor. The BRIC countries' huge markets and resource reserves have ensured that all these countries boast considerably large economies.
Indeed, the sheer size of their economies has led to improvements in the context of their divisions of labor. Meanwhile, they have also contributed to industrial agglomeration within these countries, thus creating a strong environment for their economic takeoff. Just as the World Bank's 2009 World Development Report pointed out, developing nations are fast entering a new realm of "agglomeration economies."
—The BRIC nations' diversified products have helped strengthen their comparative advantages in foreign trade. For these countries, dualistic or pluralistic economic structures, regional and industrial differences, as well as product diversity, have proven a boon with respect to their trade with other countries.
Bigger countries have larger areas and relatively complete industrial systems. They thus often have a diversified structure of export commodities. Currently, China's export commodities mainly consist of food products, textiles, chemical products and machinery and electronic products. India mainly exports software products and textiles. Brazil principally exports agricultural products, minerals and aerospace products. Russia exports minerals, energy products and aerospace products.
Recently, foreign trade structures across the world have become increasingly specialized, although characteristics of diversification remain. On a positive note, this sort of structure has its advantages. For instance, it can help a country make better use of its natural, human and technological resources.
Against this backdrop, a single-export commodity structure is preferable for a small country. But for a big country, such as a BRIC nation, a diversified export commodity structure is appropriate as well. Indeed, the economic aggregates of big countries can be so overwhelming that the overall dimensions of a single industry can exceed those of all the industries of a smaller nation. That's why big countries are able to gain a competitive edge in the international market even if they have a diversified export mix.