There’s something you crucially need to understand about the global economic crisis: It doesn’t exist.
Sure, Europe may be weeks away from a monetary cataclysm that has the potential of crashing all its economies plus some of the euro-exposed banks across the Atlantic. The United States may be suffering its highest poverty rates in half a century. And here in Britain, the combination of high inflation and an economy that actually shrank last quarter may return the ugly word “stagflation” – stagnation plus inflation – to our vocabulary.
But that hardly constitutes “global.” If you live in Sao Paulo, Moscow, Mumbai, Shanghai, Mexico City, Jakarta, Istanbul, Johannesburg or a dozen other centres in the eastern and southern three-quarters of the world, then your country hasn’t been experiencing any kind of crisis, beyond a few rough months in 2008 and 2009. In fact, most of those places have been enjoying a more or less continuous boom.
If you view the world rather strictly through the lens of economic growth, you can paint a picture of neatly symmetrical rebalancing.
That was what I was told the other day by Jim O’Neill, the brusque Mancunian who runs Goldman Sachs Asset Management and is most famous for having coined the acronym BRICs (Brazil, Russia, India, China) 10 years ago to unite the ex-poor economies that were becoming economic powerhouses.
He remains a proud defender of his four-letter word. “I find it quite astonishing as I travel around the world, the amount of time that the conversation is completely dominated by Greece and this mess over in Europe,” he said. “China growing by a trillion dollars of GDP every year is effectively creating a new Greece every four months. … What happens to these guys is way more important than anything that’s going on in Europe.”
Mr. O’Neill has been in a rather triumphant mood in recent months, as his glowing prognostications a decade ago proved to be conservative: Growth in all four countries has surpassed all his forecasts; Mexico, South Korea, Indonesia and Turkey have done equally well, and several economies in sub-Saharan Africa have been growing at a record pace. We reached a certain apex this past autumn when the BRIC countries made a serious proposal to provide Europe with a financial rescue package (fortunately for everyone, it did not happen). It is easy to imagine that the world has simply inverted itself.
But what, actually, is happening? We need to get our metaphors straight. The world does not have a fixed pool of wealth that is simply sloshing over to the eastern and southern edges of the globe, leaving the West in the shallows. Nor is there a golden escalator that is taking the world’s billion poorest people straight from thatched-roof huts into condominium towers, without conflict in between.
In fact, it appears – if you look beyond simple measures of gross domestic product and instead focus on the lives and household budgets of the newly non-poor – that many of these miracle countries are about to hit a BRIC wall.
It’s fair to say that the world is now in the midst of a tumultuous in-between period. Before, we had several decades of unequal stability. The West consumed, the East produced, and the South did neither. The West had non-growing urban populations, the East and South had fast-growing rural ones. Most food was produced in a few highly developed areas, and the East and South could barely feed themselves, importing food.
Some day we will have a more equal stability – when West, East and South will all have domestic consumption and consumer economies; when all will have urban, stable populations; and when agricultural land in Asia and Africa is used to produce food for sale, not to house people. We’re in between those stabilities now.
Those three elements are changing at different paces, producing conflict. China, Russia and Brazil are urbanized with stable populations, but don’t have much domestic consumption because wages are low and their economies rely on foreign-exchange earnings. India has a domestic economy, but remains rural, overpopulated and produces half the food it could. And its gross sexual inequality is hindering progress. Africa’s growth and demographic improvement is pushed by agricultural and resource development, but Africa lacks urban economic growth and consumer economies, and won’t have them until it invests in those things.
When countries hit those walls, there is tension: Chinese workers protest, Brazilian slum-dwellers get angry, Russians demand a fair election, Indians revolt against their governments and Africa has democratic revolutions. Those events, rather than GDP, are the important indicators.