BRIC economies in 2011

In that short decade, the original four BRICs – Brazil, Russia, India and China – have not only been joined by a fifth, South Africa, but a clutch of other candidates such as Mexico, Indonesia, and Turkey are also snapping at their heels.

In the same period, they have also gone from being seen in the developed world as a vast source of low-cost labour to produce goods for the Western world to a primary source of the economic growth that has dried up in the developed world since the global financial crisis.

With the numbers of middle-class citizens rising by some 70 million or more a year, Goldman Sachs now sees the BRICS and their ilk as a major market in themselves, where households earning above US$6000 a year become hungry for more energy, and above US$8000 unleash a powerful demand for high value consumer durables.

By 2030, Goldman estimates there will be another two billion middle class consumers, mainly in what were once called the “emerging markets”.

The global financial crisis has been a huge part of the rise of the BRICS.

While the so-called “developed” economies of Europe, Japan and the US face years of slow growth as they shrug off the debt binge of the 2000s, the BRICS and their mushrooming middle classes represent an answer to where growth in the future will come from.

More than that, these aspiring and newly affluent people will seek better again for their children. As a result, education, health services and social infrastructure will all be major areas of investment, offering opportunities far beyond traditional merchandise trade relationships.

Growing economic influence

In some of the BRICS, there are inflationary headwinds. Yet none are looking at growth below 4 percent in the year ahead, and at least three are looking at growth rates of nearly 10 percent.

The BRICS are also starting to flex their muscles in the post-GFC environment.

In April, the five BRICS leaders held a one day summit on China’s Hainan Island with not an OECD leader in sight.

High on the agenda: fears about the way gyrating US dollar and the first stirrings of a coordinated call for a new global reserve currency system as the greenback loses its lustre.

While the Chinese yuan is most touted as a replacement for the US dollar, that looks still to be many years away. Global trust in the legal and institutional framework of the Chinese monetary authorities will take time to mature.

The rising economic clout of the BRIC nations was illustrated in the appointment of a new leader for the International Monetary Fund, where the BRICS were forceful in pointing out the unbalanced voting power in the IMF.

The countries of Europe hold 32 percent of the voting power at the global fund, with some 24 percent of world economic activity.

The BRICS, by comparison, currently muster just 11 percent of votes at the IMF.