British economist Jim O’Neill criticized his compatriots for failing to take Russia seriously as an investment destination at a Chatham House event on January 20, describing investors’ hesitance as a “British mental disease.”
The think tank event was held under the title “Ten Years of BRIC Life,” referring to an acronym O’Neill coined for a Goldman Sachs Economic Research paper in 2001. Representing four emerging markets – Brazil, Russia, India and China - the term “BRIC” went on to define economic news for the first decade of the 21st century. With the BRICs increasingly driving global growth amidst post-crisis sluggishness in the West, the term is increasingly acquiring political significance.
O’Neill, now Chairman of Asset Management for Goldman Sachs, addressed concerns that Russia should be removed from the BRICs moniker, while also highlighting points where the original paper had underestimated the economic growth of certain countries, most especially China. Additionally, he contrasted the increasing focus on the eurozone crisis with the impressive economic growth by the newly minted MIST (Mexico, Indonesia, South Korea and Turkey) countries and their impact on the global economy. Below are some excerpts of his discussion from the full transcript.
On calls for Russia to be removed from the BRICs:
“I say that right at the front because it is the thing that always comes up, particularly in this country…it seems to be like a bit of a British mental disease, frankly in my opinion. ‘We don't like Russia, so we're not going to treat it as being a serious place.’
“Whilst Russia has got lots of problems and lots of challenges, it is more than one percent of global GDP and on some of the numbers that we play around with, the increase in the dollar value of Russia's GDP in the decade ahead is probably going to be close to, if not more – we actually have it bigger, than the increase in the dollar value of the euro area's GDP. So if we choose to dislike Russia because of all these things and not want to have any engagement with them, it seems not to be a particularly smart thing for a country which has got the challenges that we have.”
On the impact of the BRICs and the accuracy of the original predictions:
“The BRIC story has kind of changed my professional life… And it's because it has become… so far, much bigger than we thought it would be ten years ago. And by the way, that also includes Russia. Until we had the crisis in 2008, Russia was the one that was surprising us the most in terms of its GDP growth rate. And so if we would have been seen here back in 2008, it would have been extremely easy to pour cold water on those that think Russia doesn't belong in this exalted status. It is obviously for a number of reasons questionable.”
The BRIC and MIST countries:
Those eight countries collectively this decade, on very conservative numbers, will see their dollar GDP increase by $15 trillion, or in the context of how people in the West struggle and worry, more than twice the combined change in the GDP of the US and the euro area.”
On Western concerns over the eurozone:
“I find it quite astonishing as I travel around the world, as I do, the amount of time that conversation is completely dominated about Greece, and then with it all the rest of this remarkable mess over in Europe. China, growing at what is now effectively $1 trillion of GDP more every year, is effectively creating the equivalent of another Greece every four months. So you could wipe Greece off the map and within four months, China's created the economic value of another one.”
Jim O'Neill is the Chairman of Goldman Sachs Asset Management. As former Chief Economist at Goldman Sachs, he was responsible for coining the term BRICs in 2001.
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