Jim O’Neill: 10 Years of BRIC Countries

Modern Russia conducted an interview with Goldman Sachs’ Jim O’Neill, who coined the term BRIC 10 years ago when he released “Building Better Global Economic BRICs,” highlighting the economic importance of four emerging economies: Brazil, Russia, India and China.  

Dr. O’Neill spoke to us about Russia’s economic growth and the future of the BRIC countries.     

1. It’s been 10 years since your report "Building Better Global Economic BRICs", which coined the famous acronym for the emerging countries of Brazil, Russia, India and China.  How is Russia tracking against your original projection?

Since 2001, the aggregate growth of the BRIC economies has been so much faster than I envisaged.  In the most optimistic scenario, I imagined they could rise from around the 8 percent of global GDP they were to about 14 percent today.  In fact, they are closer to 20 percent.  Of course, it is largely because of China, but each of the four, Russia included, expanded more than I thought.  In fact, until the global credit crisis in 2008, Russia was the best positive outperformer.  Then, Russia of course has struggled both relatively and absolutely as the reality of its dependency on oil has become clearer.    

2. How has Russia’s economy changed since 2001? 

The Russian economy in many ways hasn’t really changed much at all even though it is three times bigger than it was in 2001.  It is really so dependent on energy and resources still, and has clearly benefited from the boom in those resources.  I often wonder what might happen if oil prices fell below $50 again and stayed down.  Russia might struggle.  Indeed, if I were involved in Russian policy, I would try to stress test the economic system to assume if that were the case.  With all this being said, one area where Russia impresses me is the use of technology and its preparedness to embrace the Internet for advancing the economy and society.  In many ways, Russian business people are ahead of many others in Europe in this area.  

3. What aspects about the country’s economy have surprised you?   What are the biggest economic challenges facing Russia? How can the country begin to overcome these challenges?

We maintain something called a growth environment score – GES – an index of 13 variables that are key to productivity and sustainable growth.  It can vary from 0 to 10, with 10 being the best.  Of the BRIC countries, Brazil is the highest at 5.6, closely followed by China at 5.5.  Russia is currently at 4.5, ahead of India at 4.0.  The weakest areas for Russia are the well-known ones: the rule of law, the degree of corruption and especially poor demographics.  On the latter, there has been some progress under Putin and this needs to continue.  Beyond this critical point, I think diversifying the economy away from energy and improving the rule of law and system of governance are key.    

4. How would you address the critics who argue that Russia should be dropped from the BRIC countries acronym?  

Only if they pay me! Or in a similar facetious manner, I would have to drop India also, as Russia scores more highly than India in terms of the growth environment score.  I think many people who suggest that I drop the R in BRIC don’t really understand the concept and look at these issues with a very narrow Western-centric mentality.  Russia has 140 million people, more than any European nation, and if it continues to avoid a major crisis, and grow 3-4 percent for the next 20 years, its economy will be probably as big, if not bigger than Germany and the other European countries.  So while Russia is never going to get to the size of China, and soon India will start to become much bigger, it can hold its own against many of the G7 countries.   

5. Where do you see Russia, economically, in 2021?  How would you benchmark Russia against the other BRIC countries? 

I think by 2021, Russia’s annual GDP should be somewhere around $3.5 trillion, assuming it can grow by 3-4 percent. I think it is very unlikely that – at least in current US$ terms – it can become as large as Putin and his colleagues would like, i.e. a top five major economy.  That could happen by 2050, but it would need to have a lot of things improve, especially the demographics, and to diversify away from energy.      

6. Anything else you’d like to add?  

Yes, I think Russia should try really hard to use the 2018 World Cup as a focal point for implementing many of the changes it knows it has to make – and to invite me to be a guest for the whole month it is on! 

Dr. O’Neill will release his new book, “The Growth Map: Economic Opportunity in the BRICs and Beyond,” in early December.  To see other Modern Russia contributions from Dr. O’Neill, please visit http://www.modernrussia.com/users/jim-oneill.