The world is changing and becoming increasingly multipolar due to the emergence of China, India, Russia, Brazil and South Africa forming so called BRICS. The global influence of America is fading out due to the recent decline in their stock market and the emergence of other markets. The framework of the global economy has changed dramatically due to the collapse of Lehman Brothers in 2008. The change in swift happened from G7 to G20 (group of world’s largest 20 economies) and this G20 comprises of these five nations from BRICS. Unlike 2009 the world economy is expected to have a positive growth in future, considered high economic growth by China and India than US. The world sees BRICS as the emerging economies and many enterprises has started moving out to these countries as they look promising. With China emerging as a superpower followed by India, BRICS has turned into major player in the global economy, that is expected by the world economists to shape the 21st century.
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This paper aims to study the trends, similarities and patterns in the activities and movements of the BRICS economy to its other counterparts, as this could help the investors to learn about the financial happenings in these five nations. The details are collected through available secondary data’s and also by conducting economic research. The analysis is done using various statistical methods.
This paper focuses to help the investors in knowing the development of various markets among the BRICS nations and invest accordingly. As each market is inter dependent on each other, this study aims to learn how the economic development in BRICS nations led to major financial changes in other developing nations.
Background Information
This study looks at the rise of the BRICS economies and their rising importance to the global economy and the trends that will shape their performance. In last two years as the world failed to recover from global financial crisis, the world economy is teetering on the edge of another major recession. Output growth has already slowed considerably during 2011, especially in the developed countries. The baseline predictors predict that this recession continuous even during the year 2012 and 2013. Such progress is far from sufficient to deal with the continued job crises in most developed economies and will drag down income growth in developing countries.
The communal strength of the BRICS economies is of ever increasing importance to the strength of the global economy. At the same time as matured economies across the world struggling with immense budget deficits, weak growth and rising unemployment, the BRICS are mounting swiftly, lifting people out of poverty and driving the global economy. The manner in which leaders in the troubled Eurozone recently pleaded with these markets for funds to help ease the sovereign debt crisis marks yet another critical step in the switch of economic power from ‘west’ to ‘east’. Of course, when measured on a per capita basis, the GDP of BRICS economies still are lagging behind the G7 countries. However, on an absolute basis, they are catching up fast. The BRICS are estimated to contribute for 37% of global development in the period 2011-16, with China alone contributing 22%. This will increase the BRICS share of global output from 19% to 23%. In the meantime, the share of global output produced by the G7 economies will decrease from 48% to 44% over the same period.
Moreover investment activity in BRICS countries seems healthy which is estimated that it will have 47% increased investment in plant and machinery and by 46% in R&D during the year 2012. Across the G7, investment activity looks slower with net 31% and net 17% planning to increase investment in plant and machinery and R&D respectively. These statistics and information summarizes the importance of BRICS in the modern world business community. [Grant Thornton International Business Report 2012]
Literature review
Maurice G. Kendall was one of the earliest detectors of the concept of efficient markets in 1953. This statistician presented a paper on the behavior of stock and commodity prices and he found that prices follow a random walk, i.e. price changes are independent of one another. (Brealey & Myers, 2000) After Kendall’s work, many studies of stock market efficiency have followed.
As BRICS turned out to be biggest talking point in the modern era many researchers conducted various researches on BRICS countries and about their culture, geography, growing economy, modernization, industrialization and various other areas.
This Egmont Paper is the first product of a new research project about the EU and the BRIC countries, launched by the Institute in February 2009, to look at how the EU positions itself in an increasingly multipolar world. A vast topic, this paper is intended as a scene-setter, analyzing just what the geopolitical changes are and offering some initial recommendations. Forthcoming publications will focus on the EU instrument of “strategic partnership”, assessing how the effectiveness of this tool can be improved, and on the reform of the multilateral architecture, offering suggestions for reform that would enhance both the EU’s presence and the overall strength of “effective multilateralism”.
The EU-BRIC project fits in Egmont’s well established research agenda about the EU as a global actor and is tightly linked to other ongoing projects about European strategy. Indeed, it is not just about “a secure Europe in a better world”, the subtitle of the European Security Strategy: we are also facing the challenge of maintaining a secure Europe in a changing world.
In October 2009 Thomas Renard from the Royal institute for international business relations conducted a research on the topic ‘A BRIC in the world: Emerging powers, Europe and the coming order’
According to his research the American unipolar moment has ended. Yet, it seems too early nonetheless to evoke true multipolarity. Indeed, the US remains the dominant power, or the “lonely superpower”, and is likely to maintain its status for years and probably decades to come. America’s decline is not an illusion, but it must be understood in relative terms. US global influence is fading because it contrasts with the rise of the ‘rest’, i.e. the empowerment of other actors at the local, regional and global level.
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There is a great uncertainty as regards to who will emerge as a major power and when the US dominance will become definite history. In fact, it is very likely that only few countries will emerge as central hubs of the system in the 21st century, creating a sort of asymmetrical multipolarity with a distinction between dominant or central powers, major powers, regional powers and local powers.
Based on the analysis of several indicators, his research refines the “BRIC dream” into a more realistic BR-I-C scenario in which China appears to be the real story and the only emerging power that can challenge the US in the coming years India will follow the path of China but its emergence will be slower and in all less impressive. Brazil and Russia are probably the least emergent among the emerging powers, but this is not to say that they are not emerging.
His paper offers a broad analysis of the very important changes affecting our world. It attempts to offer a perspective on the coming order without surrendering to the temptation of difficult and dangerous predictions. It focuses on the emergence of new powers and the advent of a new international structure. More specifically, his paper places the EU at the Centre of its argumentation and asks the fundamental questions of what this upcoming multipolarity means for Europe and where the EU fits among the emerging powers.
The first section of his research proposed a brief historical perspective on the current trends shaping the global system. The second section described those current trends in more detail, focusing on three main aspects: multipolarity, interdependence and multilateralism. The third section identified the major poles of the coming order, based on a selective set of indicators. The fourth section analyzed the EU as a potential emerging power while underscoring various important distinctions with the other (emerging) global powers. Finally, the fifth section details the EU’s strategy to deal with the current trends and proposes some recommendations for improving it.
The author then concluded by telling that the rules of the great game for global power are changing. The US cannot play alone anymore. President Obama has already recognized China as a new major player, notably when he declared that “the relationship between the United States and China will shape the 21st century” during a visit to Beijing last July 2009. In other words, both countries were likely to become the central powers of the coming order. Russia and Europe were trying to stay in the game, while Brazil and India are trying to step in. They all have the potential to become major or middle powers, provided they avoid being “game over”.
More players in the game also mean that the way of playing is different. The attractiveness of unilateralism is declining because ever less issues can be dealt with unilaterally in the age of interpolarity. More likely, the coming order will witness a growing share of multilateralism, although under many different aspects. Today’s multi-multilateralism is characterized by the coexistence of formal and informal; global and regional; general and issue-specific forums. This complex network of multilateral forums is a natural mirror of the broader trends affecting the system and its flexibility alone allowed it to integrate emerging powers in the global system so rapidly. Multi-multilateralism is nonetheless doomed to be replaced by a reformed global multilateral structure if it is to satisfy the growing aspirations of the emerging players and to tackle global challenges effectively. In other words, multi-multilateralism is a transitory phase towards either reformed multilateralism or the end of multilateralism as we know it.
Although the EU arguably favors a multilateral approach to international relations, multilateralism might not always be favorable to the EU. Indeed, the EU advocates systemic and rule-based multilateralism and might therefore rapidly find itself in a relatively uncomfortable position in a multi-multilateral order. To begin with, the failure to negotiate a reform of the global multilateral system could push the emerging powers away from Western-inspired forums and encourage them to create alternative institutions. Conversely, organizing a grand bargain with the emerging powers could offer an unprecedented opportunity to solve major issues. Finally, the formation of bilateral or multilateral alliances excluding the EU could be potentially damaging; a G-2 between China and America e.g. would slowly but inevitably make the US lean towards Asia, away from Europe.
For the EU to remain relevant in the 21st century, it will need to promote effective multilateralism at the global and EU levels, to seal real strategic partner ships, and to develop its leadership capacity in order a) to influence the global agenda, and b) to take the lead in issues of particular importance to the EU. Leadership and effective multilateralism are complementary and mutually reinforcing. They are Europe’s best option to enter interpolarity as a global power. The EU will not rule the 21st century, but it can still become a major pole, and it must certainly avoid to be ruled out.
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