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Wednesday 23 Aug 2017 | 12:50 | SYDNEY
Wednesday 23 Aug 2017 | 12:50 | SYDNEY

The BRIC model: Big is beautiful

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8 July 2009 16:03

I’ve spent the last two weeks on a research trip around East Asia, during which I heard a surprising amount about the BRIC (Brazil, Russia, India, China) model for economic development. Surprising, because it’s hard to see how such a diverse group of countries can offer a coherent model. 

After listening more closely to what was being said, however, I realized that for many of my interlocutors the BRIC model boiled down to being big enough to rely on domestic demand to drive economic growth. 

In a world economy where there has been something of return to export pessimism based on fears about a prolonged period of weak US consumer demand, the presence of a large domestic market is seen as an important positive.

This way of thinking about the world was also apparent in another feature of the trip: a growing sense of optimism about Indonesia’s economic prospects. Of course, much of this optimism was based on political developments. It also reflected the fact that Indonesia is one of the better performing regional economies at the moment, thanks in part to the fact that it has been less exposed to the sharp decline in global manufacturing trade than many other economies in the region:

Source: World Bank Global Development Finance 2009.

But it also seems to have reflected the emergence of a ‘big is beautiful’ view that size matters in a world economy where many observers think the export-led growth model no longer looks as attractive as it used to be. 

Indeed, the argument is already being made that Indonesia should be classed as one of the BRICs – or presumably BRICIs, as they would then become. This would make for an interesting case of 'back to the future', since before there were the BRICs, there was the World Bank’s 'Big 5' (warning: very large PDF) of Brazil, China, India, Indonesia, and Russia. One consequence of the 1997-98 financial crisis was that Indonesia dropped out of this list of emerging market contenders. As the GFC unfolds, Indonesia is finding itself back in contention.

Photo by Flickr user Leo Reynolds, used under a Creative Commons license.

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