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01/23/2012

Book Review: The Growth Map


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The-Growth-Map

Ten years ago Jim O'Neill, chairman of Goldman Sachs Asset Management, changed the field of global investing by coining the now iconic phrase, “BRIC”—abbreviated for the four countries that he and his team predicted as the main emerging economies. Brazil, Russia, India, and China—countries that he said would eventually surpass the six largest Western economies, and changed the scope of emerging markets. In his new book, The Growth Map: Economic Opportunity in the BRICs and Beyond, O’Neill provides a firsthand account of the evolution of “BRIC,” and where these countries currently stand. He also introduces a new prediction: the "Next Eleven" countries: Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey, and Vietnam. These countries, according to O’Neill’s prediction, will offer great opportunities for investors over the next decade, similar to the BRICs.

Of the four countries chosen in 2001, Brazil was a country that had long been viewed as having the potential to become a major economy. For decades, Brazil had failed to live up to expectations. This changed in 2003 when Lula da Silva became president, and began an effective anti-inflation policy. The end result is O'Neill sees Brazil having an economy in 2050 that is four times larger than today.

As for Russia, it is a BRIC in which few have much faith. According to O’Neill, it’s "hard to find people optimistic about Russia.” Despite its political and economic problems, O'Neill sees it as, "…having the potential to have a higher GNP per capita than the other BRICs, and, even higher than all other European countries." If positive changes are made, according to O’Neill, per capita income could reach $20,000 in 2020, and $60,000 in 2050. Clearly Russia has the potential to be a major consumer market.

Among the BRICs, India is the "greatest mystery." It is "the most vibrant, beautiful, creative, inspiring place I have ever seen. But, the scale of poverty is astonishing, and the difficulties of getting things done are equally so," O’Neill says. India struggles, while China moves ahead.

China has progressed from emerging to emerged; many expect it will be the world's largest economy. China has fast rising wealth, and is "on the brink of a significant consumer takeoff." Its wealth management consumer businesses are attracting a lot of top tier, major player interest. In terms of psychology, China combines energetic optimism, and "worry that everything could go wrong."

O'Neill is very detailed about all the negatives and challenges in these countries, but is committed to the positives that are transforming them and our world. Things cannot always be predicted in full, but as he concludes, "the day everything becomes crystal clear is probably the day we should stop investing."

–Bill Hayes

 

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