World Bank: The Rise of the BRIICS A Harbinger Of A New World Economic Order

World Bank: The Rise of the BRIICS A Harbinger Of A New World Economic Order

May. 17 2011 - 5:49 pm | 193 views | 0 recommendations | 0 comments

The days of U.S. global economic dominance are numbered. Areport recently released by the World Bank predicts that by 2025, a multi-polar world will emerge in which economic clout is spread across developed and emerging economies.

Between 2010 and 2025, average growth rates in emerging economies are expected to be more than twice that of advanced economies — 4.7 to our 2.3 percent. The BRIICS (Brazil, Russia, India, Indonesia, China, South Korea) will lead the emerging world, accounting for more than half of all global growth.

Interestingly, trade and investment patterns are shifting too. Foreign investment deals between developing countries are rapidly increasing. According to the report, over a third of FDI inflows to developing countries now originate in other developing countries, a trend which is predicted to increase as emerging economies further industrialize and shift production down the value chain. This is already underway in China, where the WSJ recentlyreported rising wages are causing local companies to shift production outside the country, in some cases to Bangladesh, in an effort to keep costs down.

According to Mansoor Dailami, manager of the Emerging Global Trends team and lead author of the report, China’s increasing economic dominance will lead to a more international role for its currency. “The most likely global currency scenario in 2025 will be a multi-currency one centered on the dollar, the euro, and the renminbi.” Already, the Chinese are moving to internationalize their currency through the development of offshore renminbi markets and by encouraging its use in trade.

In the long term, growth in emerging economies will be contingent on their ability to innovate and shift away from an externally driven growth model to one fueled in part by local consumption. Reforms across the board will be needed in order for a middle class to form.

The shift towards a multi-polar world will usher in a new era for U.S. policymakers. Power is no longer as centralized as it once was. Policy coordination will become increasingly important in navigating a more integrated global economy and seizing the opportunities that lie ahead.