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  • Jim O'Neill on BRIC Nations, 'Emerging Economies' no Longer

    In his book, The Growth Map: Economic Opportunity in the BRICs and Beyond , Jim O'Neill argues that the term emerging markets no longer applies to the BRIC nations (and a few others, including Mexico and Korea). While he has long been bullish on the economies of Brazil, India, and China, O'Neil--chairman of Goldman Sachs Asset Management--has come to realize that, in many ways, these economies have earned a little more respect as strong, stable markets. He spoke recently with Charlie Rose about the strength of the BRIC economies, and how we all need to stop regarding "growth markets" as "developing." Here is an excerpt: Watch the full interview here .

  • Brookings Global MetroMonitor: Metro Areas Continue to Drive Growth Worldwide, But Fastest Growth is in Emerging Economies

    The Brookings Institution 's Global MetroMonitor for 2011 paints a picture of shifting strength from cities in the developed nations to Asia and South America. Not that the metro areas of the US and Western Europe are not still vital drivers of the global economy, but the growth was elsewhere in between 2010 and 2011. Note where much of the blue is on this map: The map is a helpful supplement to the report (click here to access the interactive map). As it shows, most of the strongest performing metro areas--90%, in fact--are outside of the US and Western Europe, while almost all of the weakest are in Japan, the US, and Western Europe. Alan Berube , director of research for the Brookings Metropolitan Policy Program and one of the authors of the report, notes some of the key takeaways from the Global MetroMonitor in this video: Read the full report here .

  • The Case for Continued Growth in Latin America

    Since 2008, some Latin American economies--we're looking at you, Brazil--have managed to do quite well relative to the economies in other regions. But as we see China and India losing a bit of momentum, might these Latin American nations be more vulnerable to global slowdowns? Paulo Levy of IPEA , the applied economic research institute of the Brazilian government, thinks there is a good chance that Latin American economies will have another year of strong performance. At Project Syndicate , he predicts 4% growth over the year. That's not a stunning figure, but it is likely to be well ahead of the pace elsewhere. Levy: One reason for this prediction is that abundant liquidity in international markets and continuing high demand from China and India may prevent commodity prices – especially for agricultural products – from falling as much as they did during the 2008-2009 crisis. Gains in terms of trade have been crucial for growth in Latin America, given the region’s low domestic saving rates, because they encourage investment but have relatively little negative impact on current-account balances. Strong capital inflows, especially of foreign direct investment, and terms-of-trade recovery since 2009 have made the region less vulnerable to external shocks – that is, to recurrence of the abrupt capital-flow reversal that occurred in late 2008 and early 2009. More importantly, most Latin American countries now have in place counter-cyclical measures to mitigate any negative external impact. For example, many countries that were tightening their monetary policy when the first signs of turbulence emerged have either put interest-rate hikes on hold, or, like Brazil, have already started to reduce rates. Most Latin American countries’ recent adjustments, moreover, have prevented their budget positions and current-account deficits from becoming sources of vulnerability. This appears to be the case, for example, in Peru, where sound fiscal policies have kept deficits and inflation under control. It is also true in Colombia, where strong budget revenues could allow for a temporary spending boost to counter external risks. Noteworthy exceptions are Argentina and Venezuela, where macroeconomic tensions have reduced the scope for counter-cyclical action, and Mexico, whose fate is bound by extensive trade links to that of the United States. Read Southern Resilience here .

  • The World Economic Forum's Future of Manufacturing Project

    Here is a new video from the World Economic Forum on the future of manufacturing. While it comes across as a bit earnest in parts, we are sharing it here because it does a nice job of explaining how manufacturing--"advanced manufacturing" in particular--drives global economic growth. What is your take? Do policymakers need to work harder to drive advanced manufacturing in their economies? Can developed economies like the US compete with the new manufacturing juggernauts like Brazil and China?

  • Brazil's Staggering Growth Rate: 19 New 'Millionaires' Per Day

    As developed nations in Europe and the US have struggled to keep from slipping into recession, Brazil's economy has, for the most part, continued to gain strength. One sign of growth in Brazil is the increasing number of wealthy Brazilians. At Forbes , Ivan Castano reports that Brazil's population of millionaires is now growing at a rate of 19 per day: Individuals with a net worth ranging from $539,000 – $2.7 million ($1m-$5m reais) make up the bulk of the new millionaires, [Guilhermo] Morales said, adding that most private banks tend to individuals whose net worth falls below $5.4 million ($10m reais). “I think that this trend will continue for the next three years but I don’t see it lasting forever. After all, there is a limit to everything,” Morales noted. Brazil’s economy has been growing at an annual average of 5% in recent years and is predicted to maintain that pace in the medium term. However, some economists have warned that the country’s economy could overheat as inflation rises to unsustainable levels. The 19-millionaires-a-day statistic was measured by taking all of an individual’s wealth into account, including investments, property, savings and other assets in addition to cash. Some in the private banking conference said the statistic seemed a bit overhyped but Emerson Pieri, Head of Wealth Management, Latin America, at Haliwell Bank (which unveiled the millionaire statistics as part of a Brazilian wealth management study) insisted they are reliable. Read Brazil's Booming Economy Is Creating 19 'Millionaires' Every Day here .

  • OECD: Slower Economic Activity on the Horizon

    The OECD 's composite leading indicators (CLIs) "point more strongly to slowdowns in all major economies" than they were last month. Here is a look at the composite CLIs for September: Anything below that 100 marker points to economic activity below the long term trend. And most OECD countries are below the line now. The US, Russia and Japan remain holdouts, but Japan and US are still trending downward toward the 100 marker. The indicators for Germany might be the most disappointing, and underscores the struggles in Europe: See the specific CLIs for OECD countries here .

  • OECD: Signs of a Slowdown

    The OECD 's composite leading indicators (CLIs) are "designed to anticipate turning points in economic activity relative to trend." The CLIs for August, just released today, are now pointing toward a global slowdown: Anything below that 100 marker points to economic activity below the long term trend. The August numbers show most countries in the OECD already below the line. India, Brazil and China are all below the line as well, with India and Brazil well below. The US, Germany, and Russia are looking better, but are also trending toward slowdown. Japan, is an outlier. Its CLI "continues to indicate a potential turning-point in economic activity." See the specific CLIs for OECD countries here .

  • BRIC Nations Boosting Scotch Exports

    Scotch as an economic indicator? The high priced whiskey has had a very strong year. The Guardian 's Severin Carrell reports that revenue from exports of Scotch were up more than 20 percent during the first half of this year. That is more than a little pleasing to the Scottish government as it has set some very ambitious growth targets over the next few years--50% growth in exports by 2017, according to the Guardian. But what we find striking is where the growth is: Foreign shipments of blended and malt whisky were worth £1.8bn, compared with £1.47bn in the first half of 2010, despite the global economic downturn, the relative high cost of whisky and depressed overseas sales by other British exporters. The Scotch Whisky Association (SWA) said that the strongest sales increases were in Asia, rising by 33% to £423m, and in Central and South America, where the value of exports jumped by nearly 50% to £214m. Sales in the US hit £268m, up 14%, and in France rose by 13%, up to £220m. Gavin Hewitt, the SWA's chief executive, said whisky was now a "main driver" for the UK in building overseas markets. The association's success in breaking down trade barriers and strengthening legal protections for the Scotch brand in India and Turkey had been essential, he added. Brazil, China, India? Scotch nations? Surely the growth in Scotch buying there is a sign of a rising consumer class, and bodes well for other luxury items globally. Read the full article here .

  • Dani Rodrik on the New Economic Powers and Global Economic Growth

    While Europe and the US are struggling with low growth and calls for austerity, some key developing economies are thriving. In a commentary at Project Syndicate , Dani Rodrik points out that, unlike their counterparts in most developed economies, "[p]olicymakers in China, Brazil, India, and Turkey worry about too much growth, rather than too little." As is often the case, fiction best reflects the changing mood. The émigré Russian novelist Gary Shteyngart’s comic novel is as good a guide as any to what might lie ahead. Set in the near future, the story unfolds against the background of a US that has slid into financial ruin and single-party dictatorship, and that finds itself embroiled in yet another pointless foreign military adventure – this time in Venezuela. All the real work in corporations is done by skilled immigrants; Ivy League colleges have adopted the names of their Asian counterparts in order to survive; the economy is beholden to China’s central bank; and “yuan-pegged US dollars” have replaced regular currency as the safe asset of choice. But can developing countries really carry the world economy? Much of the optimism about their economic prospects is the result of extrapolation. The decade preceding the global financial crisis was in many ways the best ever for the developing world. Growth spread far beyond a few Asian countries, and, for the first time since the 1950’s, the vast majority of poor countries experienced what economists call convergence – a narrowing of the income gap with rich countries. This, however, was a unique period, characterized by a lot of economic tailwind. Commodity prices were high, benefiting African and Latin American countries in particular, and external finance was plentiful and cheap. Moreover, many African countries hit bottom and rebounded from long periods of civil war and economic decline. And, of course, rapid growth in the advanced countries generally fueled an increase in world trade volumes to record highs. Still, Rodrik is not too quick to dismiss the possibility that some developing economies will become effective engines for global growth. He is, for example, generally pleased to see improved economic governance in the new economies. But, he warns that moments of high growth for sizable economies will remain just that: moments. Read The Future of Economic Growth here .

  • McKinsey Global Institute Report on the Economic Power of Cities

    In case you haven't been paying attention, urban centers are getting more and more powerful. Over the next 15 years, the 600 largest cities will account for an estimated 35% of the expansion of the global workforce, according to a new report from the McKinsey Global Institute . Cities just about everywhere growing in size, GDP, and share of national GDP. But cities in developing economies are growing at a faster rate. From the report Urban world: Mapping the economic power of cities: Today, major urban areas in developed regions are, without doubt, economic giants. Half of global GDP in 2007 came from 380 cities in developed regions, with more than 20 percent of global GDP coming from 190 North American cities alone. The 220 largest cities in developing regions contributed another 10 percent. But by 2025, one-third of these developed market cities will no longer make the top 600; and one out of every 20 cities in emerging markets is likely to see their rank drop out of the top 600. By 2025, 136 new cities are expected to enter the top 600, all of them from the developing world and overwhelmingly—100 new cities—from China. Take a look at how the balance of urban power is shifting east: The lesson for global-minded businesses seems pretty clear. The action will be where the people are. And increasingly, the people are going to be in growing cities in emerging markets. To be sure, there is growth in US cities as well--just not at the same rate. Read the full report here . The McKinsey Quarterly has a useful interactive map of the world with city-by-city data drawn from the report. Click here to explore the map .

  • Shiller's Bubble Hunches

    At Project Syndicate , Yale economist Robert Shiller takes a stab at predicting where the next bubble might be. Shiller says there is no way to accurately predict bubbles--"bubbles are social epidemics, fostered by a sort of interpersonal contagion"--so he shares some "hunches." We have had a huge rebound from the bottom of the world’s stock markets in 2009. The S&P 500 is up 87% in real terms since March 9 of that year. But, while the history of stock-market prediction is littered with too much failure to try to decide whether the bounceback will continue much longer, it doesn’t look like a bubble, but more like the end of a depression scare. The rise in equity prices has not come with a contagious “new era” story, but rather a “sigh of relief” story. Likewise, home prices have been booming over the past year or two in several places, notably China, Brazil, and Canada, and prices could still be driven up in many other places. But another housing bubble is not imminent in countries where one just burst. Conservative government policies will probably reduce subsidies to housing, and the current mood in these markets does not seem conducive to a bubble. A continuation of today’s commodity-price boom seems more likely, for it has more of a “new era” story attached to it. Increasing worries about global warming, and its effects on food prices, or about the cold and snowy winter in the northern hemisphere and its effects on heating fuel prices, are contagious stories. They are even connected to the day’s top story, the revolutions in the Middle East, which, according to some accounts, were triggered by popular discontent over high food prices – and which could themselves trigger further increases in oil prices. But my favorite dark-horse bubble candidate for the next decade or so is farmland – and not just because there have been stories in recent months of booming farmland prices in the US and the United Kingdo m. Read Bubble Spotting here .

  • Dallas Fed International Economic Update: Industrial Production Strong in Emerging Economies

    The Dallas Fed 's latest International Economic Update contains positive economic readings from emerging economies and some advanced economies, but more bad news for Europe. The most sharply positive news is in emerging economies, where industrial production keeps rising, and is now "close to or beyond the 2008 peak." The picture for advanced economies is not as pleasant, but the recent positive growth in industrial production is reflective of an improving overall economic situation: Read the full report here .

  • G-8 Supplanted by G-20

    It looks as though the G-8 is largely a thing of the past, and the G-20 is here to stay. Without China, India, and Brazil, the old Group of Eight nations no longer represented a large enough chunk of the global economic powers. The Wall Street Journal 's Jonathan Weisma n explains:

  • Change Begins at the Top: Two Stories of Company Transformation

    A lot of eyes are on the emerging economies these days to see if they will continue to rise during the global economic crisis, or if the recession will end up stunting their growth. IMF economists projected growth—albeit at a slowed down pace—for key emerging economies even as they expected contraction for the global economy as a whole. The McKinsey Quarterly has two interviews with key finance leaders in two of the most important emerging economies—India and Brazil. Over the last few years, Om Prakash Bhatt , of the State Bank of India, and Roberto Setubal of Banco Itaú , each took banks that were among their countries largest businesses and tackled major transformation projects. In each case, these CEOs say that change was necessary, and their companies have benefited. And the lessons they learned are applicable to other companies in transition. Both say change has to involve executives leading conversations with managers throughout the company. Roberto Setubal stresses that change begins at the top: The role of CEO is key. If you want change to happen, you have to change your own ways. I realized that the decision-making process was a reflection of how I used to manage the company. So if you want the company to be more democratic, you have to allow yourself to be challenged by others. You have to commit yourself totally and really believe that this is the right way to go. This is very difficult in the beginning because sometimes I knew that I could make the decision much faster on my own. But once we created an environment of discussing and listening to what others were saying and implemented a good process for making decisions, I could delegate more and rely on five or ten smart people with different backgrounds to make better decisions than one person. Om Prakash Bhatt says that he made sure to work with managers throughout the company and spend important face time with trade union leaders: These are important stakeholders, and I brought senior representatives from the unions and officers’ associations together in a meeting similar to the management conclaves. I spent four days with 30 leaders from across the country. Some of my best advisers at the bank warned that the leaders weren’t trustworthy and could be disruptive, but by being different and asking them to a conclave—like monks in a cave—I built up huge curiosity. They wanted to know what I was doing and to be a part of it. I told them I’d sit with them, but only if they came as friends of the bank. I think what hooked them was not only the quality of the discussions and the revelations but that the chairman was willing to spend so much time with them, eating and drinking, even singing and dancing. Read the full interviews at McKinsey Quarterly online. The Setubal interview is available here . Om Prakash Bhatt's interview is here .