India and China: Governance Issues and Development

Important disclosures appear at the end of this document.

Dreaming With BRICs: The Path to 2050

Dominic WilsonRoopa Purushothaman

1st October 2003

Global EconomicsPaper No: 99

� Over the next 50 years, Brazil, Russia, India and China—the BRICseconomies—could become a much larger force in the world economy. Wemap out GDP growth, income per capita and currency movements in theBRICs economies until 2050.

� The results are startling. If things go right, in less than 40 years, the BRICseconomies together could be larger than the G6 in US dollar terms. By 2025they could account for over half the size of the G6. Of the current G6, only theUS and Japan may be among the six largest economies in US dollar terms in2050.

� The list of the world’s ten largest economies may look quite different in 2050.The largest economies in the world (by GDP) may no longer be the richest (byincome per capita), making strategic choices for firms more complex.

EconomicResearch from the

GS Financial Workbench®

at https://www.gs.com

Many thanks to Jim O’Neill, Paulo Leme, SandraLawson, Warren Pearson and our regionaleconomists for their contributions to this paper.

Global Paper No 99 2 1st October 2003

SUMMARY� Over the next 50 years, Brazil, Russia, India and China—the BRICs economies—could become a much

larger force in the world economy. Using the latest demographic projections and a model of capitalaccumulation and productivity growth, we map out GDP growth, income per capita and currencymovements in the BRICs economies until 2050.

� The results are startling. If things go right, in less than 40 years, the BRICs economies together could belarger than the G6 in US dollar terms. By 2025 they could account for over half the size of the G6. Currentlythey are worth less than 15%. Of the current G6, only the US and Japan may be among the six largesteconomies in US dollar terms in 2050.

� About two-thirds of the increase in US dollar GDP from the BRICs should come from higher real growth,with the balance through currency appreciation. The BRICs’ real exchange rates could appreciate by up to300% over the next 50 years (an average of 2.5% a year).

� The shift in GDP relative to the G6 takes place steadily over the period, but is most dramatic in the first 30years. Growth for the BRICs is likely to slow significantly toward the end of the period, with only Indiaseeing growth rates significantly above 3% by 2050. And individuals in the BRICs are still likely to bepoorer on average than individuals in the G6 economies, with the exception of Russia. China’s per capitaincome could be roughly what the developed economies are now (about US$30,000 per capita).

� As early as 2009, the annual increase in US dollar spending from the BRICs could be greater than that fromthe G6 and more than twice as much in dollar terms as it is now. By 2025 the annual increase in US dollarspending from the BRICs could be twice that of the G6, and four times higher by 2050.

� The key assumption underlying our projections is that the BRICs maintain policies and developinstitutions that are supportive of growth. Each of the BRICs faces significant challenges in keepingdevelopment on track. This means that there is a good chance that our projections are not met, eitherthrough bad policy or bad luck. But if the BRICs come anywhere close to meeting the projections set outhere, the implications for the pattern of growth and economic activity could be large.

� The relative importance of the BRICs as an engine of new demand growth and spending power may shiftmore dramatically and quickly than expected. Higher growth in these economies could offset the impact ofgreying populations and slower growth in the advanced economies.

� Higher growth may lead to higher returns and increased demand for capital. The weight of the BRICs ininvestment portfolios could rise sharply. Capital flows might move further in their favour, promptingmajor currency realignments.

� Rising incomes may also see these economies move through the ‘sweet spot’ of growth for different kindsof products, as local spending patterns change. This could be an important determinant of demand andpricing patterns for a range of commodities.

� As today’s advanced economies become a shrinking part of the world economy, the accompanying shiftsin spending could provide significant opportunities for global companies. Being invested in and involvedin the right markets—particularly the right emerging markets—may become an increasingly importantstrategic choice.

� The list of the world’s ten largest economies may look quite different in 2050. The largest economies in theworld (by GDP) may no longer be the richest (by income per capita), making strategic choices for firmsmore complex.

The world economy has changed a lot over the past50 years. Over the next 50, the changes could be at

least as dramatic.

We have highlighted the importance of thinkingabout the developing world in our recent globalresearch, focusing on key features of developmentand globalisation that we think are important toinvestors with a long-term perspective. A majortheme of this work has been that, over the next fewdecades, the growth generated by the largedeveloping countries, particularly the BRICs (Brazil,Russia, India and China) could become a much largerforce in the world economy than it is now—and muchlarger than many investors currently expect.

In this piece, we gauge just how large a force theBRICs could become over the next 50 years. We dothis not simply by extrapolating from current growthrates, but by setting out clear assumptions about howthe process of growth and development works andapplying a formal framework to generate long-termforecasts. We look at our BRICs projections relativeto long-term projections for the G6 (US, Japan, UK,Germany, France and Italy)1.

Using the latest demographic projections and amodel of capital accumulation and productivitygrowth, we map out GDP growth, income per capitaand currency movements in the BRICs economiesuntil 2050. This allows us to paint a picture of how theworld economy might change over the decadesahead.

The results of the exercise are startling. They suggestthat if things go right, the BRICs could become a veryimportant source of new global spending in the nottoo distant future. The chart below shows that India’seconomy, for instance, could be larger than Japan’sby 2032, and China’s larger than the US by 2041 (andlarger than everyone else as early as 2016). TheBRICs economies taken together could be larger thanthe G6 by 2039.

Our projections are optimistic, in the sense that theyassume reasonably successful development. But theyare economically sensible, internally consistent andprovide a clear benchmark against which investorscan set their expectations. There is a good chance thatthe right conditions in one or another economy willnot fall into place and the projections will not be


2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

UK US

France Germany Japan

G6

Italy France Germany

Italy

Germany Japan

Russia

Brazil

India

China

BRICs

Overtaking the G6: When BRICs' US$GDP Would Exceed G6

Italy

France

*cars indicate when BRICs US$GDP exceeds US$GDP in the G6

GS BRICs Model Projections. See text for details and assumptions.

Germany

1 Any decision to limit the sample of countries is to some extent arbitrary. In focusing on the G6 (rather than the G7 or a broader grouping), wedecided to limit our focus to those developed economies with GDP currently over US$1 trillion. This means that Canada and and some of theother larger developed economies are not included. Adding these economies to the analysis would not materially change the conclusions.

realized. If the BRICs pursue sound policies,however, the world we envisage here might turn out tobe a reality, not just a dream.

The projections leave us in no doubt that the progressof the BRICs will be critical to how the worldeconomy evolves. If these economies can fulfil theirpotential for growth, they could become a dominantforce in generating spending growth over the next fewdecades.

A Dramatically Different World

We start with some key conclusions that describe theway the world might change over the next 50 years.The big assumption underlying all of theseprojections is that the BRICs maintaingrowth-supportive policy settings. The chartsthroughout the text illustrate these points. Ourconclusions fall under five main topics: 1) economicsize; 2) economic growth; 3) incomes anddemographics; 4) global demand patterns; and 5)currency movements.

Economic Size

� In less than 40 years, the BRICs’ economiestogether could be larger than the G6 in US dollarterms. By 2025 they could account for over halfthe size of the G6. Currently they are worth lessthan 15%.

� In US dollar terms, China could overtakeGermany in the next four years, Japan by 2015and the US by 2039. India’s economy could belarger than all but the US and China in 30 years.Russia would overtake Germany, France, Italyand the UK.

� Of the current G6 (US, Japan, Germany, France,Italy, UK) only the US and Japan may be amongthe six largest economies in US dollar terms in2050.

Economic Growth

� India has the potential to show the fastest growthover the next 30 and 50 years. Growth could behigher than 5% over the next 30 years and close to5% as late as 2050 if development proceeds


0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2000 2010 2020 2030 2040 2050

BRICs

G62025: BRICs

economies

over half as

large as the G6

By 2040:

BRICS

overtake

the G6

BRICs Have a Larger US$GDP Than the G6

in Less Than 40 YearsGDP

(2003 US$bn)


BRICs Share of GDP Rises

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2000 2010 2020 2030 2040 2050

G6 share ofcombined BRICsand G6 GDP

BRICs share ofcombined BRICsand G6 GDP

28% 33% 39%45%

50%

56%

60%

GDP

(2003 US$bn)


The Largest Economies in 2050

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

Ch US In Jpn Br Russ UK Ger Fr It

GDP

(2003 US$bn)


successfully.

� Overall, growth for the BRICs is likely to slowsignificantly over this time frame. By 2050, onlyIndia on our projections would be recordinggrowth rates significantly above 3%.

Incomes and Demographics

� Despite much faster growth, individuals in theBRICs are still likely to be poorer on average thanindividuals in the G6 economies by 2050. Russiais the exception, essentially catching up with thepoorer of the G6 in terms of income per capita by2050. China’s per capita income could be similarto where the developed economies are now(about US$30,000 per capita). By 2030, China’sincome per capita could be roughly what Korea’sis today. In the US, income per capita by 2050could reach roughly $80,000.

� Demographics play an important role in the waythe world will change. Even within the BRICs,demographic impacts vary greatly. The declinein working-age population is generally projectedto take place later than in the developedeconomies, but will be steeper in Russia andChina than India and Brazil.

Global Demand Patterns

� As early as 2009, the annual increase in US dollarspending from the BRICs could be greater thanthat from the G6 and more than twice as much indollar terms as it is now. By 2025 the annualincrease in US dollar spending from the BRICscould be twice that of the G6, and four timeshigher by 2050.

Currency Movements

� Rising exchange rates could contribute asignificant amount to the rise in US dollar GDP inthe BRICs. About 1/3 of the increase in US dollarGDP from the BRICs over the period may comefrom rising currencies, with the other 2/3 fromfaster growth.

� The BRICs’ real exchange rates could appreciateby up to 300% over the next 50 years (an average


China Overtakes the G3; India Is Close

Behind

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

2000 2010 2020 2030 2040 2050

China

India

Japan

US

Germany

GDP

(2003 US$bn)


India Shows Most Rapid Growth Potential

of the BRICS

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Brazil

China

India

Russia


real GDP

growth (%yoy)

$521

$1,594

$4,517

$1,137

$656$470

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2010 2030 2050

BRICs

G6

Annual increase

in US$GDP

(2003 $USbn)

Incremental Demand From

the BRICs Could Eventually

Be Quadruple G6 Demand


of 2.5% a year). China’s currency could double invalue in ten years’ time if growth continued andthe exchange rate were allowed to float freely.

How Countries Get Richer

Our predictions may seem dramatic. But over aperiod of a few decades, the world economy canchange a lot. Looking back 30 or 50 years illustratesthat point. Fifty years ago, Japan and Germany werestruggling to emerge from reconstruction. Thirtyyears ago, Korea was just beginning to emerge fromits position as a low-income nation. And even over thelast decade, China’s importance to the worldeconomy has increased substantially.

History also illustrates that any kind of long-termprojection is subject to a great deal of uncertainty.The further ahead into the future you look, the moreuncertain things become. Predictions that the USSR(or Japan) would overtake the US as the dominanteconomic power turned out tobebadly off the mark.

While this makes modeling these kinds of shiftsdifficult, it is still essential. Over 80% of the valuegenerated by the world’s major equity markets willcome from earnings delivered more than 10 yearsaway. Developing strategies to position for growthmay take several years and require significantforward planning. The best option is to provide asensible framework, based on clear assumptions.

As developing economies grow, they have the

potential to post higher growth rates as they catch upwith the developed world. This potential comes fromtwo sources. The first is that developing economieshave less capital (per worker) than developedeconomies (in the language of simple growth modelsthey are further from their ‘steady states’). Returns oncapital are higher and a given investment rate resultsin higher growth in the capital stock. The second isthat developing countries may be able to usetechnologies available in more developed countriesto ‘catch up’ with developed country techniques.

As countries develop, these forces fade and growthrates tend to slow towards developed country levels.In Japan and Germany, very rapid growth in the 1960sand 1970s gave way to more moderate growth in the1980s and 1990s. This is why simple extrapolationgives silly answers over long timeframes. As a crudeexample, assuming that China’s GDP growthcontinued to grow at its current 8% per year over thenext three decades would lead to the prediction thatChina’s economy would be three times larger thanthe US by 2030 in US dollar terms and 25 times largerby 2050.

Countries also grow richer on the back ofappreciating currencies. Currencies tend to rise ashigher productivity leads economies to converge onPurchasing Power Parity (PPP) exchange rates.There is a clear tendency for countries with higherincome per capita to have exchange rates closer toPPP. The BRICs economies all have exchange ratesthat are a long way below PPP rates. These large


Japanese GDPGrowthDeclinedAsthe

EconomyDeveloped

10.4%

5.0%

4.0%

1.8%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

1960-70 1970-80 1980-90 1990-00

Average

yoy%growth

BRICs Exchange Rates Could Appreciate

By Close to 300%

289%

281%

208%

129%

0% 50% 100% 150% 200% 250% 300% 350%

China

India

Russia

Brazil

Real exchange rate appreciation (%)GS BRICs Model Projections. See text for details and assumptions.

differences between PPP and actual exchange ratescome about because productivity levels are muchlower in developing economies. As they develop andproductivity rises, there will be a tendency for theircurrencies to rise towards PPP. The idea thatcountries experiencing higher productivity growthtend to appreciate is an important part of both ourGSDEER and GSDEEMER models of equilibriumexchange rates.

Breaking Down Growth

To translate these two processes into actualprojections, we need to develop a model. The modelwe use is described in more detail in the Appendix butthe intuition behind it is quite simple. Growthaccounting divides GDP growth into threecomponents:

� Growth in employment

� Growth in the capital stock

� Technical progress (or total-factor productivity(TFP) growth).2

We model each component explicitly. We use the USCensus Bureau’s demographic projections to

forecast employment growth over the long term,assuming that the proportion of the working agepopulation that works stays roughly stable. We useassumptions about the investment rate to map out thepath that the capital stock will take over time. And wemodel TFP growth as a process of catch-up on thedeveloped economies, by assuming that the larger theincome gap between the BRICs and the developedeconomies, the greater the potential for catch-up andstronger TFP growth.

We then use the projections of productivity growthfrom this exercise to map out the path of the realexchange rate. As in our GSDEER framework, weassume that if an economy experiences higherproductivity growth than the US, its equilibriumexchange rate will tend to appreciate.

By varying the assumptions about investment,demographics or the speed of catch-up, we cangenerate different paths for annual GDP, GDPgrowth, GDP per capita (in local currency or USdollars), productivity growth and the real exchangerate.

Because both the growth and currency projections arelong-term projections, we ignore the impact of theeconomic cycle. Effectively, the projections can beinterpreted as growth in the trend (or potentialgrowth) of the economy and the currencies’ path as anequililibrium path. Where economies peg theirexchange rates (as in China), it is even moreimportant to view the exchange rate projections as anequilibrium real rate. In practice, real exchange rateappreciation might come about through acombination of nominal appreciation and higherinflation, with different mixes having differentimplications. We abstract from inflation, expressingall of our projections in real terms (either 2003 localcurrency or 2003 US dollars).3

Generally speaking, the structure of the models isidentical across the four economies. We make twominor alterations. We assume that the ‘convergencespeed’ of TFP in Brazil and India is slower than in


-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

-6 -4 -2 0 2

Deviation from purchasing power parity*

GDP per capita relative to the US*

Higher Income Per Capita Moves Exchange Rates

Closer to PPP

*expressed in logs

2 We do not explicitly allow for increases in human capital (education), which are implicitly picked up in the technical progress/TFP term inour model.

3 Higher inflation in the BRICs would raise nominal GDP forecasts in local currencies and nominal exchange rates, but would not change theforecasts of real GDP or of US dollar GDP under the standard assumption that higher inflation would translate into an offsetting depreciationin the currency.

Russia and China for the first twenty years, largelybecause of lower education levels and poorerinfrastructure (more on these factors below), butgradually rises from 2020 onwards (as thesestructural problems are addressed) so that all of theBRICs are ‘running’ at the same convergence speed.We also assume that China’s investment rategradually declines from its current levels of around36% to 30% (close to the Asian average) by 2015.

We use GS forecasts until 2004 and begin thesimulations in 2005.

A More Detailed Look at the BRICs’ Potential

We have already highlighted some of the moststriking results, though there are many otherintriguing aspects. The tables and charts set out thekey features of the projections, summarising them in5-year blocks. They show average GDP growth rates,income per capita in US dollars, the real exchangerate and the main demographic trends.

In each economy, as development occurs, growthtends to slow and the exchange rate appreciates. Bothrising currencies and faster growth raise US dollarGDP per capita gradually and the gap between theBRICs and developed economies narrows slowly.

The impact of demographics varies, with labour forcegrowth contributing relatively more to growth in

India and Brazil and detracting from growth inRussia, where the US Census projections show thelabour force shrinking quite rapidly. Where labourforce and population growth is rapid, income percapita tends to rise more slowly as higher investmentis needed just to keep up with population growth.

To illustrate the shift in economic gravity, we also makecomparisons with the G6. To do that, we use a lesssophisticated version of the same model to project G6growth. We assume a common 2% labour productivitygrowth rate across the G6, so differences in projectedGDP growth are purely a function of demographics(and real exchange rates remain roughly stable). Ashrinking working age population appears to be thebiggest issue in Japan and Italy, whose growth rates arelower than the others, and the smallest issue in the US,which maintains the fastest growth.

Our G6 projections allow us to compare the paths ofGDP and GDP per capita in the BRICs with that of themore advanced economies in a common currency.The shift in GDP relative to the G6 takes placesteadily over the period, but is most dramatic in thefirst 30 years. The BRICs overtake the G6 throughhigher real growth and through the appreciation ofBRICs’ currencies. About 1/3 of the increase in USdollar GDP from the BRICs over the period maycome from rising currencies, with the other 2/3 fromfaster growth.

We also look explicitly at where new demand growthin the world will come from. While it takes some timefor the level of GDP in the BRICs to approach the G6,their share of new demand growth rises much morerapidly. Because it is incremental demand thatgenerally drives returns, this measure may be


% Brazil China India Russia

2000-2005 2.7 8.0 5.3 5.9

2005-2010 4.2 7.2 6.1 4.8

2010-2015 4.1 5.9 5.9 3.8

2015-2020 3.8 5.0 5.7 3.4

2020-2025 3.7 4.6 5.7 3.4

2025-2030 3.8 4.1 5.9 3.5

2030-2035 3.9 3.9 6.1 3.1

2035-2040 3.8 3.9 6.0 2.6

2040-2045 3.6 3.5 5.6 2.2

2045-2050 3.4 2.9 5.2 1.9


BRICsReal GDP Growth: 5-Year Period Averages

WorkingAge PopulationProjectedTo

Decline

50

52

54

56

58

60

62

64

66

68

70

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

%of total

population

Brazil

Russia

India

China

G6

working age population =share

of population aged 15-60


Brazil China India Russia France Germany Italy Japan UK US

2000-2005 -9.8 9.2 3.7 7.0 2.2 1.4 2.7 1.1 3.0 2.6

2005-2010 6.3 11.2 7.5 10.3 1.5 2.0 1.6 0.9 1.9 1.7

2010-2015 6.4 9.2 7.4 8.1 1.5 1.6 1.7 1.2 1.9 1.3

2015-2020 6.2 7.8 7.2 7.5 1.6 1.3 1.7 1.8 1.6 1.3

2020-2025 4.6 7.3 7.4 6.1 1.6 0.9 1.2 1.8 1.2 1.4

2025-2030 4.7 6.9 8.2 6.2 1.6 0.9 0.9 1.5 1.3 1.7

2030-2035 5.2 6.5 8.9 5.2 1.6 1.7 0.8 1.0 1.7 1.9

2035-2040 5.3 6.3 8.9 4.3 1.9 2.0 1.3 1.2 2.0 2.0

2040-2045 5.0 5.9 8.3 3.6 1.9 1.9 1.8 1.6 1.8 1.9

2045-2050 4.9 5.4 7.6 3.4 2.0 1.8 2.1 2.0 1.7 1.9

GSBRICs Model Projections. See text for details andassumptions.

Projected US$ GDP Per Capita Growth: 5-Year Averages

Average

%yoy

BRICs G6


2000 4,338 854 468 2,675 22,078 22,814 18,677 32,960 24,142 34,797

2005 2,512 1,324 559 3,718 24,547 24,402 21,277 34,744 27,920 39,552

2010 3,417 2,233 804 5,948 26,314 26,877 23,018 36,172 30,611 42,926

2015 4,664 3,428 1,149 8,736 28,338 29,111 25,086 38,626 33,594 45,835

2020 6,302 4,965 1,622 12,527 30,723 31,000 27,239 42,359 36,234 48,849

2025 7,781 7,051 2,331 16,652 33,203 32,299 28,894 46,391 38,479 52,450

2030 9,823 9,809 3,473 22,427 35,876 33,898 30,177 49,944 41,194 57,263

2035 12,682 13,434 5,327 28,749 38,779 37,087 31,402 52,313 44,985 63,017

2040 16,370 18,209 8,124 35,314 42,601 40,966 33,583 55,721 49,658 69,431

2045 20,926 24,192 12,046 42,081 46,795 44,940 36,859 60,454 54,386 76,228

2050 26,592 31,357 17,366 49,646 51,594 48,952 40,901 66,805 59,122 83,710


Projected US$GDP Per Capita

2003US$BRICs G6

Brazil China India Russia France Germany Italy Japan UK US BRICs G6

2000 762 1078 469 391 1,311 1,875 1,078 4,176 1,437 9,825 2,700 19,702

2005 468 1724 604 534 1,489 2,011 1,236 4,427 1,688 11,697 3,330 22,548

2010 668 2998 929 847 1,622 2,212 1,337 4,601 1,876 13,271 5,441 24,919

2015 952 4754 1411 1232 1,767 2,386 1,447 4,858 2,089 14,786 8,349 27,332

2020 1333 7070 2104 1741 1,930 2,524 1,553 5,221 2,285 16,415 12,248 29,928

2025 1695 10213 3174 2264 2,095 2,604 1,625 5,567 2,456 18,340 17,345 32,687

2030 2189 14312 4935 2980 2,267 2,697 1,671 5,810 2,649 20,833 24,415 35,927

2035 2871 19605 7854 3734 2,445 2,903 1,708 5,882 2,901 23,828 34,064 39,668

2040 3740 26439 12367 4467 2,668 3,147 1,788 6,039 3,201 27,229 47,013 44,072

2045 4794 34799 18847 5156 2,898 3,381 1,912 6,297 3,496 30,956 63,596 48,940

2050 6074 44453 27803 5870 3,148 3,603 2,061 6,673 3,782 35,165 84,201 54,433

GSBRICsModelProjections. Seetext for detailsandassumptions.

ProjectedUS$GDP

2003$USbnBRICs G6

particularly useful to assess the extent ofopportunities in these markets. We measure that newdemand growth as the change in US dollar spendingpower in the various economies, so again itincorporates both growth and currency effects. Onthese measures, the BRICs come to dominate the G6as a source of growth in spending power within 10years.

Taking each of the economies in brief:

� Brazil. Over the next 50 years, Brazil’s GDPgrowth rate averages 3.6%. The size of Brazil’seconomy overtakes Italy by 2025; France by2031; UK and Germany by 2036.

� China. China’s GDP growth rate falls to 5% in2020 from its 8.1% growth rate projected for2003. By the mid-2040s, growth slows to around3.5%. Even so, high investment rates, a largelabor force and steady convergence would meanChina becomes the world’s largest economy by2041.

� India. While growth in the G6, Brazil, Russiaand China is expected to slow significantly overthe next 50 years, India’s growth rate remainsabove 5% throughout the period. India’s GDPoutstrips that of Japan by 2032. With the onlypopulation out of the BRICS that continues togrow throughout the next 50 years, India has the

potential to raise its US dollar income per capitain 2050 to 35 times current levels. Still, India’sincome per capita will be significantly lower thanany of the countries we look at.

� Russia. Russia’s growth projections arehampered by a shrinking population (anassumption that may be too negative). But strongconvergencerateswork toRussia’sbenefit, andby2050, the country’s GDP per capita is by far thehighest in the group, and comparable to the G6.Russia’s economy overtakes Italy in 2018; Francein 2024; UK in 2027 and Germany in 2028.

Although we focus on the BRICs, as the four largestdeveloping economies, we do not mean to suggestthat development elsewhere is not important. In thebox on p11, we look at what our approach says forSouth Africa and the African region and other largerdeveloping economies could also become important.

Are the Results Plausible?

The projection of a substantial shift in the generationof growth towards the BRICs is dramatic. Is itplausible?

We have looked at three main ways to cross check theforecasts, all of which give us broad comfort with theresults.

First, the forecasts for GDP growth in the next 10years are not out of line with the IMF’s assumptions


Projected Population Growth Rates

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2001 2008 2015 2022 2029 2036 2043 2050

%

Brazil

China

India

Russia

G6

China's Income Per CapitaGrowing

Share of US Income Per Capita

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2000 2010 2020 2030 2040 2050

2003

US$bn

US GDP PerCapita (US$bn)

China GDP PerCapita (US$bn)

17% 21% 26%32%

37%

GSBRICs Model Projections. See text for details and assumptions.


With Asia, Europe and Latin America representedin the BRICs profile, some readers will noticeAfrica’s absence. The BRICs are chosen becausethey are the four largest developing economiescurrently. Still, it is interesting and important tolook beyond at the potential for Africa, andparticularly South Africa, the largest economy inthe region, toplay apart in the same kind ofprocess.

We have already published a 10-year outlook onSouth Africa using detailed econometric work toproject the same components of growth(employment growth, capital stock growth andtechnical progress) that underpin our methodologyhere (see Global Economics Paper #93, SouthAfrica Growth and Unemployment: A Ten-YearOutlook). The study showed that South Africacould achieve 5% growth over the next decade if theright policies were put in place. The emphasis ongetting the conditions for growth right is one that isimportant for the BRICs also.

To provide comparison, we applied our projectionmethods for the BRICs to South Africa. Themethod is simpler than that in our paper on SouthAfrica, but does provide a longer-term outlook. Thetable sets out the main results in terms of growth.Projected growth over the next decade is a littlelower than the 5% projected in our more detailedstudy (around 4% here), but the main thrust of the

outlook is similar. The differences arise largelybecause the demographic projections we assume muchsharper shrinkage in the labour force (around 1% peryear) than did the more detailed exercise. Both inSouth Africa, and in the region more generally, thechallenge of AIDS and the impact it will have onlabour force and population dynamics is an importantrisk and challenge that has no direct counterpartelsewhere.

Our longer-term projections show South Africagrowing at an average rate of around 3.5% over thenext 50 years, comparable to our predictions for Russiaand Brazil. With declining population growth rates,per capita incomes under these projections would risesignificantly more rapidly. We find under theseprojections that South Africa’s economy would besignificantly smaller than the BRICs in 2050 (aroundUS$1.2bn compared to US$5.9bn for Russia, thesmallest of the BRICs economies), though itsprojected GDP per capita would actually be higher.

South Africa and the Challenge for the African Continent

SouthAfricaProjectedReal GDPGrowth

3.4%

4.4%

3.6%3.3%

3.1%3.3% 3.3% 3.3% 3.3%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

2000-

2005

2005-

2010

2010-

2015

2015-

2020

2025-

2030

2030-

2035

2035-

2040

2040-

2045

2045-

2050

Average yoy%

growth

GSBRICs Model Projections. See text for details and assumptions.

ProjectedIncomePerCapita

0

10,000

20,000

30,000

40,000

50,000

60,000

2000 2010 2020 2030 2040 2050

India

Brazil

China

SouthAfrica

Russia

GDPpercapita

(2003US$)

GSBRICsModelProjections. Seetext for detailsandassumptions.

2003US$bn SouthAfrica Brazil China India Russia

2000 83 762 1078 469 391

2010 147 668 2998 929 847

2020 267 1333 7070 2104 1741

2030 447 2189 14312 4935 2980

2040 739 3740 26439 12367 4467

2050 1174 6074 44453 27803 5870

GSBRICs ModelProjections. Seetext for details andassumptions.

ProjectedUS$GDPLevels

of potential growth in these economies (roughly 5%for Russia, 4% for Brazil, 8% for China, 5-6% forIndia). With the exception of Brazil, our projectedgrowth rates are also close to recent performance.Brazil’s performance would have to improve quitesignificantly relative to the past.

Second, although the implied changes in GDP andcurrencies may look dramatic on an absolute basis,they are significantly less spectacular than what someeconomies actually achieved over the last fewdecades. In Japan, between 1955 and 1985 real GDPincreased by nearly 8 times (from initial levels ofincome per capita not unlike some of the BRICs) andreal industrial production increased tenfold. Between1970 and 1995—the yen appreciated by over 300% innominal terms against the US dollar. In the morerecent past, Korea’s GDP in 2000 increased by nearly9 times between 1970 and 2000. Next to theseexperiences our projections look quite tame.Although the projections assume that economiesremain on a steady development track, they do notassume ‘miracle-economy’ growth.

As a final check on our estimates, we applied anentirely different approach to generate long-termgrowth projections based on cross-countryeconometric research. We took a well-knownexisting econometric model from Levine and Renelt(LR) that explains average GDP growth over the nextthirty years as a function of initial income per capita,investment rates, population growth and secondaryschool enrollments4.

Although the technique employed is very differentand a year-by-year path cannot be generated, themodel has close parallels to our own approach. Initialincome per capita drives our productivity catch-up,investment drives capital accumumulation, and thelevel of education can be thought of as helping to

determine the speed of convergence. Projectionsusing the LR equation are not identical to our own, butclose enough to reassure us that we are makingsensible assumptions. Our own models are a bit moreoptimistic about growth prospects in general, but notby much.

A Look Back In Time—What Would We HaveSaid in 1960

We mentioned earlier that the world has changed a lotin the last fifty years. One further check on theplausibility of our projections is to go back in time,apply the same methods that we have used here andlook at how our projections of GDP growth thenwould have compared with subsequent reality.

To do that, we looked at a set of 11 developed anddeveloping countries (US, UK, Germany, France,Italy, Japan, Brazil, Argentina, India, Korea andHong Kong) starting in 1960 and projecting theirGDP growth for the following 40 years (dataavailability meant we could not easily do a full 50year projection).

We applied the same methodology, modeling capitalstock growth as a function of the starting level ofcapital and investment and technical progress as acatch-up process on the US. Because we did not havedemographic projections for 1960 (as we do now forthe next fifty years), we used actual population datafor the period as the basis for our labour force growthassumptions (effectively assuming that this part ofthe exercise was predicted perfectly).

The results of that exercise are generallyencouraging. In general, the projected averagegrowth rates over the period are surprisingly close tothe actual outcomes. For the more developedcountries, where the growth path has been steadier(France, Germany, UK, US, Italy) the differencesbetween projected and actual growth rates are small.

For the developing countries (and Japan, which in1960 was a developing country that was significantlypoorer than Argentina) the range of outcomes iswider. For those countries where policy settings werenot particularly growth-supportive—India, Brazil


30 year average

real GDPgrowthOur Projections Levine-Renelt Model

Brazil 3.7 3.3

Russia 3.9 3.5

India 5.8 5.3

China 5.6 5.8

Comparing Our Projections With the Levine-Renelt Model

4 Levine, Ross & Renelt, David, 1992. “A Sensitivity Analysis of Cross-Country Growth Regressions,” American Economic Review, Vol. 82(4) p942-63.


A set of core factors—macroeconomic stability,institutional capacity, openness and education—canset the stage for growth. Robert Barro’s influentialwork on the determinants of growth found that growthis enhanced by higher schooling and life expectancy,lower fertility, lower government consumption, bettermaintenance of the rule of law, lower inflation andimprovements in the terms of trade. These corepolicies are linked: institutional capacity is requiredto implement stable macroeconomic policies, macrostability is crucial to trade, and without price stabilitya country rarely has much success in liberalizing andexpanding trade. We briefly view some of the mostrecent findings on these ingredients here:

Macro Stability. An unstable macro environmentcan hamper growth by distorting prices andincentives. Inflation hinders growth by discouragingsaving and investment. Accordingly, a key focus isprice stability, achieved through fiscal deficitreduction, tighter monetary policy and exchange-raterealignment. Within the BRICs, macroeconomicindicators reflecting policy divergence show wideswings: through the 1990s, Brazil averaged aninflation rate of 548% and a government deficit of21.2% of GDP, against China’s average inflation rateof 8% and government deficit of 2.3% of GDP.

Institutions. Institutions affect the ‘efficiency’ of aneconomy much in the same way as technology does:more efficient institutions allow an economy toproduce the same output with fewer inputs: Badinstitutions lower incentives to invest, to work and tosave. ‘Institutions’ in this broad sense include thelegal system, functioning markets, health andeducation systems, financial institutions and thegovernment bureaucracy. Recent research argues thatpoor political and economic policies are onlysymptoms of longer-run institutional factors—a line

of reasoning that could help explain the disappointingresults of developing countries‘ adoption ofmacroeconomic policy reforms in the 1990s.

Openness. Openness to trade and FDI can provideaccess to imported inputs, new technology and largermarkets. Empirical studies of trade and growth fallinto three buckets. First, country studies documentthe economic and political consequences ofimport-substitution policies and export promotingpolicies. Second, much work uses cross-section orpanel data to examine the cross-country relationshipbetween openness and growth. This has producedmixed evidence, but in general it demonstrates apositive relationship between openness and growth.Third, sector, industry and plant-level studiesinvestigate the effects of trade policy on employment,profits, productivity and output at a micro-economiclevel. There appears to be a greater consensus herethan in the cross-country work about theproductivity-enhancing effects of tradeliberalization.

Education. As economies grow rapidly, they mayface shortages of skilled workers, meaning that moreyears of schooling are a prerequisite for the next stageof economic development. Enrolment rates haveincreased dramatically over the past 30 years, onaverage over 5% per year, particularly in highereducation (around 14%). Among the BRICs, Indiareceives low marks for education indicators,particularly at the primary and secondary levels.Many cross-country studies have found positive andstatistically significant correlations betweenschooling and growth rates of per capita GDP—onthe order of 0.3% faster annual growth over a 30-yearperiod from an additional one year of schooling.

The Conditions for Growth

and Argentina—actual growth fell below what wewould have projected. But for the Asian economiesthat had an unusually favourable growth experience,our method would have underpredicted actual growthperformance in some cases quite significantly.

Overall, the results highlight that our method ofprojection seems broadly sensible. For the BRICs tomeet our projections over the next fifty years, they donot need ‘miracle’ performance—though it isimportant that they stay on the right track inmaintaining broadly favourable conditions forgrowth.

Ensuring the Conditions For Growth

This historical exercise highlights a critical point.For our projections to be close to the truth it isimportant that the BRICs remain on a steady growthtrack and keep the conditions in place that will allowthat to happen. That is harder than it sounds and is themain reason why there is a good chance that theprojections might not be realised. Of the BRICs,Brazil has not been growing in line with projectionsand may have the most immediate obstacles to thiskind of growth. It provides a good illustration of theimportance of getting the necessary conditions inplace (see box on p.15).

Research points to a wide range of conditions that arecritical to ensuring solid growth performance andincreasingly recognises that getting the rightinsitutions as well as the right policies is important.5

These are the things that the BRICs must get right (orkeep getting right) if the kinds of paths we describeare to be close to the truth. The main ingredients(more detailed discussion of the evidence is providedin the box) are:

� Sound macroeconomic policies and a stablemacroeconomic background. Low inflation,supportive government policy, sound publicfinances and a well-managed exchange rate canall help to promote growth. Each of the BRICshas been through periods of macroeconomicinstability in the last few decades and some facesignificant macroeconomic challenges still.Brazil for instance has suffered greatly from theprecariousness of the public finances and theforeign borrowing that it brought about.

� Strong and stable political institutions.Political uncertainty and instability discouragesinvestment and damages growth. Each of theBRICs is likely to face considerable (anddifferent) challenges in political developmentover the next few decades. For some (Russiamost obviously), the task of institution-buildinghas been a major issue in recent growthperformance.

� Openness. Openness to trade and foreign directinvestment has generally been an important partof successful development. The openness of theBRICs varies, but India is still relatively closedon many measures.

� High levels of education. Higher levels ofeducation are generally helpful in contributing tomore rapid growth and catch-up. The LR growthestimates above are based on a strong connectionbetween secondary schooling and growthpotential. Of the BRICs, India has the most workto do in expanding education.


0

1

2

3

4

5

6

7

8

Arg Br Fr Ger HK In It Jp Ko UK US

Actual

Predicted

Projected average annual GDP growth, 1960-2000 (%)

How Our Model Fares in Gauging Growth 1960-2000


5 Because of this, the catch-up process is often described as a process of ‘conditional convergence’ where the tendency for less developedeconomies to grow more rapidly is only evident after controlling for these conditions.


Of the BRICs, Brazil is the only one where recentgrowth experience has been significantly lower thanour projected growth rates. This suggests that moreneeds to be done to unlock sustained higher growth inBrazil than is the case elsewhere and that ourconvergence assumptions for Brazil (though alreadylower than in China and Russia) may still prove toooptimistic without deeper structural reforms.

Over the last 50 years, Brazil’s real GDP growth rateamounted to 5.3%, but the chart below shows thatgrowth has been declining sharply since the debtcrisis of the 1980s. Following a growth surge betweenthe late 1960s and the early-1970s on the back ofeconomic liberalization, growth rates fell—in partbecause of a series of external shocks combined withpoor policy response amidst of a political transitionfrom a military regime to a democracy.

Over the last decade, real GDP growth amounted to2.9%, compared to an average of 5.3% since 1950.The excessive reliance on external financing anddomestic public debt during the oil crisis and duringthe Real plan has rendered this adjustment effortparticularly difficult, in part explaining the markeddrop in growth rates.

The adjustment process has also reduced investment,which contributed to a depreciation of the capitalstock, particularly in infrastructure, with importantconsequences for productivity. Even so, temporarysurges in external financing or statistical reboundsmay push growth higher temporarily, but for Brazil tobreak the historical downward trend in GDP growthand attain the kind of path set out in our projectionshere will take more.

The Lula Administration is making some progress.Macro stabilization is a key precondition ofsuccessful reform and is now clearly underway. Theresult of that stabilization is likely to be animprovement in growth over the next year or two thatis reflected in our current forecasts of about 3.5% ayear. On its own, though, stabilization will beinsufficient to raise and sustain Brazil’s growth rate tothe kinds of levels that are set out in the projections in

this paper. If that goal is to be achieved, substantialstructural reforms will also be needed.

Comparing Brazil with China and the other Asianeconomies gives a sense of the relatively largerobstacles that Brazil currently faces.

� Brazil is much less open to trade. The tradablegoods sector in China is almost eight times largerthan in Brazil, when measured by imports plusexports.

� Investment and savings are lower. Savings andinvestment ratios are around 18-19% of GDPcompared to an investment rate of 36% of GDP inChina and an Asian average of around 30%.

� Public and foreign debt are much higher.Without a deeper fiscal adjustment and lowerdebt to GDP ratio (currently at 57.7% of GDP ona net basis and 78.2% of GDP on a gross basis),the private sector is almost completely crowdedout from credit markets. China’s net foreign debtand public debt are both significantly smaller.

Unless significant progress is made in removing orreducing these obstacles, the projections set out here(which still show much lower growth than Brazil’spost-war average) are unlikely to be achievable andthe slide in trend growth could continue.

Brazil: Challenges in Setting the Conditions For Sustained Growth

-10

-5

0

5

10

15

1948 1958 1968 1978 1988 1998

Real GDP

growth

Real GDPGrowth Trend


Brazil'sTrendGDPGrowthRate Is

Declining

Real GDPGrowth

Growth (%yoy)

How Different Assumptions Would ChangeThings

In our models, the effect of these conditions forgrowth can be thought of as operating through ourassumptions about the investment rate and the rate ofcatch-up in TFP with the developed economies. If theBRICs economies fail to deliver the kinds ofconditions that are broadly necessary for sustainedgrowth, our assumptions about investment andconvergence will prove too optimistic. For Brazil andIndia, in particular, if they succeed more quickly thanwe expect, investment rates might actually be higherthan our projections and convergence more rapid.

To illustrate in a simple way the point that theassumptions that we have made—and the underlyingconditions that determine them—are important, weshow briefly what happens if we change them:

� Catch-up. Because the convergence ratecaptures a broad range of factors that determinethe ability to ‘catch up’, altering it can make asignificant difference to projections. Forexample, if we lower China’s ‘convergence rate’by a third, our projections of average GDPgrowth rate over the 50-year period fall to 4.3%from 4.8% and our projected 2050 US$GDPlevel drops by 39%. In our baseline model, ratesof convergence are generally slower for India andBrazil than for China and Russia. If we raised ourconvergence rates in India and Brazil to those ofChina and Russia, India’s 2000-2030 averageGDP growth rate would rise to 7.4%, against5.8% originally. Brazil’s GDP growth rate wouldrise as well: to 4.3% from 3.7%.

� Investment. The assumed investment rates areless important, but substantial differences fromour assumptions would certainly alter the mainconclusions. Lowering our assumptions ofChina’s investment rate by 5 percentage pointsslightly lowers China’s average 2000-2030 GDPgrowth rate to 5.5% from 5.7%. Cutting 5percentage points off of investment rates acrossthe BRICS would reduce their GDP levels onaverage by around 13% by 2050.

� Demographics. The demographic assumptionsmay also turn out to be incorrect. For instance,

Russia’s demographics might not turn out to beas negative as the US census projections, anddeclining fertility and rising mortality may turnout to have been a temporary feature of thetransition from communism. Shiftingdemographic trends might also be partly offsetby attempts to raise participation or to extendworking ages, neither of which we currentlycapture.

Sensitivity to these kinds of assumptions clearlymeans that there is significant uncertainty around ourprojections. The advantage of the framework that wehave developed is that we now have the tools to look atthese and other questions in much more detail. We alsohave a clear baseline against which to measure them.

Implications of the BRICs’ Ascendancy

Each of the BRICs faces very significant challengesin keeping development on track. This means thatthere is a good chance that our projections are notmet, either through bad policy or bad luck.

Despite the challenges, we think the prospect is worthtaking seriously. After all, three of thesemarkets—China, India and Russia—have alreadybeen at the top of the growth charts in recent years.They may stay there.

If the BRICs do come anywhere close to meeting theprojections set out here, the implications for thepattern of growth and economic activity could bevery large indeed. Parts of this story—theopportunities in China, for instance—are wellunderstood. But we suspect that many otherparts—the potential for India and the other marketsand the interplay of aging in the developedeconomies with growth in the developing ones—maynot be.

We will be using the tools developed here to look indetail at different kinds of scenarios and to flesh outthe links between our growth projections andinvestment opportunities, but we set out some briefconclusions here:

� The relative importance of the BRICs as anengine of new demand growth and spendingpower may shift more dramatically and quickly


than expected under the right conditions. Highergrowth in these economies could offset theimpact of greying populations and slower growthin today’s advanced economies.

� Higher growth may lead to higher returns andincreased demand for capital in thesemarkets—and for the means to finance it. Theweight of the BRICs in investment portfolioscould rise sharply. The pattern of capital flowsmight move further in their favour and majorcurrency realignments would take place.

� Rising incomes may also see these economiesmove through the ‘sweet spot’ of growth fordifferent kinds of products, as local spendingpatterns change. This could be an importantdeterminant of demand and pricing patterns for arange of commodities.

� As the advanced economies become a shrinkingpart of the world economy, the accompanyingshifts in spending could provide significantopportunities for many of today’s globalcompanies. Being invested in and involved in theright markets—and particularly the rightemerging markets—may become anincreasingly important strategic choice for manyfirms.

� The list of the world’s ten largest economies maylook quite different in fifty years time. Thelargest economies in the world (by GDP) may

also no longer be the richest (by income percapita) making strategic choices for firms morecomplex.

� Regional neighbours could benefit from thegrowth opportunities from the BRICs. With threeout of the four largest economies in 2050potentially residing in Asia, we could seeimportant geopolitical shifts towards the Asianregion. China’s growth is already having asignificant impact on the opportunities for therest of Asia. Sustained strong growth in the otherBRICs economies might have similar impacts ontheir major trading partners.

Are you ready?

Dominic Wilson and Roopa Purushothaman


GDPSize andRelative Income Per Capita

LevelsWill Diverge Over Time

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Ch US In Jp Br Russ UK Ger Fr It

2003US$bn

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

US$GDP US$GDPper capita

2003US$


Growth Model

We provide detail on the underlying assumptions ofour models. The model relies on a simple formulationof the overall level of GDP (Y) in terms of a) labour(L) b) the capital stock (K) and c) the level of“technical progress” (A) or Total Factor Productivity(TFP).

We assume that GDP is a simple (Cobb-Douglas)function of these three ingredients:

where a is the share of income that accrues tocapital.

We then need to describe the process by which each ofthe different components (labour, the capital stockand TFP) change over time.

� For, L, we simply use the projections of theworking age population (15-60) from the USCensus Bureau.

� For K, we take the initial capital stock, assume aninvestment rate (investment as a % of GDP) and adepreciation rate to calculate the growth in thecapital stock:

� For A, the description of technical progress, weassume that technology changes as part of aprocess of catch-up with the most developedcountries. The speed of convergence is assumedto depend on income per capita, with theassumption that as the developing economies getcloser to the income levels of the more developedeconomies, their TFP growth rate slows.Developing countries can have faster growth inthis area because there is room to ‘catch up’ withdeveloped countries:

where� is a measure of how fast convergence takesplace and 1.3% is our assumed long-term TFP growth

rate for the US.

The assumptions needed to generate the forecasts aresummarised below:

� Labour force and population, from the USCensus Bureau projections

� Depreciation rate (�) assumed to be 4% as in theWorld Bank capital stock estimates

� Investment rate assumptions based on recenthistory, for Brazil (19%), for India (22%) forRussia (25%) for China (36% until 2010,declining to 30% thereafter).

� Income share of capital assumed to be 1/3, astandard assumption (�) from historicalevidence

� US long-run TFP growth assumed to be 1.33%,implying steady-state labour productivitygrowth of 2% - our long-run estimate.

� Convergence speed for TFP (�) assumed to be1.5%, within the range of estimates fromacademic research.

Exchange Rate Model

Our model of real exchange rates is then calculatedfrom the predictions of labour productivity growth.Specifically, we assume that a 1% productivitydifferential in favour of economy A relative to the USwill raise its equilibrium real exchange rate againstthe US dollar by 1%, where our long-run assumptionfor US productivity growth is again 2%.

This assumption that the relationship is one-for-oneunderpins our GSDEER models and the coefficienton relative productivity terms in our GSDEEMERmodels is generally also clustered around 1. We makethe simplifying assumption that over the long term,only productivity differentials play a large role indetermining real exchange rates.


�� 1LAKY

��

�

��

� US

DC

t

t

apitaIncomeperc

apitaIncomeperc

A

Aln%3.1

1

�

Appendix I: A Long-Term Model of Growthand Exchange Rates

t

t

ttt Y

Y

IKK .)1(1 ��

�

�

��

02.0ln)ln( ��

�

� � L

Ye


Brazil China India Russia France Germany Italy Japan UK US BRICs G6

2000 762 1,078 469 391 1,311 1,875 1,078 4,176 1,437 9,825 2,700 19,702

2001 601 1,157 466 383 1,321 1,855 1,093 4,032 1,425 10,082 2,607 19,808

2002 491 1,252 474 379 1,346 1,866 1,114 4,358 1,498 10,446 2,595 20,628

2003 461 1,353 511 430 1,387 1,900 1,155 4,366 1,565 10,879 2,754 21,253

2004 435 1,529 554 476 1,455 1,966 1,212 4,366 1,647 11,351 2,994 21,998

2005 468 1,724 604 534 1,489 2,011 1,236 4,427 1,688 11,697 3,330 22,548

2006 502 1,936 659 594 1,520 2,059 1,257 4,498 1,728 12,041 3,691 23,104

2007 539 2,169 718 654 1,547 2,102 1,277 4,536 1,762 12,348 4,079 23,572

2008 579 2,422 782 716 1,572 2,141 1,297 4,556 1,797 12,656 4,499 24,019

2009 622 2,699 853 780 1,597 2,178 1,317 4,573 1,836 12,966 4,953 24,466

2010 668 2,998 929 847 1,622 2,212 1,337 4,601 1,876 13,271 5,441 24,919

2011 718 3,316 1,011 917 1,649 2,246 1,358 4,638 1,918 13,580 5,962 25,389

2012 771 3,650 1,100 990 1,677 2,282 1,381 4,683 1,960 13,883 6,512 25,866

2013 828 4,002 1,196 1,068 1,706 2,317 1,403 4,736 2,004 14,184 7,094 26,349

2014 888 4,371 1,299 1,149 1,736 2,352 1,425 4,795 2,046 14,486 7,707 26,840

2015 952 4,754 1,411 1,232 1,767 2,386 1,447 4,858 2,089 14,786 8,349 27,332

2016 1,019 5,156 1,531 1,322 1,799 2,418 1,469 4,925 2,130 15,106 9,028 27,847

2017 1,091 5,585 1,659 1,417 1,832 2,448 1,492 4,999 2,170 15,427 9,752 28,367

2018 1,167 6,041 1,797 1,518 1,865 2,476 1,513 5,074 2,209 15,750 10,524 28,887

2019 1,248 6,538 1,945 1,626 1,897 2,502 1,534 5,146 2,247 16,083 11,357 29,410

2020 1,333 7,070 2,104 1,741 1,930 2,524 1,553 5,221 2,285 16,415 12,248 29,928

2021 1,397 7,646 2,278 1,829 1,963 2,544 1,571 5,297 2,321 16,765 13,150 30,462

2022 1,465 8,250 2,470 1,924 1,996 2,562 1,588 5,372 2,355 17,133 14,109 31,006

2023 1,537 8,863 2,682 2,028 2,029 2,577 1,603 5,443 2,389 17,518 15,110 31,559

2024 1,613 9,517 2,916 2,141 2,062 2,591 1,615 5,509 2,422 17,918 16,187 32,117

2025 1,695 10,213 3,174 2,264 2,095 2,604 1,625 5,567 2,456 18,340 17,345 32,687

2026 1,781 10,947 3,459 2,395 2,128 2,619 1,634 5,641 2,491 18,803 18,582 33,316

2027 1,873 11,732 3,774 2,533 2,163 2,634 1,644 5,696 2,528 19,293 19,913 33,958

2028 1,971 12,555 4,123 2,679 2,198 2,652 1,653 5,740 2,567 19,801 21,327 34,611

2029 2,076 13,409 4,508 2,828 2,233 2,672 1,662 5,778 2,607 20,319 22,821 35,271

2030 2,189 14,312 4,935 2,980 2,267 2,697 1,671 5,810 2,649 20,833 24,415 35,927

2031 2,308 15,260 5,407 3,131 2,300 2,727 1,678 5,835 2,692 21,371 26,107 36,603

2032 2,436 16,264 5,930 3,283 2,333 2,763 1,686 5,851 2,740 21,946 27,911 37,319

2033 2,572 17,317 6,508 3,434 2,367 2,806 1,692 5,861 2,791 22,554 29,830 38,072

2034 2,716 18,428 7,147 3,585 2,404 2,854 1,699 5,869 2,845 23,187 31,877 38,858

2035 2,871 19,605 7,854 3,734 2,445 2,903 1,708 5,882 2,901 23,828 34,064 39,668

2036 3,033 20,845 8,621 3,881 2,490 2,953 1,719 5,902 2,961 24,492 36,380 40,516

2037 3,201 22,152 9,453 4,028 2,535 3,002 1,733 5,930 3,023 25,168 38,833 41,389

2038 3,374 23,522 10,352 4,175 2,580 3,051 1,748 5,961 3,085 25,852 41,423 42,276

2039 3,554 24,949 11,322 4,321 2,625 3,100 1,767 5,998 3,144 26,542 44,147 43,175

2040 3,740 26,439 12,367 4,467 2,668 3,147 1,788 6,039 3,201 27,229 47,013 44,072

2041 3,932 28,003 13,490 4,613 2,711 3,192 1,810 6,086 3,258 27,929 50,038 44,987

2042 4,128 29,589 14,696 4,756 2,754 3,238 1,834 6,136 3,317 28,654 53,171 45,933

2043 4,336 31,257 15,989 4,891 2,801 3,285 1,859 6,187 3,377 29,399 56,473 46,908

2044 4,560 33,003 17,371 5,022 2,849 3,333 1,885 6,239 3,437 30,170 59,955 47,913

2045 4,794 34,799 18,847 5,156 2,898 3,381 1,912 6,297 3,496 30,956 63,596 48,940

2046 5,031 36,636 20,421 5,289 2,946 3,428 1,941 6,362 3,554 31,761 67,378 49,993

2047 5,276 38,490 22,099 5,417 2,995 3,473 1,971 6,431 3,611 32,592 71,281 51,074

2048 5,527 40,420 23,886 5,552 3,045 3,516 2,001 6,506 3,668 33,437 75,385 52,173

2049 5,789 42,408 25,785 5,701 3,097 3,559 2,031 6,586 3,725 34,297 79,684 53,296

2050 6,074 44,453 27,803 5,870 3,148 3,603 2,061 6,673 3,782 35,165 84,201 54,433


ProjectedUS$GDP

BRICs G62003US$bn

Appendix II: Our Projections In Detail



2000 4,338 854 468 2,675 22,078 22,814 18,677 32,960 24,142 34,797

2001 3,381 910 457 2,633 22,143 22,545 18,895 31,775 23,860 35,373

2002 2,726 979 458 2,611 22,461 22,659 19,224 34,297 25,003 36,312

2003 2,530 1,051 486 2,976 23,047 23,059 19,920 34,322 26,042 37,470

2004 2,364 1,181 520 3,305 24,080 23,856 20,881 34,290 27,333 38,735

2005 2,512 1,324 559 3,718 24,547 24,402 21,277 34,744 27,920 39,552

2006 2,668 1,478 602 4,142 24,968 24,986 21,629 35,292 28,509 40,346

2007 2,835 1,646 647 4,570 25,321 25,512 21,960 35,587 28,986 41,004

2008 3,015 1,827 695 5,013 25,650 25,998 22,300 35,751 29,492 41,655

2009 3,209 2,023 748 5,470 25,975 26,452 22,649 35,917 30,043 42,304

2010 3,417 2,233 804 5,948 26,314 26,877 23,018 36,172 30,611 42,926

2011 3,640 2,453 864 6,453 26,682 27,312 23,407 36,516 31,201 43,550

2012 3,875 2,682 929 6,981 27,069 27,767 23,816 36,942 31,808 44,142

2013 4,124 2,922 998 7,540 27,470 28,224 24,234 37,442 32,413 44,715

2014 4,387 3,171 1,071 8,126 27,892 28,674 24,656 38,016 33,007 45,283

2015 4,664 3,428 1,149 8,736 28,338 29,111 25,086 38,626 33,594 45,835

2016 4,957 3,696 1,233 9,389 28,807 29,534 25,522 39,292 34,161 46,440

2017 5,266 3,981 1,321 10,092 29,282 29,936 25,964 40,032 34,700 47,035

2018 5,594 4,283 1,416 10,845 29,762 30,321 26,407 40,795 35,218 47,630

2019 5,939 4,613 1,516 11,655 30,242 30,678 26,833 41,561 35,731 48,247

2020 6,302 4,965 1,622 12,527 30,723 31,000 27,239 42,359 36,234 48,849

2021 6,562 5,346 1,739 13,212 31,211 31,296 27,628 43,186 36,709 49,496

2022 6,838 5,747 1,867 13,959 31,709 31,572 27,995 44,023 37,154 50,182

2023 7,133 6,153 2,007 14,777 32,208 31,824 28,335 44,845 37,593 50,902

2024 7,447 6,587 2,161 15,674 32,701 32,058 28,628 45,648 38,031 51,652

2025 7,781 7,051 2,331 16,652 33,203 32,299 28,894 46,391 38,479 52,450

2026 8,136 7,542 2,517 17,697 33,718 32,555 29,152 47,287 38,958 53,348

2027 8,514 8,068 2,723 18,809 34,251 32,830 29,413 48,037 39,466 54,306

2028 8,919 8,621 2,949 19,983 34,796 33,135 29,671 48,709 40,013 55,297

2029 9,352 9,198 3,199 21,194 35,339 33,483 29,922 49,350 40,585 56,294

2030 9,823 9,809 3,473 22,427 35,876 33,898 30,177 49,944 41,194 57,263

2031 10,320 10,454 3,776 23,674 36,406 34,378 30,417 50,483 41,823 58,281

2032 10,852 11,138 4,110 24,926 36,938 34,938 30,657 50,966 42,534 59,384

2033 11,421 11,859 4,477 26,191 37,493 35,605 30,884 51,400 43,301 60,560

2034 12,030 12,623 4,882 27,470 38,101 36,332 31,126 51,826 44,124 61,786

2035 12,682 13,434 5,327 28,749 38,779 37,087 31,402 52,313 44,985 63,017

2036 13,364 14,293 5,808 30,030 39,518 37,857 31,730 52,868 45,898 64,292

2037 14,075 15,201 6,326 31,323 40,278 38,628 32,116 53,499 46,858 65,581

2038 14,813 16,157 6,884 32,636 41,049 39,408 32,548 54,180 47,827 66,875

2039 15,576 17,159 7,482 33,966 41,834 40,195 33,036 54,924 48,758 68,165

2040 16,370 18,209 8,124 35,314 42,601 40,966 33,583 55,721 49,658 69,431

2041 17,191 19,315 8,810 36,684 43,363 41,727 34,169 56,591 50,569 70,713

2042 18,037 20,443 9,544 38,057 44,151 42,499 34,787 57,507 51,509 72,040

2043 18,935 21,635 10,326 39,386 44,998 43,291 35,442 58,448 52,470 73,401

2044 19,904 22,892 11,160 40,706 45,893 44,110 36,133 59,419 53,434 74,805

2045 20,926 24,192 12,046 42,081 46,795 44,940 36,859 60,454 54,386 76,228

2046 21,964 25,530 12,988 43,463 47,706 45,759 37,627 61,583 55,331 77,680

2047 23,040 26,891 13,988 44,832 48,640 46,559 38,430 62,774 56,275 79,171

2048 24,152 28,321 15,050 46,280 49,601 47,346 39,237 64,035 57,211 80,677

2049 25,318 29,810 16,174 47,871 50,589 48,142 40,061 65,376 58,169 82,196

2050 26,592 31,357 17,366 49,646 51,594 48,952 40,901 66,805 59,122 83,710


2003 US$BRICs G6

Projected US$GDP Per Capita



2000 4.2 8.0 5.4 10.0 4.2 2.9 3.3 2.8 3.1 3.8

2001 1.5 7.3 4.2 5.0 2.1 0.6 1.7 0.4 2.1 0.3

2002 1.5 8.2 4.7 4.3 1.2 0.2 0.4 0.1 1.9 2.4

2003 1.1 8.1 5.6 6.1 0.5 0.0 0.6 2.7 1.8 2.7

2004 3.5 8.4 5.9 4.4 2.9 1.9 2.4 1.7 2.9 3.5

2005 4.2 7.9 6.2 5.8 2.3 2.3 2.0 1.4 2.4 3.1

2006 4.1 7.6 6.2 5.3 2.1 2.4 1.7 1.6 2.4 2.9

2007 4.1 7.3 6.1 4.8 1.8 2.1 1.6 0.8 2.0 2.6

2008 4.1 7.1 6.1 4.5 1.6 1.9 1.5 0.4 2.0 2.5

2009 4.2 6.9 6.1 4.3 1.6 1.7 1.5 0.4 2.2 2.5

2010 4.2 6.6 6.1 4.1 1.6 1.5 1.6 0.6 2.2 2.4

2011 4.1 6.4 6.0 4.0 1.7 1.6 1.6 0.8 2.2 2.3

2012 4.1 6.0 6.0 3.8 1.7 1.6 1.6 1.0 2.2 2.2

2013 4.0 5.8 5.9 3.7 1.7 1.6 1.6 1.1 2.2 2.2

2014 4.0 5.5 5.9 3.6 1.8 1.5 1.6 1.3 2.1 2.1

2015 3.9 5.2 5.8 3.5 1.8 1.4 1.6 1.3 2.1 2.1

2016 3.9 5.1 5.8 3.4 1.8 1.3 1.5 1.4 2.0 2.2

2017 3.8 4.9 5.7 3.4 1.8 1.2 1.5 1.5 1.9 2.1

2018 3.8 4.8 5.7 3.3 1.8 1.2 1.5 1.5 1.8 2.1

2019 3.7 5.1 5.6 3.3 1.8 1.0 1.4 1.4 1.7 2.1

2020 3.7 5.0 5.5 3.3 1.7 0.9 1.3 1.4 1.7 2.1

2021 3.7 5.2 5.6 3.3 1.7 0.8 1.2 1.5 1.6 2.1

2022 3.7 4.9 5.7 3.3 1.7 0.7 1.0 1.4 1.5 2.2

2023 3.7 4.1 5.7 3.4 1.7 0.6 0.9 1.3 1.4 2.2

2024 3.8 4.2 5.8 3.5 1.6 0.5 0.7 1.2 1.4 2.3

2025 3.8 4.2 5.8 3.6 1.6 0.5 0.6 1.0 1.4 2.4

2026 3.8 4.1 5.9 3.6 1.6 0.6 0.6 1.3 1.4 2.5

2027 3.8 4.3 5.9 3.6 1.6 0.6 0.6 1.0 1.5 2.6

2028 3.8 4.1 6.0 3.6 1.6 0.7 0.6 0.8 1.5 2.6

2029 3.8 3.9 6.0 3.5 1.6 0.8 0.5 0.7 1.6 2.6

2030 3.9 3.9 6.1 3.4 1.5 0.9 0.5 0.6 1.6 2.5

2031 3.9 3.8 6.1 3.3 1.5 1.1 0.5 0.4 1.6 2.6

2032 3.9 3.9 6.1 3.1 1.4 1.3 0.4 0.3 1.8 2.7

2033 3.9 3.8 6.2 3.0 1.5 1.6 0.4 0.2 1.9 2.8

2034 3.9 3.8 6.2 2.9 1.6 1.7 0.4 0.1 1.9 2.8

2035 3.9 3.9 6.2 2.8 1.7 1.7 0.5 0.2 2.0 2.8

2036 3.9 3.9 6.1 2.7 1.8 1.7 0.6 0.3 2.0 2.8

2037 3.8 3.9 6.1 2.6 1.8 1.7 0.8 0.5 2.1 2.8

2038 3.8 3.9 6.0 2.5 1.8 1.6 0.9 0.5 2.1 2.7

2039 3.7 3.8 5.9 2.5 1.8 1.6 1.0 0.6 1.9 2.7

2040 3.6 3.7 5.8 2.4 1.7 1.5 1.2 0.7 1.8 2.6

2041 3.6 3.8 5.8 2.3 1.6 1.4 1.3 0.8 1.8 2.6

2042 3.5 3.4 5.7 2.2 1.6 1.4 1.3 0.8 1.8 2.6

2043 3.5 3.5 5.6 2.1 1.7 1.4 1.4 0.8 1.8 2.6

2044 3.6 3.5 5.5 2.0 1.7 1.5 1.4 0.8 1.8 2.6

2045 3.5 3.3 5.4 2.0 1.7 1.4 1.5 0.9 1.7 2.6

2046 3.4 3.1 5.4 1.9 1.7 1.4 1.5 1.0 1.7 2.6

2047 3.4 2.8 5.3 1.8 1.7 1.3 1.5 1.1 1.6 2.6

2048 3.3 2.9 5.2 1.9 1.7 1.2 1.5 1.2 1.6 2.6

2049 3.3 2.8 5.1 2.0 1.7 1.2 1.5 1.2 1.6 2.6

2050 3.4 2.7 5.1 2.1 1.7 1.2 1.5 1.3 1.5 2.5

*indicative projections made only on the model assumptions described in the text. Not GS official forecasts.


BRICs G6*

Projected Real GDP Growth

%yoy

We have used the US census’ population estimates,which are based on the cohort component populationprojection method, which follows each cohort ofpeople of the same age throughout its lifetimeaccording to mortality, fertility and migration.

First, fertility rates are projected and applied to thefemale population in childbearing ages to estimatethe number of births every year (see chart). Second,each cohort of children born is also followed throughtime by exposing it to projected mortality rates.Finally, the component method takes into accountany in-migrants who are incorporated into thepopulation and out-migrants who leave thepopulation. Migrants are added to or subtracted fromthe population at each specific age.

In setting levels for mortality and fertility, availabledata on past trends provide guidance. For mortality,information concerning programs of public healthare taken into account. For fertility, factors such astrends in age at marriage; the proportion of womenusing contraception; the strength of family planningprograms; and any foreseen changes in women’seducational attainment or in their labor forceparticipation are factored into the analysis.Assumptions about future migration are morespeculative than assumptions about fertility andmortality. The future path of international migrationis set on the basis of past international migrationestimates as well as the policy stance of countriesregarding future international migration flows.


Appendix III:Demographic Projections:The Cohort Component Method

Total FertilityRate

1

1.5

2

2.5

3

3.5

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 205

%

Brazil

China

India

Russia


Paper Title Date Author

97 How China Can Help the World 17-Sep-03 Jim O'Neill & Dominic Wilson

96 EU Enlargement: Grow th Impetus or Governance

Nightmare?

03-Sep-03 Erik Nielsen

95 Getting Globalization Right: Meeting the Challenge of the

Century

23-Jul-03 Jim O'Neill, Sandra Lawson &

Roopa Purushothaman

94 Globalization and the Challenge of Reducing World Poverty -

A role for the International Financing Facility?

08-Jul-03 Lord Griffiths of Fforestfach, Jim

O’Neill & Mike Buchanan

93 South Africa Grow th and Unemployment: A Ten-Year

Outlook

13-May-03 Carlos Teixeira & Rumi Masih

92 The ECB’s Monetary Strategy Review : Aligning Words With

Actions

06-May-03 David Walton & Kevin Daly

91 Will Germany Avoid Deflation? 05-Mar-03 Dirk Schumacher & David Walton

90 Can the UK Achieve a Smooth Transition to EMU? 21-Feb-03 David Walton & Ben Broadbent

89 The Challenge of the Century: Getting Globalization Right 24-Jan-03 Jim O’Neill & Roopa

Purushothaman

88 New Directions in EU Merger Policy 18-Dec-02 David Walton

87 Will the UK Consumer Boom End in Bust? 11-Dec-02 Ben Broadbent & Kevin Daly

86 Forecasting Sw iss Interest Rates: A Hybrid Approach 04-Nov-02 Inês Lopes & Nicolas Sobczak

85 Germany - Euroland's Dragging Anchor 29-Oct-02 Dirk Schumacher & David Walton

84 The Equity Risk Premium From An Economics Perspective 25-Oct-02 Jim O’Neill, Dominic Wilson &

Rumi Masih

83 Housing and the US Consumer: Mortgaging the Economy’s

Future

07-Oct-02 Jan Hatzius

82 Central European Equities: Further Outperformance Ahead 06-Oct-02 Jens J. Nordvig-Rasmussen

81 Europe's Stability Pact: In Need of New Clothes 30-Aug-02 David Walton

80 Fact or Fiction? Estimating the Probability of UK EMU Entry

from Financial Markets

28-Jun-02 Ben Broadbent & Kevin Daly

79 Adjusted GS-ESS: A User's Manual for Dedicated Investors 21-Jun-02 Alberto Ades & Demian Reidel

78 In Defence of Efficiencies in Mergers 14-Jun-02 David Walton

Recent Global Economics Papers

Goldman Sachs Global Research Centres

New YorkGoldman, Sachs & Co.1 New York Plaza, 47th FloorNew York, New York 1000, USATel: +1(212) 902 1000Fax: +1(212) 902 2145

LondonGoldman Sachs InternationalPeterborough Court133 Fleet StreetLondon, EC4A 2BB, EnglandTel: +44(0)20 7774 1000Fax: +44(0)20 7774 1181

ParisGoldman Sachs Inc et Cie2, rue de Thann75017 Paris, FranceTel: +33(1) 4212 1341Fax: +33(1) 4212 1499

Hong KongGoldman Sachs (Asia) L.L.C.Cheung Kong Center,68th Floor2 Queen’s Road CentralHong KongTel: +852 2978 0300Fax: +852 2978 0479

FrankfurtGoldman, Sachs & Co. oHGMesseTurmD-60308 Frankfurt am Main,GermanyTel: +49(69) 7532 1000Fax: +49(69) 7532 2800

TokyoGoldman Sachs (Japan) Ltd.ARK Mori Building, 10th Floor12-32, Akasaka 1-chomeMinato-ku, Tokyo 107, JapanTel: +81(3) 3589 7000Fax: +81(3) 3587 9263

SingaporeGoldman Sachs (Singapore) Pte.1 Raffles Place, #07-01 South Lobby,Singapore 039393Tel: +65 228 8128Fax: +65 228 8474

KoreaGoldman, Sachs & Co.Dong Ah Life Insurance Building33 Da-Dong, Chung-KuSeoul, South KoreaTel: +82(2) 3788 1000Fax: +82(2) 3788 1001

Copyright 2003 The Goldman Sachs Group, Inc. All rights reserved.

This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would beillegal. We are not soliciting any action based on this material. It is for the general information of clients of The Goldman Sachs Group, Inc. It does not constitute apersonal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice orrecommendation in this material, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The priceand value of the investments referred to in this material and the income from them may go down as well as up, and investors may realize losses on any investments. Pastperformance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. The Goldman Sachs Group, Inc. does notprovide tax advice to its clients, and all investors are strongly advised to consult with their tax advisers regarding any potential investment. Certain transactions -including those involving futures, options, and other derivatives as well as non-investment-grade securities - give rise to substantial risk and are not suitable for allinvestors. The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such.Opinions expressed are our current opinions as of the date appearing on this material only. We endeavor to update on a reasonable basis the information discussed inthis material, but regulatory, compliance, or other reasons may prevent us from doing so. We and our affiliates, officers, directors, and employees, including personsinvolved in the preparation or issuance of this material, may from time to time have “long” or “short” positions in, act as principal in, and buy or sell the securities orderivatives (including options) thereof of companies mentioned herein. For purposes of calculating whether The Goldman Sachs Group, Inc. beneficially owns orcontrols, including having the right to vote for directors, 1% of more of a class of the common equity security of the subject issuer of a research report, The GoldmanSachs Group, Inc. includes all derivatives that, by their terms, give a right to acquire the common equity security within 60 days through the conversion or exercise of awarrant, option, or other right but does not aggregate accounts managed by Goldman Sachs Asset Management. No part of this material may be (i) copied,photocopied, or duplicated in any form by any means or (ii) redistributed without The Goldman Sachs Group, Inc.’s prior written consent.

This material is distributed in the United States by Goldman, Sachs & Co., in Hong Kong by Goldman Sachs (Asia) L.L.C., in Korea by Goldman Sachs (Asia) L.L.C.,Seoul Branch, in Japan by Goldman Sachs (Japan) Ltd., in Australia by Goldman Sachs Australia Pty Limited (ACN 092 589 770), and in Singapore by GoldmanSachs (Singapore) Pte. This material has been issued by The Goldman Sachs Group, Inc. and/or one of its affiliates and has been approved for the purposes of section21 of the Financial Services and Markets Act 2000 by Goldman Sachs International, which is regulated by the Financial Services Authority, in connection with itsdistribution in the United Kingdom, and by Goldman Sachs Canada, in connection with its distribution in Canada. Goldman Sachs International and its non-USaffiliates may, to the extent permitted under applicable law, have acted on or used this research, to the extent that it relates to non-US issuers, prior to or immediatelyfollowing its publication. Foreign-currency-denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or priceof, or income derived from, the investment. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies, effectivelyassume currency risk. In addition, options involve risk and are not suitable for all investors. Please ensure that you have read and understood the current optionsdisclosure document before entering into any options transactions.

Further information on any of the securities mentioned in this material may be obtained on request, and for this purpose, persons in Italy should contactGoldman Sachs S.I.M. S.p.A. in Milan or its London branch office at 133 Fleet Street; persons in Hong Kong should contact Goldman Sachs (Asia) L.L.C. at2 Queen’s Road Central; and persons in Australia should contact Goldman Sachs Australia Pty Limited. Persons who would be categorized as privatecustomers in the United Kingdom, as such term is defined in the rules of the Financial Services Authority, should read this material in conjunction with the lastpublished reports on the companies mentioned herein and should refer to the risk warnings that have been sent to them by Goldman Sachs International. A copy ofthese risk warnings is available from the offices of Goldman Sachs International on request. A glossary of certain of the financial terms used in this material is alsoavailable on request. Derivatives research is not suitable for private customers. Unless governing law permits otherwise, you must contact a Goldman Sachs entity inyour home jurisdiction if you want to use our services in effecting a transaction in the securities mentioned in this material.

Goldman Sachs Research personnel may be contacted by electronic mail through the Internet at [email protected]

Final version in ASIAN PERSPECTIVE, Vol. 31, No. 4, 2007, pp. 742.

The BRICs Countries (Brazil, Russia, India, and China) as Analytical Category: Mirage or Insight?*

Leslie Elliott Armijo Portland State University

[email protected]

Revision of November 1, 2007*

American hegemony has passed its peak. The twenty-first century will see a more multi-polar international system. Yet Western European countries may not be the United States’ main foils in decades to come. Four new poles of the international system are now widely known in the business and financial press as the “BRICs economies” (Brazil, Russia, India, and China). Does the concept of “the BRICs” have meaning within a rigorous political science framing? From the perspective of an economic liberal employing neoclassical assumptions to understand the world economy, the category’s justification is surprisingly weak. In contrast, a political or economic realist’s framing instructs us to focus on states that are increasing their relative material capabilities—as each of the four is. Finally, within a liberal institutionalist’s mental model, the BRICs countries are a compelling set, yet one with a deep cleavage between two sub-groups: large emerging powers likely to remain authoritarian or revert to that state, and those that are securely democratic.

* This version presented at the Annual Meeting of the International Studies Association, San Francisco, March 25-29, 2008.

mailto:[email protected]

The BRICs Countries (Brazil, Russia, India, and China) as Analytical Category: Mirage or Insight?

In 2003 the institutional investment firm Goldman Sachs issued a research report that coined a catchy acronym: the “BRICs economies,” or Brazil, Russia, India, and China.1 At the time of writing the four large emerging economies collectively represented only 15 percent of the gross national production (GDP) of the six major advanced industrial economies: the United States, Japan, Germany, Britain, France, and Italy. Economists Dominic Wilson and Roopa Purushothaman, however, predicted that “in less than 40 years” the BRICs were likely to catch up to the six, providing the world’s principal “engine of new demand growth and spending power,” which could “offset the impact of graying populations and slower growth in the advanced economies.”2 Since then the international financial press has run with the label, which has caught the imagination of investors much as the term emerging markets did a few years back. This paper critically examines the “BRICs countries” concept.

These four countries are not an obvious set. Their internal politics and economics are dissimilar. Although all are federal states, only India and Brazil are well-institutionalized democracies, one of which is parliamentary and the other presidential. Russia is a declared democracy moving toward authoritarianism, while China is a Marxist people’s republic. Each of the four embodies distinct cultural and linguistic traditions, though they share the characteristic of having been recognizable political entities for centuries. All four possess modern industrial sectors, with ever deepening links to the global capitalist economy, along with large areas of the economy that operate informally, outside the reach of regulators and tax collectors. Their stock market capitalization to gross national product (GDP) ratio varies from 35 percent for China (mainly in Hong Kong and Shanghai), to 60, 69, and 72 percent for Brazil, India, and Russia, respectively.3 Russia and China are significantly globalized, with trade/GDP ratios of 48 and 64 percent respectively, the latter quite extraordinary given China’s large absolute economic size.4 India and Brazil are less globally integrated, with trade/GDP ratios in 2005 of 29 and 25 percent respectively. Although three of the four BRICs countries have substantial and reasonably secure trade surpluses, India has a persistent trade deficit. The three trade surplus BRICs--Brazil, Russia, and China--each have external debts with net present values in the $200 billion range, while India’s foreign debt is about half this. Russia’s exports are extraordinarily concentrated in natural gas and other energy products, while the other three have more diversified export profiles. Finally, each of the quartet faces looming challenges that could choke its economic progress: corruption, pollution, and shortages of natural resources in China; India’s woeful physical infrastructure and contained yet nasty communal conflicts; Brazil’s

1 I thank Vinod Aggarwal, Melvin Gurtov, Christine Kearney, Karthika Sasikumar, Aseema Sinha, and Anthony Spanakos for helpful comments. Remaining mistakes are of course mine.2 Dominic Wilson and Roopa Purushothaman, “Dreaming with BRICs: The Path to 2050,” Global Economics Paper No. 99, New York: Goldman Sachs, October 1, 2003, p. 2. 3 Unless otherwise noted, all figures in this paragraph and the next are from The Little Data Book 20O7, Washington, DC: The World Bank.4 For comparison, the United States’ trade/GDP in 2005 was 21 percent.

inability to grow rapidly despite today’s favorable international environment of high commodity prices; and Russia’s corruption and vulnerability to the “natural resource curse” of ample public funds even sans good government for its citizens and firms.

These are neither the same strengths nor extremely similar development challenges across the group of four countries. Examined from the perspective of either domestic politics or economic structure, it would seem more sensible to group Brazil with Argentina, Mexico, Chile, Colombia, or Venezuela; India with Pakistan and Bangladesh; and so forth. The notion of the BRICs countries as a set thus appears forced. However, an alternative and equally valid way to approach the question might be to ask whether the BRICs countries form a set because they have a similar type of influence in, or equivalent implications for, the international political or economic system. Do they alter the conditions of international interactions for other players—whether states, firms, or international organizations—in parallel ways? It is in this latter sense that the set of the “BRICs economies” or “BRICs countries” may have merit as an analytical category. The remainder of the paper explores the concept with the aid of three alternative frameworks for conceptualizing the workings of the global economy: economic liberalism, realism, and liberal institutionalism.5

I. Economic Liberalism and the BRICs

Capitalist investment firms writing research reports and newsletters for clients generally operate within an economic liberal’s view of the international political economy. The mental model of economic liberalism assumes that the international economy operates roughly as modeled by neoclassical economics. World markets are mostly globalized, decentralized, and competitive; capitalist firms are the key actors; and governments are important only insofar as they provide good or bad economic institutions, which can help or hinder the firms that invest and produce within their borders. Firms decide whether to participate in the global economy based on their expectations of profit. State boundaries are significant principally because states possess unlike endowments of human, physical, and financial capital, as well as natural resources. National governments also provide national frameworks for economic governance, some of which are more friendly to the private sector than others. However, within the economically liberal worldview, governments cannot materially affect the competitive position of home country firms, for example, by enacting economically nationalist regulations such as tariffs, subsidies, or intentionally undervalued exchange rates.

The BRICs category is significant within the economic liberal’s framing if these four countries offer unique or exceptional opportunities for foreign investors. This might be the case were they all exceptionally high growth economies, and many have assumed

5 For a fuller analysis of the ways in which these three framings yield alternative yet convincing visions of the international political economy see Leslie Elliott Armijo and John Echeverri-Gent, “The Politics of Global Markets: Mental Models of Trade and Finance in an Unequal World,” Chapter in Report of the APSA Task Force on Inequality and Difference in the Developing World, Washington, D.C.: American Political Science Association, September. Available at: http://www.apsanet.org/section_557.cfm.

http://www.apsanet.org/section_557.cfm

that this is what the BRICs category implies.6 Instead their 2000-2006 growth rates vary widely, from Brazil’s modest 3.1 percent, below the world growth rate of 3.3 percent, to the 6.7 percent logged by both India and Russia, to China’s astonishing 9.4 percent. In any case, high national growth rates do not necessarily result in high returns to private investors. William J. Berstein observes that, “[J]ust as growth stocks have lower returns than value stocks, so do growth nations have lower returns than value nations—and they similarly get overbought … Between January 1988 and April 2006, the returns for emerging-markets equity and the S&P 500 were 18.78% and 12.07%, respectively. However, … the lion’s share of the emerging-markets return was earned before 1994, when there was little international interest in them. Begin the analysis on January 1994 and numbers change to 7.76% for emerging markets and 10.72% for the S&P 500.”7

Bernstein attributes disappointing returns in emerging markets to problems with corporate governance, such as unwarranted share dilution.

The Goldman Sachs team called the four prospective “engines of growth,” suggesting that there were excellent investment opportunities within the four economies, perhaps because of their large domestic markets, expected to grow rapidly as the growth of the middle class created new consumers, and thus rapid demand growth, for example, in automobiles, electricity, and local capital markets.8 Risks to investors also should be lower in larger as contrasted to smaller emerging market economies because, other dimensions being equal, larger economies will be less trade dependent and globally integrated than smaller economies, and thus less exposed to exogenous economic shocks. However as noted above both China and Russia are heavily trade dependent. The four also are seen as future competitors of the US and other advanced industrial countries. Subhash C. Jain writes, “After the collapse of the Soviet Union, the US became the lone superpower of the world. But it may not be able to hold this dominant position for long. ..US companies must train their current and future managers to compete with firms in the BRICs.”9 In the end, the core argument in the business and financial literature about why the BRICs countries are significant or important rests on the relative economic size of the four countries, both at present and in the near future, and the implicit (and possibly dubious) assumption that large size implies economic dynamism. The central organizing principle for the BRICs category is not growth rates, nor opportunities for investor profits, but rather sheer economic size. In a recent edited volume on the BRICs, the only one of the nineteen papers, almost all written by business school faculty, that explicitly makes the case for why we should investigate these countries as a set is the original paper by the two Goldman Sachs economists, which has been included in the volume.10

6 For example, “High-growth economies make a siren call to multinationals,” Financial Times, February 8, 2006, p. 10 of London edition.7 William J. Bernstein, “Thick as a BRIC,” Efficient Frontier Online Journal, August, 2006. At www.efficientfrontier.com8 Jim O’Neill, Sandra Lawson, and Roopa Purushothaman, “The BRICs and Global Markets: Crude, Cars and Capital,” CEO Confidential, October 2004.9 Subhash C. Jain, ed., Emerging Economies and the Transformation of International Business, Cheltenham, UK: Edward Elgar, 2006, p. xv.10 Jain, Op. Cit.

http://www.efficientfrontier.com/

This leads to two observations. The first is that the growth predictions are plausible if not assured. As shown in Table 1, China has grown very rapidly since 1980, while the other three BRICs have steadily if incrementally increased their share of the global economy, such that the four together represent about 12 percent of world output. In fact, if we use the purchasing power parity (PPP) measure of gross domestic product (GDP), arguably more appropriate for comparisons of advanced industrial with developing economies, then China’s economy already is three-quarters the size of that of the US, and the world’s four largest economies are the US, China, India, and Japan. Moreover, Brazil and Russia already are similarly-sized economies to Germany, Britain, France, and Italy. Table 2 projects future growth. According to the Wilson and Purushothaman model, the BRICs countries could account for a share of world production equivalent to that of the six industrialized democracies (referred to as the Group of Six or G6) by 2040.11 Their predictions of future growth are reasonable though unverifiable. Interestingly, they anticipate steady, cumulative growth in Brazil and India of just under 4 and 6 percent respectively through mid-century, but steadily declining rates of expansion in China and Russia, falling to about 3 percent in the former and 2 percent in the latter by 2050.12 They do not explicitly consider the possible political consequences in China or Russia were growth to slow dramatically.

Table 1. Economic Power Today(percent of world production)

GDP at Market Exchange GDP in PPP 1980 1990 2000 2006 1980 1990 2000 2006

US 25.2 26.4 30.7 27.4 21.3 21.3 21.5 19.8Japan 9.6 13.8 14.6 9.0 8.1 8.7 7.2 6.2

Germany 8.3 7.8 6.0 6.0 6.0 5.2 4.7 3.9Britain 4.9 4.5 4.5 4.9 4.0 3.7 3.5 3.2France 6.3 5.9 4.2 4.6 4.2 4.0 3.5 4.1Italy 4.2 5.2 3.5 3.8 4.1 3.8 3.3 2.7G6 58.5 63.5 63.5 55.7 47.4 46.6 43.7 38.8

China 1.7 1.6 3.8 5.5 3.1 5.6 11.0 15.0India 1.7 1.5 1.5 1.9 3.3 4.3 5.3 6.4Brazil 2.4 2.6 2.2 2.6 3.4 2.9 2.7 2.6Russia .. 2.4 0.8 2.0 .. 4.6 2.3 2.6BRICs .. 7.8 8.1 11.7 .. 17.3 21.3 26.5

Calculated from World Bank, World Development Indicators (WDI), accessed online September 2007.

11 Adding Canada to include the full membership of the Group of Seven (G7) delays the BRICs countries’ catch up date only by a few years. The Goldman Sachs’ team of Wilson and Purushothaman may have thought 2040 a more memorable date or six an easier number to work with.12 Wilson and Purshothaman 2003, p. 21.

Table 2. Projected Economic Power(percent of combined production of US, Japan, Germany, Britain, France, and Italy, plus the four BRICs)

1990 2006 2020 2030 2040 2050G6 89 83 72 61 50 40

BRICs 11 17 28 39 50 60

Years 1990 and 2006 calculated from WDI, GDP at market rate. Years 2020 to 2050 from estimates of Wilson and Purushothaman 2003, p. 4.

A second observation is that the large or small size of an economy is not really a core concept within neoclassical economics. That is, the economic liberal’s framing on the essential nature of the international economy provides no compelling reason for concluding that any economic advantages possibly inherent in larger size ought to trump those of a faster growth rate or good property rights protection or other economic or financial ratios of interest to private investors. It is not clear within this framing why a rational investor might prefer slower-growing Brazil to faster-growing Korea or Malaysia. And yet the BRICs concept has proven to have legs—it has been repeated often and enthusiastically, both within the investor community and in international policy circles.13 Perhaps the concept’s intuitive appeal cannot be encompassed or understood within the mental model of decentralized global free markets. We may need to look elsewhere to understand why it has resonated so widely.

II. Political “Realism” and the BRICs

The problem may lie in the economic liberal’s mental model, which offers few insights into the role of the relative size of a country. As noted, there are some reasons to believe that the latter proposition might sometimes be true, as with the expected advantages from having a good-sized domestic market. But sheer economic size is far from the only determinant of profitability, and thus “the BRICs economies” is an odd and illogical set. Size also might be important when we consider firms in a market, because of concerns over oligopoly or oligopsony. But this is not normally how we think about countries, with the partial exception of natural resource producers. So what is behind the intuitive appeal of the BRICs category? Perhaps the answer is that even economic liberals recognize that cross-border trade and investment transactions occur within an international political economy.

13 For an example of each, see Grant Thornton International, “Emerging Markets: Brazil, Russia, India, and China,” International Business Report 2007, No. 1; GTZ and German Council for Sustainable Development, “BRICS + G: Sustainability and Growth: A Conference Report,” 2005, available at: www.bricsg.net. The United Nations University’s World Institute for Development Economics Research (WIDER), also recently has funded a large research initiative on the set of countries it optimistically designates “Engines of Growth for the 21st Century” and calls the “CIBS group”: China, India, Brazil, and South Africa.

http://www.bricsg.net/

From the perspective of those who would describe themselves as realist analysts of international relations, the relative size of economies is of fundamental importance, because economic size is an essential clue to the relative capabilities—in other words, the “power”--of countries. Can we make sense of the BRICs concept through a political realist’s framing? Realists see a world of sovereign states, none of whose governments happily yield to the dominance of the others. The essence of international politics is “anarchy,” meaning the absence of a legitimate, effective central authority whose decisions carry the weight of law and are ultimately backed by force. In other words there is no world government. Even when sovereign states agree upon international laws and rules of civilized conduct among them, the lack of international enforcement machinery implies that each sovereign state must look to its own protection and interests. In such a self-help system mutual distrust, the only rational stance for a responsible national government, sadly but inevitably leads to large defense expenditures, arms races, and the potential for instability and even war, as insecure states may be tempted to attack preemptively.14

We have now moved our reference framework dramatically. The economic liberal’s world is one in which transnational investment flows freely across borders. Economic growth requires new technologies and the spread of an open, non-discriminatory, and above all peaceful global political economy. The international relations analog of economic liberalism may be found in the various versions of the “trade brings peace” hypothesis.15 The realist mental model is quite different. Realists understand trade and investment flows as occurring within—and subordinate to—the more significant and enduring structure of interstate relations. It is international peace that permits and enables trade, not the reverse. Moreover, rational and responsible national leaders never lose sight of the fundamentally anarchic nature of the global system. Consequently, where economic liberals stress mutual absolute gains from trade, realists are primed to notice relative gains, in which one party, or one country, benefits more than the other. It is likely that much of the interest generated in the US and Europe by the notion of the BRICs derives from underlying realist fears sparked by the prospect of an ascendant group of mostly non-traditional and non-European major powers. From a realist viewpoint, two questions about the BRICs are paramount. First, are the relative material capabilities of any or all of these four countries significant enough today, or in a plausible near future, to consider them as major powers at the global level? Second, if so, then what might this mean for the interstate system?

We begin with the question of the relative power of the BRICs countries, considered here as independent entities, not as a group. We assume an essentially realist/neorealist world in which the primary players in international affairs are sovereign states. Of course the conceptualization of Russia—a traditional major power in the

14 See Kenneth N. Waltz, Theory of International Politics, New York: McGraw-Hill, 1979; A.F. K. Organski, A.F.K. and Jacek Kugler, The War Ledger. Chicago: University of Chicago Press, 1981; John Mearsheimer, The Tragedy of Great Power Politics. W.W. Norton, 2001.

15 See John R. Oneal, Bruce Russett, and Michael L. Berbaum. 2003. “Causes of Peace: Democracy, Interdependence, and International Organizations,” International Studies Quarterly 47, pp. 371-393. See also this volume’s contribution by Rusko and Sasikumar.

nineteenth century and presumed superpower between 1945 and as recently as 1990—as an emerging power is distinctly odd from a realist perspective. Is Russia a declining major power or a rising BRIC? While this is a legitimate question, we leave it aside here, and treat Russia as a emerging power, assuming the early 1990s as our implicit baseline.

In this section of the paper, I therefore introduce a variety of mostly quantitative evidence in order to evaluate whether any or all of the BRICs are on their way toward becoming major powers. Rather than comparing the six largest members of the Group of Seven industrial countries, as done by the Goldman Sachs economists, I compare the five largest industrial democracies to the four BRICs. As is traditional, I begin with military might. Although there are currently 192 member states in the United Nations, in 2006 the US alone accounted for an astonishing 45.7 percent of world defense spending. Britain, with the next largest share, contributed only 5.1 percent.16 The only other countries that account for 2 percent or more of total world military expenditures are the remaining members of the G5, France, Japan, and Germany, plus three of the four BRIC countries: China, Russia, and India, the latter with 4.3, 3.0, and 2.1 percent, respectively.17 Together the shares of these seven countries total only 26.1 percent of world military expenditure. Militarily, the world is unequivocally unipolar.

Next we turn to the economy. Even analysts explicitly concerned with the security balance pragmatically observe that wealth can be used to purchase or produce weapons. Power transition theorists A.F.K. Organski and Jacek Kugler, for example, have preferred GDP as the single best proxy for national power.18 As discussed above, the four BRICs already figure among the top ten to fifteen economies, depending on the measure employed, and will likely move up this ranking in the coming decades. If economic size is the sine qua non of state power, then the BRICs are a likely set of new major powers by the early mid twenty-first century.

Alternatively, one might construct an index combining several different types of power capabilities. The University of Michigan’s Correlates of War (COW) Project has produced a long time series for their Composite Index of National Capabilities (CINC), whose six components are total population, urban population, iron and steel production, energy consumption, military personnel, and military expenditure. The index takes each country’s share of the world in each of the six categories, then averages them to compute the country’s estimated share of total world material capabilities, as shown in Table 3. The table suggests several trends. First the distribution of national material capabilities relevant to national power has become notably more diffuse and decentralized over the postwar period. While the countries represented in the table accounted for 75 percent of total world capabilities in 1955, their share had fallen to only 56 percent by 2001, more than half of which corresponds to the fall in estimated US capabilities in the first three postwar decades. The dissolution of the Soviet Union also has a dramatic effect, causing that country’s share of global capabilities to fall from 18 to only 10 percent. Nonetheless the US’ supposed “unipolar moment” doesn’t really show up as such: in 1991, the US 16 Economist, “The Hobbled Hegemon,” June 28, 2007, accessed online.17 Brazil, overwhelming dominant in its neighborhood, has no need for a large military. See Sotero and Armijo in this Special Issue.18 Op.Cit., p. 45.

receives a score of 14 percent of total world capabilities, as compared to 11 for China and 10 for Russia. By this index, the BRIC’s total material capabilities were roughly equivalent to those of the G5 as early as 1991. In 2001, the US and China each code as great powers, with all other states far behind.

Table 3. Composite Index of National Capabilities (percent of world total)

1955 1978 1991 2001United States 27 14 14 15Japan 5 5 5 5Britain 5 3 3 2Germany 4 3 3 3France 3 2 2 2G5 42 27 27 27China 9 12 11 13India 5 5 6 7USSR/Russia 18 18 10 6Brazil 1 2 2 3BRICs 33 37 29 29G5 + BRICs 75 64 56 56

Data from Singer, J. David, Stuart Bremer, and John Stuckey. (1972). "Capability Distribution, Uncertainty, and Major Power War, 1820-1965." in Bruce Russett (ed) Peace, War, and Numbers, Beverly Hills: Sage, 19-48. As updated in the National Material Capabilities Dataset, Version 3.02, accessed at www.correlatesofwar.orgon August 2, 2007.

One could object that the COW Index, intentionally created to incorporate data series’ available back to the early nineteenth century, is anachronistic and unrepresentative of important dimensions of national capability at the turn of the twenty-first century. For example, there is no component measuring economic size, and the index includes only indirect measures of industrialization or technological sophistication. Income per capita, also excluded, could be an easy and fairly reliable proxy for technological development. All of the G5 are of course high income, while Brazil and Russia are usually classed as middle income states, and China and India as low income ones. Collecting data on scientific patents applied for, cell phone or internet use per capita, or similar measures would yield results similar to the income per capita ranking. Another arguably significant omission in the relative power index just presented is any mention of natural resource endowments. For example, access to water for both drinking and industrial uses could may prove to be one of the defining issues of the twenty-first century. In this, the G5 possibly excepting Japan, Russia, and Brazil would all seem to be adequately to well endowed, while China and India will confront acute shortages, especially as global warming continues.

Energy capabilities are more difficult to compute, though Table 4 reproduces some relevant indicators. All the G5 are vulnerable, though Britain least so. Although the

http://www.correlatesofwar.org/

US, China, and Russia are all large energy producers, Japan, Germany, and France import more than half their domestic requirements. The US, because it is so energy inefficient, also imports a third of its consumption. It can expect dramatically increased pressure from other countries, including the BRICs, to cut both its consumption and its carbon emissions, both of which are wildly disproportionate to its share of world population.

Table 4. Energy Capabilities and Vulnerabilities

% World Energy

Production

Imports as % Energy Consume

d

Population as % World

Consumption as % World

CO2

Emissions

% World

Emissions/Population

US 15 31 5 24 22 4.4Japan 1 83 2 6 4 2.0

Britain 2 5 1 2 2 2.0German

y1 62 1 4 3 3.0

France 1 51 1 3 1 1.0G5 20 .. 10 39 32 3.2w

China 14 6 21 13 18 0.8India 4 18 17 3 4 0.3

Russia 10 -80 2 10 6 3.0Brazil 2 15 3 2 1 0.3BRICs 30 .. 43 28 29 0.7wG5 +

BRICs50 .. 53 67 61 0.9w

Sources: IEA, Key World Energy Statistics 2006, Paris: International Energy Agency, 2006; and IMF, World Economic Outlook 2006, Washington, DC: International Monetary Fund, April 2006.

The four BRIC countries have extremely varied energy profiles. Although China currently has low energy imports as a share of energy consumption, its government worries greatly about its future energy needs. This imperative drives much of China’s foreign economic policy, as its rulers seeks natural resource leases and long term supply contracts from the Sudan to Venezuela. China’s energy production and use is also profoundly dirty and inefficient; with 13 percent of world consumption, China accounts for 18 percent of emissions. China’s total carbon emissions are only exceeded by those of the US. Among the BRICs, India is the most energy-vulnerable, lacking both large fossil fuel reserves and the comparatively abundant land and water resources that make biofuel production attractive for Brazil. It is also the country among the four with the lowest electricity use given its population size, and thus the greatest pent-up demand. Russia is a very significant energy exporter, accounting for 12 percent of world crude oil production and 22 percent of natural gas production, and exporting energy from all sources equivalent to 80 percent of its home consumption. Russia’s energy challenges have to do

with avoiding the classic institutional problems of natural resource management, ranging from exchange rate overvaluation leading to de-industrialization via a scenario known as the ‘Dutch disease,’ to incentives for corruption and unsustainable economic populism.19

Russia, like the US, consumes five times as much energy as its share of global population would predict. Some portion of Russia’s energy consumption is related to its large-scale production of energy-related exports. But its overall energy profile suggests that engaging Russia in future energy conservation efforts could be problematic. Finally, Brazil is relatively fortunate. Brazil receives an astonishing 83 percent of its energy from hydroelectric power, although it imports both petroleum and natural gas.20 Brazil is also the world’s major producer of both sugar and ethanol, and its comparative efficiency in biofuel production suggest major expansion possibilities for biofuel exports. Biofuels and combustible wastes currently account for about 11 percent of world energy use, as compared to 34 percent for oil, 25 percent coal, and 21 percent natural gas.21 As international publics become more worried about global warming, interest in biofuels should rise, possibly to Brazil’s advantage.22 In general, to the degree that we incorporate an energy vulnerability dimension into a relative power calculation, Russia and Brazil look stronger, and China and India weaker.

Another way to compare the G5 and the BRIC countries is through their international financial power. By several significant measures, the US’ world financial hegemony has diminished in recent decades. We look first at the currency composition of total foreign exchange (FX) holdings. The US dollar no longer dominates central banks’ holdings of official reserves to the extent that it once did. The US dollar, which accounted for almost all FX reserves held by central banks in the early post Second World War period, by 1989 had fallen to only about 55 percent of allocated official reserves. In the 1990s the US dollar share of official FX reserves rose briefly, probably because of a “flight to quality” associated with global financial crises, by 1998 accounting for about 70 percent of the total. But from the turn of the century its structural decline began again. The US dollar share in official FX reserves had fallen to 66 percent by the third quarter of 2005, while euro holdings rose to 24 percent, causing concern in Washington, D.C.23 In addition, central banks today are a great deal more secretive about their foreign exchange holdings: in 1989 only 7 percent of reserves were reported as “unallocated” reserves, while by 2005 over 32 percent were.

19 On the natural resource “curse,” see Xavier Sala-I-Martin and Arvind Subramanian, “Addressing the Natural Resource Curse: An Illustration from Nigeria,” IMF Working Paper 03/139, Washington, DC: The International Monetary Fund.20 World Bank, World Development Indicators Online, consulted September, 2007. Available at www.worldbank.org. On Brazil’s energy profile and promise see also Sotero and Armijo in this issue.21 International Energy Agency, Op. Cit., 2006, p. 6.22 Not all biofuels are clean to produce or use, but Brazil’s profile is relatively good on this dimension. See Sotero and Armijo in this Special Issue.23 Barry Eichengreen and Donald J. Matthieson, “The Currency Composition of Foreign Exchange Reserves: Retrospect and Prospect,” IMF Working Paper 00/131, Washington, D.C.: International Monetary Fund, 2000, p. 20; Ewe-Ghee Lim, “The Euro’s Challenge to the Dollar: Different Views from Economists and Evidence from COFER (Composition of Official Foreign Exchange Reserves) and Other Data,” IMF Working Paper 06/153, Washington, D.C.: International Monetary Fund, 2000, p. 17.

http://www.worldbank.org/

A second indicator of global financial power is who has a large hoard of cash and liquid financial assets, useful for protecting one’s home currency and economy against attack, intervening to staunch financial crises abroad--or for threatening disinvestment or lack of access to one’s home financial markets as a quid pro quo in interstate political negotiations. In recent decades, US official holdings of other countries’ currencies—the foreign exchange reserves held by the central bank—have diminished dramatically. At the end of the Second World War the US held by far the largest share of global FX reserves, mainly the British pound and other Western European currencies, plus monetary gold. But there has been an enormous structural shift since about 1980. Today, although the US economy accounts for 28 percent of world production, US government holdings of official FX reserves represent only 1 percent of global reserves, as shown in Table 5. If FX reserves plus monetary gold are calculated instead, the US share rises to 4 percent, still far inferior to that of either China or Japan at 21 and 18 percent, respectively; slightly less than either Taiwan and Korea with 6 and 5 percent each; and close to the shares of Russia, India, Singapore, and Germany, at 4, 3, 3, and 2 percent each.24 This share is hardly enough, one might imagine, to backstop the US’ accustomed role as global financial leader through its dominant positions in world markets, the G7, the International Monetary Fund, the World Bank, and other fora for global financial governance.25

In fact, all of the G5 together hold only 21 percent of global FX reserves, while the BRICs control 35 percent. Stocks of foreign direct investment (FDI), also shown in Table 5, are a third indicator of financial attractiveness (inward) and clout (outward). Though the G5 continue to be the most attractive destinations for FDI, the BRICs’ share has been increasing; China, Russia, and Brazil each have larger stocks of inward FDI than Japan. Outward FDI from multinational firms based in the BRICs economies also has been growing, although the 52 percent of global FDI owned by the five wealthy democracies still dwarfs the 2 percent owned by the four BRICs. However, as FDI stocks cumulate slowly over time they are lagging indicators of power. Annual flows, not shown, reveal faster convergence.

24 World Bank, World Development Indicators, consulted August 2007.25 On the political economy of global financial governance see Leslie Elliott Armijo, “The Terms of the Debate: What’s Democracy Got to Do with It?,” in L.E. Armijo, ed., Debating the Global Financial Architecture, Albany, NY: SUNY Press, 2001.

Table 5. Financial Power, 2005(percent of world)

Foreign ExchangeReserves

Inward FDI, Stock Outward FDI, Stock

United States 1.1 16.0 19.2Japan 17.3 1.0 3.6Britain 0.8 8.0 11.6

Germany 0.8 5.0 9.1France 0.8 5.9 8.0

G5 20.8 35.9 51.5China 23.8 2.0 0.4India 3.4 0.4 0.0

Russia 5.8 1.3 1.1Brazil 1.7 2.0 0.7BRICs 34.7 9.7 2.2

G5 + BRICs 55.5 45.6 53.7

* FDI from UNCTAD, World Investment Report 2006. Figures for 2005.* FX reserves from IMF Statistics Online, “Total Reserves Minus Gold.” Figures for 2006.* Memo: Eurozone FX reserves: 3.9; Developing Asia: 44.6.

Not surprisingly, there is an active debate over whether these structural global financial shifts matter. For example, one reason for the steady shrinking in US foreign exchange holdings is American use of the seiniorage privilege enjoyed by the key currency country. When a country’s home currency is in demand abroad as a store of value and for international transactions purposes, then that country can issue larger amounts than are demanded for domestic use. So long as foreigners are prepared to absorb dollars, the US government can print, and spend, without any automatic restraint. Moreover, given the enormous investment of virtually all foreign central banks, not to mention their private business communities, in dollar-denominated assets, a dramatic dollar devaluation is feared by all sovereign players--though not perhaps by terrorists. Essentially freed from foreign exchange constraints by its control of dollar seiniorage, the US has become a major international debtor country. The US’ enormous trade deficits are matched by equivalently large inflows of foreign capital, as foreign central banks typically invest their dollars in US Treasury securities. Harvard economists Ricardo Hausmann and Federico Sturzenegger assert that US international accounts have been misunderstood and miscalculated and actually reflect great productivity and strength.26

But if the shift in measured holdings of foreign exchange reserves matters, then the new power holders are Japan, developing nations in Asia, and oil exporters. In early August 2007 brief but real global market turmoil followed China’s announcement that it

26 Ricardo Hausmann and Federico Sturzenegger, “Global Imbalances or Bad Accounting? The Missing Dark Matter in the Wealth of Nations,” Unpublished paper, Cambridge, MA: Kennedy School of Government, December 2005.

might begin to invest a small portion of its massive dollar reserves not in US government securities, but rather in higher-yielding though riskier private securities, including corporate equity and bonds.27 Governments in Asia and the Middle East, prominently including China, are estimated to control $2.5 trillion in these new investment vehicles, known as sovereign wealth funds (SWFs).28 Although it was the US Treasury Secretary and other American financial officials that played leading roles in the financial crises of the 1990s, could China and other developing countries, along with Japan, hold a preponderance of the financial cards in years to come? The largest holders of SWFs include one oil-producing advanced industrial country, Norway; three Middle Eastern OPEC members, United Arab Emirates, Saudi Arabia, and Kuwait; and three emerging market economies, Singapore, China, and Russia. Some estimate that sovereign wealth funds could reach $10 trillion in ten years. “At that size, ‘they are the global financial system,’ says former IMF chief economist Kenneth Rogoff.”29

This section thus far has examined the category “the BRICs countries” in the light of a realist framework emphasizing the relative power of individual sovereign states. China looks quite consequential, India and Russia somewhat less so, and Brazil still less so, although the order depends significantly on the specific metric employed. We conclude that it is certain that China is or soon will be a major power, eventually second only to the US, and reasonable to anticipate that the other three also soon could be major powers.30 On several relevant dimensions each of the four soon will outstrip the US’ traditional Western European allies—although this judgment would change dramatically if the Western European countries were to move toward close political union. Though the US remains overwhelmingly first among equals, multipolarity is increasing.

Our second question for this section concerns the likely systemic consequences of rising multipolarity, including a new set of challenger countries, from within a realist understanding. We begin by reminding ourselves of how many realists understand the status quo. Some propose that the break up of the Soviet Union, and Russia’s economic and military weakness, generated unipolarity in the international system. In 1990 Charles Krauthammer wrote, “It has been assumed that the old bipolar world would beget a multipolar world with power dispersed to new centers in Japan, Germany (and/or “Europe”), China, and a diminished Soviet Union/Russia. … The immediate post-Cold War world is not multipolar. It is unipolar. The center of world power is an unchallenged superpower, the United States, attended by its Western allies.”31 A decade later he emphatically reasserted his thesis:

27 Richard McGregor, “China affirms dollar’s global reserve status,” Financial Times, August 13, 2007; see also Jeffrey Garten, “We need rules for sovereign funds,” Financial Times, August 8, 2007.28 Tony Barber and George Parker, “EU demands more transparency over sovereign fund investments,” Financial Times, September 28, 2007. 29 Bob Davis, “How Trade Talks Could Tame Sovereign Wealth Funds,” Wall Street Journal, October 29, 2007, p. A2.30 For a provocative corrective to worries that China is quickly catching up to the US in overall capabilities, see Steve Chan, “Is There a Power Transition Between the US and China? The Different Faces of National Power,” Asian Survey, 45:5, 2005, pp. 687-701.31 Charles Krauthammer, “The Unipolar Moment,” Foreign Affairs: America and the World, 1990/1991.

When I first proposed the unipolar model in 1990, I suggested … that, if America did not wreak its economy, unipolarity could last thirty or forty years. That seemed bold at the time. Today it seems rather modest. The unipolar moment has become the unipolar era. It remains true, however, that its durability will be decided at home. It will depend largely on whether it is welcomed by Americans or seen as a burden to be shed.32

Neoconservative foreign policy analysts including Krauthammer thus announced the US’ ability and duty to lead, which they expected to last decades into the future. The initial years of the twenty-first century have been a period of American self-assertion, as illustrated by the activist foreign policy of President George W. Bush. But if China or others of the BRICs might be catching up, then the realist perspective gives one reasons to be concerned—or relieved—at the imminent demise of America’s unipolar moment. Some realists suggest that a period of particular danger for interstate war occurs when the former hegemon is declining and a new one rising.33 Tellingly, however, many realist analysts worry about the emergence of China—and the reemergence of Russia—as major powers in the current century, but seem unconcerned about Japan, India, and Brazil. Perhaps this is because China and Russia appear to pose a greater military threat, as both are long-declared nuclear states with large standing armies. But there is more to the argument than simply a concern over rising material capabilities among countries that were weak following the Second World War. What many realist scholars actually fear is the rise of a powerful anti-Western and anti-liberal-values coalition, led by China but possibly also including Russia.

What is emerging is a "World Without the West." This world rests on a rapid deepening of interconnectivity within the developing world--in flows of goods, money, people and ideas--that is surprisingly autonomous from Western control, resulting in the development of a new, parallel international system. …The rising powers have begun to articulate an alternative institutional architecture …. [that] proposes to manage international politics through a neo-Westphalian synthesis comprised of hard-shell states…Inviolable sovereignty in the World Without the West rejects key tenets of "modern" liberal internationalism and particularly any notion of global civil society or public opinion justifying political or military intervention in the affairs of the state.34

China and Russia represent a return of economically successful authoritarian capitalist powers, which have been absent since the defeat of Germany and Japan in 1945, but they are much larger than the latter two

32 Charles Krauthammer, “The Unipolar Moment Revisited,” The National Interest, Winter 2002/2003, p. 17. For a counter-argument that nonetheless relies on an essentially realist logic see Layne, Christopher Layne, “The Unipolar Illusion Revisited: The Coming End of the United States’ Unipolar Moment,” International Security, 31:2, Fall 2006, pp. 7-41.33 For example, Ronald L. Tammen, “The Impact of Asia on World Politics: China and India Options for the United States,” International Studies Review, 6, pp. 563-580.34 Nazneen Barma, Ely Ratner, and Steven Weber, “A World Without the West,” The National Interest, 90, July/August 2007.

countries ever were…. As it was during the twentieth century, the US factor remains the greatest guarantee that liberal democracy will not be thrown on the defensive.35

The result of the end of America’s unipolar moment, in other words, may be the opportunity for a China-centered authoritarian yet increasingly capitalist bloc, with Russia left to decide on pure power-balancing criteria whether it wishes to fortify itself vis-à-vis the West (thus looking to the East for alliance partners) or China (thus cautiously turning West).36 But let us return to the mental model of realism. A pure realist framing suggests that rational alliance choices in a non-hierarchical system are made solely on the basis of countries seeking to prevent one unit (country) or alliance system from attaining sufficient capabilities to pose a plausible threat to other units. One may thus wonder why is China perceived by many analysts throughout the advanced industrial democracies as unusually threatening, given that any conceivable military threat from China is at best several decades in the future. What probably has happened is that once again some analysts’ intuitions about what matters in the international system have outrun their conscious mental model, a point to which I return below.

This section began with two queries. We asked whether it was reasonable to imagine that, in purely material capability terms, any or all of Brazil, Russia, India, and China could by the mid-twentieth century be considered “major powers.” A variety of evidence suggests that by this criterion first China, then India and Russia, and then Brazil, all would be indisputable members of the set of top five to seven major powers--at the latest approximately three decades hence.37 We also questioned how and why a shift in the identities of the major powers might matter for the conduct of the global political economy. We identified widespread unease with the relative rise of China, in particular, but then went on to argue that the reasons for analysts’ discomfort with the image of a powerful China seemed to spread beyond the confines of the realist mental model. In other words, the actual concerns appeared to touch on issues of political institutions and values, and the domestic political characteristics of states. Allowing these analytical dimensions moves the debate decisively to the terrain of our third mental model.

III. Liberal Institutionalism and the BRICs

Our final perspective on the concept of “the BRICs” is that of liberal institutionalism, which we here define very broadly to encompass all of the schools and sub-schools of international relations that assert that institutions, and/or ideas and values (whether domestic, transnational, or international), may concretely influence international outcomes.38 The liberal institutionalist mental model begins from a realist, balance of power framing, but then makes crucial additional assumptions disallowed within a strict

35 Azar Gat, “The Return of Authoritarian Great Powers,” Foreign Affairs, July/August 2007.36 The description of China as an emerging “authoritarian capitalist” power is controversial. The Chinese government describes its economic system as “socialist market.” 37 The analysis also assumes that major countries of Western Europe will not decide to push for tighter political union, complementing their current monetary and economic integration, in order to preserve their current level of global influence. On how key non-BRICs countries might react to the rise of the BRICs see the papers by Brawley; Laurence; and Lee, Ma, and Park in this Special Issue.

realist model. For starters, most liberal institutionalists would expand the definition of “power” to allow for “soft” as well as “hard” capabilities in assessing the relative power of states.39 If citizens of other countries wish to attend university in your country, speak your national tongue, watch your movies, emigrate to your country, or identify their political institutions or cultural values as being like yours, then your country has soft power. Hard power capabilities ranging from military might to a large domestic market may enable a country to employ constraints (military threats) or inducements (market access) to gain the cooperation of others. In contrast the use of soft power relies on persuasion and the desire for emulation to inspire cooperation. Soft power inheres in a country’s reputation—for political stability, economic growth, trustworthiness in diplomacy, or public-spiritedness in managing international institutions. Reputation, or world public opinion, is a different kind of relative power indicator, and one that arguably incorporates both hard and soft power components. Germany’s Bertelsmann Foundation recently queried a wide sample of respondents from nine countries on which countries and major international organizations they perceived as world powers, both today and in the near future. Table 6 summarizes their findings. The only two countries that 50 percent or more of respondents expect to be great powers in 2020 are the US and China.

38 We include within a single paradigm theorists sometimes separated into “neoliberals” (in the international relations sense), “institutionalists,” and “constructivists.” See Brawley in this volume.39 See Joseph S. Nye, Soft Power: The Means to Success in World Politics. PublicAffairs Press, 2004.

Table 6. Which Countries or Organizations are/will be World Powers?*(percent of all respondents who select)

Today In 2020United States 81 57

Japan 37 32Britain 33 30

Germany 26 22France 21 20

European Union 32 26China 45 55India 12 16

Russia 27 24Brazil 5 10

South Africa 4 6United Nations 26 23

* Global percentage calculated as unweighted mean of country averages.* Source: “World Powers in the Twenty-First Century: The Results of a Representative Survey in Brazil, China, France, Germany, India, Japan, Russia, the United Kingdom, and the United States,” Berlin, Bertelsmann Foundation, June 2, 2006. http://www.bertelsmann-stiftung.de/bst/en/media/xcms_bst_dms_19189_19190_2.pdf

But the critical differences of the liberal institutionalist mental model as compared to the realist framing go beyond simply allowing soft components of power into our assessment of the relative ranking of states in the global system. First, liberal institutionalists (sometimes called neoliberal institutionalists, or simply institutionalists) typically believe that, in addition to states’ relative capabilities, the incentives and opportunities created by international institutions influence state choices and global outcomes. States are not the only significant actors in international relations. Under certain conditions, international governmental organizations (IGOs)--or even less-formalized but well-accepted global “regimes” of shared expectations about norms, rules, and procedures--may enmesh rationally suspicious sovereign states in mutually beneficial relations of reciprocity and trust.40 Interstate diplomacy poses countless pressing problems of collective action, defined as situations in which one party may make itself vulnerable by acting cooperatively, yet mutual cooperation produces a better outcome for all. Examples range from pollution control to disarmament. Liberal institutionalists posit that both formal IGOs, and less formal global regimes mixing state-to-state diplomacy with transnational private cooperation and monitoring, have measurably and mostly positively altered international relations, particularly in the six decades following the last

40 Keohane, Robert O., Power and Governance in a Partially Globalized World. London: Routledge, 2002; Robert O. Keohane, After Hegemony: Cooperation and Discord in the World Political Economy. Princeton: Princeton University Press, 1983; Andreas Hasenclever, Peter Mayer, and Volker Rittberger, Theories of International Regimes. Cambridge: Cambridge University Press, 1997.

http://www.bertelsmann-stiftung.de/bst/en/media/xcms_bst_dms_19189_19190_2.pdf

major power war, World War Two. For example, regular and mutual arms verification reduces the incentives for arms races, making accidental war less likely. Membership in international economic organizations such as the World Trade Organization facilitates trade, contract enforcement, and economic growth.

Second, many liberal institutionalists would take further theoretical steps and assert that domestic institutions and/or ideas and values also influence state choices and international outcomes.41 For example, democratic peace theory suggests that pairs or dyads of democratic states are better able to surmount the barriers to mutual trust and cooperate voluntarily across borders than are dyads in which at least one state is authoritarian.42 One proposed mechanism by which democratic dyads build relations of mutual trust turns on democratic countries’ relatively transparent and slow-moving domestic policy processes, full of potential veto players, which make sudden policy reversals extremely unlikely. Democratic leaders also are said to be less capable than autocrats of initiating an unprovoked surprise attack on an ally, simply because democratic publics cannot mentally re-categorize an erstwhile friend as a ‘rogue state’ overnight. The costs of breaking international agreements are thus higher for democracies.43 Other analysts emphasize democracy’s allegedly “dovish” value of settling disputes peacefully, and related humanitarian and universalistic norms.44

According to this “constructivist” variant of liberal institutionalism, the values held by citizens and their leaders can alter state choices, thus helping to create or maintain enduring and consequential international institutions that structure the incentives to and preferences of future state leaders and democratic publics. The institutionalist mental model thus asks not only what material capabilities the BRICs possess, but also what they and their leaders want. A liberal institutionalist asks whether a possible new G7—perhaps the US, Japan, the four BRICs, and the European Union as a collective voice--in the mid twenty-first century would be likely to alter the character of international institutions and global cooperation. This framing reveals that there are two distinct subsets of BRICs: the mostly authoritarian emerging powers, China and Russia, and the securely if sometimes chaotically democratic ones, India and Brazil.

China and Russia

We noted above the fears of many ostensibly realist analysts over the possible rise of an anti-liberal values coalition. Within a strict structural realist framing where only the interstate balance of power matters, this fear is illogical.45 But once we admit that domestic institutions and goals might shape international alliance preferences we are in

41 Moravcsik, Andrew, 1997. "Taking Preferences Seriously: A Liberal Theory of International Politics," International Organization, 51:4, Autumn; Audie Jeanne Klotz. Norms in International Relations: The Struggle Against Apartheid. Ithaca, NY: Cornell University Press, 1999.42 Michael E. Brown, Sean M. Lynn-Jones, and Steven E. Miller, eds. Debating the Democratic Peace. Cambridge, MA: The MIT Press, 1996 [2001].43 Brett Ashley Leeds, “Domestic Political Institutions, Credible Commitments, and International Cooperation,” American Journal of Political Science, 43:4, October, 1999, pp. 979-1002.44 Zeev Maoz and Bruce Russett. 1993. “Normative and Structural Causes of Democratic Peace, 1946-1986,” American Political Science Review, 87:3, September, pp. 624-638.45 See Waltz, Op. Cit.

the institutionalist/cognitivist/neoliberal domain. We shall assume that both China and Russia are accurately described today as authoritarian states. Will such states, once they become major powers, be likely to respect and expand the existing, and mostly liberal, network of global governance institutions?

There are two possibilities. Authoritarian leaders might be expected to value interstate cooperation on practical matters involving non-zero-sum threats to collective economic and physical security: disease prevention, protection of international shipping from piracy, and perhaps control of clandestine human, drugs, and weapons trafficking. But they are unlikely to favor international promotion of democratic values and processes: human rights, labor rights, and a free press and electronic media. The tenor of authoritarian countries’ participation in international regimes governing such subjects as trade, finance, climate change, and arms control should fall somewhere in between the extremes of willing cooperation and covert obstructionism, with Chinese and Russian leaders probably supportive of the goals of global economic governance, but much less willing than democracies to open their domestic institutions to supranational inspection or oversight, and very suspicious that they will be asked to sacrifice disproportionately.46

Meanwhile, Western analysts probably have underestimated the soft power of China and Russia, each of which have long and heroic imperial histories.47 Both China and Russia have been active in constructing IGOs that they dominate.48 As authoritarian major powers arise, the wealthy democracies also may participate less in international regimes, judging that their counterparts in Beijing and Moscow, as compared to those in London or Paris, are less constrained by domestic veto players and mass public opinion from acting capriciously, and therefore cannot fully be trusted. In sum, the inclusion of authoritarian countries as major powers may not necessarily signal an overt retreat from intergovernmental cooperation, but it is also unlikely to inspire its rapid expansion.

The other possibility, which many liberal institutionalists believe likely, is that participation in global governance will promote liberalizing domestic change within authoritarian polities. This is the political convergence thesis.49 As citizens become wealthier and better educated, they also will expect more choices and more freedoms; political democracy will become more attractive. Both case study and econometric investigations demonstrate a high correlation between high levels of income per capita and stable democratic politics, although the precise causal link remains contested.50 By a similar logic, constructive engagement of today’s democratic major powers with rising

46 For example, a recent attempt at US-Chinese bilateral cooperation over manned space satellites ended abruptly when the US representative was denied access to Chinese human spaceflight training facilities. Guy Gugliotta, “New Challengers Emerge, Threatening to Take the Lead,” New York Times, September 25, 2007.47 On the attractiveness of China in Africa today see Liang in this issue.48 See Hancock and Liang in this Special Issue.49 On the attractiveness, or even inevitability, of liberal democracy and market capitalism see Frances Fukuyama, The End of History and the Last Man, Free Press, 1992; Michael Mandelbaum, The Ideas that Conquered the World: Peace, Democracy, and Free Markets in the Twenty-First Century. New York: Council on Foreign Relations, 2002. Fukuyama, however, has recently argued that heedless international behavior by a hegemonic liberal democracy may undermine the attractiveness of its domestic political and economic systems. See his America at the Crossroads: Democracy, Power, and the Neoconservative Legacy, New Haven, CT: Yale University Press, 2007.

authoritarian states should promote political convergence on liberal democracy. In 1997 the Group of Seven (G7), sometimes referred to as the rich countries’ club, took the unprecedented step of expanding its membership to include Russia, arguing that it was a “major power” with a right to be included. Those who pushed for inclusion of Russia hoped to support and strengthen liberal, pro-Western political forces within the country. Whether G8 membership has successfully compensated Russia for the West’s provocative decision to expand NATO eastwards remains an open question.

More recently the hopes of liberal institutionalists have centered on China. Hempson-Jones argues that China’s participation in IGOs has softened its practice, if not yet its official rhetoric, and that the former is a more important clue to its future behavior.51 China has gradually reduced its resistance to UN Peacekeeping missions. In August 2007 China backed down from its steadfast opposition in the UN Security Council to a peacekeeping mission for Darfur, the site of massacres acknowledged by most observers to be genocide tacitly endorsed by Khartoum. This occurred despite Beijing’s close ties with the Sudanese government and significant natural resource investments there. China, though not a formal member of the Association of South East Asian Countries (ASEAN), is a large presence in its discussions and a participant in several parallel processes involving its East Asian neighbors. According to some analysts, China has learned from discussions with its sovereign partners, occasionally modifying its policy positions. Since 2003 China has found common ground with other developing countries through its recent, though modest, participation in the G20 group formed to lobby the advanced industrial countries to liberalize agricultural trade. Li argues that returned foreign students have brought foreign liberal values home.52 Yet it would be foolish to conclude that mere willingness to participate in numerous international agreements means that an autocratic state will allow itself to be constrained in its behavior by those agreements. China’s neighbors, prominently including India, struggle to assess the credibility of China as an economic and political partner.53

India and Brazil

A liberal institutionalist also would ask what India and Brazil might want from global governance. Democratic peace theory predicts greater mutual trust between state dyads in which both countries are democracies. India and Brazil should be skilled at peaceful interstate cooperation for the same reasons that the US, France, or Japan are. The commitments of politicians are relatively credible, since abrupt shifts in policy will be difficult to explain to voters. Moreover, both India and Brazil have demonstrated considerable soft power, or attractive and persuasive international capabilities. For

50 See Dietrich Rueschemeyer, Evelyne Huber Stephens, and John D. Stephens, Capitalist Development and Democracy. Chicago: University of Chicago Press, 1993, especially Chapters 1 & 2; Adam Przeworski, Michael Alvarez, José Cheibub, and Fernando Limongi. 2000. Democracy and Development, Cambridge: Cambridge University Press.51 Hempson-Jones, Justin S., “The Evolution of China’s Engagement with International Governmental Organizations: Toward a Liberal Foreign Policy?,” Asian Survey, 45:5, 2005, pp. 702-721. See also Liang in this volume.52 He Li, “Returned Students and Political Change in China,” Asian Perspective, 30:2, 2006, pp. 5-29.53 See Rusko and Sasikumar in this volume.

example, India was a leader in both the Non-Aligned Movement of the 1950s through 1970s and the New International Economic Order of the 1970s and early 1980s, each of which might have found greater long-run success had more of their members been democracies like India. More recently, Brazil and Argentina have improved their relations dramatically since both have democratized. If some democracies who are major powers (the European members of today’s G7) are substituted for by other newly-powerful democracies (such as India and Brazil), then we may expect global governance institutions, overarching liberal values, and processes to remain much the same.

Nonetheless, some of the content of global governance initiatives could shift in response to weightier participation from developing country democracies. Like France or Britain, India and Brazil should value human rights, labor rights, and a free press. But leaders of India and Brazil may view global redistribution more favorably than leaders of the wealthy democracies. For example, climate change is an issue on which both Brazil and India have implemented domestic reforms and could be global leaders, but the substance of their leadership could make today’s G7 uncomfortable. Both democratic BRICs will side with other developing countries in demanding much greater conservation efforts from the US, Japan, and the EU, rather than from countries whose peak industrial pushes remain ahead of them. Indian and Brazilian politicians and non-governmental organization (NGO) activists also have been active in South-South diplomacy. Both countries have played host to the World Social Forum (WSF), the anti-Davos meeting, the original idea for which came from a Brazilian businessman and social activist, Oded Grajew.54 Anti-AIDs activists in the two countries have begun transnational collaboration, sharing ideas and pressuring their governments to insist on their rights to manufacture generic versions of expensive pharmaceuticals developed in the wealthy democracies. In 2003 Brazil joined India and South Africa in issuing the Brasília Declaration, which announced the three democracies’ intent of negotiating jointly within the WTO. This core became the Group of 20 (G20, also known as the G22) developing countries, which came to world attention during Cancún Ministerial meeting of the WTO by its refusal to negotiate over liberalizing the regulation of inward foreign direct investment) until the advanced industrial countries committed to substantial agricultural trade liberalization.55 What is particularly interesting in the Brazil-India-South Africa cooperation is that the three have been able to cooperate despite their lack of closely parallel interests in agricultural and other commodity trade. Contrast this with the utter inability of developing country debtor countries in Latin America and elsewhere to form a united front vis-à-vis creditor country banks and governments in the 1980s, a period when many were either autocracies or very new and fragile democracies.

This section thus has argued that a liberal institutionalist framing leads us to ask the most interesting questions about how and why a substitution of countries within the set of major powers might alter global politics. However and at the same time, the concept of “the BRICs” as a single useful analytical set shatters. Instead what appears to be most significant is whether the large emerging powers, whoever they may be, can be 54 See Gilberto Nascimento’s interview with Grajew in Isto E, December 12, 2000.55 Marcio Botelho, “The G-20: Aims and Perspectives of a New Trade Alliance,” M.A. Thesis (Berlin: University of Applied Sciences, 2005); Andrew Hurrell and Amrita Narlikar, “A New Politics of Confrontation? Brazil and India in Multilateral Trade Negotiations,” Global Society 20:4, 2006.

socialized into the hitherto cozy club of large industrial democracies, dominated by the US, that have more or less cooperatively managed the interlocking global governance regimes since the last hot conflict among major power combatants, the Second World War.56 If the large emerging powers become both status quo powers, interested in preserving existing global governance institutions, and more or less open, liberal societies, then the world may not miss US hegemony—much. If not, then the maintenance of mutually beneficial, yet purely voluntary, interstate cooperation founded on reciprocal trust becomes significantly more problematic.

IV. Conclusions

This paper has asked whether the ”BRICs countries” is a viable analytical category. The four do not share domestic political institutions, international goals, or economic structures and challenges. If the category nonetheless provides insight, it must be because this set of countries holds similar implications for the larger system—the international political economy—within which it is embedded.

The remainder of the essay considered the concept from three alternative systemic perspectives. I began with an economic liberal’s framing, a mental model that assumes the international economy is neither oligopolized nor highly politicized, but rather functions as a decentralized free market most of the time. From this perspective, the BRICs economies would be a analytically viable set if they offered usual opportunities for foreign portfolio and direct investors, or if their multinational firms could be expected to be ferocious competitors in the future, or if some other economic characteristic plausibly distinguished the four from the larger set of developing and post-communist countries known as emerging market economies. I found this claim unconvincing. In fact, a look at the business literature suggests that the core proposition even among scholars is simply that the BRICs economies will be large and therefore must be important—as markets, investment destinations, and competitors. While logically consistent economic liberals should care about factors such as the quality of national economic governance within emerging market economies, a concern with relative size—and thus relative power—implicitly transports us to the cognitive territory of political and economic realism.

A realist approach suggests that advanced industrial countries whose relative international position may be slipping are justified in fearing the rise of the BRICs countries. Moreover, within a pure balance of power mental model for interpreting trends in the international political economy, the structure of relative material capabilities among units or countries shapes systemic outcomes: the end of American hegemony may undermine global stability. Yet there is more to be said. In particular, the realist model is unclear about why Japan or Germany, enemies of the US (and the liberal democratic “West”) within living memory, today are universally perceived as reliable Western allies,

56 On the ways in which liberal global governance regimes have also served the parochial interests of the major powers, see especially Lloyd Gruber, Ruling the Waves: Power Politics and the Rise of Supranational Institutions, Princeton, NJ: Princeton University Press, 2000; and William K. Tabb, Economic Governance in an Age of Globalization. New York: Columbia University Press, 2004.

while China and Russia arouse enormous suspicion. To understand, we need a liberal institutionalist’s perspective, plus the additional proposition that democratic states may be more supportive of existing institutions of global economic governance, and of evolving political cooperation around liberal values, than autocracies. Ultimately it is uncertainties about the likely future balance between democratic and authoritarian major powers that should make a focus on the relative rise of the BRICs countries compelling for analysts of both international business and world politics.

If China and Russia become major powers that are authoritarian, albeit marketized, then the net tenor of global governance will revert to being more Westphalian, as sovereign states increasingly shy away from even mild criticism of one another and abjure ‘interference’ within one another’s borders. In contrast, the relative rise of liberal democratic states such as India and Brazil portends that ideals of secular universalism, religious and ethnic tolerance, and universal human rights will continue to spread, however gradually and imperfectly. We also should expect Indian or Brazilian integration into the club of the powerful to push global negotiations in areas such as climate change, or the international trade and investment regimes, toward somewhat more globally redistributive bargains. This does not of course mean that either India or Brazil will put the interests of the poorest countries, many of which are in sub-Saharan Africa, above those of their own citizens, any more than today’s wealthy democracies have been willing to sacrifice their comforts or agricultural subsidies for the sake of Indians, Chinese, or Brazilians. Ultimately, our expectations of how these four new players might behave suggest two distinct subsets, one authoritarian and the other democratic. The category of “the BRICs” is thus, strictu sensu, a mirage—but one that nonetheless has provided considerable insight. For the present, perhaps we should keep it.

Principal References

Armijo, Leslie Elliott. 2001. “The Terms of the Debate: What’s Democracy Got to Do with It?,” in L.E. Armijo, ed., Debating the Global Financial Architecture, Albany, NY: SUNY Press.

Barma, Nazneen, Ely Ratner, and Steven Weber. 2007. “A World Without the West,” The National Interest, Issue 90, July/August, pp. 23-30.

Brown, Michael E., Sean M. Lynn-Jones, and Steven E. Miller, eds. 1996 [2001]. Debating the Democratic Peace. Cambridge, MA: The MIT Press,.

Chan, Steve. 2005. “Is There a Power Transition Between the US and China? The Different Faces of National Power,” Asian Survey, 45:5, pp. 687-701.

Doyle, Michael W. 2005. “Three Pillars of the Democratic Peace,” American Political Science Review, 99:3, August, pp. 463-466.

Frances Fukuyama. 1992. The End of History and the Last Man, Free Press.Frances Fukuyama. 2007. America at the Crossroads: Democracy, Power, and the

Neoconservative Legacy, New Haven, CT: Yale University Press.

Gat, Azar. 2007. “The Return of Authoritarian Great Powers,” Foreign Affairs, July/August, pp. 59-69.

Hasenclever, Andreas, Peter Mayer, and Volker Rittberger. 1997. Theories of International Regimes. Cambridge: Cambridge University Press.

Hempson-Jones, Justin S. 2005. “The Evolution of China’s Engagement with International Governmental Organizations: Toward a Liberal Foreign Policy?,” Asian Survey, 45:5, pp. 702-721.

Hurrell, Andrew and Amrita Narlikar. 2006. “A New Politics of Confrontation? Brazil and India in Multilateral Trade Negotiations,” Global Society 20:4, pp. 415-433.

Jain, Subhash C., ed. 2006. Emerging Economies and the Transformation of International Business, Cheltenham, UK: Edward Elgar.

Keohane, Robert O. 1983. After Hegemony: Cooperation and Discord in the World Political Economy. Princeton: Princeton University Press.

Keohane, Robert O. 2002. Power and Governance in a Partially Globalized World. London: Routledge.

Klotz, Audie Jeanne. 1999. Norms in International Relations: The Struggle Against Apartheid. Ithaca, NY: Cornell University Press.

Krauthammer, Charles. 1990. “The Unipolar Moment,” Foreign Affairs: America and the World, 1990/1991.

Krauthammer, Charles. 2002. “The Unipolar Moment Revisited,” The National Interest, Winter 2002/2003, p. 17.

Layne, Christopher. 2006. “The Unipolar Illusion Revisited: The Coming End of the United States’ Unipolar Moment,” International Security, 31:2, Fall, pp. 7-41.

Leeds, Brett Ashley. 1999. “Domestic Political Institutions, Credible Commitments, and International Cooperation,” American Journal of Political Science, 43:4, October, pp. 979-1002.

Li, He. 2006. “Returned Students and Political Change in China,” Asian Perspective, 30:2, 2006, pp. 5-29.

Mandelbaum, Michael. 2002. The Ideas that Conquered the World: Peace, Democracy, and Free Markets in the Twenty-First Century. New York: Council on Foreign Relations.

Maoz, Zeev and Bruce Russett. 1993. “Normative and Structural Causes of Democratic Peace, 1946-1986,” American Political Science Review, 87:3, September, pp. 624-638.

Mearsheimer, John. 2001. The Tragedy of Great Power Politics. W.W. Norton.Moravcsik, Andrew, 1997. "Taking Preferences Seriously: A Liberal Theory of

International Politics," International Organization, 51:4, Autumn, pp. 513-553.Joseph S. Nye, Soft Power: The Means to Success in World Politics. PublicAffairs Press,

2004.Oneal, John R., Bruce Russett, and Michael L. Berbaum. 2003. “Causes of Peace:

Democracy, Interdependence, and International Organizations,” International Studies Quarterly 47, pp. 371-393.

Organski, A.F.K. and Jacek Kugler. 1981. The War Ledger. Chicago: University of Chicago Press.

Przeworski, Adam, Michael Alvarez, José Cheibub, and Fernando Limongi. 2000. Democracy and Development, Cambridge: Cambridge University Press.

Rueschemeyer, Dietrich, Evelyne Huber Stephens, and John D. Stephens. 1993. Capitalist Development and Democracy. Chicago: University of Chicago Press.

Singer, J. David, Stuart Bremer, and John Stuckey. 1972. "Capability Distribution, Uncertainty, and Major Power War, 1820-1965." in Bruce Russett (ed) Peace, War, and Numbers, Beverly Hills: Sage, 19-48.

Tabb, William K. 2004. Economic Governance in an Age of Globalization. New York: Columbia University Press.

Tammen, Ronald L. 2006. “The Impact of Asia on World Politics: China and India Options for the United States,” International Studies Review, 6, pp. 563-580.

Waltz, Kenneth N. 1979. Theory of International Politics, New York: McGraw-Hill.Wilson, Dominic and Roopa Purushothaman. 2003. “Dreaming with BRICs: The Path to

2050,” Global Economics Paper No. 99, New York: Goldman Sachs, October 1.

India and China: Governance Issues andDevelopment

PRANAB BARDHAN

The world’s two most populous countries each made international headlines in2008, thanks to the Sichuan earthquake and Beijing Olympics, the Mumbaiterror attacks, and reports of how the global financial crisis affected the Chineseand Indian economies. However, China and India were also seen in 2008 asmaking up, together, one of the ongoing development stories of the twenty-firstcentury—and there are good reasons to think this trend will continue throughout2009. Thanks to years of strikingly high growth rates for India and even higherones for China, comparisons of the two countries have proliferated. This hasresulted in a slew of books and articles, often aimed at investors, that worryover or enthuse about the way the “dragon” and the “elephant” have been upend-ing or bringing new energy into the global economic order. Scholars immersed inthe study of Asia often find these publications lacking in depth, but there is noquestion that economic shifts in the two countries and surging interest in theircurrent trajectories are important. With this in mind, we decided this would bea useful time to revisit a familiar governance issue that has long been associatedwith joint discussions of China and India: the relationship between democracyand development. We invited economist Pranab Bardhan, author of a forthcomingbook on the political economy of India and China titledAwakening Giants, Feet ofClay, to reflect on the subject, concentrating in particular on issues of governance—a topic he has explored in plenary and keynote addresses given everywhere fromMontreal to Manchester, Beijing to Bogota, Canberra to Calcutta.

ANY COMPARATIVE STUDY OF contemporary China and India inevitably involvesdiscussion of democracy and development, but most of the standard treat-

ments stay at the level of simplistic clichés and high-minded platitudes. Mygoal here is to go beyond this, highlighting some of the complexities in the func-tioning of democracy in India and authoritarianism in China, and asking what thiscontrast tells us about governance and economic management in the context ofdevelopment in these two large and still—despite record growth years—poorcountries.

One reason such a consideration matters is that the dramatic economicsuccess story of China in the last quarter century has revived a hoary myth: thatauthoritarianism delivers much more than democracy, particularly early on.

Pranab Bardhan ([email protected]) is Professor of Economics at the University of California,Berkeley.

The Journal of Asian Studies Vol. 68, No. 2 (May) 2009: 347–357.© 2009 The Association for Asian Studies, Inc. doi:10.1017/S002191180900062X

This myth is reinforced by the memory of the impressive economicperformances of other East Asian authoritarian regimes, such as South Koreaand Taiwan prior to their democratic turns. The lingering hope of democratshas been that as the Chinese middle class prospers, its members will demandwhat their counterparts in South Korea and Taiwan got: movement toward pol-itical democracy.

The relationship between authoritarianism, democracy, and development,however, is not so simple. Authoritarianism is neither necessary nor sufficientfor development. That it is not necessary is illustrated by today’s industrialdemocracies and by scattered cases of development success: Costa Rica, Bots-wana, and now India. That it is not sufficient is evident from disastrous authori-tarian regimes in Africa and elsewhere.

Even if we did not value democracy for its own sake, and looked at it in apurely instrumental way, it is worth reiterating some basic development-relatedadvantages of democracy. First of all, democracies are better able to avoid cata-strophic mistakes, such as China’s Great Leap Forward (which was accompaniedby a famine that killed nearly 30 million people) and the Cultural Revolution(which was linked to massive mayhem). Democracies also have greater healingpowers after difficult times. In general, democracy provides a better capacityfor managing conflicts, which in the long run enables a more stable politicalenvironment for development.

India’s democratic pluralism has provided the means of containing many(though not all) social conflicts, a capacity that China’s homogenizing, monolithicstate does not yet seem to have acquired. Faced with a public crisis or politicalshock, the Chinese leadership, which is otherwise so pragmatic, tends to over-react, suppress information, and act heavy-handedly. (One example of this heavy-handedness is that, according to some accounts by human rights organizations,although both countries have capital punishment, China executes more peoplein one week than India has put to death in the sixty-plus years sinceindependence.)

Some degree of tolerance for diversity and dissent has historically been thesafety valve for India’s extremely heterogeneous society. For many centuries,on the contrary, Chinese authorities have typically given much less scope to plur-alism and diversity; a centralizing, authoritarian Communist Party has carried onthis tradition. Nurtured in this centralizing tradition of control, there is a certainpreoccupation in China (not just in the party) with order and stability and theimportance of avoiding da luan (great turmoil), as well as a quickness to branddissenting movements and local autonomy efforts as seditious. This often leadsto unnecessarily harsh repression.

In recent years, China has diffused and contained many conflicts by localizingthem. More positively, the policy of decentralized development and regionalautonomy has encouraged local initiatives and incentives. But in order to keepthese local initiatives under some moderate bounds and to make them serve

348 Pranab Bardhan

national goals through tournament-like competition in regional economic per-formance, centralized control has been maintained through the channels of apromotion and reward system that encourages local officials to depend onthose above them in the party bureaucracy. But centralized control is notalways benign, even though the party leadership has in recent years curbedsome of its arbitrary practices and shown some sensitivity to popular grievances.As long as checks and balances on the top leadership are not fully institutiona-lized, the danger of going off the rails in response to unexpected events and exag-geration of dissent always remains.

Democracies in general experience more intense pressure to share thebenefits of development among the people, thus making it more sustainable.They also provide more scope for popular movements against capitalist excessesand environmental degradation. In addition, there are more politicalopportunities to mitigate social inequalities (especially acute in India) that actas barriers to socioeconomic mobility and to the full development of individualpotential.

Finally, democratic societies provide better environments for nurturing thedevelopment of information technologies, a matter of importance in thecurrent knowledge-driven global economy. Intensive cybercensorship in Chinamay seriously limit future innovation. Censorship (and anticipatory self-censorship) inhibits imaginativeness and inventiveness. State control ofinformation also sometimes makes for delay in official recognition, and thushandling, of an incipient crisis. From the SARS outbreak to last year’s taintedmilk scandal, there are many examples of this. Weeks before the latter scandalbroke, journalists were encouraged to suppress bad news because of theOlympics, which was being stage-managed as China’s moment of internationalglory. Journalists who were fully aware of the tainted milk case avoided writingabout this “in order to be harmonious,” as one editor said later (New YorkTimes, September 27, 2008). Meanwhile, hundreds of thousands of childrenfell sick (a few even died), and the reputation of Chinese products was seriouslydamaged.

All that said, India’s experience suggests that democracy can also hinderdevelopment in ways not usually considered by democracy enthusiasts. Competi-tive populism—short-run pandering and handouts to win elections—mayhurt long-run investment, particularly in physical infrastructure, a keydevelopment-related bottleneck in India. Such political arrangements make itdifficult, for example, to charge user fees for roads, electricity, and irrigation, dis-couraging investment in these areas. Conversely, in China, infrastructure compa-nies can charge more commercial rates. Competitive populism also makes itdifficult to carry out policy experimentation of the kind that China’s leadershave excelled in throughout the reform era (“crossing the river, groping for thestones,” as Deng Xiaoping famously put it). It is harder to cut losses andretreat from a failed project in India, which, with its inevitable job losses and

Asia Beyond the Headlines 349

bailout pressures, has electoral consequences that discourage leaders from policyexperimentation in the first place.

In Indian democracy, the legislative process is often relegated to a secondorder of importance, giving short shrift to the deliberative process of democracythat John Stuart Mill and other classical liberal theorists valued so much. Overall,India’s particular form of democracy relies less on deliberation than on popularmobilization. This means that issues that could be resolved through the delibera-tive give-and-take get trapped in rhetorical intransigence and strident divisive-ness of street theater. Decision deadlocks are frequent, which has immensepolitical and economic costs. This is over and above the general case that democ-racy’s slow decision-making processes can be costly in a world of fast-changingmarkets and technology.

Besides, when democracy relies on popular mobilization in a country wherethe general education level is low, civic associations relatively weak, and publicdebates relatively uninformed, the opposition can get away with being irrespon-sible (e.g., opposing the government for policies they themselves supported whenin power). It also gives political opportunists leeway in segmenting the electoratealong ethnic, regional, or religious lines; fomenting sectarian fear and anxiety isoften a successful political mobilization device.

The hopes of democrats relying on the middle classes in authoritarianregimes have not always borne fruit. Latin American and South Europeanhistory has been replete with episodes of middle classes hailing a supreme cau-dillo. The police state in China shows no signs of loosening its grip, despite thespectacular progress in the opening of the economy. While there has beensome relaxation in controls over individual expression and lifestyle, and moreopen middle-class grumbling over pollution and forcible acquisition of property,the state still never fails to clamp down on political activities that have even aremote chance of challenging the party’s monopoly on power. Many middle-classChinese seem likely to remain complicit in this in the name of preserving socialstability or “harmony,” as long as opportunities for money making and wallowingin nationalist pride keep on thriving. A kind of preening nationalism has replacedsocialism as the social glue in China, with the state leadership occasionally tryingto stoke and then modulate collective passions about what the West or Japan haddone in the past to China in the “century of humiliation” (sometimes fomented byfrenzy on the Internet among the young) and to turn any external criticism into aslur on national self-respect.

The Indian urban middle classes also have a prickly nationalism, but morethan harking back to two centuries of direct colonial subordination, it occasionallyturns instead to majoritarian atavism to serve as a unifier in the context of unma-nageable social and cultural diversity in society and works itself up questioningthe national loyalty of domestic minority groups (in a context where the violentpartition of the country at independence remains a festering wound). Urbanupper and middle classes in many parts of India are impatient about climbing

350 Pranab Bardhan

the global ranks of big power and often regard as a hindrance and liability thenumerically large poor outside their gated communities, with their all toovisible squalor and messy democratic politics.

* * *

Democracy has brought about a kind of social revolution in India. It hasspread out to the remote reaches of this far-flung country in ever-wideningcircles of political awareness and self-assertion among socially hithertosubordinate groups. These groups have increased faith in the efficacy of the pol-itical system, and they vigorously participate in larger numbers in the electoralprocess.

But the great puzzle of Indian democracy is why the poor, so assertive whenelection time comes, often do not punish politicians who are ineffective at resol-ving the endemic problems of poverty, disease, and illiteracy. It is possible thatendemic poverty is widely regarded among the common people as a complexphenomenon with multiple causes, and they ascribe only limited responsibilityto the government. The measures of government performance are in any caserather noisy, particularly so in a world of illiteracy and low levels of civic organ-ization and formal communication on public issues. A perceived slight in thespeech of a political leader felt by a particular ethnic group will usually causemuch more of an uproar than the same leader’s failure to change policies thathelp keep thousands of children severely malnourished in the same ethnicgroup. The same issue of group dignity comes up in the case of reservation ofpublic-sector jobs for backward groups, which fervently catches their publicimagination, even though objectively the overwhelming majority of the peoplein these groups have no chance of ever landing those jobs, as they and their chil-dren largely drop out of school by the fifth grade. Even when these public jobquotas mainly help the tiny elite in backward groups, as a symbol and a possibleobject of aspiration for their children, they ostensibly serve a valuable function inattempts at group upliftment.

While the electorate does not seem to penalize politicians for their endemicpoverty, they are less forgiving when there is a sharp and concentrated deterio-ration in their economic condition. Amartya Sen has commented on the politicalsensitivity of democracies to the threat of famine, but to me, the more common-place example for this in India is the electorate’s high degree of inflation sensi-tivity. It is a common presumption that an annual inflation rate at thedouble-digit level, if it continues for some time, will be politically intolerable inIndia, and politicians universally support a conservative monetary and sometimeseven fiscal policy to avoid this danger. The poor tend to make the governmentdirectly responsible for inflation and expect it to stop it in its tracks, even atthe expense of cutting budgetary programs for infrastructure that would helpthe poor in the long run.


The Indian electorate is often regarded as reflexively anti-incumbent, par-ticularly in contrast with the electorate in the United States. This may have some-thing to do with widespread dissatisfaction with the delivery of social services andpublic goods. Because the poor usually get mobilized along caste and ethnic lines,the modalities of such mobilization are often multidimensional, and poverty alle-viation is only one of many issues that get articulated in the public domain. Also,the process of ethnic mobilization is often easily hijacked by the elite of thesegroups, who channel the lion’s share of the benefits toward themselves. Theintended poor beneficiaries are often unorganized and uninformed about theirentitlements, and they also lack the ability to evaluate the quality of the particulareducation or health service provided.

Besides, at any given moment in India, an election somewhere is not far off(national, state, municipal, and village elections are staggered), and, as in electiontimes everywhere, short-term calculations dominate. Populist quick-fix policiesrather than sustainable improvements in structural conditions become theorder of the day, and because it is usually the case in India’s extremely fractioussociety that no disadvantaged group by itself is numerically predominant, the exi-gencies of electoral alliances with other groups (some of them not so disadvan-taged) dilute the need to attend to the poorest. Because the better-off people(including better-off sections of disadvantaged groups) increasingly turn toprivate sources of public services (primary and secondary education, healthcare, irrigation, drinking water, child nutrition), the political support structurefor public access to these services or improvement in their quality is ratherweak or eroded in many parts of the country. There are also differentialdegrees of public vigilance over (or effectiveness of) different types of antipovertyprograms. Political clientelism prevails, under which the delivery of private andshort-run benefits (in the form of temporary employment projects, subsidies,loan waivers, etc.) get priority over public services and long-term investment ininfrastructural facilities (roads, public health and sanitation, watershed develop-ment, etc.).

The problem of poor delivery of social services involves more than just a lackof public vigilance or demand. It is a serious governance problem from the supplyside as well (such as inadequate school buildings or health clinics with appropri-ate facilities and within manageable distance, rampant absenteeism by teachers,doctors, nurses, etc.).

Decentralization of governance in the sense of devolution of power toelected local governments was constitutionally adopted in India in the early1990s. It was supposed to increase the accountability of the service bureaucracyas well as generate resources to address felt needs at the local level. But this par-ticular governance reform remains largely on paper, except in three or four states,and in this sense local democracy is still rather weak in India. In most cases, localgovernment officials are primarily involved in selecting the beneficiaries of pro-grams that are designed and funded from above. A large number of local

352 Pranab Bardhan

governments simply do not have adequate funds, or the appropriate delegatedfunctions or competent functionaries, to carry out locally initiated autonomousprojects that could make a significant difference in the lives of the poor; thereis considerable misappropriation of funds and delivery of services to nontargetgroups, sometimes giving decentralization a bad name. Yet there have beensome localized success stories.

In China, decentralization has been successful in providing incentives (and dis-cipline) for rural industrialization. But decentralization has increased regionalinequalities. In spite of the fiscal recentralization of the mid-1990s and a greatdeal of central transfers to local areas, there is a widespread rural budget crisis inChina. The system is still sufficiently fiscally decentralized, with large numbers ofunfunded mandates for local governments, that while the better-off regions canafford superior public services, the lagging regions have to live with large cuts incommunity services. These tensions of fiscal federalism are increasing in India,too. The better-performing state governments are now openly protesting large redis-tributive transfers to laggard states ordained by the Finance Commission. In theIndian democratic system, however, some of these laggard populous states (suchas Uttar Pradesh or Bihar) send a very large number of members to Parliament,and the (shaky) coalition governments at the center can ill afford to alienate them.

* * *

There are interesting contrasts in the style and content of governance inChina and India. In China, there is more decisive policy initiative and executionthan in India. This is not all attributable to an authoritarian setup. In general, col-lective action problems in goal formulation and policy enforcement are lesssevere in China than in the conflict-ridden, extremely heterogeneous society ofIndia, where any major controversial decision is preceded by endless discussion,loud agitation, breast-beating street antics, and sometimes even fistfights andproperty damage; ultimately, what gets carried out after considerable delay is amuch fought over, imperfect compromise. But for the same reason, executiveauthority in India, while weak, is more legitimate. The same disorderly processesof fractious pluralistic democracy that make decisiveness on the part of the lea-dership difficult also make executive authority more legitimate in the eyes of thepeople. The Chinese leadership, conversely, has to derive popular legitimacyfrom ensuring rapid economic growth and job expansion (which are understress in the current recession), and also somewhat from advancing toward “har-monious” goals (i.e., environmentally friendly growth with some rudimentarysocial protection and effective political order). Ethnicity-based dignity politics,group upliftment, and other sectarian issues that crowd the political agenda inIndia are less of an encumbrance.

Recently, the Chinese political leadership has been more technocratic andprofessional than that in India, which helps in informed, purposive decision


making. (Even the party membership composition in China has changed substan-tially lately: In 1978, two-thirds of the members were workers and peasants, butby 2005, their share had fallen to 29 percent, and by then, 23 percent of memberswere professionals, 30 percent college students).

Promotions in the administrative services are more performance based(instead of being seniority based) in China than in India. “Transfers and postings”of officials are major preoccupations of (and sometimes a source of illicit incomefor) Indian politicians, particularly at the state level. Rotation and temporarysojourns of Indian bureaucrats in a given job inhibit on-the-job learning ofincreasingly complex tasks. Regulatory effectiveness in commercial transactionsis also better in China than in India, even though guanxi and corruption continueto contaminate the process. Nepotism in state appointments, however, may havegone further in China than in India: It is reported that many of the senior pos-itions in some of the state-dominated sectors in China are filled by the childrenand other relatives of high-ranking party officials. Some Chinese economists havewarned about the dangers of crony capitalism.

Corruption is pervasive in both countries. But corruption in China is, ingeneral, qualitatively different from that in India in at least three ways: (1) Thelines of authority are more well defined and streamlined, whereas in India,there is multiple veto power of different authorities (part of thechecks-and-balances system) on a given decision—as a result, even after payingbribes, one is never sure whether the job will get done. (2) Because the officialrewards and promotions in China are more directly linked to local economic per-formance, the officials involved do not usually lose sight of the overall perform-ance record, even as they line their own pockets. (3) As elections become moreexpensive, politicians in India have to be on the lookout for collecting seriousmoney to an extent not necessary in China. But at the same time, there aremore institutionalized efforts in India to check the sources of corruption: TheRight to Information Act, for example, which recently came into existence as aresult of an energetic public activist movement in India, is an important stepin that direction.

The social revolution that democracy has brought about has also had someimpact on the nature of governance in India. The diminishing hold of elitecontrol and the welcome expansion of democracy to the lower rungs of thesocial hierarchy have been associated with a loosening of the earlier administra-tive protocols and a steady erosion of the institutional insulation of the decision-making process in public administration and economic management. This hasaffected not just the ability to credibly commit to long-term decisions, but thewhole fabric of governance itself. It is now common practice, for example, fora low-caste chief minister in a state to proceed, immediately upon assumingoffice, to transfer away top civil servants belonging to upper castes and to getpliant bureaucrats from his or her own caste. Some of the new social groupscoming to power are even nonchalant in suggesting that all these years, upper

354 Pranab Bardhan

classes and castes have looted the state, and now it is their turn. If, in the process,they trample upon some individual rights or some procedural aspects of demo-cratic administration, the institutions that are supposed to kick in to restrainthem are relatively weak. Highly corrupt politicians are regularly reelected bytheir particular ethnic or local constituencies (which they nurse assiduouslyeven while fleecing the rest of the system). Personal extravagance at stateexpense by particular ethnic leaders is often a source of community pride for his-torically disadvantaged groups.

This is part of a fundamental tension between the participatory and pro-cedural aspects of Indian democracy: The unfolding of the logic of populistdemocracy has itself become a threat to democratic governance. The participa-tory aspects of democracy and the all-consuming emphasis on electoral mobiliz-ation, often of whole groups (described by journalists as “vote banks”), have ledthe system to look away from politicians’ and their followers’ rampant proceduralviolations, generating a “culture of impunity” that the Indian political system willhave to grapple with for quite some time to come. Of course, ultimately, thechecks and balances of the ramshackle but still vibrant legal system kick in tocurb undue excesses, in a way that is rather rare in China. The independent judi-ciary, the Election Commission, and a few of the regulatory bodies still functionwith some degree of insulation from political interference and hold up dueprocess against great odds.

This institutional insulation is much weaker in China, and the “culture of impu-nity” among top party officials is more prevalent. But there has been discernibleprogress in the legal system: As disputes become more complex, political interfer-ence, though still substantial, is declining, particularly inmatters of commercial law.There is greater transparency than before in the corporate governance of statecompanies, particularly those listed on overseas stock exchanges. The media andnongovernmental organizations as watchdogs are more active in India. But corpor-ate ownership of media is a problem for independent investigations in bothcountries, just in different ways. There is occasional official clamping down on cor-ruption in China (including even summary execution as punishment), but cynicalpeople often describe this as mostly targeted at political enemies or at best smallfries, exempting the big fish or cronies of the dominant faction leaders.

The party has also tentatively started to introduce some form of intrapartydemocracy at the lower levels, with multiple candidates for positions. It isironic that Indian democracy, which in the beginning decades allowed for agreat deal of intraparty democracy, now has largely deviated from this tradition.In most major national parties, the leaders are often nominated from above.Young and ambitious local politicians, finding their path of upward mobilityblocked within the larger parties, often are inclined to go out and form theirown parties, thereby acquiring leverage in India’s coalition politics. This is onesource of the country’s increasing political fragmentation, which hinders purpo-sive governance.


I have already discussed the important role that decentralization of powercombined with central control over personnel and promotion plays in Chinesegovernance. In recent years, the central government has recentralized publicfinances (as it was facing fiscal erosion by the mid-1990s) and taken on final auth-ority over the personnel and loan decisions of local banks (to check the mounting“nonperforming loans” that local officials indulged in). But even at the countylevel, local government still has a great deal of power (much more than inIndia) in privatizing state companies, in making regulatory approvals and distri-buting patronage, in appointing local oversight committees against financialand other irregularities, in appointing and fixing the salaries of judges andpublic prosecutors, and so on. It is difficult for the central government tocontrol local officials and to wean them away from the cozy rental havens theyhave built in collusion with local business and commercial interests. In itspursuit of the goals of reducing inequality, stopping land seizures, containingenvironmental damages, and preventing the frequent regulatory scandals (relat-ing to food and other consumer product safety), the central government faces atleast the covert opposition of local officials. Even when the local official is notvenal, in an atmosphere of information control, his usual inclination is to suppressbad news, as it may adversely affect his chances of promotion or his reputation.

Yet over more than a quarter century now, the Chinese central leadership hasshown a remarkable adaptability to changing circumstances and a capacity tomobilize new support coalitions to protect its political power. Keeping themain focus on economic growth and national glory as the source of its politicallegitimacy, it has moved away from its earlier constituent groups among peasantsand workers, allowing urban–rural disparity to grow and presiding over massivelayoffs of workers; it has accommodated the erstwhile “red-hat capitalists” in sym-biotic relation with state officials, and gradually co-opted the new private entre-preneurs and professionals (including much of the intelligentsia); through itscontrol of bank lending and regulatory approval of investment, it has skillfullybalanced regional and factional interests. It is now trying to move some stateresources away from the government-business groups of coastal China (e.g.,those connected with what used to be called the “Shanghai coalition”), and haspublicly shown a great deal of empathy for hitherto excluded groups in remoterural areas and urban migrants, while still being supportive of markets andgeneral noninterference with thriving private enterprises. By streamlining therules of succession and establishing clear procedures for term and age limitsfor leaders, it has restructured the rules of authoritarian hierarchy to increasecareer predictability and general elite support.

But China is still far from establishing a comprehensive rule-based systemand institutionalizing a credible set of checks and balances. It has installed afar more decisive and purposive governance structure than India, but itsweaker institutional checks (such as the lack of independent judiciary or otherregulatory authority) and low capacity for conflict management make it more

356 Pranab Bardhan

brittle in the face of a crisis than the messy-looking system in India, for all itsflaws. As the economy becomes more complex and social relations becomemore convoluted and intense, the absence of transparent and accountable pro-cesses and the attempts by a “control-freak” leadership to force conformity andlockstep discipline will generate acute tension and informational inefficiency.Several alternative political scenarios for the future in China have been depictedby political speculators, none more plausible than the others; some (wistfully)predict the eventual outbreak of Taiwan- or Korea-style democracy, but onlyon a large scale, starting with the big cities; others predict that even if Chinamanages a soft landing into some form of quasi-democracy, it will be of thecorrupt oligarchic kind under a predominant party like the one that prevailedin Mexico under the Institutional Revolutionary Party for many decades.

While the Indian system has more institutionalized outlets for letting offsteam, it also has more ethnic and religious tensions and centrifugal forces tograpple with. Its appalling governance structure for the delivery of social services,its anomic inability to carry out collective action or to overcome populist hin-drances to long-term investment in order to address the infrastructural deficitthat is reaching crisis proportions, its overpoliticized administration and decision-making processes, and its clogged courts and corrupt police and patronage poli-tics that make a mockery of the rule of law for the common people—all will con-tinue to hobble the process of economic growth and alleviation of its still massivepoverty. Yet the differential state capacity and governance performance amongdifferent states (better in some South or West Indian states) may generateover time a bit of healthy competition in investment climate and poverty allevia-tion performance to set examples for the democratic participants in all states todemand, overshadowing the salience of ethnicity or religion in politics.

Both China and India have done much better in the last quarter century thaneither did in the last 200 years in terms of economic growth. And each country’spolity has shown remarkable resilience in its own way. Still, we should not under-estimate the structural weaknesses in their governance mechanisms and the enor-mousness of the social and political uncertainties that cloud the horizons for thesetwo countries.


Putin’s Legacy and Russia’s Identity

ALFRED B. EVANS, JR

AS A NUMBER OF SCHOLARS HAVE POINTED OUT, POST-SOVIET RUSSIA faces an

identity crisis (Tsygankov 2006a, 2007; Suny 2007). The Soviet regime had promoted

its conception of Russia’s role in a multinational community of people, but after the

break-up of the USSR that interpretation became outdated. With new urgency

Russian intellectuals addressed the question of the identity of their country, as

implicitly all Russians might wonder, ‘Who are we?’ and ‘Where is Russia going?’

Different groups of Russian intellectuals and politicians offered competing answers to

these questions, presenting alternative definitions of Russia’s identity (Tolz 1998, p.

995, 2001; Hopf 2006, p. 700; Legvold 2007). The issues that were debated concerned

not only the choice of strategy for domestic and foreign policy, but also the essential

character and values of the national community and a view of that nation’s place in

the world.

History and ideology

Debate over the question of Russia’s identity was not a new phenomenon, however,

even though it occurred under new conditions in the post-Soviet period. The question

of ‘Who are we?’ had been addressed by Russian intellectuals and political leaders for

hundreds of years. The varying answers to that question in earlier eras have been

echoed in the discussion of the post-Soviet period. One element of continuity was

evident in such debates: in every era in which that issue was raised, the West was the

principal Other that served as the main reference point in defining Russia’s identity

(Tolz 1998, p. 995; Tsygankov 2006a, p. 37). Russia’s relationship with Europe has

been a key question since the time of Peter the Great in the late 1600s and early 1700s

(Stent 2007, p. 397). Since that time it has been apparent that Russia’s rulers have

faced a dilemma in relation to the more modernised societies of Western Europe:

whether to emulate the example of the West in order to advance their country’s

development or to preserve Russia’s separate values and customs at the risk of denying

it the capacity to compete with Europe (Tsygankov 2007, p. 380). A basic division of

opinion in response to that dilemma has been evident in one period after another in

the history of tsarist Russia. Fundamentally the Russian intelligentsia has displayed

ambivalence in its attitude toward Europe, combining feelings of attraction and

aversion in relation to the societies of the West (Stent 2007, pp. 398–99, 435). Vladimir

Putin has offered his answer to the question of Russia’s place in the world, and his

EUROPE-ASIA STUDIES

Vol. 60, No. 6, August 2008, 899 – 912

ISSN 0966-8136 print; ISSN 1465-3427 online/08/060899-14 ª 2008 University of Glasgow

DOI: 10.1080/09668130802161140

statements recognise the crucial importance of his country’s relationship with the

West, now including both the United States and the European Union. In consistency

with Russian tradition, Putin’s attitude toward the West is deeply ambivalent, and the

conflicting tendencies in his assessment of Russia’s relationship with the West are

reflected in the internal tension within the system of values that he has adopted.

It is clear that Putin has given approval to a well-defined set of values and policy

goals. Whether we can speak of the ideas associated with his political leadership as

‘Putin’s ideology’ is not clear, however. On that question the pronouncements of the

political regime are apparently contradictory. Before becoming President of Russia,

Putin’s most basic articulation of his outlook declared that Russia should not have a

state ideology (1999b). Yet by 2006 a prominent member of the presidential

administration insisted that Russian society did need an ideology, and that the

dominant United Russia (Edinaya Rossiya) party should give its approval to the theses

that supposedly could be based on Putin’s speeches (Surkov 2006a). Soon that official,

Vladislav Surkov, welcomed the publication of a book entitled Putin: His Ideology

(Chadaev 2006). Surkov introduced the concept of ‘sovereign democracy’ as the

essence of the ideology associated with the Putin leadership (2006b). Yet before long

Dmitrii Medvedev, a deputy prime minister, expressed some reservations about the

value of the term ‘sovereign democracy’ (2006), and Putin himself voiced similar

thoughts in September 2006 (Putin 2006b) and again seemed to distance himself from

that concept in September 2007 (Putin 2007a). In December 2007 Medvedev, who had

seemed sceptical about the merits of the concept that had been popularised by Surkov,

was chosen to be the presidential nominee of the dominant United Russia party with

Putin’s public approval. So it is not clear that Putin, who was said to be the main

source of the new official ideology, has actually been willing to take responsibility for

the creation of such a package of doctrines. Contrasting statements by high-ranking

officials may imply not only that there is some division in the inner circles of the elite

concerning particular formulations, but also that the Putin administration’s attitude

toward ideology contains contradictory impulses.

As if Putin’s stance did not create enough confusion on that subject, a review of

scholarly writings reveals striking ambiguity in relation to the meaning of ideology.

John Gerring (1997) has documented the use of a great variety of definitions of the

word among different scholars. Mainstream students of that topic in the social sciences

would agree that the term ‘ideology’ pertains to a system or collection of ideas, and

that the ideas should include direct political content, should attempt to motivate

substantial numbers of people to action, and should display some degree of coherence

or integration (Hunt 1987; Freeden 2006). Scholars disagree, however, in relation to

the breadth and internal coherence that may be expected of an ideology. A broader

definition of ideology, as ‘a relatively coherent, emotionally charged, and conceptually

interlocking set of ideas’ (Hunt 1987, p. 15), would easily allow us to conclude that

there is an ideology of the Putin regime in contemporary Russia. A narrower and more

rigorous definition, insisting on a degree of comprehensiveness and internal

integration similar to that possessed by Soviet Marxism–Leninism, would deny the

label of ideology to the outlook associated with the Putin leadership.

For the remainder of this essay we will set aside the question of whether the ideas

associated with the Putin regime should be called an ideology. Yet it is apparent that

900 ALFRED B. EVANS, JR

Putin’s statements do indicate the existence of a body of interrelated assumptions and

values that provide a general orientation for decisions that have structured political

institutions and policies. Putin’s major strategic choices should not be seen as having

been merely ad hoc responses to immediate conditions (and indeed it could be argued

that ad hoc decision making has been characteristic of Putin much less than it was for

Boris Yel’tsin in the 1990s). The central thesis of this essay is that Putin’s actions have

been guided by core values and long-term goals whose general outlines were delineated

even before he took office as the President of Russia. Putin has sought to reshape

reality to fit his values and goals, with considerable success so far; and he seeks to

ensure that the orientation for policy that he has chosen will continue to guide

Russia’s political leaders in future decades. It is argued here that in its totality Putin’s

thinking constitutes a distinctive choice of an identity for contemporary Russia.

Russia and the world

As noted earlier, for centuries the West, originally consisting of Western Europe, was

the principal Other for Russia, the main basis of comparison against which Russians

shaped the identity of their society. During the last years of existence of the Soviet

Union, Mikhail Gorbachev looked on Western Europe as providing the model for a

political and economic system (Stent 2007, p. 394) and attempted to Westernise Soviet

institutions. He wanted Russia (and the whole of the USSR) to be accepted as part of

the ‘common European home’, and he affirmed that a commitment to democracy and

individual rights was shared by all nations in Europe. Boris Yel’tsin, as the first

President of the independent Russian Federation, attempted to outdo Gorbachev in

adopting the image of a Westerniser, and though in practice his policies were

profoundly inconsistent, in theory Yel’tsin’s programme of change was justified as

bringing features of Western democracy and capitalism to Russia. Vladimir Putin has

repeatedly said that Russia is a European country, and has asserted that historically

Russia has shared common values and experiences with the other European countries

(Putin 2000a, p. 169, 2005e, 2007a; Tret’yakov 2005a). Putin has even gone so far as to

claim that Russia moved toward the protection of freedom at a pace generally similar

to that of other European nations. ‘On our own historical path, at times falling

behind, at times outstripping our partners, we passed through the same stages of

establishing democratic, legal, and civic institutions’ (Putin 2005d). That statement is

so wildly fictitious that it raises the question of the intentions of the person who

offered it.

In fact, Putin and other officials of the Russian government have emphatically

rejected criticism of the tendency of concentration of power in their country since 2000,

and have angrily repudiated any efforts by Western governments and non-

governmental organisations to verify the implementation of democratic principles by

Russian political institutions. We must conclude that Putin’s repeated assertions that

Russia is a part of Europe are not motivated by a desire to share common political

values with the European democracies. Putin does wish closer institutional linkages

between Russia and Europe (Stent 2007, p. 422) for reasons related to his view of

Russia’s essential national interests. Even before he became President of Russia, Putin’s

written words revealed his conviction that economic growth and modernisation would

PUTIN’S LEGACY AND RUSSIA’S IDENTITY 901

be vital for his country’s security (1999a). Robert Legvold has remarked that Putin’s

view of the international setting reflects a ‘Hobbesian view of the world’ (2007, p. 10),

and this author has reported that ‘persistent statements by Putin reinforce the

impression that he sees the world in which Russia exists as filled with danger resulting

from a relentless, dog-eat-dog struggle’ (Evans 2008, p. 7). In Putin’s opinion, economic

strength is the basis of survival in that harsh competition; to be inferior economically is

to be vulnerable politically and militarily. In his view Russia can preserve its

independence and protect its identity only if its economy becomes one of the most

developed in the world. An article that Putin published in 1999, based on his graduate

dissertation, showed that he already was focused on the goal of making Russia a ‘great

economic power’ on the basis of its vast energy resources (Putin 1999a; Balzer 2005).

While Putin does not show enthusiasm for Russia’s assimilation to the liberal

political values of the West, economic integration with the West can serve the goal of

modernising Russia’s economy (Trenin 2007, p. 96). Angela Stent has argued

persuasively that Putin seeks a closer relationship with Europe because he expects that

‘selective adoption of European institutions will enable Russia to become a stronger,

prosperous, modern society that will participate more fully in a globalised world’

(Stent 2007, p. 421). Putin regards globalisation, primarily in the form of international

economic integration, as a powerful and irresistible force, and he emphasises that

isolation from the world economy is a recipe for underdevelopment (Evans 2008, p.8).

Thus he insists that integration into the international economy is necessary for Russia

to achieve a high level of economic advancement. But as Celeste Wallander puts it, the

Putin leadership is determined ‘to control and manage globalisation’s challenges while

pursuing its opportunities’ (Wallander 2007, p. 459). The leadership is convinced that

to deal with both the challenges and opportunities for Russia’s development that are

posed by globalisation, ‘a greater role for the state’ is imperative (Wallander 2007, p.

490). Wallander points out that historically those in authority in Russia have reacted

to increases in the impact of global trends on their society by prescribing greater state

control to manage the internal consequences of such trends (2007, p. 450). It is clear

that Putin’s approach fits squarely within that tradition of pursuing state-dominant

development.

Defending Russia’s sovereignty

According to Putin, one aspect of globalism is the existence of values that are universal

on a worldwide scale, and a commitment to democracy is among those values that are

universal for all of humanity (Putin 1999b, 2005d). Putin has said many times that

Russia has made its choice in favour of democracy (Evans 2008, p. 6). How has he

reconciled his ostensible support for democracy with the consolidation of a semi-

authoritarian political system in Russia under his leadership? Putin argues that while

the basic principles of democracy have universal validity, the implementation of those

principles in any country must fit the conditions that are distinctive for that country

(Putin 2005e). Thus he reasons that ‘the fundamental principles of democracy and the

institutions of democracy should be adapted to the realities of Russian life, to our

traditions and history’ (Putin 2005a). Putin argues that the form of government that

emerges in Russia will be a blend of universal ideals and ‘primordial Russian values


that have stood the test of time’ (Putin 1999b). In December 1999, before Putin

became President of Russia, he decisively rejected the notion of importing ‘abstract

models and schemes from other countries’ (Putin 1999b). While the status of the term

‘sovereign democracy’ may be uncertain, there is no doubt that protecting Russia’s

sovereignty is vitally important for Putin in order to ensure that his country is

completely independent in choosing its own form of development.

The growing emphasis on the concept of sovereignty by Russia’s leadership after

2005, a trend that was evident in Putin’s speeches, was closely associated with ever

more vehement repudiation of foreign governments’ criticism of changes in Russian

political practices as undemocratic. Putin angrily denies the right of anyone outside

Russia to evaluate his country’s political institutions or to intervene in the affairs of

that nation in order to attempt to correct deviations from democratic principles. He

has complained that such efforts assume a patriarchal relationship between certain

countries (implicitly the USA and Western Europe) and Russia, or in other words a

relationship between superiors and inferiors (Putin 2007b). He charges that efforts

supposedly aimed at spreading democracy are in fact motivated by the self-interest of

the states that finance such programmes, which threaten to compromise the

independence of the countries targeted for such attention. By 2006 Putin evoked the

concept of neocolonialism to attack the notion of democracy promotion, when he

charged that the idea of a ‘civilising role’ that was used to justify European colonialism

in the nineteenth century had been replaced in recent times by the term

‘democratisation’ (Putin 2006a). Vladislav Surkov, a deputy head of the presidential

administration who often is described as the main ideologist of the Putin leadership,

ratcheted up the rhetoric when he appealed to the memory of Ernesto ‘Che’ Guevara

as one from whom contemporary Russians could learn that it is crucial to build an

economic basis for real political sovereignty (Surkov 2006b). One of the principal

implications of the Putin regime’s emphasis on sovereignty is that, as Dmitrii Trenin

has summarised it, Russia no longer should recognise the ‘moral authority’ of the

USA and Europe, the established democracies of the West (Trenin 2007, p. 96).

Combined with Putin’s frequent assertions that Russia is a European nation and that

his country is committed to the principles of democracy, the concept of sovereignty

that the leadership has emphasised in recent years communicates the desire by the

political and economic elite of Russia to enter the Western world on its own terms

(Zagladin et al. 2006, p. 46), not on the basis of conditions that have been determined

by Western governments.

Vladimir Putin has stressed that democracy in Russia must be compatible with

Russian conditions and the traditions of Russian history. One part of Russian tradition

that he has identified is the centralisation of power in a strong state. ‘From the very

beginning, Russia was created as a supercentralised state. That’s practically laid down

in its genetic code, its traditions, and the mentality of its people’ (Putin 2000a, p. 86).

Putin also considers collectivism and paternalism to be among the traditions of the

Russian people (Putin 1999b). Almost as often as he has endorsed the idea of

democracy, Putin has spoken of the need to build a stronger civil society in Russia. In

December 2007, when he admitted the persistence of the problem of corruption in the

Russian state, he acknowledged the absence of ‘social control of the activities of public

institutions’, and described the strengthening of civil society as the most promising


means to achieve that goal (Putin 2007b). Western scholars think of civil society as the

sphere of social organisation that involves the efforts of citizens acting largely

independently of the state. The Putin leadership has assumed, however, that in Russia a

strong civil society will not take shape unless the state takes the initiative to make that

happen. That assumption was reflected in Vladislav Surkov’s assertion: ‘If society isn’t

able to put forth initiatives on its own, then we must stimulate it’ (Weir 2005, p. 1).

Vitalii Tret’yakov has remarked astutely that in Putin’s view the state must be called on

to create the conditions for democracy and freedom since Russian society itself is not

capable of coping with that task (Tret’yakov 2005b, p. 77).

One of the recurring themes in Putin’s statements about Russian society is the

urgent need for a fundamental unity of values among all segments of the population of

his country. His assessment of the problems facing Russia has consistently revealed a

fear of disunity in society and a tendency to equate differences on values with

disintegration and weakness. In December 1999 he said that progress was impossible

‘in a society finding itself in a condition of division, internally disintegrated, a society

in which social strata and political forces adhere to different basic values and

fundamental ideological orientations’ (Putin 1999b). In May 2003 he asserted that it

would be difficult to overcome contemporary challenges if society is ‘splintered into

small groups’, each of which is devoted to its own narrow interests, and he called for

consolidation ‘around basic national values and tasks’ (Putin 2003). Thus he saw the

proper response to disunity as a strong consensus of values in Russian society. In an

interview in early 2000, when Putin was asked to identify the main priority for Russia,

he answered that it was the adoption of goals or moral values that all members of the

society could understand, like the ‘Code of the Builder of Communism’ that was

disseminated in the Soviet Union in the 1960s (Putin 2000b). Putin again stressed the

importance of soglasie, meaning agreement, consensus, or harmony in society, in his

first presidential address to the Russian parliament in July 2000, in which he said that

a consensus on goals should come from the unique cultural traditions and shared

historical memory of the Russian nation (Putin 2000b). When interviewed by a

journalist from Time in December 2007 he returned to that theme, urging, ‘We need to

pay the utmost attention to our common moral values and consolidate Russian society

on this basis’, and adding, ‘I think that this is an absolute priority’ (Putin 2007b).

The Putin leadership has stigmatised Russians who stand outside the boundaries of

the supposed consensus as disloyal to the nation. In September 2004 Vladislav Surkov

referred to those on the right and left in his country who were particularly critical of

the regime as a ‘fifth column’ within the society that allegedly sought ‘the defeat of

their own country in the war on terror’.1 Putin has made it clear that he believes that

the most outspoken domestic critics of the state are serving foreign masters, having

sold their loyalty to foreign governments that seek to undermine Russia’s

independence (Putin 2004, 2007b). When speaking at a campaign rally of the United

Russia party shortly before the parliamentary election of December 2007, he poured

contempt on the critics of the regime: ‘Those who oppose us need a weak, sick state, a

disoriented, divided society, so that behind its back they can get up to their dirty deeds

1RFE/RL Newsline, ‘Putin Senior Staffer Details Proposed Political Reforms’, 8, 185, Part I, 29

September 2004.


and profit at your and my expense’. Putin charged, ‘unfortunately there are jackals

inside the country who sponge off foreign embassies’.2 Putin’s strong desire for unity

in Russian society leads him to regard any fundamental opposition to the political

regime as reflecting disloyalty to the nation. As President of Russia, Vladimir Putin

has turned that country away from the Westernising direction followed by Mikhail

Gorbachev and Boris Yel’tsin, and instead of advocating a course of development

guided by the values of liberal democracy he has chosen a unique model that he sees as

consistent with the historical tradition distinctive to Russia (Zagladin et al. 2006,

p. 40). Under Putin, ‘sovereignty’ has become the code word for the demand that the

West accept Russia’s right to make its independent choice of political and economic

institutions.

While the fundamental values supported by Putin have not changed since he became

President of Russia in 2000, the theme of non-interference in his nation’s internal

affairs has received growing emphasis among Russia’s political elite during the last few

years (Tsygankov 2007, p. 385). Beginning in 2005, hostility toward the West was also

more openly voiced by the political leadership of Russia, and was even expressed by

Putin himself more directly than ever before in 2007 (Shlapentokh 2007). There may

have been a number of reasons for those trends in the rhetoric of the Putin regime. In

the first place, Russian leaders apparently resented Western criticism of the practices

of that regime, which had intensified as it became increasingly clear that changes

brought by Putin were moving toward a more authoritarian concentration of power

(Shlapentokh 2007). In addition, since Russia had experienced several years of steady

economic growth since the late 1990s (primarily fuelled by rising prices for oil, which

that country exports in large quantities), the leaders of the Russian state seemed to

believe that their power position in the world had improved qualitatively, and felt free

to take a more assertive stance in relation to the West (Tsygankov 2006a, p. 288;

Shlapentokh 2007). In essence, they believed that if Russia was to be accepted as a

major power, as they hoped and expected, other countries should refrain from looking

down on their country and presuming to instruct it on domestic political practices.

The growing stress on the need to protect Russia’s sovereignty appears to have been

most directly a response to the ‘coloured revolutions’ in some other states of the

former Soviet Union, and particularly the ‘Orange Revolution’ in Ukraine in late 2004

that overturned the results of an election that had been widely seen as marred by fraud

(Okara 2007; Krastev 2007, p. 37). As Vladimir Shlapentokh argues, ‘the reemergence

of the foreign threat to the regime as a major political and ideological issue in Moscow

was deeply influenced by the developments in Ukraine in 2004’ (Shlapentokh 2007).

The obsession with ‘orange technology’ in Russian sources in recent years lends

plausibility to Shlapentokh’s conclusion that Putin feared that the same methods used

in Ukraine might be employed to undermine the stability of the regime that he had

consolidated in Russia.

The concept of ‘sovereign democracy’ must be seen in part as a reaction to the goal

of democracy promotion by the USA, which increasingly led the Putin leadership to

worry that the United States might seek to bring about regime change in Russia

(Shlapentokh 2007). But pressure on the government of Russia concerning its

2The Economist, 2007, p. 640.


domestic actions also came from Europe, which may have created a more fundamental

cause for discomfort in the Putin leadership. Europe has come closer to Russia in

recent years with the expansion of the European Union (which now includes most of

formerly communist Eastern Europe and three states that were republics of the Soviet

Union) and the growth of trade between Russia and the EU. Neil Macfarlane notes

that there has been growing dissonance between Russia and the EU, as the

government of Russia seeks cooperation as a means of serving economic needs, while

the European Union has a ‘preoccupation with liberal values’ that is ‘annoying from

the Russian perspective’ (Macfarlane 2006, p. 54). As Angela Stent (2007) has pointed

out, the nations that are members of the EU have given up a significant degree of their

national sovereignty to create a united Europe, which is disturbing for a Russian state

that seeks a closer economic relationship with Europe while attempting to guard the

autonomy of its domestic political structures. Moscow also has resisted the scrutiny

from outside that is embodied in the monitoring of Russian elections by the

Organisation for Security and Cooperation in Europe (OSCE), an organisation of 55

countries to which Russia belongs (Bigg 2008). A series of factors makes it possible to

understand the increasing vehemence of the Putin leadership’s denunciations of

attempts by foreign nations to exert influence on political practices in Russia, leading

the regime to intensify its insistence on the necessity of protecting Russia’s sovereignty.

A new ideological challenge?

As criticism of Western governments by members of the Russian elite has grown

harsher and there have been efforts to create an official ideology for Russia, we may

wonder whether the Putin leadership has decided to present an ideological challenge to

Western democracy. Not long ago it was reasonable to assume that the words and

actions of the Putin regime were intended not to seek changes in the outside world, but

to moderate the impact on Russia of systemic trends in the world (Macfarlane 2006,

p. 8). By 2007, however, it was possible to argue that the Russian state’s goals had

become more ambitious; as Derek Averre reported, statements by ‘leading Russian

officials have represented a clear attempt to challenge the international order’ (Averre

2007, p. 177). From a stance of defence of Russia’s distinctive form of democracy,

the pronouncements of Russian officials and loyal intellectuals shifted to a

counteroffensive against Western governments, pointing out the flaws of Western

political processes and at times even implying that Russian democracy is superior to

Western democracy (Shlapentokh 2007). Leonid Polyakov suggested that there was a

justification for considering ‘sovereign democracy’ as a model that might evoke ‘global

resonance’, appealing to many countries which have experienced substantial economic

development in recent years (Polyakov 2007, p. 67). He asserted that sovereign

democracy represents a ‘universal form of political order of a nation in the conditions

of globalisation’ (2007, p. 68, emphasis in original).

Sergei Lavrov, the Foreign Minister of the Russian Federation, says that recent

trends in international relations have resulted in a situation in which the West is losing

its monopoly of models of development and its control over processes of globalisation

(Lavrov 2007a). Immanuel Wallerstein argues that Vladimir Putin has gained greater

confidence in dealing with the West because of changes in the world economy


(Wallerstein 2007). Putin contends that economic growth in the ‘emerging nations’ is

bringing a shift in the balance of political power, which will become more pronounced

in the coming decades (Putin 2007b). Some Western scholars have begun to argue that

the growth of ties among the ‘rising powers’ who recently have enjoyed rapid economic

development is creating ‘an alternative system of international politics’ that is

‘surprisingly independent fromWestern control’ (Barma et al. 2007, pp. 23–24). Russia

is often categorised as one of the BRIC countries (Brazil, Russia, India and China), and

according to Andrew Hurrell, all of those countries believe that they are entitled to ‘a

more influential role in world affairs’ (Hurrell 2006, p. 2). At the very least, the

emerging powers may be said to share dissatisfaction with some aspects of the existing

structuring of power in the world, especially the degree of domination by the USA as

the sole superpower (Macfarlane 2006, p. 41). In particular, the leaders of China and

Russia find a common cause in rejecting the notion that the West should be the source

of ideas about development for the rest of the world (Ferdinand 2007, p. 679). Both

China and Russia may be thought of as examples of ‘developmental states’, or ‘states

where the government still plays a crucial role in determining the direction of

development’ (Ferdinand 2007, p. 663). It would be possible to regard ‘sovereign

democracy’ as Russia’s ideological version of the model of the developmental state, and

it is apparent that there are some in Russia who are eager to take that approach. S. A.

Karaganov asserts that a struggle is being waged between two models of development,

on the one hand ‘the liberal-democratic model of the West’, and on the other, the semi-

authoritarian capitalism exemplified by some Asian states. He wants Russia to join on

the side of the latter group in endorsing a model that he expects to be more attractive

for many countries of the former Third World (Karaganov 2007).

So far, however, Russia’s highest leaders have not shown any interest in entering

into a global ideological struggle or packaging any model of development for export to

other countries. According to Sergei Lavrov, the Russian state has renounced ideology

and ‘grand designs’ in its foreign policy in favour of a pragmatic approach (Lavrov

2007b, p. 8). His statement implies that Russia’s actions in relation to the rest of the

world will be guided by the country’s national interests as its leaders perceive them

(Zagladin et al. 2006, p. 44). Putin has said that Russia should renounce the Soviet

legacy of trying to lead a worldwide movement toward communist revolution and

attempting to ‘impose a certain way of life on other countries’ (Putin 2007b). He has

also cautioned against the assumption of any ‘missionary functions’ for Russia,

warning that it would be harmful for the country to be seized by missionary ideas

(Putin 2007a). We should recall that Putin himself, and his successor Dmitrii

Medvedev, have distanced themselves carefully from the concept of ‘sovereign

democracy’, which could have furnished a convenient title for a model to be offered for

export as an alternative to the Western liberal-democratic model.

It is true that the Russian state is opposed to efforts to achieve a unipolar world

dominated by the USA, or even a world dominated by the West (Lavrov 2006, 2007b,

p. 12), because of the fear that such a concentration of power would relegate Russia to

second-class status and make it vulnerable to the designs of the most powerful

countries. But, contrary to the wishes of the more radical Eurasianists in Russia, Putin

has not sought to lead an international coalition in opposition to the main centres of

power in the world. (After all, if such a coalition took shape despite the great diversity


of interests of the potential partners in its ranks, it would be unlikely that Russia

would be accepted as its leader on the basis of its population size or economic

weight. In addition, to become part of such a coalition would require Russia to

commit itself to goals that might restrict its freedom to pursue its own interests.)

Instead the Russian state under Putin has pursued a foreign policy that has been

flexible and many-sided, open to forming short-term, limited partnerships with a great

variety of states. V. I. Pantin captures the spirit of the Putin administration when he

urges, ‘the internal and external self-determination of Russia should not be one-

sidedly pro-Western or anti-Western, liberal or anti-liberal’ (Zagladin et al. 2006,

p. 41). While Putin hopes that Russia will benefit from a shift in power in favour of the

countries with emerging economies, he has avoided making the claim that Russia has

crafted a model of development to be offered to other nations as an alternative to the

liberal-democratic values promoted by the West.

Conclusion

Though Vladimir Putin is often described as a pragmatist, we have seen that before he

came to power as President of Russia he was committed to core values and goals that

would guide him during the next eight years. He evidently hopes that those values and

goals will continue to determine the direction of policy-making by the Russian state in

the years to come. The ideas that have been associated with the Putin regime constitute

a distinctive answer to the question of Russia’s identity that was posed with

heightened urgency after the dissolution of the Soviet Union. A key question for

Russians since the time of Peter the Great has been their society’s relationship with the

West, which originally was equated with Europe. We have noted that the Russian

elite’s attitude toward the West traditionally has been filled with ambivalence, and that

has continued under Putin. On the one hand, he has repeatedly insisted that Russia is a

part of Europe, and shares the same basic aspirations with the nations of Western

Europe, including the goal of implementing the principles of democracy. But on the

other hand, he warns against attempts to import foreign models into his country,

argues that the form of government in Russia must fit the time-honoured traditions of

that nation, and angrily repudiates efforts by outsiders to evaluate the performance of

political institutions in Russia.

Putin wants his country to be accepted in the community of Western democracies on

its own terms, which he sees as necessary to preserve Russia’s distinctive identity.

Putin’s expectations for a consensus of values in Russian society and his view of the

limits of acceptable division within the national political system reflect his response to

the ‘liberal idea’, generally accepted in contemporary Western countries, that

international integration entails not only closer economic cooperation among different

nations but also the lowering of national barriers to the dissemination of democratic

political ideas and institutions (Averre 2007, p. 179). As Derek Averre points out, ‘it is

only in the recent period that Moscow has formulated a coherent and vigorous

response’ to that thinking (2007, p. 180) by articulating a set of ideas that are said to be

grounded in the traditions that have shape Russia’s unique identity. Putin’s position

implies approval for a premise that is accepted by some other late-developing states,

which in opposition to the Western emphasis on individual rights as the basis of self-


determination argues in favour of ‘state determination’, or the idea that ‘sovereign

states are empowered to set the terms of the relationship inside their borders between

the government and the governed’ (Barma et al. 2007, p. 27). In Putin’s view, a

predominant role by the state is necessary, not only to lead Russia to success in the

economic competition stimulated by globalisation, but also to manage the

consequences of global trends for domestic society. The political orientation that

pervades Putin’s statements seeks to defend deeply conservative values, rather than

calling on Russia to renew the radical challenge to Western democracy and capitalism

that was posed by the Bolsheviks.

While Putin has offered an answer to the question of Russia’s identity, his answer

reveals major elements of ambiguity, and beneath the surface it contains internal

contradictions. Andrei Tsygankov has observed that the contemporary Westernisers

and Eurasianists represent ‘polar opposites’ on the question of Russian identity, and

we might add that those extremes have deep roots in Russian history. Tsygankov

points out that Vladimir Putin’s vision of Russia falls between those polar opposites,

and is a ‘cultural synthesis’ of such competing positions (Tsygankov 2007, p. 381). As

a synthesis, the integrated body of ideas offered by Putin displays contradictory

impulses that are inherent in its values and logic. In the first place, there is a conflict

between the acceptance of international integration and the demand for protection of

Russia’s autonomy. Putin argues that international economic integration is irresistible,

and that it is necessary for Russia to plunge into globalisation in order to become a

great economic power. But at the same time Putin’s statements reveal a deep fear that

international integration will open Russia to control from outside and the erosion of

the independence of action by the Russian state and society. Putin’s position is

fundamentally ambiguous about the political implications of international integration.

He asserts that Russia has joined in the general international consensus in favour of

democracy (Lavrov 2007b, p. 10), but he wants to insulate the political process in

Russia from foreign influence. While he repudiates Western criticism, he does show

sensitivity to the need to satisfy some international standards in following democratic

procedures. The degree of pluralism that is permitted in the political arena in Putin’s

Russia is qualitatively greater than that which was allowed in the Soviet Union before

Gorbachev, but the limits of pluralism have been tightened since Putin came to power,

and the acceptable degree of disagreement is still not entirely clear.

Most obviously, contradictory messages from the Putin leadership reflect the

dilemma posed by the demands of ideology and pragmatism. The effort by Vladislav

Surkov and others within the presidential administration and the dominant political

party to fashion a systematic set of ideas that could be presented as ‘Putin’s ideology’

may have been motivated in part by the desire to ensure continuity in policy during the

periods of leadership transition that will come in future decades. There was also an

evident desire to present the thinking of the leadership in a form suitable for mass

consumption, so that millions of political activists could be indoctrinated in the same

ideas. In addition, even in Putin’s speeches it has been evident that he has felt the need

to offer an articulate answer to the challenge of the ‘liberal idea’ promoted by the

Western democracies that occupy a dominant position in the contemporary world. On

the other hand, Putin has been reluctant to give full approval to the concept of

sovereign democracy that has been presented (with considerable justification) as the


authoritative summary of his thinking. He has not joined in the call for an ideology

that can be recognised as authoritative for Russia. Putin seems to want to preserve his

flexibility of action in domestic and foreign policies, and he may realise that a

commitment to an explicit and integrated ideology would limit his freedom of choice,

or at least force him to justify his actions in terms of established doctrinal principles.

Also, an entrenched ideology can make it more difficult for leaders to become aware of

key aspects of changing developments, as Putin has ample reason to recall. Further,

for the regime to adopt a full-fledged ideology would invite the resumption of the

ideological struggle with the West, and Putin does not seem to believe that such a

struggle would be necessary or profitable for Russia. Thus while Putin has endorsed a

set of values that offer an answer to the question of Russia’s identity and provide

guidance for long-term strategy, his answer includes substantial ambiguity and

contains contradictory impulses. That ambiguity implies that there is the potential for

the ideational legacy of the Putin presidency to be interpreted in different ways in the

future as new challenges and opportunities arise. Whether the Russian state will yield

to the temptation to mount a more aggressive ideological counterattack against the

West will depend not only on the results of trends within Russia’s political elite, but

also on the choices made by Western governments.

California State University, Fresno

References

Averre, D. (2007) ‘‘‘Sovereign Democracy’’ and Russia’s Relations with the European Union’,Demokratizatsiya, 15, 2, Spring.

Balzer, H. (2005) ‘The Putin Thesis and Russian Energy Policy’, Post-Soviet Affairs, 21, 3, July–September.

Barma, N., Ratner, E. & Weber, S. (2007) ‘A World Without the West’, The National Interest, 90,July–August.

Bigg, C. (2008) ‘Russia: Moscow Bares its Teeth, Signaling Tough Time for OSCE’, RFE/RL Newsline,4 January, in Johnson’s Russia List, 4, 4 January, available at: www.cdi.org/russia/johnson,accessed 4 January 2008.

Chadaev, A. (2006) Putin: ego ideologiya (Moscow, Evropa).Evans, A. (2008) ‘Power and Ideology: Vladimir Putin and the Russian Political System’, The Carl

Beck Papers in Russian and East European Studies of the University of Pittsburgh, No. 1902,January (Pittsburgh, University of Pittsburgh).

Ferdinand, P. (2007) ‘Russia and China: Converging Responses to Globalization’, InternationalAffairs, 83, 4, July.

Freeden, M. (2006) ‘Ideology and Political Theory’, Journal of Political Ideologies, 11, 1, February.Gerring, J. (1997) ‘Ideology: A Definitional Analysis’, Political Research Quarterly, 50, 4,

December.Hopf, T. (2006) ‘Moscow’s Foreign Policy, 1945–2000: Identities, Institutions, and Interests’, in Suny,

R. (ed.) (2006) The Cambridge History of Russia, Volume III, The Twentieth Century (Cambridge,Cambridge University Press).

Hunt, M. (1987) Ideology and US Foreign Policy (New Haven, Yale University Press).Hurrell, A. (2006) ‘Hegemony, Liberalism, and Global Order: What Space for Would-Be Great

Powers?’, International Affairs, 82, 1, January.Karaganov, S. (2007) ‘Novaya era protivostoyaniya’, Rossiya v global’noi politike, 4, July–August.Krastev, I. (2007) ‘Rossiya kak ‘‘drugaya Evropa’’’, Rossiya v global’noi politike, 5, 4, July–August.Lavrov, S. (2006) ‘Rossiya v global’noi politike’, Moskovskie novosti, 3 March.Lavrov, S. (2007a) ‘Nastoyashchee i budushchee global’noi politiki; vzglyad iz Moskvy’, Rossiya v

global’noi politike, 5, 2, March–April.Lavrov, S. (2007b) ‘Sderzhivanie Rossii: nazad v budushchee?’, Rossiya v global’noi politike, 5, 4, July–

August.


Legvold, R. (ed.) (2007) Russian Foreign Policy in the Twenty-First Century and the Shadow of the Past(New York, Columbia University Press).

Macfarlane, S.N. (2006) ‘The ‘‘R’’ in BRIC: Is Russia an Emerging Power?’, International Affairs, 82,1, January.

Medvedev, D. (2006) ‘Dlya protsvetaniya vsekh nado uchytivat’ interesy kazhdogo’ [transcript of aninterview by Valerii Fadeev], Ekspert, 28, 24 July.

Okara, A. (2007) ‘Sovereign Democracy: A New Russian Idea or a PR Project’, Russia in GlobalAffairs, 21, July–September.

Polyakov, L. (2007) ‘Suverennaya demokratiya: politicheskii fakt kak teoreticheskii predmetnost’,Obshchestvennye nauki i sovremennost’, 2.

Putin, V. (1999a) ‘Mineral Resources in the Strategy for Development of the Russian Economy’,Zapiski Gornogo Instituta, 144, reprinted in Problems of Post-Communism, 53, 1, January–February 2006 [originally published in Zapiski Gornogo Instituta, 144].

Putin, V. (1999b) ‘Rossiya na rubezhe tysyacheletiya’, Rossiiskaya gazeta, 31 December.Putin, V. [with Gevorkyan, N., Timakova, N. & Kolesnikov, A.] (2000a) First Person: An Astonishingly

Frank Self-Portrait of Russia’s President Vladimir Putin [translated by Catherine A. Fitzpatrick](New York, Public Affairs).

Putin, V. (2000b) ‘Poslanie Federal’nomu Sobraniyu Rossiiskoi Federatsii’, 8 July, presidentialwebsite, available at: http://www.kremlin.ru/mainpage/shtml, accessed July 2000.

Putin, V. (2003) ‘Poslanie Federal’nomu Sobraniyu Rossiiskoi Federatsii’, 16 May, presidentialwebsite, available at: http://www.kremlin.ru/mainpage/shtml, accessed May 2003.

Putin, V. (2004) ‘Poslanie Federal’nomu Sobraniyu Rossiiskoi Federatsii’, 26 May, presidentialwebsite, available at: http://www.kremlin.ru/mainpage/shtml, accessed May 2004.

Putin, V. (2005a) ‘Interv’yu ‘‘Radio Slovenksogo’’ i Slovatskoi telekompanii STV’, 22 February, pre-sidential website, available at: http://www.kremlin.ru/mainpage/shtml, accessed February 2005.

Putin, V. (2005b) ‘Zayavlenie dlya pressy i otvety na voprosy na sovmestnoi s Prezidentom SShADzordzhem Bushem press-konferentsii’, Bratislava, 24 February, presidential website, availableat: http://www.kremlin.ru/mainpage/shtml, accessed March 2005.

Putin, V. (2005c) ‘Poslanie Federal’nomu Sobraniyu Rossiiskoi Federatsii’, 25 April, presidentialwebsite, available at: http://www.kremlin.ru/mainpage/shtml, accessed April 2005.

Putin, V. (2005d) ‘Uroki pobedy nad natsizmom’, Gazeta Figaro, 7 May, presidential website, availableat: http://www.kremlin.ru/mainpage/shtml, accessed August 2005.

Putin, V. (2005e) ‘Interv’yu amerikanskomu telenanalu ‘‘Foks N’yus’’’, 17 September, presidentialwebsite, available at: http://www.kremlin.ru/mainpage/shtml, accessed September 2005.

Putin, V. (2006a) ‘Interv’yu telekanalu En-Bi-Si (SshA)’, 12 July, presidential website, available at:http://www.kremlin.ru/mainpage/shtml, accessed August 2006.

Putin, V. (2006b) ‘Stenograficheskii otchet o vstreche s uchastnikami tret’ego zasedaniyamezhdunarodnogo diskussionogo kluba ‘‘Valdai’’’, 9 September, presidential website, availableat: http://www.kremlin.ru/mainpage/shtml, accessed September 2006.

Putin, V. (2007a) ‘Vstrecha s uchastnikami mezhdunarodnogo diskussionogo kluba ‘‘Valdai’’’, 14September, presidential website, available at: http://www.kremlin.ru/mainpage/shtml, accessedSeptember 2007.

Putin, V. (2007b) ‘Interview with Time Magazine’, presidential website, 19 December, in Johnson’sRussia List, 260, 20 December, available at: http://www.cdi.org/russia/johnson, accessedDecember 2007.

Shlapentokh, V. (2007) ‘Perceptions of a Threat to the Regime as a Major Factor of Russian ForeignPolicy: From Lenin to Putin’, Johnson’s Russia List, 199, 19 September, available at: http://www.cdi.org/russia/johnson, accessed 19 September 2007.

Stent, A. (2007) ‘Reluctant Europeans: Three Centuries of Russian Ambivalence toward the West’, inLegvold, R. (ed.) (2007).

Suny, R. (2007) ‘Living in the Hood: Russia, Empire, and Old and New Neighbors’, Legvold, R. (ed.)(2007).

Surkov, V. (2006a) ‘Suverenitet—eto politicheskii sinonim konkurentosposobnosti’, speech of 7February, Politicheskii klass, 15, 31 March.

Surkov, V. (2006b) ‘Rossiya-samostoyatel’nyi sub’’ekt istorii’, 11 July, Edinaya Rossiya website,available at: http://www.edinoros.ru, accessed July 2006.

Tolz, V. (1998) ‘Forging the Nation: National Identity and Nation Building in Post-CommunistRussia’, Europe-Asia Studies, 50, 6, September.

Tolz, V. (2001) Inventing the Nation: Russia (Oxford and New York, Oxford University Press).Trenin, D. (2007) ‘Russia Redefines Itself and Its Relations with the West’, Washington Quarterly, 30,

2, Spring.


Tret’yakov, V. (2005a) ‘Suverennaya demokratiya’, Rossiiskaya gazeta, 28 April.Tret’yakov, V. (2005b) Nuzhen li nam Putin posle 2008 goda? (Moscow, IIK ‘Rossiiskaya gazeta’).Tsygankov, A. (2006a) ‘Projecting Confidence, Not Fear: Russia’s Post-Imperial Assertiveness’, Orbis,

50, 4, September.Tsygankov, A. (2006b) Russia’s Foreign Policy: Change and Continuity in National Identity (Lanham,

Rowman and Littlefield).Tsygankov, A. (2007) ‘Finding a Civilisational Idea: ‘‘West’’, ‘‘Eurasia’’, and ‘‘Euro-East’’ in Russia’s

Foreign Policy’, Geopolitics, 12, 3, July.Wallander, C. (2007) ‘Global Challenges and Russian Foreign Policy’, in Legvold, R. (ed.) (2007).Wallerstein, I. (2007) ‘What Does Putin Want?’, Middle East Online, 20 November, in Johnson’s Russia

List, 240, 20 November, available at: http://www.cdi.org/russia/johnson, accessed 21 November2007.

Weir, F. (2005) ‘Putin’s ‘‘Chamber’’: A Parallel Parliament?’, Christian Science Monitor, 2 November.Zagladin, N.V., Pankin, V.V., Pantin, V.I., Semenenko, I.S. & Kholodkovskii, K.G. (2006) ‘Faktory

politicheskogo samoopredeleniya Rossii v sovremennom mire’ (Round Table), Mirovayaekonomika i mezhdunarodnye otnosheniya, 6.


Documents

India and China: Governance Issues and Development