Building a Future With Sturdy BRICs

Goldman Sachs’s Jim O’Neil takes the credit for labeling the emerging-markets giants as the BRICs, and he continues to espouse this cause. Amid the gloom enveloping so much analysis, he finds reasons for constant optimism.

His latest good cheer comes in the shape of China’s March trade figures. The first monthly deficit in six years may be an aberration, for the country hasn’t put the brakes on exporting, but, points out Mr. O’Neill, just look at the scale of the imports.

For that single month, imports, at $119.4 billion, were up $47.5 billion compared with a year earlier. During the first quarter as a whole, imports at $301.7 billion had leapt by $118.4 billion from the previous year.

While politicians get vexed about the strength of the yuan and try to goad China into letting its currency appreciate, Mr. O’Neill prefers to concentrate on the good news: If Chinese imports continue to grow at this rate for the entire year, the effect will be as significant as if another Indonesia, Sweden or Turkey had burst onto the trading scene.

Optimists such as Mr. O’Neill see China and the other BRICs— Brazil, Russia and India—as the force that could help pull the West out of its doldrums. But, while that could be a welcome spin off of the growing strength of that country, China’s ambitions lack any element of altruism.

As if to underline that message, this week has seen China Petroleum & Chemical Corp. paying $4.65 billion for a stake in the Syncrude Canada oil-sands project. A month earlier, Chinese oil-exploration company Cnooc paid more than $3 billion for a stake in a major Argentinian oil-exploration company. China is now amassing energy assets at a phenomenal rate, in Africa as well as the Americas, where it no longer seems to be coming up against the protectionist objections that prevented its planned takeover of Unocal Corp. back in 2005.

Despite the posturing over tariffs that continues between the U.S. and China, perhaps there is a tacit acceptance in Washington of the importance of retaining China as a welcoming market for U.S. imports.

This week, U.S. President Barack Obama has been welcoming BRIC leaders, along with more than 40 others, to his nuclear summit. Russia’s president, Dmitry Medvedev, took the opportunity to call on the BRICs to work together, not merely to use their influence in security matters but more widely, for instance, in financial matters.

That will now be on the agenda for the BRIC summit to be held shortly in Brasilia. Tensions between the four countries are many, but their growing strength represents a massive change in the balance of power in the world.

The contrast between the BRICs and the PIIGS (Portugal, Ireland, Italy, Greece and Spain) is a painful one for Europe to confront.

Yet given the recent happenings in Greece and the potential for similar—if not so extreme—events in other European countries, there is no escaping the fact that the map of global influence now looks very different.

Western politicians are understandably reluctant to confront this fact. It is one thing to point to the economic challenge posed by the merging markets, and cite it as a reason why investment in education and science has to be improved if the West is to compete. It is an entirely different matter to admit to a shrinking presence in the world’s power league.

It is certainly not something that is likely to be given much of an airing during the U.K.’s election campaign.

In fact, any discussion of foreign policy during the run up to May 6 might well sound, to that legendary Martian who just happened to drop in on the conversation, as if Britain was still running an empire. And yet one of the most interesting exchanges that might take place would be to draw out the three main parties in the coming weeks on how they see Britain’s role on the international stage.

Tomorrow sees the first of three televised debates between the leaders of the Conservative, Labour and Liberal Democrat parties. This import from the U.S. is a novel feature of the 2010 general election, and no one knows how influential it will turn out to be in determining the outcome.

The main thrust is likely to be on how to deal with the massive deficit in the national finances, but the truth is nothing that has been heard from the three parties so far goes anywhere near addressing the real scale of the pain that will have to be taken if a debt that is on course to reach £1.4 trillion is to be brought under control.

The specter of Greece, now in what looks to be only a temporary respite from default, should be enough to persuade responsible leaders that saving a few billion pounds here or there is simply not enough. But to talk about drastic moves such as slashing the defence budget to something commensurate with the status of a country that is no longer a world power may be judged a recipe for vote losing.

Equally, talk of slashing public-sector pay and pensions, now a burden the country can simply no longer afford, isn’t going to persuade the swathes of electors who work in the public sector to give their support.

And the five million people in Britain who subsist on benefits, virtually the same number that did so when Labour came to power, aren’t likely to vote for the party that promises to force them into work, even though some two-thirds are estimated to be capable of earning.

Once the election is over, though, such tough choices will have to be on the agenda whichever party wins.