Original Title: Father of Bricks: India will soon overtake Britain and France to become the fifth largest economy in the world
Compile Nie Lin
Jim ONeill, former chairman of Goldman Sachs Asset Management Corporation and former Business Secretary of the UK Treasury, recently wrote in Project Syndicate to re-analyze the economic growth prospects of major global economies in the next decade, starting with long-term drivers of economic growth. He was most optimistic about Indias economy, believing that India would soon overtake Britain and France to become the fifth largest economy in the world.
In 2001, ONeill, then chief economist of Goldman Sachs, coined the term BRICS and predicted the economic growth of the worlds major economies over the next 30 years. Judging from the performance of these economies in the past 20 years, some of his predictions have been successful and some have been missed.
Heres ONeill and his colleaguesforecast of the global economy in 2001. From 2001 to 2017, the real economic growth of the United States, Britain, Japan, China and India is close to ONeills forecast at that time, while the situation of the euro zone, Brazil and Russia is not small gap with his expectations.
Specifically, despite sluggish productivity growth in the United States and the United Kingdom, the two countrieseconomic growth is close to ONeills previous expectations due to rapid employment growth. Nevertheless, ONeill pointed out that given that the unemployment rates in the United States and Britain are close to historic lows and that their public policies are also shifting towards anti-immigration, employment growth in these two countries is unlikely to reach the level of the last decade in the next decade. For the United States and Britain to grow as a whole, productivity must be improved.
ONeill believes that the future economic growth can be predicted more accurately through the growth or decrease of a countrys labor force and the growth of a countrys productivity. The variable of working population can be predicted from retirees and mortality rates in a country. In contrast, productivity is a variable with greater uncertainty.
For the less than expected performance of the eurozone economy, ONeill said this reflected weak productivity growth in the region on the one hand, and pointed to potential problems to be solved in the eurozone on the other.
At present, most economists predict that the potential economic growth rate of the euro area will be around 1% in the next decade. However, ONeill believes that the potential growth rate of the euro area is still expected to reach 1.5%. The key is whether the German economic model can be transformed into a more domestic demand-driven one.
According to ONeills forecast 20 years ago, China will achieve more than 5% annual economic growth between 2021 and 2030. Although Chinas economic growth is slower than before, ONeill believes that the market should not be overly pessimistic about Chinas economy. He pointed out that Chinas nominal annual growth rate of 5% is equivalent to Germanys growth rate of 15% - 20%.
ONeill is more optimistic about Indias economy. He said that thanks to the huge growth space of the labor force, Indias economic growth in the next decade will be much faster than Chinas. But a crucial question is whether India will implement reforms to boost strong productivity growth. If such reforms can be implemented, Indias economic performance over the next decade will exceed his previous expectations. Even if such reforms fail, India will soon overtake Britain and France as the fifth largest economy in the world.
For Brazil and Russia, ONeill said that unless the two countries reduce their dependence on commodities, their economies will only grow strongly at peak energy prices. He also predicted that the Russian economy would move in a disappointing direction over the next decade, whether reformed or not, because of the countrys serious ageing trend. If Brazil is able to implement social and health care reforms (which are difficult, of course), the Brazilian economy may be close to its 2001 target.
For Next Eleven, ONeill said that African countries, such as Nigeria, have huge growth potential in view of demographic trends, but they may never meet expectations without major reforms.
The concept of 11 new drilling countries was proposed by Goldman Sachs in a report at the end of 2005. Goldman Sachs estimates GDP growth rates based on three indicators: labor growth, capital stock and technological growth. It believes that 11 countries, including Mexico, Indonesia, Nigeria, South Korea, Vietnam, Turkey, Philippines, Egypt, Pakistan, Iran and Bangladesh, have second only to the BRICS countries in terms of economic development potential, not only in terms of good economic performance, but also in the past. The scenery is also bright.