The Growth Map

1. The BRICs: New Engines of Global Growth Emerge

Globalization didn’t need to be Americanization; there was scope for the other parts of the world to create their own definitions of the term using their own characteristics.

Globalization's new face. The global financial crisis of 2008 revealed that the world economy was no longer solely dependent on the West. Countries like Brazil, Russia, India, and China (BRICs) demonstrated resilience and continued growth, proving they were not merely traditional "emerging markets" but significant drivers of global activity. This shift highlighted that globalization was a multi-polar phenomenon, not just an extension of Western influence.

A powerful collective. Since 2001, the combined GDP of the BRIC countries has quadrupled, contributing a third of global economic growth. Their share of world trade has doubled, and trade between the BRICs has grown even faster. This economic ascent, particularly China's overtaking of major G7 economies, necessitates a fundamental rethinking of the global economic landscape and the roles different nations play.

Beyond exports. While exports initially played a role, especially for China, the post-2008 growth is increasingly fueled by domestic demand and infrastructure spending. The rise of the BRIC consumer, coupled with significant foreign direct investment inflows and accumulating foreign exchange reserves, underscores their growing self-sufficiency and influence on the world stage, moving them from emerging status to "Growth Markets."

2. Demographics and Productivity: The Core Drivers of Potential

Countries with young and expanding labor forces, which are becoming increasingly efficient, will show the largest gains in real GDP.

Population power. The fundamental argument for the BRICs' potential lies in their vast populations, totaling nearly 3 billion people. A large and growing working-age population provides a natural advantage for economic expansion, as seen historically in the United States compared to Europe. More workers mean more output and more consumers.

Efficiency gains. Beyond sheer numbers, the opportunity for productivity growth is immense in developing economies. As these countries adopt modern technology, improve infrastructure, and enhance education, their workforces become more efficient, closing the gap with developed nations. This convergence in productivity is a key engine for sustained, rapid GDP growth.

Long-term outlook. Projecting growth to 2050 requires considering long-term demographic trends and the pace of productivity convergence. While some BRICs like Russia face aging populations, others like India have incredibly favorable demographics. Blending these factors with assumptions about investment rates and policy environments allows for scenarios where BRIC economies significantly surpass current G7 members in size, fundamentally rebalancing the world economy.

3. BRIC by BRIC: Unique Paths, Shared Ambition

To understand fully what the BRICs are all about, it is necessary to examine each country individually.

Brazil's transformation. Once plagued by hyperinflation and instability, Brazil has achieved remarkable economic progress by prioritizing inflation targeting and macroeconomic stability. Its large, young population and abundant resources position it for significant future growth, though challenges like currency overvaluation and the need for continued structural reforms remain. Brazil's success in navigating the 2008 crisis demonstrated its newfound resilience.

Russia's potential. Despite demographic challenges and reliance on commodities, Russia possesses significant potential, particularly in technology and human capital. Its ability to diversify its economy, improve governance, and address social issues like life expectancy will determine if it can achieve its potential to become a major European economic power, potentially surpassing Germany in size within decades. Hosting major sporting events like the Olympics and World Cup offers opportunities for infrastructure development and global visibility.

India's mystery. India's astonishing demographics, large English-speaking population, and robust domestic demand provide immense potential for rapid growth, possibly making it the world's third-largest economy. However, it faces significant hurdles:

• Bureaucracy and corruption
• Infrastructure deficits
• Low education and technology adoption rates for the majority
• Protectionist tendencies hindering trade and foreign investment
  Overcoming these challenges through strong leadership and policy implementation is crucial for India to realize its "thirty times bigger" potential by 2050.

China's dominance. China's unprecedented growth over the past three decades has made it the world's second-largest economy, driven by urbanization, investment, and exports. While facing challenges like an aging population, environmental degradation, and potential asset bubbles, its strong central leadership and focus on long-term planning position it for continued, albeit slower, growth. China's shift towards boosting domestic consumption is vital for its future stability and global impact.

4. Beyond the BRICs: Identifying the Next Wave of Growth Markets

Given the increasing importance of some of these economies, we set out to differentiate them from the traditional emerging-market universe.

The Next Eleven. Recognizing that growth wasn't limited to the BRICs, the "Next Eleven" (N-11) group was identified, comprising large, populous emerging economies with potential. While diverse, countries like Indonesia, Mexico, South Korea, and Turkey stood out due to their size and relatively higher development levels compared to others like Bangladesh, Nigeria, and Pakistan.

Growth Markets defined. To better reflect their increasing significance and differentiation from traditional emerging markets, a new category, "Growth Markets," was introduced. These are economies that:

• Account for at least 1% of global GDP.
• Possess favorable demographics and productivity momentum.
• Have superior growth environments compared to most emerging markets.
• Offer sufficient financial infrastructure and market depth for international investors.
  Indonesia, Mexico, South Korea, and Turkey, alongside the BRICs, fit this description, collectively poised to contribute significantly more to global GDP growth than the G7 in the coming decade.

Africa's potential. While South Africa's inclusion in the political BRIC group is debatable based on economic size and demographics, Africa as a continent holds immense long-term potential due to its rapidly growing population. However, realizing this potential requires significant improvements in growth environment scores, addressing issues like governance, education, health care, and technology adoption. Countries like Nigeria, with its large population and improving scores, could become future Growth Markets.

5. Resource Constraints: A Challenge Met by Innovation and Policy

I do have faith that scientific innovation, wise government policy and the markets can provide solutions that will help us avoid the doomsayers’ scenarios.

Malthusian fears revisited. The rapid growth of the BRICs and other populous nations naturally raises concerns about resource scarcity, echoing Malthus's historical warnings. The surge in commodity prices since 2000 is often cited as evidence of intensifying demand straining limited supply, potentially hindering future growth and exacerbating environmental issues.

Technology and adaptation. However, history shows that human ingenuity and market responses can overcome perceived resource limits. Just as motorized transport solved the 19th-century horse manure crisis, technological innovation, increased efficiency, and the development of alternative sources can mitigate future resource pressures. Higher prices incentivize both increased supply investment and reduced demand through conservation and substitution.

China's proactive stance. Notably, China is aggressively pursuing a low-carbon economy and investing heavily in renewable energy and electric vehicles. This ambitious policy, driven by environmental concerns and energy security, could significantly alter future global energy demand projections. If China and other Growth Markets succeed in decoupling growth from traditional energy consumption, the long-term outlook for commodity prices and resource availability may be less dire than often feared.

6. The BRIC Consumer: A Transformative Force in Global Demand

The rising levels of consumption in the BRIC countries are a compelling sign of how quickly these economies are changing.

A burgeoning market. The most compelling evidence of the BRICs' transformation is the dramatic rise in consumption. From $1.4 trillion in 2000, BRIC consumption reached $5 trillion by 2010 and could rival or exceed the U.S. market by 2025. This growth is fueled by rising incomes, particularly among a rapidly expanding middle class, creating massive new markets for goods and services.

Sectoral impact. This consumer boom is already reshaping global industries. The auto industry, luxury goods, travel, and retail sectors are increasingly reliant on demand from BRIC consumers. Companies with strong brands and the ability to adapt to local tastes are finding immense opportunities, often offsetting slower growth in traditional Western markets.

Urbanization's role. Rapid urbanization in countries like China and India concentrates populations, accelerates knowledge transfer, and stimulates economic competition and consumption. The proliferation of large cities with millions of residents moving up the economic ladder creates dense, dynamic consumer hubs that are a dream for businesses. This trend, coupled with increasing wealth, is fundamentally altering global demand patterns.

7. Shifting Global Relationships and the Need for New Alliances

The rise of the BRIC economies and the Growth Markets will result in dramatic changes in relationships between those countries and the rest of the world...

New trade partners. The economic ascent of the BRICs is reshaping global trade flows. China is now Brazil's largest export market, and German exports to China are rapidly approaching those to France. This necessitates new bilateral relationships and potentially regional realignments, as countries reorient their trade strategies towards these growing markets.

Asia's complex future. Within Asia, the rise of China and India alongside a still prosperous Japan creates a complex dynamic. Managing historical tensions, fostering greater bilateral trade (especially between China and India), and cooperating on regional and global issues like resource security and climate change are crucial challenges. The potential for an Asian monetary union, while debated, highlights the need for deeper economic and political cooperation.

Western adjustments. Developed nations, particularly the United States and Europe, must adapt to the BRICs' growing influence. This involves:

• Embracing them as export markets rather than just low-cost competitors.
• Managing complex political relationships, especially with non-democratic regimes like China and Russia.
• Rethinking traditional alliances and spheres of influence.
• Encouraging free trade and investment flows while addressing legitimate concerns about fairness and reciprocity.

8. Outdated Global Governance Needs Urgent Reform

Unless the BRICs are embraced more fully by the powers that now dominate the world’s economic policy councils, we cannot enjoy the full benefits of their growth.

G7's diminishing relevance. The traditional G7 group, formed when its members dominated the world economy, no longer accurately reflects global economic power. China is the second-largest economy, Brazil is larger than Italy, and India and Russia are larger than Canada. Maintaining a structure where these rising powers are excluded from core decision-making bodies hinders effective global economic management.

The G20's potential. The G20, which includes the BRICs and other major economies, offers a more representative forum for global economic dialogue. Its revival during the 2008 crisis was a necessary step, but its size can make timely decision-making challenging. A balance between legitimacy and effectiveness is needed, perhaps through a streamlined G20 or a more representative, yet smaller, core group.

Reforming international institutions. Institutions like the IMF and World Bank, established after World War II, also need to adapt their governance structures, voting rights, and leadership selection processes to reflect the new economic reality. Appointing leaders based on merit rather than nationality and increasing the representation of BRICs and other Growth Markets is essential for their legitimacy and effectiveness in addressing global challenges.

9. Investing in Growth: Opportunities Beyond Traditional Markets

It should be clear by now that I no longer regard the BRICs as emerging markets.

Beyond "emerging". The BRICs are now integral to the global economy, and treating them as traditional emerging markets with outdated risk metrics is inappropriate. Multinational companies have recognized this, integrating BRIC operations as core to their global strategy, often ahead of financial investors.

Investment opportunities. As BRIC economies mature, their capital markets will develop, offering diverse investment opportunities across public and private equity, fixed income, and foreign exchange. This development is driven by:

• Growing domestic investor bases (pension funds, mutual funds).
• Increasing demand for sophisticated financial products.
• The need for corporate debt markets to fund infrastructure and growth.
• A political desire in some countries (like China) to develop major financial centers.

Shifting portfolio allocations. The increasing size and sophistication of BRIC capital markets will compel global investors, including large pension funds, to significantly increase their exposure to these markets to maintain diversified portfolios. Projections suggest emerging market equities could comprise over half of global equity capitalization by 2030, necessitating trillions in net purchases by Western investors.

Challenges remain. Despite the immense potential, investing in BRICs is not without challenges. These include:

• Governance and transparency issues (especially in Russia and India).
• Regulatory uncertainty and bureaucracy.
• Market volatility and potential for asset bubbles.
• The need for local expertise and patience.
  However, for investors willing to navigate these complexities, the long-term growth story of the BRICs and other Growth Markets presents compelling opportunities for diversification and return.

Last updated: July 4, 2025