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    South Asia
 
     Jan 26, 2011
 


 

Long live BRIC, welcome MIST
By Sreeram Chaulia

After setting the terms of discourse in world affairs at the turn of the millennium with the coinage, "BRIC" (Brazil, Russia, India and China), Jim O'Neill - the former chief economist of Goldman Sachs - has just kick-started the new decade with a fresh acronym: "MIST" (Mexico, Indonesia, South Korea and Turkey).

The catchiness of a four-country grouping which can be uttered in a simple abbreviated form that can play on every stakeholder's lip has proven a sure hit with BRIC, which captivated the investor community and shook global geopolitics. Whether MIST can achieve the same haloed status as a byword for high, guaranteed return on money and as a harbinger of further redistribution of power in the international system remains to be seen.

O'Neill, who is now chairman of Goldman Sachs Asset Management, believes that these four distinct economies deserve to be uttered in the same breath because each of them fulfills the size criterion of accounting for more than 1% of global GDP in nominal terms. He also expects the MIST economies to rise further in size and hence makes the case for them to be taken seriously as growth markets.

O'Neill has an uncanny knack of timing his neologisms to coincide with large pools of investment funds seeking new opportunities and pastures. The magical and solid-sounding BRIC helped channel enormous sums of capital into its constituent countries at a time where interests rates were low globally and money managers were on the look out for higher yielding destinations in Asia. BRIC countries themselves seized upon O'Neill's phrase and engaged in their own BRIC heads-of-state summits, BRIC investment forums, and BRIC academic seminars to cash in on the euphoria.

Today, with interest rates at an all-time low in advanced economies, MIST might just prove to be another hit as investors buy into O'Neill's growth markets advice for engineering a long-term realignment of capital flows in their direction.

South Korea, Indonesia and Turkey have already become targets of "hot money" infusions since the economic crash of 2008 and their respective governments have been installing checks to prevent excessive short-term speculative movements that may hurt their macroeconomic stability. The "MIST" concept could well hurt their immediate efforts to limit unmanageably large sums of capital rushing in, but hardly any contemporary government will pass up a chance to be paraded as the ideal new place to do business.

Fast growing economies in Asia love nation-branding and image-burnishing through certification from Western opinion-making citadels like Goldman Sachs. This month, Moody's raised Indonesia's credit rating to a 13-year-high of "Ba1", which is just one step below investment grade and right behind the positions of Brazil and India.

But the authorities in Jakarta were dissatisfied and issued statements to the effect that their country deserved better and that they will strive to get the coveted investment grade in 2011 from all the principal Western rating agencies. O'Neill could well have framed the most seductive new term in international business from the perspective of MIST's members.

Critics abound of the BRIC concept and it is obvious that doubts will also be raised about MIST as a hodgepodge that lacks unit homogeneity and does not match basic comparative metrics. The differences in liquidity within the MIST stock markets, per capita incomes, as well as the varied forms of capital controls and macroeconomic models adopted by each of these four countries will be thrown up to contend that O'Neill is indulging in gimmickry or crass salesmanship.

Indian economist Ila Patnaik wrote last year that democratic India had a starkly contrasting governance environment compared to authoritarian China and Russia, and that BRIC is a "meaningless" group for mutual learning of policy lessons. She advocated, instead, that India learn from "countries more like us", ie democracies such as Brazil, South Korea, South Africa and Turkey. If her line of thinking were advanced, India has more in common with MIST than with the rest of BRIC.

Still, all the BRIC countries together decided that size of gross domestic product and potential for growth were sufficient minimum common denominators on the basis of which they could carry across ideas and best practices for piloting their respective rises in the global economy. Despite O'Neill's detractors, his BRIC prophecy has been self-fulfilling and MIST promises to follow suit.

One of the less understood consequences of O'Neill's investor-advice catch phrases is their capacity to break understood notions of who dominates the world order. In hindsight, we can now see that the "unipolar moment" of the 1990s ended in the previous decade thanks to popularization of the term BRIC.

When Russia, China, India and Brazil lay prostrate and the US economy was "roaring" in the nineties, as economist Joseph Stiglitz put it, the international power configuration was decidedly unipolar. Once BRIC picked up momentum and began registering rapid growth (partially as a result of O'Neill's prognosis that appealed to foreign investors), it came home that we no longer lived in a world with a sole superpower.

Size does matter in measurement of power, no matter what the internal divergences are among BRIC or MIST countries. The more BRIC and MIST grow in GDP size, the greater their capability to convert economic resources into military and soft power gains. No one can gainsay the fact that BRIC countries' militaries grew in power projection abilities and technological know-how over the last ten years as a direct result of their economic growth.

Defense outlays, which are measured as a percent of a nation's GDP, proportionally increase as an economy grows. Likewise, the resource base with which a state can drum up goodwill and win more friends by playing a more global role is economic in nature. If public diplomacy divisions of foreign ministries of the "emerged" countries are to be effective, the bottom line is how big their war chests are and how well they are complemented by their respective national capitalist classes.

Fixation with GDP has rightly been lambasted by followers of alternative yardsticks of a nation's worth, such as low carbon footprints, prevalence of rule of law and social justice, lesser income inequalities, better human development indices, and even maximum levels of "gross happiness" among the citizenry.

But Jim O'Neill knows the pulse of the current international political economy better. A compact between states and markets exists wherein the pursuit of GDP growth has been set in stone as the most desirable trait which will be pursued at any cost, even it means producing vast multitudes of losers in society.

In imagery, MIST evokes a vapidity unlike the tactile and reassuring BRIC. But symbolism aside, the former might redefine the second decade of this century by distributing hard and soft power even more horizontally across the globe. The word "multipolarity" will have a more populated and dense sense if MIST (plus some inevitable additions and self-nominations that will be inserted as more medium-sized economies grow in Asia, Africa and Latin America) becomes the toast of policymakers.

Sreeram Chaulia is Vice Dean of the Jindal School of International Affairs in Sonipat, India, and the author of the forthcoming book, International Organizations and Civilian Protection: Power, Ideas and Humanitarian Aid in Conflict Zones (I B Tauris).

(Copyright 2011 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)
 

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