Another BRIC in the Wall?

NEW YORK – Conventional wisdom rarely survives a good stress test, and few tests have been as stressful as that which the global economy has endured over the past 24 months. A healthy season of reappraisal has dawned, shining a new light on boom-time notions like the value of opaque markets, the untouchable status of the American consumer, or the wisdom of deregulation.

One piece of bubble wisdom that has escaped relatively unscathed, however, is the assumption that the “BRIC” countries – Brazil, Russia, India, and China – will increasingly call the economic tune in years to come. The BRIC notion, coined in a 2003 Goldman Sachs report, is not all bad: at 75% correct, it scores a good deal better than most economic prognostications of the day.

Yet the economic crisis that began in 2008 exposed one of the four as an impostor. Set the vital statistics of the BRIC economies side-by-side and it becomes painfully obvious that, in the words of the old Sesame Street game, “One of these things is not like the other.”  

The weakness of the Russian economy and its highly leveraged banks and corporations, in particular, which was masked in recent years by the windfall brought by spiking oil and gas prices, burst into full view as the global economy tumbled. Saddled with a rust-belt infrastructure, Russia further disqualifies itself with dysfunctional and revanchist politics and a demographic trend in near-terminal decline.