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The Bloom Is off the BRICS

A few years ago, pundits and policymakers were predicting that the BRICS countries would be the new engines of the global economy. But now, with all five countries facing serious challenges to growth, they will have to double down on pro-market reform if they are to avoid the dreaded middle-income trap.

STANFORD – A few years ago, pundits and policymakers were predicting that the BRICS countries – Brazil, Russia, India, China, and South Africa – would be the new engines of global growth. Naive extrapolation of rapid growth led many people to imagine an ever-brighter future for these economies – and, thanks to them, for the rest of the world as well.

But now the bloom is off the rose. The economies of Brazil and Russia are contracting, while those of China and South Africa have slowed substantially. Only India’s growth rate has stayed up, now slightly exceeding China’s. Will the BRICS fulfill their former promise? Or are continued problems inevitable?

Given that low-income economies typically have little fixed capital (computers, factories, infrastructure) and human capital (education and training) per worker, they tend to have higher potential returns to capital investment. That means they can grow more rapidly than wealthier economies, until their per capita income catches up.

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