On Sept. 14, 2008, American financial services firm Lehman Brothers collapsed. This failure set off a chain reaction of ill-fated economic events spurring a global economic crisis.
The recession plunged the world’s markets into the worst financial crisis in modern history. News of bailouts, layoffs, bankruptcies and shrinking Gross Domestic Product (GDP)’s dominated the headlines all year.
In April 2009, the International Monetary Fund (IMF) said figures this dire have not been seen since the Great Depression of the 1930s. Again, at the end of August 2009, Bloomberg reported that the world was finally emerging from the worst recession since the end of the Second World War.
Today, many of the world’s economies are beginning to show signs of recovery.
Notably, however, America is still in a slump, and as a result, the United States may soon find its influence in the world waning.
Money spells power in the world of economics. The fact that the U.S. dollar is the main global reserve currency means America holds superpower status, economically and geopolitically speaking, throughout the world.
However, as the dollar continues its slide, more and more countries are openly hinting about moving away from or dropping the currency altogether.
“Dollar obituaries are nothing new,” stated the Telegraph’s Edmund Conway. However, today the Telegraph reports that, according to Stephen Jen of BlueGold Capital Management, “People are having second thoughts not simply because they don’t like the dollar, but they are having second thoughts about whether U.S. assets are obviously the strongest assets to own.”
In an interview with Russia Today, financial analyst Max Keiser explained, “Countries like Russia and China and Brazil are trying to divorce themselves from the U.S., because it’s a completely toxic currency that’s just right for fraud. It supports an empire that’s just too lazy to compete.”
While this is a frightening proposition for those who appreciate America’s influence and condone America’s policing of the world, the BRIC countries – Brazil, Russia, India, China – see this as an opportunity of multifaceted proportions.
The BRIC countries make up the fastest growing developing economies in the world. In 2001, Goldman Sachs hypothesized that together the BRICs would take over the world’s economic markets by 2050.
Strangely enough, this latest global economic crisis appears to have helped the BRIC countries more than ever before. Therefore, it is very possible that this economic crisis could spell out a new alignment of world powers.
For years the BRIC countries have asked, “Why not the yuan, rupee, ruble or the real?”
At the first BRIC summit in Yekaterinburg, Russia on June 19, the group collectively recognized that the aftermath of the global recession marked its best chance for increasing each country’s clout on the world stage. For these countries, a higher position in the global pecking order means more influence in international policymaking and eventually, the possibility of a movement to a “multi-polar” world.
Interestingly, many Canadians have similar sentiment.
At a Sept. 19 Young Liberals rally at Wilfrid Laurier University’s campus pub Wilfs, Canada’s opposition leader Michael Ignatieff said, “You’ve got to have government that invests in creating new markets in India and China. If you want growth then you’ve got to go where growth is. Where is the growth? You all know it, it’s India and China.”
Ignatieff furthered, “And where has the Prime Minister been over the last four years? Well, I can tell you one thing – he hasn’t been to Beijing and New Delhi. He hasn’t been to India and China.”
It appears that in the future, countries like Canada may no longer look south of the border for economic growth, stability, and power. Instead, they could be looking to the BRICs.
However, there are skeptics out there – those who believe the BRICs do not stand a chance on the world stage. Whatever the case, winds of change are appearing in the forecast. Most telling remains that earlier this month, the United Nations backed an initiative to create an artificial global reserve currency.
While this is not the first time such a suggestion has been posed, a global institution backing such a recommendation is a first. Chris Higson, a professor at a London business school, told Russia Today that access and use of a variety of global currencies is a positive step for the world economy.
Higson explained, “We will be in a better place if we simply don’t rely on one possibly unreliable superpower exercising its authority.”
Overall, it is undeniable that the BRIC countries harbour great potential.
Regardless of what happens in the coming months and years, these emerging markets will remain the ones to watch for in the future.
The governments of the eight countries (Canada, France, Germany, Italy, Japan, Russia, the United Kingdom, and the United States) in the world’s northern hemisphere.
The central bank governors and financial ministers from the world’s 19 largest economies, plus the European Union.
The developing economies of Brazil, Russia, India and China, which represent the fastest growing markets in the world.
Portion of world currency reserves held in American dollars.
The year by which Goldman Sachs predicts the combined economies of the BRICs will eclipse the combined economies of the world’s richest countries.
Amount of global land area the BRICs account for.
Percentage of the world’s population that call the BRICs home.