BRIC Ascendant – Wall St Hype vs Reallity

February 26, 2005

In October 2003, Goldman Sachs published a research paper, ‘Dreaming with BRICs: The Path to 2050 which predicted that by 2050, the hierarchy of the largest economies would be significantly changed, with China the largest, followed by the USA, India, Japan, Brazil and Russia. All the European members of the G-7 would be significantly outpaced.

This was updated in October 2004, in a second report, called "The BRICs and Global Markets: Crude, Cars and Capital" (sorry, could not find a link – but it is summarized below), whose title is quite explicit, and which basically confirms the 4 countries’ emergence as major economic powers and the corresponding growing irrelevance of Europe, with the US more or less holding their own.

How realistic is that, seriously?

To cut to the chase, one of the consequences of this significant shift in relative wealth would be, among other, a massive reallocation of assets, as summarized in this article about the second GS report:

The share of these economies in global capital markets is currently 3.5 per cent, and depending on the extent of capital market development, they could account for anything between 10 and 17 per cent of global equity markets by 2020.

Market capitalization in the BRIC economies could increase by a factor of four times or $4 trillion (source: Goldman Sachs). While these markets will still remain dwarfed by the huge size and liquidity of Wall Street (despite such rapid growth), they will come close to approximating the size of Europe within 15 years.
(…)
Imagine if in 15 years the stock markets of the BRIC countries really approximate Europe in size.

Is there any global portfolio investor positioned adequately to handle such a seismic shift in index weightings? Europe currently accounts for approximately 15-20 per cent of most global stock indices, compared to 3-3.5 per cent for the BRIC markets.
(…)
Can global long-only investors, wedded to relative performance, profit from this inevitable directional move, or will only the hedge funds (with no index fixation) benefit?

Given all the data above as well as the conclusions of the first BRIC report, can any asset allocator really justify having only about 3 per cent of his/her equity assets in stocks of emerging market countries?

Remember that Goldman Sachs is really a huge hedging fund with an investment bank attached to it. They trade massively for their own account (i.e. they bet their own money and that of their investors), and, for some reason, they have decided that they wanted to bet on India and China and against Europe. It fits with l’air du temps (sclerotic Europe is the past, dynamic Asia is the future), it looks insightful and well researched, and they have the track record to back their bets after all…

Can I nevertheless say that I am not convinced?

Europe is doomed

A first point, made in this article (here, in French) is that Goldman Sachs is possibly close to the truth with regards to China and India (and maybe Russia and Brazil), but that it has made what appear to be voluntary mistakes to reduce the size of the European economies by taking extremely unfavorable hypotheses:

– a simple one is to take the 2000 EUR/USD rate (0.88) to convert the Euro economies in dollar terms. At the time of publication of the first report, the rate was already above 1.15 in October 2003 and above 1.20 in October 2004;

– the second one is to take reallylow growth rates for Japan (0.9%) and continental Europe (1.3 to 1.7%) – the UK, for some strange reason, is treated more kindly (2%) – and ends up being a bigger economy than Germany in 2050…

This obviously makes the European economies much smaller, relatively speaking, than the fast growing BRICs…

Future growth is extrapolated from current (high) numbers

The second point to discuss is – how sustainable on the long term is the current strong growth of the BRICs?

This research paper from the National Bank of Denmark has many interesting insights and statistics on the question. The two graphs below, pulled form that paper, show the past growth of the BRICs and the current consensus for their future growth:

This does show that, indeed, most economists expect significant growth in coming years. But then again, they expected the same with regards to Japan back in the late 80s…

Oil, oil, oil

The third issue is, of course, oil and commodities. To their credit, the second Goldman Sachs report addresses the question of oil, but this is more to show how impressive the growth will be (I have not been able to access the report itself, and am commenting on this summary, so i apologize if the question is actually treated with more care by GS, but that’s not how it looks from what I have been able to find)

(from the same article)
China and India will emerge as the world’s largest car markets over time. Within 20 years, China most probably will have overtaken the US as the world’s largest car market. India will also displace the US about 10-15 years later.

Highlighting India’s greater inefficiency in energy use, the data indicate that within 15 years India’s contribution to global oil demand growth will overtake China’s. India’s share of actual global oil demand will also peak near 17-18 per cent, similar to China’s.

The report makes the point that the emergence of the BRICK economies has already had an impact on global commodity markets, namely the impact of China. The huge price run-up in most industrial commodities is attributed to strong Chinese demand.

Speaking in fractions of the total economy is both impressive (the relative evolution of various countries appears starkly – some growing and some "declining") and misleading (the total is always 100%, which gives the impression of a stable market, even though we all know that even "declining countries" are still growing and so is their oil consumption). It would make more sense to talk in absolute volumes with regards to oil.

Thankfully, this is what this new article about China and India in the Financial Times (behind subscription wall) provides, and it gives a pretty grim picture:

The race by Asia’s two emerging economic giants to secure fuel has begun in earnest.

With world energy supplies already tight, the question is not whether the rising demand from India and China will bring them into commercial competition with each other and with other big importers such as the US and Japan: that is already happening. The question is whether it will lead to diplomatic tension and ultimately increase the risk of military conflict in the Asia-Pacific region.

Why? Quite simple:

Chines and Indian oil demand is expected to grow from respectively 7mb/d and 4mb/d today to 13mb/d and 7mb/d in 2030, an increase, for these two countries alone, of 9mb/d which happens to be the current production of Saudi Arabia or Russia, the current 2 top producers. Get this – we need a new Saudi Arabia, or a new Russia, just to accommodate the expected increased consumption of these two countries, without taking into account the demand growth of the rest of the world – and the requirement to renew the current production capacities as they decline.

Guess what? The Indians and Chinese are perfectly aware of this, and are engaging in a massive effort to access oil reserves – and to build up their military:

The main evidence of concern is that Beijing, nervous about the possible use of US and Indian naval power to control oil supplies from the Middle East in the event of conflict, is rapidly strengthening its own navy. "The Chinese are building up a capability to defend those sea lanes," says Gary Samore, director of studies at the London-based International Institute for Strategic Studies. "There is a naval rivalry building up in south-east Asia and the Indian Ocean."

(…)

In Mapping the Global Future, an assessment of the world’s prospects in 2020, the US government’s National Intelligence Council says China is expected to boost its energy consumption by 150 per cent and India by nearly 100 per cent if they maintain steady growth. "The single most important factor affecting the demand for energy will be global economic growth, particularly that of China and India," says the report, released in December.

Both countries lack domestic resources and need to ensure access to imports. "The need for energy will be a major factor in shaping their foreign and defense policies, including expanding naval power," says the intelligence report, adding that this is likely to prompt China to be more "activist" in the Middle East, Africa, Latin America and Eurasia.

And of course, meanwhile, other countries are not remaining idle:

Last year the UK for the first time became a net gas importer, as a result of which there is a lot of interest in pipeline and LNG deals in the UK and Europe," says Anna Howell, a Hong Kong-based consultant for Herbert Smith, the international law firm. "That is exactly what we’re already seeing here in India and China."

Japan, the world’s second largest economy, and South Korea, which recently sealed an agreement to buy $20bn of LNG from the Russian far east and Yemen, also remain highly dependent on energy imports. The continuing confrontation between China and Japan over a gas field in a disputed part of the East China sea and the fierce diplomatic battle (apparently won by Japan) over the route of a proposed Russian pipeline carrying Siberian oil show that the dangers of energy competition are real.

And, as the FT points out, this quest for energy has other nasty side effects:

The energy squeeze is not so good for human rights or environmental protection, in central Asia or countries such as Burma. Governments in oil importing countries typically care more about energy security than the politics of the exporter. Democratic India has forged close relations with Burma’s military junta and all but abandoned support for the pro-democracy opposition led by Aung San Suu Kyi. Like China, India is prepared to sacrifice other goals in the search for energy security.

Altogether, the FT points out that 5 different policies can be pursued:

– boost domestic output of oil and gas (this will not be sufficient),

– ensure good relations with suppliers (that means dealing with countries like Iran, Russia, Burma, Australia, Gabon, Venezuela, who have very different priorities and very different relations with the US to take into account)

– guard against disruptions to supply, by building up stockpiles (this is very costly and drives prices up);

– diversify sources of supply, both geographically and in terms of fuel types (LNG, GTL, nuclear) (this requires long term planning and investment),

– improve fuel efficiency (this requires to impose real behavioral changes to the population and economic actors).

All of these have costs, either direct (new investment, new regulations, long term purchase commitments) or indirect (competition with other countries, diplomatic interference with other issues, military build up), and runaway growth could be soon severely constrained by temporary shortages of energy.

Russia and Brazil
The situation of the BRs, as opposed to the ICs, is totally different.

The only common points are that they are big countries with currently high growth. But while China and India are commodity importers, both Russia and Brazil are commodity exporters, and a chunk of their growth (especially in the case of Russia) is caused by the commodity windfall. Brazil and Russia also are massively unequal economies (see the National Bank of Denmark study above), While Brazil has managed to attract foreign investment and has a modern industrial base, Russia is burdened by an obsolete industrial apparatus, falling population and probably the most corrupt administrative apparatus of the 4.

as a percentage of GDP

So, while Chinese (and, to some extent, Indian and Brazilian) growth is based on a massive investment drive in the industrial sector, led by foreign capital outsourcing and offshoring to take advantage of the low cost base, and swallowing resources to crank out the goods the rich world buys, Brazil to some extent and most of all Russia are taking advantage of the massive need by China for commodities.

The sheer volume of the Chinese imports is having a all too visible macro economic impact – prices skyrocketing (see oil, steel, and many others), shortage of goods (thinking shipping capacity, for instance), and rushed diplomacy viz. the commodity producing countries.

These tendencies, to some extent, are created by the massive US economic imbalances: over consumption fueled by deficits and debt – and fulfilled by Chinese production, so both the USA and China have a stake in the stability of that macro-economic "deal". The problem, of course, is that this is physically unsustainable, in that China’s industrialization requires the same resources as US consumption does, starting with oil, and that the two countries become competitors for these resources, in a new "grand game" of diplomacy, brinkmanship and military games.

Put in the middle of this the "transformational diplomacy" pursued by Bushco, which has pretty much an explicit intent to create chaos and (ultimately, hopefully) change in the most strategic region in the oil game, the Middle East, and you have many ingredients to think that the "BRIC boom" is more a dream than anything else.

So, back to Goldman Sachs
Investment banks have very simple sayings ("don’t bet against the Fed", "the trend is your friend") which make their life easier (you don’t get blamed if you’re wrong but in the middle of the herd).

Chinese growth, backed now by 20 years of impressive numbers, is such a trend. Add in the more recent "trendlets" that can be identified in the other big non-Western countries (and caused for the most part by the same underlying causes in the US), and you have an irresistible story which pleases tour new clients in these countries, flatters them, and also makes you a friend of the Bush administration.

Are the trends spectacular? Sure! Do they make for good marketing? Sure! Are they realistic? Who cares! Are we going straight into a massive brick wall? No, of course not (we would not be making money then).

What’s that word again? Denial?

Posted by on February 26, 2005 at 14:56 UTC | Permalink

Comments

Kos posted for your kind recommendations and support.
Apparently, Goldman Sachs made a presentation at CERAWeek saying that they expected oil prices to remain around 35$/b in the coming years, and that they saw an excess of supply over demand in the coming few years as many new fields came on stream.
I have trouble believing that, but they have a better track record at making money from these things than I do…

Posted by: Jérôme | Feb 26 2005 15:30 utc | 1

There’s been a lot of dissonance on Wall Street about investing in China, period. For some in the investment banking community, China’s an irresistible gold rush, while for others, it’s a rush for fool’s gold; and it would be interesting, in this respect, to see how Morgan Stanley differs from Goldman Sachs on the subject of capitalizing China (as I gather it does)–and perhaps we should read this document as a rhetorical stroke from within that ongoing debate. The question of commodities markets is a little different, I gather: it seems the Chinese need lots of stuff, such as scrap iron (a friend of mine is watching that particular niche very closely). Good brokers should do very well there.

Posted by: alabama | Feb 26 2005 15:36 utc | 2

Of course those other commodities markets (taking scrap iron as the good example here) move in response to the price of oil (since it takes a lot of fossil fuel to process scrap iron).

Posted by: alabama | Feb 26 2005 15:42 utc | 3

Any comparisson of GDP and growth not done in Purchasing Power Parity is simply useless. The Goldman Dollar/Euro is obviously wrong and the basis of their report faulty.
That said – the trends in growth and the commodity races are real. Can we find mechanisms that allow for peaceful competition in this?
Who will be the rough player in this game starting the big war of this century?

Posted by: b | Feb 26 2005 16:47 utc | 4

Some glooming analysis from Lind is fitting this thread.

“In the early morning of Feb. 9, Tokyo informed Beijing’s embassy here that the Senkaku Islands would be administered by the Japanese coast guard.” In that small story in the Christian Science Monitor are some interesting portents.
Few other newspapers bothered to report what undoubtedly seemed to editors a trivial matter. It may in fact prove trivial. But possibly not. History is well larded with small events that had large consequences, as devotees of the War of Jenkins’ Ear know. In this case, Japan told an increasingly nationalistic China to stuff it on a question, ownership of the tiny Senkakus and the possibly quite large oil and gas deposits around them, that has echoes in modern Chinese history. From the Meiji Restoration in Japan to the end of World War II, the Japanese frequently told the Chinese to stuff it. Then, there was nothing a weak China could do about it. Now, China is no longer weak.
…
To an historian, a crisis over the Senkakus would fit in a larger and not comforting pattern: the world before 1914. Then, an unstable European order blundered from crisis to crisis, just avoiding a general war in each, until some shots fired in Sarajevo brought down the whole house of cards and with it Western civilization. Today, we have the war in Iraq, the Israeli-Palestinian mess (the Balkans of our time?), the Balkans themselves, a threatened American attack on Iran, a resurgent FARC in Columbia, and a North Korea that just declared itself a nuclear state. The fin de siecle feeling grows ever stronger; what small incident will it be this time that causes the house of cards to collapse, the house of cards that is a world of “unipolar” American dominance?
The tragedy here is that states continue to play the game of rivalry between states, paying no attention to the prime fact of a Fourth Generation world: when states fight each other, the likely winners will be non-state elements. Again, the analogy with 1914 is hard to avoid. Then, the ancient Houses of Hapsburg, Romanov and Hohenzollern remained focused on each other, thinking only in terms of which would triumph over its rivals. In fact, the events they allowed to be set in motion destroyed them all. The real victors were a guy named Ulyanov sitting in a café in Zurich and a transatlantic republic, the United States.
…
So it will be today when states fight other states, regardless of which state “wins” the formal conflict. We see that already in Iraq, where the American victory over the Iraqi state created a new and fertile field for Islamic non-state forces. China could easily come apart internally as a result of war; God knows what might emerge out of a Japan that again suffered nuclear attack, or the ruins of Korea. Nor is the internal stability of the United States guaranteed in the event of military defeat and strategic disaster. Thanks to the cultural Marxism of “Political Correctness” and “multiculturalism,” we are no longer “one nation, under God, indivisible.”

Posted by: b | Feb 26 2005 17:22 utc | 5

Another interesting report, even longer than Jérôme’s piece from the PINR: ”Setting the Stage for a New Cold War: China’s Quest for Energy Security” Here is the last graph of the detailed report.

Conclusion: Energy Takes Center Stage as the Catalyst for Conflict
Friction between China and the West has so far focused on the question of China’s undervalued exchange rate, its human rights record and relations with “rogue” states. However, the competition over energy resources is now becoming an additional area of contention. China’s growing presence on the international energy stage could ultimately bring it into confrontation with the world’s largest energy consumer, the United States. While China and the U.S. have launched the U.S.-China Energy Policy Dialogue, both states are also engaged in a competition for energy resources in Russia, the Caspian, the Middle East, the Americas and Africa. This competition could potentially combine with other areas of friction. For example, in the event of China engaging in a conflict with Taiwan, Japan or India or internal repression such as a repeat of the Tiananmen Square massacre of 1989, the United States could censure China’s actions by an oil embargo or by blocking vital sea lanes in the Straits of Malacca, thus sparking a wider conflict.
It is not by coincidence that China has made progress in resolving its border disputes with India and Russia, while failing to make progress on territorial disputes with Japan in the East China Sea and in the South China Sea given that the latter involve access to potential oil and gas resources. In this context, China’s claim to pursuing a “peaceful ascendancy” policy and putting aside areas of disagreement in favor of creating a stable environment for economic development is limited to areas where China’s vital strategic interests are not threatened.

Posted by: Anonymous | Feb 26 2005 18:21 utc | 6

> What’s that word again? Denial?
My very dilletante and ideologically tinged rant.
To understand the opinions which come out of places like Goldman Sachs and other major money corporations, it helps if one understands that it is these places who actually steer national economies and the world economy at large.
Second, the analysis does not take seem to take oil or energy shortage into account too much, and it also seems not to factor in major wars precisely because of this. That is rather funny in face of the US doing just about everything in their power to piss off everybody else.
Now, why would the BRIC nationsgrow big, the US more or less keep its place and europe be relegated to insignificance in the eyes of these people ?
BRIC or Brazil Russia India China, have in common that there is no ‘social net’ in place, at least nothing comparable to what most european countries have. By ‘social net’ i mean a system where companies have to pay into funds which finance unemployment monies and retirements, plus a viable healthcare system.
The US stilll has some of it but they are disposing of it at a rapid pace.
The UK would look a bit better as compared to continental europe because maggie thatcher already did good work fucking the english over for what they were worth.
On continental europe most nations have still viable social networks and qualitatively good public healthcare systems. All of this costs a lot, but what is worse, the companies by law have to match up in some form or other what employees pay into same insurance pots. Also, there are lots of communal, provincial and national taxes which apply to employers as a function of their payroll. For example, here in Vienna every company has to pay a “U-Bahn Tax” according to their number of employees.
All of this is, in the eyes of people who work as analysts for institutions of dubious honorability like Goldman Sachs, expenses which bring nothing in return. In their eyes, fffordable healthcare for everybody is expensive, to pay for workers retirements is expensive, unemployment benefits are expensive. Expensive translates to undesirable.
The economic models of China for example, where labor is cheap and a considerable art of the working force is organized as parts of a gulag, or India, where lots of children work for almost nothing and laws protecting the labor force are probably ineffective if they exist at all, is always to be favored over an economic system where they would be compelled to carry their part of the costs.
The shibbolet (or sibboleth, depending on who you are) which determines how their analysis is to be ‘correctly’ interpreted is of course “economic growth”, or more exactly “the economy”.
“Economic growth”: reality-based (or lefty) people would tend to say something like “the wages increaded 3% but the inflation was 3,5%, thus the real buying power decreased by 0,5%, additionally, 9500 small businesses went bust and unemployment increased to 9,5% over the period” (sounds bad, or not ?). At the same time, the Goldman Sachs guy would probably say “Wages increased by 0,5% less than inflation, additionally, many unviable companies went out of business thus increasing the overall market flexibility of the better adapted actors. Net increases of after-tax earnings averaged 15% for major corporations during the period” (sounds reassuring).
From above it should become clear what “economy” is to these people, how it is segmented, who are the (worthy) actors and who is not, and what is economic growth.
In short, i’d generally say “yes, denial” but with some caveats as to the mentality and outlook of those supposedly in denial.

Posted by: name | Feb 26 2005 20:51 utc | 7

i would like to somewhat alter and complete the conclusion to my post.
the paper by Goldman Sachs and others as presented and analyzed by Jerome would be not so much bona-fide analysis of the future viability of the different economic blocs, but an ideological rant telling european political elites to ditch social security and public healthcare fast _or_else_, camouflaged as an economic analysis.

Posted by: name | Feb 26 2005 21:09 utc | 8

@name –
you are spot on – it is pure ideology. Unfortunatly it does get distributed “as is” in most media.
I wonder what oil price is the base of their analyse. Even this week I saw predictions of an average $30-35/bl for this year. This is redicules even if we would have a global crash.
We will be lucky if the average will stay below $50bl this year.

Posted by: b | Feb 26 2005 21:56 utc | 9

WaPo on page A1: China’s Quiet Rise Casts Wide Shadow

With stronger economic ties between East Asian countries and China has come a rise in Beijing’s political and diplomatic influence, according to a variety of sources in China and the region. Treading softly but casting a big shadow, they say, China has emerged as an active and decisive leader in East Asia, transforming economic and diplomatic relationships across an area long dominated by the United States.
The shift in status, increasingly clear over the past year, has changed the way Chinese officials view their country’s international role as well as the way other Asians look to Beijing for cues. In many ways, China has started to act like a traditional big power, tending to its regional interests and pulling smaller neighbors along in its wake.
…
“There is now this feeling that we have to consult the Chinese,” said Abdul Razak Baginda of the Malaysian Strategic Research Center. He added, “We have to accept some degree of Chinese leadership, particularly in light of the lack of leadership elsewhere.”
…
Although teenagers across Asia follow Japanese fads and read Japanese comics, its cultural power has been no match for China’s, which is exported through language ties, entrenched overseas communities and traditional philosophies. In addition, Japan’s role as a ruthless military occupier during World War II created a legacy that still haunts the region.

How will the US (and Japan) react? So far they want to fight this out, if needed with brutal force. my take is – it`s too late. Either you nuke China or you comply with their natural role.
They have some $800 billion in US bonds and treasuries. Do you really want to nuke them?

Posted by: b | Feb 26 2005 22:51 utc | 10

b – thanks for all the good links.
As I’ve written before, the Chinese see themselves in a position of very high vulnerability currently, and they are doing their best not to piss off the USA, which, from their point of view, has further become irrational and petulant, but still has tremendous ability to do damage: import rules, control of the shipping lanes, influence over the oil majors and over many of the commodity producers (think Australia)…
And they have real problems to solve – find the oil, coal, steel, etc… to keep the industrial machine that needs to absorb dozens of millions of migrant workers, without destroying completely their air, water, etc. They are bumping against the limits of the no-holds-barred growth model, internally and externally, and they have to be extremely careful in what they do.

Posted by: Jérôme | Feb 26 2005 23:07 utc | 11

Yes, b – that statement stood out to me too when I read this article today (…lack of leadership elswhere…).
Before reading this thread, I had not heard of the Senakaku Islands nor the dispute over them. But I used to hear a lot about the Spratly Islands further south, claimed to some extent by China, Viet Nam, the Philippines, and also – I think – Indonesia. I used to expect that that would become a flashpoint for hostilities of some sort, but I never hear anything about the Spratlys anymore.

Posted by: Maxcrat | Feb 26 2005 23:14 utc | 12

I am surprised that some good hearted socialist hasn’t pointed out all those dollars collected by China and Japan are actually the difference in wages paid to workers in China and to Japan’s contract workers in SE Asia and to workers in the USA. Capitalists are making their money by syphoning of a percentage of the money movement between the US and Asia.
This whole scheme depends on cheap transportation on huge container ships that cross the Pacific.
War, an oil crises or worker uprisings will bring the whole house of cards tumbling down. Or, perhaps in the less apocalyptic version, the US federal debt raises interest rates enough that all the households with ARMs default on their mortgages crashing the housing bubble and throwing the USA into a depression.

Posted by: Jim S | Feb 26 2005 23:15 utc | 13

This is baloney. Anyone who puts Russia that high and assumes Japan will rise again well above the EU should stop crack.
India and China will be hit hard by economic crises and recessions between now and 2050. EU, Japan, US will too, but you can’t project a continuous growth in both these big economies.
Of the BRIC + Japan, only Russia has enough oil for istelf. In fact, if you add US and EU, it still works. And with time, peaked Russian reserves and economic development of Russia, Moscow may well have to stop oil exports, and will just be the only major economic power to be (barely) self-sufficient for a couple of decades.
Why consider the military build-up from India and China as a preliminary of an Asian Great War? Is it too far-fetched to suspect they may decide to divide Middle East and Central Asia between themselves, and to merely close the area to US? In the middle term, India could well close the Gulf to US.
GS stating that oil will be at 35$ for several years? Damn, someone please tell me why these hack crack-heads idiots are paid millions each year, and I’m not? Even me, who’s as close to an economist as Bush is to a French Literature PhD, can see this is lunacy.
Alabama: scrap iron, indeed. I’ve got a friend who told me recently that what you just dumped for free or even had to pay to get rid of is now bought for a pretty nice sum.
B: “Who will be the rough player in this game starting the big war of this century?”
That was a rhetorical question, I suppose? Or are you waiting for W to go after Iran to answer?
Lind is quite right, alas (well, except for the silly reactionary bit about Marxism multiculturalism but that’s not surprising from him).
“In fact, the events they allowed to be set in motion destroyed them all. The real victors were a guy named Ulyanov sitting in a café in Zurich and a transatlantic republic, the United States.”
This actually is why I’ve always thought that EU should officially declare that it will be no part of any war between US and islamists, or US and China, and should just sit on the fence watching the show, why building up military. Then, if the winner isn’t totally exhausted and still shows some violent tendencies, they should jump in and put it to rest, like a rabid dog. (notice I didn’t mention who would be the winner; I don’t know and ultimately don’t care much)
I also think Lind is dead wrong when he talks about N Korea nuking Osaka. There’s no strategic value in doing this, particularly when they may not even have a dozen of nukes, making them that more valuable. There is one and only one worthy target there, and it’s Tokyo. Hit the head, and the whole body of capitalist economy collapses like a rotten wooden house.
Name, you’re way too kind with ” institutions of dubious honorability like Goldman Sachs”
What about “world-classe criminal and human scum”?
Of course, your analysis is the right one. This is pure propaganda about “how the world should work, according to our slave-owner mindset”. Or “if you don’t agree I’m the Master of the World, you should die, you rebel scum”

Posted by: Clueless Joe | Feb 26 2005 23:32 utc | 14

Jérôme: You probably already thought of this frightening thought I have, but if shit happens and a massive military conflagration erupts, I don’t think China will have much trouble with millions of unemployed workers; they’ll just beef up their army and will send them marching through Asia. They look to me to be quite similar to Stalin in 1940, frightened to death by Hitler and not wanting to piss the Nazis off under any excuse.
Jim S: Indeed, a major war and oil crisis would seriously limit the sea trade and would make local factories more useful. The real question is how many factories are left in the US? If a lot of them have actually been brought down and shipped to China to be rebuilt, it would take some time before the US rebuilds a serious industrial base (except probably for military hardware).

Posted by: Clueless Joe | Feb 26 2005 23:36 utc | 15

Can anyone make sense of this logic? We’ve known for decades that China would be The Power by mid 21 cen, if we’re still around, or First Among Equals. So how the fuck does it make sense to accelerate that development & destroy yourselves internally by shipping all yr. factories – often literally lock, stock & barrel – to them??????? Especially when the age of cheap oil will then be long gone?
Or is the answer, obviously it’s Insane; but it’s what happens when you let David Rockefeller & the capitalist elite destroy your national government?

Posted by: jj | Feb 27 2005 2:16 utc | 16

@ b “Can we find mechanisms that allow for peaceful competition in this?”
Isn’t competition inherent in Capitaism? Remember as VP Dick Cheny said, “The American Way of life is non-negotiatable.”

Posted by: The Key | Feb 27 2005 9:52 utc | 17

“The American Way of life is non-negotiable.” Provided of course one has defined what the term means. “American Way of Life” = the way of life that further enriches and empowers people like Cheney? I thought so.

Posted by: teuton | Feb 27 2005 15:44 utc | 18

@key that wasn’t Cheney iirc, that was Bush Sr.

Posted by: DeAnander | Feb 28 2005 3:09 utc | 19

@key afterthought — same Hydra, different head.

Posted by: DeAnander | Feb 28 2005 3:10 utc | 20

I’ve always found that in Ireland, you can determine who an economist works for by reading their opinions on house prices. If they say that there is a massive price bubble, sure to burst soon, they work for a stockbroker. If they say that the price increases are natural and justified they work for a lending agency. In-house economists rarely publish opinions that are inconvenient for their employers.

Posted by: Colman | Feb 28 2005 12:32 utc | 21

To rephrase the GS report: please move lots of your money into stocks we own and funds we manage so we can make a killing.
I’m not sure that a deeper reading of this is really required. It’s all about this quarter’s bonus.

Posted by: Colman | Feb 28 2005 12:39 utc | 22

By the by, the report is not talking about the EU: it’s talking about existing members of the G7, blithely ignoring the existence of the EU. So, Germany, France and the UK will be matched together by China, Brazil, India and Russia together.
Not the EU, since the EU isn’t a member of the G7. See? If they counted the EU at a realistic Euro exchange rate, the EU might be bigger than the US, and that wouldn’t do.

Posted by: Colman | Feb 28 2005 12:48 utc | 23

If memory serves, before the BRIC’s and before the asian tigers there were the NIC’s (new industrialising countries). Does anyone remember them? Brazil was part of this group too (and Mexico).

Posted by: Greco | Feb 28 2005 13:10 utc | 24

Greco – yep
“developping countries”
“emerging markets’
“tigers”
“BRIC”
etc…
De Gaulle had the ultimate putdown: “Brazil is a country with great prospects and will remain that way for a long time”

Posted by: Jérôme | Feb 28 2005 18:35 utc | 25

The last employee I had, I paid 18% (rather standard, it may vary a bit, Switzerland) of her salary for social charges. The details are too tedious, and don’t properly describe the situation, which is complex. Anyway, to give a rough picture, that covered employer’s contrib. to old age pension (social security), invalidity insurance (“disability” – coverage not too good) to second level pension (a big whack), unemployment insurance (18 months at 80% of pay, she was a mother), accident insurance (90+% coverage for work / work – trajectory related accidents), and more. It did not include health insurance (health insurance is ‘private’ in CH), but covered up to a year of salary paid in full for incapacity to work due to illness or disability provoked by ill-health. And a few more little things.
So what? It makes for happy, secure employees, who can hop in and out (usually rapidly out, except for ppl aged over 55, another snarl) of unemployment; ppl who spend their money; ppl who can, and do, re-train; ppl who will work hard, and will not take a second or third job; ppl who are committed to their job and do not feel the urge to steal from their employer or cheat him; children who feel and are secure; etc. If anything can be said against it from a capitalist p-o-v (adopted here) it is that the system does not encourage mobility and creativity. However, the main obstacles to mobility in CH are to be found elsewhere; mainly lack of affordable or any housing, linguistic diversity, a jagged geography and expensive, often impossible, travel; local fief-doms…; creativity is too slippery to take up here.
The US insistence on cheap labor (to put it very, very kindly) is an outcome of its history: lush, virgin lands, the killing off of the original inhabitants, the importing of cut-price workers, that is, slaves, and immigrants who worked just to eat. Plentiful energy resources (now gone! The tractor replaced the slave..) coupled with the championing of the car, the illusion of glamor and freedom used as a hidden prop to worker mobility, lead to an impasse, see today’s MacMansions.
A foolhardy, headlong, depletion of its assets, a conquering mentality, and finally, the impossibility of doing anything else besides exporting that ideology, or imposing it on others, while insisting on the non-negotiable Amercian way of life – and ultimately, straight-out killing for those resources that are necessary for its survival, was the only option.
“Pure ideology” – “How the world should work” (See name, b, Clueless Joe..)
Open doors! — many other things could be said.

Posted by: Blackie | Feb 28 2005 20:16 utc | 26

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