BRICs: A Puny Declaration but a Brawny Future

by Sanjeev Kulkarni

In my GEI News Brief reporting on the April BRIC Conference I was struck by a number of opinionated observations (mine) that had no place in a news article. Those thoughts have prompted the following Op Ed.

I’ll start with something that may sound harsh: Almost all senior government and military officials from every country ultimately morph into people who basically do not have to earn their living, have nil accountability and with an alibi for every failure. Since these are the people that have structured the current state of world affairs, is it any surprise that the world has so many of their collective characteristics?

As a crude generalization, the military and government folks from US are too isolated living in their own cocoon and thinking that they own the world. In India the wide spread graft in bureaucracy and the politician-bureaucracy nexis is well known. The situation in China is not much different and officials in Brussels are far removed from pan European ground reality.

But a few observations can be given.

The US dollar is being subjected to tri-variant requirements of fiat sovereign currency, world reserve currency and the boiling frog syndrome that the dollar is invincible. International trade has shifted from being US centric to multiple regions, so multi-lateral trade agreements are bound to follow.

As we know the helicopter money never went for creating genuine US sovereign wealth. Most of it was balance sheet adjustment to recapitalize poor balance sheets of financial institutions. This many argue was necessary. Whatever real surplus money was available leaked away abroad to create asset bubbles.

Independent of the asset bubble is the rising demand for commodities, natural resources and rising energy demands due to population pressures and developing emerging economies.

This is not to say that the dollar will collapse overnight, but we are looking at likely degradation over a period of ten years, more or less.

The response to these likely developments throughout the world is made more difficult by various parochial situations. For example, India is too garrulous. Indians revel in their democratic processes….but then everything cannot be subjected to strikes and endless debates which produce nothing but hot air. Look at the politicization of nuclear power plants issue here. Where in the heavens is energy going to come from? US sources 20 percent electricity from nuclear plants, France 77 percent. And in India it is measly 3 percent. Of course, China is even less. (All data is from 2007.)

Some sense is dawning that India and China face similar problems and they are not easy to solve despite the Chinese bravado and their usual smoke and mirror statistics. Building fast trains that the normal people cannot afford or building ghost cities is not real progress despite the impressive GDP figures dished out by China.

The Chinese leadership is slowly waking up to the fact that that they can no longer behave as bullies. And, as I have been saying all along, China is a paper dragon and must reform. Only one little match can destroy the largest paper dragon

In that sense the importance of BRIC’s declaration cannot be ignored. Newer silk trade routes are being formed with multiple centers, of which Europe and US will be amongst many. However, as a reading of the news article clearly reveals, the declaration is long on enumerated points and short on definitive action.

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Sanjeev Kulkarni is an entrepreneur based in Pune, India. He worked for large organizations in board level position before venturing on his own. He is currently involved as an investor in health care software company and as an investor, mentor in an automation company. Very widely traveled, he has experience of working in different geographical areas with people of varying nationalities. He did his BS from Indian Institute of Technology, Delhi.