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Tag: JIM O'NEILL

  • Jim O’Neill on 9/11, the BRICs, and Biden’s priorities

    Jim O’Neill on 9/11, the BRICs, and Biden’s priorities

     

    The former Commercial Secretary to the Treasury and Goldman Sachs chief economist on the 20thanniversary of coining the influential term the BRICs

    In late summer 2001, when I was co-head of economic research at Goldman Sachs with Gavin Davies, it became clear there was a strong probability Gavin would be leaving to become Chairman of the BBC. In Goldman’s inimitable style, their immediate thought was to find another co-head for me.

    And so I became involved in interviewing all sorts of incredibly illustrious economists from around the world – spectacularly well-known names. I had to explore the idea that I would have some credibility as their equal.

    Then, crucially, September 11thhappened. I’d been at the annual Economics Association Conference in the Twin Towers. On the Tuesday, Gavin and I were hosting our monthly video conference with all our MDs around the world. Halfway through, the guys in New York left. We were wrapped up in our little world – we just carried on. Then, around 15 minutes later Gavin left for his final interview for the BBC. He popped back into the room and said: “I think you probably want to be aware that apparently some plane has hit one of the Twin Towers.” My first instinct was to say: “Okay, thanks Gavin. Now, you guys in Asia…”

    But within two days of it happening, I came to the strange conclusion that the underlying message to take away from this tragedy – rightly or wrongly – is that this was the end of American-led globalisation. It was the terrorists lashing out and saying: “We’ve had enough of Americanization.”

    Within six weeks, I published my first piece: ‘The world needs better economic BRICs”. Three things were at the core of it. Firstly, I’d already been mesmerised by China’s role in helping solve the Asian crisis in the late 90s so I was already aware of the relevance of China for the world. Then, of course, we were coming to the end of the first decade of the collapse of the Soviet Union, and the supposed emergence of Russia as some kind of democratic state. The G7 would soon expand to the G8 to accommodate Russia. 

    Thirdly, we’d also seen the launch of the Euro as a single currency. So France, Germany and Italy now shared a single monetary policy, currency and the common framework for fiscal policy, which would still have the same equal representation as all these seeds of global economic governance.

    It was only in 2003 that the acronym became well-known in business, when we published our outline as to what the world could look like by 2050.  We deliberately called that ‘Dreaming with BRICs’. People forget that we wrote about what could happen if ever country fulfilled its potential. Of course, in reality the idea that every country in the world would reach its productivity potential is crazy. The idea that they’d all do it at the same time is completely absurd. 

    In reality, what has happened is that China has become so big that it’s twice the size of the other three put together. So when it comes to discussing the BRICs as an economic or political group, China completely dominates. Because of that, it still means that the various assumptions we made about the BRICS becoming bigger than the G6 in the future, actually could still happen – despite what has been a very disappointing decade for Brazil and Russia. 

    Overall, China and India look as though they’re going along the central path that we assumed. Meanwhile, Brazil and Russia have proved that they suffer from the so-called commodities curse. They can’t seemingly adjust their economies from being excessively dependent on commodity price swings. They keep having these violent economic cycles. In both countries, there’s also significant evidence of misallocation of resources and a lot of blatant corrupt practices that go with these dominant industries. Both countries need to reform and stimulate their private sectors.

    Interestingly, the legal people at Goldman spent a brief amount of time exploring the case for acquiring the rights to the acronym. Whenever anyone mentioned the phrase BRICs, they wanted it to be Goldman Sachs BRICs. I argued against that because then other places wouldn’t have used it. 

    Today I worry that the American democratic system is struggling. The country is having to adjust to the fact that for the past 20 years, US economic growth has been so unequal. There’s been no rise in real wages during that time, which has caused this remarkable split politically. If we don’t see renewed economic growth post-COVID – and alongside it, shared economic growth – then the fragility will only grow more.

  • Jim O’Neill on the MINTs, Goldman v government, and how countries become successful

    Jim O’Neill on the MINTs, Goldman v government, and how countries become successful

    former Chief Economist at Goldman Sachs and former Commercial Secretary to the Treasury Jim O’Neill

    After my paper published by Goldman Sachs coining the term ‘the BRICs’ – which referred to Brazil, Russia, China and India as crucial emerging markets – I used to engage with other countries’ finance ministers. Occasionally I’d find countries annoyed not to have been included in the acronym.

    In 2013, I coined the term the MINTs, to take into account Mexico, Indonesia, Nigeria and Turkey – all of which seemed to me interesting countries.

    Today, the country that has the biggest viable basis for being irritated that it wasn’t included in the BRICs acronym is Indonesia. It’s a very interesting place – it’s another significant commodities producer, but it has weathered the past decades better than Brazil or Russia. 

    Of course, what makes Indonesia additionally interesting is that it’s a very large Muslim country which practices reasonably openly quite a few aspects of modern capitalism. So it has very positive demographics. 

    In terms of conceptual potential, I’m also very interested in Nigeria – though there you’re talking not in the next 20 years but in the next 40. If that crazy place could have a proper economic policy framework it would become extremely big in the African context as its demographics are just incredible. It’s an extremely young population with great capacity for productivity. 

    This is where economic outcomes come down to political leadership. Brazil, Russia and Nigeria, have all been impacted by poor governance, and we’ve seen that with India this year with the virus. In 2000, I developed the Global Sustainability Growth Index, which included around 190 countries. We statistically examined hundreds of variables, and ended up including about 15 which seem especially important for economic growth. Among the things that really matter is the strength of a country’s institutional framework.

    That index today shows China scoring much higher than any of the other BRIC countries – and interestingly India scores lower than Russia or Brazil in spite of its spectacular demographics. 

    But we have our own inequality and problems here at home – I hope Boris Johnson is genuine about his levelling up agenda. He’s only been in power a relatively short period of time, and because of Covid, we haven’t even had a proper budget or multi-year spending review yet: everything’s been a policy response. Boris seems to struggle with rhetoric and the whole idea that a prime minister should under-promise and over-deliver. He’s raised very big expectations – and these are things which will take a long time to deliver on. So far, there’s very little evidence that he is delivering on it. 

    I retain a close friendship with George Osborne, and with Whitehall officials. When I worked in government, to my pleasant surprise I found the quality of the staff in the Treasury to be just as good as at Goldman Sachs – but with greater public spirit. The hard thing for me was that I wasn’t a member of the Labour Party; I was there to execute a technical role. But I was surrounded by ministers who were obsessed with where they were in terms of political horse-trading. 

    I found their motives troubling. They would decide what to support based on how it would help them in their next job which is extremely different to Goldman Sachs. Even within the same party, competing ideologies were different – often irreconcilably so. In that sense, I witnessed first-hand the ridiculous developments within the Conservative Party: I was shocked as to how crazy it was.

    By comparison, I was lucky at Goldman. They were mad enough to offer me a partnership to join – I was only the fifth. They’d taken on a lot of risk themselves. But I was daunted – then as now, the image of Goldman was intimidating from the outside. It was full of remarkably smart and incredibly driven people. They had 300 people in the place with their own views on the dollar – many of whom were smarter than me. But it really is a meritocracy in there. So long as I delivered the goods, nobody gave a damn about my background.