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THE BRICs (AND MORTAR) OF THE NEW GLOBAL ECONOMY

John Brown

Asia Sentinel, May 14, 2008

The global wealth balance shifts from the consumer economies to the producer economies

In the early days of the American republic, fortune seekers were urged to “Go west, young man!” Unfortunately, with the American economy now clearly showing its fragility, the rallying cry for today could be, “Go abroad!”

In the past quarter century, the center of wealth creation has steadily moved away from the United States and towards new foreign competitors, especially the so-called BRIC countries of Brazil, Russia, India and China, where economic growth rates have greatly eclipsed the US. In recent years, this economic might has translated into much higher returns on their respective stock markets. These movements are creating a wave of real wealth that wise investors cannot afford to miss.

In the mid 1970s, a transformation began in which the driving force of the US economy shifted from producers to consumers. Today, measured by gross domestic product, consumption accounts for some 72 percent of the US. It is no wonder then, that as economics is so synonymous with spending, that the stimulus package recently passed by the US Congress, is skewed heavily (90 percent) in favor of the consumer (where the votes are) at the expense of producers.

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