Not too long ago, Brazil, Russia, India, and China were looked upon with envy by the international arena. Predictions of decoupling—a theory in which emerging economies have strengthened so much that they no longer depend on the United States for economic growth—were seen as a foregone conclusion for the BRIC nations. To the surprise of many, what was once a mere formality is now a distant reality.
Lately, BRIC nations have encountered different degrees of turbulence with engineering economic growth. The European economic crisis, coupled with sluggish U.S. growth, has hindered the BRIC’s economic growth when analyzed as a single bloc—discarding the decoupling phenomenon and proving the opposite is still the norm, to the chagrin of BRIC leaders. In addition, corruption continues to be an endemic problem for all BRIC members, dampening not only their political systems, but also investor confidence. High taxes and heavy regulation are thorny matters that never appear to cease, stalling future productivity, investment and growth, especially in Brazil and India. In short, not all is rosy in BRIC land.
However, to undervalue these emerging economies now would be a mistake, or living in a state of denial. Most importantly, the state of the global economy should not be perceived as a G7 vs. BRICs battle for economic supremacy. Instead, the BRIC nations should be viewed as a market for exports not only for the United States, but also for the European Union and emerging Latin American and Asian nations—another vehicle fueling the engines of economic growth.
If we were to include South Africa in the BRIC bloc, as is increasingly common, the five nations would represent 40 percent of the world’s population and approximately 25 percent of the world’s GDP. South Africa has participated in the last two BRIC summits and will host the next summit in March 2013. I say the more the merrier, as long as the goal for BRIC nations is to integrate more profoundly with the world economy, instead of designing a model of ‘us’ against ‘them’.
The problems for BRIC nations are threefold. First, the BRIC economies are not performing at a rate that was forecasted by domestic and foreign economists. Second, although all BRIC nations appear to stutter simultaneously, the notion that they are similar cannot be further from the truth. Each country has a unique economic model that is not duplicated by other BRIC members; in fact, the only two commonalities are that they are both emerging economies and they happen to be lumped together in a catchy acronym. Third, no one can really answer who is leading the BRIC group, whereas the G7 and Western nations look to Washington, D.C. for leadership, The BRIC nations seem to jockeying for the leadership role, or at times shying away from it (i.e. China).
If there were to be a leader of the BRIC nations, the obvious candidate would be China. However, China is dealing with its own set of woes. In 2012, for the first time this century, China grew at a rate below 8 percent. Although a figure near 8 percent would be a miracle for crisis-laden EU countries and the United States, for China it is seen as average or less. Why the drop? China’s labor force is no longer growing as fast as before, the so-called labor dividend (a surplus of a cheap labor pool) has been exhausted; moreover, wages in China are increasing, especially in factory labor, which causes a severe dent in China’s competitiveness. This has opened a new space for Mexico to reignite their exports for the United States, placing China in a position where it now has to compete against other nations based on strategy, efficiency, and optimal productivity instead of relying on dirt-cheap labor. A portion of the slowdown can be also attributed to Chinese leaders, who made a bold decision earlier this year to increase interest rates in order to tame inflation and cool the county’s real estate crazeand avoid property bubbles similar to episodes in Japan during the 90s and the United States in 2008.
China is still the second largest economy in the world, and out of all the BRIC members, it is still the fasting growing economy. The country is projected to bounce back in 2013, avoiding a hard landing, and targeting the ever-important 8 percent growth rate for 2013. However, according to Ruchir Sharma, author of Breakout Nations, if China’s growth were to fall to a GDP rate of 6 to 7 percent, recession would occur, but it would not be on the same scale as the Euro crisis or the United States’ Great Recession. The bad news is that a decelerated China will hurt other growing nations, including BRIC partners India, South Africa, and Brazil.
The darling of the Americas, Brazil, is no longer feeling the confidence it exuberated when they were awarded the 2014 World Cup and 2016 Rio Olympics. The nation’s 2012 GDP is expected to come in below 1 percent—a very disappointing figure, especially compared to its 2010 growth rate of 7.5 percent. Brazil was once the hot spot for international investors and businesses, but lately the samba country has lost some of its mojo, muddled with an overvalued currency against the U.S. dollar, high taxes, poor infrastructure, constant government intervention, and self-placed barriers holding back entrepreneurial growth. The slowdown in China has hurt Brazil, which now sees itself as a quasi-prisoner to China’s economic growth, transferring their dependency from the U.S. to the Middle Kingdom. To counteract the economic bottleneck and galvanize economic activity, Brazil is lowering interest rates and easing credit. It may work. However, what we have learned as of late is that Brazil is miles away from decoupling from anybody.
India too is struggling with below average growth rates. A few years ago, India was touted as the second coming of China-esque growth, projected to grow from 2010 and onward at a rate of 8 to 10 percent. But not so fast. The last two years have been meager for India. At the beginning of 2012, India was scheduled to hit a GDP of 6.5 percent, but unfortunately economists project that the country will not deliver that number, aligning India to a lower growth rate of roughly 5 percent. For investors in Indian stocks, the last five years have delivered a negative yearly return of 8.3 percent, a microcosm of India’s underperformance. The Indian government has initiated new reforms to jump-start the economy—d such as opening retail sectors to foreign investors and raising prices for subsidized fuels; although they are welcomed, pervasive corruption and horrid regulations need to be addressed in order for India to become an authentic emerging market player. No more than two years ago India was riding a wave of enormous confidence; it now needs to fix their internal problems before they can once again look outward.
Russia is no exception to the BRIC’s latest snags. Putin’s quasi-authoritarian style of governing has put a wet blanket on investment confidence, as the current governance style appears to hinge on whether Vladimir Putin favors a certain domestic or international company. Russia faces other challenges such as a heavy dependency on natural resources and a shrinking and aging population, akin to Japan. If the price of oil continues to drop, Russia will be adversely affected, as oil and gas are their largest exports. The EU and its crippling recession has not done Russia any favors lately either; Europe is Russia’s main trading partner and the largest purchaser of Russia’s natural resources, yet demand has dropped significantly, affecting Russia’s GDP growth. Corruption also cripples economic growth in Russia—an overlapping characteristic that all BRIC members share.
The luster of the BRICs is slowly losing its shine. The advancements of the BRIC nations and other emerging markets in the last 12 to 15 years have been nothing short of amazing, but to sustain incredible growth without encountering periods of slow growth is virtually impossible. The lesson here is to move away from categorizing emerging markets in lazy groups dressed in acronyms. Each country has unique characteristics and comparative advantages, and while some emerging markets are in near crisis mode, others like Colombia, Nigeria, Chile, Indonesia, and Turkey are in an expansionary phase. The BRIC nations have had their run, and maybe they have one or two more hurrahs left in them. However, the notion that Brazil, Russia, India, and China were on the road to create an alternative to the United States and the G7 was—and still is—a distant desire.
Oscar Montealegre is a Los Angeles-based Diplomatic Courier Contributor specializing in Latin American markets, finance, economics, and geopolitics. He holds an MA in International Relations, a BA in Journalism, and a Certificate in International Trade and Commerce.
But it’s difficult to think about value when we have no buoy for understanding it outside our traditional lenses: for example, our time, our job, and what others tell us they are worth in cash. This, largely, is the world’s paradigm for value so far. But understanding what value really means changes everything—and will be at the center of the decentralized revolution in global coordination that will unfold over the next decade. So, where do we begin?
Let’s start with gold.
Gold is an inherent value. When backing a market, gold allows us to grow a balanced economy well into the trillions. But why does it allow for massive stable markets to form around it? It is gold's permanence that creates stability. We understand that gold will always have value, because it is inherent in all of us, not just in one part of the world, but everywhere, not just today, but tomorrow and for the long haul.
In the 1930s when the gold standard was removed, we learned that the U.S. dollar didn’t need gold to back its economy to flourish. We learned that it was just a symbol for U.S. citizens to decentralize their coordination around the United States economy.
It turns out, common agreement is a philosophy for building shared economy.
And so it seems inherent value is a marker for us to begin exploring what the future could look like—a future beyond gold and the existing realm of credit. And so what else has inherent value? Is education as valuable as gold? What about healthcare? What about a vote that can’t be tampered with? What about an ID that can’t be stolen or erased? What about access to nutrition or clean water? You will find value everywhere you look.
It turns out, we’ve already done the legwork necessary to uncover the most elemental inherent values: The Sustainable Development Goals are commitments grown out of the drive to bring to life basic tenets of the Universal Declaration of Human Rights—the closest possible social contract we have to a global, common agreement.
We’ve already agreed.
Our agreements are grounded in deep value centers that are globally shared, but undervalued and unfulfilled. The reason for this is our inability to quantify intangible value. All of these rich, inherent values are still nebulous and fragmented in implementation—largely existing as ideals and blueprints for deep, globally shared common agreement. That is, we all agree education, health, and equality have value, but we lack common units for understanding who and who is not contributing value—leaving us to fumble in our own, uncoordinated siloes as we chase the phantoms of impact. In essence, we lack common currencies for our common agreements.
Now we find ourselves at the nexus of the real paradigm of Blockchain, allowing us to fuse economics with inherent value by proving the participation of some great human effort, then quantifying the impact of that effort in unforgeable and decentralized ledgers. It allows us to build economic models for tomorrow, that create wholly new markets and economies for and around each of the richest of human endeavors.
In late 2017 at the height of the Bitcoin bubble, without individual coordination, planning, or the help of institutions, almost $1 trillion was infused into blockchain markets. This is remarkable, and the revolution has only just begun. When you realize that Blockchain is in a similar stage of development as the internet pre-AOL, you will see a glimpse of the global transformation to come.
Only twice in the information age have we had such a paradigm shift in global infrastructure reform—the computer and the internet. While the computer taught us how to store and process data, the Internet built off that ability and furthered the conversation by teaching us how to transfer that information. Blockchain takes another massive step forward—it builds off the internet, adding to the story of information storage and transfer—but, it teaches us a new, priceless and not yet understood skill: how to transfer value.
This third wave kicked off with a rough start—as happens with the birth of new technologies and their corresponding liberties. Blockchain has, thus far, been totally unregulated. Many, doubtless, have taken advantage. A young child, stretching their arms for the first couple times might knock over a cookie jar or two. Eventually, however, they learn to use their faculties—for evil or for good. As such, while it’s wise to be skeptical at this phase in blockchain’s evolution, it’s important not to be blind to its remarkable implications in a post-regulated world, so that we may wield its faculties like a surgeon’s scalpel—not for evil or snake-oil sales, but for the creation of more good, for the flourishing of commonwealth.
But what of the volatility in blockchain markets? People agree Bitcoin has value, but they don’t understand why they are in agreement, and so cryptomarkets fluctuate violently. Stable blockchain economies will require new symbolic gold standards that clearly articulate why someone would agree to support each market, to anchor common agreement with stability. The more globally shared these new value standards, the better.
Is education more valuable than gold? What about healthcare or nutrition or clean water?
We set out in 2018 to prove a hypothesis—we believe that if you back a cryptocurrency economy with a globally agreed upon inherent value like education, you can solve for volatility and stabilize a mature long lasting cryptomarket that awards everyone who adds value to that market in a decentralized way without the friction of individual partnerships.
What if education was a new gold standard?
And what if this new Learning Economy had protocols to award everyone who is helping to steward the growth of global education?
Education is a mountain. Everyone takes a different path to the top. Blockchain allows us to measure all of those unique learning pathways, online and in classrooms, into immutable blockchain Learning Ledgers.
By quantifying the true value of education, a whole economy can be built around it to pay students to learn, educators to create substantive courses, and stewards to help the Learning Economy grow. It was designed to provide a decentralized way for everyone adding value to global education to coordinate around the commonwealth without the friction of individual partnerships. Imagine the same for healthcare, nutrition, and our environment?
Imagine a world where we can pay refugees to learn languages as they find themselves in foreign lands, a world where we can pay those laid off by the tide of automation to retrain themselves for the new economy, a world where we can pay the next generation to prepare themselves for the unsolved problems of tomorrow.
Imagine new commonwealth economies that alleviate the global burdens of poverty, disease, hunger, inequality, ignorance, toxic water, and joblessness. Commonwealths that orbit inherent values, upheld by immutable blockchain protocols that reward anyone in the ecosystem stewarding the economy—whether that means feeding the hungry, providing aid for the global poor, delivering mosquito nets in malaria-ridden areas, or developing transformative technologies that can provide a Harvard-class education to anyone in the world willing to learn.
These worlds are not out of reach—we are only now opening our eyes to the horizons of blockchain, decentralized coordination, and new gold standards. Even though coordination is the last of the seventeen sustainable development goals, when solved, its tide will lift for the rest—a much-needed rocket fuel for global prosperity.
“Let us raise a standard to which the wise and the honest can repair.” —George Washington