Among the BRIC nations-Brazil, Russia, India, and China-to what extent have these countries experienced similar trends in economic development? Brazil is the country of Carnival, gorgeous beaches, and high economic disparities between the rich and the poor. Russia makes the news regularly for its intrusion into Ukraine and its still high tensions with the United States. India, aside from being the hip travel destination for college students, boats as impressive economy and diverse cultural background. When talks of a bipolar world system are brought up, China is always mentioned. What do these countries have in common? They are all part of the BRIC nations, a term coined in 2011 to group the “large emerging market economies” (O’Neil 2001, 1).
Practically, an investigation of the trends of economic development within the BRIC nations would allow economists to further pinpoint whether there is a set model of economic development. Answering this question would allow policy makers to best replicate the trends in their own countries. By applying the strategies found within the BRIC nations to other countries, underdeveloped countries can induce similar economic success, thus balancing out international trade and the world economy.
Not only would their economic condition improve, but there would also be advances in human development and quality of life. Without the investigation of these countries and their economies, economists and politicians would be blindingly and naively following the assumption that patterns of development cannot be found or implemented in other countries. Thus, the development of the third world and of emerging powers is solely by chance and spontaneous luck. This puts the fate of many nations and billions of people hanging in the balance.
Given the relative boom of these countries in coordination with one another, this study expects that the four BRIC nations-Brazil, Russia, India, and China -will follow the same model of economic development. Whether the economic development of these countries most closely adheres to one of the five investigated models is unclear as the economic theories were investigated first, not the evolution of the BRIC economies. As a preliminary hypothesis, it is believed that the four BRIC economies will follow the neoclassical counter-revolution model of economic growth due to the present emphasis on internationalization and globalization.
The purpose of this literature review is to examine some of the key models of economic development. According to the literature reviewed, the models are grouped into four main “clusters”: linear stages of growth models, structural change models, international dependence models, and neoclassical counter-revolution models.
Additionally, two more recent theories are included: the new growth theory and the theory of coordination failure (Dang and Pheng 2015, 11). Two famous models that utilize linear stages of growth to explain economic development are Rostow’s stages of growth model and the Harrod-Domar model. Both of these models emphasize “injections of capital to achieve rapid GDP growth rates” (Dang and Pheng 2015, 16). Rostow broke economic development down into five stages: (1) the traditional society, (2) the preconditions for takeoff, (3) the take-off, (4) the drive to maturity, and (5) the age of high mass consumption (Dang and Pheng 2015, 16; Rostow 1991). Rostow makes the bold claim that “the story of each national economy-and sometimes the story of regions” can be categorized into these five stages (Rostow 1991, 1). Both models agree that the prime mobilizer of economic growth is investments.
The 1960s and 1970s saw a change in the way economists viewed development. The structural change models advocate for “the reallocation of labour from the agricultural sector the the industrial sector” (Dang and Pheng 2015, 16). The most popular structural change model is Lewis’ two- sector model, also known as the theory of surplus labor. These two sectors of the economy are sometimes divided into “complexes” (Zaidi and Mukhopadhyay 1975, 65). The “primary complex” consists of livestock, farming, and the clothing industries. The “secondary complex” is made up on all other industrial businesses (Zaidi and Mukhopadhyay 1975, 65). Within this model, the agricultural sector is abandoned for the industrial sector and large sections of the labour force are moved to industrial settings. These workers, given they are in unlimited supply, would still receive low wages and in turn the profits from these wages would be invested back into the industrial sector. This creates a self-sustaining cycle of growth and expansion (Dang and Pheng 2015, 17). Both the linear stages of growth model and the structural changes model see investments as key to growth. However, the structural changes model does not rely on the necessity of “preconditions for takeoff” (Dang and Pheng 2015, 16).
As an extension of Marxist theory, the international dependence model that the underdevelopment in countries is a direct cause of over dependence on developed countries and multinational corporations (Dang and Phen 2015, 18). This theory states that underdeveloped and developing countries are limited in their relation with developed countries because the developed countries are able to “exploit [their] natural resources” to get “cheap supply of food and raw materials” (Dang and Pheng 2015, 18). This theory, popular in the 1970s and 1980s, saw a rise in support with the onset of rapid international globalization. Thus, developing countries should break free from this unequal, parasitic relationship to see improvement in their economic condition.
In the 1980s, neoclassical counter-revolution economists turned their outward gaze inward. These economists proposed that economic underdevelopment was not the cause of abusive developed countries. “Domestic issues” such as “poor resource allocation, government-induced price distortions and corruption” were to blame for poor economic performance (Dang and Pheng 2015, 19). These models can be summed up by the central elements of “liberalization, stabilization and privatization” (Dang and Pheng 2015, 19).
Thus, to remedy this situation three main responses were advocated: “the free market approach, the new political economy approach and the market- friendly approach” (Dang and Pheng 2015, 19). Thus, under this model, open economies, increased foreign trade, private investments, increased savings and investments, improvements in technology, and improvements in labour quality and quantity are necessary to bring a traditional economy into the modern world. The new growth theorists of the 1990s also believe that technology is a key factor in economic development. However, the emphasis is not placed specifically on poor resource allocation specifically as it relates to technology. The new growth theory attests that “economic growth results from increasing returns to the use of knowledge rather than labour and capital” (Dang and Pheng 2015, 20).
Thus, proponents of this theory suggests that higher investments be placed on “human capital (education), infrastructure, or research and development (R&D)” (Dang and Pheng 2015, 20). To remedy this situation, government should give economic priority to “industries such as computer software and telecommunications” (Dang and Pheng 2015, 20). The new growth model again places the blame on internal factors and not predatory external developed countries. The theory of coordination failure addresses a key issue present in all the other theories: investments. This theory, among the more recent theories of economic development, claims that economies are ecosystems “where the behavior of one can affect the others” (Dang and Pheng 2015, 21). The same is true of investments. In an ideal situation, the “returns of one investment depends on the presence or extent of other investments” (Dang and Pheng 2015, 20). In this scenario, when both investors trust that the other will invest at the same time, there is said to be coordination. When one investment is not present the economy experiences coordination failure.
The downfall of this specific theory is apparent. It provides no techniques or strategies by which the government can coordinate investments because it depends on a superior and omniscient knowledge of how the parts of economic systems work as a whole. Additional research finds that “in the spirit of the labor surplus model of Lewis,” Brazil has also shown that “rapid urban population growth,” or a transition from the primary complex to the secondary complex, “has been a positive factor in the growth” of its economy (Yep 1976, 119-120). The use of the structural change model has shown to have a “strong positive effect on Brazil’s economic growth” (Yap 1976, 137). Quantitative studies of economic development in India show that during 1959-1971, India experienced economic development along the two-sector model with industrying being “the leading sector in industrial change” (Zaidi and Mukhopadhyay 1975, 72). Furthermore, this same study reveals that this industrial change was greater than that of the United States and Japan over roughly the same span of time (Zaidi and Mukhopadhyay 1975, 72).
The four cases–Brazil, Russia, India, and China-were not solely chosen for their popularity among economists and political theorists. These four cases were chosen because they are developing countries. They are middle powers that have risen out of the third world. Furthermore, there is a temporal correlation between the economic boom, influence, and power of these countries. This sample excludes South Africa from the cases selection because South Africa was not present at the initial BRICS Summit in 2009 (Fifth BRICS 2009). Furthermore, these cases are paradigmatic information- orientated selection (Flyvbjerg 2006, 230). These cases are not randomly selected and the conclusions from this research strive to operate “as a reference point and may function as a focus for the founding of schools of thought” in relation to economic development (Flyvbjerg 2006, 232.) Similar to Bhalla and Berry, scholars of structural economic development, the methodology of this research will be case studies (Gemmell 1982, 37). Since the methodology of case studies has been has been linked to theory building, it makes sense to use case studies of Brazil, Russia, India, and China to see how closely they adhere to the theories (Flyvbjerg 2006; Stake 1978, 7).
Choosing a sample spread across such a vast geographical region has its limitations. The main limitation being culture. It is blatantly apparent that the four chosen nations are vastly different in their culture and history. This paper holds true that politics and economics are linked as political reform is sometimes necessary for economic reform. This paper also acknowledges that culture and history undoubtedly shape the politico-economic system of a country. Thus, having such disparate countries poses the limitation of homogeneity. On the contrary, if the research finds that these countries do follow a singular development model, then the results would be that much significant due to their cultural and geographical differences.
This paper will use a variety of economic indicators including GDP, GDP growth rate, Human Development Index, Millennium Development Goals, data on exports and imports, and government budgets to analyze economic development trends. Most of this data will come from outside parties like the International Monetary Fund and the United Nations. However, data on exports, imports, and government spending is usually monitored and reported by the country itself. This data may have discrepancies from the actual figures. In all possible cases, third-party data will be used. It is pertinent that when each data indicator is available from a singular third- party source, that one source should be utilized. For example, if the International Monetary Fund has GDP data for all four countries, this data should be utilized as the same methodology was used to acquire these figures. Economic data from the past ten years will be collected and analyzed as a study of this size involving four nations requires a lot of detail, time, and effort.
Quantitative data will be graphed linear to show trends in the data. Qualitative data and quantitative data will be included in the written case report that investigates the following three components: (1) economic history of the nation (2), description and analysis of economic trends, and (3) adherence or rejection of the models of economic development. Once the quantitative and qualitative data of each country is analyzed individually, a cross analysis of the countries can be completed. This will investigate the use of a certain model across all the countries and the relative time frame during which development occurs. Each year between 1994-2014 will be coded individually for one of the five models. This coding will be based on a criteria for each of the five models as shown in the table. Each model contains the same amount of criteria so the methodology remains consistent and reliable. Furthermore, a holistic analysis of the country’s economic development will be taken into account. The included table show a breakdown of the criteria.
Using this data and qualitative sources, the countries will be analyzed and categorized into one of the five models of development. This research will also require qualitative research into the development of the countries. The five theories mentioned in the literature review have been qualitatively coded for their key characteristics. Coding will be only done for five models as the sixth model, coordination theory, does not provide concrete solutions to economic woes. It Is provided in the literature review to show a continuity of ideas and models. This coding of the models into a concrete criteria will allow me to more easily and reliably categorize the economic trends and development within the four countries. The question as to why these countries experience high economic growth must be analyzed against existing theories. The following table indicates the coding of the models.
To reiterate, this study posits that due to the increase in internationalization and globalization in the past ten years, the four countries will follow the neoclassical counter-revolution model of economic development. If this study finds that this hypothesis is true it will have advantageous effects for developing and emerging countries looking to improve their economic condition.
This research strives to close the gap between theory and practically. Though there has been regional studies of economic development, mainly in the Latin and Central American region due to its close historical ideas and its stark inequality across countries, not many transnational and international studies of economic development. Furthermore, of the four cases sampled, Russia has received its fair share of analyses and investigations stemming from its complex and intriguing Soviet heritage (Baykov; Rudolph 1985). The other three countries, relatively excluded since recent times in excessive dealing with the United States, whether for positive or negative reasons, have evaded this same type of in-depth investigation. Thus, this study attempts to close both gaps by breaking free of the confines of regional studies and also by giving Brazil, China, and India there due respect in the economic discipline.
- Baykov, Alexander. 1954. “The Economic Development of Russia.” The Economic History Review 7 (2): 137-149.
- Dang, Giang and Low Sui Pheng. 2015. “Theories of Economic Development.” In Infrastructure Investments in Developing Countries: The Case of Vietnam, 1 1-26. Singapore: Springer. Fifth BRICS Summit. 2009. “First Summit.” Accessed April 26, 2015. http://www.brics5.co.za/about-brics/summit-declaration/first-summit/ Flyvbjerg, Bent. “Five MisunderstandingsAboutCas e-Study Research. ” Qualitative Inquiry 12 (2): 219-245.
- Gemmell, Norman. 1982. “Economic Development and Structural Change: The Role of the Service Sector.” | ournal of Development Studies 1 9 (1): 37- 66. O’Neil, Jim. 2011. “Building Better Global Economic BRICs.” New York: Goldman Sachs. Print. Global Economics Paper No: 66. Rostow, Walt Whitman. 1991. “The Five Stages-of-Growth-A Summary.” In T he Stages of Economic Growth: A Non-Communist Manifesto Third Edition, 4 -16. Cambridge: Cambridge University Press.
- Rudolph, Richard L. 1985. “Agricultural Structure and Proto-Industrialization in Russia: Economic Development with Unfree Labor.” The Journal of Economic History 45 (1): 47-69. Stake, RobertE.1978. “TheCaseStudy MethodinSoci alinquiry.” Educational Researcher 7 (2): 5-8. Yap, Lorene. “Internal Migration and Economic Development in Brazil.” The Quarterly Journal of Economics 9 0 (1): 119-137.
- Zaidi, Mahmood A. and Sudhin K. Mukhopadhyay. 1975. “Economic Development, Structural Change and Employment Potential.” Journal of Development Studies 11 (2): 64-74.