Jim O'Neill: America doesn't need to be the world leader to prosper
Former Goldman Sachs chief economist Jim O’Neill is famous for his 2001 coining of the term “BRIC,” a framework he created to highlight the rise of Brazil, Russia, India and China in the global system. These developing countries not only have continued to rise, but its members—particularly Russia and China—increasingly dominate the news today.
O’Neill said his idea for the term came to him right after 9/11, after thinking about the implications of the attack beyond the horror.
“It kind of strangely in my head came to me that maybe this means in order for globalization to thrive going forward, it had to be more than just what it appeared to be in the previous twenty years: the never-ending rise of the Americanization of the world as such.”
America doesn’t have to be dominant to prosper
But O’Neill told Yahoo Finance the reality of globalization without ‘Americanization’ isn’t necessarily a negative thing for America, and it could perhaps be a good thing if Americans can set aside their ego.
“If we have a world by the mid-2030s where the combined GDP of the BRIC countries is bigger than the G-7, that is going to be very good for many multinational American countries,” he said, pointing out benefits that include a reduced US trade deficit.
The United Kingdom provides a good framework, O’Neill said, as wealth has grown in the country even as its super power status has diminished. The UK held superpower status into the beginning of the twentieth century. However, fighting two world wars along with the rise of the US and Soviet Union (both hostile to British imperialism) ended its superpower status, which many historians time-peg to the Suez Crisis of 1956.
“Even though Britain no longer has anything like the global presence it did before the Suez crisis, it’s a country that’s seen its wealth triple since then,” O’Neill said. “The US is much more likely to be wealthier for more American people if China, India and others become very big economies in the future irrelevant of whether if they’re bigger than the US or not. I don’t think that’s going to harm the wealth at all of the average American. That is definitely the case of the United Kingdom.”
Meanwhile, President Trump seems to have embraced a nationalist rhetoric, emphasizing country borders and a zero-sum outlook where the rise of other countries (including China) would be negative for the US.
At the recent G-20 meeting, President Trump said in a speech, “The fundamental question of our time is whether the West has the will to survive. Do we have the confidence in our values to defend them at any cost? Do we have enough respect for our citizens to protect our borders?”
While some, including former Treasury Secretary Larry Summers, have said this confirms the breakdown of international order many have feared since the election, O’Neill said that Trump’s “outdated” rhetoric isn’t necessarily as worrisome as many think.
“It’s forcing other countries to take a bigger leadership role in the world,” O’Neill said, pointing to areas like climate change.
The US could harm itself with trade policy
One area that could be negative for the US when it comes to not embracing globalization is trade.
“This is one of the areas where the US could lose out and therefore harm itself,” O’Neill said.
Indeed, the European Union and Japan just announced a trade deal and Asian countries aim to move forward on the Trans-Pacific Partnership without the United States.
Trump’s message about the ill-effects of globalization has resonated with many Americans, however, and O’Neill said this is just the latest version of pointing-the-finger, which says has “short-term superficial appeal.”
“Trump’s strategy has been a more aggressive version of many repeated temptations like this going back for a good thirty years,” O’Neill said. “I started out in the world of finance in the early 80s when it was very fashionable to blame Japan for all things going wrong in the United States. For the past 15 years, it’s now become China.”
‘No longevity’ to controversial style from Putin
O’Neill added that he’s not worried about a potential rise of Russia, which has become a ‘bad actor’ on the global stage.
“It is also the case that Russia won’t have any chance of becoming as big as the other three countries unless it can do something about its dreadful demographics, its excessive dependency on oil and gas, and its weak productivity…If the Russian economy doesn’t start to improve in coming years, Putin is going to probably run into a serious problem.”
Nicole Sinclair is markets correspondent at Yahoo Finance
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