It’s often said that “the more things change, the more they stay the same,” especially when superficial appraisals miss or lack an understanding of the underlying condition. We remember not long ago when the expectation was that a New World Order would surface, shifting economic power from Western Civilization to the BRICs. In 2011 Jim O’Neil, then Managing Director at Goldman Sachs and the individual that coined the term “BRIC,” offered his opinion in “BRICs’ rapid growth tips the global balance” that he wrote for The Telegraph.

Investors need to grasp the opportunities afforded by rapid growth in Brazil, Russia, India and China, says economist Jim O’Neill in the second extract from his new book ‘The Growth Map: Economic Opportunity in the BRICs and Beyond’

But Mr. O’Neil’s article started far more optimistic than that:

My only regret on the first BRICS analysis of 2001 is that we weren’t bolder. Between 2001 and 2010, the BRIC economies’ GDP rose much more sharply than I had thought possible even in the most optimistic scenario.

In 2012, and after plenty of gloom and doom predictions for the West, I created the graphic titled “Global Economics 101” to save time consuming, often pointless exchanges.

Then I added that until the formula is changed and the blue and red circles become green, all the talk in the world about emerging and new economic powerhouses is meaningless, but left out that it’s always about the people and nothing else.

In 2020 China is still the leading member of BRICs, but is a ponzi scheme that is unraveling before our eyes, although it hasn’t been officially classified as such yet. The vision that China would become the powerhouse is quickly becoming a mirage that is only fed by wishful thinking and politically driven propaganda.

Because a picture is still worth 1,000 words, there’s an ETF — Exchange Traded Fund — that allowed investors to partake in the BRIC success story since November of 2007: The iShares MSCI BRIC ETF (symbol:BKF).

The iShares MSCI BRIC ETF seeks to track the investment results of an index composed of Chinese equities that are available to international investors, and Brazilian, Russian, and Indian equities.

Obviously the chart comparing the performance of the MSCI BRIC ETF to the S&P 500 speaks for itself.

Credit must be given where credit is due, and in November 2012 an article in The Telegraph pointed out that the “US Conference Board fears Brics miracle over as world faces decade-long slump,” and “the catch-up boom in China, India, Brazil is largely over and will be followed by a drastic slowdown over the next decade, according to a grim report by America’s top forecasting body.” But

The Conference Board’s forecast is starkly at odds with a report by the OECD last week predicting that China would keep growing at 6.6pc until 2030, and India at 6.7pc — propelling the two rising powers to global dominance.

Why was the OECD wrong? There’s a lack of economic self-sufficiency in the BRICs, while there’s still a refusal to dispel “The Myth That All Men Are Created Equal.”

However, Jim O’Neill stated in October 2012 that “the next decade, as he defined it, will be about China becoming “more like us” – boosting consumption, exporting less – and the UK becoming more like China.” Goldman Sachs, Mr. O’Neill’s employer, took the unusual step in that same month of filing “with the Securities and Exchange Commission detailing plans to shutter mutual funds focused on stocks in two of those countries: Brazil and India.” Obviously Mr. O’Neil didn’t understand the core cultural and sociopolitical differences between the BRICs and the West.

Obviously the current coronavirus-induced economic shutdown highlighted the dependency on Western consumption, although the “massaged” economic data points coming out of Beijing are designed to paint a different picture mostly for domestic audiences. Going forward and as uncertain as the economic outlook appears, there’s another factor to consider: repatriation of manufacturing for corporate and national security purposes, with a few exceptions applying to traditional Western allies. Thus BRICS investing will hit a brick wall.

One thing to note is that South Africa became the “S” in BRICS in 2010, although the same rule still applies: “the more things change, the more they stay the same.”

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