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Abstract
Intertwinements of economic practices with economic knowledge have been of particular interest for sociologists and cultural anthropologists during recent years. This article discusses a particular case of such intertwinements: in 2001, Goldman Sachs economists invented the acronym ‘BRIC’ for grouping together the largest emerging economies – Brazil, Russia, India and China. The economists projected that over the course of 50 years, the BRICs would become the new core of the world economy. This article interprets the BRICs concept as an innovation in the classificatory regimes of finance. These classificatory regimes are understood as persistent cultural constructs. In the domain of international finance, classifications have traditionally been organized according to the distinction of developed and developing economies, with assumptions regarding return expectations and risks attached to this distinction. The BRICs concept alters these classificatory regimes and re-describes a selective group of emerging markets as solid, long-term investment destinations. In order to establish this innovation, the Goldman Sachs economists draw on calculative framings, narrative strategies and metaphorical language. As evidenced by descriptive statistics of portfolio flows, a preliminary analysis of investment discourses and of changes in the emerging market funds industry, Goldman Sachs' expertise on the BRICs indeed seems to have contributed to the emergence of a new cultural circuit of capital of post-emerging market investments to developing economies.
ACKNOWLEDGEMENTS
The author acknowledges helpful comments by Karin Knorr Cetina, Andreas Langenohl, Michael Pryke, Philip Smith, Urs Stäheli, and the anonymous JCE reviewers on an earlier version of this paper.
Notes
1. For instance, the European Business School (EBS) in Oestrich-Winkel, Germany, offers a special master course entitled ‘BRIC MBA’.
2. Compare, for instance, the Boston Consulting Group (Citation2010).
3. In this paper, I will focus on the financial markets and omit an analysis of policy-makers’ reactivity to the BRICs concept. I lack data on the interrelationships between financial experts and state actors as well as on the institutional and bureaucratic logics that underlie the BRICs summits. However, the case clearly indicates the relevance of further research in this direction. I thank an anonymous reviewer of JCE for corresponding remarks.
4. Other approaches refer to virtualism (Carrier & Miller Citation1998) and reactivity (Espeland & Sauder Citation2007). Moreover, in a recent response to Callon's theses, Marion Fourcade posits that performativity should be explained with reference to institutions and their specific cultures. She argues that ‘[t]he mere availability of certain economic technologies does not guarantee their performative effects for the simple reasons that these technologies may not muster enough institutional and political support or that they may not resonate enough with the cultural claims they are supposed to represent’ (Fourcade Citation2011, p. 1725).
5. Frontier market is sometimes quoted as an additional investment category for potential emerging markets.
6. The rationale [of emerging market investment] was that private capital, through the forces of globalization, would substantially reward economies that modernized their private sectors and built the necessary institutional infrastructure to support free market enterprise’ (Smith Citation2007, p. 75).
7. ‘This build-up of short-term international borrowing was a result of financial liberalization that took place in the years preceding the crisis. In South Korea, for example, this included the removal of a number of restrictions on foreign ownership of domestic financial and non-financial institutions. Korea's debt nearly tripled from $44 billion in 1993 to $120 billion in September 1997’ (Weisbrot Citation1997, p. 2).
8. All of the Global Economics Papers on the BRICs were republished by Goldman Sachs in special compilations, entitled ‘Growth and Development. The Path to 2050‘ (Citation2004), ‘The World and the BRICs‘ (2006) and ‘BRICs and Beyond‘ (Citation2007); in 2011, Jim O'Neill has published a related book with the title ‘The Growth Map‘.
9. The Group of Seven (G7) has traditionally included all the Western economic superpowers (which have consisted of the United States, Japan, Germany, France, United Kingdom, Italy and Canada). G7 meetings have led to important political-economic decisions such as the Louvre and Plaza Accord.
10. Jim O'Neill proposes the formation of a new G9 that should include the BRIC states, with one voice for European Union states.
11. The scenarios are based on simple extrapolation, extrapolation plus adjustment for real exchange rates, based on an extrapolation of the one-year forecast and based on forecasts and adjustment for real exchange rates.
12. ‘We do not really know the “right” answer as to which method is right but we go on to argue that … it may not matter. Whether you look at the future either in current US$ or PPP [purchasing power parity] terms, relative positions of key countries in the world economy are changing’ (Goldman Sachs Citation2001).
13. Solow's theory makes the initial assumptions that there is an economy producing one single product with constant returns to scale. Hence, when all input factors are increased, output is increased accordingly (Solow Citation2000).
14. The formula is Y=AKaL1−a. See appendix of the 2003 paper for more detail.
15. This process of ‘catch-up’ and ‘take-over’ is visualized in league tables and maps. In one striking example, BRIC economies are represented as cars on a route to overtake the G7.
16. The Group of Six (G6) are the G7 excluding Canada.
17. See interview in the video ‘Introducing Growth Markets’ on http://www.goldmansachs.com/our-thinking/topics/global-economic-outlook/intro-growth-markets/index.html (accessed 8 June 2012).
18. Jim O'Neill himself recalls that he ‘spent a lot of time [on deciding] how to present [this paper] and in particular the title of the piece’ (Interview with author, 1 June 2009).
19. The BRICs research is additionally marketed by videos presented on Goldman Sachs' website, among them ‘the BRICs Dream’, ‘Introducing Growth Markets’ and ‘Insights on the Growth Markets’. In these videos, economic dynamism is visualized through panoramic images of commercial ports and cityscapes with construction sites and traffic in fast motion; see http://www.goldmansachs.com/our-thinking/topics/global-economic-outlook/intro-growth-markets/index.html (accessed 8 June 2012).
20. ‘[I]t is now six years since we coined the term “BRIC” in our Global Economics Paper, “Building Better Global Economic BRICs”, published on November 30, 2001. Since then, these countries’ equity markets have seen a remarkable increase in their value’(2007, p. 5. See also Goldman Sachs Citation2005, p. 3).
21. In various articles for the Financial Times (22 April 2005; 14 September 2006; 23 January 2007; 24 September 2010), Jim O'Neill draws on the BRICs concept.
22. Interview with Jim O'Neill in video ‘Introducing Growth Markets’, http://www.goldmansachs.com/our-thinking/topics/global-economic-outlook/intro-growth-markets/index.html (accessed 8 June 2012).
23. As quoted in the introduction, Jim O'Neill tells that, after publishing the 2003 paper, he ‘received letters from the CEOs of some important well-known companies around the world telling us that it was the most influential research that they had ever read’ (Interview with author, 1 June 2009).
24.. Jim O'Neill tells that his work has impacted ‘people like Niall Ferguson, who know. He has just published a book. There was a very interesting, amusing [incident]. The Guardian newspaper wrote a critique of his book, saying it was a disgrace that I was mentioned more than Karl Marx which I thought is very funny.’
25. The IMF Coordinated Portfolio Investment Survey, including its methodology, is accessible on http://cpis.imf.org.
26. The MSCI emerging markets index includes 21 countries; these are the BRICs and Chile, Czech Republic, Colombia, Egypt, Hungary, Indonesia, Republic of Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, South Africa, Taiwan, Thailand, and Turkey. See http://www.msci.com/products/indices/tools/index_country_membership/emerging_markets.html (accessed 25 September 2012).
27. This danger is clearly raised by comparisons of BRICs with TMT. The FT author John Authers, for instance, suggested to ‘call up a graph of China's Shenzhen Composite Index, starting 14 months ago. Then, on a different screen, call up a graph of the Nasdaq Composite in the 14 month leading up to 10 March 2000 (the day tech stocks peaked and began their epic crash). Then invite colleagues to try to spot the difference between the two. The two graphs are almost identical, with gains of more than 100 per cent in less than a year and an almost vertical rise in the last few months’ (Financial Times, 24 January 2007).