The possibility of these reforms has long seemed remote, like the advent of democracy in China or the resolution to India’s feud with Pakistan. Now, however, the economic picture has changed in a way that makes change more urgent.
The BRICs are still feeling the effects of the global downturn; the International Monetary Fund has predicted growth rates for this year that are just a shadow of what they were in 2007. Moreover, the BRICs can now begin to see the limits of their growth in the absence of reform. Wages are finally rising in China, along with the currency, making exports more expensive. Brazil is reaching peak urbanization. Russia’s energy-based influence will dwindle as substitutes and other sources come online, and India has been reluctant to lay out the welcome mat for foreign companies in many industries.
Soon enough, all the BRICs will need to find new ways to attract investment, create jobs, and raise living standards. Making their consumers a more attractive proposition to foreign companies would go a long way to achieving all three by laying the groundwork for new production facilities staffed by local workers making goods and services for local households.
India, the poorest of the BRICs, has finally started down this road. In the past few months, it has made industries ranging from insurance to supermarkets more open to foreign companies. Joint ventures with local players will still be required in many cases, but greater foreign ownership will be permitted. It’s not quite a multitrillion-dollar free-for-all just yet, but it’s a start.
Daniel Altman teaches economics at New York University’s Stern School of Business and is chief economist of Big Think.