China Tells

BRIC is coined by Goldman Sachs to describe the four fastest emerging economies in the world: Brazil, Russia, India and China. All these four countries have gone through phenomenal growth in the last few decades, and their GDP combined has already accounted for about 15% of global economy. It is estimated that BRIC, along with US and Japan will become the six biggest economies by 2050.

However, are the BRIC people really wealthier as it appears on the paper? Who are the real benedictory of the glorious development? For example, China’s real GDP keeps growing at near or above double digit for at least 15 years, but have Chinese people become wealthier by 10% annually in the last 15 years?

It is not an easy task to assess the proportion of benefit that its people obtains during a country’s economic growth. However, by looking at some of the data we can get a step closer to the truth.

Below is a list of countries for their GDP per capita and the number of richest people in Forbes 100 that belongs to that nationality (2007).

The number is very telling: India almost has the same number of billionaires as Germany even though its GDP per capita is about 7.6% of that of Germany. China, Russia and Brazil each have more billionaires than that of Japan or UK despite the sharp difference in terms of GDP per capita.

Next, it helps to take a look at the evolution of wealth distribution in BRICs in the last few decades. Here I introduce a concept of GINI coefficient. The Gini coefficient is a measure of statistical dispersion developed by the Italian statistician Corrado Gini. It is commonly used as a measure of inequality of income or wealth. Gini coefficient has a value between 0 and 100, with 0 meaning perfect equality and 100 meaning perfect inequality (eg., one person has all the income). The higher the Gini coefficient, the more unequal a society would be.

The numbers don’t lie. All BRIC countries have experienced a decent growth in Gini coefficient in the last 30 years. China’s Gini has grown steadily from 30 to almost 40 since 1970s when the country started its economy reform. Russia had a dramatic revolution in the wealth distribution when Soviet Union collapsed in 1990s. India’s Gini stepped to a higher level above 30 during 1990s when the government started to open the economy. And Brazil, having always been the top Gini country in the world, continues to polarize its wealth distribution towards the richer.

During the same period, most developed countries either went through a steady period (eg., Japan and Germany), or decreasing era (eg., France) of Gini coefficient. The only exception is USA, whose Gini increased from 35 to 45 during the same period. Such a change is consistent with the fact that USA tops the world’s wealthiest people list with 38 billionaires.

It is never easy to identify the impact of a country’s growth on different sectors of its people. Like a coin having two sides, there are always winners and losers in the game of change. Such structural changes are more notable in economies that have gone through phenomenal growth such as BRICs.

There are various reasons for BRIC countries to experience a higher level of wealth concentration in the last three decades. What might be common, though, is that the upper class with more power and wealth has a natural tendency to reap more benefits and fortify their superior status during a time of change. In addition, they are better equipped to achieve such objectives.  However, we shall never forget those who are left behind the globalization trend and have not benefited as much, or are even worse off during the ever changing competition. The recent incidence in Xinjiang, China is a good example of social unrest and even violence caused by people who are not happy with their conditions. There are ethnic elements to complicate the whole matter, but it does not rule out the economic reason behind the scene as one of the crucial factors. Without caring for those who are lagging behind, or the ‘grass root’ class, the grand story of BRIC’s development is only relevant to the few who have benefited most and a fantasy for the rest of the mass population.