The man who coined the term Brics is adding four new countries – Mexico, Indonesia, Turkey and South Korea
First there were the "Brics" - now there's "Bric 'n' Mitsk." Jim O'Neill, the economist who coined the term Brics to describe Brazil, Russia, India and China, is adding Mexico, Indonesia, Turkey and South Korea to the original four countries to create a new grouping of growth markets.
"It's just pathetic to call these four 'emerging markets'," he told the Financial Times. O'Neill, chairman of Goldman Sachs Asset Management, told the FT his new approach will involve looking at fresh ways to measure exposure to equity markets beyond market capitalisation, such as looking at gross domestic product, corporate revenue growth and the volatility of asset returns.
The concept of "emerging markets" was created 30 years ago by World Bank economist Antoine van Agtmael to replace the more pejorative "third world" tag. O'Neill told the FT that the term was no longer helpful because it encompassed countries with too great a range of economic prospects.
Some emerging markets are illiquid and small, but any economy from the emerging markets world that is already 1% of global GDP or more, and has the potential for that to rise, has the ability to be taken seriously, said O'Neill.
Mexico and South Korea each account for 1.6% of global GDP in nominal terms; Turkey 1.2% and Indonesia 1.1%.
His new growth markets grouping doesn't quite have the ring of Brics about it, but O'Neill looks as though he's on the right lines – Moody's this morning upgraded Indonesia's rating to one notch below investment grade, to Ba1 from Ba2.
O'Neill also tells the FT's Gillian Tett how he came up with concept of Brics in 2001. It was shortly after the departure of his colleague, Gavyn Davies, who was co-head of economics at the investment bank. Feeling under pressure to come up with a new idea, O'Neill found inspiration in the wake of the tragic events on 9/11. "What 9/11 told me was that there was no way that globalisation was going to be Americanisation in the future – nor should it be."
"In order for globalisation to advance, it had to be accepted by more people … but not by imposing the dominant American social and philosophical beliefs and structures."
His prediction that the Brics would overtake the six largest western economies was initially greeted with scepticism but the concept has become widely accepted. And it has had a huge impact on O'Neill: "It has transformed my life," he said.