Maybe it’s because I’ve been reading Charles Mann’s terrific new book, “1493: Uncovering the New World Columbus Created,” and my head is full of all the horrors (ecological, genocidal, etc.) knowingly and unknowingly inflicted on the rest of the planet by Europeans. But I just can’t get over the enormous, ironic implications of the news that representatives of some of the world’s biggest up-and-coming developing countries are busily thinking of ways to help Europe find a way out of its troubles.
The Financial Times’ Joe Leahy reports from Sao Paulo:
Officials from the leading emerging market economies will meet in Washington next week to discuss potential joint action to help the crisis-hit eurozone, said Guido Mantega, Brazil’s finance minister. The idea will be discussed at a meeting of the finance ministers and central bank governors of the “Bric” nations — Brazil, Russia, India and China, plus South Africa — on Thursday.
Leahy writes that “any concentrated joint effort by the Bric nations to support the eurozone would mark a further symbolic shift in the momentum of the global economy towards the largest emerging markets.” That’s a rather dry way to describe an epochal reversal of historical trends that have been cemented in place for centuries. Sure, before Europe exploded to world domination in the 16th and 17th centuries, the bulk of the world’s productive economic activity took place in China and India, and not so long ago Russia was the guiding force behind a major superpower, but seeing Brazil and South Africa become significant players on the world stage is eye-opening.
Of course, there are still some significant differences between the newly emerging and the already been there/done that crowd. A review of IMF statistics for per-capita GDP (adjusted for differences in cost-of-living and inflation rates) suggests that the notion that the Brics should come to the rescue of Europe is just a bit ridiculous.
Here’s a look at some of the European nations believed to be most vulnerable to the sovereign debt crisis, ranked by per-capita GDP:
Ireland $38,550; France, $34,077; Spain $29,742; Italy, $29,392: Greece, $28,434; Portugal $23,233.
And here are the “Brics” plus South Africa: Russia $15,837; Brazil $11,239; South Africa, $10,498; China $7,519; India, $3,339.
Reviewing the disparity in living standards you might think that China or Brazil or India would be better off investing their stockpile of foreign reserves in domestic upgrades, rather than in buying European bonds. But as the rest of the world learned when Europe unleashed imperialism, disease and the gospel across the Americas and into Asia, what happens in the Old World can easily remake the New: On an interconnected planet, Brazilians and South Africans may have as much to lose from a Greek default as do France or Germany.
But the award for most ironic quote of the week has to go to Chinese Premier Wen Jiabao, who sternly warned European and American leaders this week to “put their own houses in order.”
Chinese Premier Wen Jiabao, facing calls to widen support for indebted European countries, signaled that developed nations should cut deficits and open markets rather than rely on China to bail out the world economy.
Cut deficits and open markets? Isn’t that what Washington Consensus-preaching Americans were telling the rest of the world to do just a decade or so ago. Ouch!