1. Can we build on the BRICs?
Prepared for: AIB SE 2013 Conference
Presenter: Ilan Alon, Ph.D.
Cornell Professor of International Business, Rollins
College
Visiting Scholar and Asia Fellow, Harvard University
2. Dreaming with BRICs
By 2025, BRIC will account for over half the
size of the G6
Of the current G6, only the US and Japan may
be among the six largest economies in US
dollar terms in 2050
The largest economies in the world (by GDP)
may no longer be the richest (by income per
capita)
6. Research Question
Can a country with bad governance sustain
economic growth and competitiveness?
Russia
China
India
7. What is Governance?
Traditions and institutions by which authority
in a country is exercised
Process by which governments are selected,
monitored, replaced
Capacity of government to effectively formulate
and implement sound policies
Respect of citizens and the state for the
institutions that govern economic and social
interactions among them
(Kaufmann and Kraay, 2007)
17. China Example: Rules of the Road - Institutions
Largest number of
fatalities, despite low
number of passenger
miles
Guanxi not unique to
China (relationship based
economies)
Implication to transition
18. India example: key challenges
Poor (remember Maslow)
Corruption
Inequality
Gridlock in government
Caste system
Religious fractionalization
Red tape…
21. Russia Example
Dividends of economic (and political)
liberalization: Perestroika (restructuring) and
Glasnost (opening)
Improvements in governance in the period
following the Russian economic crisis (1998)
Run up in prices of oil and other commodities
Slippage into autocracy and lack of control of
corruption has limited growth potential
22. Research on Russian Governance
Informal rules (e.g., blat, organized crime)
sometimes conflict with formal rule (rule of law)
Governance suffers from Trust, Transparency,
Enforcement of Law (Judge and Naoumova, 2004)
Selective prosecution of uncooperative elites
24. Nicolay II the Expiator
“There are
treachery
cowardice
and a deceit
everywhere
around us”
25. Alexander III the Peacekeeper
“Russia in all
over the
world always
had just two
loyal friends:
army and
fleet”
26. Research Implications
Do governance and institutions matter?
Can countries lead the world economically and still have a
bad governance?
Can countries improve competitiveness regardless of
governance?
What are the implications to international institutions?
What are the implications to companies?
What are the roles of demographics? Energy prices?
Geopolitical positioning?
Triad powers are here to stay: Europe, US and Japan
New players will need to adapt; change the rules; takeover
27. Role of Government
Government ownership
Some key industries are dominated by state
owned enterprises
Government involvement in key firms high
(Judge and Naoumova, 2004) e.g. Yukos
Government legislates the rules
Government enforces the rules
Connection to government is important
Competition is unfair and unequal
Market efficiency is lost
Editor's Notes
2003
Competition implies free and fair
Assumed in modern day capitalistic competition: Free and Fair Rivalry31 data sources, 25 organizations, informed stakeholders
Not deterministicWho is right? Depends on future governance.
Deep socio-economic problems
Demographics crisis, dependence on oil, defiance of international cooperation, international currency, political stabilityConclusion: don’t discount the old powers: