BRICs Guy on the EU's Road to Smurfdom

Jim O'Neill is known to most as the Goldman Sachs guy who termed the terms "BRICs" to represent the bloc of large developing countries Brazil, Russia, India, and China and to football fans as the would-be savior of Manchester United from the dastardly, debt-loving Glazer Ameriscum. (See anyone else buy a football team via LBO?) He also coined "MINTs" for Mexico, Indonesia, Nigeria and Turkey, albeit their subsequent performance is even spottier than the BRICs'.

Now, BeyondBRICs points us to a new report from him published by Bruegel that suggests the developed countries will lose a larger share of the world economy faster than he had thought. In other words, it's not just the BRICs but the entire developing country caboodle that's going to be growing especially in trade terms like gangbusters relative to their industrialized counterparts. Most vulnerable are the Europeans who are set for a kicking, especially after O'Neill and his bean counters totted up the figures post-European crisis:

We highlight the dramatic degree of the shifts taking place in world GDP and trade and include fresh projections of what world trade patterns might look like in 2020, should the trends observed over the past decade to continue. We also show the resulting shift in trade relationships for many key countries. European member states tend to have quite different trading partners’ profiles, and this heterogeneity is quite likely to become more pronounced with time. This, in turn, suggests a significant challenge for the effective functioning of the euro area and weakens the original rationale of its creation.

This figure shows precipitous declines in Europe's share of world trade in the next few years leading to 2020:

Individual EU nations are obviously not expected to fare well, with even Germany becoming less important:

Even as a proponent of developing countries, I think he's a tad optimistic and weighs post-European crisis data too much in extrapolating their future performance. We'll see. O'Neill also writes about things a lot of IPE commentators have commented on in that institutions of global economic governance do not fully reflect changes in the world's changing distribution of wealth. Remember, the US still selects the World Bank head, while the EU does the same for the IMF. The Eurocentric G-7 isn't exactly diverse and has become less so since they downsized from the G-8 after kicking out Russia. These ideas should not be new to IPE Zone readers, but it's good to hear an influential economist say the same things.