Were we wrong to embrace the BRICs?

David Bullard says that while the BRIC nations are stumbling, the USA is on the rise again

I flew down to Cape Town last weekend to MC the Maserati Charity Yacht Regatta. One of the "perks" was that I would be on one of the racing yachts on Saturday afternoon and would then morph from waterproofs to dinner suit and flawlessly conduct the evening' gala dinner. The only possible fly in the ointment as far as I could see was chronic seasickness.

Having lived in land- locked Joburg for the past 32 years I haven't had much opportunity to hang off the side of a yacht with my derriere dragging in the water. I've sailed on cruise liners on very stormy waters in the Bay of Biscay and managed to make it to breakfast when even the waiters were looking a little bit green, but I didn't think this was a cast iron guarantee that I wouldn't be violently ill on what would presumably be grey and choppy Cape winter seas.

So I was delighted when I arrived at the Royal Cape Yacht Club on Saturday to sunny skies and calm seas. So calm in fact that Sea Oyster, the catamaran that was hosting team Maserati  and me, had to use engine power to get back to land. Despite this we came first in our class; not difficult considering we were the only multi-hulled vessel in the race.

My flight out of Cape Town on Sunday morning coincided with the arrival of an aircraft with the words "United States of America" on the side. Yes indeed, the US President was landing at a bog standard airport. Apparently he couldn't land, Gupta style, at one of our key point military airbases because the runways are too short. How's that for bad planning?

It was a typically understated affair with fleets of bullet proof limos parked on the tarmac (no jostling at the baggage carousel for the Obamas) and lots of men in sun glasses with curly bits of wire going into their ears. Four military cargo planes were parked in a row, presumably to fly the whole travelling circus out again when the show is over.

I'm not quite sure why Barack Obama came here, other than to sample the superb Cape Town winter weather. The ruling party has made its anti American views known over the years and cabinet ministers have regularly thumbed their noses at the UK and the US.  Quite what is in it for the US or SA is uncertain but I suppose we should feel deeply honoured that an educated black president with not a hint of scandal attached to his name should be prepared to converse with an uneducated black president mired in controversy. That's politics for you.

What did occur to me during Obama's visit was the thought that maybe we have backed the wrong horse with our BRICS association. Things are not going quite as well with the BRICS as many had hoped and, perversely, things are going much better with the US of A than anyone could have ever imagined. Daniel W. Drezner made some very good points in an article in last week's Spectator (The return of America).

He makes the point that, unlike the UK, the US is now free of bailed out banks, having sold them at a tidy $25 billion profit. Contrast this with the UK's lack of success. As Drezner puts it, "Britain looks like it will be saddled with zombie banks for another decade".

While US government debt is still breathtakingly high (around 17 trillion dollars) and rising, American households and companies have been reducing their indebtedness.  The debt to income ratio of US households has fallen from a pre crisis 137% to 116%; lower that European household indebtedness. The equivalent figure for the UK is 160%.

American manufacturing is also doing well for the simple reason that US energy costs have plunged. The Americans have enthusiastically gone ahead with hydraulic fracturing (fracking) with the result that gas prices are a third of those charged in Europe. Small wonder then that companies like the Austrian steelmaker Voestalpine have announced that they will build a $550mln plant in Texas, having rejected 16 other potential global sites. US labour may not be the cheapest in the world but the promise of cheap energy obviously negates that.

It's already old news that that by 2020 the US could topple Saudi Arabia to become the world's largest oil producer and some pundits predict that by 2030 the US could become self sufficient in energy. While other governments dilly dally about fracking because it might upset the environmentalists the US has taken the view that all that stuff underground is the best way to improve the lives of those overground.

Five years ago there were plenty of "experts writing off America and confidently claiming that US world influence would diminish and that the new game in town was the BRIC alliance of Brazil, Russia, India and China. But as the song says, "it aint necessarily so". 

Brazil's problems go far deeper than an objection to so much money being spent to stage the World Cup in 2014. Russia's energy boom is at an end and China could be heading for its own credit crunch having created a property bubble. It's also unlikely that China will remain a source of cheap labour as Chinese workers see the prosperity springing up around them and demand higher wages and better working conditions.

As far as South Africa is concerned, we need to be open for trade with anyone. We are too insignificant to be calling the shots and deciding who to deal with. Of course, it would help if we could ditch the economic saboteurs within the cabinet but that's not going to happen any time soon. What would be great though would be some indication that the current government have an economic plan for the country's future. But maybe we'll have to leave that to Kenny Kunene and Julius Malema.

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