Inflection Point

One of the central questions facing the post-American era has been, who will replace the US consumer as the source of final demand in the world-system.

Sometime later this year, I think we're going to find out.

In December of 2009, the GDP of the BRIC nations (Brazil, Russia, India, China) reached $9.17 trillion. To put this in perspective, that's about two-thirds the GDP of the US. It's slightly more than half the output of the 27-member European Union, and twice the size of Japan. It's amazing to think that back in 1999, the BRIC economies were only one third of their current size.

If the BRICs continue on their growth path -- and their leading indicators are turning sharply positive -- by 2011 their net additional GDP will roughly equal the comparable US figure (about $700 billion, assuming 2% annual growth).

However, the old model of running up export-surpluses to debt-crazed US consumers won't work anymore. Instead, the BRICs have to rely on internal demand. Not only that, but the BRICs, just like the rest of the planet, urgently need to green their economies, or there won't be a planet for any of us to live on anymore.

In a nutshell, the BRICs have to redirect some of their forex accumulation into indigenous consumption and green infrastructure (about $200 billion per year should do the trick).

Can they pull it off? The BRICs all have heavily regulated financial systems, reasonably effective states, low debt levels -- about 20% of GDP, on average -- and vast savings ($3.3 trillion in foreign exchange reserves). All they need is the political will.

And the BRICs aren't alone: Japan and Europe will help out, too.