BRICS is acronym of developing countries which comprised of Brazil, Russia, India, China and South Africa. These five countries even though they are located at different geographical area, they have one thing in common which is economic growth. One would wonder why these countries grow so fast than other developing countries. This question will be answered in the paper. This paper will examine the key factors of economic growth in the above countries. Second, it will explore the reason behind their faster growth compare to neighboring developing countries.
One of the main key factors of economic growth is human capital. Both BRICS countries have well skilled labor. The stock of knowledge accumulated by employees resulted in higher GDP. Human capital can promote economic growth indirectly or in directly because it is the only tools can be combined with Know-how to improve efficiency and innovation. It has been explained in endogenous growth model formulated by Romer (1986); that the accumulation of knowledge can be combined with physical capital to produce output. The ideas generate innovation which can enhance economic growth and more output. Secondly, technology is the invention created by human capital. These BRICS countries have improved greatly since earlier 1990s. For instance China and Russia both advanced human capital that is also equivalent to other western countries. This well skilled labor is the driving force in the BRICS countries. Population growth is another factor behind accumulated human labor because huge population will consume more resources. With this pressure, more labor will be used for production.
Capital accumulation is another factor of economic growth. Capital can be invested in many projects, for example research and development. Government can invest in huge machineries to build bridges and highways which later promote economic activities. More free movement of goods and services will create more jobs and greater GDP through the wave of multiplier effect. Haldar quoted Mankiw et al. (1992) and Barro and Sala-i- Martin (1992) “’the further an economy is ‘below’ its steady state, the faster the economy should growth.”’ This is true. BRICS countries are growing faster because they all were below steady state. This is the main different between developed countries like USA and BRICS countries. BRICS countries have invested their capitals in many projects since year 2000 and the capital return is greater. The stock of capital availability in these countries promoted the economic growth. China is the leading country among the BRICS countries because its capital investment is greater than others. The expansion we see in Russia, China and Brazil’s economy is the resulted of accumulated capital investment. Capital is a key ingredient of economic growth. It can be invested in computers, school buildings or plane. This investment through multiplier effect promotes economic growth...