The acronym BRIC was coined by Jim O’Neill in his now-distant 2001 paper, but Brazil, Russia, India and China are still considered to be at a similar stage of economic development. The truth is, however, that the BRIC countries are not that alike. They have quite different economies – and quite different issues.

B is for Brazil

Brazil has in the last decade turned itself into a place where it is very expensive to do business. And government is to blame. Not only has the tax burden risen from 22% of GDP in the 1980s to 36% today, but the tax system is ridiculously complex. Unfortunately most of the money goes on pensions and wasteful spending on the unreasonably big government and not on the reforms and innovations.

The other problem is tiresome overregulation, even record low interest rates are of no use to the economy. Business leaders believe that uncertainty over regulations holding vital investment in infrastructure.

R is for Russia

Russia faces serious political problems and its economical structure may no longer be regarded as that of a BRIC country.

The major source of problems, of course, is the 2008 economic crisis. The Russian economy experienced the highest capital flight among the BRICs in the last decade. In August 2011 alone, USD 500 million was taken out of Russian investment funds, and the drop continues. The Russian Ministry of Finance estimated capital flight for 2011 to more than USD 80 billion, and that major capital investment cannot be expected before 2013.

According to Norwegian Institute of International Affairs, in one week in September 2011, investors withdrew 315 million dollars from Russian capital market, which is double the capital flight from China and India for that week.

Even the Russian press has noticed that the Goldman Sachs prognosis of a lower global growth rate for 2012/2013 has made Russia look like an outsider within BRIC.

Despite the fact that Russia is the largest oil exporter in the world and the second best in natural gas, it is not what is happening with the other BRIC countries.

I is for India

India lacks a big export industry. In this situation it is unlikely to see essential growth in exports in the near future. What is even more important that India has a substantial account deficit and to cover it $50-70 billion in investments is needed every year.

Unlike the other BRIC countries, India is still desperately poor. Widespread corruption and lack of jobs in the country with rapidly growing population are also the reasons to worry.

C is for China

China’s validity in BRIC has never been questioned. It is not only China’s rapid growth but also political weight on the international stage that put it ahead and above the other three.

And even though China’s economy may be slowing, it is still the best investment destination of the four big emerging markets. The thing is – market should stop thinking of China as a 10 percent galloping state. China is getting past being just about quantity. So the growth may be slowing but it is still at a very high rate.

The GDP of China’s economy has increased from $1.57tn to nearly $6.3tn, rising to number 2 in the world ranking. What is even more important, China has transformed into a state that exports capital and manufacturing from mainly agricultural country. And now it has more and more possibilities to strengthen further its influence on the international arena.

The magnitude of Chinese economy and Beijing’s ability to drive the economy away from troubles make it less sensitive than huge but less controllable states like India, the oligarchic Russia or overregulated Brazil. So is China just another brick in the wall? Not quite, not quite.

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Pennsylvania, U.S.A. — Governor Tom Corbett signed on June 30th the 2012-13 budget, strengthening the state’s economy and education system, while continuing his commitment not to increase taxes for the citizens of Pennsylvania.

The $27.66 billion budget was signed on time for the second consecutive year.

“Our taxpayers deserve government that works for them,” Corbett said. “Today we re-affirm our commitment to job growth, to education, to the needy and to the taxpayers.”

“While times are still difficult and we wish we had more to spend, our revenues have improved, allowing us to increase funding to some important areas of our final budget.”

Along with the budget, the legislature agreed to adopt several of Corbett’s major initiatives such as improvements to the criminal justice system, an education reform package, and eliminating the agriculture inheritance tax.

This budget also continues the phase-out of the Capital Stock and Franchise tax and guarantees critical tax credit incentives for companies committed to bringing business and jobs to Pennsylvania.

Corbett was able to increase spending from his originally proposed budget because state revenues have increased in recent months, a result of following the course of reform, restraint and responsibility.

This year’s state budget positions Pennsylvania for a structurally sound financial future. However, Corbett urged caution because even with progress, there is still concern for the future with impending pension cost increases, rising debt service costs and medical cost increases.

Highlights of the 2012-13 budget include:

Education

• This budget restores, or in some cases, increases funding for early, basic and higher education, for a total of $11.35 billion. State-related and state system universities will receive $1.58 billion, the same amount of funding as last year.
• Funding for school districts is increased over last year and the Accountability Block Grant is funded at $100 million, supporting full-day kindergarten in many school districts.
• The current educator evaluation system, which has been unchanged for more than 40 years, will undergo across-the-board reforms, based in part upon multiple measures of student achievement.
• Expansion of the state’s successful Educational Improvement Tax Credit (EITC) program, which uses business donations to provide scholarships to low- and moderate-income students in exchange for a tax credit.

Economic Growth

• Long-term tax incentives for companies committed to bringing business and jobs to Pennsylvania. Companies can earn tax credits over a span of 25 years proportional to the industry’s activity in the state.
• For example, Shell Chemical announced in March that it was considering building a petrochemical complex in Beaver County, which would turn by-products of natural gas to ethylene. Ethylene is used to produce a variety of items from tires to toys, food packaging to footwear.
• In April, Delta Air Lines’ wholly-owned subsidiary, Monroe Energy LLC, acquired a Delaware Countyrefinery, preserving hundreds of direct jobs and thousands of jobs in related industries. To make this possible, Delta received a grant from the Department of Community and Economic Development, contingent upon the company investing at least $350 million at the project site and employing at least 402 full-time workers on-site for at least five years.
• Creating programs that will support employers and workers, such as JOBSFirst PA, which invests in small and large businesses, offering initiatives to cultivate and create new industries and jobs.
• Providing employer-driven, on-the-job training opportunities for unemployed workers through a new program called Keystone Works. This program will allow jobless Pennsylvanians to keep receiving unemployment benefits while being retrained and helps employers identify the best candidates before they hire.

Taxes

• Continuing the effort to eliminate the Capital Stock and Franchise Tax.
• Elimination of the Pennsylvania Inheritance Tax for farming families, previously levied when property was transferred from one generation to the next or between family members. The law goes into effect immediately.

Human Services

• The Human Services Block Grant pilot program, including up to 20 counties, will combine several funding appropriations such as child welfare, mental health, drug and alcohol, into one. Not only will this allow counties greater discretion in spending the money, but also streamlines reporting requirements into one, unified document. The program will allow for more personalized services to those in need while providing the flexibility counties need to provide services during times of reduced funding.
• Foster children will receive support until the age of 21. Previously, foster care ended at the age of 18, removing the children from a support system during a critical period in their lives.
• The budget increases funding for state programs for people with intellectual disabilities, addressing vulnerable populations currently on the waiting list.
• Healthcare providers for those in need, including nursing homes and hospitals, will receive full funding in this budget.

Cost Containment

• Provides for the merger of the Department of Banking and the Securities Commission, realizing $1 million in savings.
• Improves the criminal justice system with the adoption of Justice Reinvestment Initiative legislation, which will help save the state hundreds of millions of dollars by making prisons and parole more effective and efficient.
• Enables the Department of Environmental Protection to rely less on taxpayer dollars and more on accurate cost-accounting from funds supported by fines and permit fees.
• Makes the Department of Environmental Protection more efficient. With the same number of inspectors, the Department of Environmental Protection conducted twice as many oil and gas site inspections in 2011 versus 2010.
• Reduces expenditures for employee travel by more than $2 million. Through a collaborative effort by the Office of Administration, Office of the Budget and Department of General Services, policies were reformed in January 2012 for the reimbursement of travel expenses and requiring employees to use the most cost-effective means of vehicle travel.
• Trims costs in the Office of Administration by $2.9 million without impacting productivity and sustainability.
• Consolidates the Bureau of PENNSAFE, resulting in savings of nearly $1 million a year. This is an example of the governor’s commitment to streamlining government and making operations more efficient and effective.

Image Courtesy of  Tom Corbett

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New York, U.S.A. — Leaders of European Union member states are meeting in Brussels to discuss measures that might alleviate the financial crisis, and reassure stakeholders that the region and its weakest economies have a sound plan for restoring economic growth.

“Following today’s release of The Conference Board Leading Economic Index for the Euro Area, which fell for a third consecutive month (albeit at a slower pace), all eyes have turned to Brussels,” said Jean Claude Manini, The Conference Board Senior Economist for Europe. “The sharp deterioration in confidence suggests that output growth has fallen back into negative territory in recent months. If confidence in the economy and Europe’s financial situation cannot be restored quickly, economic activity may experience a deeper and longer contraction than currently projected.”

According to Bart van Ark, The Conference Board Chief Economist: “The latest EU summit represents a new and important opportunity to adopt a credible timetable of robust measures to get this crisis under control. The idea of a banking union is one of the most promising steps in the short term. While this would eventually involve accepting joint obligation for the debts of other member states in some form, if a bold and comprehensive process is identified, a gradual implementation might be acceptable for those involved in the decision making.”

Following months of rising financial market turmoil in the Euro Area, The Conference Board recently revised its projection for Euro Area GDP in 2012 down from -0.1 percent to -0.3 percent and also has made downward revisions to its forecasts for Spain, Italy, France, and the U.K. This morning’s release of The Conference Board Leading Economic Index for the Euro Area and The Conference Board Coincident Economic Index for the Euro Area provides additional evidence that the condition of the region’s economy is continuing to deteriorate.

To provide additional context regarding the challenges summit participants will be addressing, The Conference Board has released the June edition of its Economics Watch European View publication. This report contains details regarding our near-term forecast, a discussion of how member states may seek to reduce financial risk in the banking sector, and a detailed look at what the implementation of austerity measures could mean for the economies of Euro Area members.

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With the 2012 election season in full swing, the economy continues to be one of the biggest factors impacting Americans’ choice for president, with 49 percent saying their vote in November will be most influenced by the issue of jobs creation, according to the latest Workplace Insights survey by Adecco Staffing US, part of the world’s largest recruitment and workforce solutions provider.

The omnibus survey, conducted by Opinion Research Corporation International on behalf of Adecco Staffing US, shows 36 percent of Americans believe President Obama has the most successful plan to create jobs in the U.S.

As far as the current pool of Republican candidates, only 15 percent of respondents believe Mitt Romney has the best plan to create jobs and about half that amount (8 percent) believe Ron Paul or Newt Gingrich (7 percent) have the best plan. Only 3 percent of Americans believe Rick Santorum has the most successful plan to create jobs.

“With economic growth and recovery still taking place, job creation is still understandably one of the most important things on the minds of Americans,” said Joyce Russell, EVP and President of Adecco Staffing US. “Given how many people are still looking for work, it should be no surprise that this issue has the power to ultimately decide who will win the 2012 presidential election.”

The survey also shows that Americans want the government’s help in bridging the job skills gap. In fact, 64 percent believe the government should offer job seekers additional skills training or education. Americans also believe the U.S. government could be doing more to create jobs, with 66 percent of respondents saying the government should give incentives, such as tax breaks, to businesses. Only 4 percent believe the U.S. government is doing exactly what it should be doing to create more jobs.

Additional survey findings include:

Perception of Temporary Jobs is Improving:  According to the survey, nearly two-thirds (63 percent) of Americans view a temporary job more positively that they did last year. In fact, 86 percent of those surveyed believe a temporary job is a good career option for people looking to gain valuable work experience.

Congress and the Federal Government More to Blame for Lack of Jobs than President Obama: Though 21 percent of respondents fault corporations and businesses for the lack of jobs creation in the U.S., Congress and the Federal Government are not far behind with 18 and 15 percent, respectively. Meanwhile, only 14 percent of Americans believe President Obama is most to blame.

Some Optimism about Job Market:  In spite of economic uncertainty, 60 percent of Americans believe there will be more jobs available in 2012 than there were last year.

Job Security Wins out over Perks for U.S. Workers:  Nearly a third (31 percent) of respondents said job security was most important to them—a noticeable increase compared to the 21 percent who felt this way in 2011. Job security is so important that 64 percent of Americans would consider leaving their current job if they had guaranteed job security. This is just slightly lower than those that would leave their job for increased salary or compensation (72 percent).

More Americans Plan to Speak Up about Raises, Promotion: Nearly a quarter (24 percent) of those surveyed plan to ask for a raise, bonus, or promotion in 2012, compared to 20 percent who said they had planned to do so last year. But it seems those plans went by the wayside in 2011: only half that number (13 percent) actually ended up asking for a raise last year.

Regardless of whether or not American workers plan to proactively ask for a raise, bonus or promotion, there is optimism that they will get one, as 41 percent of respondents plan on getting a raise, bonus, or promotion in 2012. This is definitely positive thinking considering only 32 percent of Americans actually received a raise in 2011.

Workers Broadening Their Career Options in 2012: The survey shows that Americans are more open to working in different fields than they were in 2011. In fact, 68 percent of respondents said they’d be more willing to take a job in a field outside of their degree or study today than they would have been last year.

emin kuliyev / Shutterstock.com

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In three years, the Regional Greenhouse Gas Initiative (RGGI) added economic value worth more than $1.6 billion (or nearly $33 per person) to the 10 member states, according to a first-of-its-kind report released today at the National Association of Regulatory Utility Commissioners (NARUC) conference by the independent economic consulting firm Analysis Group.

According to the report, “The Economic Impacts of the Regional Greenhouse Gas Initiative on Ten Northeast and Mid-Atlantic States,” RGGI investments to date will end up delivering the following results:

• The regional economy gains more than $1.6 billion in economic value added (reflecting the difference between total revenues in the overall economy, less the cost to produce goods and services)
• Customers save nearly $1.1 billion on electricity bills, and an additional $174 million on natural gas and heating oil bills, for a total of $1.3 billion in savings over the next decade through installation of energy efficiency measures using funding from RGGI auction proceeds to date
• 16,000 jobs are created region wide
• Reduced demand for fossil fuels keeps more than $765 million in the local economy
• Power plant owners experience $1.6 billion in lower revenue over time, although overall had higher revenues than costs as a result of RGGI during the 2009-2011 period

RGGI requires major power producers to buy allowances at auction for each ton of carbon dioxide (CO2) they emit. Power plant owners have spent roughly $912 million from mid-2008 through September 2011 to buy allowances from states.

The report released today is the first to track these expenditures by power plant owners in auctions to buy CO2 allowances, the impacts on electricity prices paid by consumers, and the auction proceeds disbursed to the states and subsequently spent on different projects. Results from the study are expected to be published in the December edition of The Electricity Journal, a leading policy journal for the U.S. electric power industry.

“As the first U.S. experiment with a carbon price in electricity markets, RGGI now has produced actual historical data that reveal the concrete economic impacts at the state and regional level,” said Dr. Susan Tierney, one of the lead authors of the report and a managing principal of Analysis Group.

“We tracked the dollars spent, and RGGI generates greater economic growth in every one of the 10 states that participate in RGGI than would occur without a carbon price. The states’ auction of the CO2 allowances was important for generating those public benefits.”The report identifies that spending on energy efficiency programs was the most popular way states spent RGGI funds, and the most economically advantageous.

Funds were also invested in other ways, all with positive economic outcomes, including worker training, community-based renewable energy projects, bill-payment assistance to low-income and other energy customers, land protection, and contributions to a state’s general fund to help close budget gaps.

“Although RGGI represents a well-functioning multi-state agreement, RGGI is fundamentally rooted in states’ rights. Each state spent the money raised through the regional carbon market according to its own individual priorities,” commented report co-author Paul Hibbard, a vice president with Analysis Group.

“Regardless of what they invested in, each state benefitted from capturing the value of the RGGI allowances for public benefit, re-investing the auction proceeds back into the local economy, and reducing fossil fuel demand. By and large, these dollars remained inside their local economies. And, those states that made energy efficiency a priority reaped even greater economic benefits.”

In a meeting yesterday, Analysis Group briefed state officials on the study results. The 10 RGGI states reside in one of three “electrical regions,” each with a different mix of electricity generating sources. Each region’s relative reliance on fossil fuels affected the level of economic benefits, as did the states’ different choices about how and when they chose to invest their auction proceeds.

The performance of this regional market is important given the RGGI states’ large population (1/6 of the U.S.) and economic clout (1/5 of U.S. GDP), according to the report. As a result of the relative efficiency and low emissions of the region’s electricity mix, the 10 states in RGGI use only 11 percent of the country’s power generation and produce 6 percent of all U.S. carbon emissions.

The full report is available at www.analysisgroup.com/rggi.aspx.

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