Will the MINT countries become the best place in the world to become a millionaire?

Economist Jim O'Neil has grouped Mexico, India, Nigeria and Turkey together as the economies most likely to explode over the next decade. But there are lessons to be learned from the BRICs - a rising tide does not lift all boats.

Where in the world can you still expect to get minted? The clue is in the question. Jim O’Neill, the economist of "BRIC" fame recently invented a new acronym, MINT, to showcase the next four economic frontiers.

O’Neill’s prophetic acronym was coined in 2001 to predict the economic emergence of Brazil, Russia, India and China (BRIC) and resulted in a rush of new-found wealth in all four economies. Over the past decade we’ve seen the number of millionaires swelling in these countries. Indian millionaires have developed a fad for yachts, Russians for Knightsbridge, Chinese for fine wine and apparently, the latest thing to have in Brazil, is a helicopter.

Just as these BRIC economies come off the crest of the wave and start lowering their growth predictions, O’Neill has come up with a new acronym for the decade: MINT, meaning Mexico, India, Nigeria and Turkey. 

So, will the MINTs follow in the wake of the BRICs and become the next great wealth frontier? Research conducted by wealth consultancy WealthInsight, together with Spear's magazine, which compares the MINTs, BRICs and G8, suggests so. Led by Indonesia, which expects to see a 22 percent increase in the number of resident millionaires in 2014, the MINTs are set to overtake the BRICs over the year ahead. In doing so, however, they will leave the old G8 countries far behind. The countries in the G8 are struggling in the single digits and the growth of millionaires in the US is under half that of Indonesia.

Green refers to MINT countries, red to BRICs and white to the G8.

These are startling figures and here’s why: data on millionaire populations is akin to estimates on the size of the middle class. Though the term is rooted in English traditionalism, the idea of the "middle class" is important to economists. So, when the World Bank estimates that the Nigerian middle class has grown by 28 per cent, there is a data domino effect with the last domino being GDP. In simplistic terms, when the GDP rises, so does the local economy, resulting in prosperity and poverty reduction ... or so the neo-liberal theory goes.

This is when figures on millionaires come in. They allow perspective by looking at the extreme ends of the data domino chain: poverty and prosperity. If the number of millionaires rises faster than poverty reduction, then there are serious problems of inequality to be addressed. You might think such a scenario absurd, but look at what’s happening now in Nigeria: while the percentage of millionaires grows at 17.1 percent, the number of Nigerians living below the poverty line is also growing. Between 2010 and 2012 the percentage of Nigerians living below the poverty line grew to 67 per cent according to the World Bank.

So, to misquote the renowned phrase: a rising tide does not lift all boats. Many will remain firmly on the sea bed during 2014, as poverty sees no change or even rises in some MINT countries. But perhaps we shouldn’t be surprised that O’Neill’s prophetic acronyms turn out to be a double-edged sword. The blazing path to extreme wealth, buttressed by the less fortunate, has already been set by the BRICs. MINTs should learn from this and promote measures to counter extreme inequality. 

In the meantime we can only guess what extravagance will arise from a new millionaire class in Mexico, Indonesia, Nigeria and Turkey. We thought we saw it all with the BRICs.

The number of millionaires in India is expected to grow by 17.1 per cent this year. Photograph: Getty Images.

Oliver Williams is an analyst at WealthInsight and writes for VRL Financial News

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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation