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Published : 31 Jul 2023, 02:49 PM
The BRICS are an acronym searching for a geopolitical role. When Brazil, Russia, India, China and South Africa get together for their annual summit in Johannesburg next month, a top issue for discussion will be whether to expand the club. Emerging economies might be better off if it disbands.
It’s more than two decades since Jim O’Neill, a former chief economist at Goldman Sachs, invented the term to combine four large emerging economies with huge potential. (South Africa wasn’t on his list.)
All four countries initially performed well. In the first decade, China’s economy grew by 176%, India’s by 110%, Russia’s by 60%, Brazil’s by 47% and South Africa’s by 41%. They formed a club which held its first summit in 2008. O’Neill likes to tease the BRICS that their economic performance subsequently went downhill - particularly after the much smaller South Africa joined in 2011.
Since then, Russia, Brazil and South Africa have all struggled economically. In the decade to 2022 their total output grew by just 13%, 7% and 12%, respectively. China and India continued to power ahead, albeit at a slower rate. The result is that the group is now seriously lopsided. China’s output of $19 trillion this year will be 50 times South Africa’s.
Undeterred, the BRICS are now talking about adding new letters. The summit’s South African hosts say 22 countries have asked to join - and another 20 are interested. While no official list has been published, countries that have shown interest in the past range from Saudi Arabia, Argentina and Egypt to Iran, Cuba, and Kazakhstan.
Developing countries are understandably resentful that rich countries haven’t addressed their needs. The United States and its allies have been guilty of breaking international norms, as in the invasion of Iraq, and of neglect, for example during the COVId-19 pandemic.
But the Global South won’t get much from a club whose leading members are China, which is throwing its weight around in its region, and Russia, a near-pariah state. India and other emerging economies would do better to form their own non-aligned bloc.
FEW ACHIEVEMENTS
Despite their annual gatherings, the BRICS haven’t achieved anything notable together. They created a multilateral lender, the New Development Bank, in 2015. But it has approved only $33 billion of projects in its entire history. The World Bank, by contrast, committed $104 billion in its 2022 fiscal year alone.
The fault line between India and China, which fought a small war in the Himalayas in 2020, is one reason the BRICS club has done so little. India sees the People’s Republic as its most dangerous threat.
It is also hard to view China, now the world’s second-largest economy, as a voice for the Global South. Besides, most developing countries don’t want to be forced to choose sides in a showdown with the United States.
Russia’s invasion of Ukraine has further compromised the BRICS. Indeed, Vladimir Putin is not attending this year’s summit because South Africa would be required to arrest him, as it is a member of the International Criminal Court which has issued a warrant against the Russian President.
China is keen to expand the club to new members. But it’s not obvious what a bigger group would do. Given how hard it has been for even five nations to agree, it’s fanciful to suppose a larger and more disparate gathering would achieve anything more than complain about American hegemony.
Take currencies. It’s true that many developing countries want to wean themselves off their dependence on the US dollar. The vagaries of Federal Reserve monetary policy whipsaw their economies. They would also like an alternative place to stash foreign exchange assets after the world’s rich democracies froze Russia’s reserves following the invasion of Ukraine.
But neither China nor India has a fully convertible currency - limiting the attractiveness of the yuan and the rupee. What’s more, New Delhi doesn’t want to be sucked into China’s currency orbit. It has been trying to stop oil importers paying for Russian oil with yuan, albeit with limited success.
BEYOND BRICS
Developing nations have other options for joining forces. During the Cold War, India helped create the Non-Aligned Movement, which brought together countries that didn’t want to be part of either the US or Soviet Union sphere of influence. Today’s large non-aligned nations could create a similar group.
They would, of course, first need to agree what they would stand for. Top of the list would be to stress their neutral status.
This is not just a matter of pride. Developing countries can benefit from playing one superpower off against the other. Both the United States and China have shown they are willing to offer so-called swing states inducements - from weapons to infrastructure and help in building green economies - to stop them falling into the other’s camp.
Some countries won’t want to be equidistant from the two superpowers. Countries which see China as a threat, including India and the Philippines, have recently tilted towards the United States. But almost all developing countries can agree on two issues. They don’t want a new Cold War that would crush their growth opportunities. And they need help to decarbonise their economies rapidly and protect against the worst ravages of climate change. So they should be able to unite on keeping the global trading system open and ramping up flows of climate finance.
But to do any of this, the club would have to exclude China and Russia. There would also be little point in including rich fossil fuel states such as Saudi Arabia, which has a strong interest in delaying action on climate change.
Assume the group limited membership to neutral countries whose economic output is bigger than South Africa’s $400 billion. There would be nine new potential members: Mexico, Indonesia, Argentina, Thailand, Nigeria, Vietnam, Malaysia, the Philippines and Bangladesh.
Including Brazil, India and South Africa, this new club of 12 would account for 36% of the world’s population, 22% of its greenhouse gas emissions and 12% of its GDP. Six of them would also be members of the Group of 20 large economies.
Though the 12 letters would not fit easily into a snappy acronym, the new club would have a better chance than the BRICS of finding a useful role.
*Hugo Dixon is a British business journalist and the former editor-in-chief and chairman of the financial commentary website Breakingviews which he co-founded.
