BRICS is fake

BRICS is fake

It's not an anti-NATO, it's not going to replace the dollar, and it's not going to control global economic growth.

Advertisement

Even as China’s economy enters what’s probably a long-term slowdown, the Western press is warning about China’s attempt to build world influence — and maybe world domination? — via new international organizations that it controls. Here’s James Kynge in the Financial Times:

The key to China’s blueprint is to steadily institutionalise its leadership over the developing world by creating, expanding and funding a raft of China-led groupings of countries…[T]he aims of this strategy are largely two-fold: to ensure that a broad swath of the world remains open to Chinese trade and investment and to use the voting power of developing countries at the UN and in other forums to project Chinese power and values.

The most important such grouping — or at least, the one that has received the most attention and been met with the most alarm in the West — is the BRICS. This somewhat odd organization began life 22 years ago as an investment strategy created by Goldman Sachs analyst Jim O’Neill — basically, a grouping of large developing countries he thought would grow rapidly. “BRICs” was an acronym for that list of countries — Brazil, Russia, India, China. Later, the four countries actually got together and decided to turn the Goldman Sachs acronym into an actual economic forum, where they’d meet periodically and talk about how to speed economic development, create new financial institutions, and increase developing countries’ general influence in the world. In 2010 South Africa joined, and BRICs became BRICS.

The BRICS kept meeting and proposing economic initiatives, none of which went anywhere. I’ll just quote what I wrote about the grouping back in February:

In 2009 [the BRICS] started meeting regularly and trying to think about how to create their own economic institutions — a New Development Bank to compete with the World Bank, a Contingent Reserve Arrangement to lend each other money in times of currency crisis (something the IMF usually does), a system of submarine fiber-optic cables, and so on.

This, too, did not end up working out. The New Development Bank has disbursed almost no loan money at all, causing Jim O’Neill to declare it a disappointment. When Russia invaded Ukraine in 2022, the NDB cut ties with it. The Contingent Reserve Arrangement has done basically nothing, and the BRICS Cable never happened.

Yes, two short paragraphs are sufficient to list the sum total of all the nothing that the BRICS organization has so far succeeded in doing. And yet somehow people keep believing that BRICS is an organization of global importance. I don’t just mean people in the Western press, but a number of countries around the world. At the recent BRICS summit in South Africa, the grouping accepted six new members: Saudi Arabia, Iran, UAE, Argentina, Egypt, and Ethiopia. These six were narrowed down from 19 that originally submitted bids earlier this year (though some, like Indonesia, later backed away). It’s not clear whether the organization will have a two-tiered membership and some countries will be only “partners”, but given that BRICS doesn’t actually do anything in terms of actual economic policy, I’m not sure that matters.

So why has BRICS received so much attention in the media? One reason is that some people think (and some people hope) that it’s a nascent geopolitical or even military bloc — a global anti-NATO that will put an end to U.S. hegemony and Western dominance etc. etc. For example, economist Branko Milanovic recently wrote:

This is, of course, nonsense. China and Russia are indeed in a quasi-alliance against the developed democracies, and India still has somewhat friendly relations with Russia dating back to their Cold War partnership. But India and China are strategic rivals, not allies. They have an occasionally bloody border conflict, which periodic talk of “de-escalation” has failed to defuse. India bans many Chinese apps and is moving to restrict imports of Chinese goods, even as it deepens its economic and strategic partnershipwith the U.S.

The tensions between India and China are very visible in Indian public opinion, which, like that of many countries in Asia and elsewhere, has shifted strongly against China over the last few years. In fact, Brazil has also become less favorable toward China:

This is the clearest reason why BRICS is not going to become an anti-NATO. There are other reasons on top of that — Saudi Arabia is still a U.S. ally, and countries like Brazil, South Africa, Ethiopia, Egypt, and Argentina have little desire to become involved in great-power clashes. Russia and Iran may want to ally with China against the developed democracies, but the rest simply aren’t interested in that.

The BRICS also disagree on basic values. India and Brazil value democracy very highly, while China, Russia, and Iran have been its biggest detractors. This is one of many reasons why the frequent comparisons between BRICS and the G7, which does promote a set of shared democratic ideals, are inapt.

Those differences in values have played out in the tensions within BRICS. The push to expand the grouping came from China, while India and Brazil tried to resist:

India and Brazil are pushing back against a Chinese bid to rapidly expand the BRICS group of emerging markets to grow its political clout and counter the US…China has repeatedly lobbied for expansion during those meetings…

Draft rules for admission to the group were drawn up after India’s opposition to China’s push for expansion, said two Indian officials…India has put forward the idea that BRICS nations should look to emerging economies as well as democracies like Argentina and Nigeria if they want to expand the group, rather than Saudi Arabia, with its dynastic and autocratic rule…

Brazil is working quietly to avoid direct confrontation in the BRICS bloc and resist pressure from China to make it an antagonistic body that challenges the G7, a Brazilian official said.

This makes BRICS look a little bit like another China-led organization that people once thought would become an anti-NATO: the Shanghai Cooperation Organization, which also includes China, Russia, India, and Iran, and Saudi Arabia and Egypt as “dialogue partners”. That organization ended up having no power or relevance or actual concrete initiatives, also because of tensions between India and China. (In fact, if you squint very hard, you might see an Indian strategy of joining Chinese-led organizations and then neutralizing their effectiveness.) BRICS, in geostrategic terms, seems likely to end up exactly where the SCO did.

Tensions between the member countries are one reason BRICS is also never going to do the thingthat Russia has floated: establish a common currency to replace the U.S. dollar. If India won’t even let Chinese apps into the country, there’s just no way it’s going to unite the rupee with the RMB. And given China’s much greater economic heft relative to the other BRICS members, engaging in a common currency scheme would basically remove monetary policy independence from Brazil, India, Saudi Arabia, Argentina, Egypt, and the rest. Russia and Iran, with their heavily sanctioned economies and financial systems, might see wisdom in yuan-izing their currencies, but none of the others will. A BRICS currency to put it bluntly, is never going to happen.

What about replacing U.S. financial dominance more generally, even without a common currency? Here I think there are some common misunderstandings about how the international financial system actually works. There are multilateral organizations like the IMF and the World Bank that lend money to poor countries, and which are currently dominated by the West. But they don’t have anything approaching a monopoly on lending money to poor countries; China already does plenty of this on its own.

Advertisement

So even if the BRICS actually got their Contingent Reserve Arrangement off the ground and turned it into an alternative IMF/World Bank, that would not change the global financial system much from the way it already is. And in practice, the loans made by such a facility would be politically determined in Beijing, and would perform just about as well as China’s, i.e. not very well. India and Brazil probably don’t want to get a bunch of poor countries mad at them for engaging in “debt trap diplomacy”, so I predict they’ll push to limit IMF-like or World Bank-like lending by the BRICS.

Other than the dollar’s role as a reserve/payment currency and the existence of multilateral lending institutions, there’s just not that much to the international financial system. The only other big piece is global payment infrastructure, like SWIFT. The U.S. and Europe did show that they could throw their weight around by limiting access to this infrastructure when they put financial sanctions on Russia following the invasion of Ukraine. But the effect of those financial sanctions lasted only about a year, as Russia eventually found other ways to pay and get paid. And that was about the most fearsome financial weapon in the West’s arsenal.

So there’s really not much to the supposed Western or U.S. control of the global financial system — meaning there’s just not much for BRICS to replace in the first place. The outsized role the U.S. plays in the system exists primarily because of convenience, not hegemony; to see this, witness how the BRICS’ New Development Bank does most of its borrowing in dollars. It’s not because the U.S. makes them do it; it’s just easier.

The Western press’ final worry about the BRICS is that the bloc will cement Chinese economic and leadership over the developing world. Here’s Kynge:

Advertisement

The crucial context to this strategy is that by seeking increased leadership over the global south, China is throwing in its lot with the largest and fastest-growing part of the world…

“China will always be a member of the family of developing countries,” Xi told a forum in 2021. “We will continue to do our utmost in raising the representation and voice of developing nations in the global governance system.”

This is certainly something that China’s leaders have in mind:

Now, if I were China’s Ministry of Foreign Affairs, I wouldn’t go around proudly declaring that my country will never reach developed status — no one thinks the middle-income trap is a cool place to be. But in any case, it’s clear that China thinks that in light of their deteriorating image and stagnating exports in developed nations, they can pivot to being the leader of a developing-world economic bloc.

But if you look at the BRICS countries, including the new entrants, you’ll see that very few of them are actually developing rapidly. They’re mostly natural resource exporters, whose economies have plateaued at varying levels of income. Other than China itself, only India and Ethiopia have actually grown by a significant amount over the last decade or so.

Advertisement

I’ve already mentioned India’s economic rivalry with China, so in terms of rapid growth potential in the BRICS that China could tap into, that really only leaves Ethiopia, which is riven by deep political instability that sometimes spills into civil war.

The bulk of the growth potential of the world right now lies in the countries of South and Southeast Asia — India, Bangladesh, Indonesia, Philippines, Vietnam, and so on. But except for India, they’re not in BRICS. And most of these countries’ opinions of China range from mildly unfriendly to openly hostile. As China’s territorial and hegemonic ambitions in Asia grow, these countries are drawing closer to India, Japan, the U.S., Europe, and each other. Some will still welcome Chinese investment and goods, but they’ll try to balance that out with investment and trade linkages with China’s democratic rivals as well. And China’s economic slowdown is likely to reduce much of its mindshare in developing nations, as is already happening in Brazil.

So anyway, every aspect of the threat that some in the Western press perceive from BRICS is essentially fake. More incisive commentators see that the organization is likely to become something like the SCO — an acronym looking for a purpose, coupled with a vague notion of geo-economic power that never quite coalesces into anything real.

Connect With Us : 0242202447 | 0551484843 | 0266361755 | 059 199 7513 |

Like what you see?

Hit the buttons below to follow us, you won't regret it...

0
Shares