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BRICS Power
When the chief economist of Goldman Sachs, the US investment powerhouse, coined the acronym “BRIC” in a 2001 report that predicted the “emerging” economies of Brazil, Russia, India and China would surpass the current leading economies by the middle of this century, he was merely agglomerating them to make the point. He certainly did not foresee he was creating a grouping that would soon begin to coordinate its actions on the world stage. But that is exactly what happened before the end of the decade.
Looking simply at their massive and burgeoning production and trade numbers, the economist concluded that not only could the global economy no longer be summarised simply with reference to the large advanced economies, global policy issues, such as currencies, trade imbalances or climate change, continue to be addressed in conclaves of the Group of Eight. He was very prescient.
As soon as the financial meltdown in the US and European economies took hold in 2008, the G8 quickly morphed into the G20, which included the BRIC economies, to determine a course of action that would lead the world economy out of a potentially crippling world depression. Working on the sidelines to coordinate their response, the BRIC nations demanded changes in the economic regime that had been fixed since the end of WWII to favour the G8 – especially on the governance of the IMF/World Bank.
The need for structured collaboration became apparent and the four countries met for the first time the following year in Russia. Their 16-point statement said simply that the BRIC countries “believe there is a strong need for a stable, predictable and more diversified international monetary system.” They also reiterated their earlier commitment to advance the reform of international financial institutions so as to reflect changes in the world economy.
In a more or less direct attack on the Western domination of Bretton Woods institutions like the IMF and the World Bank, the statement said emerging and developing economies must have greater voice and representation and the “heads and senior leadership” of these bodies “should be appointed through an open, transparent and merit-based selection process.” In response to these demands, the G8 grudgingly made some changes in the voting scheme of the IMF/World Bank.
The following year the leaders met in Brazil and continued their demands for changes in the status quo – especially Russia’s identification of the need for the present situation of the US dollar being the de facto world reserve currency to be replaced by a basket of currencies.
The BRIC economies continued their astounding growth and by the end of 2010, accounted for about 25 percent of the global land mass and 40 percent of the world’s population. With a combined GDP of $8.7 trillion (6.2 trillion euros) in 2010, the BRIC economies have accounted for 30 percent of global economic growth since 2000 and 45 percent of global economic growth since the beginning of the financial crisis.
The growing influence of the BRIC economies can be seen in their prominence in global trade. The combined BRIC share of world trade increased from 6.9 percent in 1999 to about 14.2 percent in 2008. Of interest to Guyanese, in addition to their contribution to global trade, BRIC economies have contributed to an increase in trade among developing countries, which is growing three times faster than the trade growth rate among advanced economies.
BRIC economies have contributed up to 60 percent of trade between low-income countries (LIC) and non-LIC emerging economies with bilateral trade between BRIC and LIC increasing by about 25 percent a year in the last decade
This year the grouping gathered in the southern Chinese city of Sanya and invited for the first time, South Africa, the largest economy in Africa. BRIC is now BRICS. While there are some that are railing at the level of BRIC investment in Africa, they ignore that for the past two centuries western exploitation of African resources has resulted in the “underdevelopment” of the continent (to use Walter Rodney’s expression). The presence of South Africa in the councils of BRICS should make a repetition much more difficult.
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