Wednesday, 23 August 2023 10:05

BRICS, the economic group of America’s rivals and friends alike, explained

Prior to the BRICS summit, South African President Cyril Ramaphosa met with Chinese President Xi Jinping in Pretoria on August 22, 2023.

When leaders of Brazil, Russia, India, China, and South Africa meet this week, many observers may ask: Could this group of countries challenge the US and West?

Before the summit, South African President Cyril Ramaphosa described “a common desire to have a more balanced global order” and said, “We will not be drawn into a contest between global powers.”

The five countries constitute BRICS. It’s not a formal alliance, but instead an informal group largely focused on economics. Leaders of the BRICS countries meet annually and a decade ago established their own development bank. But due to their own differences and in the face of a largely US-run global financial system, their efforts have been in many ways symbolic.

Still, that symbolism is potent. As many as 40 countries want to join BRICS, according to South Africa’s 2023 summit chair. At a particularly tense political moment as the West lines up to support Ukraine against Russia, and as the US and China escalate a new Cold War in the making, many countries are seeking alternatives.

Some scholars see echoes of the Non-Aligned Movement. During the Cold War, Asian and African countries met in Bandung, Indonesia, in 1955 to forge an organization that sought to transcend US-Soviet competition.

“This is Bandung all over again,” says Patrick Heller, a sociologist at Brown University. “There is still a really strong sort of anti-colonial reflex in all these countries, that Europe and the US have dominated everything for as long as anyone can remember.”

Yet a reversal of that domination is a long way off. Each of the BRICS countries is experiencing economic slowdowns; and unlike the Non-Aligned Movement, the five countries don’t seem to represent more than a sum of their parts ideologically or politically. But if the parts could come together, it would really be something: more than 3 billion people in those countries alone.

The summit is unlikely to provide that clear vision. Not just because the divisions between Russia and China, and India and China, run deep. The paradox may be that the BRICS won’t be able to unite over a shared agenda as Russia’s war on Ukraine continues. (Russian President Vladimir Putin won’t attend the summit because South Africa is a signatory to the International Criminal Court, where Putin faces charges of alleged war crimes for the Ukraine invasion.) With Russia at war in Europe, and China effectively in a cold war with the US, the BRICS format becomes less of an alternative third vision for the world, and more a way for each US adversary to shore up friendships with middle powers.

BRICS vision for a different type of world order is as of yet not on offer — but there’s a desire for one. And that’s a reality that the Biden administration must reckon with.

What is BRICS?

In 2001, Goldman Sachs economist Jim O’Neill coined an acronym of Brazil, Russia, India, and China — BRICs. At the time, the four economies comprised only 8 percent of the global economy, but were rising rapidly. O’Neill wrote that they offered investment opportunities and their growth posed serious questions about global governance. “Over the next 10 years, the weight of the BRICs and especially China in world GDP will grow, raising important issues about the global economic impact of fiscal and monetary policy in the BRICs,” O’Neill wrote.

It is also a time capsule of a different moment: with China joining the World Trade Organization in 2001 and before Xi Jinping took high office, a US consensus suggested that economic growth would lead China toward democratization. Back then, however difficult it might be to conceptualize today, Russia under Putin represented hope, too.

The grouping began to meet annually, and South Africa joined in 2010 — officially making the group BRICS, big S. The BRICS gained new appeal, especially after the 2008-2009 financial crisis that originated in the US housing market and in European contexts, but quickly damaged economies in the Global South.

Today, the five countries are on uneven economic ground: While the countries’ share of the global economy has grown over the last two decades — now making up more than the G7 group of advanced economies — they’ve developed at decidedly different rates.

Could the BRICS countries compete with the G7 though? Heller noted that there are things uniting the G7: They are all democracies, which makes it easier for the countries to coordinate and communicate; they are all large, developed economies; and the G7 still dominates the global governance institutions like the World Trade Organization (WTO), the International Monetary Fund (IMF), and even patent agreements, which means that these countries have huge advantages within the international financial and economic system.

Experts say that BRICS countries are concerned about their sovereignty and lack of representation in international institutions. They seek alternative centers of finance, harbor resentment for the WTO, IMF, and World Bank, and seek a world that is not run by the US dollar, which they see as a coercive instrument.

But even as the BRICS countries push for international governance institutions where they have more of a say, internal dynamics and economic trends in the countries may inhibit the potential for unity.

Brazil’s Luiz Inácio Lula da Silva is a progressive democrat, but the country is also recovering from its own January 6-style attack on its capital earlier this year and repairing the isolationist foreign policy of predecessor Jair Bolsonaro. Russia wages a war against Ukraine that, beyond the moral bankruptcy of it all, has tanked its own economy. US-led sanctions on Russia have shaken the economy, and pushed Russia to pursue alternatives to the US dollar. For its part, India also is experiencing democratic decline, and despite that the Biden administration embraces Prime Minister Narendra Modi. India’s relations with Russia and China are complicated, to the point that it’s difficult to imagine them all agreeing on much. Meanwhile, China’s economy is struggling even as it seeks geopolitical friendships, as competition with the United States becomes a new organizing principle for the world. And then South Africa, whose leading diplomats have overtly called for a new non-aligned movement, is also facing economic and democracy woes.

O’Neill recalled in a recent TV interview how he came up with the BRICs paper for Goldman Sachs by reflecting how much of the world has become sick of “Americanization of the world” and that countries like China needed a bigger role in global governance.

“It led me to think we need to somehow develop a world in which different philosophies, different cultures, different political beliefs and regimes can somehow coexist,” he said. “My god, we haven’t really got very far in 22 years.”

What will BRICS do now?

BRICS is not cohesive enough to provide an alternative to the US-led global economy and the enduring supremacy of the US dollar. But by raising important issues in this summit, the BRICS countries show they may over time create leverage.

Much of the focus in recent weeks has been around the dozens of countries that want to join the bloc. Expansion is unlikely to happen any time soon; for one, India and Brazil are cautious about adding new members, perhaps because it would dilute their influence. But the fact that so many countries want to join the grouping is important in and of itself.

Another item that many observers are closely following is the prospect of a shared currency for BRICS. Realistically, the establishment of a new currency would take years, and reports say that the topic isn’t even formally on the leaders’ agenda this week in South Africa. But as with enlargement, it’s telling that so many journalists and analysts have discussed it in the lead-up to the summit. It shows the extreme wariness some countries have of the US dollar at a time when US-led sanctions have had punishing effects and surprising knock-on effects, though the US will prevail over the international financial scene for some time.

More practical, then, is the New Development Bank, the BRICS answer to the World Bank. Its relatively small $50 billion of subscribed capital is about half of what the World Bank commits to annually. Still, Saudi Arabia wants to join. Egypt, Bangladesh, and the United Arab Emirates are members of the New Development Bank.

“There is consensus on the fact that the global order needs to change, needs to be more balanced, whether it is through the reform of the current institutions or through the creation of new ones,” says Aude Darnal, a researcher at the Stimson Center.

Speaking at the United Nations last year, President Biden called for the reform of the UN Security Council. “The time has come for this institution to become more inclusive,” he said, and US diplomats are reportedly following up, but the shape of such changes remains unclear.

The ongoing tensions between the US and China across multiple arenas might have more of an impact on the international economy and politics than what BRICS comes up with at this summit.

The US is doubling down on its close Asia partners to counter China. Just days before the BRICS summit, President Joe Biden hosted the leaders of Japan and South Korea for an extraordinary meeting at Camp David. And now China is meeting with its informal partners as dozens of countries clamor to join BRICS. China needs allies, and does not have natural and well-developed partners, so BRICS may ultimately present an opportunity.

BRICS countries are “consistent with a line that the Global South is rising and needs to be heard from, and has its imperatives and interests,” said Derek Mitchell, who worked as a senior Asia adviser and ambassador during the Obama administration and is now the president of the National Democratic Institute. “And China wants to lead that, and I would imagine that India will have a problem with China leading that, just the way the Soviets had a problem with that during the old Cold War days when they were fighting for leadership of the Third World.”

That helps explain why the Biden administration has sought to draw India closer, feting Modi with a state dinner this summer. Secretary of State Antony Blinken said in June that the US is “deeply engaged with its leading members,” emphasizing Biden’s contacts with Lula and Modi.

Yet the United States has played down the significance of BRICS — a move that could be shortsighted. For Darnal, the interest of dozens of Global South countries in joining BRICS is a major global indicator of where things go from here. “It would be a mistake to simply overlook that and simply say, well, they will not achieve anything,” she told me.