This year’s BRICS Summit began on July 9th, and, given the macroeconomic and geopolitical context that currently characterises the global economy: expect less speculative grandstanding, more concrete steps towards alternative global governance arrangements. The summit is framed by this month’s marked cooling of China’s rate of GDP growth, India’s supporters grumbling at an increasingly audible level, Russia’s economy very clearly in the doldrums, and South Africa making ever slower progress in getting its economic strategic act together.
It would be a mistake for analysts of global affairs to follow the current mainstream thesis that the BRICS’s ascendance in international economic governance has halted; au contraire. In 2015, Brazil, Russia, India, Indonesia, China, and South Africa 25-35% of the world’s annual wealth creation, they are keen on expanding this footprint. Just look past double-digit GDP growth as an indicator.
Why does the BRICS Summit matter? The long and short of it is that during the 2008 financial crisis, the G8 was obsolesced as the economic forum of note, losing its place to a mixture of the G20, the Shanghai Cooperation Organization, and the world’s key emerging markets as they conferred with each other in the namesake summit. This conferring led to the Summit’s creation as a symbol of China and Russia’s desire for a more representative directorship of the World Bank and International Monetary Fund. It represented their concrete alternative, as cooperation fails.
Initially, this alternative vision of post-cold war economic governance gave birth to the New Development Bank (previously known as the BRICS bank), but according to Bruce Jones at the Brookings Institution’s Project on International Order and Strategy, China’s misgivings on the unitary voting weights led directly to the Asian Infrastructure Investment Bank (AIIB) gaining the bulk of the leading emerging market’s attention. Despite the United States’ initial dissent with regards to the AIIB’s viability as a responsible global economic player, almost every member of the G20 has signed at the time of writing, with a few notable exceptions.
The monetary implications of the Shanghai based AIIB’s accounting will free up even more Chinese foreign exchange reserve, back of envelope currently above USD3 trillions albeit amidst rising domestic debt levels, for infrastructure investments along its Silk Road route and beyond. China has successfully packaged the BRICS’s crisis-time enthusiasm for alternative blueprints to global governance into a core driver of its international economic expansion.
The BRICS’s expanding global footprint seven years after the financial crisis is evident today in the staggering number of acquisitions in the Fortune 500, CAC 40 in Paris, all over the United Kingdom, Spain, Italy, and soon Greece. These stakes in leading corporate groups package the BRICS’s collective clout influence on the world’s leading multinationals as they chart their way back into economic recovery and growth. Curiously, China’s leadership has decided to assent to Vladimir Putin’s overtures regarding favourably-termed sovereign funding facilities, in exchange for greater geopolitical and international trade partnership.
Recent rumours of rising dissent between the two players are more tactical in nature (i.e. recent veto-related disagreements at the United Nations) than strategic, disagreements over procedure do not overshadow comprehensive bilateral agreements that have occurred frequently since 2008. Skeptics should look again at Russia and China’s stances in Central Asia recently to find any concrete sign of growing disagreement. This search should prove inconclusive; Russia and China are still on the same page.
Russia, of its own accord, cemented its geostrategic dominance over the leading Central Asian economies during 2007 and 2014’s oil price boom. Sanctions notwithstanding. This makes any decision when it comes to Ukraine largely about a renewed debate over the future of Europe, with less of an impact on Russian domestic politics. Russia’s economy has deep structural problems that need fixing, but these haven’t harmed its economic might yet. The country still holds considerable sway over economic fates all over Eastern Europe. Its recent agreements over the Eurasian Economic Union with Kazakhstan, Kyrgyzstan and Belarus, and the member-states of the Shanghai Cooperation Organization (India and Pakistan are now members, Iran a candidate) will only augment the importance of its role in the BRICS group of economies.
Brazil and South Africa are the BRICS group’s main laggards at this time, this due to much needed economic reforms needed but delayed for too long. There is a serious case for replacing South Africa with Nigeria, when it comes to painting a representative picture of emerging markets’ clout in economic governance today. Indeed, Brazil’s push for closer trade relations with the United States is simply too little being decided upon too late, it might even be symbolic move. What’s more, the country’s recent push for infrastructure investment domestically will only worsen the national debt outlook, observers should shift the outlook for Brazil to next electoral cycles for meaningful reform to become the case. Colombia and Chile are much more accurate snapshots of Latin American dynamism in international trade.
Likewise, South Africa has a long way to go in disentangling its economy from its current productivity slump and its intractable political economy. While substantial investment opportunities remain, at least according to KPMG’s Africa blog, Nigeria, Mozambique, and Angola are much more dynamic and representative of Sub-Saharan Africa’s emerging take on global economic governance. Should Johannesburg’s situation persevere, it is very likely that one of these economies will supplant its leadership in international trade.
Collectively, Brazil, Russia, India, and China represent a close majority of global growth year after year, with or without a European recovery. It is therefore problematic, analytically speaking, that economic commentary underlines China’s slowing annual growth rate (instead of its ever increasing international trade footprint), Russia’s recession (despite its sustained resource-driven clout over much of Eastern Europe and Central Asia), and South Africa’s slump despite its leadership over one of world’s fastest growing middle class regions. The AIIB won widespread support this winter and should bear more scrutiny. The global implications of emerging markets’ collective sway, in shareholdings, over Europe and the United States’ fastest growing sectors, in addition to the Shanghai Cooperation Organization’s rising clout in Asia will be missed if this faulty thesis persists.
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Yves Guillaume is an analyst of international finance, strategy, and geopolitics. He is Associate Editor, Trade and Economy, at iAffairs Canada and Global Brief magazine; as well as a Research Fellow at the NATO Council of Canada. He frequently comments on foreign and public policy on CTV National News and the Huffington Post. Prior to being a Chartered Financial Analyst (CFA) Program Candidate, he studied political science at the University of Toronto.
Featured Photo Courtesy the Kremlin.
