The BRICS Fallacy

The emerging economies of Brazil, Russia, India, and China came into vogue in 2001, with South Africa joining in 2010, were first collectively known as the BRICs, today currently as the BRICS. A Goldman Sachs research paper predicted the weight of the BRICs, led by China, would grow the global GDP by 2011. In conjunction with a growth in global trade, Goldman Sachs advocated the world’s current policymakers would need a transformation to meet the rising influence of the BRICs. This policy realignment was based on a projected 2050 BRIC growth that would rival the G-7 countries. The projection date was later changed to 2032 when the BRICs were synonymous with new financial investment opportunities for the next generation of investors. As the world progressed through the 2008 financial crisis until the summer of 2013 the BRICS have maintained GDP growth albeit less than the 2001 estimates however the troubling issue remains, that of China’s much higher growth than the other members.

To understand why China is preforming better than other members, one must return to the post global financial crisis and the first formal BRIC summit of 2009. This summit, and those BRICS summits thereafter, called for a more democratic and multipolar world order rather than the U.S. led post World War II power. The BRICs swift return to prosperity was due in large part to domestic demand and the almost 25% of the economic output of the world. China led the 2011 BRICS summit with an agenda focused on international finance to lead the member nations forward in two critical areas, 1) multipolar financial representation, and 2) prevent BRICS destabilization. While China may be advocating for global financial reform, it’s own practices within the BRICS are potentially more self serving than group serving when viewed from the other non-China BRICS nations. The non-C BRICS view China’s currency manipulations counter productive their own economic success especially in the manufacturing sectors. This extends further where China as literally wiped out many local industries and has been accused of dumping more low cost goods as a measure to increase their own export growth. As the Chinese economy became second in the world in 2010, which is larger than the other member nations combined and alone exports almost 38% of the member nations, tensions have increased. The member nations are dependent on China’s import of their materials but China’s economic downturn has significantly reduced exports and that reduces the non-C members’ economic growth. To prevent destabilization from non-BRICS investment flooding the local economies, a BRICS bank was established however the contributions from each member are not uniform. In the case of Brazil and South Africa, China has proposed to make the initial contribution for them. If the other member nations agree, the ‘at what cost’ is still has to be determined, which has the non-C BRICS concerned.

The BRICS also have radically different forms of culture and government, where by they guard their sovereignty more from the U.S. than any other nation state. This collective non-U.S. interference has been good for them in seeking consensus on global climate change, labor standards, and trade negotiations. The have embraced the WTO to tighten the rules on anti-dumping measures, China’s duplicity certainly comes to mind here, but have growing impatience with the slow pace of the international financial institutions. While the BRICS are united in economic ties, the consensus for diplomatic unity is distributed widely in the grey area between black and white. Perhaps the failure of a single BRICS voice or individually abstaining from UN Security Council resolutions in dealing with human rights issues is a cultural bridge to far or seen as not in my backyard issue. There remain issues revolving around how the individual member nations view the election of leaders when coupled with bribes, kickbacks, and taxation. These culturally acceptable norms are not consistent even among the BRICS which can lead to issues of trust in establishing long term trade agreements, let alone the outsiders wishing for a piece of the global trade action. The accepted nature within each nation to subvert income to avoid taxation implies the true GDP keeps all BRICS in a state of curious distrust when the yearly financial numbers are publically released.

In the end, the BRICS concept is merely an international financial institutions’ white paper on the rise and cooperation of small economies to challenge the existing paradigm of global trade. Goldman Sachs overstated the rise of the BRICS at the beginning and12 years later the ever-shifting power of nations has shown little influence by them as a collective group. It appears China found a convenient social tool to propagate global growth with only notional discord to its slash and burn of local economies while stock piling resources for later use.

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