The most recent summit of Brazil, Russia, India, China and South Africa has now ended amid excited media coverage. Brics – which is expanding to 11 members – is often portrayed as a rising counterweight to a US-led G7 and established global governance order, plus a potential threat to dollar dominance. The hyperbole is woefully exaggerated.
Global weight is surely now more dispersed than before. China is the second-largest world economy, swamping individual European countries and Japan, and US-China tensions have intensified. The attention paid to Brics and China’s dominant role in the group reflects that reality. But Brics lacks the cohesion in values as well as geopolitical and broad economic interests to play a steering role for the global economy and act as an effective counterweight to existing structures.
In creating the ‘Bric’ acronym in 2001, Jim O’Neill rightly observed that Brazil, Russia, India and China (South Africa later added the ‘S’) were increasingly accounting for a larger share of global gross domestic product and growth momentum, which should be reflected in global governance.
Over the following decade, Brics made strides forward – often with US and western support – building on their shared interest in more global economic and financial clout. G7 finance ministers invited Brics finance ministry and central bank officials to their gatherings.
Led by their finance representatives, Bric countries succeeded in pushing for increased International Monetary Fund voting power and assumed top-10 positions. They contributed to and took a blocking share in the IMF’s expanded emergency support lines and created the New Development Bank. They joined the Financial Stability Board. Brics, especially China, was essential in helping stave off world economic collapse during the 2008 financial crisis and received much praise for it.
In large part because of Brics participation in the G20 finance ministers process, the G20 started meeting at the leaders’ level in 2008 and was later recognised as the premier forum for international economic co-operation, pushing the G7 into a lesser, informal role. Throughout, US officials especially recognised China’s growing heft, establishing close bilateral relations on top of multilateral ties.
But for a multitude of reasons, Brics failed to become a cohesive force following the 2008 financial crisis.
First, while China’s economy powered on despite its own travails, especially in 2015-16, the Russian and Brazilian economies performed weakly. Declining global commodity prices after 2014 hit Brazil and Russia hard, with the former also impacted by poor macroeconomic management. India was seen as protectionist and remained inwardly focused. The expanded Brics simply looks like the Chinese G1 plus 10 satellites.
Second, on the geopolitical front, President Xi Jinping was viewed as turning China towards authoritarianism and statism. Relations with the US soured. Meanwhile, Putin’s 2014 invasion of Donbas and Crimea made Russia an outcast. This weakened Brics’s ability to work with an increasingly reticent West to gain greater voice on the global economic and financial agenda. The G7 found new life, precisely to counter China and Russia, through collective work on issues such as cybersecurity, financial sanctions, military co-operation and advocacy for democracy.
Third, the Brics desire to play a greater role in global financial governance didn’t translate into broader cohesion and power at the leaders’ level because the group simply doesn’t share common geopolitical interests and values. Brics expansion will only exacerbate complexity.
China and India have a historically tense rivalry and fraught relationship that carries on to this day. Russia and Iran are pariahs. Brazil’s clout is significantly diminished, as is President Luiz Inacio Lula de Silva’s reputation. Brics members don’t agree about Russia’s barbaric invasion of Ukraine. There is longstanding enmity between Iran and Saudi Arabia. China raises fears in the South China Sea and Southeast Asian countries aren’t Brics members. Africa and many key emerging market countries wish to avoid choosing between China and the US. Some, like Mexico and Indonesia, seemingly want no part of Brics.
Many of these divergences were evidenced in the Brics leaders’ risibly long 25-page summit declaration. It speaks of a commitment to democracy, respect for human rights, avoiding conflict, food security, a central World Trade Organization role for multilateralism in trade – positions wantonly contradicted by many Brics members.
The Brics movement argues for de-dollarisation and reducing US global economic clout. While it’s easy to rally around a dim view of the G7, the US and the dollar’s global role, that is different to offering a viable alternative.
The renminbi is not ready to assume a significant global role given the lack of convertibility, capital controls, immature capital markets and weak rule of law. Global investors have shunned China since the start of Russia’s war against Ukraine.
Talk about creating a Brics global currency is fantastical. Are the Brics members willing to shed their national currencies? Are they prepared to create a Brics central bank? Are their economies compatible or is there an optimal currency area? Do they have the financial infrastructure, let alone the requisite economic openness and convertibility? The answers are self-evident.
Notwithstanding China’s huge global clout, Brics is simply too diversified and lacks a positive agenda to play a global steering role. The Brics hoopla is over the top.
Mark Sobel is US Chair of OMFIF.