The World Order has been constantly changing from Roman Empire to Sovereign States to Dictatorships to Democracies. For most of the last two centuries the Western Domination of Globe has been the order from period of Colonization to the Washington Consensus post World War 2. After Cold War ended new multi lateral organizations started to emerge such as BRICS & SCO. BRICS is informal group & association of nations that included Brazil, Russia, India & China; while South Africa joined BRIC in the year 2010.
The term “BRIC” was coined in 2001 by then-chairman of Goldman Sachs Asset Management, Jim O’Neill, in his publication Building Better Global Economic BRICs. The foreign ministers of the initial four BRIC states (Brazil, Russia, India, and China) met in New York City in September 2006 at the margins of the General Debate of the UN General Assembly, beginning a series of high-level meetings. A full-scale diplomatic meeting was held in Yekaterinburg, Russia, on 16 June 2009 where the BRIC nations announced the need for a new global reserve currency, which would have to be “diversified, stable and predictable”. South Africa officially became a member nation on 24 December 2010, after being formally invited by the BRIC countries to join the group & attended the BRICS Summit 2011 in Sanya, China.
BRICs Conceptualized as an Idea
To understand BRICS one needs to look back on how it was conceptualized as an idea or a group. BRICS as a Term or Grouping of Nations was first Coined & Conceptualized in 2001 by then-chairman of Goldman Sachs Asset Management, Jim O’Neill, in his publication Building Better Global Economic BRICs. In his Publication of November 2001, Jim O’Neill of Goldman Sachs discussed the state of the world economy with particular emphasis on the relationship between the G7 and some of the larger emerging market economies. Their latest forecasts for 2001 and 2002 suggested a healthier outlook in some of the larger emerging market economies compared to the G7. It was forcasted that 1.7% world GDP growth in 2002 with Brazil, Russia, India and China (BRICs) each set to grow again by more than the G7. On a PPP basis, the aggregate size of the BRICs was about 23.3% of world GDP at the end of 2000, somewhat higher than both Euroland and Japan. Whilst on a current GDP basis, the size of the BRICs is just under 8%, this is also set to rise. Some of these countries are already bigger than some individual G7 economies; China, at 3.6% of world GDP (using current US$ prices), was slightly bigger than Italy at the end of 2000, and notably larger than Canada.
In view of the expected continued relative growth of the BRICs, the opportunity should be taken to incorporate China and probably Brazil and Russia and possibly India, expanding the key body of global economic policy co-ordination to 8 or 9. It is time for the world to build better global economic BRICs. It was advocated that the case for the inclusion of China is overwhelming. The case for the other three is less clear-cut, but in many of the scenarios for future makeup of world economy , the case for the inclusion of all three is at least as strong as Canada, and in some ways, as and strong as Italy. He advocated that G7 should now be modified to G9 with Russia & China as the rising powers of world economies. He however laid a special stress on inclusion of China in the Grouping of G7.
BRICS : A New Global Order ?
BRICS constitute a formidable agglomeration. The five countries have a combined population of 3 billion, about 40 percent of the world’s total, and their combined GDP tops $16 trillion, or about one-fifth of the world’s economic activity. But that only means that they are big countries, with big economies. Other than that, the only thing they have in common is that they are not Western powers.
Between 2000 and 2014, China’s economy has grown at almost 11 percent annually, quadrupling its GDP. It is now richer than South Africa and almost as wealthy as Brazil and Russia, according to the IMF’s World Economic Outlook. The latter three countries achieved only 3-4.5 percent, well below the emerging and developing world average over that period. India has grown at 8 percent since 2000, but from a very low base and despite a big dip in 2011-2013. With the notable exception of China, the BRICS did not use the spell of high growth in the decade 2000 to implement structural reforms needed to boost competitiveness and sustain high growth rates. In the 2014-2015 edition of the Global Competitiveness Index rankings, China comes 28th out of 144 economies, well ahead of Russia (53rd), South Africa (56th), Brazil (57th), and India (71st).
In addition, India, South Africa, and Brazil – especially worrisome given its income level –still need to consolidate the basic foundations of competitiveness: infrastructure; health, basic education; and macroeconomic stability. To Address these problems at Brazil Summit of 2014, the BRICS countries agreed to setup its own BRICS Bank, which will have permanent Headquaters in China & the first presidency will be held by India’s for 6 years & later will be rotational among the members. The New Development Bank, with an initial corpus of $50 billion which could later be doubled to $100 billion, could be an alternative to the IMF to fund Infrastructure needs in BRICS Countries. China Contributes 41 Bn $ to Bank’s Reserves while Russia, India & Brazil contribute 18 Bn $ each & South Africa contributes 5 Bn $. Complementing the BRICS Bank is the new initiative of China’s AIIB which could also add to the multitude of financing options for developmental projects of the member states.
Inherent Contradictions in BRICS
BRICS is touted by many analysts as the New World Order where the conglomerations of Emergening Economies would challenge the Washington Consensus & the Western Hegemony on world’s Financial System by way of IMF, World Bank, Multilateral Corporations etc. This dominant theme & analysis is a result of deep ideological allegiance to prospective rise of Pan-Asian, Oriental Economic Order that would challenge the western hegemony & more so the US $. The De-Dollarisation is a frequent theme BRICS is associated with. To Assume that BRICS is formed to overthrow a western system would be a gross overstatement & fanciful contrary to its conceptual basis envisioned in 2001. These analysts tend to grossly overlook the inherent weakness & contradictions in BRICS Countries. These analysts also miss the point that the world is about to witness the biggest & historic trade deals like TPP & TTIP which will further integrate many nations from Asia to Europe as part of Washington Consensus.
BRICS Concept is riddled with inherent contradictions among the member states some of which is more evident with regional rivalry between India & China or the Conflict of economic unions of China & Russia in Central Asia. China has already created another Financial Institution like AIIB, a shanghai based Bank with 60 member diverse pool compared to limited membership of BRICS Bank. China is promoting AIIB where it holds VETO with majority share holding of 26.06% of shares, i.e. 4 times 2nd largest share holder in it i.e. India. China has been holding aggressive consultations with World Bank & EU States like Italy, Germany etc for its famed “One Belt One Road” project which aims at Reviving the Old Silk Route connecting China with Central Asia & all the way to Europe.
China’s Long standing Boundary Dispute with India, Abetment of Terror Activities in NE India, Massive Infrastructure investments via AIIB in Silk Route Project in Central Asia, Economic & Military Engagement in Afghan-Pak region like CPEC is likely to raise eyebrows with regional powers like India. India’s Foreign Secretary S Jaishankar has already that stated in regard of “One Road One belt” – Silk Route as a “A national initiative is devised with national interest, it is not incumbent on others to buy it,” Jaishankar said. “Where we stand is that if this is something on which they want a larger buy in, then they (the Chinese) need to have larger discussions, and those haven’t happened.”. The same thing was echoed by Indian PM Narendra Modi in his Central Asian tour. Similarly, China is investing big money in Kazhakistan as part of its OBOR Strategy that directly undercuts the Russian influence. China is also investing in Ukraine with Agriculture Deals, 15 Bn $ in housing sector over 15 years & IT. Significantly Ukraine falls at European end of the Silk Route China is planning for. In addition to Ukraine, China has underwritten 5 major projects in Belarus from Hydrocarbons to Industrial Parks. From Kazhakistan to Ukarine to Belarus; China’s growing influence is bound to undercut Russia’s Sphere of Influence in the much-hyped “Eurasian economic Union”. With Ukraine Crisis, the Russian economy is facing recession owing to sanctions & crude, commodity crash that is likely to prolong after Iran’s Nuclear Deal, making Russia more dependent on China for its energy exports that constitutes the bulk of the Russian Export driven Revenues. It would be fair to say that now China is the Fulcrum as Both Russia & Ukraine depend on Chinese capital or soft economic power.
The Geo political events like Russian embrace of being China’s junior Partner in Shanghai Based Economic Order, China syncing of AIIB, OBOR with CPEC in Pakistan; puts India in a relatively tight corner pushing it into the embrace of United States, Japan, Australia & Vietnam in Asia Pacific. India is an ally of China and Russia under BRICS, but on the other hand it has entered into a new defense cooperation deal with the Pentagon, which is (unofficially) directed against China. It is also cooperating with the US in aerospace technology. India constitutes the largest market (after Saudi Arabia) for the sale of US weapons systems. And all these transactions are in US dollars. Brazil signed a far-reaching Defense agreement with the US in 2010 under the government of Luis Ignacio da Silva, who in the words of the IMF’s former managing director Heinrich Koeller, “Is Our Best President”. Even now Brazil is saddled with Economic Recession owing to Decade of Socialistic Economic Model & Corruption scandals like Petrobras that has badly hit President Dilma Rousseff’s popularity ratings in Brazil.
On the other hand China, which has recently become the global center of manufacturing industries and the export platform of trans- national production networks, is perceived as the de facto economic leader of the BRICS group & with ambitious trans national projects like AIIB (With a VETO), OBOR, String of Pearls it aims to emerge as opposite pole to Washington Consensus in form of Beijing Consensus by foisting a Shanghai Based Regional & Global Economic Order. China’s aspirations to foist its order upon other states is further corroborated by the fact that the Chinese President Xi Jingping called upon the BRICS Nations to lobby for further Governance reforms in IMF ultimately aiming to have its currency Yuan as part of SDR. The fact that China is using BRICS Bank & AIIB as instrumentalities to foist Beijing Consensus is evidently clear when BRICS Bank President KV Kamath said that first loan by the bank will be issued in Chinese currency.
Another Reality check would be that India’s external debt in 2013 was of the order of more than $427 Billion, that of Brazil was a staggering $482 billion, South Africa’s external debt was of the order of $140 Billion. All three countries have central banks reserves (including gold and Forex holdings), which are lower than their external debt. As of 2013, Brazil has 359 Bn $ in Forex Reserve, while India had 300 bn $ & South Africa has 50 Bn
To sum it up, BRICS is an evolving concept & to project it as New World Order will be a gross over statement as BRICS is not formed on the basis of Geographical Connotations or a corresponding Economic Union like EU backed by a charter or a treaty but rather is an absolutely informal association of nations as Russian Foreign Minister Lavrov spoke on 09thJuly 2015 at BRICS Summit in UFA. Even Russian President Vladimir Putin, stated at the BRICS Summit in UFA in 2015 that “BRICS has no plans to form military, political alliance”. Hence, it would be fair to state that a loose informal grouping of nations without a Charter or a prospective Political, Economic & Military alliance/union is incapable of being termed as “New World Order”.