Last month, new Chinese President Xi Jinping (習近平) chose Moscow for his first foreign visit. He and Russian President Vladimir Putin announced a number of agreements and then traveled to Durban, South Africa, for the fifth BRICS (Brazil, Russia, India, China and South Africa) summit, where they joined with the leaders of Brazil, India and South Africa to announce the creation of a new development bank that could challenge the dominance of the World Bank and the IMF.
The five leaders’ speeches referred to a changing world order and Xi said that “the potential of BRICS development is infinite.”
It looked as if the BRICS had finally come of age. Three years ago, I was skeptical about the BRICS, and despite the recent summit’s apparent success, I still am.
Nearly 12 years ago, then-Goldman Sachs chief economist Jim O’Neill coined the term “BRIC” to describe the “emerging markets” of Brazil, Russia, India and China. From 2000 to 2008, these four countries’ share of global output rose rapidly from 16 percent to 22 percent (in purchasing power parity terms), and their economies performed better than average in the subsequent global recession.
For investors, that outcome justified the creation of the catchy acronym. However, then a strange thing happened: The investors’ creature came to life. In 2009, the four countries met for the first time in Russia in an effort to forge an international political organization. South Africa joined the bloc in late 2010, primarily for political reasons.
As O’Neill recently told the China Daily, “South Africa is quite fortunate enough to be in the group, as, economically, it is rather small compared to the others.”
Moreover, its economic performance has been relatively sluggish, with a growth rate of just 2.3 percent last year.
So, while the BRICS may be helpful in coordinating certain diplomatic tactics, the term lumps together highly disparate countries. Not only is South Africa miniscule compared with the others, but China’s economy is larger than those of all of the other members combined. Likewise, India, Brazil and South Africa are democracies, and occasionally meet in an alternative forum that they call IBSA (the India, Brazil, South Africa Dialogue Forum).
Also, while the large autocracies, Russia and China, find it diplomatically advantageous to tweak the US, both have different, but crucial relationships with Washington. Both have also worked to thwart the efforts by India, Brazil and South Africa to become permanent members of the UN Security Council.
As I wrote three years ago, in analytical terms, it makes little sense to include Russia, a former superpower, with the developing economies. Russia lacks diversified exports, faces severe demographic and health problems, and, in former Russian president Dmitri Medvedev’s words, “greatly needs modernization.”
Little has changed since Putin returned to the presidency last year. While economic growth benefited from the dramatic growth in oil and gas prices during the past decade, other competitive industries have yet to emerge and the country now faces the prospect of declining energy prices. While it aims to maintain 5 percent annual growth, its economy was relatively flat last year.
If Russia’s power resources seem to be declining, Brazil’s appear to be more impressive, given it has a territory nearly three times the size of India’s, a 90 percent literacy rate and triple the per capita income of India — and nearly twice that of China. However, in the three years since my earlier assessment, Brazil’s performance has slipped: Annual economic growth has slowed from 7.5 percent in 2010 to just 1 percent last year, with a 3.5 percent rate expected this year.
Like Brazil, India experienced a spurt of output growth after liberalizing its economy in the 1990s and had, until a few years ago, a GDP growth approaching Chinese-style rates. However, this year, output is expected to rise by a relatively sluggish 5.9 percent. Unless it improves its infrastructure and literacy rate — particularly for women — India is unlikely to catch up with China.
So, should we take today’s BRICS more seriously than the BRICs of three years ago?
Tellingly, the meeting in Durban failed to produce any details of the structure of the proposed new development bank, suggesting that little progress had been made in the year since the BRICS’ last meeting in New Delhi, India, where the plan was announced. Despite a commitment to launch “formal negotiations” to establish the bank, disagreements about the size and shares of the bank’s capital have not been resolved.
That lack of unity is symptomatic of the BRICS members’ underlying incompatibilities. In political terms, China, India and Russia are vying with each other for power in Asia. In economic terms, Brazil, India and South Africa are concerned about the effects of China’s undervalued currency on their economies.
Three years ago, I wrote: “BRIC is not likely to become a serious political organization of like-minded states.”
The BRICS’ most recent meeting has given me no reason to revise that assessment.
Joseph Nye is a political science professor at Harvard University.
Copyright: Project Syndicate