Last month, the new president of China, Xi Jinping, chose to travel to Moscow for his first foreign visit. He and Russian President Vladimir Putin announced a number of agreements and then together traveled to Durban, South Africa, for the fifth “BRICS” summit. There they joined with the leaders of India, Brazil, and South Africa to announce the creation of a new development bank that could challenge the dominance of the World Bank and the International Monetary Fund.
The five leaders’ speeches referred to a shifting world order, and Xi said “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 apparent success of the recent Durban summit, I still am skeptical.
Nearly 12 years ago, Jim O’Neill, who was then the chief economist for Goldman Sachs, 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 period of global recession.
For investors, such an outcome justified the creation of the catchy acronym. Then a strange thing happened: The investors’ creature came to life. In 2009, representatives of the four countries met for the first time in Russia to try to forge an international political organization. South Africa joined the bloc in late 2010, primarily for political reasons. As O’Neill recently told China Daily, “ South Africa is quite fortunate enough to be in the group, as, economically, it is rather small compared to the others.” Moreover, the country’s economic performance has been relatively sluggish of late, with a growth rate of just 2.3 percent last year.
Indeed, while the BRICS may be helpful in coordinating certain diplomatic tactics, the term lumps together what are highly disparate countries. Not only is South Africa miniscule compared to the other countries, 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.” And, while the large autocracies, Russia and China, find it diplomatically advantageous to tweak the United States, both have different but also crucial relationships with the Americans. And both have worked to thwart efforts by India, Brazil, and South Africa to become permanent members of the United Nations Security Council.
As I wrote three years ago, in analytical terms it makes little sense to include Russia, which is a former superpower, with those countries that have developing economies. Russia lacks diversified exports, it faces severe demographic and health problems, and, in former President Dmitri Medvedev’s words, “greatly needs modernization.” Little has changed since Putin returned to the presidency last year. While Russian economic growth benefited from the dramatic rise in oil and gas prices during the last 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 proved to be relatively flat last year.
If Russia’s power resources seem to be declining, Brazil’s appear to be more impressive, given that it has a territory nearly three times the size of India’s, a literacy rate estimated at 90 percent, and triple the per capita income of India (and nearly twice that of China). But, in the three years since my earlier assessment, Brazil’s performance has also slipped; annual economic growth has slowed from 7.5 percent in 2010 to 1 percent last year, with a 3.5 percent rate expected in 2013.
Like Brazil, India experienced a spurt of output growth after liberalizing its economy in the 1990s. Indeed, until a few years ago, gross domestic product growth was approaching rates that are seen in China. This year, however, output is expected to rise by a relatively sluggish 5.9 percent. Unless India improves its infrastructure and raises its literacy rate (particularly for women), it is unlikely to catch up with China.
So, should we take today’s BRICS more seriously than we did 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. This suggested that little progress had been made in the year since the BRICS’ last meeting in New Delhi, where the plan was initially announced. In fact, despite the countries’ 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 to enhance their power in Asia. And, in economic terms, Brazil, India, and South Africa are concerned about the effects that China’s undervalued currency is having on their economies.
Three years ago, I wrote that, “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 S. Nye, a professor at Harvard University, is the author of “The Future of Power.” THE DAILY STAR publishes this commentary in collaboration with Project Syndicate © (www.project-syndicate.org).