Originally coined as a term during the early 2000s, BRIC referred to the global economic weight of Brazil, Russia, India and China. The term was popularised through financial reports developed by the investment bank Goldman Sachs and it foresaw the economic importance that these four nations would carry on the world stage during the coming decades. The BRICS economies stand in contrast to the Group of Seven (G7) of the world’s most developed and industrial economies, since the BRICS nations are still considered as being developing economies.
The idea of uniting the world’s largest developing economies under the term BRIC (Brazil, Russia, India and China) belongs to James O’Neill, a well-known analyst in the field of global economic research from the leading US investment bank Goldman Sachs. In 2001, O’Neill wrote an article, ‘Building Better Global Economic BRICs’, in which he introduced a grouping acronym BRIC (by taking similarity to the English word ‘brick’). Following the logic of the abbreviation, Kazakhstan that possesses a huge growth potential could become a new member of the BRICs ‘to complete the whole picture’. But firstly the Republic of South Africa joined the alliance, giving the organisation a transcontinental character.
During the years of existence and development, BRICS has been in a constant process of transformation. However, we must emphasise the essence of the creation of this format—the consolidation of the countries which are projected by leading analysts of the world to become the world’s most powerful economies in the 21st century. This also brings the understanding of the critical role of the BRICS in global processes of building a new world order through the consolidation of international efforts. Such format fulfils the function of an ‘architect of globalisation’, laying the foundation for a new global construction, made of ‘bricks’, whose strength will depend on how long our common planetary home will stand. Thus, the BRICS format cannot operate in the logic of isolation of the developing world from the developed Western countries. The power of the BRICS and its civilisational mission consists in bringing the consolidated global efforts to a new level of ‘strong wave’ of rapidly growing economies. Collective leadership is a new experience that civilisation realises within the BRICS framework in the face of globalisation. The challenge for the BRICS consists in the development of a new global model of governance which should not be unipolar but consolidated and constructive. The goal is also to avoid a negative scenario of unfolding globalisation and to start a complicated merging of the global growing economies without distorting or breaking the single financial and economic continuum of the world. It is important to continue following this path, and not to hamper the growing potential of the BRICS by the pole confrontation with the West.
BRICS nations are striving to capitalise on their economic leverage for more political influence. BRICS’s growing impact on Low Income Countries (LICs) through trade, foreign direct investment and development financing is significant. Therefore, this is challenging the traditional western donors such as the EU, the US and Japan. These relations instil the vision of South-South-Cooperation (SSC), which is based on solidarity, shared experiences and self-reliance of the South. The development cooperation is focusing on trade, investment and economic growth as the main vehicles of advancement that can be achieved via regional integration and neighbours’ bilateral cooperation. The cooperation also insists on the principles of non-interference and national sovereignty. It does not focus on issues related to governance and social standard which are crucial for LICs’ sustainable development.
The BRICS nations, which overall account for more than 40 percent of the world’s population, have been key drivers of this historic movement toward alleviation of greater overall global income inequality. The collective economic growth and very large populations of India and China, in particular, have lifted a massive amount of people out of poverty.
These countervailing pressures, like tectonic plates, are pushing against each other. While the net global trend for the past 200 years has been toward greater overall income inequality, there is significant, growing evidence since the turn of the millennium that the “positive effect” of growing income equality between countries, spurred by the development of the global South, is superseding the “negative effect” from increasing inequality within nations.
Monumental as this could be, however, the picture is not yet very clear. While more proof is needed to judge whether this economic phenomenon is robust and sustainable, what is certain is that the overall lot of the South has improved dramatically, as exemplified by BRICS over the past generation.
The most prominent beneficiaries have been a much heralded “new” middle class—estimated to be as large as a third of the world’s population—disproportionately located in key Asian emerging economies. Much of the bottom third of the global income hierarchy has generally benefited, too.
However, not all of the South has shared fully this success story, to date at least. Much of Africa, and some of Latin America, for instance, have generally not benefited as much as Asia, and this is an issue the South African Summit hosts will seek to explore.
It is unclear whether the development of the global South has enough momentum to keep driving forward a more equitable world order. This will depend largely on the same twin issues of whether emerging markets generally continue to grow robustly, and whether the trend toward rising income inequality within countries is sustained. On the first issue, the trajectory of the global economy will very likely continue to shift toward the South, and for the foreseeable future many key emerging markets will probably remain robust. However, the remarkable wave of emerging, market growth of the past generation might now decelerate, and the global transformation it has produced in recent years potentially will not be repeated.
Regarding the second issue, it is not set in stone that ever-growing income inequality within countries will continue, especially if there is a political will to address it. However, the debate over what long-term reform agenda should be undertaken to tackle this problem is contested by the left and right across much of the world.
The BRICS comprises both the fastest-growing and largest emerging market economies. They account for almost three billion people, or just under half of the total population of the world. In recent times, the BRICS nations have also contributed to the majority of world GDP growth. According to various economists’ projections, it is only a matter of time before China becomes the biggest economy in the world—sometime between 2030 and 2050—seems the consensus. In fact, Goldman Sachs believes that by 2050 these will be the most important economies, relegating the US to the fifth place. They are primarily an investment category now, although some political and economic alliances may develop from that grouping. If they do, it is likely to be temporary. Once China assumes its rightful place, it may have no need for these alliances.
BRICS’s cooperation has been driven not only by economic and political factors but also by the failure of the existing global economic governance framework to satisfy the needs of these countries. As a result, the BRICS countries have established a new cooperative mechanism that promotes political and security governance structure reform in the UN and in the international financial, monetary and trade systems. Seven BRICS summits have been held thus far. Importantly, cooperation between the BRICS countries not only produces outcomes that align with their own interests but also reflects the interests of other countries. Their cooperation will lead to progressive changes in the international system and minimise the inevitable shocks that may result from reform.
In general, the BRICS countries have gradually become aware that they share mutual interests in international affairs and actively participate in international multilateral cooperation. The G20 has become an important platform for them to strengthen cooperation and provides a new supporting mechanism for their participation in global economic governance. While BRICS and other emerging economies have been pushing for deep reforms in global governance, their national interests and world views differ, which makes complete alignment in the G20 unrealistic. Since 2013, structural problems in BRICS’s economies have also been significant, including large income gaps, lack of financial transparency and infrastructure deficiencies. At the same time, the external economic environment is not favourable to
BRICS, with emerging market economies experiencing sharp slowdown of late. This has led to divergent growth trends between the BRICS economies. Weak geopolitical links, complicated internal and external relations, and inadequate governance capabilities also pose challenges for BRICS.
China can also continue to promote a stable and resilient international financial structure that improves the representativeness of emerging economies. And, last but not least, China can play an important role in facilitating policy coordination between BRICS and other G20 members. There is much for BRICS to achieve, from jointly promoting global trade growth to enhancing the transparency of regional trade agreements. But to do this, BRICS nations must make use of internal exchanges, share knowledge and unify their stance to ensure their voice is louder, clearer and fully reflected in the G20.