2023-09-02 08:08:48
Economist Jim O’Neill, the spiritual father of the Brics, is critical of the achievements of this country club. According to him, Westerners should be worried regarding its enlargement, a source of polarization.
One fine day in 2001, British economist Jim O’Neill tossed out an acronym in an analysis report. More than twenty years later, he still suffers the consequences, but does not seem to worry regarding it. “I have never had as much media interest as I have in recent weeks. I spoke to at least 50 journalists“, he explains with enthusiasm.
The reason for this enthusiasm is to be found in the Brics summit, which was held last week. During this forum bringing together these five emerging countries – Brazil, Russia, India, China and South Africa (South Africa), the first letter of each country forming the acronym Brics –, the club expanded for the first time since 2010. After O’Neill, at the time chief economist of the investment bank Goldman Sachs, launched the acronym BRIC in 2001, grouping four emerging countries, the quartet decided in 2009 to form a formal club. A year later, South Africa joined them and Bric became Brics.
“By their sheer size, India and China might drag the rest of the world down in their wake.”
This time the enlargement is more ambitious. Next January 1, no less than six new countries will join the clubthe most notable new member being Saudi Arabia. Other newcomers are Argentina, Egypt, Ethiopia, Iran and the United Arab Emirates. The share of the new BRICS countries will thus increase to nearly 30% of world GDP and will represent more than half of the planet’s population. This enlargement is causing some nervousness in the West.
But what is the real strike force of the new Brics? The initial club was already criticized for lacking cohesion. With a larger group, the situation may not improve. That doesn’t mean, however, that the emergence of these Brics shouldn’t be seen as a wake-up call, says O’Neill, now a columnist and adviser to the Chatham House think tank.
When you launched the acronym Bric in 2001, we understood that you wanted to highlight the fact that the big emerging countries like China and India deserved to have their say in the management of the world. Have things changed in the meantime?
At the time, I found it strange that China played such a large role in resolving the Asian financial crisis of 1997-98, but did not no formal role in world management. It was clear, however, that these countries would become increasingly important. There resurrection of the G20 to resolve the financial crisis of 2008 responded to this idea. At the time, the American government was blowing a progressive wind, with, among other things, a project to reform the International Monetary Fund (IMF) and to strengthen the weight of China. For a time, we thought that the emerging countries would have more say in the matter. Until the political situation deteriorates from 2015-2016 with the election of the US President Donald Trump and the increasingly authoritarian tendencies of the Chinese president Xi Jinping.
The Achilles’ heel of the Brics lies in their major differences. But what do you think is the main stumbling block? Is it the divergence of their economies or their political systems or of rivalries between the members of the group?
The biggest problem is rivalry between india and china. Ironically, the two countries continue to grow in importance within the global economy and, together with the United States, form the trio of countries that will really matter. So it would make a huge difference if China and India find an agreement on issues such as climate change, global trade and their representation in institutions like the IMF and the UN. The sheer size of the two countries might lead the rest of the world in their wake. But, aside from their rivalries, it doesn’t help that they both think of themselves as the voice of the countries of the South.
©via REUTERS
Do you think they will manage to iron out their differences?
Interestingly, Xi and Indian Prime Minister Modi met on the sidelines of the BRICS summit. They then posted a message stating that they wanted reduce tensions at the border. But I have doubts. After decades of mutual distrust, it is not easy to trust each other once more.
Does this lack of convergence explain the poor record of the Brics which, according to you, “have accomplished nothing” since their creation?
I’m willing to give them some credit for creating the New Development Bank (which provides aid to developing countries, editor’s note). Until recently, this bank was fairly well run, away from politics. But today, it can no longer escape it, especially since the invasion of Ukraine by Russia. And honestly, it has only lent limited amounts so far, a fraction of the outstanding amount of the Chinese development bank. Finally, the Brics play an essentially symbolic role. Alas, their enlargement might prompt the West to react by strengthening the G7, which, in turn, would strengthen the will of the BRICS to act as a counterweight to the G7. This is worrying because we will have to work together to tackle global issues.
“When countries like Indonesia, Mexico and Turkey take the plunge, the Brics will represent a much larger portion of global GDP than the G7.”
What logic do you see in the selection of the six new members of the Brics?
In any case, there is clearly no economic logic because, in this case, Indonesia should be the first country to join the club. One can therefore wonder what is the objective of the Brics. Take the inclusion of Iran. I am surprised that India and Brazil have agreed. This demonstrates that China and Russia have more influence than I thought.
How do you see the membership of the Gulf States, namely Saudi Arabia and the United Arab Emirates?
Saudi Arabia’s membership is fascinating. As a leader in oil production and export, the Saudis have a lot of influence on the price of hydrocarbons. It will be interesting to see if this will provide the necessary impetus to settle oil sales in a currency other than the dollar.
Shouldn’t the West start to worry regarding the rise of the Brics club?
Certainly. If we don’t change anything in global governance, we will probably see other countries join the BRICS. When countries like Indonesia, Mexico and Turkey take the plunge, the BRICS will represent a much larger portion of global GDP than the G7. It is a development that the United States has encouraged since Trump’s election by turning inward.
“China should be ready to make its currency more accessible for trade and investment instead of sticking to capital controls.”
On the other hand, countries like India and Brazil are careful not to completely turn their backs on the West by keeping all options open…
It’s true. And that’s why the Brics are mostly symbolic. With India – which is also the largest democratic country in the world – they cannot manifest as one either. authoritarian bloc, although some members may wish to do so. Nor do I have the impression that the creation of an authoritarian bloc is Xi Jinping’s priority. China attaches more importance to the simplistic idea of becoming the southern countries champion. The Chinese like to believe it, whether it’s true or not.
To escape the domination of the dollar, the idea of launching a common currency for the Brics was launched as the summit approached. Do you think that’s nonsense?
Can you imagine China and India creating a common central bank for a new currency? All of these economies are so different! Brazil is located 16,000 kilometers from China. It would be crazy. On the other hand, China is trying to make its currency play a bigger role in the global economy, but that has nothing to do with the BRICS.
At the same time, you recognize that it is not healthy for emerging countries to be so dependent on the dollar and therefore also on American monetary policy. So what is the alternative?
These are political choices. Eventually, China should be ready to make your currency more accessible for trade and investment rather than just capital controls. And if the euro wishes to become a real alternative to the dollar, the EU will have to agree to issue common bonds in euros as an alternative to US Treasury bonds.
The Brics have also become an investment product in their own right, even if the return is disappointing. Was that to be expected?
The key phrases
- “The biggest problem of the Brics is rivalry between india and china.”
- “There is clearly no economic logic in expanding the group.
- “If we don’t change anything in global governance, we will probably see other countries join the BRICS.”
- “All of these economies are so different! It would be crazy to launch a common currency.”
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