1050x300-AGI-Five Brics in search of mortar

Five Brics in search of mortar

Author(s): Asia Global Institute

Date: Apr 3, 2012

Theme(s): Finance & Macroeconomics, Trade & Investment

Publications: Opinions & Speeches

Economist Jim O’Neill, former head of global research at Goldman Sachs, coined the term “Brics” in 2001. It has both specific and symbolic significance. The specific is that it referred to four countries – Brazil, Russia, India and China [more] – which O’Neill saw as the leaders among the new emerging powers, the heavyweights that would make a difference to the planet. The symbolic is that it became a generic term for dynamic emerging economies, including, apart from the big four, Indonesia, Turkey, Mexico and South Africa, among others. Brics reflected the new age of 21st century transformative globalisation.

I have to say I have always been sceptical of the term and still do not find it a useful analytical concept. The differences between the four are immense and far more so than the similarities. But I have to admit it has been taken seriously in umpteen board rooms, policy institutions and forums, and it is clearly a fixture of 21st century global vocabulary.

It has also, somewhat surprisingly, been taken seriously by the countries concerned. They have constituted themselves into an “entity” and hold institutionalised meetings. One change is that they have included South Africa – hence whereas originally the “s” in “Brics” denoted the plural, in the new version it stands for South Africa.

The latest Brics summit was just held in New Delhi. A major outcome is that they have urged for the formation of an alternative institution to the World Bank, a sort of Brics Bank. This proposal comes on the justified grounds that the “World” Bank is far too much a “Western” Bank. The near certainty that the US candidate, Jim Kim, for the succession of the current president, Robert Zoellick, will be appointed will add more fuel to the fire.

There is absolutely no doubt that the existing global institutions – the UN, the World Bank, the IMF, and the WTO – are not in sync with the current deeply transformative age. The fact, for example, that both Britain and France should each have a permanent seat on the UN Security Council, whereas India, to name one obvious candidate, does not is patently absurd and a reflection of obsolescence.

Too true!

However, the main opponent to India having a permanent seat is China. China in turn has tense territorial disputes with both Russia and India. At the moment the Brazilians are incandescent in respect to the alleged undervaluation of the Chinese RMB and speak darkly of a currency war. The Brics proved incapable of joining forces in presenting a candidate for the succession of former IMF chief Dominique Strauss-Khan and seem pretty sure to repeat this non-performance over the succession of the head of the World (aka Western) Bank.

There is indeed a profound need for the emergence of new institutional architecture that reflects the new global era and that can provide the governance framework so badly needed. But with the Brics we are not there yet: the Brics exist, but the mortar is elusive. Whether proper foundations can eventually be laid and a solid edifice emerge remains to be seen. If so, what is sure is that it will take a lot of time in a world where many matters are urgently calling for rapid and intelligent attention.