In 2001, when Jim O’Neill of Goldman Sachs coined the acronym BRIC to refer to Brazil, Russia, India, and China, the world had high hopes for the four emerging economies, whose combined GDP was expected to reach $128.4 trillion by 2050, dwarfing America’s projected GDP of $38.5 trillion. When the four countries’ leaders gather on March 26 in South Africa – which joined their ranks in 2010 – for the fifth BRICS summit, their progress and potential will be reassessed.
The summit’s hosts have set ambitious goals, reflected in the summit’s theme: “BRICS and Africa – a partnership for development, integration, and industrialization.” They seek to advance national interests, further the African agenda, and realign the world’s financial, political, and trade architecture – an agenda that encompasses objectives from previous summits, while reflecting South Africa’s goal of harnessing its membership to benefit all of Africa.
But, while strengthening ties with African countries might seem like the kind of pragmatic development issue that should bring consensus, the seeds of doubt are already being sown. Lamido Sanusi, the governor of Nigeria’s central bank, has called for Africans to recognize that “their romance with China” has helped to bring about “a new form of imperialism.”
Moreover, the central item on the summit’s agenda, a proposed “BRICS development bank,” is one that has gone nowhere at previous summits. This time, armed with a “feasibility study” put together by the five BRICS finance ministers, some progress may at last be made. With trade, both among the BRICS countries and between the BRICS and the rest of Africa, expected to increase from roughly $340 billion in 2012 to more than $500 billion in 2015, there is also much to discuss on the commercial front.
So far, the goal of “global realignment” away from the advanced countries has catalyzed these five very disparate countries’ efforts to forge their own bloc. But the primacy given to “advancing national interests” has always precluded real concerted action, at least until now.
This is why the idea of establishing a BRICS development bank has taken on such importance. And the recently conducted feasibility study might spur long-awaited progress. But toward what end?
According to China’s official news agency, the development bank’s primary objective would be “to direct development in a manner that reflects the BRICS’ priorities and competencies.” Once the bank is established, a working group will be tasked with building the necessary technical and governance capacity. But this stock rhetoric fails to address the discrepancies between the BRICS’ interests, or to define the bank’s role in reconciling and advancing them.
The fact that China is already Africa’s top trading partner, for example, invites questions about the proposed bank’s potential contributions. And China’s answer – that the bank would foster the “development of more robust and inter-dependent ties between the BRICS” – provides little substance. Is the bank supposed to serve as a counterweight to global multilateral development banks like the World Bank, or to reduce American and European dominance over the Bretton Woods institutions?
Whatever the underlying objective, it must be identified, and its concomitant risks addressed, if the BRICS are to make genuine progress. For example, if the proposed bank is simply an additional funding institution aimed at supporting the BRICS’s development agenda, the participating countries’ leaders must establish how it will interact with national institutions, such as the Brazilian Development Bank, the China Development Bank, and the Export-Import Bank of India.
But the problem of aligning the BRICS’ interests is a much deeper one. Consider India’s need for massive investments in infrastructure, made evident in its just-proposed 2013-2014 budget. Some hopeful Indians see a BRICS bank as a way to channel China’s surplus funds – as well as its expertise and experience – to such investments (especially railways), as well as to strengthen Sino-Indian ties. But, given the two countries’ many serious bilateral problems, will either government really want to bind itself so closely to the other?
Likewise, it is unclear what South Africa has to gain from the BRICS. Over the last few decades, the country has used mining revenues to pave roads, strengthen law enforcement, advance education, and revitalize cities and towns. The country’s most serious remaining problems – poverty and social inequality – are unlikely to be ameliorated through cooperation with the other BRICS countries, all of which rank among the world’s most unequal societies.
Other shared problems – such as corruption, poverty, and social underdevelopment – would be similarly difficult to address together. And it seems that the BRICS may not even be willing to try. Although Wen Jiabao, in his final address as Prime Minister, highlighted the enduring obstacles to China’s economic development (many of which its fellow BRICS share), China’s new president, Xi Jinping, insists that his country will not sacrifice its “sovereignty, security, or development interests” for the sake of more trade.
Meanwhile, Russia’s impaired democracy and resource-driven economy are a poor example for its fellow BRICS – and, in fact, could serve as a warning to the others about the risks of excessive reliance on the state. And Brazil, like India a genuine democracy, also seems sui generis. Despite the commodities boom of the last decade, its industrial output relative to GDP is no higher than it was when the effort to create a BRICS bloc began.
The BRICS’ ambitions – and the world’s expectations for them – may yet be fulfilled. But shared potential does not translate into collaborative action. On the contrary, each of the BRICS will have to pursue its goals, and confront its challenges, individually.
Jaswant Singh, a former Indian finance minister, foreign minister, and defense minister, is the author of Jinnah: India – Partition – Independence.
Copyright: Project Syndicate, 2013. www.project-syndicate.org