An ‘Expired’ Concept
There may be a number of things that the BRICS countries have in common, but a shared economic model is definitely not one of them. And in other ways, Brazil, Russia, India, China and South Africa are too different to be able to pursue a successful common policy.
Jean-Michel Six is Managing Director and Chief Economist for Europe, the Middle East, and Africa at Standard & Poor’s.
There are two schools of thought when it comes to the BRICS phenomenon. Some believe that this group of countries represents a new economic power that follows in the footsteps of what is commonly known as the Western World. They call it a veritable developing bloc of powerful economies with fast-growing populations, or use many other catchy phrases – which beyond any doubt are true. Many encouraging statements were also heard at the recent BRICS summit in South Africa, where new plans to create a BRICS bank, and a common foreign exchange reserve, were unveiled. All of the above go to show that developing markets are striving to find new ways to restore their independence in their relations with the West.
This is probably the BRICS countries’ only ‘claim to fame’ today. Members of the club possess different traits, which can be somewhat misleading. You are referring to the BRICS countries as a promising joint project? But what do Russia, India and China really have in common? Russia’s economy, with its excessive dependence on oil and gas, is still mostly driven by its commodities market; India still lives off its agriculture; and China continues to accelerate its economic development while still offering very little in the way of raw commodities. If you retort by pointing out that these countries are characterised by high productivity growth, you should bear in mind how much the structure of this growth varies from country to country. These differences were particularly salient during the crisis period. Russia continued to follow the commodities markets, Brazil’s growth slowed down considerably, while South Africa managed to survive only thanks to China’s high demand for metals and other minerals.
Just about the only thing that the members of this club do have in common is that they are all developing markets. Their cultures are radically different, their political systems are at the opposite ends of the spectrum, and their economic structures are obviously dissimilar. The BRICS club is a fine concept, but it has long expired. It would be difficult to identify one country that could be called the weakest link. What seems doubtful is whether these links of different calibres might be capable of forming a single chain. The state machineries of the five BRICS countries pursue economic models that develop in parallel. That is precisely why their development paths are highly unlikely to cross in the next 20 years.
However, they do have one reason to stick together: their desire to restore global equilibrium. The BRICS countries stand a better chance of winning more independence from the West, and of gaining more economic clout, if they remain a political alliance. As the summit in South Africa demonstrated, the BRICS countries have truly learned to talk to one another, and even take independent decisions. It remains to be seen, however, whether this approach will bear fruit, since the political problems faced by these countries are as diverse as their economic structures.
Preserving the alliance offers an interesting experience, and probably makes a certain sense – after all, the club is only 13 years old. In my view, however, we should not pin our hopes on it. It will be crucial for each country to continue to implement their domestic reforms separately. It is not a bad idea to look to your neighbours, allies and maybe even friends – but it hardly makes any sense if you do not back it up with your own competitive edge.