Why BRICS 2.0 Will Take Off
The original concept of BRICS that highlighted a grouping of the world’s largest high-growth economies, or ‘BRICS 1.0,’ is giving way to ‘BRICS 2.0,’ which is all about embarking on the institution-building process among the five nations.
‘BRICS 1.0’ was about showing the world the growth market potential of Brazil, Russia, India, and China, as well as the scale of their geoeconomic relevance. It emphasized strengths, such as the size of their territories and populations, that could outline the future of the global economy.
Many advances have been made since the BRICS acronym first appeared in 2001. The concept has evolved a great deal in the last 14 years. It was originally little more than a profitable group of assets or a promising trade partnership with the world’s largest emerging markets. But today, BRICS stands for an increasingly important tool, which is helping to enhance global governance and, consequently, to further consolidate a multipolar world. We should therefore talk about ‘BRICS 2.0.’
These emerging giants needed to join forces and act as a group in order to allow for greater internal and external policy cohesion, and to exert a greater influence in the international sphere. To make progress, the alliance needed to become more than just a set of nations that shared similar geographical, social, and economic statistics. They all had vast territories, large populations, big economies, and the potential to play constructive or fragmentary roles in their geopolitical regions and in the global economy. In addition, they needed to build articulate views and take actions in pursuit of their interests and in understanding – and shaping – how the world should work.
It took a serious effort, but an institution-building process began in 2009 when the heads of state of the BRICS countries (which went on to include South Africa) formalized their annual summit meetings. BRICS began to move towards becoming a truly valid category for the analysis of present and future international relations, as well as a relevant political and economic group.
As a consequence of this common desire to build new institutions, the BRICS countries were no longer a ‘concept-in-the-making.’ In this light, the 6th BRICS Summit, held in 2014 in Fortaleza, is symbolic of the rise of BRICS 2.0.
BRICS 2.0 is all about the continued institution-building process. And of course the establishment of the New Development Bank (NDB) is an important move toward structuring the BRICS as a group.
The key issues approved at the Fortaleza Summit relate to the establishment of the NDB – starting out with a capital structure of $50 billion – and the Contingency Reserve Arrangement (CRA), which will provide $100 billion to fight eventual liquidity crises.
Are these minor accomplishments? Perhaps. However, when we compare the emerging BRICS powers with the old G7, we can see that the BRICS will go further. The self-proclaimed group of the seven ‘most industrialized nations’ never went beyond protocol meetings where they exchanged views on international economic issues.
For the BRICS institution to succeed, it must avoid a double temptation.
On the one hand, the NDB should resist adopting a purely rhetorical South-South attitude and discourse, and should instead set up pragmatic new institutions as effective development tools. We should also not take the NDB as a counterpoint to the International Monetary Fund (IMF) and the World Bank.
Many advances have been made since the BRICS acronym first appeared in 2001. But today, the grouping stands for an increasingly important tool, which is helping to enhance global governance and, consequently, to further consolidate a multipolar world. We should therefore talk about ‘BRICS 2.0’
Unfair and outdated as they may be, the so-called Bretton Woods institutions should not represent a ‘fixation’ on the part of BRICS as it strives for a stronger voice and more clout with those agencies. The BRICS will waste a lot of energy if they concentrate too much on denouncing the inadequate power structure of those multilateral financial agencies.
Actually, when it comes to the Washington-based financial institutions, there is little to oppose and much to add. Both the IMF and the World Bank are lagging in terms of governance and muscle. The election process for their chief executives is ridiculously anachronistic. It is as if the US and Europe are the exclusive power players in an outdated cooperative, in which Europe always appoints the director-general of the IMF and the US does the same for the World Bank.
Given the magnitude of contemporary challenges, both the IMF and the World Bank are devoid of the necessary capital structure to perform their original functions of liquidity provision or development financing. Those agencies have reinvented themselves, it is true, as ‘think tanks’ staffed by very skilled and able professionals. Both are, no doubt, extremely useful sources of information and analysis. But in terms of their once expected role as managers of global capitalism, the IMF and World Bank are nothing more than toothless lions.
On the other hand, the institutional dynamics towards an ever-stronger BRICS group must not be paralyzed by the marked heterogeneity that characterizes each member-country. BRICS nations are indeed very different. Russia and China are permanent members of the UN Security Council. Russia, India, and China are nuclear powers. India and Brazil are huge representative democracies. Russia and Brazil are major producers of commodities. China’s economy is 25 times bigger than South Africa’s. China and India have set in motion important structural reforms, whereas Brazil, Russia, and South Africa have not.
However, international experience shows that the absence of a comprehensive commonality of interests is not an insurmountable obstacle to joint projects.
Look at the European Union. Despite huge achievements since the Rome Treaty, member-countries still differ widely on many political and economic issues, either on governance coming out of Brussels or on other global agenda items. Some have embraced the euro, while others do not want to deepen integration with current partners. They would rather accept new members and promote ‘horizontal’ rather than ‘vertical’ integration measures. Some (like Germany) call for the reform of the Security Council. Others (like France and the United Kingdom) are less enthusiastic.
For the BRICS countries, the essential point is that the areas in which their interests coincide – such as development financing, improving global economic governance, and building a more equitable world order – should coexist pragmatically with their differences in economic clout, political agenda, and worldview. If that is the case, then BRICS 2.0 will definitely take off.