Laying the bricks for the new world

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Diversity – the word that may end up best capturing the essence of the 21st century, an era that will be defined by multipolarity and multiculturalism, believes Ruben Vardanyan, chairman of the editorial board of BRICS Business Magazine, Co-head of Sberbank CIB*. He outlined his view of the economic and geopolitical changes that the world may be facing over the next thirty years. It’s a view in which Brazil, Russia, India, China, and South Africa will figure prominently.

The countries gathered under the umbrella of BRICS are very different. What is it that unites them? Isn’t the concept a bit contrived?

At the beginning, any association has a certain artificiality to it because in addition to characteristics that seem alike, there are those which don’t appear to have anything in common with each other. The political makeups of the countries — Russia, Brazil, India, China, and South Africa — vary quite substantially. There is a rather significant difference between communist China and democratic Brazil, which is free from any sort of ideology. If you’re talking about the key factors that led to the formation of the group, it would be high growth rates, large economies and fairly significant population bases. These factors taken together will give these countries the opportunity to exert influence on the global economy over the next 20–30 years.

Keep in mind that China and Russia were sort of blank slates — twenty years ago they were outside the world economy. India and Brazil were missed opportunities. People have been waiting for Brazil to break out for the last fifty years, but it just doesn’t happen. South Africa had just gone through the end of Apartheid and the subsequent ironing out of a new system of government. There are other, no less interesting countries, such as Indonesia, which have a lot in common with the above–mentioned five. But when evaluating the influence of different countries, it’s clear that South Africa is the key country in Africa in a lot of areas. You can say the same thing about Brazil in Latin America, or Russia, and obviously China and India — not just regionally but on a global scale. So the organisation as it now stands isn’t the least bit artificial. Now, whether these countries will stay joined forever is another question. It’s an issue of self–identification. The world has changed: we’ve moved away from the “vacuum cleaner model” where all resources were in the service of Europe, the U.S., and Japan, only to return to other parts of the world in the form of investment and goods. Now we’ve arrived at something else.

It’s important to determine whether the G20 has come into its own as an international institution and how the system of checks and balances works. Right now, the G20 doesn’t reflect the current state of affairs

The very creation of BRICS is a telling sign that unipolarity is a thing of the past. Nowadays, there couldn’t be a situation in which the majority of countries are either not visible at all or insignificant from the point of view of economics, politics, culture and even sports. A lot of new leaders have emerged. The world has become multipolar. So I think that the idea of BRICS should be approached from this standpoint. It wasn’t that long ago that there was the socialist camp and the capitalist camp but not countries united together. But now the configuration is different. Even the situation in Europe has become more complicated and it’s not entirely clear whether Europe will stay together.

Cho Tak Wong, Eike Batista, Ratan Tata systematically assess opportunities of BRICS countries

The theory of multipolarity is repeated extremely frequently — so often in fact that one starts to get the impression that now it just needs to actually manifest itself.

There are realities which are very different from those about which we are speaking. Regardless of how much we talk about multipolarity, the UN Security Council is structured in such a way that the right of veto is at the disposal of only five countries. India, for example, isn’t one of them. Even Germany and Japan aren’t included because they lost WW II. Why is multipolarity talked about so much? An understanding of the new reality is already coming but the mechanisms that would allow that reality to be expressed have not yet been created. The transition from G8 to G20 is just one attempt to move in that direction. It also raises the question about the necessity of even preserving the G8, about what the G8 even means if Europe is now one entity. On the other hand, it’s important to determine whether the G20 has come into its own as an international institution and how the system of checks and balances works. Right now, the G20 doesn’t reflect the current state of affairs but it does do a relatively suitable job of accommodating it. Nevertheless, the gap between what is said and what is being done is too big.

What is the hierarchy of the international institutions which do or do not reflect this new reality?

The Security Council makes the decision whether or not to send in troops or impose sanctions. The World Bank distributes quotas, determines the relative weights of various countries, the size of their payments. The headquarters of key international institutions are located either in Europe or the United States. Period. But that will change. At some point, the head offices of such organisations will be forced to move out of Geneva and New York, perhaps to a newly–built city in China or Brazil or Singapore, because that will better reflect the reality of the new day. And it will make more sense if you look at where the flow of information and people is headed.

Will the old world resist these changes?

There are two natural processes here. We are all by nature conservative and it’s hard to change. And barring a cataclysm, no one is going to rejoice at such changes. Everyone is used to the way things are, settled in and comfortable and no one wants to make decisions and incur expense. After all, things more or less calmed down after the Second World War. The winners decided how things would be and then tried to live according to that paradigm. The desire to preserve the status–quo is a natural human impulse. So there will be resistance to the changes. At the same time, life keeps moving forward and things will change whether we want them to or not. The choice of host cities for the Olympics and World Cup for the next eight years is a good example. It wasn’t long ago that neither Russia nor Brazil would have even been in contention for the honour of hosting such an event.

Describe the actual economic cooperation among BRICS countries.

There almost isn’t any, which is a good challenge. Clearly the small volumes that go between China, India, and Russia can’t compare with the total volume of exports/imports of these countries. There are subjective reasons for this – strained relations between India and China and complicated relations between Russia and China. There are other reasons: let’s say the lack of a large outlet for Russian goods in India, which mostly buys raw materials and military equipment. India also doesn’t have much capability here; Brazil is far away and mostly exports food products. But the process is underway and the number of Russians that are going to study in China or learning Chinese is continually growing. More and more people want to go to Brazil, not because of the festival, but because it’s possible to build a business there. The numbers show that this is already becoming a definite trend. I am convinced that the worsening social situation in Europe will lead a lot of people to look at Latin America and Southeast Asia as preferable in terms of the job market, as well as capital and information markets.

But the flow of information still has not changed directions?

Chinese money is still staying in China or going to countries in Southeast Asia where there’s a large Chinese diaspora and where the Chinese have well–established connections. But this money could go into buying reputation–enhancing brands in Europe or the U.S. Indian money is going to the U.S. and Europe or is staying in the domestic market because Indians better understand the Anglo–Saxon model. But that will be changing and in fact the flow of capital is already starting to reorient itself. It seems to me that the magazine is getting started not when everything is established and solidified but at a time when the pace is accelerating. The abbreviation BRICS has been around for eleven years — a significant amount of time in the life of a person — but historically, that’s nothing. It will take another 10–15. By then a new generation will be operating in a system with different coordinates. 

Ruben Vardanyan believes that BRICS will get the opportunity to exert influence on the global economy over the next 20–30 years

Are any high–profile individuals displaying interest in investing in other BRICS members?

Of course. People like Eike Batista, Lakshmi Mittal, Ratan Tata, and Cho Tak Wong are quite active and systematically evaluate emerging possibilities. Chinese investors are carefully monitoring what’s going on in Russia. So yes, mutual interest is appearing, albeit slowly. Very slowly. There shouldn’t be any illusion at the first stage; this process will not strike anyone as being easy.

Does BRICS also have any clear prospects in the political arena?

I can’t give a complete answer to that question. Even if BRICS turns into a serious political organisation, it will nevertheless be fragmented. More likely, we should be talking about a configuration that includes a larger amount of countries. A closed group of four or five countries is only able to solve specific problems. As the scale of the problems increases at a global level, 15–20 countries would be needed. In terms of who else should be included, besides Brazil, India, Russia, China, and South Africa, countries such as South Korea, Indonesia, Viet Nam, and Nigeria (all of its problems notwithstanding, Nigeria has huge potential by virtue of its 150–million strong population) all unquestionably deserve to be mentioned. Also, of course, Mexico and maybe Argentina.

People who are not well versed in history will be interested to know that before 1820, India and China counted for 50% of the world’s GDP. Russia had a 2.5% share and the USA provided for 1.5%

For many it seems that by postulating a multipolar world, Moscow and Beijing are in fact gravitating towards systems that they can dominate.

This is a serious issue. People who are not well versed in history will be interested to know that before 1820, India and China accounted for 50% of the world’s GDP. Russia had a 2.5% share and the USA provided for 1.5%. I think that China’s five thousand year history gives it the right to look at many things in a different light. India only recently became a country and the question remains to what extent it has taken on the characteristics of one. Today India is more like a confederation of states that is inhabited by people with large national, religious and cultural differences. Russia has been a nation, in one way or another, for four hundred years which is obviously a long period in terms of history, but not an enormous one. Brazil, on the other hand, is a new country and a decade ago the average age of its population was eighteen.

The basic data is very varied, and so it’s understood that a unipolar world is the simplest variant. However, monopolies can’t last for very long. Unsurprisingly, the bipolar model is the most stable one, if it is vested with elements of mutual deterrence. The atomic bomb played a large role in stopping two opposing camps from spiralling into armed conflict. Both sides were equal and clearly understood that they could simply destroy each other. The illusion that America could become the single global centre was upheld for a while, but in the end the United States missed its chance to turn the illusion into reality. The Roman Empire was in the same state for a few hundred years, which shows the short–lived nature of such a position.

At a first and perhaps cursory glance, it seems like the very idea of combining two completely different cultures sows the seeds for possible future conflict.

There’s no need to combine anything. I hope that we won’t become hostages to the abbreviation (BRICS). The point is that in the next 20–30 years the key players will not be Europe and America, but other countries instead. These countries possess different characteristics, but are all actively transforming, modernising and rebuilding. They are transforming into regional and global leaders.

An entirely natural process is underway, which cannot be simply seen in black and white. One party will want to remain alone and not join forces with anyone, whilst another will want to be in the same club as the Americans and the Europeans. We’re trying to simplify everything, to see everything in patterns, but this is only taking us further away from reality. Life is more layered and complex than that. We need to understand that a trend definitely does exist and it influences even the most ordinary of people, but this is not to say that everyone falls into line and continues to exist in one system.

In the previous one hundred and fifty years the success of a country has often been associated with such concepts as “Protestant ethic,” “Protestant outlook” or “Protestant work ethic.” Now civilisations with completely different cultural foundations and outlooks are competing for leadership. What does this mean for those who have got used to the old order of things?

Attempts to attach labels and keep everything simple are normal human desires. Yet there even discrepancies with regard to “Protestant ethic”. For example, Bavaria is a Catholic land, but despite this it is one of the richest and successful German regions. With all due respect to the principles described by Max Weber, he was mistaken in his conclusion that Protestant ethic is the main driver of all things.

The Vikings did not adhere to Protestantism, but they were the engine of change in Europe. Essentially the Normans were Vikings and the Anglo–Saxons were Vikings that conquered England. Sicily was also controlled by the Normans and in a few centuries they determined Italian history. Even Oleg, Igor and other Old Russian kings were Vikings. But, of course, in itself the question is very important. The world we will live in will not only be multipolar in an economic sense, but also multicultural and multireligious. After Islam arose in the seventh century its followers began to fight for territory — mainly they battled against Christians. We have lived with this confrontation between Muslim and Christian since the Crusades. Now everyone must understand that the world is not just populated by representatives of those two faiths. Buddhists, Hindus, Shintoists, and Confucianists also share this world. The ability to communicate, work and share information with those that are not like you will be very important in future.

In the past everything was very simple. Everyone tried to come to the USA, learn English and live according to the law there, since U.S. laws are the same for everyone. That’s not how it works now. For example, you find yourself in India, and you understand that it’s not like being in the USA, China or Russia. This makes the world more complicated. For the majority of people this is an uncomfortable environment, where different models are popular.

You mean to say that the level of inner anxiety is increasing?

Definitely. The more alternatives there are the worse things are for the average person’s mind. Only very few are ready to embrace changes and face challenges. Ninety–seven percent of people want a simplified and rather primitive model of existence.

In the past everything was very simple. Everyone tried to come to the USA, learn English and live according to the law there, since U.S. laws are the same for everyone. That’s not how it works now

The BRICS countries are demographically uneven and each country faces its own number of threats. For example, gerontologists have claimed that in several decades’ time, the one–child policy will undermine China’s economic power and the question of leadership will no longer relevant for the country.

There are many problems besides that. For example, it’s recently been discovered that children of surrogate parents have a lessened ability to procreate and that their immune systems are weaker. There are questions regarding cloning and genetic modification of internal organs and organ transplantation. I think that we’re still in a century of technological revolutions, a century in which biology and genetics can cause a great deal of change. This will impact everyone, and BRICS is not an exception. Russia has its own challenges: we’re an aging nation that is not regenerating itself; the birth–rate is not sufficient for population growth. Brazil is a very young country that has not yet become a nation. China, India and South Africa also have their own challenges. I believe that no one will be able to find answers to them in order to prevent crises, including China.

At the same time, external circumstances have also radically changed. If you look at the history of Europe, it becomes clear that for the first time ever we have been living for over fifty years without suffering through wars or plagues, in other words, the population is no longer falling due to conflicts, natural disasters or epidemics.

I always say that mankind only has three paths for making serious changes – revolution, reform and inquisition. Other methods simply don’t exist

At The Russia Forum 2012 that was held by Sberbank and Troika Dialog at the start of the year, the opinion was stated that the younger generation in countries with fast–growing economies often has high expectations. In other words, the main resource for change is dissatisfied by the speed at which change is coming about.

It means that these young people will be disappointed. They will either emigrate or remain and try to change the system. I always say that, unfortunately, mankind only has three paths for making serious changes — revolution, reform and inquisition. Other methods simply don’t exist. Revolution completely demolishes old systems. Reform focuses on one segment of society. The Protestants or Peter the Great serve as examples. Everyone who wears a beard is wrong, and those who don’t are right. Some will live well and others will live a poor life. And then there’s inquisition, like what happened under Stalin — unpaid forced labour and “we need a breakthrough!” The inquisition model also played a role in Europe. Of course, there’s also the evolutionary path of development, but it’s rather slow and laden with compromises. At some point, all countries risk switching from an evolutionary approach to more radical models. Reform may be positive, but human sacrifice can turn out to be enormous — during the rule of Peter the Great, more people perished than in many other periods. Revolution is even worse.

All the BRICS countries are without a doubt moving along an evolutionary path. What’s really unique is that Russia and South Africa managed to change their political systems without going through revolutions. Russia followed a reform path, like South Africa’s rejection of Apartheid. China is attempting to reform its Communist Party by means of evolution. Brazil is gradually transforming from a country of social inequality to a country with a more stable and predictable economy and longer–term planning. This is where the threat is — at some point it’s possible that there won’t be enough energy to grow further and make mild changes. I’ll say it again, evolution is a compromise. Many may be dissatisfied with evolution, but at the same time it is without fatal scenarios.

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