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BRICS: The Whole Is Much Less Than The Sum of the Parts

As expected, there was much more barking than biting at the BRICS summit in New Delhi this week. A BRICS-backed bank was among the new institutions the five BRICS countries (Brazil, Russia, India, China, South Africa) said they hoped to create, but different interests and priorities among countries with few things in common blocked any significant progress.

But the barking was at times eloquent and, in Via Meadia‘s view, not always unjustified. Notably, Dilma Rousseff, Brazil’s president, raged against the “monetary tsunami” unleashed by developed countries’ monetary polices in the wake of the financial crisis, and asserted, correctly, that these steps are partly responsible for the erosion of emerging economies’ competitiveness:

“This (economic) crisis started in the developed world. It will not be overcome simply through measures of austerity, fiscal consolidations and depreciation of the labour force, let alone through quantitative easing policies that have triggered what can only be described as a monetary tsunami, have led to a currency war and have introduced new and perverse forms of protectionism in the world.”

When economic crisis hits, it is still sauve qui peut. The EU isn’t going to accept limits on its actions to save the euro because those actions inconvenience Brazil. Ditto the US, where the Fed isn’t going to do something it thinks could harm the US economy because of fears that the South Africans might not approve.

Even united, the BRICS don’t have the ability to change this — and they aren’t united. But it isn’t just the rich countries who make policy to suit their own economic needs. China and India both pursue economic strategies that impose significant costs on other countries (ask Brazil about competition from China with its low currency and low cost manufacturing base). Few countries are more nationalistic, and more willing to bend the rules for the sake of pleasing powerful local interests than Russia.

It’s understandable that leaders like Brazil’s Dilma and South Africa’s Zuma, struggling to keep their base happy in the midst of global economic turmoil, are both frustrated by the policy choices they face and resent the injustice that poor countries pay for the steps that rich countries take. On the other hand, it’s worth remembering that the liberal international that now exists, whatever its flaws, has given poor countries unprecedented opportunities to attract foreign investment and grow rich through trade.

With patience, determination, shrewdness and skill, the BRICS have a chance to reach rich world levels of prosperity much faster than anyone dreamed was possible a generation ago.  As the old, anti-liberal left declines in these countries (along with the old anti-liberal right), their policies get smarter and their outlook improves. Russia, the country with the most questionable economic future among the group, is the one where liberals have the least influence on policy and where both the nationalist right and the neo-communist left are pathologically suspicious of free markets — and resist both democracy and the impartial rule of law.

From the American point of view, the rise of rich, happy BRICS is a consummation devoutly to be wished. The Delhi summit may not have gotten much done, but that is less because the BRICS don’t matter than because each of these countries is carving out its own unique future in its own unique way.

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  • Jacksonian Libertarian

    “On the other hand, it’s worth remembering that the liberal international that now exists, whatever its flaws, has given poor countries unprecedented opportunities to attract foreign investment and grow rich through trade.”

    How true, to complain about a currency tsunami when you have been manipulating your currency to obtain a price advantage for your exporting businesses is just sour grapes. I continue to believe we should pay off all foreign held US Treasuries ($4.5 Trillion) to provide liquidity to the American Global Trading System and to rebalance the very unbalanced system. I’m sure they would complain about being paid back, because it would mean an end to their currency cheating, and the highly competitive American businesses would enjoy a price advantage for the first time in 4 decades.

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