But I don’t think the BRICS — meeting today in Xiamen in China for the ninth time as an organization — actually qualify as a trading bloc, and do little to promote globalization beyond their annual get-togethers.
Compared to other international trade alliances - like the European Union, the North American Free Trade Association (Nafta, under fire from President Trump), the Association of South East Asian Nations (Asean) — the BRICS have little commonality of commercial interest. They are just too different — economically, politically and geographically — each from the other to enjoy any of the “synergies” President Xi Jinping of China wished for them at the opening ceremony.
What has the economy of China got in common with that or Russia? One is the manufacturing workshop of the world, the other a gigantic petrol station.
How is Brazil synergetic with India? Both with big agricultural and expanding consumer markets, they appear to be competitive, rather than co-operative, in global markets.
How is South Africa similar to any of the others, except that it too has a problem with government abuse of and interference in the economy? In fact, you could argue that the one thing the five BRICS have in common is government manipulation of the normal process of business.
A bit of historical context is required to understand how the BRICS got where they are today. In 2001, Jim O’Neill, then chief economist of Goldman Sachs, published a research paper for the bank entitled “The world needs better economic BRICS.” Snappy headline, and the idea took off to a greater degree than probably even O’Neill intended.
Riding the wave of globalization, then in its heyday, O’Neill explained that most of the future growth in the global economy would come from four countries — Brazil, Russia, India and China - and that these economic units shared certain characteristics — big populations, fast growing middle classes, emerging consumer demand and cheap labour — that entitled them to be regarded as an investible unit.
And that’s what is was in the beginning: an investment category. The theory — born out for a long time by actual results – was that if a financial institution got involved in the BRICS stock markets or private equity investment it would produce a better return than the dull old economies of Europe or North America.
The BRICS have little commonality of commercial interest. They are just too different – economically, politically and geographically – each from the other to enjoy any of the “synergies” President Xi Jinping of China wished for them at the opening ceremony.
It worked very well indeed until, inevitably, the global financial crisis hit world economic growth for six in 2008, and they found that being investible was no protection against economic and financial reality. In fact, it was a definite weakness, as foreign capital withdrew from many of the BRICS countries.
But that experience seems to have spurred them into action to make the loose BRICS concept a more formal structure. The first formal summit of BRICS leaders took place in Russia in 2009, and it was then that South Africa was asked to join, adding the “S” to the acronym in reality rather than just for plurality.
The admission of South Africa was confirmation that the BRICS has serious political ambitions, for it is difficult to see how it was justified on anything other than political grounds. The existing BRICS needed an African representative if they were to be regarded as a credible global (though non-western) organization.
But South Africa does not satisfy the basic membership credentials: its population and GDP are much smaller than the other four. In many ways, Nigeria would have been a far better African representative, but politics overrode economic logic in this case. Even O’Neill was skeptical about the inclusion of South Africa, and some critics regard it as the basic flaw in the BRICS model.
It’s easy to dismiss criticism of the BRICS as a simple case of the old guard — Europe, North America, the G7 group of economies — protective of their own patch and keen to knock down any upstart rival. But that criticism is hitting home.
Two members of the Chongyang Institute for Financial Studies were recently given the opportunity in the Financial Times’ “Beyond BRICS” forum to argue against the BRICS critics, and their article — “10 myths about BRICS debunked” — puts forward some persuasive arguments for the organization.
“Many people misunderstand and have negative views of the BRICS, assuming they don’t harbour intentional malice towards the group,” they said in the FT.
Well, I don’t harbour any intentional malice. I just question the basis for the BRICS’ existence as an economic and political unit.
One fact, I think, is conclusive. Despite the years they have been a unit, and the annual calls for “synergy”, the BRICS actually do not seem to like each other very much, at least in trading terms. None of the top eight foreign trading partners of China, the biggest member and world’s biggest exporter, are fellow BRICS. Russia creeps in at number nine, but that’s because China’s appetite for oil is insatiable.
If the BRICS want to be taken seriously, they should prove that their “synergies” are real, and start trading with each other.
• Frank Kane is an award-winning business journalist based in Dubai. He can be reached on Twitter @frankkanedubai