BRICS nations make the case for globalization
The host of Thursday’s virtual BRICS summit, Chinese President Xi Jinping, wants the bloc to move beyond its differences on the Russian invasion of Ukraine and focus on a clear forward agenda, including expanding the group. This is why Beijing last month invited nine other countries to attend its meetings: Saudi Arabia, Argentina, Kazakhstan, Egypt, the UAE, Indonesia, Nigeria, Senegal and Thailand.
Today, the BRICS countries account for more than 40 percent of the world’s population and about a quarter of global gross domestic product. China discussed measures at the summit that could help BRICS become an even bigger player in trade and investment. Xi wants the five powers to help spearhead a campaign for economic globalization in the face of signs that the process may be going into reverse as the pandemic recedes.
China’s advocacy of this agenda reflects, in large part, the fact that it has been a big beneficiary of globalization, with International Monetary Fund data showing that its economy is now larger than the US’ on a purchasing power parity basis. However, another key reason Beijing is pushing this is its commitment to inclusive growth.
China wants to help usher in a new era of more sustainable and fairer global development. Through reform of the multilateral system, including the UN, and by refocusing the attention and resources of the global community on the sustainable development agenda, Beijing believes BRICS can support a sustained, equitable recovery from the pandemic.
This topic of inclusive growth is especially pertinent given that the world is facing what could be a pivotal moment. Remarkable World Bank research indicates that, for the first time in some two centuries, overall global income inequality — one of the measures of economic inequality — appears to be declining.
The BRICS nations have been the key drivers of this historic movement toward greater overall global income equality. The collective economic growth and very large populations of India and China, in particular, have lifted a massive amount of people out of poverty.
At the same time, however, there is an opposing force: growing income inequality, which has become increasingly politically salient. In the US, for example, concerns over stagnant living standards have led to significant support for populists such as Donald Trump.
These two opposing forces are, like tectonic plates, pushing against each other. While the net global trend for the past 200 years has been toward greater overall income inequality, there is now significant and growing evidence that, since the turn of the millennium, the “positive” effect of growing income equality between countries, spurred by the development of the Global South, is superseding the “negative” effect of increasing inequality within nations.
While more proof is needed to judge whether this economic phenomenon is robust and sustainable, what is certain is that the overall lot of the south has improved dramatically, as exemplified by the BRICS group over the last generation. The most prominent beneficiaries have been a much-heralded “new” middle class — estimated to be as large as a third of the world’s population — that is disproportionately located in key Asian emerging economies such as China, India and the likes of Indonesia.
With the current economic challenges China and some other key emerging markets, including Brazil and South Africa, are now experiencing, it is unclear whether the development of the Global South has enough momentum to keep driving toward a more equitable world order.
China wants to help usher in a new era of more sustainable and fairer global development.
The trajectory of the global economy will very likely continue to shift toward the south and, for the foreseeable future, some key emerging markets may well remain in robust shape. However, the remarkable wave of emerging-market growth of the last generation appears to be decelerating and the global transformation it has produced in recent years may not be repeated.
This underlines that the fragile process of decreasing global income inequality could yet go into reverse if emerging-market growth decelerates faster than anticipated and/or income inequality within countries accelerates. This would undercut efforts to foster inclusive growth — and the political ramifications that come with it may be ugly.
- Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics.