Whenever the BRICs have a powwow, as they did during their second summit this week in Brasilia, I can’t help thinking about the future of the global economy. After all, the BRICs – that’s Goldman Sachs-speak for the four great emerging economies of Brazil, Russia, India and China – in many ways represent that future. There’s something that smells inherently revolutionary, or at least counter-culture, about these summits. Rather than meeting in a global forum such as the G20, with the developed world included, the fact that these four up-and-comers go out of their way to huddle on their own leaves the impression that they’re plotting what the world will look like when they’re in charge.
Yet in the end, nothing so radical appeared to be taking place. What made this latest BRIC summit interesting was how little they had to say about what they want the new world order to be. Instead, they just want a bigger piece of the existing world order.
In the summit communiqué, which you can read here, you’ll have to get through all the usual diplomatic niceties about forging better relations and a more peaceful world (blah, blah, blah), before finding any real meat. The strongest point concerns the International Monetary Fund and World Bank. Here’s a bit of the statement:
We will strive to achieve an ambitious conclusion to the ongoing and long overdue reforms of the Bretton Woods institutions. The IMF and the World Bank urgently need to address their legitimacy deficits. Reforming these institutions’ governance structures requires first and foremost a substantial shift in voting power in favor of emerging market economies and developing countries to bring their participation in decision making in line with their relative weight in the world economy…We do also agree on the need for an open and merit based selection method, irrespective of nationality, for the heading positions of the IMF and the World Bank…The international community must deliver a result worthy of the expectations we all share for these institutions within the agreed timeframe or run the risk of seeing them fade into obsolescence.
They avoided the sticky issue of the future of the dollar as a reserve currency, but they did say they’d try to do more transactions in their own currencies:
We have asked our Finance Ministers and Central Bank Governors to look into regional monetary arrangements and discuss modalities of cooperation between our countries in this area. In order to facilitate trade and investment, we will study feasibilities of monetary cooperation, including local currency trade settlement arrangement between our countries.
And they only produced generalities on global financial reform:
We believe that the world needs today a reformed and more stable financial architecture that will make the global economy less prone and more resilient to future crises, and that there is a greater need for a more stable, predictable and diversified international monetary system.
What makes all this especially bland is that it’s all either already in motion – such as the restructuring of the IMF and World Bank — or too vague to give us any real idea of what the BRICs envision for the world economy.
But that’s not a surprise. These burgeoning powers rightfully want (and rightfully deserve) the influence over the world economic system to match their growing economic might. Yet at the same time, they’re not really ready to take on that much responsibility in the world economy, either. All are still poor and wrapped up in the problems of their own development. Maybe one day they’ll want their own currencies to rival the U.S. dollar – China almost certainty envisions just that – but they are also aware that they don’t possess the economic clout to make that happen at this point. So even though they’ll demand their seats at the table of power, they’re not about to start changing the plates and cutlery.
Beyond the fact that they all want to flex their global muscles, it’s hard to imagine the BRICs agreeing on much of anything. The G7 always had trouble getting much done, and they have a lot more in common than these four countries. You’ve got the world’s largest democracy (India) sitting down with the world’s largest authoritarian regime (China). China and India are also clearly economic competitors (and they’ve got a border dispute brewing between them as well). Nor are they all on the same page in regard to economic policy. Brazilian officials, just like politicians in Washington, have recently been critical of China’s controversial currency regime. Nor is this a meeting of equals. China is easily the dominant force in the group, both economically and politically, and the BRICs can’t do much without Beijing on board. Perhaps international affairs expert David Rothkopf put it best:
Without China, the BRICs are just the BRI, a bland, soft cheese that is primarily known for the whine that goes with it. China is the muscle of the group and the Chinese know it. They have effective veto power over any BRIC initiatives because without them, who cares really?
Until the BRICs start taking the bold positions on world affairs to match their economic power, no one will care.