Building Identity?

Following the end of the Shanghai Cooperation Organization Summit (SCO), the leaders of the BRICs – Brazil, Russia, India and China met formally for the first time on June 16th.  This leaders meeting caps a series of ministerial gatherings of either the BRICs or the G5 (Brazil, Russia, India, China, South Africa and Mexico).

In the run up to the Leaders meeting there was much speculation over the Leaders’ possible statements or actions in reducing the reserve currency role of the US dollar.  But as noted by ‘Dr. Doom,’ Nouriel Roubini, Professor of Economics at the Stern School of Business at NYU, in an online piece on, “the inaugural summit focused primarily on forging common positions on financial regulatory reform and climate change, rather than foreign exchange rate management.”  Still the fact that these Leaders met at all is slightly stunning and adds to the overall momentum for large emerging economies collaborative efforts.  But we need to be realistic about such collaborative action.

The large emerging market powers, whether in the G5 or the BRIC gatherings, are making their collective presence known.  However, much of their focus is on the global financial crisis and the Leaders club – the G20.  The G5 and BRIC gatherings have called for coordination and have identified the G20 as the appropriate forum for such collaboration. In the Sapporo Declaration of July 8, 2008 the G5 declared:

Given current global macroeconomic imbalances, it is essential to enhance policy coordination not only among advanced economies but also with emerging market economies, including by reinforcing existing multilateral mechanism for Coordination.  The Financial G-20 is an appropriate forum for this endeavor.

And the BRIC Finance Ministers just prior the G20 Leaders meeting in London expressed their support for the G20:

We consider that the G20’s position as the focal point to coordinate with global economic and financial challenges and to lead international efforts responding to the current crisis should be consolidated.

Finally,  in their joint statement following the historic Leaders meeting, the BRIC leaders declared:

1. We stress the central role played by the G20 Summits in dealing with the financial crisis. They have fostered cooperation, policy coordination and political dialogue regarding international economic and financial matters.

2. We call upon all states and relevant international bodies to act vigorously to implement the decisions adopted at the G20 Summit in London on April 2, 2009. We shall cooperate closely among ourselves and with other partners to ensure further progress of collective action at the next G20 Summit to be held in Pittsburgh in September 2009. We look forward to a successful outcome of the United Nations Conference on the World Financial and Economic Crisis and its Impact on Development to be held in New York on June 24-26, 2009.

Too many commentators have been quick to declare the successful collective leadership either for the BRICs or the G5.  It is evident that these countries are exploring collective action but there is a long way to go before declaring these clubs a permanent presence.  Meanwhile that leadership of the emerging market countries is focused on the G20 and its attention on the global financial crisis.

So, Decoupling is not Dead

Jim O’Neill, Head of Global Economic Research for Goldman Sachs, is not ready to declare decoupling dead – at least with regard to the BRICs.  O’Neill, the ‘inventor’ of the BRICs, recently sought to resuscitate the notion that the BRICs can continue to grow even after their largest export market, the US, succumbs to the Great Recession, because they rely on domestic demand.  The piece is entitled “The New Shopping Superpower:  The BRICs rely increasingly on domestic demand and can boom even if export markets like the US slow,” and was published in NEWSWEEK (March 21, 2009 in the published magazine, March 30, 2009 issue).  Indeed, Jim not only defends decoupling, he has revised his estimate of when he believes the BRICs, collectively, will outgrow, in dollar terms, the G7.  Earlier predictions by Jim argued the BRICs would collectively have a larger economy in 2035.  Now Jim, with an examination of current rates, predicts that the shift could occur as early as 2027.

Though Jim recognizes that, collectively, the BRICs are likely to grow at only 4 percent, predictions for the global economy are a decline of 1.1 percent.  Individual developed states are in much more difficult shape, with Goldman Sachs’s predictions for the US down 3.2 percent, worse for the Euro zone and a dizzying 6.1 percent decline for Japan.

Meanwhile China is predicted to grow at 7 percent this year and over 8 percent in 2010 and India at 6.6 for the same year.  As O’Neill concludes:

“Within the overall picture, there is clear evidence of major rebalancing, as BRIC shoppers account for an increasingly large share of global consumption.  When we track retail shoppers from 2004 to 2008 (using data adjusted for inflation and the relative size of national economies), it becomes clear that European and Japanese shoppers are barely contributing anything to real consumption growth.  American shoppers gradually contributed less up to 2007 before completely zipping up their wallets in 2008.  BRIC shoppers slowly contributed more, and, importantly, their contribution continued to increase into 2008, despite the collapse of the US shopper.”

Jim looks to better growth for China on the basis that China’s retail sales grew by 15 per cent in February.  Consumer prices have declined sharply providing a boost to real income for Chinese consumers.  Jim also notes that the government has announced plans to strengthen medical coverage that he, and I’m sure the government, hopes will help release the savings of the public. And then there is infrastructure spending, etc., etc., ending with the current stock market rally. Notwithstanding the lowering of current growth predictions, Jim remains optimistic over China’s growth prospects.

And he may be right, though the cascading implications of the global financial crisis and its impact on trade, investment and jobs should not be underestimated.  For instance, I note that Brazil’s economy – another of the BRIC economies – is now suffering.  A recent article in the New York Times (“Brazil’s ‘Teflon’ Leader Nicked by Slump,” by Alexei Barrionuevo, dated April 3, 2009) suggests the real economy is now “hurting”. Brazil’s GDP has fallen 3.6 percent in the last quarter of 2008 from the third, and the country lost 654,946 jobs in December 2008, with 101,748 more lost jobs in January.

I would continue to hold all bets on decoupling for the moment.


Well now that the theory of ‘decoupling’ has been assigned to the history bin as a fanciful assessment of the global economy, we need to analyze the impact of the global financial crisis on the Rising BRICSAM.  It appears to be – not good.

Most analysts have commented on the efforts most BRIC countries have undertaken to defend themselves against financial instability.  The BRIC countries have all built large surpluses of foreign reserves.  Examine the figures on foreign exchange reserves below.

  • China      $USD 1.9 trillion (September 2008)         +33% change in year 2007
  • Russia     $USD 485 billion (November 6, 2008)
  • India        $USD 253 billion (October 2008)            +65%
  • Brazil       $USD 205 billion (August 31, 2008)       +106%

These figures, by the way, come from a presentation by Prashant Pathak the managing partner of ReichmannHauer Capital Partners here in Toronto.  This week Prashant gave a marvelous presentation to  our (Jim de Wilde, Jonathan Hausmann and myself) undergraduate commerce course from the Rotman School of Management entitled, ‘Globalization, Global capital markets and the Structure of the International Political Economy’ (more on that in the future).

The point here is that each of the BRIC countries had taken steps to defend their economies.  Bitter lessons of Continue reading

Examining the Big Picture

Recently at CIGI we have launched three initiatives, which examine the Rising BRICSAM and their impact collectively and individually on global governance.

The first is the Princeton Summer Workshop, which in collaboration with our partners at Princeton University (Dean Anne-Marie Slaughter and Professor John Ikenberry)  we held from August 25th through the midday of August 27th. This Conference was an opportunity for authors to present and discuss their first draft efforts. The title of the Conference and the future volume identifies the meeting focus  – ‘Rising States; Rising Institutions.’

There are chapters on the largest of the emerging powers – Brazil, China and India and how these three impact global governance.  There is a chapter examining the development of a number of emerging power organizations; a chapter on Continue reading

A Call to Arms?

Prime Minister Gordon Brown has seemingly risen from the ashes.  His actions to protect the financial institutions in the United Kingdom and his call for global cooperation and a kind of Bretton Woods II have revitalized his leadership image.

On October 17th, in the Washington Post Prime Minister Brown penned an op-ed, “Out of the Ashes” The Financial Crisis is also an Opportunity to Create New Rules for our Global Economy.” In the opinion piece Brown casts a view back Continue reading

Now I’m Sailing Away

I apologize to all those known and unknown eyeballs. Unfortunaley,  not really but I am off with family to the wilds of Xinjiang, Gansu and Shaanxi. And oh yes off to Hami for the total solar eclipse. And oh yeah, the Olympics. Back with you on or about August 16th.

“BRIC by BRIC” Part I

Whether we look at the UNSC-P5 or the industrialized G7/8, or other global governance institutions, the refrain is the same – the organization cannot get the work done given current membership. The organization neither has the economic heft, in some cases, or the diplomatic leadership, in other cases, or both, to make decisions. But constructing the path to new global governance architecture – devising membership reform – is not simple. Indeed the redistribution of power in the international system and accommodating new leadership is the key dilemma in reform. Exploring the development of G7/8 enlargement is the purpose of a paper by Timothy Shaw (his appointments span the world but currently he is at the University of the West Indies and CIGI Senior Fellow) , Agata Antkiewicz (Senior Researcher at CIGI) and Andrew Cooper (Associate Director and CIGI Distinguished Fellow) (Shaw et al.) for the economic diplomacy Project at CIGI. The paper Continue reading

A First Meeting at Yekaterinburg

For me Yekaterinburg evokes Russian history and the events of the Russian Revolution. But it now calls forth a different, and much more contemporary event. On May 16th, the 4 Foreign Ministers of the BRICs (Brazil, Russia, India and Mexico) met together formally for the first time. As we have pointed out in these blog posts, the time would seem to raise critical questions on the evolution and integration of the BRICs and B(R)ICSAM into new or reformed organizations and institutions of global and regional governance. In recent blog posts we’ve begun to report on Distinguished CIGI Fellow, Andy Cooper’s economic diplomacy Project examining the path of interaction and possible enlargement of the G7/8 with the structured dialogue of the Heiligendamm Process (HP). Discussions abound over the possible creation of any of the following: the G9 or 10 or G13 or an earlier enlargement the L20. These are exciting global governance possibilities Continue reading

Including ASEAN

As I have argued in previous blog posts, regional entities are unique organizational and institutional elements of contemporary international relations. How we take them into account remains a question. In my view, they could represent significant new ‘state’ actors in the global and regional governance architecture.

And so we have included ASEAN in CIGI’s expanded BRICs constellation – BRICSAM. Paul Bowles, an economist at the University of Northern British Columbia (yes, there is such an institution – at Prince George and through the north and I am assured by Paul it is quite beautiful) has undertaken an examination of ASEAN in the context of CIGI Andy Cooper’s Economic Diplomacy Project (ably assisted by Agata Antkiewicz – Research Coordinator). This Project focuses Continue reading

Unique 21st Century Regionalism

Regional organizations and institutions are significant aspects of governance and multilateralism in global relations. Certainly, in the recent past much attentioin has been focused on the growth and consequences of regional trade organizations – NAFTA, the EU and the spaghetti bowl of other small and large regional trade agreements and organizations. But there has been, and continues to be, regional political and security organizations as well. The granddaddy of the them all is the North American Treaty Organization (NATO) – that bridges the North American-Europe divide. But there are a host of more than bilateral agreements that dot the regional landscape and create regional Continue reading