Category Archives: The BRICS

Cold Reality – Economic Growth Among the BRICS

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I was caught by the recent FT article chronicling a report from Goldman Sachs that concluded “that the global economy will expand at a faster rate this decade than in any of the previous three.”  What powers this enhanced growth, according to Goldman Sachs and its celebrity economist, Jim O’Neill, are the original BRICs – excluding therefore South Africa.

With the economic growth of the BRICS in mind I decided to look a bit more closely at the economic growth.  My inquiry produced the table below on economic growth.

Economic Growth for the BRICS

Country Current Estimate 2013 Recent – 2012 Previous -2011
China 7.5% (Premier Wen) 7.8% 8.0 -9.2%
India 6.1% to 6.7% (Finance) 5% 6.5%
Brazil 3.26% (Finance) .98% 2.7%
Russia 3.3% (World Bank) 3.4% (Federal Statistics) 4.3%
South Africa 2.6% (Reserve Bank) 2.5% 3.5%

A couple things are apparent.  First of course O’Neill would strongly object to an examination of what I call the “Political BRICS”.  The Political BRICS is the global summit leadership that has met annually now from 2009 – though ministers met before that.  For O’Neill, and publicly stated, he argued that South Africa should not be included in his conception of the BRICS.  All of his original members rank  within the top ten of GDP growth.  South Africa in contrast is ranked only 26th (all this according to the CIA’s World Facts Handbook).

It is also apparent from this cursory examination that China still stands out from the rest for rapid growth – well beyond any of the other BRICS.

And finally it would appear that current estimates of economic growth are decidedly moderated from recent years.  Moreover, if you follow the estimations of economic growth mixed signals appear to be the ‘order of the day’.  India is struggling with inflation; Brazil has generally healthy growth, but not any way the “China growth rates” at least in recent years.  And of course South African growth has been sputtering along and there are estimates that South Africa will lose its place as the largest African economy to Nigeria.

Now I suppose it is all relative.  The article I alluded to was written in part to raise concerns over European growth and in particular Eurozone growth. In that light the projected growth from the BRICS looks solid in comparison to the Eurozone.  But still it does seem to me that the economic growth – with the exception of China – seems rather modest.  And there is a constant mixed bag of reporting that raises the capacity of China to continue to grow at an above 7 percent rate.

Am I wrong?

 

An Apparently Potent ‘Flavor of the Month’

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Well I have been absent – my bad.  But I do have an explanation.  I am currently in South Africa at the invitation of colleagues from the University of Pretoria – Tuks as it was once called – and between preparation for leaving for SA – and indeed arriving here – time ran short.  But I am back now.

This should help to explain my absence.  An hour after arriving I was whisked to Witwatersrand University in Johannesburg and the Jan Smuts House where the South African Institute of International Affairs (SAIIA) is now located.  There experts examined, “Values in Global Economic Governance: Do India, Brazil, and South Africa Share a Common Vision?”

Hardly able to catch my breath, I was requested to join a gathering in the downtown the following day, where a panel was organized to discuss South Africa and its role in the G20.  Entitled, “South Africa and the G20 – Challenges and Opportunities” this panel was put together by SAIIA again and in this event the featured speaker at the panel was the Deputy Governor of the South African Reserve Bank, Daniel Mminele.

A third day and ‘lo and behold’ – a third panel.  Fortunately, this panel was organized by colleagues here at the Department of Political Sciences at Pretoria.  Here again the organizers put together a panel on the G20 and the featured speaker on this occasion – Alan Hirsch the Director General of Policy Coordination and overseas economic policy implementation in the South African Presidency, in other words – South Africa’s Sherpa.  The session entitled “The G20: Looking to the Future” included a number of officials from the diplomatic community including officials from the Russian and Mexican embassies as well as representative from the Open Society Foundation representing civil society.

So quite an opportunity to learn about the G20 and other global summitry institutions and how the informed and informing public here and select officials view current global summitry So what do I glean from all this conference activity?

Well South Africa continues to take its leading role in Africa seriously.  But there are signs of concern.  South Africa is struggling to raise economic growth.  And there are projections that Nigeria will overtake South Africa in the size of its economy.  Statistics from the government in the last few days reveal that unemployment has risen to 25.5 percent.  And who knows what the real number is.  Strikes are seemingly an ever-present phenomenon, especially in the mining sector.  Though wage increases have been accepted, employers have begun a series of public announcements identifying plans to down size to cope with the wage increases.  There are a series of government scandals over government provision of services from the delivery of textbooks to the public schools to the provision and tolling of new roads, and on.  And there are growing doubts over the Zuma presidency.  Where is the drive?  The goals?

In the midst of this, there is excitement – in the global summitry community – over South Africa’s hosting of the BRICS Summit in March.  This enthusiasm appears to have spread beyond officialdom to the media and public intellectuals and even beyond to the broader public.  Why?  It is not clear?  Part of it appears to be that the Zuma presidency seems to view BRICS membership and hosting as a part of the Zuma legacy.  While his predecessor highlighted South Africa’s involvement in the IBSA Summit – India, Brazil and South Africa – Zuma and his officials have turned their sites on the BRICS.  Indeed The SAIIA conference at Jan Smuts House explored the future prospects for South Africa in IBSA – tied together by the commitment to democratic governance – as opposed to the BRICS – tied together by – well no one is quite sure.  For the moment the public has been excited by the proposal to inaugurate a BRICS bank.  There has been much discussion of exactly how to put together such an institution and to what end would such a bank be created for at least in concept as early as the next summit.  South Africa has publicly announced that it would be willing to host the bank in South Africa – especially if the bank’s purpose was to fund infrastructure in Africa.  There is much loose talk that the bank could represent an alternative to the “old” institutions of the World Bank.  But that seems far-fetched and South African officials have been quick to tamp down such talk.

As many have suggested though the fascination here in South Africa with the BRICS appears to be that it represents an alternative club – without the traditional powers.  No UK, France or United States.  And including China.  It appears to resonate with the anti-colonial rhetoric of many in global south.  Interesting – but it is such an odd collection.

And the love affair with China is tempered here in South Africa by China’s actions.  In Pretoria there is much frustration.  China is completing a new and very large embassy here – in fact near the US embassy.  Workers were transported in from abroad and apparently 80 percent of material procurement occurred from China.  Reality beyond the rhetoric.

So there it is – enthusiasm for an alternative – but the hard reality of policy practices that may not secure favor.  Let’s keep looking.

Strange Members

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This narrative is not about odd appendages – although possibly metaphorically – it is.  It is about who is – and who is not – strange members in some of the ‘Informals’ – in this case the BRICS and the G20 Leaders Summit.

Now I am not one to spend my days worrying about representation and membership in global summitry.  Membership in most of these Informals is self identified.  Nobody is running  for ‘Class President’.  Having said that frequently debates have broken out among the experts and the critics over the failure to include one country or another.

There was for years a drumbeat of criticism over the membership of the G7/8 – the so-called ‘Club of the Rich’. There were frequent charges advanced over the lack of legitimacy of these original 7 and demands that the Club expand to include the newly emerging large market counties – and others as well.

When the G20 Leaders Summit was born out of the global financial crisis and brought together for the first time the traditional economic powers with the newly rising economic powers including China, Brazil and India, the legitimacy debate quieted briefly but reemerged over the lack of representation for one region or another. The representation and legitimacy debates really are a discussion without resolution. But experts and commentators can’t leave it alone.

Earlier in the week I was fortunate enough to join friends and colleagues in New York City at the Asia Society for a conference on the “Rising Powers and a New Emerging Order” .  This Conference had been called together by the Chicago Council on Global Affairs and the principal interlocutor on this Project – Richard “Rich” Williamson. Williamson is the senior fellow at the Chicago Council for multilateral institutions.  Rich has had a varied career serving various Republican Presidents in various foreign policy posts and has served also as the Chair of the Illinois Republican Party.    Today he is a senior advisor to the presumptive Republican presidential candidate – Mitt Romney. Rich is deeply interested and involved in evaluating the adequacy of global governance institutions.  This current project is designed to understand the new power dynamics of the international system and to evaluate the adequacy of the current international institutions in the face of major transition and evolution.  Besides assessing the adequacy of the current leadership of the United States, Rich is keen to understand the impact of the rise of the large emerging market countries on international institutions.  To do so Rich and his colleagues from the Chicago Council have brought together some of the “talking heads” in global governance to look closely at the operation of these international institutions.  In the context of the rising powers – of course – the group was soon into examining the BRICS – though there was frequent reference to the potentially unique role of China.  It is not unreasonable in the context of  current global summitry to examine the BRICS – but any close inspection immediately raises questions over whether there is any there – there.  And for the moment I don’t think there is.  I mean the group couldn’t even agree to support a single candidate for the position of president of the World Bank.  While this may represent for some politicians and commentators – the revenge and return of the Group of 77 – it is not.  And as the group was able to tease out, China has a laser-like policy that focuses on its own national interest  – and avoids distractions unrelated to these interests.  The BRICS remain the invention of Jim O’Neill at Goldman Sachs – and not a terribly vital instrument of these key powers.  I hope to comment more on the impact of the rising powers – as seen from this workshop – but let me turn to yet another strange member.

And to do that I am led back to the G20.  I was met yesterday morning with a smiling picture – and a lead story in one of the global financial papers on the seizure by Argentina of Spain’s Repsol’s majority stake in Argentina’s largest oil company – YPF. Argentina has also announced that it will not pay fair market value for the seizure of Repsol’s majority stake.  The quote accompanying a smiling President – you can find it in the “pink paper” is: “I am a head of state and not a hoodlum” evokes for most of us aging North Americans the words of a US President. “I am not a crook.”  But I think the President Christina Fernandez de Kirchner reveals exactly what she is and and what kind of government she leads – a “hoodlum gang”.

Argentina’s bad economic behavior has over the last few years become all too apparent. In the near past the Argentinian government has seized private pension funds. It has been ordered to pay many millions of dollars in damages by international arbitration tribunals and insistently refused to do so – even abandoning the World Bank facility on international investment.

And yes Argentina is a member of the G20.  How can this be?  By now we are all familiar with the story that led to Argentina’s inclusion.  While details differ the fact is that those putting together the membership of the G20 in 1998 – then finance ministers – were partial to the then Argentinian finance minister – and so magically Argentina became a member of the G20.

But seriously folks – how can Argentina continue to be included in the High Table of Global Summitry?  This apex of global leadership is dedicated to maintaining the vitality of the global economy including no trade protectionism, open borders and the global health of the international economy.  It has to be embarrassing to G20 Leaders to be faced with a member country so destructive of the rule of law in the global economy.  It really is time to do something.  But don’t worry – they won’t.

Image Credit:  Wikipedia – Barack Obama and Cristina Fernandez de Kirchner in 2009

Is it a Caucus; Or a Bloc?

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There has been a fair degree of speculation – and comment – going on around the global media and in the blogosphere whether the fourth Summit of the BRICS in New Delhi represents a new global leadership group – read that as an alternative to the the traditional powers – whether G7 or G8 or even the G20 or a setting for collective thinking from these countries?

My colleague Stewart Patrick – at the Internationalist blog  at the Council on Foreign Relations captured what he sees as the common characteristics of this gathering:

But if the members lacked a common history or vision, they had at least two things in common: their status as emerging economic powerhouses and their resentment of a global economy they saw stacked in favor of the West.

By now it is rather common knowledge that the group – BRICS – was born from the fertile mind of Jim O’Neill of Goldman Sachs and was identified initially as an investment focus for clients of the investment bank for the 21st century.

This Indian gathering – the 4th and the first to formally include South Africa – has been watched with some fascination by the media and the global punditry.  Now many commentators have pointed out the rather obvious – that these large emerging market powers have little in common.  In the BRICS there are both democratic states – Brazil, India and South Africa, and two notable authoritarian states – Russia and China.  But so what.  If we are searching for the “like minded – we are now talking about a “concert of powers” where the common characteristics might well be essential.  In fact the capacity to join states together with a variety of characteristics and views may be crucial in contemporary global summitry.  Indeed as is often pointed out the G20 is important precisely because it bridges across traditional states – the G7 – and gathers these states together with the new large emerging market states.  It is not a gathering of the like-minded – but it is a gathering of the key contemporary powers.  It doesn’t make reaching coordinated decisions easy but it brings to the High Table of Global Summitry the major actors in the global economy.

But what then is the point of the BRICS and their annual leaders gathering – and more? For some the point of this exercise is – not much.  As Parag Khanna of the New America Foundation wrote in the FT:

Being in the Brics ultimately may not mean much more than being in the UN Security Council or any other high-status grouping (despite the obvious difference that the UN is  legal body).  One can be in the group, but that doesn’t guarantee that one will be influential or even that the group as a whole will be effective.

The Leaders closed their Summit with the Delhi Declaration.  It is possible to gather a number of clues about the existence and the self-identified mission of the BRICS from examining the most recent declaration. In their own words the Declaration argued that the BRICS:

BRICS is a platform for dialogue and cooperation amongst countries that represent 43% of the world’s population, for the promotion of peace , security and development in a multi-polar, inter-dependent and increasingly complex, globalizing world.  Coming, as we do, from Asia, Europe and Latin America, the transcontinental dimension of our interaction adds to its value and significance.

The comment from the BRICS Leaders on the G20 suggests a rather positive note from these large emerging market Leaders with respect to this new global summit instrument:

In this context, we believe that the primary role of the G20 as premier forum for international economic cooperation at this juncture is to facilitate enhanced macroeconomic policy coordination, to enable global economic recovery and secure financial stability, including through an improved international monetary and financial architecture.  We approach the next G20 Summit in Mexico with commitment to work with the Presidency, all members and the international community to achieve positive results, consistent with national policy frameworks, to ensure strong, sustainable ans balanced growth.

But there are more than a few paragraphs that constitute  – well carping by the BRICS Leaders of the influence and direction promoted by the traditional states.  There is frustration at the “loose” monetary policy of more than a few traditional power central banks.  There is almost exasperation at the slow pace of quota and governance reform at the IMF and the World Bank.  There is annoyance at the effort by the US to appoint yet again the new head of the World Bank rather than opening up the choice to a wider range of applicants including those from the BRICS countries.  In these sections there is more than a hint of oppositional leadership to the influence and leadership of the global economy by the traditional G7 countries.

When one looks to collective outputs one is not particularly “bowled over” by collective actions. There is discussion of intra-bloc trade using local currencies –  which may only impede fully currency convertibility for a number of these states including China – and investigation of  a new development bank facility.  Other than that there is a significant listing of ministerial gathers, finance, trade, science and technology and health ministers, etc. – see in particular the Delhi Action Plan – but it is rather obscure as to what the goals for such meetings are.  While such gatherings might be helpful, one assumes that G20 ministerial meetings might be even more useful for such ministers and the need to hold both might well run these ministers ragged.

The dilemma at first blush is whether the BRICS see themselves as a a “bloc” – potentially an oppositional bloc – that stands apart from the G7 and criticizes their efforts to bring reform – and potentially blocking coordination and reform. Such a creation could well be harmful in an already challenged global governance regime.  On the other hand a caucus where ideas can be vetted but where coordination and decision making occurs at other leadership settings with traditional players, newly energized middle powers and developing countries – well that might prove a useful coalition.

Meanwhile the challenges posed  by global governance continue – BRICS or no BRICS.

 

 

Image Credit: AFP