BRICS and the World Order: A Beginner's Guide
46 Pages Posted: 31 May 2014
Date Written: May 30, 2014
The BRIC acronym, which stands for Brazil, Russia, India and China, originated in a Goldman Sachs paper – Building Better Global Economic BRICs – as part of an economic modelling exercise to forecast global economic trends over the next half-century. The main finding was that the BRIC countries collectively would play an increasingly important role in the global economy. Another paper by Goldman Sachs in 2003 – Dreaming with BRICs: The Path to 2050 – concretised the earlier findings. It predicted that over the next 50 years, the BRIC economies could become a major force in the world economy, and that by 2050 the only industrialised/developed economies among the six-largest global economies would be the US and Japan in US dollar terms.
The emerging dynamics over the last decade tend to support the predictions. Starting with a share of a little over 10% in world gross domestic product (GDP) and less than 4% in world trade in 1990, BRICS (with the recent inclusion of South Africa to the forum) now constitutes about 25% of world GDP and 15% of world trade. The increase in GDP implies that the economic size of BRICS in terms of its share in world GDP has expanded by 150% in the past two decades. In addition, all the BRICS countries are now members of major international and multilateral institutions, such as the World Trade Organisation, the UN, the Group of 20 (G-20) and the UN Framework Convention on Climate Change, and are very active participants therein. There are various other indicators, such as trends in inflows and outflows of foreign direct investment, trade openness, current account balance, forex reserves and economically active labour forces that could make BRICS a formidable force to reckon with in future.
However, this does not imply that all is well for the group, as several issues remain to be addressed at both individual and the group level. Such issues include the relatively low ranking of BRICS countries (with the exception of South Africa with respect to many indicators) in the World Bank’s annual report, Doing Business 2012; inadequate infrastructure; a lack of institutionalisation; the heterogeneous nature of the group and lack of cohesive identity; the fragile nature of trade and investment linkages among the BRICS countries; and differences within the group on values, economics, political structures and geopolitical interests. If not addressed urgently, these could pose serious challenges to the realisation of what was predicted by Goldman Sachs.
The paper shows that there is plenty of scope for the BRICS countries, perhaps along with the regions they represent, to organise themselves into a formidable power bloc if they can overcome some of their differences. Issues that require urgent attention include devising and implementing measures to minimise economic and political differences within the group, leading to a real sense of co-operation and co-ordination; target-driven and time-bound deliverables, accompanied by appropriate measures and mechanisms; deciding on common candidates and fielding and supporting consensual candidates; and bringing in civil societies in institutionalisation mechanisms.
Keywords: BRIC, BRICS, role of BRICS, BRICS contribution to world economy, emerging world economic order, intra-BRICS trade
JEL Classification: F01, F02, F15
Suggested Citation: Suggested Citation