Debate: BRIC
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Nothing to bind group together
Joseph S. Nye
Journalists continue to lavish attention on the so-called BRIC countries (Brazil, Russia, India and China), but I remain skeptical of the concept. Goldman Sachs coined the term in 2001 to draw attention to profitable opportunities in what it considered "emerging markets".
The BRIC countries' share of world GDP rose from 16 percent in 2000 to 22 percent in 2008. Collectively they did better than average in the subsequent global recession. Together, they account for 42 percent of world population and one-third of global economic growth in the past 10 years.
Obviously, that is good news for the world economy, but an economic term has taken on a political life of its own, despite the fact that Russia fits poorly in the category. In June 2009, the foreign ministers of the four countries met for the first time in Yekaterinburg, Russia, to transform a catchy acronym into an international political force.
The BRIC nations hold $2.8 trillion or 42 percent of global foreign reserves (though most of that is held by China.) So, in Yekaterinburg, Russian President Dmitri Medvedev declared: "There can be no successful global currency system if the financial instruments that are used are denominated in only one currency."
After China eclipsed the US as Brazil's largest trading partner, Beijing and Brasilia announced plans to settle trade in their national currencies rather than dollars. And although Russia accounts for only 5 percent of China's trade, the two countries announced a similar agreement.
After the recent financial crisis, Goldman Sachs upped the ante and projected that the combined GDP of the BRIC countries might exceed that of the G7 countries by 2027, about 10 years sooner than initially believed. Such simple extrapolations of current economic growth rates often turn out to be mistaken because of unforeseen events. But, whatever the merits of this linear economic projection, the term BRIC still makes little sense for long-term assessments of global power relations.
While a BRIC meeting may be convenient for coordinating some short-term diplomatic tactics, the term lumps together disparate countries that have deep divisions. It makes little sense to include Russia, a former superpower, with three developing economies. Of the four members, Russia has the smallest and most literate population and a much higher per capita income, but, more importantly, many observers believe that Russia is declining while the other three are rising in power resources.
Russia today not only suffers more from the aftermath of the global recession, but also faces severe long-term liabilities: a lack of diversified exports, severe demographic and health problems, and, in Medvedev's own words, an urgent need for "modernization".
When one looks closely at the numbers, the heart of the BRIC acronym is the rise in China's resources. The role of Brazil is a pleasant surprise, though.
Since curbing inflation and introducing market reform in the 1990s, Brazil has shown an impressive rate of economic growth in the range of 5 percent. With a territory nearly three times the size of India's, 90 percent of its 200 million people literate, a $2-trillion GDP equivalent to Russia's and per capita income of $10,000 (three times India's and nearly twice China's), Brazil has impressive power resources. In 2007, the discovery of massive offshore oil reserves promised to make Brazil a significant power in the energy arena as well.
Brazil, like the other BRIC countries, also faces a serious number of problems. It ranks 75th out of 180 countries on Transparency International's corruption perceptions index (compared to 79th for China, 84th for India, and 146th for Russia). The World Economic Forum ranks Brazil 56th among 133 countries in terms of economic competitiveness (compared to 29th for China, 49th for India, and 63rd for Russia). Poverty and inequality remain serious problems. Brazil's Gini coefficient is 0.57 (1.0 is perfect inequality, with one person receiving all income), compared to 0.45 for the US, 0.46 for China, 0.37 for India and 0.42 for Russia.
So, how seriously should analysts take the term BRIC? As an indicator of economic opportunity, they should welcome it, though it would make more sense if Indonesia replaced Russia. In political terms, China, India, and Russia are competitors for power in Asia, and Brazil and India have been hurt by China's undervalued currency. Thus, BRIC is not likely to become a serious political organization of like-minded states.
The author, a former US assistant secretary of defense, is a professor at Harvard University and author of Soft Power: The Means to Success in World Politics.
Project Syndicate
