BRICS could be the world”s economic beacon
The BRICS countries – Brazil, Russia, India, China and South Africa – could recover from the Covid-19 pandemic and its induced recession more quickly if India and Brazil work with China instead of fight it. In doing so, the BRICS could pull the world economy on an upward trajectory for a number of reasons.
One, the five countries” economies are highly complementary. For example, Brazil, Russia and to some extent South Africa and India could guarantee the natural resources China needs to sustain its manufacturing prowess. China, for its part, has the capital, know-how and technology to invest in its fellow members” infrastructures and help their industrialization, taking them to the next stages of development.
Two, being major developing nations, the BRICS have considerable room for expanding the size and scope of their economies.
Three, the BRICS” combined GDP is already large, at US$45 trillion in PPP (purchasing power parity) terms and is expected to surpass the Group of Seven’s $44 trillion in 2021.
What’s more, the World Bank and other organizations are predicting that the average BRICS annualized growth rate for 2021 and beyond is estimated at more than 5%, compared with the G7’s less than 4%. So the BRICS have a solid foundation for sustaining long-term economic growth and stability.
It could be argued that it was Indian Prime Minister Narendra Modi’s and Brazilian President Jair Bolsonaro’s playing the anti-China card that was largely responsible for those two countries” pandemic crisis and economic malaise. For example, they refused to accept Chinese vaccines and medical help to control the pandemic’s surge.
Unfortunately, the bad news did not end there, the efforts to rein in the pandemic culminated in contracting the economy of India by 8% and of Brazil by 4% in 2020.
It is too bad that Modi and Bolsonaro placed their own interests over those of their people. In the quest for votes, the two leaders in fact squandered the opportunities to control the pandemic and reverse the economic downturns. Along with their fellow BRICS members, Brazil and India do have what it takes not only to recover from the pandemic, but to be the world’s economic lighthouse.
Brazil, Russia and South Africa (to a lesser extent) are richly endowed with oil, gas, iron ore and other natural resources China requires to sustain its manufacturing prowess. As the most populous of the five nations, China and India are also blessed with an abundance of human capital. With the right policies and cooperative relations, the BRICS could realize huge economic, geopolitical and social gains.
Liberalized investment and trade agreements, for example, could expedite and promote efficient flow of goods and financial services among the five countries. Russia and Brazil could provide China and India with as many natural resources and agricultural products as the latter two countries need or want. With a combined market of nearly 3 billion people, China and India could guarantee the prosperities of the food production sectors of Brazil and India.
China has the capital, expertise and technological know-how to help build the other four countries” infrastructures and industrialization. According to the IIGF Green BRI Center, China invested more than $17 billion in 140 countries across the globe in January of 2021 alone, accumulating to a total of more than $4 trillion since 2013.
The Belt and Road investments have jumpstarted the development of many underdeveloped economies in Africa and other regions across the globe. According to the Nigerian government, Chinese investment in railroad construction, mining and industries created industrial vertical integration in the country, creating new industries and employment opportunities, taking the country to a higher and wealthier level of development.
In terms of human capital, India’s large and relatively young population (26.6% between 0 and 14 and 67% in the 15-to-64 age groups) could afford it a demographic dividend. With sufficient investment in education and training, India could acquire a skilled labor pool to attract domestic and foreign investments.
Although China’s population is aging, the demographic issue is being addressed with increasing investment in education, raising the retirement age and allowing couples to have three children.
It was China’s huge investment in education that enabled it to produce millions of university graduates in the STEM (science, technology, engineering and mathematics) fields. This helped China leapfrog technological advancement or innovation, replacing workers with robots, thus addressing the labor shortage.
Raising the retirement age from the present 55 years of age for women and 60 for men to 65 or older could enhance productivity because of their experiences. China could do that because its population is getting healthier and living longer. Added benefits of raising the retirement age would be increased household income and reducing the government’s (and families”) financial burden of looking after retirees.
The recent change in allowing couples to have three children would prevent the economy from falling into the ”middle income trap” of getting old before getting rich. Though many couples may not want more than one baby because of the high cost of raising children and lifestyle preferences, many others do. In this respect, there could be a marginal increase in population size.
Last but not least, BRICS” large population, estimated at about 40% of the world total, generates enormous economies of scale, thus improving competitiveness. Add the billions more people in the other 140 BRI participating countries, the BRICS economies could sustain stable growth even without input from the West and Japan.
According to China’s Ministry of Commerce, accumulated two-way trade between China and the BRI participating countries exceeded $9 trillion in 2020. That number would likely grow because more countries and organizations are showing interest in joining the BRI.
On the military front BRICS is a ”near power” to the US and its allies, with China and India possessing thousands of nuclear weapons and constantly developing and producing more advanced and lethal weapons.
Technologically, the BRICS is not that far behind the G7 because China, Russia and India are technology powers. China might in fact have surpassed the G7 in artificial intelligence, fifth-generation telephony, and quantum computing, just to name a few of its achievements. India produces some of the best and brightest tech minds in the world. And there is no question that Russia is equal to any G7 nation in terms of military and space technologies.
So yes, BRICS has the wherewithal to recover from the pandemic and economic woes and to become a beacon for the global economy.
G7 countries are ”has been” powers
On the other hand, the G7 – the US, the UK, Germany, Japan, France, Canada and Italy – is a ”has been” millionaires” club whose members refuse to believe they are broke. In attempting to recover from the Covid-induced recession, the economies simply printed money or increased the national debt.
However, increasing the money supply and national debt leads to inflation and dampens fiscal and monetary policy effectiveness in the G7 countries.
Printing too much money, too, will dilute the value and importance of the greenback, putting America’s and the global financial systems at risk. This will not only destabilize the US and global financial systems, but also cause currency and trade wars.
Lack of financial or economic muscle is the major reason the G7 annual summits have remained little more than photo ops, its leaders singing the same old song and making empty promises.
Created in 1975 to address the world’s economic woes, the club has held annual summits on how to address issues such as oil crises and promising to help developing nations deal with their economic woes. Guess what: The developing nations are still waiting and global economic issues remain problematic.
The 2021 pledge of establishing an alternative to China’s BRI to build infrastructure in poor or developing nations, too, will likely be all talk. The G7 countries, the US in particular, are struggling if not failing to reverse rising poverty and rebuilding crumbling infrastructure at home for lack of funds. So where are the trillions of dollars that the G7 promised to spend on the ”build back better for the world” (B3W) proposal?
The world can be forgiven for being skeptical about the promises made by the US and its allies. For example, even former secretary of state Mike Pompeo’s modest proposal of creating a $113 million fund to counter the BRI was an empty promise. The same fate happened to later proposals.
Furthermore, the business communities in the G7 are not on the same page as their governments with respect to China. Instead of heeding government directives to reduce dependence on, if not decouple entirely from, China, they actually increased investments there.
Recruiting new members
Lack of financial and economic muscles and determination to contain China might be the reason the G7 invited India, Australia, South Korea and South Africa to the 2021 meeting in the UK, hoping to turn it into a G11.
Adding South Korea to the Quadrilateral Security Dialogue would strengthen its geopolitical position to counter China in the Asia-Pacific region. The G7 probably hopes that plying South Africa away from China would erode the latter’s influence in the African continent.
However, the G7 may have a problem recruiting those four countries into the alliance, particularly when it is intended to counter China.
South Africa is not only a member of BRICS, but also relies heavily on China for investment and trade. South Korea is crossing its fingers that the US will not pressure it into joining the G7 for security as well as economic reasons. The Covid-19 pandemic has laid bare how badly India needs Chinese investment, trade and health-care equipment. Australia has shown signs that it wants to improve trade relations with China.
Furthermore, joining the G7 to counter China would not only risk the invitees” economic interests, but could worsen their security positions.
As the 19th-century British statesman Lord Palmerston observed, countries have no permanent friends or foes, only national interests. Joining the G7 is definitely not in the invitees” national interests.
Against this backdrop, there is no better time for Modi and Bolsonaro to rethink their China policies. Ongoing BRICS meetings present a golden opportunity for the leaders of the club to talk cooperation, instituting trade, investment, health, security and technology agreements to achieve their nations” economic and geopolitical potentials.
Source: Asia Times