The BRICS: Symbolic Power or Ineffective Bloc?

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The BRICS intellectual father said they “never got anything” and that the idea of ​​a common bloc currency is “ridiculous”

Jim O’Neill, the economist who created the acronym “BRIC” to refer to the emerging economies of Brazil, Russia, India and China, said that the bloc, which was established as such in 2009 and in 2010 added South Africa to become ” BRICS”, achieved nothing but symbolic power.

“Since they started meeting, they have never achieved anything,” O’Neill told the British newspaper Financial Times, also noting that the idea of ​​a common bloc currency is “ridiculous.”

As head of Goldman Sachs’ asset management division, O’Neill coined the acronym BRIC in 2001, grouping 4 large emerging economies that already governed nearly half of the world’s population.

“The group would be more effective if its key members were more serious about common goals; China and India rarely agree on anything and, given the current bilateral relationship, neither wants the other to gain more influence in global institutions” (Jim O’´Neill)

Now, as an adviser to Chatham House, a sort of London think tank on international politics and economics, he says that his purpose was not to encourage those countries to form a bloc, but rather to have a greater interference in global affairs. The most appropriate forum for that purpose, he pointed out, is the G20, formed in 1998 from the enlargement of the G7, to give a more effective response to the financial crisis in Southeast Asia.

“What the world really needs is to resurrect the G20, which already includes all the key players, and add a few more. It continues to be the best forum to address global issues such as economic growth, international trade, climate change, pandemic prevention, and the like. Although he faces great challenges, he can still recapture the spirit of 2008-10, when he coordinated the international response to the global financial crisis. At some point, the US and China will have to overcome their differences and allow the G20 to regain its centrality,” O’Neill wrote on the influential Project Syndicate website.

As for the BRICS, O’Neill wrote, the group would be more effective if its key members were more serious about common goals. Instead, he noted, “China and India rarely agree on anything and, given the current bilateral relationship, neither wants the other to gain more influence in global institutions, unless they are equally balanced.”

O’Neill highlighted the differences in objectives and the tension between China and India, the two largest partners of the BRICS. In the photo, Narendra Modi and, further back, Xi Jinping AP Photo/Manish Swarup, File

O’Neill also questioned the list of 6 countries that the BRICS “invited” to join the bloc as of 2024. “The decision does not seem to have been adopted with any clear objective, much less with economic criteria. Why, by the way, was Indonesia not invited? Why Argentina and not Mexico, or why Ethiopia but not Nigeria?” he wondered.

According to O’Neill, with its increased membership, the “symbolic power” of the BRICS will grow. The group, he considered, rarely managed to present itself as the voice of the developing world, although it was successful in reminding everyone that the current structure of international institutions does not reflect the global economic changes of the last 30 years.

It is true, wrote the name giver to the BRICS, that by GDP size measured by purchasing power the group is “slightly larger” than the G7, but since their currencies are undervalued, “at nominal dollars” their combined GDP is “significantly smaller” than the G7.

It is also true, he continued, that China is already the second largest economy in the world, that its economy is 3 times larger than those of Germany and Japan and close to 75% of that of the US, and that India grew strongly and by 2030 it could be the third largest economy in the world. But it is also true, he counterbalanced, that the incidence of the GDP of Russia and Brazil is today more or less the same as it was in 2001, and that South Africa is not the largest economy in Africa, since it was surpassed by Nigeria.

Jim O’Neill, the Goldman Sachs global analyst who in 2001 coined the acronym BRIC, to refer to Brazil, Russia, India and China

According to O’Neill, just as the US has a disproportionate weight in the G7, China has it in the BRICS, to the point that it doubles the GDP of the other 4 current partners, added together. That is why he points out that the G20 would be a better forum to deal with global challenges.

Finally, although the analyst acknowledges that the dominance of the dollar as a global currency is a problem and makes many countries dance to the rhythm of the measures of the US Federal Reserve, this problem could be alleviated if the euro area accepted that its financial instruments were large and liquid enough and – similarly – if the BRICS members, especially China and India, undertake financial reforms to allow their currencies to be used more widely.

Instead, he concluded, if they continue to complain about the dollar and speculate about an “abstract” common currency, the BRICS are unlikely to achieve anything.

2023-08-28 08:30:02
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