Raining on the BRICS Parade
As the 2023 summit ends, BRICS still hasn't shown much potential.
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Last week, representatives from the nations of Brazil, Russia, India, China, and South Africa met for their long-awaited BRICS summit. BRICS, an acronym of the member countries, has been turning heads recently, with some commentators even positing it could become a global organization that rivals the Western-backed institutions of the International Monetary Fund, the World Bank, and perhaps even NATO.
But while it would benefit many developing nations to have an alternative to the forced austerity and economic subjugation of the Bretton Woods System, an inspection of BRICS shows that it is far from providing this much-needed relief.
What is BRICS?
Oddly enough, the idea for BRICS didn’t come from any of its member states. The term BRIC was coined in 2001 by a Goldman Sachs analyst who predicted Brazil, Russia, India, and China as the fastest-growing nations that capitalists should invest in. The term stuck, and what was once a proposed Goldman Sachs investment strategy became a real intergovernmental organization. In 2009 the four countries started meeting to discuss trade, foreign relations, and other diplomatic issues. In 2010 South Africa joined, adding the “S” that made “BRIC” plural.
While they’ve struggled to materialize their stated goals (more on that below), the original five nation-states are inherently influential. Together, they encompass over 25% of the world’s land mass, over 40% of its population, and about 32.5% of global GDP, all figures that are soon to rise. At the summit, it was announced that Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates will join BRICS on January 1st, 2024.
So, What Does BRICS Do?
While the group has many stated goals, the one that many observers are most excited about is creating global economic institutions outside the Bretton Woods System. Named after the hotel in which the 1944 conference took place, the Bretton Woods System is a configuration of global money management that centers other currencies on the U.S. dollar. This gives the United States and its Western, capitalist allies immense financial control over emerging markets. For example, in order for a developing nation to receive a loan from the Intentional Monetary Fund (IMF), it must agree to austerity measures that cut social spending and tighten other public goods. So while IMF-loaned cash is injected into the top of a developing economy, it can be difficult for it to make its way down to the nation’s middle and lower classes. According to a paper from Boston University, IMF-required austerity is significantly associated with rising inequality; the tighter the austerity the more severe the poverty.
Needless to say, many are excited about BRICS’s alternative to the IMF, The New Development Bank (NDB), which offers loans for developing nations to complete specific projects absent the IMF’s austerity demands. At least, that’s the theory. When the NDB announced its inaugural chief in 2015, he went out of his way to stress he did not see the NDB as a “rival” to the IMF.
Additionally, the NDB has done very little since its launch eight years ago. According to the NDB website, it has financed just 96 global projects with $32.8 billion. That comes out to just $4.1 billion every year. For comparison, the Asian Development Bank lends approximately $9 billion a year. It’s fair to grade the NDB on a curve, given it’s existed for much less time. But even still, just $4.1 billion allocated annually is unimpressive and doesn’t give hope it will rival the IMF, which currently has about a trillion dollars in reserve.
The other proposed policy BRICS is celebrated for is the creation of its own currency, which could be used to replace the US dollar. This would further help both BRICS members and the nations the NDB finances, as they would be free from the effects of American monetary policy. A BRICS currency was floated most recently at the summit by Brazilian President Lula, but he appears to be the only member behind the move. Before the summit, India had declared “there is no idea of a BRICS currency,” South Africa said such a discussion was not on the agenda, and Russia and China offered hollow platitudes about “reforming the international financial system” without going into detail.
While the NDB is a living, breathing institution, the prospective alternative currency highlights the problems inherent to BRICS, which will only be exacerbated by its incoming members.
More Members More Problems
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