|Follow us on:|
BRICS are embracing the change, argues senior journalist Peter Lavelle in his SWOT analysis
It is a truism today to say the BRICS countries (Brazil, Russia, India, China, and South Africa) are important. However, this is rarely explained why this is the case other than, these five countries are key drivers of global economic growth in a time when most advanced western economies are grappling with austerity. Indeed this is obvious, but the BRICS mean so much more. What follows is a SWOT analysis explaining their real importance and quite possibly reasons to expect the BRICS to be around for a while to come, as well as to stand out as countries to be emulated in the emerging market world.
The greatest strength the BRICS have is their – though relative in these tough times – growth stories. The IMF has recently released a new global growth forecast – cutting growth from 3.3 per cent in 2012 and 3.6 per cent in 2013, down from 3.5 per cent this year and 3.9 per cent next year. No one can blame the BRICS for this new forecast. In fact, the IMF squarely put blame on the U.S. and Europe for not getting their fiscal, monetary, budget “cliffs” in order. To be fair, China’s growth trajectory is slowing, but that is partly due to lower demand for its exports by the more advanced economies.
Another strength is the continued internal purchasing demand within each of the BRICS economies. Importantly, another strength is the natural tendency to trade their goods in national currencies. The BRICS, you see, have a natural desire to start avoiding the greenback. The American debt crisis and the continued use of quantitative easing by the Federal Reserve weaken the dollar’s prospects. Some of the collective declarations BRICS have made have been an interesting turn of events, most notably, while doling out $75 billion to the IMF for the Eurozone bailout fund, also when they spoke out against protectionism in the December 2011 WTO ministerial meet, issuing a joint declaration to the effect.
At face value, the greatest weakness of the BRICS is the fact that they are treated as junior partners by the major emerged economies. The “IMF-Washington consensus” has long been designed to protect and advance the economies of the Euro-Atlantic-Japan sphere of economic influence. Changing this hard (and one could argue ultimately unfair) reality has been slow coming.
However, the Great Recession of 2008 to the present has changed this calculus. The BRICS have scarce overlapping and collective foreign policy agendas, and as a result unable to create a united front to demand reordering of the global political system overnight, or anytime soon. Though, they can and are separately demanding the rich western world (under siege due to their own policy mistakes) to take pause and truly listen to the complaints of the emerging market world. The most recent WTO trade round comes to mind as well as Russia and China’s growing complaints regarding Washington deteriorating debt problems.
For those secretly hoping the BRICS will present themselves as an alternative to western-centric political order any time soon would be ill advised to bet the farm on this scenario. The greatest threat to the BRICS is western mismanagement of their economies – what they can do collectively, at the moment, is increased bilateral trade among themselves using their national currencies.
The Eurozone crisis and Washington’s propensity to export inflation via quantitative easing threatens not only the BRICS, but also the rest of the global economy. Also and ironically, another threat is the obvious political desire of individual BRICS countries to act out alone, separately when victims of selfish policy-making coming out Washington and Brussels. We witnessed this not long ago with Brazil’s fury against Ben Bernanke quantitative easing. Loud words came out of Brasilia, but almost zero international (read: BRICS) collective response.
The most important opportunity the BRICS have before them is the growing ability to act alone and collectively. This may seem paradoxical, but it isn’t. Opportunities abound! First, continue real and meaningful reforms at home. All the BRICS have ample room to (re)structure their economies to be more competitive globally and grow their middle classes (and combat poverty).
They all have a toolbox of fiscal and monetary options unlike their emerged western peers. All have learned the lesson of not “financialising” their economies – Wall Street and High Street are acts not to follow. In these emerging and vitally important states, the real economy counts and real people count even more.
The fact the BRICS exist says something important and very telling. The current global economic and financial order is undergoing irreversible change because it is exhausted and out of new ideas. The BRICS are not forcing this change; they are embracing it and adapting to this change accordingly.
The BRICS will rarely act together toward particular foreign policy goals, but count on them to all collectively demand the global economy truly serve the interests of consumers in the global marketplace. Each member of the BRICS have specific and diverse characteristics, but their interest toward a more equitable global economic order is all but universal among them.