The “B” in BRICS: Beautiful or Bombastic?
July 15, 2014, 3:05 pm

The Sixth BRICS Summit in Fortaleza, Brazil marks an interesting shift in the activities and discourse of the five-member bloc, and raises questions about what Brazil, in particular, hopes to gain from its involvement with this group.

In the past, the BRICS demanded attention on the basis of their growing importance to the world economy. In the decade prior to 2012, the share of the BRIC economies (not including South Africa) increased four fold, rising to 20 per cent of world economic output. This share is likely to continue to rise, and each BRIC economy is in the global top 10, in terms of overall size.

Putin at an official breakfast hosted by Brazilian President Dilma Rousseff on 14 July 2014 [PPIO]

Brazil’s President Dilma Rousseff has argued that Brazil could be “an example for the world” because of its reduction of economic inequality and poverty over the last decade.

The creation of a BRICS Development Bank and concomitant Contingent Reserve Arrangement (CRA) to finance infrastructure in emerging economies, on the agenda in Fortaleza, would put resources behind this claim.

The bank would begin with $100 billion in capital. Access to funds would depend on two committees, a board of governors and a technical advisory board. Brazil is slated to lead the implementation of the plan to create the bank, if it is approved in Fortaleza. Progress towards this goal would then be reviewed at the next BRICS summit scheduled to take place in Russia in 2015.

But what should we make of Brazilian declarations about this initiative? For example, on the Brazilian Foreign Ministry’s web page, we are told that the Fortaleza Summit “will showcase BRICS’ accomplishments…” and show that the BRICS are “a positive force for the democratization of international relations and for the enhancement of existing institutions of international governance”. Some would challenge these claims, and dismiss the BRICS Summit as a photo opportunity to enhance President Rousseff’s re-election campaign. (The first round of the presidential election in Brazil is scheduled for 5 October.) They would question the relevance of the BRICS group, which includes very disparate countries that seem unable to unite on important diplomatic questions. They would also point out that Brazil is still more economically unequal than all of its BRICS partners, with the exception of South Africa. It suffers from high levels of criminal violence, frequent disrespect for citizens’ civil rights, and corruption. Widespread protests in 2013 criticized the quality of public services and questioned the legitimacy of representative institutions. In this view, rather than serve as an example to the world, Brazil should be the object of deep economic, political and social reform by its newly activated and disgruntled citizenry.

Brazil’s constructive global role

This is a valid perspective from a domestic point of view. However, the significance of Brazilian discourse in the current global context should not be completely dismissed. This is because in the centres of global capitalism, growth is increasingly exclusive and inegalitarian, while the institutions of global governance remain oligarchic. Despite Brazil’s problems, its implied criticism of the undemocratic nature of global governance, and the inegalitarian trend in contemporary economic policymaking, is both welcome and constructive.

The reaction to the financial crisis of 2008-2009 in the centres of global capitalism has been an unusual combination of loose monetary policy and austerity. The Federal Reserve in the US alone injected around $5 trillion into the global economy in five years. Banks were bailed out without being restructured. Meanwhile, policies of austerity were pursued in both Washington and the European Union. In Europe, for example, the public sector has been slashed, unemployment has risen to high levels, especially in southern Europe, and the sustainability of welfare state commitments has been seriously undermined. Inequality and poverty have increased. This is one reason why Thomas Picketty’s book Capital in the Twenty-First Century has garnered so much attention. It points to the ability of small numbers of people to generate large fortunes in the richest capitalist countries, while the economic system fails to ensure good jobs and rising standards of living for the majority. His diagnosis has hit a nerve, even though his prescriptions might be unviable.

At the same time, the commanding heights of global economic governance, the IMF and World Bank, have not been transformed to fully represent the current weight of the emerging economies. It is therefore not surprising that the BRICS would now like to create their own development bank. Brazilian policymakers support this move because it reflects their desire for a less unipolar world. This new order is marked by both a high degree of transnational integration in the areas of trade, finance, and production, and multipolarity with regard to decision-making. In this regard, Brazilian leaders do not want the proposed development bank to result in confrontation with the established powers. They therefore welcome World Bank President Jim Yong Kim’s recent statement that the new bank, if it is established, would not represent a threat to the operations of the World Bank.

For many years, the metaphor of a restaurant has been used in relation to the BRICS. Do they merely want a seat at the table, or do they want to change the menu? Now we can see a third option: the BRICS can sit at their own table, thereby establishing a degree of autonomy from other powers.

The fact that Brazil’s social, political and economic conditions are far from ideal does not detract from the validity of its Foreign Ministry’s implicit criticism of global economic governance. Emerging powers have often been able to change the international system, simply by taking new positions in international fora, regardless of the specific mix of self-seeking and/or altruistic motivations that have driven their behaviour. The point is not whether Brazil should be a model to be emulated, but whether its emphasis on inclusive growth is the right one in the current global context. Economic policy in the rich world appears to be shortsighted, unsustainable, and unjust. The growth it is generating benefits too few people.

What can be done to find solutions to global problems of poverty, inequality, and poor governance? This is the potential Brazilian contribution to the BRICS Summit in Fortaleza. It should be taken seriously.