Economically and politically the five economies could not be more different when it comes to size, structure, values and national interestsby George Magnus / July 25, 2014 / Leave a comment
Once upon a time, not long ago, the acronym “BRICS” suggested the biggest transformation in the way the world works and its governance structure since the Industrial Revolution. The term stands for “Brazil, Russia, India, China and South Africa,” and it captured the inevitability of economic dominance by large, rapidly growing emerging countries, and the decline of a mature and, more recently, beleaguered Western world.
But this view was always tainted by hyperbole, prediction-by-spreadsheet, and a complete disregard for political economy. While these problems with the BRICS concept have become increasingly apparent over time, Russia’s conduct in the Ukraine and the latest, tragic consequences of its support for separatist rebels have put a large nail in the coffin of the idea.
It all looked so different in 2001, when the BRICs term was coined at Goldman Sachs in the aftermath of the 9/11 attacks on the US. At the time, it was the BRICs (lower case s), with the capital S for South Africa coming later. As a marketing tool for Goldman Sachs (and subsequently others), BRICS was an outstanding success. It became a metaphor for a new world order (or the restoration of a much older pre-18th century structure). The term embraced new business opportunities, the world’s next billion consumers, radical changes in trade and investment flows, and the gradual but inexorable shift in global governance towards China and other emerging market giants. The Great Financial Crisis arrived as ‘proof’ that this was indeed so.
Read more on the BRICS:
World Cup 2014: Brazil’s century?
Investment report: Population and profits
But things haven’t quite worked out according to that script. The 2008-9 financial crisis turned out to be a shock for the emerging world as well. It is now clear that the story of the BRICS and emerging markets relied on economic catching up, facilitated by unprecedentedly fast and favourable globalisation. Today, the key drivers of catching up have become a spent force or are no longer as effective, and big question marks hang over globalisation. Global trade is growing more slowly and is subject to greater restraint, global investment flows are significantly lower, global financial flows are a shadow of what they were before 2008, and the commodity price…