By: Parsa Avaz-Barandish
May 2024
In November of 2001, Jim O’Neill, a Goldman Sachs economist, wrote a report titled, “Building Better Global Economic BRICs” At that time, Brazil, Russia, India, and China experienced significant economic growth and they were referred to as “large emerging markets.” The first line of the report states, “In 2001 and 2002, real GDP growth in large emerging market economies will exceed that of the G7.” The G7 is a group of 7 highly developed Western nations: Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. It is a bastion for support of liberalization, globalization, and free-enterprise. These nations are widely regarded as being the major players in the global economy and global politics. The first line alone demonstrates the West’s growing concern over the impact of these perhaps revisionist nations on the global economy–nations that aim at revising the Western-led international system. It describes BRIC in contrast to G7, by saying the former will “exceed” the G7’s growth. This bears the question, how powerful are these nations now, what are their economic policies, and how are they changing the world order?
O’Neill’s grouping of these nations as a strong growing economic power proved to materialize not long after. In 2009, a coalition of the four countries, Brazil, Russia, India, and China joined together to establish an economic organization. The leaders of each of the respective countries, President Lula da Silva, President Dmitry Medvedev, Prime Minister Manmohan Singh, and President Hu Jintao, met in Yekaterinburg, Russia and called themselves —, exactly as O’Neill coined —, BRIC.
At that time, they called for “greater voice and representation in international financial institutions,” which were highly Western dominated at the time. Two years later, in 2011, they would be joined by South Africa, resulting in the organization becoming BRICS.
Originally, the organization was nor perceived as an actual bloc. Even up until that year, many examination boards did not consider the body as a legitimate organization, rather a loose group of countries with similar economic characteristics. However, this quickly changed.
In 2011, an article in the Christian Science Monitor titled “Amid BRICS’ rise and ‘Arab Spring’, a new global order forms” illustrated the growing uncertainty, resulting from the rise of BRICS. It compared the development of BRICS to the fall of the Soviet Union and the development of a new world order in each situation. It argued that American dominance had faded and there was “fading authority and consensus on the world stage.”
These worries may appear to be a slight exaggeration, but the fact is that fears of BRICS domination have not yet strayed. Rather, they have only grown. In total, BRICS nations now encompass almost 30% of the land on Earth and contain over 45% of the global population. They have a combined GDP that accounts for 27% of the gross world product (GWP) of approximately $104 trillion. BRICS has significantly grown and is on a path to create a new world order.
Since 1945, the US dollar has been the standard world reserve currency, used in nearly 88% of all transactions in international trade. Up until very recently, the global sale and purchasing of oil was exclusively done in dollars. This meant every country had to maintain a large supply of dollars to be able to purchase this critical resource. While the US holds total power to print dollars, having to afford only the cost of the paper it is printed on, all other nations would have to give up the exact amount of their own currency for an equivalent amount in dollars. This system has placed all other nations in a disadvantage and created what some have referred to as a monopoly, allowing for the weaponization of the dollar. The implications of this is what has caused enormous opposition. Because the US has the power to control interest rates and other nations have to adjust their rates accordingly to meet these exchange rates, many developing nations have been put into vulnerable positions and seek an alternative.
Furthermore, the West also controls the Society for Worldwide Interbank Financial Telecommunications (SWIFT), a global financial system for international transactions. Western control of SWIFT means it has the power to remove nations and banks from the system, as it did to numerous Russian banks following Russia’s invasion of Ukraine in 2022. This puts a major halt on these nations’ economies as they are not able to interact as well with the global economy.
Many nations also store their foreign reserves in US or European banks. When Russia invaded Ukraine, Western nations had the power to freeze all of Russia’s foreign assets, estimated to be nearly $300 billion. Clearly, the West, specifically the US, has an enormous amount of power in the global economy and on international trade.
BRICS has aimed at countering this Western-dominated economic world order.
In 2014, BRICS developed its own bank called the New Development Bank (NDB) to fund developmental projects in member nations, rather than relying on the International Monetary Fund (IMF) or the World Bank. IMF and World Banks are Western-controlled bodies that provide money for nations with conditionals — in this case known as the Washington Consensus, a set of prescriptions that require certain political and economic conditions for a nation to receive funding. These include requiring a greater free-market system and general liberalization of the economy.
However, these conditionals are not necessarily in favor of countries with state controlled economies, such as Russia and China. Conditionals are often perceived to be a way to spread US and Western interests, especially in Africa.
A unique aspect of the New Development Bank is that it doesn’t have conditionals, meaning BRICS nations can get funding without restrictions. Since Russia’s invasion of Ukraine, however, the bank has stopped funding projects in Russia due to the threat of widespread Western sanctions on NDB members.
Furthermore, similar to the European-run SWIFT system, BRICS developed its own international banking system, named BRICS PAY, so member nations do not face the threat of being cut off from international trade.
In a process of de-dollarization, the BRICS nations have also discussed plans for the development of a new currency for international trade. The chairman of Russia’s Duma said that BRICS is in the process of developing a new currency backed by gold and other tangible assets. Some have questioned the feasibility of creating a new currency to use over multiple continents that can compete with the dollar. While the Euro in the late-1990s European Union (EU) was more feasible because of the political and geographic conditions of Europe, it may not be as simple for BRICS.
On the other hand, BRICS nations account for nearly half of the global population, meaning that automatically, a large part of the world would be using this new currency for trade. Many predict that even if the currency is created, it would not completely overtake the international banking system. Many scholars note that BRICS financial systems will act more so as an “alternative.” Western led systems for the global economy will not cease to exist, rather there will be an alternative to it.
January 1, 2024 marked a new era for BRICS.
Egypt, Ethiopia, Iran, and the United Arab Emirates joined the bloc. This first large-scale expansion of the organization encapsulates the growth of support for what can be called a movement against the current world order. In addition to this, Bangladesh, Bolivia, Kazakhstan, Senegal, Venezuela, Nigeria, and Vietnam among many other countries have applied for membership as of 2023.
This wave of support for BRICS from developing nations demonstrates their feeling of neglect from the West. They seek some alternatives, which BRICS claims it can provide (granted, China has proven to display highly hegemonic and exploitative behavior in Africa). Regardless, a growing support from the global South and East demonstrates that BRICS is more than just an economic organization, but also an ideological and political organization to “diversify” the status quo.
With the rise of BRICS and its attempts at separation from the international system, it bears the question, will these nations dominate a new global order?
They have already proven to be ambitious in their goal of creating a whole new system for their economies and obviously their politics and ideologies differ acutely from those of the West. According to the IMF, BRICS has surpassed the G7’s share of GWP based on Purchasing Power Parity (PPP), however it falls behind in nominal GWP. With that being said, Goldman Sachs presumes that BRICS nations will surpass G7’s share of GWP in nominal terms by 2050. In terms of standard of living, however, the GDP per capita of G7 nations is much higher than that of BRICS nations.
Overall, it’s unlikely BRICS will be dominating the structure of the global economy in the very near future. In fact, India and China–the biggest economies of the BRICS nations–trade most with the US. Many BRICS members have EU nations or the US on the top of their list of trade partners, meaning that economically, these nations very much rely on G7 both to sell goods and services, as well as to receive them. This heavy reliance on the West indicates the likelihood of a more multipolar world rather than a complete domination of BRICS.
Since the fall of the Soviet Union, a unipolar world with the economic and political hegemony of the United States has germinated. Whereas during the existence of the USSR, the Soviet Union and the US acted as counterweights to each other to a certain degree, now the US has developed a disproportionate amount of power. And a prime example of this unchecked power is the 2003 US invasion of Iraq. Even the UN — an organization representing global interests — could not stop what was declared as an illegal invasion by the general-secretary.
However, in the last decade or so, this has changed.
It was never a matter of if, it was always a matter of when. In 1993, Samuel P. Huntington wrote an article in Foreign Affairs titled “The Clash of Civilizations?” In it he argued that post-Cold War conflicts would be sourced from religious and cultural divisions, primarily between the West and East. While his paper is contested for taking on a somewhat simplistic view of a nuanced international system and providing harmful justifications for Western actions, it has proven to be true to a certain degree. BRICS itself demonstrates the development of a multipolar world and the rise of the global East and South.
By no means does this mean that the end of US power is imminent; the US will continue to be an important player in world politics and the global economy. But BRICS’s attempt at diversifying the global stage just demonstrates that there is some alternative to the Western-led world order and at least some demand for it.
Many scholars have referred to BRICS as a “counterweight,” as a way of evening out Western domination, not necessarily suppressing. BRICS embodies a large part of the dissent and opposition to the Western-led global order. It demonstrates both a potential healthy transition into multipolarism in global politics, but also the rise of nationalism and fanaticism as displayed in many of the governments of BRICS’s member nations. The US must make careful policy decisions in order to ensure that the inevitable rise of these nations is both not suppressed — as to create further opposition and conflict — but also checked, controlled, and balanced.