In These New Times

BRIC: A new bloc of fast-growing developing economies
Daily Star
Saturday Aug 1st 2009

Barrister Harun ur Rashid
BRIC or BRICs is an acronym that refers to the fast-growing developing economies of Brazil, Russia, India, and China. The acronym was first coined and prominently used by Goldman Sachs in 2001. Goldman Sachs argued that, since they are developing rapidly, by 2050 the combined economies of the BRICs could eclipse the combined economies of the current richest countries of the world. The four countries, combined, currently account for more than a quarter of the world’s land area and more than 40% of the world’s population.

Goldman Sachs did not argue that the BRICs would organise themselves into an economic bloc, or a formal trading association, as the European Union has done.

The Economist publishes an annual table of social and economic national statistics in its Pocket World in Figures. Extrapolating the global rankings from their 2008 Edition, the BRIC countries and economies in relation to various categories provide an interesting touchstone in relation to the economic underpinnings of the BRIC thesis. It also illustrates how, despite their divergent economic bases, the economic indicators are remarkably similar in global rankings between the different economies.

There are strong indications that the four BRIC countries have been seeking to form a ‘political club’ or ‘alliance’, and thereby converting their growing economic power into greater geopolitical clout because during the 21st century, success in global economy is judged by internal relations within like-minded groups for gains by collective bargaining.

It became a reality when their first summit took place in Russia in June 2009, after the summit of Shangahai Cooperation Organisation.

On June 16, 2009, the leaders of the BRIC countries held their first summit in Yekaterinburg, in Russia and issued a declaration calling for the establishment of a multi-polar world order. The Foreign Ministers of the BRIC countries had met previously on May 16, 2008 also in Yekaterinburg. President Luiz Inácio Lula da Silva, President Dmitry Medvedev, Prime Minister Dr. Manmohan Singh, and President Hu Jintao, the respective leaders of Brazil, Russia, India and China, attended the summit.

The core focus of the summit was related to improving the current global economic situation and discussing how the four countries can better work together in the future, as well as a more general push to reform financial institutions.

It may be recalled that in last April in London, the G-20 leaders met in a summit. One of the decisions was the revamping of IMF and World Bank to ensure other nations are given greater influence and senior positions of IMF and World Bank will be open to candidates from the developing world.

There was also discussion surrounding how developing nations, such as those members of BRIC, could be better involved in global affairs in the future. In the aftermath of the summit the BRIC nations suggested that there was a need for a new global reserve currency that is ‘diversified, stable and predictable’.

The statement that was released stopped short of making a direct attack on the perceived ‘dominance’ of the US dollar, something which the Russians have been critical of. However, it still led to a fall in the value of the dollar against other major currencies.

One week prior to the summit, Brazil offered $10 billion to the International Monetary Fund. It was the first time that the country had ever made such a loan.

Brazil had previously received loans from the IMF and this announcement was treated as a significant demonstration of how Brazil’s economic position has changed. China also announced plans to invest a total of $50 billion and Russia planned to invest $10 billion.

BRIC countries are future growth engines of the world. These countries are emerging more quickly than most nations from the global economic crisis.

A criticism is that the BRIC projections are based on the assumptions that resources are limitless and endlessly available when needed. In reality, many important resources currently necessary to sustain economic growth, such as oil, natural gas, coal, other fossil fuels, and uranium might soon experience a peak in production before enough renewable energy can be developed and commercialized, which might result in slower economic growth than anticipated, thus throwing off the projections and their dates.

The economic emergence of the BRICs will have unpredictable consequences for the global environment. Indeed, the carrying capacity for the Earth has a finite limit to how much the BRICs can exploit natural resources before harming the global environment which, many environmental experts believe, is now suspended between a tipping point and a point of no return. Only the strenuous efforts of all countries are capable of safe-guarding the Earth.

Though the BRIC countries have their differences, there are scholars who believe that this new bloc can play a vital role in international arena. The importance of this should be perceived because of the fact that the world’s largest growing economies got together on the same platform and discussed their respective concerns.

An awkward truth is that the world is neither dominated by a uni-polar power nor multi-polar powers. Currently we live in a non-polar world and the balance of power is going through an evolution period.

Whatever the fact is the world itself is in transition. The world has changed since 1945, when Big-2 (US and UK) used to decide the fate of the free world. By the end of 20th century, Big -2 became G-7, then-G-8 only to be replaced by G-20 by the 21st century.

The author is former Bangladesh Ambassador to the UN, Geneva.