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BRICs and the Eurodebt Crisis
The BRICs economies have become increasingly important to the global economy,
world trade
and finance in recent years, especially since the global financial and economic
crisis of 2008.
The BRICs economies are also affected by the ongoing European sovereign debt
crisis; it is
hurting their economies cutting their economic growth rates, leading to a de-
acceleration of their
economies and will lead to a rise in unemployment eventually. In the case of
Brazil the
economic growth rate of the Brazilian economy for 2011 it is estimated will be
halved to 3.5%
compared to 2010. This is a major reason why Brazils President Dilma and
former President
Lula have called on Europes political leaders to take unified and decisive action to
resolve the
current Euro debt crisis, and the threat of a Greek default. It can push the global
economy into a
severe crisis, and world recession. Even China with its strong high growth
economy and large
foreign exchange reserves can be badly hurt, as the European Union is Chinaslargest export
market. This is a contributing factor in the BRICs countries offering to help their
European
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economic and trade partners. China has promised to shore up the Euro by buying
up
government debt of countries like Spain, and Italy.
The BRICs countries contain more than half of the worlds population, and an
increasing
proportion of global trade and Gross Domestic Product. They cannot afford to let
the European
economies sink. China is now the worlds second largest economy and expected in
the future to
become the largest global economy, it is the worlds largest manufacturer and
exporter, and it
has the worlds largest foreign currency reserves. It has also the worlds largest
population.
However, there has been recent research to show that China is losing its
competitiveness as the
worlds global manufacturing workshop due to the effects of high inflation, and
declining
labour productivity and the USAs productivity is increasing. It is forecast that
three
manufacturing million jobs lost by America to China could eventually return to the
USA,
Various solutions have been put forward to solve the Euro economic and financial
crisis. One
radical plan is to divide the current Euro zone and to create a wealthy, financially
stable, with
strong economies and stable public finances Northern Euro, and a Southern Euro
zone of the
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southern European economies with weaker economies, large budget deficits, and
economies
based more on tourism and services. This split would mean that the Southern Euro
economiescould have a softer common currency, which would be cheaper, thus exports could
be expanded
more easily and unemployment greatly reduced. However, this simplistic solution
overlooks
that trillions of Euros in contracts for trade, and investment are in Euros, this
would have a
catastrophic effect upon European banks and even northern Euro zone states. To
unscramble
the Euro egg would prove extremely difficult and costly for both strong and weak
Euro zone
economies alike. Former UK Conservative Prime Minister John Major recently
suggested in a
BBC TV interview that Greece might default, and that the Eurozone banks need toprovide
funding for European banks to increase their capitalization so they can absorb
losses from any
Greek default. Shortly French president Sarkozy and the German Chancellor
Angela Merkel
intend to unveil a plan to sort out the Euro debt crisis, which would require
increased
capitalization from the central European Financial Stability Fund, these European
banks are
mainly German and French, which have the heaviest exposure to Greek public
debt. Even
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Britains Euro-sceptic Minister of Finance George Osborne has spoken out in
favour of closer
economic coordination and fiscal union for Eurozone economies to make the
monetary unionwork. Germanys Chancellor Angela Merkel, despite her serious concern over the
huge funding
involved in the bailouts of the indebted weaker Euro economies, she has strongly
defended the
survival of the Euro, and suggested that the end of the Euro would lead to the
collapse of the
European Union and its allied institutions. This and would spell the end of
European regional
economic and political cooperation and integration as we know it.
President Obama recently said publicly that the European Union needs to gets its
act together,
and quickly solve the European debt and economic crisis, which he believes could
undermine 2
the American economy and its recovery, there is the real worry of financial
contagion. Europe is
too slowly getting its economic and financial act together, the credit agency
downgraded the
Italy and Spains debt, and a credit agency in Britain downgraded the credit rating
of four
leading British banks, such as Lloyds and Nationwide, and strangely the Finance
Minister
George Osborne supported this, an apparent own goal for Britains financial
system by Mr.
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Osborne.
In America, there have been peaceful protests of thousands of people in Wall
Street against the
big Wall Street banks and financial system, and the high level of unemployment inAmerica,
and the large social and economic inequality. President Obama expressed
sympathy with the
frustration felt by the protesters and many other Americans about the financial and
economic
system. These protests have now spread to other big American cities such as
Washington, and
Los Angeles.
The Eurozone governments should learn from the experience of BRICs countries,
who in the
past suffered economic meltdowns and banking crises, yet overcame these
difficulties, and are
now much stronger globally economically and politically. However, BRICs
economies like
China and Brazil will be seriously affected by the expected global recession and
economic
downturn in 2012, which can lead to a big fall in agricultural and commodities
export prices,
and the end of that boom could hit the Brazilian economy. Brazil is experiencinga deacceleration of its economy as a result of the global financial crisis, at the same
time inflation is
at a six year high of 7%, and the countrys economic growth rate of GDP has been
halved to
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3.5%. There is a real danger of economic recession and job losses affecting BRICs
economies
like Brazil, Russia with its natural resources based economy, China, and India as
well.The head of the IMF Cristine Lagarde, the former French Finance Minister met her
old boss in
Paris on 8
th
of October to discuss the Euro financial crisis. Later she will have a meeting with
him and the German Chancellor Angela Merkel to debate further what economicmeasures the
Eurozone leaders need to take to bring this serious Euro debt financial and
economic crisis to a
close, and to prevent it pushing the world economy into a serious recession.
The European Central Bank (ECB) has recently said it would provide unlimited
loans to prevent
a regional Eurozone credit crunch, where banks would not lend to each other,
which would have
a dire effect on the Euro land economy. The Bank of England agreed to pump 75
billion pounds
into the economy through quantitative easing again, and decided not to increase
interest rates,
which remain at a low 0.5%. However, the British Prime Minister has refused to
provide help
for the British economy by reducing the pace of deficit reduction, both he and the
Minister of
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Finance Gordon Osborne have said that there is no gain without pain; this is
despite the IMF
warning that European governments should go easy on deficit reduction and
austerity. The IMFalso surges Eurozone governments to recapitalise their banks to avoid a banking
and financial
crisis, which could follow a Greek default. The IMF said that Europes stronger
economies
should avoid imposing budget cuts at the expense of growth. They also said that
Europes big
economies such as the United Kingdom, France, and Germany should consider
delaying cuts
because they can borrow money at historically low interest rates. They also said
that an
economic recession for 2012 could happen.
The BRICs countries such as China and Brazil have offered to help the Euroland
countries, but
so far, no concrete practical aid has materialized apart from exhortations. The
President of
Chinas huge state-backed Sovereign Wealth Fund on a visit to Brazil denied that
China would
bail out the Eurozone economies with financial aid, and said that his Fund instead
wished to
step up investment and purchase of companies in growing emerging markets like
Brazil.
President Obama called for the US Senate to pass the urgently needed Jobs Plan,
which can
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create many US jobs, and he said that the Senate must pass this bill, as the fragile
US economy
needs it to head off an economic recession. The US economy in September 2011
unexpectedly3created 103,000 new jobs, which was a welcome surprise, but not sufficient to
dent the
unemployment figures which remain at 9.1%. Some economists put the real
unemployment rate
at 16% when account is taken of those who have dropped out of the workforce, or
are
underemployed. Bernie Sanders the sole socialist in the US Congress, and an
independent US
Senator for Vermont suggested that this figure does not take into account the
millions who have
dropped out of the labour force demoralized from looking for non-existent jobs.
He criticised
the Obama Administration for spending multi-billions on bailing out Wall Streetbanks, but
failing to provide loans for small businesses to hire people. The big American
corporations are
holding US$ 2 trillion in cash, which should be invested instead in capital plant
and machinery,
and in job hiring to reduce the jobless rate. American businesses should be less
risk averse, and
start hiring people, this is the position of the President of Starbucks Howard
Schultz who plans
to open hundreds of new stores in the USA and to create 3,500 net new jobs this
year, and he
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has also started a campaign Create Jobs for USA, and provided US$ 5 million seed
money.
Europes economic and financial crisis continues with no immediate end in sight.
Thegovernments of France, Germany, and Belgium have nationalized the troubled
Dexia Bank; the
rescue package has pushed the Belgium public debt to a dangerous level 97% of its
Gross
Domestic product, which could cause the credit rating agencies to downgrade the
Belgium
government debt. This bank has exposure to a huge global debt of US$700 billion
($1.2
trillion), which if this bank was allowed to collapse it would set off a full blown
European
banking and financial crisis, which could have dire consequences for the weak
fragile American
economy, and spread outward and lead to a global economic crisis and slowdown.BRICs
economies would also be badly hit. The current European economic crisis has led
to heavy
financial asset losses for BRICs economies.
The main problem facing the Eurozone is that there are 17 separate national
governments and
fiscal authorities, while what is need is a common fiscal authority to sort out the
Euro countries
public finances, to prevent heavy budget overspending and big budget deficits and
huge public
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debts. The USA, Brazil has a common monetary union and authority, and that the
Euro area
needs a common central fiscal authority, which avoids the current banking and
financialproblems faced by the Euro states. One of the Euro zones smallest and poorest
members
Slovakias Parliament recently voted against the plan to expand the powers of the
European
Financial Stability Facility, which also involves expanding the size of the
Eurozone bailout fund
to 440 billion Euros (US$600 billion, 383 billion pounds). The Slovak Parliament
has now
finally approved the plan eventually, after an agreement to call soon for a general
election, but
small states hold the bigger economies for ransom, and can put the spanner in the
works for a
while. This could in the future can be avoided if a supranational fiscal authority, orbody, is
created for the whole Eurozone area, which would complement the existing
common single
currency and monetary union. There are those in Europe argue that the lesson to
be learned
from the Euro debt crisis is the need for further European integration.
One lesson that can be learned from the current global economic and financial
crisis is that it
affects everyone, both BRICs economies and developed G8 economies, and
including the poor
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low income developing economies. There is a need to work out a viable solution
together to
prevent the world sliding into another world recession, as we are all in this
together, which willbe affected by a global economic slowdown and recession. In 2012 it will be five
years since
the global credit crunch crisis developed into the worst world economic and
financial crisis
since the Great Depression of the 1930s, and it has taken to long for the worlds
leaders and
central bankers to come up with an economic recovery plan. We should remember
that World
War 2 lasted only six years. The Eurozone states need to have a common
supranational fiscal
body like Brazil, UK, Australia, and the USA if the Eurozone is to work properly
and avoid
future sovereign debt, financial and economic crises. German Chancellor AngelaMerkel said
recently that there was no big bang solution to the Euro debt economic and
financial crisis.
However, the EUs slowness in responding to the Euro debt crisis of Greece and
other
peripheral economies has made the situation was far worse than it should have
been. 4
Europes financial crisis has adversely hurt a strong BRICs economy like Brazil,
which has had
to slash its growth prospects for 2011 to only 3.5%. Europe is Chinas biggest
export market
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and the Chinese economy can be damaged as exports are halted. Brazil has a
well-regulated
banking and financial system, state-owned and controlled banks like the Bank of
Brazil andCaixa Economica, and which are well capitalised. Brazils President Dilma
Rousseff during her
recent visit to Europe had talks with the leading European Union leaders and said
that fiscal
policies involving cuts in public expenditures can make the economic situation
worse by leading
to more unemployment, and a lack of economic growth. A rise in European share
prices was
reversed after the pessimistic German Finance Minister cautioned that a Eurozone
debt crisis
plan might not be ready at the end of this week. This contradicts the G20 Finance
Ministers
meeting in Paris on Saturday 15
th
of October who stated that the next EU Summit would deal
with the challenges through a comprehensive plan when they meet on the 23
rd
of October.
The German Finance minister Wolfgang Schoeuble warned the Brussels European
Summit was
not expected to provide a definitive solution to the crisis, while the financial
markets want a
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definite result. The G20 leaders meet again on the 3
rd
and 4
th
of November. Last Saturday they
said that the IMF needed more finance and firepower, but later they said that the
IMF had
enough funds to deal with the European financial crisis. The European Union
leaders and the
USA were against expanding the funds of the IMF, perhaps fears of giving too
much economic
and financial power to the rising emerging economies.
Two respected centre left statesmen former President Lula de Silva of Brazil, and
the ex-British
Labour Prime Minister Gordon Brown met in Madrid recently to discuss how to
solve the
European and global economic crisis. One must hope with their considerable
experience and
influence that they help to provide a viable solution to the crisis. Brazils President
Dilma
Rousseff at the IBSA (India, Brazil, and South Africa) Forum of the largest
democracies on
their respective continents, agreed to a progressive common position and
consensus on the
European economic crisis, which would mean that any solution would protect the
economic and
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social interests of Europes poor low income groups, and prevent the crisis from
spreading to
emerging economies. The writer believes that Greece cannot possibly repay its
huge publicdebt, and that the richer Euro economies must fund a 60% write-off of the Greek
debt,
combined with billions in extra funds to recapitalize European banks. Otherwise, a
Greek
default would lead to the collapse of the Euro, and seriously damage the Eurozone
economies
and the European Union itself greatly. The influential Governor of the Bank of
England Mervyn
King has suggested that China should import more in order to help solve global
financial
problems; this is a very good idea. Chinas huge export surpluses and financial
reserves create a
serious imbalance in the global economy affecting both rich developed economies,and
emerging economies.
Brics currencies:-
BRICS agree to local currency credits to ease dollar dependency
The BRICS - Brazil, Russia, India, China and South Africa - haveagreed to provide credit to each other in local currencies. Officials
say the deal will facilitate economic growth in times of crisis.
The currency swap deal is aimed at promoting trade and investment inlocal currencies as well as to cut transaction costs. Its also seen as a stepto replace the dollar as a reserve currency in trade between BRICS.The idea is in line with many interests and economic exigencies in theworld economy,Yaroslav Lissovolik, the chief economist at Deutsche
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Bank told RT. The euro and dollar are no longer seen as unquestionablemonopolies in the role of reserve currencies. Clearly the world needs morereserve currencies.
The deal would also increase the BRICS influence on the internationalarena and will make their cooperation less sensitive to sanctions from theWest, experts say."The BRICS countries are in the first rank to do the job that internationalfinancial system now needs. What the BRICS said was a very welcomedwake up call,"John Kirton, the Co-Director of the BRICS ReasearchGroup told RT.Russia and China have been trading in the rouble and yuan for severalyears, now Russia plans to expand local currency settlement with India.With China it took us three years to (evolve) from initial conversations to
trading in local currencies,Vladimir Dmitriev, the chairman of Russia sVEB told reporters. I think we will meet similar terms with India.
Meanwhile the swap requires a lot of technical work by each country suchas the synchronization of national banking legislation, according to Mr.Dmitriev.
The BRICS countries are also going to announce plans on a jointdevelopment bank which is considered a possible rival to the World Bankand the IMF. If established, it would function as a lending agency and
would provide finance for joint BRICS projects."They made it very clear it would be built to benefit not only BRICScountries themselves, but developing countries more broadly," saidKIrton. "But the big message was to give the World Bank more resources,only then would they see how the BRICS bank would fit in the supplementwhat theyve already got."
The cracks in the brics
As it prepares to hold its latest annual summit in New Delhi on March 28-29, the BRICS grouping Brazil, Russia, India, China, and South Africa
remains a concept in search of a common identity and institutionalizedcooperation. That is hardly surprising, given that these countries havevery different political systems, economies, and national goals, and arelocated in very different parts of the world. Yet the five emerging
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economies pride themselves on forming the first important non-Westernglobal initiative.
The lack of common ground among the BRICS has prompted cynics tocall the grouping an acronym with no substance. To its protagonists,
however, it is a product of todays ongoing global power shifts, and hasthe potential to evolve into a major instrument in shaping the architectureof global governance the midwife of a new international order.
After all, the BRICS economies are likely to be the most important sourceof future global growth. They represent more than a quarter of theEarths landmass, over 41% of its population, almost 25% of world GDP,and nearly half of all foreign-exchange and gold reserves. The BRICS, infact, might also be dubbed the R-5, after its members currencies thereal, ruble, rupee, renminbi, and rand.
At the New Delhi summit, the BRICS leaders will discuss the creation ofjoint institutions, particularly a common development bank that can helpto mobilize savings between the countries. Currently, the BRICScountries constitute a loose, informal bloc. If the groups leaders fail tomake progress on establishing an institutional structure, they will lendcredence to the contention that it is merely a talking shop for countriesso diverse that their shared interests, to the extent that there are any,cannot be translated into a common plan of action.
It was just last year that BRIC (Brazil, Russia, India, and China) became
BRICS with the addition of South Africa. The BRIC concept, conceived in2001 by Jim ONeill of Goldman Sachs, was embraced by the fouroriginal countries only in 2008, when their foreign ministers met on thesidelines of a Russia-India-China (RIC) trilateral meeting. The addition ofBrazil paved the way for the first BRIC summit in 2009, which,interestingly, piggybacked on the Shanghai Cooperation Organization(SCO) meeting in Yekaterinburg, Russia, that year.
That association helped the SCO still largely a Sino-Russian enterprise to receive more publicity, but it left the BRIC countries with little space
to start formulating a unified action plan. The subsequent enlargement toinclude South Africa has made the BRICS a more global grouping, whichthreatens to render irrelevant yet another initiative, the IBSA (India,Brazil, and South Africa).
For Brazil, Russia, India, and South Africa, the BRICS grouping servesas a forum to underscore their rising economic clout and showcase their
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emergence as global players. But, for China, which needs no recognitionas a rising world power, the BRICS offers tangible not just symbolicbenefits. As a result, China indeed has cast a lengthening shadow overthe group, openly seeking, for example, to control the proposed commondevelopment bank something that India and Russia, in particular, areloath to accept.
At a time when China is under pressure for manipulating the value of therenminbi to maintain export competitiveness, the BRICS frameworkoffers it a platform to expand its currencys international role. As part ofits quest for a global currency that could rival the dollar or the euro, acash-rich China plans to extend renminbi loans to the other BRICSmembers.
Lending and trading in renminbi is likely to boost Chinas international
standing and clout further. But its undervalued currency and hiddenexport subsidies have been systematically undermining manufacturing inother BRICS countries, especially India and Brazil.
Proponents of the BRICS concept nonetheless remain hopeful that thegroup can serve as a catalyst for global institutional reform. With existinginternational arrangements remaining virtually static since the mid-twentieth century (even as non-Western economic powers andnontraditional challenges have emerged), the world needs more than thehalfhearted and desultory steps taken thus far. The formation of the G-
20, for example, was an improvisation designed to defer genuinefinancial reform.
In fact, the modest measures implemented in response to the changingdistribution of global power have been limited to the economic realm,with the hard core of international relations peace and securityremaining the exclusive preserve of a handful of countries.
China is not on the same page as the other BRICS countries when itcomes to global institutional reform. It is a revisionist power concerning
the global financial architecture, seeking an overhaul of the BrettonWoods system. But it is a status quo power with respect to the UnitedNations system, and steadfastly opposes enlargement of the SecurityCouncils permanent membership. It wishes to remain Asias solecountry with a permanent seat a stance that places it at odds withIndia.
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If the BRICS countries are to jell as a pressure group in internationalrelations, they must agree on what they believe to be attainable politicaland economic objectives. For example, they are generally united in theirfrustration with but not in their proposed response tothe dollarsstatus as the worlds reserve currency. Indeed, the most importantbilateral relationship each BRICS country has is with the United States.
The BRICS concept represents, above all, its members desire to makethe global order more plural. But it is uncertain whether the groupsmembers will ever evolve into a coherent grouping with defined goalsand institutional mechanisms. In the coming days, we might find outwhether the BRICS will ever be more than a catchy acronym with anannual boondoggle attached
2013 BRICS summit
From Wikipedia, the free encyclopedia
2013 BRICS summit
Host country South Africa
Date 2013
The 2013 BRICS summit will be the fifth annualBRICS summit, an
international relations conference attended by the head of states or heads
of government of the five member
statesBrazil,Russia,India,ChinaandSouth Africa. The summit will be held
in South Africa in 2013.[1]
[edit]Background
A declaration at the end of2012 BRICS summitread that: "Brazil, Russia,India and China thank South Africa for the proposal to host the 5th summit
in 2013. They intend to provide multifaceted support for it.
Brics relationship with the global economy
http://en.wikipedia.org/wiki/South_Africahttp://en.wikipedia.org/wiki/South_Africahttp://en.wikipedia.org/wiki/BRICS#BRICS_summitshttp://en.wikipedia.org/wiki/BRICS#BRICS_summitshttp://en.wikipedia.org/wiki/BRICS#BRICS_summitshttp://en.wikipedia.org/wiki/Brazilhttp://en.wikipedia.org/wiki/Brazilhttp://en.wikipedia.org/wiki/Brazilhttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/South_Africahttp://en.wikipedia.org/wiki/South_Africahttp://en.wikipedia.org/wiki/2013_BRICS_summit#cite_note-0http://en.wikipedia.org/wiki/2013_BRICS_summit#cite_note-0http://en.wikipedia.org/wiki/2013_BRICS_summit#cite_note-0http://en.wikipedia.org/w/index.php?title=2013_BRICS_summit&action=edit§ion=1http://en.wikipedia.org/w/index.php?title=2013_BRICS_summit&action=edit§ion=1http://en.wikipedia.org/w/index.php?title=2013_BRICS_summit&action=edit§ion=1http://en.wikipedia.org/wiki/2012_BRICS_summithttp://en.wikipedia.org/wiki/2012_BRICS_summithttp://en.wikipedia.org/wiki/2012_BRICS_summithttp://en.wikipedia.org/wiki/2012_BRICS_summithttp://en.wikipedia.org/w/index.php?title=2013_BRICS_summit&action=edit§ion=1http://en.wikipedia.org/wiki/2013_BRICS_summit#cite_note-0http://en.wikipedia.org/wiki/South_Africahttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/Brazilhttp://en.wikipedia.org/wiki/BRICS#BRICS_summitshttp://en.wikipedia.org/wiki/South_Africa7/31/2019 BRICs and the Eurodebt Crisis
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Economic transformation is the result of a combination of structural and politically
based factors. Russia and China sunk in the destructive chaos of their socialist
economies
through the charismatic force of their original leaders. Despite being efficient whenit came to
party organization, these leadersLenin and Maowere unable to grasp the way
in which a
modern market economy works. In Russias case, the transition to capitalism has
remained
erratic, whilst China has seen a combination of political authoritarianism and firm
guidance
towards a market economy. China is unique in world history in terms of its
sustained growth,
with structural transformations that have an enormous social impact.
In the case of Brazil and India, transformations have been due less to a directed
return to the market or revolutions from above than to the deep forces of
their semicapitalist regimes, whose creative energy was released by economic
opening and trade
liberalization. Brazils central problem was to break with self-feeding inflation and
the
pernicious effects of exchange rate pressures. This process was conducted in full,
despite the
financial turbulence that threatened an adjustment between the second half of the1990s and
the beginning of the 2000s. India, meanwhile, had to lift itself from a Mesozoic
state of
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planned economy and over-zealous protectionism. Although it faced some delays,
this process
was facilitated by a high-quality economic Diaspora in the main developed
economies aphenomenon that also took place in Chinese history, but with different
characteristics.
Strictly speaking, China seems to have reproducedat a higher adaptation pace
and
with the huge ambition of rapidly recovering from the lost decades of crippling
socialism
the Japanese experience of the Meiji Revolution. It has sent its offspring to learn
from the
scientific and technological leaders of advanced capitalism. Above all, China has
focused on
the Japanese post WWII miracle, in which the country copied and adapted Western
knowhow with extreme care and quality, in order to make the same products with
its own designs
and brands. China is the only emerging nation among all the Brics that seems
destined to 5
convert itself into a dominant economy, as well as a technological and military
power.
However, the country is still very far from offering its citizens many of whom
are still
subjects of an authoritarian regime the level of individual well-being enjoyed by
the
populations in advanced capitalist countries.
Russia has lost territories with important natural and human resources and
therefore
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does not seem close to recovering the political and strategic relevance enjoyed
during the
height of its geopolitical expansion at the end of the 1970s. Despite owning a
formidablenuclear arsenal and the capacity for some military projection, the country is in no
condition to
challenge the two global economic giants of the mid-21
st
century. Russias resources are finite
and its demography is declining, albeit having a high quality human force.
India, for its part, is apt to master, with competence, the electronic services it
already
offers with expertise. It will, however, have to absorb into the market economy
hundreds of
millions of rural workers stagnating in an ancestral economy. Brazil has almost a
generation
ahead of it to benefit from a demographic bonus, namely the best possible
relationship
between the economically active and dependent strata of people. This opportunity
will
probably be missed, largely because of the low levels of technical qualification and
education
among the population, which will reduce productivity gains.
These shortcomings should not prevent the Brics from gaining greater relevance,
which they will through their heavy demographic weight and growing consumer
market, with
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the possible exception of Russia. But they will be unable to reach the levels of
technological
excellence of nearly all of the countries of the advanced capitalist world. Once
again, theexception should be China, which will reproduce Taiwan and South Koreas
technological
performance with surprising rapidity.
In the case of liberalizing capital movements and trade policy, Bric approaches
tend to
vary, although tending towards the adoption of a pattern more propitious to those
countries
international economic integration. This is in contrast to the restrictive policies
adopted by all
of these countries less than a generation ago. The most important ruptures took
place,
obviously, with the two socialist giants, as in contrast Brazil and India were on the
edges of a
capitalism characterized by an overwhelming state presence. These latter two
countries were
founding members of GATT and were there at the very start of the Bretton Woods
institutions, without having to necessarily take on their prescriptions for economic
policy.
China and Russia joined the IMF and IRBD as soon as they overcame ideological
restrictions to these symbols of the capitalist world, but the process was more
complicated in
the trade sphere. It took 14 years for China to be admitted to GATT, something
that took 6
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in combating farm subsidies and protectionism (which should include Brazils
G20 allies
China and India).
The monetary, trade and foreign investments policies of the Brics are as varied astheir
forms of global insertion, but the results are reflected in current accounts. Brazil
came out of a
quite fragile situation between the second half of the 1990s and the beginning of
the 2000s
which prompted it to seek preventive financing through three agreements with the
IMF (1998,
2001 and 2002) into a relatively comfortable international position of foreign
reserves
higher than foreign debt. With its huge trade surpluses, China is on the way to
further record
currency reserves, and should remain as a dynamic exporter in the foreseeable
future.
Russias trade surpluses are either growing or comfortable, but its structural
position is fragile
due to its dependency on oil and gas. Indias deficits, despite rising, are
manageable in
relation to its also growing economy. All those scenarios should suffer the impact
of the
international financial crisis started in the U.S., but emerging economies are
expected to
maintain a higher rate of growth than those of OECD group.
3. What will be Brics future impact on the global economy?
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The justification for the Bric acronym, according to its original proponent, is the
extent to which these economies have an impact on the global economy, as well as
their
capacity to shape the future of other developing nations. Barring Brazil, with verymodest 7
growth rates over the last years, the three other Brics have been gaining weight
and
importance globally and within sectors.
In theory, in a few years the Brics will represent a fifth of the global economy and
in
two decades will overtake the G7. This aggregation of individual volume might
make sense in
this type of intellectual exercise, in which arithmetic seems to prevail over politics.
However,
it is unlikely to indicate global economic development trends, as these are caused
by
technological transformation and capital, scientific and strategic information flows
as
shown by the history of capitalism.
In fact, given their demographic importance and the growing dissemination of
technology and direct investment, we could say that developing countries share in
global
goods and services exports and GDP will certainly rise above current levels. This
is an
elementary conclusion that adds nothing to the other aspects especially
institutional and
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political that interact with the structural forces that shape the global system.
Basically,
despite the Brics decisive economic impact, this feature by itself says nothing
about the otherfactors behind a complex relationship that goes beyond GDP and exports, and into
reciprocal
interdependency not between the Brics but between each of them and their
various
economic partners. From this point of view, the Brics group do not have an
economic
existence per se and is purely a creation of the economic spirit.
Despite arguments about the decoupling of the main emerging economies from the
G7
and other developed nations economic cycles, the truth is that the dominant
economies
impact on Bric is more decisive than normally admitted. It is not only about
consumer
markets and direct investment sources. The global economy is not just an
economic space for
the exchange of goods and services, where each nation can have greater or lesser
physical
interaction. It is, essentially, an arena for the exchange of ideas, in which the
intellectual
domination of the so-called developed Western world looks set to remain
throughout the
foreseeable future.
When we look at the overall picture for the global economy, we reach an inevitable
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conclusion: the same forces that have transformed the world since the 16th century
are still
shaping the contemporary world. These forces include not only the flow of goods
andservices, but forms of economic organization and above all, the production of ideas
and
concepts to support those physical flows. Therefore, it is inconceivable to consider
that
developing or emerging nations could be independent from the core of the global
economy.
The path and economic destination of the Brics and other emerging economies
cannot be
different from those followed by developed nations. The latter set the basic
parameters on 8
which the economy is based. However, this dynamic process is not exclusive to a
specific
center, but shared by several centers producing and spreading ideas and practicalknowledge.
The apparently novel concept of Bric is a trouvaille that has occupied journalists
minds and instigated the imagination of academics in their search for new ideas.
This concept
seems to induce those concerned with the old hegemony to seek a rupture with and
the
replacement of an old system. It is historically rare to have peaceful attempts to
change the
balance of world power, as the beneficiaries of the status quo tend to resist the
contesters
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demands for a new space in the old order. If these expectations are not met, the
new
contestants could opt for changing this order by their own initiativehopefully
throughpeaceful ways, but if necessary, they will try through violence.
Once the fascist contesters of the inter-war period were contained, defeated and
radically transformed, the geopolitics of world power began, as of 1947, to be
dominated by
Soviet expansionism without direct confrontations with the US. Conflicts took
place often via
proxies, with each side advancing and retreating in peripheral arenas where the
crucial aspects
of the great game were being played. This Third World War ended without the
conservative
hegemon winning a victory; the defeat of the economically weaker side was
actually brought
about by the implosion of a senile socialism that was incapable of competing in
terms of
productive efficiency. After the USSRs spectacular demise and in a moment in
which the US
emerged as the only superpower, the world seems to be moving towards a
transition. This
new stage sees the US decline and Chinas ascendance, the reaffirming ofRussias strength
or the emergence of new players (India, Brazil, the European Union), which could
redistribute
the cards in new strategic scenarios.
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Whatever the future of global geopolitics in the 21st centurybe it a new Cold
War of
a Cold Peace it has nothing to do with being a member of a group invented by
aneconomist, even though there might be conflicts generated by some of these
members
candidacy as emerging global powers. The Brics situation is accidental and
fortuitous,
whereas being a global emerging economy is a structural condition that was
acquired by a
long and slow process of productive and technological qualifications that will
naturally
convert into military and political power.
Brics two former socialists have authoritarian characteristics that represent a
legacy
of centuries of totalitarian states. The other two members have had democratic
trajectories -
with faults in terms of functioning and social justiceand are the market
economies closest
to capitalist organization patterns. Of all the members, Brazil has the most
advanced capitalist
structures and the most modern society. It is also the most integrated society in
language, 9
cultural, ethnic and possibly religious terms, which in principle enables a more
efficient
political administration - without institutional ruptures - and more favorable
conditions for
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modernization. Although social democratization can slow growth and adaptation to
new
environments, it also contributes to greater cohesion around national goals.
The main issues dividing the world today are no longer ideological, as they wereless
than three decades ago, when competing projects were trying to win peoples
hearts and
minds. Neither are they technical, as there seems to be reasonable consensus and
collaboration among the worlds researchers and scientists about the challenges of
medicine,
physics and biology. Todays main dilemmas are about political priorities and
alternative
economic measures to be chosen by heads-of-state for solving the age-old
problems that
afflict mankind: hunger, unemployment, health, education, security and welfare.
Experience in the recent past about these choices and attempts to impose them on
whole societies in an authoritarian manner, does not reflect well on some of the
solutions
proposed by radical challengers to the status quo. We do not have to go back to the
terrible
example of Nazi Germany or militaristic Japan to conclude that emerging powers
tend to be
hasty competitors ready to use violence if necessary to challenge the power of
older
hegemons. That History lesson must have been learned, however. Let us hope this
time it will
be different.