The Brics In The Global System Economics Essay

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In 2006, as BRICs mania gathered momentum, the four governments, at the initiative of former Russian President Vladimir Putin, collectively lifted themselves from the pages of investment reports to hold their first foreign ministers’ meeting on the sidelines of the annual UN General Assembly session. After a second meeting of the four foreign ministers in New York in September 2007, the BRICs launched a consultative process at the level of deputy foreign ministers to foster regular contacts and multilateral diplomacy. By 2008 the four BRICs foreign ministers, and on a different track the finance ministers, established a process to hold regular meetings to discuss common approaches to international problems, including the global financial crisis. Again at Russia’s initiative, the four BRIC heads of state met in July on the sidelines of the G8 (the G7 plus Russia) summit in Japan and plans were laid for a formal summit to be held in the Ural mountains city of Ekaterinburg, Russia in June 2009. Despite the group’s improbable beginnings, BRICs were on a roll.

2. Successive communiqués from follow-on meetings enumerated demands for an adjustment of global governance structures to better reflect the BRICs’ rising share of global output, trade, and financial flows. Nearly 60 percent of the total


increase in world output in 2000-2008 took place in developing and transitional countries, half of which occurred in the BRICS; their share of global GDP during the same period rose from 16 to 22 percent. Current projections estimate that China will overtake Japan as the world’s second largest economy in about 2010, and within the next two decades the top three economies in the world are expected to be China, the U.S., and India, with Russia and Brazil moving higher within the top ten.

3. BRICS symbolises the collective economic power of Brazil, Russia, India, China, and South Africa. Together the BRICS account for more than 40 per cent of the global population, nearly 30 per cent of the land mass, and a share in world GDP (in PPP terms) that increased from 16 per cent in 2000 to nearly 25 per cent in 2010 and is expected to rise significantly in the near future.

The Rise of BRICS

4. BRICS, the five of the most important rising economic powers in the early twenty-first century, have emerged individually as second-tier regional powers and collectively as a joint presence in world politics. Although BRICS diplomacy took wing under Western radar, it now features well-publicised regular summits, communiqués summarising common positions and demands, and activities to promote peer learning and public diplomacy. Goldman Sachs’s analyses may have indirectly spawned an incentive to collaborate diplomatically, but the bank is not alone in identifying (and promoting) such trends. Even before the global economic downturn, attention had begun to focus on “the post-American world,” a “non-polar world,” and especially the rise of China.


5. The BRICS countries have a significant strategic position on their continents: the Americas, Asia, Europe and Africa. Taken together, these five countries account for approximately 30 per cent of the earth’s surface. The importance of this vast territory is related to the amount of their mineral, water and energy resources, the availability of fertile land for agriculture and their biodiversity. All five countries have intensively developed activities in these areas with varying degree of success. The relative importance of agriculture and extractive activities, the transformation of mineral and energy resources and the magnitude of the BRICS agro-diversity are shown by their share in global trade in commodities and in the evolution of industrial activities. Their rich biodiversity also provides the opportunity for the development of very dynamic industries such as pharmaceuticals and biotechnology.

6. The total population of the BRICS is even more significant than their territory. The BRICS percentage of global population remained constant at around 43 percent of the world’s total population over the period 1985-2005. China’s share of the world population declined from 22.1 percent in 1982 to 19.6 percent in 2005. However the population of all the other BRICS except Russia increased. The most significant increase in population occurred in India, which had 17.4 percent of the world population in 2005. This large share of the population represents both a challenge ad a source of opportunities. Challenges that frequently occur in large populations are those to do with the provision of water, food, energy and sanitation, as well as with the health and education systems. Other undesirable challenges associated with the population problem take the form of unemployment and the high degree of inequality in the distribution of income. These problems are common to the five countries, where a significant portion of the population lacks access to essential goods and services, and demand urgent redress. Data available from the United Nations show that Brazil and South Africa are among the countries with the worst distribution of income and that India and Russia are among those with the


largest percentage of the population living below the poverty line, 28.6 percent and 30.9 percent respectively in the mid 2000s. Problems related to the perverse distribution of income and limited access to public services (education, health, housing and urban infrastructure, public safety etc.) are reflected in their low human development index.

7. Huge regional disparities in human and economic development are evident in all five countries. In general, the wealthier are those that are more industrialised. Regional redistribution of income and access to essential goods and services represent a significant challenge that these five countries have in common.

8. Regarding the structure and performance of production, the combined GDP of the BRICS (in terms of purchasing power parity) represented in 2007 approximately 23 per cent of world GDP, more than the United States. In that year, China and India accounted for 10.8 percent and 4.8 percent of world GDP respectively. The economic performance of the BRICS has, however, varied widely in the last decades. China has maintained the fastest growing economy worldwide. India has grown significantly and more regularly. Russia after experiencing a severe crisis in the 1990s, and being faced with significant disorganization of the socialist economy, began a phase of significant growth in this decade propelled by the role of oil and gas in the economy. Brazil and South Africa have seen a small improvement in their economic performance, also well below their potential.

9. The spectacular economic growth in China is mostly due to the competitiveness of its manufacturing sector. It is important to point out that the industrial system in China has diversified to a significant degree during the last 25 years. The most noteworthy change, in recent years, has been the growth in the consumer durables and electronics sectors. In China, the share of technologically


intensive sectors in industrial output during the middle of the present decade approached 35 percent of the total value added by the manufacturing sector. This share is between 14 percent and 17 percent in the other four countries.

10. All the BRICS have raised their export and import levels in the last two decades, both in volume terms and as a share of GDP. In China, Russia and South Africa, foreign trade reached, in 2002, more than 50 percent of GDP while in Brazil and India it represented approximately 30 percent of GDP. Except South Africa, which has not increased its share of world exports in the last ten years, all the other four countries experienced high growth in exports? On the import side, all five countries increased their share of world imports, with the exception of Brazil.

11. The BRICS have been the recipient of significant amounts of foreign direct investment (FDI) in the last 50 years. Prior to 1984, Brazil received the greatest amount of FDI of all the BRICS. Although China reached the same level in 1985, Brazil continued to be a major destination for FDI during the 1990s, most notably during the process of privatization that took place during that decade.

12. China became the largest recipient of FDI in the world beginning in1993. The Chinese policy of attracting multinational companies was part of a strategy to expand their technological knowledge and later to strengthen domestic industries and companies. In China and India, where the capital account was not liberalized, FDI seems to have been concentrated in new investments in production and innovation. The other BRICS countries i.e. Brazil, Russia and South Africa, where the economies were liberalized with fewer restrictions, received more portfolio investment. This demonstrates the economic and political importance of the BRICS. The increase in the degree of influence of these countries took place during a period marked by intense transformation in the economy and global society. One of


this is the integration in the economy and society of significant proportion of previously marginalised segment of the BRICS population.

13. The crisis that started to affect the world economy in 2007-2008 has repositioned the role and importance of the BRICS. In a new scenario characterised by geopolitical realignment and where the role and function of the state in the economy are being redefined, their economic weight has in fact increased. Also, their capacity to remain immune is seen as a relevant source of ideas about how to survive during the crisis and to find ways of overcoming it. The differentiated role of the BRICS in the configuration of global power and the global economy will in some way constrain the evolution of their domestic system for innovation. Also, their national system of innovation are highly dependent on their historical development and on how the different domestic actors interpret global developments as well as how they position themselves in the national and international economies. On the other hand, more room for manoeuvre for setting up new industrial and technological policies may be expected.

Significance of BRICS

14. The BRICS countries have consistently displayed high annual growth rate since 1980. China has grown at about 9.8%, followed by India at around 5.8% and Russia also at about the same level as India, while Brazil showed 2.4% growth. In comparison, the large industrialized nations group of seven (G-7) have shown 2.7% average annual growth. China and India have shown sustained growth by maintaining significantly high growth rates over a long period.


15. BRICS share of the global economy has increased by 1.5% over the last decade. During the period 2000-03, the BRIC countries contributed 1.4% of the annual global growth rate of 3.3% at purchasing power parity. Over the period 1980-2003, the per capita GDP at purchasing power parity has grown twelve fold in China, quadrupled in India, more than double in Brazil. In Russia, per capita GDP has increased by 50% over the 1998 levels. This indicates an overall increase in prosperity in BRICs. Accordingly the living standards have gone up in the BRIC economies, and the gap between the BRICs and advanced economies is narrowing down.(page 32 Sujatha)

16. This is also perhaps the most opportune time for forging closer links, given that the world economy is in a state of flux and a rebalancing is taking place towards the emerging economies. Their pivotal role in the global recovery has already catapulted the BRICs into the leadership role, which needs further cementing through greater interface among economies.

Key Indicators and Statistics


17. Economic Growth and Development of the BRICs

(a) From 2000 to 2008, the BRIC countries’ combined share of total world economic output rose from 16 to 22 percent. Together, the BRIC countries accounted for 30 percent of the increase in global output during the period.

(b) To date, the scale of China’s economy and pace of its development has out-distancebd those of its BRIC peers. China alone contributed more than half of the BRIC countries’ share and greater than 15 percent of the growth in world economic output from 2000 to 2008. The chart above on key development indicators for the BRIC countries shows the sharp contrast in GDP, merchandise exports and the UNDP’s Human Development Index (HDI) between China and the other BRIC countries.

18. Growing BRIC Middle Class

(a) The rapid economic growth and demographics of China and India are expected to give rise to a large middle class whose consumption would help drive the BRICs’ economic development and expansion of the global economy.  The charts below depict how the increase in the middle class population of the BRIC countries is forecasted to more than double that of the developed G7 economies. 


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