Conference call, anyone?
Several times a year, the lords of the global economy descend on the city of the moment. Their massive entourages fly business class, zoom around in motorcades, and sleep at five-star hotels. What do taxpayers funding all this summitry get in return? Ambiguous communiques, hollow pledges and a nagging sense that world leaders should discover video-conferencing.
The latest summit of emerging market stars is a case in point. As if the alphabet soup of G-7, G-8, G-20, Apec and Opec weren’t enough, we now must follow BRICS events. In 2009 and 2010, they were just BRIC affairs: Brazil, Russia, India and China. This year, an S was awkwardly added for South Africa. Even Jim O’Neill, the Goldman Sachs economist who 10 years ago coined the acronym BRIC, doesn’t get why it’s there.
Far more deserving additions exist in Asia—South Korea and Indonesia. Yet the more I see what the BRICS are becoming, the more I think Seoul and Jakarta should decline any invite. BRICS confabs reinforce how artificial the whole enterprise is.
Take the bluster about a new world order. No one in their right mind would argue we don’t need one, yet the Group of 20 (G-20) nations is a far more productive framework for any redesign of global markets and institutions. And each of the BRICS has a seat at the G-20 table.
The trick is for emerging economies to demand a bigger voice there—not stage sideshows. That’s not to say economic groupings are pointless. In Asia, for example, the 10-member Association of Southeast Asian Nations (Asean) is the only forum where the world can engage Myanmar’s repressive regime. Still, Asean is more about photo opportunities than substance.
The Asia-Pacific Economic Cooperation (Apec) group is a circus. The only real thing its 21 members have in common is beachfront property. An Apec-wide free-trade zone would be a wonderful thing. On its watch, bilateral agreements, not sweeping international ones, became the norm. Apec gatherings are now Davos-like affairs. Like the World Economic Forum, they’re an excuse for corporate bigwigs to jet in and do deals. Rather than meeting in Hawaii in November, Apec leaders should call it in and reduce their carbon footprint.
Important topics were broached at the 14 April BRICS summit in the Chinese city of Sanya, including regulating derivatives and volatility in commodity prices. What it really highlighted is what really matters: the C in BRICS.
The group hasn’t moved beyond being about China’s voracious appetite for the commodities of the other four members, with a bit of America-bashing tossed in.
Brazil, Russia, India and South Africa are key economies in their own right, yet BRICS gatherings have evolved into the geopolitical equivalent of investment road shows. China has piles of money, and the real action is on the sidelines of formal discussions. There, officials angle for more Chinese investment and access to the nation’s 1.3 billion consumers.
This dynamic offers some useful reality checks. For India, it’s realizing a trade deficit with China exceeding $20 billion (Rs 89,000 crore) annually will grow no matter how close Prime Minister Manmohan Singh sits to Chinese President Hu Jintao at the BRICS table.
For Russia, it’s a one-time superpower being part of an emerging-nation group it doesn’t even lead. For Brazil, it’s how Latin America’s biggest economy weakened its trade defenses for a Chinese government unwilling to do the same. For South Africa, it’s that more will be expected of it on the progress front.
As much as these economies must harness China’s 9.7% growth, they also need to protect domestic economies. Their currencies are rising while China works 24/7 to maintain an undervalued yuan. The trouble is, membership in the BRICS brotherhood makes it hard politically for officials in Brasilia, Moscow, New Delhi or Pretoria to criticize Beijing.
That’s why anger is being projected elsewhere. The US deserves some for its hypocritical policies since the 2008 crisis. Back in 1997, when Asia blew up, America told the region to raise interest rates to support currencies, reduce debt, avoid blaming speculators for market swings, and follow free market policies. Today, the US is doing exactly the opposite.
Yet, big changes such as replacing the dollar are better handled by the broader G-20. With over $4 trillion of combined currency reserves, any BRICS move to dump the dollar will shake markets.
If you think the real, ruble, rupee, yuan or rand will replace the dollar anytime soon, you’re dreaming. Even if the yuan emerged as a viable reserve currency, it first must be fully convertible. That’s a ways off.
BRICS don’t want to live in a world run by Washington—not when their combined gross domestic product could eclipse the US by the end of 2014. And it’s ridiculous that the governance of the International Monetary Fund and World Bank still rotates between the US and Europe to the exclusion of the rest of the world.
The future clearly belongs to emerging nations. It’s just not clear that BRICS as a political entity is evolving into something that can play a credible role in creating it.
Respond to this column at firstname.lastname@example.org