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Ironically, the originator of the acronym BRIC (grouping of the economies of Brazil, Russia, India, China), originally without South Africa, is the largest US investment bank, Goldman Sachs. In 2001, Goldman developed a strategy for investing in four major emerging market countries and introduced the acronym. Later, the bank launched the BRIC fund, which was freely traded on the stock market.
Unclear Function
The BRICS itself emerged from the St Petersburg International Economic Forum in 2006. It is important to note that it is an informal association and the member countries have not concluded a single free trade agreement in 15 years. We will never know whether such an association would have emerged if it had not been for Goldman Sachs and its fund. Membership in the BRICS is not onerous. As it is an informal organization, countries do not have any obligation to each other, but of course, Brazil and South Africa, for example, would like closer co-operation with China, and India-China relations are also strained at present, as the recent border conflict shows.
Khazbi Budunov is a Russian Post-Keynesian economist, and author and editor of the economics blog Politeconomics.
Russian elites were not really eager to create their own trade and currency unions, but instead dreamed of becoming part of Western unions. After the collapse of the USSR, integration processes were objectively preserved or emerged that Russia suppressed, such as the ruble currency zone in the post-Soviet space, which the former republics did not want to abandon. Moreover, Russia and Belarus, which have been working on building a union state for almost a quarter of a century, have not completed it to date. Even the idea of a Eurasian Economic Union (EEU) was proposed by Kazakhstan President Nazarbayev, and the integration of the EEU could be much more profound and is an objective necessity.
The problem that surrounds the BRICS is that the member countries occupy different positions in the international system of division of labour, and more precisely, in the American system of division of labour. They have few common interests to create a real union — trade, currency, etc. — so it seems that the only reason for the club’s existence is an excuse for respectable people to meet once a year.
No Clear Plan of Action
After February 2022, the situation has changed for Russia. However, it is fair to suggest that the West did not execute a complete de-linking of Russia, and some BRICS countries have managed to become unofficial intermediaries between the Russian and Western markets. As we know, India has become the largest buyer of Russian oil, and China supplies Russia with most of its consumer goods. Throughout history, the BRICS countries, with the exception of China, have always ranked among the last in Russia’s trade balance.
As mentioned above, the economies of each of the BRICS countries are tied to Western economies, which makes common economic interests and thus joint action by the members of the club impossible. Even the sole institution created by the BRICS countries, the New Development Bank, suspended transactions in Russia after sanctions were imposed. The bank conducts almost 80 percent of its transactions in dollars, euros, and Swiss francs.
Given the fact that Russia receives nothing from BRICS in economic terms, it seems that the Russian authorities do not have a clear plan of action regarding the bloc. However, after Russia's isolation, Russian elites started making radical statements about creating a single BRICS currency, and admitting new members to the group, from Iran to Venezuela. Even if it is possible to create a single currency and admit new members, it is unlikely that the new system will be workable due to the large economic, political, and cultural differences between the countries. The Eurozone, for example, has many problems due to the uneven development of the North and the South. And not all BRICS members support Russian initiatives. However, the inclusion of a large number of countries to the BRICS could provide an impetus to reform the international monetary system and introduce a supranational reserve currency like Keynes’ Bancor.
But can the BRICS be considered a geopolitical alliance of major peripheral countries? Undoubtedly. In this sense, the BRICS countries are very useful to Russia. For example, Russia can assume their support at the UN. Another important circumstance that played a role in uniting these countries in 2006 was the rejection of US foreign policy in the noughties, particularly the invasion of Afghanistan and Iraq. In the current environment, this seems paradoxical.
Russia’s lack of commitment to the BRICS is also confirmed by President Putin’s unwillingness to attend the BRICS summit in Johannesburg. A definite plus for Russia is that the BRICS countries have not joined Western sanctions, and it is in Russia’s interest to admit more countries to the BRICS that could openly oppose the sanctions. But all of this has technical limitations in the form of the dollar system. The BRICS countries cannot and do not want to abandon the dollar. Most likely, they, including Russia, prefer stability to multipolarity. In search of stability, international currencies are diversifying.
Putin often refers to the exploitation of non-Western countries by the West, as left-wing post-Keynesian economist Joan Robinson suggests: “The misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all”.
Speaking of the political and cultural differences between the BRICS countries, the uninformed reader may think that Brazil and South Africa are more backward than Russia. But in fact, the share of Russia’s GDP spent on education and health care is lower. Today Brazilian and South African societies are more progressive than Russian society. Moreover, they are democratic societies. Those areas where Russia is superior to them were inherited from the Soviet Union and are slowly crumbling, leaving room for a healthy debate about who is exploiting whom.
Integration processes might have been strengthened if one of the countries had assumed the role of hegemon and coordinated collective actions, but the BRICS favors a multipolar world without dictates. And the capitalist system has not experienced any period of its history without a hegemon.
