H.E. Ambassador H.H.S. Viswanathan
Distinguished Fellow, Observer Research Foundation. Coordinator of all activities connected with BRICS and IBSA (India, Brazil, South Africa), New Delhi.
It is well known that Jim O’Neill of Goldman Sachs, in a seminal paper in 2001 identified four countries (Brazil, Russia, India and China-BRIC) as the fastest growing large economies and hence the best investment destinations. But, over the last 14 years, the list of good investment destinations has come a long way. South Africa was included in 2011 thus bringing in a member of the great African continent. Today, BRICS represents 40% of the global area, 30% of the global population, 25% of the global GDP and 20% of global market capitalisation.
In the beginning, BRICS had three main agendas: Intra BRICS cooperation, reform of the global financial institutions, and addressing issues concerning global order and global governance. The achievements in all the three fronts have been impressive. There is a robust cooperation in areas of common interest like health, inclusive sustainable growth, gender issues, education, urbanisation, food and energy security, innovation and skills. Intra-BRICS trade has grown fifteen times in the period 2001-2011 and is expected to cross $250 billion this year. This is still a very small part of the true potential that exists. The five countries are exchanging information and learning from each other’s experiences and practices.
On the question of the reform of the Bretton Woods Institutions (BWIs), namely the IMF and World Bank, a small beginning was made in the G-20 Seoul Summit in 2010. Further progress has been stalled by the US Congress.
The evolution of BRICS in the last fourteen years is best described as follows: it started as an aspirational group and in time became a consultation group. Slowly, it evolved into a negotiating group and is now trying to become an agenda-setting group.
BRICS is not only a Government-to-Government activity. New ideas of cooperation are generated in the supporting mechanisms like the BRICS Academic Forum, BRICS Think Tank Council, BRICS Business Council and BRICS civil society interactions.
The Glue that Binds BRICS
This is an oft-repeated question, particularly from those who are confused about the concept of BRICS. The confusion arises because of looking at this group in old paradigms. So far, the world has been used to groups based on geography (EU, ASEAN, SAARC, etc), ideology (OECD, COMECON), commodities (OPEC, Coffee club, iron ore exporters club etc), technologies (NSG, MTCR etc), ethnicity (Arab League), and religion (OIC). BRICS does not fall in any of these categories. Yet, there are some things common between the five countries; they all have played the game of globalisation according to the rules set by the developed countries and have made a success of it. They all have common problems of development and new ones due to globalisation, like unequal growth. They all believe in multilateralism and inclusiveness. They have common aspirations and a vision to have greater voice in global affairs, so that they can contribute positively to global peace, stability and development. Spread across five continents, the five countries are looking forward to building a geography-neutral global architecture. In the past 200 years, the biggest economies were the developed countries.
Also for 200 years, modernisation was the same as westernisation. With globalisation and the rise of emerging economies, this has changed. Yes, there are differences of view on some issues among the five BRICS countries. Which plurilateral group does not have such differences? You might recall that during the heydays of the OECD, there was intense competition between the US, Europe and Japan. Yet, they cooperated effectively on certain strategic issues. Why can’t BRICS do the same? This is precisely what they are attempting— to concentrate on the convergences and reduce the divergences.
BRICS and a New Global Order
What are the changes that BRICS would like to see in the global order? They certainly would not like to overthrow the entire system. Why would they destroy a system which has benefitted them to a great extent? But the fact remains that the global order needs reforms and changes. The post World War II order has become outdated with the emergence of new powers who feel that the existing order has certain biases and advantages in favour of the western developed countries hard-wired into the system. The world has changed and hence there is need to modify the order which should be and be seen to be fair and equitable. The reality is that the geo-economic clout of BRICS is not reflected in the geo-political arena.
As Ian Bremmer points out, “the world has entered a phase of geo-political creative destruction.” Both the post World War II and the post-Cold War orders have become irrelevant. Dmitri Trenin rightly says that “life expectancy of world orders varies, but like humans, they are mortal.” Many orders in history were changed as a result of wars and violent events. This time around, one hopes that it would be a peaceful process because globalisation has created so much inter-dependence that violent changes of orders are unthinkable.
BRICS would like to address some fundamental aspects of global order. These are recognised principles of values, norms, and rules. For these to be universally accepted, the only optimum route is through a healthy process of multilateralism. One hopes that through these processes, we can work towards a true multi-polar or polycentric world order.
Connected with the question of a new global order is the issue of burden-sharing by the emerging powers, which is often demanded by the status quo powers. Here, it is a question of the chicken and the egg. The argument of the status-quo powers is that the emerging powers should step forward and take on more burdens before demanding leadership-sharing. This, in fact, is the contradiction. The emerging powers have no intention in sharing burdens if it is to promote the existing order or the existing agenda. Why would they do that if it is going to perpetuate the current inequities in the system?
Legitimacy vs. Efficiency
Let me take the example of three global institutions which stand out as being totally anachronistic,—the IMF, the World Bank and the UNSC. The first two, generally referred to as the Bretton Woods Institutions, have outdated voting powers, decision-making procedures, and selection processes for the heads of the organisations. The combined vote share of BRICS in the IMF is eleven percent, even though they contribute to 25 percent of the global GDP in nominal terms and 32 percent in PPP terms. The collective share of BRICS in the World Bank is fourteen percent. Joseph Stiglitz brings out the deficiencies of the IMF and the World Bank in eloquent terms in his book “Globalisation and its Discontents.”
It is in this context that the bold initiatives of BRICS to create two new institutions, the New Development Bank (NDB) and the Contingency Reserve Arrangement (CRA) attain significance. Here is an example of BRICS stepping forward for burden sharing. The NDB was a direct consequence of the decreasing availability of funds from the World Bank and other Multilateral Development Banks for infrastructure projects in the developing world. Similarly, the CRA is to address the short term liquidity and balance of payments difficulties of developing countries without the intrusive conditionalities of the IMF. Both these have been conceived as additional facilities to complement the World Bank and IMF, and not to supplant them.
Nonetheless, there is an important political message in the creation of NDB and CRA. They are financial institutions and will naturally work on economic principles to be successful; but, the fact remains that this is the first time in 200 years that a global institution has been created without the participation of the developed west. This, by itself, is significant. Many see this as a wakeup call for other out-dated global institutions. Some even argue that had the World Bank and IMF changed with changing circumstances, there may not have been the need for the NDB and CRA.
The other anachronistic global institution is the UNSC. Even if one grants the logic of UNSC soon after World War II, it is totally outdated in today’s reality. There is no question that it has to be made more inclusive with a greater role for the emerging powers.
This brings me to the question of legitimacy vs. efficiency. There is a specious argument given by some that for global bodies to be effective they have to be small. This argument goes against the principle of legitimacy which, along with efficiency, makes the two pillars. Efficiency without legitimacy will eventually lead to the unravelling of the organisation, and legitimacy without efficiency will make it ineffective. Ideally, as Langenhove says, “In all the global institutions there must be three balances, namely balance of power, balance of responsibilities and balance of representation.” Of all the global institutions existing today, G-20 seems to be the most legitimate in terms of participation. These 20 countries contribute 85 percent of the global GDP.
Options for BRICS?
In addressing global order and global institutions, BRICS has four options: 1) to conform, i.e., go along with those structures which are fairly equitable. 2) Reform, for example the efforts to bring changes in BWI’s, 3) Bypass, i.e., to ignore those norms which are loaded heavily against the developing world so long as this does not amount to violation of recognised international laws, and 4) Recreate; NDB and CRA are examples. Hopefully, there will be more in future.
This is not relevant to intra-BRICS cooperation. But when it comes to the question of changing the global order and global governance, this becomes important because BRICS has to engage others in a constructive dialogue. Fortunately, many in the West see BRICS in a positive light. The sceptics, however, can be classified into three groups: the first group has curiosity; their question is “what is this new animal called BRICS?” the second group is suspicious; it is suspicious about the intentions of BRICS and how their initiatives will affect its interests. The third group expresses hostility; its argument is that since BRICS question some of the existing norms, it could be a dangerous grouping. It is the duty of BRICS countries to reach out to all the three groups and articulate their points of view.
For the sceptics, it would be useful to follow what Jacques Barzun once remarked, “To see ourselves as others see us in a rare and valuable gift, without a doubt. But in international relations what is still rarer and far more useful is to see others as they see themselves.”
West vs. the Rest
Whenever there is a discussion on the need for reforms on some aspects of global order, the discourse, unfortunately, is reduced to a “West vs. the Rest” argument. This does not have to be so. Enquiry should not be interpreted as confrontation. Many confuse lack of changes in an established order with stability. But orders collapse when active stakeholders feel excluded (Volker Perthes). If we are looking for an inclusive and fair order, everybody has to be part of it. In today’s world, the reality is that the West needs the rest. Therefore, it is high time that we get over the “Us vs. Them” syndrome.
Future of BRICS
As of now, it looks bright. But the main raison d’être of BRICS’s importance will be the economic performances of the five countries. Of late, they have slowed down by a few points. BRICS will have to register excellent growth rates for the world to keep an interest in the group.
BRICS would work in a practical, gradual and incremental manner. The five leaders are all agreed on this point. Hence, while it may not be prudent to write BRICS off, there is also no need to over-hype the group. Either of these can be avoided if one sees BRICS as it is—that is, as a work in progress and not as a finished product. The intra-BRICS cooperation is bound to intensify and also extend to new sectors. As they coordinate their positions on global issues, BRICS would be able to provide a valuable alternative narrative.