The author is a former chief economist at Goldman Sachs and was UK Treasury Secretary in the government of David Cameron
20 years ago I published a paper that formally summarized the emerging economies of Brazil, Russia, India and China and coined the term “brics” to describe them. I argued that these countries are likely to continue their marked growth in gross domestic product for the next decade, and that we desperately need them to play a bigger role in world governance. Since France, Germany and Italy are in a permanent economic and monetary union, I suggested that their individual seats in the G7 and the corresponding representation at the IMF and the World Bank be merged into a single European seat to make way for the Bric countries, a slightly expanded G7.
It wasn’t until 2003, when my team published another article, “Dreaming with Brics,” that we hypothesized that these four nations could collectively become larger economies than the G6 (excluding Canada). Our timing was accidental and coincided with a globalization boom which resulted in many international companies doing more business in Bric countries.
A few years later, the financial crisis finally triggered long overdue changes in global governance. My recommendation to consolidate the major continental European economies into a single representative never materialized. But in response to the market turmoil, then US President George W. Bush convened the G20 in 2008 – a group to which the four Bric countries belonged. When Gordon Brown, the British Prime Minister at the time, received the extended group in London a year later, it consolidated its central role in global economic and financial issues.
The introduction of the Financial Stability Forum – which became the Financial Stability Board in 2009 – and a rebalancing of voting rights and ownership interests at the IMF and World Bank also seemed significant. Both seemed to me to be important developments in the direction of greater common prosperity and a more representative form of global governance for the future.
How disappointing then, another decade later in November 2021, that absolutely nothing has progressed. The mandatory five-year Special Drawing Rights Review – which would likely improve the objective presentation of key emerging market currencies to reflect their growing strength – has been postponed. Due to the rivalry between the US and China, the G20 itself now appears to be divided. Very little seems to be doing.
This is particularly worrying given that while the IMF predicts that developed economies will not suffer any significant damage in the wake of the pandemic, emerging economies, with the exception of China, are likely to experience much slower growth than they had forecast before the coronavirus outbreak.
Not only has the G20 been unable to agree on a fair plan for the distribution of Covid-19 vaccines, but some members have spoken out against the formation of a new Global Finance and Health Board that will address global resilience would strengthen future health challenges. Most worrying is the shared failure to show leadership on the 1.5 ° C climate target, the central feature of this month’s COP26 summit.
Of course, the Bric leaders also founded their own economic and political club in 2009, which South Africa became “Brics” – a development that increased the popularity of the acronym. But aside from establishing another development bank, they have done very little policy coordination to further their own collective economic endeavors. Even within the G20, they have made no constructive contribution to the global common good. That is similarly disappointing.
China was the only Bric country to surpass its growth projections, and India is not too far from meeting its estimates. But because of the dismal second decades, neither Brazil nor Russia saw their nominal US dollar shares of GDP grow more than they did in 2001. The great challenge of how these countries can successfully achieve higher income status for society as a whole remains unsolved.
South Korea remains the only shining example of the nations genuinely striving to achieve this goal. In my professional life, it is the only country that has developed its economy so that its citizens are as wealthy as in southern Europe. No other nation with more than 45 million inhabitants is still in the vicinity.
Countries like Brazil, Russia, Indonesia, Nigeria, and Vietnam should try to mimic Seoul’s economic success for their own societies. That will end up making their people wealthier and likely happier, while promoting more equality around the world.