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POWER SHIFTS AND ECONOMIC CHANGE THE DECLINE OF THE WEST:RISE OF THE BRICS? 1. Transfer of Power The transfer of power from West to East is gathering pace and soon will dramatically change the context for dealing with international
POWER SHIFTS AND ECONOMIC CHANGE THE DECLINE OF THE WEST:RISE OF THE BRICS?
“The transfer of power from West to East is gathering pace and soon will dramatically change the context for dealing with international challenges -- This time, the populous states of Asia are the aspirants seeking to play a greater role...” James Hoge in Foreign Affairs 2004
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“The real change America faces is not its own decline, but the rise of everyone else. The most extraordinary thing about the 20 years since the end of the Cold War is the unprecedented explosion of capitalist development across the
mention Indonesia, Brazil, Turkey, South Africa, Russia and the oil-rich states, constitutes a shift of the same magnitude as America's rise to power after the Second World War”. Fareed Zakaria The Post-American World. 2008
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“The West's long period of global dominance is ending, encouraged and accelerated by its own mistakes and irresponsible behaviour. We are entering a new historical cycle, in which there will be proportionally fewer Westerners, more Africans and Middle Easterners, and – with greater relevance economically and strategically – many more Asians” Dominique Moisi. European Voic.com. 15.2.10
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“The most significant political phenomenon of our new century (are) the relative rise of Asia, perhaps China especially, and its natural concomitant, the relative decline of the west as a whole and more particularly of both of its two greatest components, Europe and the US” Paul Kennedy. WORLD
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“There is no longer any question: wealth and power are moving from the North and the West to the East and the South, and the old order dominated by the United States and Europe is giving way to one increasingly shared with non- Western rising states. But if the great wheel of power is turning, what kind of global political order will emerge in the aftermath?”
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“The kind of incredible domination of the world that America and the West enjoyed for the last 200 years was a hugely artificial moment of history. For 1,800 of the last 2,000 years, the two largest economies in the world were consistently China and India. So by 2050, or earlier, the No. 1 economy will be China, No. 2 India,No.3 the United States of America — that’s the normal scheme of things” Interview 2011. Kishore Mahbubani:
See also his: The New Asian Hemisphere: The Irresistible Shift of Power to the East. 2008
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The acronym “BRICs” was coined by Jim O'Neill in a 2001 paper entitled "Building Better Global Economic BRICs". It has come into widespread use as a symbol of the shift in global economic power away from the developed G7 economies towards the developing world
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Lecture Plan
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FOUR BRICS
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THE FIFTH BRIC: 2010
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Brazil welcomes the BRICS 2014
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Putin welcomes Xi Jin Ping 2015
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BRIC SUMMIT 2016 India welcomes China
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A BRIC WORLD: 2050
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BRICs League Tables Total GDP 2007/2050 ($bn)
2007: China – 3.5 (4) Brazil 2.0 (10) Russia – 1.9 (11) India – 1.8 (12) 2050: China – 70.0 (1) India 35.0 (3) Brazil 15 (4) Russia 10.0 (5)
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GROWTH: BRICS (%)
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10 20 30 40 50 60 70 80
1991-2000 2001-2008 2010-2015
Developed Emerging markets BRICs China
INVENTING THE BRICs
The term “BRICs” was coined by Jim O’Neill of Goldman Sachs in a 2001 paper entitled "Building Better Global Economic BRICs". Global Economics Paper 66. 30th November 2001
http://www.goldmansachs.com/ourthinking/topics/brics/brics-reports- pdfs/build-better-brics.pdf
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Who were the original BRICs?
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Jim O’Neill 3 features of the BRICs (2001)
especially China in world GDP - will grow, raising important issues about the global economic impact of fiscal and monetary policy in the BRICs.
forums should be re-organised and in particular, the G7 should be adjusted to incorporate BRIC representatives.
market economies will exceed that of the G7. On a current GDP basis, BRIC share of world GDP is 8% and rising
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ACRONYM to ORGANIZATION BRICs SUMMITS: 2009-2016
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1.BRICS on BRICS
“The BRICS Summit’ in India “proved conclusively that the strongest nations in the developing world are eager to achieve unity”.
The ultimate objective “gradually to transform BRICS into a full-format mechanism for interacting on the critical issues of the global economic and political agenda.”
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grouping”. The BRICS bloc of nations is now an economic and robust locomotive which represents about 40 percent of the world's population, nearly a fifth of global gross domestic product, an estimated 4.4 trillion U.S. dollars worth of combined foreign reserves, and 17 percent of world trade”. China Daily. 15/7/2014
cooperation is an "ongoing historical process“ which will help to achieve sustainable economic development, and favourable external economic
partners.“ President Xi Jinping. 15/7/2014
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2014) comes "at a time of political turmoil, conflict and humanitarian crises in several parts of the world.“
with my BRICS partners how we can contribute to international efforts to address regional crises, address security threats and restore a climate of peace and stability in the world"
forward to a major improvement in relations with China.
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Crimea at 6th BRIC summit; human rights not raised.
the internal affairs of other states.
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preventing the US from calling the shots and isolating one of their
and others to strict IMF conditionality. Indeed, for some it is personal— Modi was barred from the United States up until his recent election. And, they see the U.S. sanctions on Russia as a test run for a strategy that may be used on others that incur Washington’s displeasure in the
western dominated institutions and have a safety net if they get pushed
17, 2014.
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infrastructure projects in member-countries. World Bank is headed by Americans.
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IMF Quota system
Votes allocated on financial contribution. G5 have 39 votes, BRICs have 11
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BRICs on IMF Reform
modernization of its governance structure so as to better reflect the increasing weight of emerging markets and developing countries in the world economy…….. We remain disappointed and seriously concerned with the current non- implementation of" the IMF reforms” discussed in 2010. BRIC Summit Statement. July 2014
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World Bank
35.86% in World Bank compared to just 13.1% of developing economies. US dominance is clear with over 15% votes followed by Japan with 8%.The total share of BRICS countries is not even near equal to that of the U.S.
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States enormous leverage over the world economy and this is a major instrument of power. It is ‘our currency but your problem’ said an American policy maker many years ago.
dollar fluctuations; (c) All countries are forced to hold US$ in reserve. In 2014, 62% of all foreign exchange reserves held by all central banks were in $US (Euro 24%)
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BRIC economies. How to reduce trade dependency on West?
Federal Reserve pumping of liquidity into US economy and raise interest rates. Four of the five BRICS suffered currency crashes. Money flooded back to New York.
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between 2002 and 2012. But China much bigger economy ($8trillion+ v $6trillion). Chinese demand pulls along other BRICs
with China. 250,000 Chinese live in Brazil.
China trade with Africa. China now South Africa’s biggest trade partner
TRIUM Global EMB Class of 2020 – Module 1 37
communist collapse of USSR
and Xi have met 6x.
reached ‘highest level in history’ and signed $400bn gas deal
Jinping pledged to deepen the relationship even further
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India: China's foreign minister has already travelled to Delhi for talks with the PM.
accepted Xi's invite to visit Beijing in 2014. Xi also invited Modi to attend the Asia Pacific Economic Cooperation forum in Beijing in November, although India is not a member.
and on the need for reform of international institutions.
boundary issue problem.
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1.More cooperation between the BRICs to increase intra-BRIC trade and investment, encourage more R&D between BRICs, 2.Discussion to set up a BRIC International Development Bank http://www.bricsindia.in/brics-report.pdf
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BRICS Development Bank. It is claimed that this will be “significant" in the evolution of the BRICS grouping into a solid and sustainable alliance; the Bank will provide “an institutionalisation for the
but this new bank will glue the members together”. March 2013
TRIUM Global EMBA Class of 2020 – Module 1 42
infrastructure projects and sustainable
Shanghai HQ; Russian and Brazilian Chairman of the 2 Boards:Governors/Directors
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combat currency crises and create a framework for providing financial aid and short-term loans during balance of payment crisis. Total =$100
will contribute $18bn each, South Africa $5 billion.
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International Economic Order….
(IMF)…”
dollar as a the dominant international currency…” Howard G. Campbell. Pambazuka News. 29 July 2014
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The end of “dollar dominance”
Many economists consider this the first step to breaking the dollar dominance in global trade….”
the U.S. and Europe..” “
diminishing sensitivity to external global conditions”. Mike Kane. Hedgeable. 12 August 2014
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“The BRICs prepare to rule”
coming……….The world’s emerging giants now have the thumbscrews on the West”
Sunday Telegraph (London, 20 July 2014)
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But is economic power of West declining?
1.Banking power in comparison 2.Death of the US$? 3.USA + EU still $27trillion (45% of world GDP) 4.Global Foreign Direct Investment: still the West
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dollar as the No. 1 choice for international financial transactions… the yuan can’t truly rival the dollar until China undertakes some fundamental financial reforms — liberalizing the trade of the yuan and capital flows in and out of the country..Until then, China’s massive reserve of dollars forces it to continually invest in dollar assets…..” Michael Schuman. TIME magazine 21 July 2014
especially given the lack of external competitors that could supplant the dollar." John Shin (Merrill Lynch)
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total global trade. And commerce across the Atlantic in goods alone exceeds $600bn”
day; investment links are even more substantial, totaling over $1.8 trillion a year. Each partner creates jobs for about 6 million workers on each side of the Atlantic, and EU-US trade accounts for almost 40% of world trade.
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Germany, Belgium, Spain, Italy, Netherlands).
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BRICS’ PROBLEMS
37% of India’s 1.21bn poor.
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Has the Brics bubble burst?
growth has been challenged very much for the last five years or so,” Jorge Mariscal, the chief investment officer of emerging markets at UBS Wealth Management, told Bloomberg Business. “The Bric concept was popular. But nothing is eternal.”
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Brics poverty and inequality
reduce world poverty in the past three decades and have eased international inequality between countries, levels of income disparities among global citizens have seen no significant change. The gap between international inequality and global inequality has widened as a result of increased income disparities within BRIC countries. http://policy-practice.oxfam.org.uk/publications/inequality- matters-brics-inequalities-fact-sheet-276312
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Brics
Growth in the informal jobs sector is associated with deepening inequality, and working women are particularly
increasingly poorer than their urban counterparts; 50.3% of China’s rural population is excluded from public benefits such as health insurance and higher levels of education. In all the BRICS, girls are disadvantaged in levels of access to education, especially in rural areas.
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COMPARING BRICS: 2010-2020 1.China, 2.India, 3.Russia, 4.Brazil
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BRICs: Summary
economy.
power?
rest will grow.
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