The weight of the BRICS in world geopolitics

Leda Catunda - Eldorado - 2018
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By SCOTT RITTER*

The BRICS already surpass the G7 in GDP corrected by purchasing power parity.

This past summer (June 26-28, 2022), the Group of Seven (G7), a self-proclaimed forum of nations that see themselves as the world's most influential economies, met at Elmau Castle in the Bavarian Alps, Germany, to hold their annual summit. The focus of this meeting [which Ukraine's President Volodymyr Zelensky attended virtually] was how to punish Russia through additional sanctions, how to further arm Ukraine, and how to contain China.

Simultaneously, China hosted, via videoconference channels, a meeting of the BRICS economic forum. Composed of Brazil, Russia, India, China and South Africa, this set of nations, relegated to the status of developing economies, focused on strengthening economic ties, international economic development and how to deal with what they collectively saw as counterproductive G7 policies.

In early 2020, Russian Deputy Minister of Foreign Affairs, Sergei Ryabkov, predicted that, based on purchasing power parity (PPP), the indices projected by the International Monetary Fund suggested that the BRICS could overtake the G7, in terms of participation in the global economy, sometime towards the end of that year. (A nation's gross domestic product adjusted for purchasing power parity, or PPP, at exchange rates, is the sum of the value of all goods and services produced in the country, equated to prices prevailing in the United States, serving as a more accurate expression of the relative economic capacity of the country than the mere calculation of GDP).

Then came the pandemic, and the restart of the global economy that followed made IMF projections controversial. The world was singularly focused on recovering from the pandemic event and, shortly thereafter, on managing the fallout from the massive Western sanctions on Russia, following the military operation in Ukraine initiated by that country in February 2022.

The G7 paid no attention to the BRICS economic challenge and instead focused on consolidating its advocacy of the “rules-based international order” that had become the mantra of the Joe Biden administration in the United States.

Miscalculation

Since the “Russian invasion” of Ukraine, an ideological divide has gripped the world, with one side, led by the G7, condemning the “invasion” and seeking to punish Russia economically, and the other, led by the BRICS, taking a more nuanced stance. , neither openly supporting Russian action nor participating in sanctions policy. This has created an intellectual vacuum when it comes to assessing the true state of affairs in global economic affairs.

It is now widely accepted that the United States and its G7 partners miscalculated the impact sanctions would have on the Russian economy, as well as the boomerang effect it would have on the West. Angus King, an independent senator from the state of Maine, noted recently that he remembered that: “When this started a year ago, all the talk was that sanctions would cripple Russia. She would be out of business and there would be riots in the streets... which they absolutely didn't. (…) Were the sanctions wrong? Wouldn't they have been well applied? Has the West underestimated Russia's ability to circumvent them? Why did the sanctions regime not play a larger role in this conflict?”

It should be noted that the IMF calculated that the Russian economy, as a result of the sanctions, would contract by at least 8%. The real figure was 2%, and the Russian economy, despite sanctions, is expected to grow in 2023, and even beyond.

This kind of miscalculation has permeated Western thinking about the global economy and the respective roles played by the G7 and the BRICS. In October 2022, the IMF published its World Economic Outlook (WEO) based on traditional GDP calculations. With him, the main economic analysts consoled themselves with the fact that, despite the political challenge brought to the fore by the BRICS in the summer of 2022, the IMF calculated that the G7 was still strong as the main global economic bloc.

In January 2023, the IMF published an update to the report World Economic Outlook previous year, reinforcing the position of strength of the G7. According to Pierre-Olivier Gourinchas, chief economist of the IMF, “the balance of risks for the outlook remained tilted downwards, but it is less tilted towards adverse results than in the edition of the World Economic Outlook of October".

This positive (to the West) allusion has prevented leading Western economic analysts from diving into the data contained in the update. I can personally attest to the reluctance of conservative editors to try to extract current relevance from “old data”.

Fortunately, there are other economic analysts, such as Richard Dias, from the British Acorn Macro Consulting, a self-described "small macroeconomic research firm that employs a top-down approach to analyzing the global economy and financial markets." Rather than accepting the IMF's rosy outlook as gospel, Dias did what analysts are supposed to do: sift through the data and draw relevant conclusions.

After digging through the database of the World Economic Outlook, from the IMF, Dias carried out a comparative analysis of the percentage of global GDP, adjusted by PPP, between the G7 and the BRICS and made a surprising discovery: the BRICS had surpassed the G7.

And this was not a projection, but a declaration of a fait accompli: the BRICS were responsible for 31,5% of global GDP adjusted by PPP, while the G7 accounted for 30,7%. To make matters worse for the G7, projected trends suggest that the gap between the two economic blocs will only widen going forward.

The reasons for an accelerated accumulation of global economic influence by the BRICS can be related to three main factors: (i) the collateral consequences of policies during the covid-19 pandemic; (ii) the boomerang effect of sanctions against Russia on G7 nations, accompanied by growing resentment among developing country economies towards G7 economic policies; and (iii) recognition of G7 priorities as rooted in colonial arrogance rather than a genuine desire to assist nations in developing their own economic potential.

It is true that the economic influence of the BRICS and the G7 is strongly influenced by the economies of China and the United States, respectively. But the relative economic trajectories of the other member states of these economic forums cannot be ruled out. While the economic prospects for most BRICS countries point to growth in the coming years, the G7 nations, largely because of the self-inflicted wound represented by the current sanctions on Russia, are experiencing slow growth or, in the case of the Kingdom United, negative, with little prospect of a reversal of this trend.

Furthermore, while membership in the G7 remains static, the BRICS are growing, with Argentina and Iran applying to join, as well as other regional powers such as Saudi Arabia, Turkey and Egypt. And what makes this potential for expansion really explosive is the recent Chinese diplomatic achievement in normalizing relations between Iran and Saudi Arabia.

The diminishing prospects of the global dominance of the US dollar, combined with the economic potential of the trans-Eurasian economic union, promoted by Russia and China, put the G7 and the BRICS on opposite trajectories. In the coming years, the latter should also surpass the former in terms of nominal GDP.

No need to hold your breath waiting for leading economic analysts to come to this conclusion. Fortunately, outliers exist, such as Richard Dias and the Acorn Macro Consulting, who seek to find new meanings in already known data.

*Scott Ritter, a former US Marine Corps intelligence officer, he was UN Chief Weapons Inspector in Iraq from 1991-98.

Translation: Ricardo Cavalcanti-Schiel.

Originally published in News Consortium.


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