What are the BRICS and why worry about them ?
• First an idea for big investors ….• An economic reality – four distinct trillion dollar plus economies (and there is more)
• Distinct variety of capitalism opposed to the Anglo-Saxon model - the rise of new forms of state led / coordinated capitalism
• The Brics against the sicks (capitalism versus capitalism)
• Then a political project (within the G-20) • Eventually a new pole – changing / replacing the ‘triad’ of globalization as we knew it
Not the developed countries
• Chimerica and beyond – creating and maintaining economic interdependencies (in a capitalist world market economy – no one can grow on his own)
• Developed countries are the thriving thanks to the expansion of the capitalist world economy (emerging economies as markets)
• Developed countries are profiting in various ways (from cheap labour, cheap manpower, cheap brains, cheap energy, cheap resources, cheap manufactured goods, cheap foodstuff, cheap services)
• The rise of the emergent economies depends upon the “West” (free trade, free market model)
The logic of intra-BRICS cooperation
• Only, if and as far as they are actually joining forces! • What emerging economies share – population / potential / resources / the need to catch up / the lack of high technology / the lack of research & development capacities / the lack of capital
• Growth patterns – very high growth rates are normal in the beginning, during the catch up periode, but not sustainable
• Vulnerabilities - exhaustion of resources / exhaustion of work force / expansion without innovation, improvement / environmental damage / urban sprawl and deterioriation of the habitats in Mega-cities
• Growth rates (acceleration / slowdown of economic growth) are for a large part policy induced
Why the BRICS can become a serious rival
• When and as far as they pursue joint projects: • Joint projects 1: the rise of intra-BRICS-trade (increasing number of bilateral / multilateral trade treaties, increasing volume of intra – BRICS-trade of more than $ 320 billion in 212, volume of intra-BRICS – trade growing at a pace of 28% per annum)
• Rapid increase of trade volume between BRICS and other developing countries (at 25% p.a.)
• Joint projects 2: the rise of intra-BRICS-FDI – both Outward and Inward FDI (more than 30% of world FDI coming from developing and transition economies, the BRICS clearly dominating)
• Rapid growth of outward FDI into the developed world (triad) - with the BRICS in the lead
• Rapid growth of intra-BRICS – M&A (inbound deals are at their peak now)
• Rapid growth of EMNCs and increasing importance of EMNCs from the BRICS in the world top league of MNCs
How real is the challenge to USA hegemony?
• A new beacon / a shining example to the developing world
• An alliance between very unequal partners • A bloc in the making? Or just junior partners to the existing great powers bloc?
• A non-Western / anti-Western bloc in the making? Or just business as usual – capitalism versus capitalism?
• How many divisions do the BRICS have? Where is the flag? Who is in charge?
• What is the counter hegemonic project / narrative? Do the BRICS have a common project of their own?
Living with Crisis – the USA as Crisis Manager
• The Great Crisis (the Fourth Great Depression in the history of modern capitalism)
• This time the Great Crisis is different! • 2009 – first BRICS summit at the deepest point of the world financial crisis
• USA (Treasury and Fed) in action – leading a series of joint actions of a core group of triad central banks
• The ultimate humiliation / triumph: the BRICS offering help to the great powers of the developed world (China, Brazil in particular)
Core challenges to the Dollar/Wall Street regime
• The BRICS (plus their allies) starting to use their own currencies in intra-BRICS-trade (and in trade with other developing countries)
• The BRICS create the largest development bank of the global South ( in addition to smaller, regional development banks) – potential impact of the BRICS Bank of the South (November 2012 / $ 240 billion)
• BRICS central banks replacing their $ assets by gold and/or financial assets in each others currencies
• BRICS central banks / banks buying and holding each others government bonds
• Long term Chinese project: to establish the Renminbi as a world reserve currency (rivalling the Dollar and the Euro)
Adapting to a multipolar world or not
• Several chessboards to play on (not levelled at all)• First: military game in an unipolar world (with the US as the only world power)
• Second: multipolar economic game – with the US, EU, Japan and China as the four major players (China gaining importance, thanks to the BRICS)
• Third: transnational game with a multitude of nonstate actors amongst which power is widely diffused
• The US have not yet given up its claim to world-leadership (number one, second to none, the indispensable nation)
• The US regard the BRICS as a challenger (lead by China) • The US still pursues a grand strategy (“Whereever the American flag was planted, there tyranny must disappear” , Walter Lippman, 1943)
The US against the BRICS
• Never treat the BRICS as a bloc – deal with each of them separately
• Strategic goal: Separate China as the core / centre / potential leader of the group from the rest
• If you cannot join them, beat them! If you cannot seduce them to join you (or stay with you), beat them!
• Isolate Brazil from China, isolate Brazil from its partner countries in Latin America
• Treat Russia as a regional power (potential ally)• Treat India as a regional power• Focus upon the weaknesses of the group / diversities and disparities between the member countries
• Pursue variegated / specialized strategies for each of them
• Never forget the real challenger – China
BRICS Projects – regional freetrade zones
• ASEAN plus – China’s most recent success (third largest free trade zone in the world)
• ACFTA – since 2010 (first with 6 Asean countries, 4 more to follow until 2015)
• 3rd largest Free trade zone in the world (i.t. of GDP / trade volume – more than 400 billion USD in 2012)
• ASEAN – China railway became operative this month (february 2013)
• Expanding ACFTA - who will join next?
USA – Towards a New Grand Strategy?
• Several grand strategies – from the start (an anticolonial revolution against the British empire)
• American Grand Strategy in the 19th century: Preserving its zone of influence, defending against the European empires
• American Grand Strategy after WW I: Supporting a new world order – as arbitrator in the background
• American Grand Strategy after WWII: Containing the Soviet empire and rebuilding a capitalist world economy under US leadership
• American Grand Strategy after 1989/90: Building global capitalism under US leadership (the ‘ civilizing mission’ again)
• Recent change: Transform the world according to the US model of democratic capitalism (some varieties are accepted)
A new world order ?
• Conventional thinking: Hegemonic cycles – the eternal rise and fall of rival hegemonic powers
• Accordingly the question asked: Who will dominate the world during the second of half of the 21st century?
• US – shift towards soft power (while still carrying the biggest stick)
• US – ruling the world via gentlemen’s clubs • Reorganize the G7-8/G20 structure – towards the G4 – G14 (neutralizing and integrating the BRICS under US leadership)
• Never think the unthinkable: A Post-American world order!