Living in a BRICS World: the New Development Model

Clare Schulte-Albert

BRICS Leaders

BRICS: Rivals and Rogues

BRICS countries have discovered their new agenda-setting power and multilateral leverage in creating new international institutions. At the 2003 WTO Doha Round, Brazil, South Africa, and India led developing nations in creating a G-20 group. Brazil, South Africa, India and China were the top negotiators at the Copenhagen conference, pledging to walk out together if the developed nations failed to meet their minimum position.

The BRICS have even created their own forum , convening high level meetings to discuss how to improve the current global economic situation, create a new global reserve currency, and find a way to work together in pushing for reform in financial institutions.

The BRICS are also increasingly filling in the gaps of global governance with respect to what Western states have referred to as “rogue states”. Brazil was able to negotiate an agreement with Iran to exchange its low-enriched uranium for nuclear fuel. In Sudan, China was able to obtain consent to the Annan Plan from Omar Al-Bashir to allow peacekeeping boots on the ground in 2006, as well as put pressure on North Korea to come back to the negotiating table at the Six Party Talks in 2005. These countries are gaining political clout in areas that the West has traditionally shunned, which becomes an advantage in a crises, but a dangerous game otherwise.

BRICSFrom Market-Oriented to State-Owned

Earlier this year, the five BRICS nations sounded richer countries out for destabilizing the world economy through reflationary monetary policies. They called for the cession of more voting rights to developing countries by the IMF and signed an agreement to extend credit facilities to reduce reliance on the dollar. Emerging economies are taking multilateral financial and monetary policy into their own hands.

Western states are increasingly aware that emerging economies present more of a challenge to traditional market capitalism. In a recent report called “Winning in a Changing World, Canada and Emerging Markets”, the roundtable discussions noted that  “a major challenge facing Canadian firms is that governments and firms in major emerging markets (China, India, and Brazil) may not always play by conventional, market-based rules. The Economist reports that 28 per cent of the emerging world’s 100 biggest companies are state-owned enterprises (SOEs).”

This trend in state-owned enterprises becoming major players in the global economy is driven by the resource-rich or resource-hungry economies of the BRICS.  Ian Bremmer has noted that state capitalism has been more harmful than helpful to the rules-based international order. Besides being a political tool that ensures that wealth creation does not threaten the leadership’s hold on power, state-owned enterprises are also notorious for forcing managers to run at market losses, engaging in bribery of local officials, and neglecting minimum labour standards.

The BRICS Development Model

Due to their colonial histories, many emerging economies present an alternative to traditional Western models of development. Development aid from the World Bank and IMF has come with conditions that ask borrowing countries to implement good governance models and neoliberal economic measures. Critics of Western aid like Dambisa Moyo and Rita Abrahamsen have pointed to the disastrous outcomes and failures of conditional aid on developing countries.

BRICS G8 Development Model

China’s no-strings attached development aid in Africa is a case in point. Beijing has been granting output-based development aid that provides infrastructure loans and debt relief in exchange for energy and mining contracts.  As a result, China has played a tremendous role in modernizing African countries and building up schools, hospitals, roads, railways, and so on. At the same time, such policies have their drawbacks – the desire to grant development aid in exchange for business does contribute to human rights abuses in dictatorial regimes like Sudan and Zimbabwe and can lead to new debt cycles, since new loans are guaranteed once the infrastructure projects are completed.

In addition to bilateral projects, the BRICS have recently come together to set up a development fund. Tired of waiting around for reform in Western institutions, the BRICS arguably understand much better the plight of developing countries when it comes to methods of eradicating poverty, securing food and energy supplies, developing infrastructure and acquiring new technologies. However, historical and political differences between this diverse group of countries, as demonstrated by the past inability to unite in support of a World Bank presidency candidate, may hamper long term progress in creating a non-Western rival economic institution.

BRICS Development Indicators

Our Values, BRICS Values

In the grand scheme, BRICS hold divergent perspectives on international obligations and responsibilities, none of which seem to lend any clearer picture of how the BRICS would reshape the rules of the international order. Russia and China seem less willing to embrace the established rules, preferring policies of non-intervention and seeking drawn out diplomatic solutions, as seen by their veto of the recent UN Security Council resolution for tougher sanctions on Syria. As democracies, India and Brazil appear more in tune with moral obligations like the responsibility to protect and sustainable development vis-à-vis traditional international institutions like the UN and Rio+20.

While analyzing the impact of these new rule-makers is pressing, we also need to consider new shifts such as the rise of new groups of emerging economies like MIST (Mexico, Indonesia, South Korea, Turkey). Experts need to think critically about how these new powers will impact the rules-based international order and how that will change the way that developed countries engage in new and traditional multilateral institutions and forums. As John Ikenberry so masterfully explained in a Foreign Affairs article, the task for Western countries is to cultivate and maintain those “rules and institutions that can protect the interests of all states in the more crowded world of the future”.