The BRICS countries: where next and what impact on the global economy?

Brazil, Russia, India, China and South Africa, originally an informal group of the leading emerging economies of the early 2000s, have since experienced very different growth paths. Their significance in the global economy at a time of considerable geopolitical uncertainty remains an open question.

Over the past two decades, there has been an astonishing restructuring of global economic power. This has been driven primarily by the rise of China and, to a lesser extent, the BRICS countries more broadly – which, in addition to the East Asian giant, encompass Brazil, Russia, India and South Africa.

As this group has become increasingly formalised and institutionalised – hosting regular summits and establishing collective bodies – many observers have worried that its growing influence might be accompanied by the normalisation of authoritarian forms of ‘state capitalism’, and even the unravelling of the liberal order.

Others have taken a more sanguine view, arguing that Eastern forms of state-led development appear superior in many ways to Anglo-American economic and political structures, and this is reconcilable with – and, indeed, depends on – an open global economy.

Either way, the concerns of many Western liberals have resurfaced following Russia’s invasion of Ukraine. Recent news that other mostly non-democratic states – Egypt, Iran, Saudi Arabia, Turkey (and Argentina) – have either applied to join the BRICS, or are considering doing so, is also cause for concern among Western governments.

What are the BRICS and why do they matter?

At one level, the idea of the BRICS is confected. The former Goldman Sachs economist (and now crossbench peer) Jim O’Neill coined the term BRIC in the early 2000s to describe the four fast-growing countries that, at the turn of the millennium, seemed most likely to begin catching up with the West (O’Neill, 2001).

Looking back, this notion appears quite problematic (Bishop, 2012). Brazil’s growth slowed dramatically around 2014 as it struggled with early de-industrialisation (Muzaka, 2017).

Russia was an erstwhile superpower. To describe it as ‘rising’ therefore was and remains questionable, particularly as its industrially atrophied post-communist economy has stayed small in global terms. Even today, as the country mounts a major military offensive, its GDP is still barely half that of the UK despite a population almost three times the size and the largest, most resource-rich territory on the planet.

India‘s growth has been impressive, but its relative share of global GDP has actually shrunk and its economy is now around one-fifth the size of China’s. One author describes the pair comparatively as the ‘slouching tiger’ and ‘roaring dragon’ (Kennedy, 2016).

South Africa is arguably not a rising power at all in global terms and was primarily tagged on to the grouping later for reasons of regional representativeness.

In fact, the story of the BRICS is largely about China’s staggering rise. Its development has been so sustained over such a long period of time that it has genuinely reshaped the distribution of global economic power (Bishop, 2016).

Figure 1: GDP by BRICS country (2000-21), in current dollars

Source: World Bank (Creative Commons License CC-BY 4.0)

As the chart shows, China’s GDP is more than double that of the other four BRICS combined: almost $18 trillion compared with Brazil ($1.6 trillion), Russia ($1.8 trillion), India ($3.2 trillion) and South Africa ($400 billion). For comparative purposes, GDP in the United States is $23 trillion but China’s economy is arguably the largest in the world in purchasing power parity (PPP) terms.

In the early research on the subject, there were fierce debates over which countries should and should not be included in the next generation of emerging powers (Cooper et al, 2006).

Some questioned whether the ‘MINT’ countries – Mexico, Indonesia, Nigeria and Turkey – might be next (O’Neill, 2013). Others stressed that a focus on large middle-income countries ignores the many small ones – such as New Zealand, Norway, Qatar and Singapore – that have achieved high levels of income and development while exercising power in unconventional ways (see Long, 2022).

There have always been question marks over which countries, exactly, should comprise the rising or emerging powers, and what criteria best capture this. What does it even mean to ‘rise’ or ‘emerge’, and how do we know when a state has finally ‘risen’ or ‘emerged’?

By the same token, as some rise, other must decline relatively: do we even have a language to describe developmental decline – or ‘undevelopment’ – in supposedly ‘developed’ countries (Bishop and Payne, 2019)?

These questions aside, the BRICS have, over time, become more deeply institutionalised. Since 2009, the countries have held annual summits with an increasingly widened agenda.

The establishment of the New Development Bank (NDB) in 2014 with $50 billion of start-up capital was another milestone. So too was the simultaneous creation of the BRICS Contingent Reserve Arrangement (CRA), a liquidity mechanism that provides support for members facing short-term balance of payments squeezes or currency instability (see Cooper, 2017).

It is in this context, at a time when much of the world is still reeling from the pandemic, that this institutionalisation process may be intensifying.

Why are countries seeking new forms of cooperation?

The motivations of prospective BRICS members are complex. Take Saudi Arabia: it is already an exceptionally wealthy country, it has a close security relationship with the United States and it can mobilise substantial sovereign wealth for investment in pursuit of economic expansion (see Trudelle, 2022). But domestic political modernisation remains slow, and the economy is highly dependent on energy and threatened in the long run by global decarbonisation.

A degree of diplomatic isolation has also followed the murder of the journalist Jamal Khashoggi. Like all authoritarian states, Saudi Arabia has to search for sources of domestic and international legitimacy. Increasingly dense trade links with China will be critical to this endeavour, by simultaneously diversifying the economy and sources of international support (Martin, 2021).

Similar stories apply to Egypt, Iran and Turkey, where the respective regimes have all experienced volatile economies, political conflict and diplomatic isolation in recent history. The Arab Spring of a decade ago still casts a very long shadow over the Middle East as a whole, leaving rulers feeling insecure and repression enduring (Josua and Edel, 2021).

Another potential BRICS member, Argentina, is a little different. Growth has fluctuated constantly since the dramatic financial crisis of 2001 (Stiglitz and Weisbrot, 2022). Periods of expansion and policy experimentation have occurred in tandem with buoyant export revenues during the late 2000s and early 2010s (Grugel and Riggirozzi, 2012).

But inflation has remained high and the currency has tanked. One US dollar bought one peso prior to 2001; a decade later it bought eight to ten pesos; and yet a decade further on, it now buys 148. Debt is also growing again. It exploded from around 40% of GDP to 160% in the aftermath of the 2001 crisis, declined again to around 40% alongside the commodity boom by 2014, and then rose once more to over 100% of GDP by the time the pandemic arrived in 2020.

Argentina has long required new sources of capital and international institutional power. Indeed, its demand for inclusion in the Group of 20 (G20) during the global financial crisis of 2007-09 in part reflected resentment at Brazil’s membership and relatively higher perceived status as an emerging power.

But what is in it for the BRICS as an organisation? New members, in theory, imply new economic resources that can be mobilised and greater strength in numbers. The expansion of the group also provides greater legitimacy and reinforces the sense that the club is worth joining – an effect that could become self-perpetuating.

At the same time, while these potential new members are certainly regionally significant, they are not the largest, most powerful, economically dynamic or diplomatically influential of countries that could theoretically join (certainly compared with the MINT countries). Furthermore, the BRICS would no longer really comprise mainly the ‘rising powers’ in a global sense with Argentina, Iran and Saudi Arabia joining.

Consequently, the broader issue is that the BRICS as an organisation still lacks deeper institutionalisation. Beyond the establishment of the NDB, ‘it is difficult to see what the group has done other than meet annually’ (O’Neill, 2021).

This problem is compounded by the fact that economic growth trajectories have been so uneven, and the group lacks clear unifying ideological principles or a shared vision for managing the global order.

Expanding the membership, then, is at least partly about gaining renewed impetus in a context where the BRICS remain beset by divergent interests, development trajectories, relative levels of geo-economic significance and ability to exercise substantial influence over the international system.

In all of these areas, China’s power resources far outstrip those of the other members, while as an aspirant hegemon, it also depends most on – and has additional responsibility for – maintaining a calm, stable and open global economy (Beeson and Zeng, 2019).

But the level of openness that China adopts, or the extent of its accommodation to liberal, Western mores, depends to a significant degree on the policy area under discussion (Hameiri and Zeng, 2019; Weinhardt and ten Brink, 2020).

How could the expansion of the BRICS affect the global economy?

The worry, from a Western perspective, relates to the fact that – with the partial exception of South Africa (Reddy, 2022) – the BRICS have become, to differing degrees, more nationalist and authoritarian over the past decade.

Xi Jinping has cemented his dominance in China. Brazil under Jair Bolsonaro – who will shortly face a presidential election run-off against Lula da Silva – and India under Narendra Modi have both experienced a starkly populist turn (de Souza, 2020; Sinha, 2021). Vladimir Putin’s Russia has become a pariah state that poses numerous thorny geopolitical questions extending well beyond the immediate Ukraine crisis (Burns, 2019; d’Eramo, 2022). In all four, minorities are persecuted and civil rights restricted.

Consequently, some European and US policy-makers worry that the BRICS may become less an economic club of rising powers seeking to influence global growth and development, and more a political one defined by their authoritarian nationalism.

Yet both the BRICS and the West share much in common. Economically, people the world over have long been disenchanted with market-led globalisation. The United States and many European countries – and even the European Union (EU) itself – have marvelled at China’s expansion and reassessed their own desperate need for new institutions and mechanisms to drive interventionist industrial policy to keep up (Lavery and Schmid, 2021; Hopewell, 2021).

Politically – with continuing constitutional upheaval wrought by Brexit and the election of Donald Trump only the most obvious examples – Western countries have also experienced declines in the quality of democracy. As European states elect (or come close to electing) nationalists like Georgia Meloni in Italy or Marine Le Pen in France, they appear more vulnerable to further democratic decay than at any other time in recent history.

Diplomatically, the war in Ukraine appears to have drawn a stark dividing line between an Eastern-backed Russia and the West. But this only obscures the complicity of many of the latter’s banking institutions and political elites in fostering Putin’s regime, even as its excesses became progressively more evident (Bienkov, 2022).

So as the BRICS rise, they disrupt the global order in problematic ways that give incentives to the West to adopt illiberal mores (Hopewell, 2017). But the East also faces the countervailing pressure to become more liberal themselves, thereby reinforcing as well as reshaping that order (Bishop and Murray-Evans, 2020).

This is evident in the ‘ambivalent’ way that China and India are torn between their self-identity as developing countries, with a purported mission to lead the Global South, and the unavoidable reality that their economic interests increasingly align with the Global North (Cooper, 2021).

The web of constraints that China and India face – notably the tension inherent in preserving an uneasy BRICS unity while becoming responsible global diplomatic powers themselves – was highlighted starkly in September 2022 when both made their displeasure at Russia’s quagmire in Ukraine public for the first time (Lau, 2022).

Will globalisation endure?

It is difficult to envisage a decisive decoupling of West from East, or a definitive process of ‘deglobalisation’. The sheer volume of trade in goods and services, the flows of capital, data and people across borders to facilitate it, the extent of economic interdependence and the complexity of global value chain-based production, which relies on inputs sourced from around the world, all militate against it (Bishop and Payne, 2021a).

We will not see a decisive retreat behind national borders. Authoritarian autarky is not a viable or credible development strategy today. But at the same time, the pressures facing states from below mean that high levels of unmediated and destabilising economic openness also remain politically toxic.

The future of the global economy will plausibly remain globalised in general – with globalisation itself changing shape – while simultaneously becoming more national in certain respects.

This is not as contradictory as it sounds. Globalisation is a process driven substantially by states that are embedded within it. The two co-exist: they are not alternatives.

We require a recalibration of the nature of the relationship – an attempt to find greater policy space for nations within a renewed overarching global framework of institutions, rules and norms.

Between the two, the regional level is crucial. Indeed, even if we are witnessing some degree of ‘reshoring’ in light of Ukraine and wider upheavals in the global economy, many production networks are likely to reconstitute themselves regionally rather than nationally (Grey, 2019). Modern forms of production at the highest points of a value chain require economies of scale that are frequently continental in scope.

The key question is not if the global economy will evolve and change shape, but rather whether this occurs in a well-managed or increasingly fraught way. This will be determined by how the framework of global governance adapts to new realities.

International bodies are unquestionably in desperate need of reform and revitalisation (Bishop and Payne, 2021b). But the system that they collectively comprise is not as dysfunctional as is often believed (Drezner, 2014).

All states require the public goods that they provide and, as Lord O’Neill (2021) notes, the greatest disappointment with the performance of the BRICS is that they have not yet lived up to their promise in terms of sustaining the G20 on the next chapter of its development.

Overcoming this will be necessary for the body to carry out its crucial role of ‘steering’ the global economy in coming years and ensuring that tensions between West and East are mollified rather than magnified.