The writer is a former chief economist at Goldman Sachs and served as a UK Treasury minister in David Cameron’s government
It is 20 years since I published a paper which formally grouped together the emerging economies of Brazil, Russia, India and China and coined the term “Brics” to describe them. I argued that since these countries were likely to continue their striking gross domestic product growth over the next decade, we urgently needed them to play a bigger role in global governance. With France, Germany and Italy in permanent economic and monetary union, I suggested their individual places in the G7 and corresponding representation at the IMF and World Bank could be consolidated into a single European seat, making way for the Bric countries to join a slightly expanded G7.
It was not until 2003, when my team published a further piece entitled “Dreaming with Brics”, that we hypothesised these four nations could collectively become bigger economies than those of the G6 (excluding Canada). Our timing was fortuitous, coinciding with a globalisation boom which meant many international companies doing more business in Bric countries.
A few years on, the financial crisis finally galvanised changes in global governance which were long overdue. My recommendation of consolidating the big continental economies into one representative never happened. But in response to the market turmoil, then US president George W Bush convened the G20 in 2008 — a grouping which included the four Bric countries. When Gordon Brown, then UK prime minister, hosted the expanded group in London a year later, this consolidated its central role in global economic and finance affairs.
The introduction of the Financial Stability Forum — which subsequently became the Financial Stability Board in 2009 — and a rebalancing of the voting rights and ownership shares at the IMF and World Bank also seemed significant. These both struck me as important developments towards a greater shared prosperity, and a more representative form of global governance for the future.
How disappointing then, another decade on in November 2021, that absolutely nothing has progressed. The mandated five-year review of the special drawing rights — which would probably boost the objective representation of key emerging currencies to reflect their growing strength — has been delayed. Due to US-China rivalry, the G20 itself now seems divided. Very little seems to get done.
This is especially concerning because while the IMF predicts that developed economies will not suffer significant damage in the wake of the pandemic, emerging markets, with the exception of China, are expected to have far slower growth than projected before coronavirus struck.
Not only has the G20 been unable to agree an equitable plan for Covid-19 vaccine distribution, but some members have also opposed the formation of a new Global Finance and Health Board, which would boost global resilience to future health challenges. The combined failure to show leadership on the 1.5C climate change target, the central feature of this month’s COP26 summit, is most worrying.
Of course, the Bric leaders also formed their own economic and political club in 2009, with the addition of South Africa making it “Brics” — a development which boosted the popularity of the acronym. But other than forming another development bank, they have done very little policy co-ordination to foster their own collective economic effort. Neither have they contributed constructively within the G20 for the global common good. This is similarly disappointing.
China is the only Bric country to have surpassed its growth projections, and India is not too far off from meeting its estimates. But due to dismal second decades, neither Brazil nor Russia have seen their nominal US dollar shares of GDP grow any bigger than they were back in 2001. The great challenge of how these countries successfully transition towards a higher income status for the whole of society remains unsolved.
South Korea continues to be the sole shining example for those nations which genuinely aspire to that goal. In my professional lifetime, it is the only country which has evolved its economy to a level where its citizens are as wealthy as those in southern Europe. No other nation of more than 45m people has yet got close.
Countries such as Brazil, Russia, Indonesia, Nigeria and Vietnam should seek to emulate Seoul’s economic success for their own societies. That will end up making their people wealthier and probably happier, while also promoting greater equality around the world.