The alliance bloc of Brazil, Russia, India, China, and South Africa (BRICS) is emerging as a massive potential competitor to the economic dominance of the United States. The gigantic power bloc represents 3.83 billion people, nearly half of the global population, as well as 50% of all recent economic growth. In contrast, the U.S. and the EU only represent 775.1 million people, not even half of that of BRICS, as well as hosting slowing economies. Could BRICS represent a new challenger to the dominance of the U.S. and the dollar?
Formed 16 years ago in 2006, BRICS aims to foster cooperation between the largest emerging economies at the time, which were predicted by Goldman Sachs to dominate the global economy by 2050. Since its establishment, the alliance bloc has only deepened their geopolitical ties, exemplified by their defiance of the call for sanctions on Russia for its invasion of Ukraine. The recent inclusion of Saudi Arabia signifies a potential departure from the kingdom’s traditional alliance with the United States. Geopolitical implications aside, the main concerns over the bloc revolve around its economic impact.
Recently, BRICS announced plans to create and implement their own currency and investment system, separate from the Western-dominated SWIFT system. This move is the largest direct challenge to the U.S. dollar’s dominance in global financial markets. In March 2023, Brazil and China publicly declared that they will be using the Chinese yuan for their commerce in lieu of the dollar. Disrupting the global economy with this move has potential upsides, since many criticize global economic institutions for favoring Western nations and hindering the development of nations in the Global South. Furthermore, the previously unchallenged dominance of the dollar undisputedly gives an advantage to the U.S. in the worldwide financial market. Over time, BRICS aims to overthrow these systems with the establishment of its own common currency for use among member countries.
While these developments may certainly be a cause for concern for the U.S. and its allies, for others it represents a potential way out from Western economic domination. Since the wave of decolonization following the end of the Second World War, many critics have argued that the U.S. and several European nations have engaged in economic neo-colonialism in the Third World. They argue that instead of direct military intervention, these developed economies put the Global South in a position of subservience through exchange rate manipulation, overproduction, offshoring, or foreign direct investment. Some go even further and cite organizations such as the World Trade Organization and the International Monetary Fund as complicit in this exploitation. It should come as no surprise then that any challenge to Western hegemony would be welcomed by some.
The stark divide between BRICS and the West has come to a head since the Russian invasion of Ukraine. Instead of rallying to Ukraine’s cause and imposing sanctions, none of BRICS’ members has ceased to trade with Russia. Additionally, the proposed new currency and banking system has been cited as a way of circumventing Russia’s exclusion from the global banking system. Critics view this as another example of the questionable behavior of BRICS nations. Some argue that BRICS represents an alliance bloc between some of the most prominent undemocratic nations. Xi Jinping of China and Vladimir Putin of Russia stand out as the obvious examples of this undemocratic nature, but India’s Narendra Modi is being increasingly seen as another anti-democratic figure due to his support of Islamophobic violence in his home country.
A potential outlier to this however is Brazil’s new president Lula da Silva. A leftist populist, da Silva could serve as a potential counterweight to the aggressive, anti-democratic nature of his colleagues. However, Lula has also been criticized for his takes on the Ukraine war, namely asking the invaded country to potentially surrender its territory in the name of peace. Altogether, the BRICS nations are an eclectic bunch. However, many Western nations have committed their fair share of illegitimate and undemocratic actions, à la the invasion of Iraq and Afghanistan by NATO forces, which necessitate more humility from their side.
Politics aside, one of the biggest differences between BRICS and the Western nations is seen in their respective economic growths. While many Western countries have struggled to maintain consistent growth, BRICS has seen some of the largest economic growth in recent memory. The combined BRICS nominal GDP was measured at $26.6 trillion, around 26% of the total global GDP, and on average their GDP has grown by 3.5% per year since 2018. On the other hand, the EU’s GDP typically has grown at around 2.5%, excluding exogenous shocks such as the COVID pandemic. Clearly, BRICS is catching up to the developed world.
However, the U.S. and EU still have some clear advantages over BRICS. One of the most notable being the presence of the largest stock markets in the world. The New York Stock Exchange is still the largest stock market in the world with no sign of that changing in the near future. In general, U.S. markets accounted for around 60% of global stock. Furthermore, the U.S. possesses powerful and advanced technological industries which the emerging economies of BRICS lack for the most part. The U.S. alone makes up around 35% of the global tech market with its tech industry worth $1.6 trillion and expected to rise to $5. trillion Of all the BRICS nations, China is the closest to catching up to the West in this regard, with a tech industry worth an estimated $1.3 trillion and the country manufactures around 29% of global technology exports. Despite this, the rest of BRICS is still lagging behind in these key industries, presenting a major weakness vis-a-vis the West.
Ultimately, how BRICS enters the world stage depends on the reception of the dominant Western nations. On one hand, the two could potentially work together and find converging interests. As liberal international relations theorists will tell you, economic cooperation and converging interests are the best way to ensure peace and development across the globe. On the other hand, if the two sides cannot find common ground, they risk re-entering into a new Cold War with rival power blocs vying for geopolitical dominance.
Written by Reed McIntire; Edited by Viktor Kharyton
Photo credit to: freepik, Julia Drössler