new BRICkS on the block

I simply can't stop being fascinated at the amount of news that we encounter every day from so many different sources. My fascination invariably finds its way in almost every blog post of mine, but the fact is that there is truth in what I say.

I again begin with this thought because while most of this society, and the world society at large, hooks onto yellow journalism, a lot of other big, political news simply pass by our radars. I think i've written a blog post about this phenomena of yellow journalism and tabloidism, and the reasons why I think this modern society laps up every second of it. Of course, let me quickly get to the point before I wander off. While we are talking about the 2G scam, Sharad Pawar, Anna Hazare, IPL, and maybe a little about Libya and Japan, I think most of us missed this recent event which one would think would create a lot more ripples in this country. I too am guilty of not paying enough attention to it once I got to know of it.

Brazil, Russia, India and China (and South Africa) recently met in China to discuss the future of what is slated to be one of the most powerful poles in the world of the future, the BRICS! Of course, the fact that it is Goldman Sachs, of all capitalist things, that formed this term makes me hate myself for taking this term and group seriously, because I am a firm believer in the concept of self-fulfilling prophecies, and a part of me believes that this group is important because some worldly force wants it to be important. Otherwise all these countries have strong bilateral ties among other other, but never as a group. Russia's a big trading partner with both India and China, Brazil and China have a huge trade in minerals, and Russia's a big oil supplier to the world now. Economically, well, at least in hindsight, one would think its quite easy to form a BRIC. You take out all the developed countries, or the OECD countries, then you take 4 of the next most economically strong (and largest) countries, and you call them the next big thing. Quite a predictable chain of thought i would suppose!

But the fact remains that ever since I have started making sense of the world economics around me, I have been wishing for this strong financial grip of the developed North American and western European nations on the global economy to break. There is no doubt in my mind that for the third world to develop, it is imperative that it does so on its own accord, and not because the American owned IMF and World Bank tell it so. For that, it is important to try to grow out of their shadow, most notably in global trade.

The west has been ruling the world when it comes to global trade, which is a very factual claim I am making, be it in terms of manufacturing, arms, financial services and anything else. In fact, I have a very strong belief that one of the biggest catalysts for the development of financial markets in these developing countries were cash rich companies from the west themselves, so their money could find a market with higher returns. Of course, these developed nations have for long pushed for more open markets, only to enable their companies to flood them with short-term, arbitrage seeking money, and when things begin to look even slightly iffy in that host country, they'll pull it out, thus sending that country into an economic tailspin. I'm not the only one saying this! One of my favorite economic commentators of today, who's views I widely subscribe to, Nobel Laureate Joseph Stiglitz says so too!

Coming back to my original point, I think its imperative that for the third world to prosper in this competitive and close-knit environment, they need to get out of the predatory shadows of the developed economies. This means a great third-world to third-world trade done more on their terms. I have a very minute awareness of global trade, the terms and conditions that go with it, and other facts, but I do know that for long, global trade has been going on the terms set by the developed world, with they being the manufacturers and the third world being the recipient of finished goods and the supplier of raw materials. It seems like I am writing this line 200 years ago when the industrial revolution brought British manufactured goods to its very same third world colonies which provided the raw materials for them. India's history books are replete with examples of this systematic impoverishment of the country.

To tie it all together, the coming together of the new economic forces on the block is a welcome change in the world economic order. These nations are increasingly trading with each other, and rising as formidable trade partners for the rest of the world. Already China has surpassed the US as the world's largest good manufacturer, and I must say I felt this news went largely unreported in the media.

These nations are also presenting a more powerful voice in the America-controlled IMF, World Bank and other institutions, and their demand for greater rights and a louder say will probably be met by these bodies. A bigger political battle is the breaking of one of the world's most exclusive club, the United Nations Security Council, where India, Brazil, and Germany, bearer of the Axis legacy of the World Wars, fight to gain entry. China and Russia are already members. Of course, Russia carries the legacy of the USSR, and China, from what some pages of history suggest, were given membership upon the insistence of Nehru, who had the choice of taking it for India.

However, if global trade is where the major fight is, then I am happy to see these relatively third world countries finally taking the fight to the western global trade model. Its actually quite sad that I use the word 'fight', because global trade was supposed to be anything but! It is quite joyful actually, to see the American industry squirm and talk of protectionism these days, considering the fact that having lost most of its low to mid end manufacturing to mainly China, there seems to be a visible trend of its service industry shifting its locus towards the third world as well. I single out the US because it has been the flag bearer of global trade in the past century.

Finally, it is not that I do not have my misgivings about the rise of China, particularly because of what they represent and what they want to achieve. I have written many times on this blog that China simply can't be a leader of the world because that would require not just economic leadership, but leadership of the mind. How can it change the way the world thinks when its own citizens are not allowed to think freely?

But coming back to the theme of my current post, BRIC nations, and adding South Africa to the list now, are not just traders now, but important investors, lapping up companies across the world, particularly mineral and manufacturing companies. From my understanding of the announcements made at the summit, most were still nothing concrete, but only reiterated past good intentions. As commented on by many writers, the BRICS are still not one single economic block, but many combinations of bilateral ties, but then this world is not short of issues where these nations can come together and change the face of global economics and politics forever.