Yet
it refuses to die. The BRICS idea has roared back to life, more
fashionable than ever, dividing the world along an unnatural line of
cleavage.
Brazil, Russia, India, China, and South Africa have
little in common. Some are democracies: others are one-party
dictatorships at war with democracy. Some endured imperial rule within
living memory: others are today’s imperialists.
Some are energy
and food importers. Others live off commodity rents. As a group, they
have failed to sustain the promise of economic take-off, assumed to be
inevitable 15 years ago.
It is America that has rebounded. It is China that has suffered a collapse in productivity growth and is sliding into the middle income trap.
The BRICS share a vaguely stated aim of “multipolarity”, but China is not trying to achieve anything of the sort.
Its
own strategy documents aspire to dominance over the world’s economic
and technological infrastructure, with Beijing setting the rules of a
new global order.
One might ask why on earth India is still party
to China's hegemonist agenda. It holds to its post-colonial credo of
non-alignment, but is implicitly aligned with the US, Japan, and
Australia in the Quadrilateral Security Dialogue.
Whether or not
the Quad evolves over time into the Nato of the East, it is already
viewed as a “military alliance aimed against China’s resurgence” by Xi
Jinping.
Yet for all the absurdities, the BRICS club is now expanding. Twelve
countries have submitted applications to join and another six are
putting out feelers...
The BRICS bank in Shanghai has been upgraded politically under Brazil’s ex-leader Dilma Rousseff, even as it is downgraded financially to AA by Fitch Ratings...
The actual terms of debt restructuring under China’s opaque
Belt & Road are draconian. Yet Egypt and Bangladesh have joined, and
Uruguay will soon follow...
Brazil and Russia each looked like commodity superpowers
during the bubble of the early 2000s, supplying energy, metals, and food
for Asia’s industrial revolution.
But both were succumbing to the resource curse. Their industrial cores were being hollowed out by overvalued currencies.
Both
sank into a lost decade when the commodity supercycle deflated. The
combined GDP of Brazil and Russia was $4.7 trillion in 2011: it was $3.4
trillion by 2021, according to World Bank data. In the meantime the US vaulted from $15.6 trillion to $23.3 trillion.
The
BRICS story is really about China. It is an article of faith in the
global South that China’s GDP will soon overtake America’s GDP by some
preordained process of history.
This looked plausible for a brief moment circa 2008. It seemed
self-evident that China, growing at double-digit rates, would inherit
the earth by compound arithmetic. The dollar was then at rock bottom.
Brazilian supermodel Gisele Bündchen famously refused to accept it as
payment.
Peak oil was in vogue and America had become dangerously
reliant on energy imports. The US current account deficit had ballooned
to 6pc of GDP. China’s surplus was 10pc of GDP, albeit by holding down
its currency to gain mercantilist market share.
What most people
did not know is that US free enterprise and technology between them had
already cracked the potential of shale. Opec and Russia lost their monopoly power in short order.
Within a decade the US was again the world’s biggest producer of oil
and gas, with energy and chemical feedstock prices low enough to power a
US manufacturing renaissance.
The heart attack in the US banking
system was not the crisis of capitalism that China and the global Left
supposed it to be. It was just an episode (a bad one) in the
Schumpeterian cycle of creative destruction.
We can see in
retrospect that China suffered deeper damage from the Lehman crisis. The
Central Party School falsely concluded that it vindicated the Communist
model of top-down control of bank credit and five-year industrial
plans.
Hubris ran rampant.
China doubled down on a
development model that was already obsolete. The economic return on each
yuan of credit hurled at construction and industrial over-capacity has
fallen from around 1:1 in 2008 to nearer 1:3 today. Such is debt
saturation. China may have missed its chance to reform in time.
It is following Japan and Korea into demographic collapse, with the big difference that it is becoming old before it is rich.
Xi Jinping has progressively abandoned the Deng Xiaoping model that
delivered 40 years of super-charged growth. He strives for global
technological ascendancy but has reverted to Maoist thought control and
treats China’s tech entrepreneurs as a threat to Party control.
China’s
structural growth rate is heading for 2pc to 3pc this decade,
converging on mature US growth rates long before it has caught up.
Informed economic opinion no longer thinks that China’s sorpasso
is inevitable before 2030, and if it does not happen this decade it is
unlikely to happen this century given America’s demographic edge – so
long as America does not self-destruct: the new Fukuyama thesis.
The
BRICS revival today is very different from its original flowering in
2008. For all the bluster, what anti-Americans object to this time is
American strength. The dollar is not weak, it is too strong for global
comfort. The US has weaponised control over the dollarised system of
global payments and credit in order to enforce American foreign policy...
This amorphous front for Chinese ambitions has succeeded in capturing the
political microphone of the global South, reviving a superannuated
concept that ought not to exist...
The West is paying a high price for dragging its feet on reform of the UN Security Council and the Bretton Woods regime."
Yet it refuses to die. The BRICS idea has roared back to life, more fashionable than ever, dividing the world along an unnatural line of cleavage.
Brazil, Russia, India, China, and South Africa have little in common. Some are democracies: others are one-party dictatorships at war with democracy. Some endured imperial rule within living memory: others are today’s imperialists.
Some are energy and food importers. Others live off commodity rents. As a group, they have failed to sustain the promise of economic take-off, assumed to be inevitable 15 years ago.
It is America that has rebounded. It is China that has suffered a collapse in productivity growth and is sliding into the middle income trap.
The BRICS share a vaguely stated aim of “multipolarity”, but China is not trying to achieve anything of the sort.
Its own strategy documents aspire to dominance over the world’s economic and technological infrastructure, with Beijing setting the rules of a new global order.
One might ask why on earth India is still party to China's hegemonist agenda. It holds to its post-colonial credo of non-alignment, but is implicitly aligned with the US, Japan, and Australia in the Quadrilateral Security Dialogue.
Whether or not the Quad evolves over time into the Nato of the East, it is already viewed as a “military alliance aimed against China’s resurgence” by Xi Jinping.
Yet for all the absurdities, the BRICS club is now expanding. Twelve countries have submitted applications to join and another six are putting out feelers...
The BRICS bank in Shanghai has been upgraded politically under Brazil’s ex-leader Dilma Rousseff, even as it is downgraded financially to AA by Fitch Ratings...
The actual terms of debt restructuring under China’s opaque Belt & Road are draconian. Yet Egypt and Bangladesh have joined, and Uruguay will soon follow...
Brazil and Russia each looked like commodity superpowers during the bubble of the early 2000s, supplying energy, metals, and food for Asia’s industrial revolution.
But both were succumbing to the resource curse. Their industrial cores were being hollowed out by overvalued currencies.
Both sank into a lost decade when the commodity supercycle deflated. The combined GDP of Brazil and Russia was $4.7 trillion in 2011: it was $3.4 trillion by 2021, according to World Bank data. In the meantime the US vaulted from $15.6 trillion to $23.3 trillion.
The BRICS story is really about China. It is an article of faith in the global South that China’s GDP will soon overtake America’s GDP by some preordained process of history.
This looked plausible for a brief moment circa 2008. It seemed self-evident that China, growing at double-digit rates, would inherit the earth by compound arithmetic. The dollar was then at rock bottom. Brazilian supermodel Gisele Bündchen famously refused to accept it as payment.
Peak oil was in vogue and America had become dangerously reliant on energy imports. The US current account deficit had ballooned to 6pc of GDP. China’s surplus was 10pc of GDP, albeit by holding down its currency to gain mercantilist market share.
What most people did not know is that US free enterprise and technology between them had already cracked the potential of shale. Opec and Russia lost their monopoly power in short order. Within a decade the US was again the world’s biggest producer of oil and gas, with energy and chemical feedstock prices low enough to power a US manufacturing renaissance.
The heart attack in the US banking system was not the crisis of capitalism that China and the global Left supposed it to be. It was just an episode (a bad one) in the Schumpeterian cycle of creative destruction.
We can see in retrospect that China suffered deeper damage from the Lehman crisis. The Central Party School falsely concluded that it vindicated the Communist model of top-down control of bank credit and five-year industrial plans.
Hubris ran rampant.
China doubled down on a development model that was already obsolete. The economic return on each yuan of credit hurled at construction and industrial over-capacity has fallen from around 1:1 in 2008 to nearer 1:3 today. Such is debt saturation. China may have missed its chance to reform in time.
It is following Japan and Korea into demographic collapse, with the big difference that it is becoming old before it is rich.
Xi Jinping has progressively abandoned the Deng Xiaoping model that delivered 40 years of super-charged growth. He strives for global technological ascendancy but has reverted to Maoist thought control and treats China’s tech entrepreneurs as a threat to Party control.
China’s structural growth rate is heading for 2pc to 3pc this decade, converging on mature US growth rates long before it has caught up. Informed economic opinion no longer thinks that China’s sorpasso is inevitable before 2030, and if it does not happen this decade it is unlikely to happen this century given America’s demographic edge – so long as America does not self-destruct: the new Fukuyama thesis.
The BRICS revival today is very different from its original flowering in 2008. For all the bluster, what anti-Americans object to this time is American strength. The dollar is not weak, it is too strong for global comfort. The US has weaponised control over the dollarised system of global payments and credit in order to enforce American foreign policy...
This amorphous front for Chinese ambitions has succeeded in capturing the political microphone of the global South, reviving a superannuated concept that ought not to exist...
The West is paying a high price for dragging its feet on reform of the UN Security Council and the Bretton Woods regime."