A history of the world, BRIC by BRIC

The bloc will account for almost 40 per cent of global GDP by 2050, signalling a change in world order.

Jim O''Neill, Chairman of Goldman Sachs A
Economist Jim O'Neill invented the concept of BRICS, a bloc of five rising powers [AFP]

Goldman Sachs – via economist Jim O’Neill in 2001 – invented the concept of a rising new bloc: BRICS (Brazil, Russia, India, China and, later, South Africa). Some cynics couldn’t help calling it the “Bloody Ridiculous Investment Concept”.

Now that doesn’t really apply. Goldman now expects the BRICS countries to account for almost 40 per cent of global gross domestic product (GDP) by 2050, and will include four of the world’s top five economies.

Soon, in fact, that acronym may have to expand to include Turkey, Indonesia, South Korea and, yes, nuclear Iran: What would that make? BRIIICTSS? Despite its well-known problems as a nation under economic siege, Iran is also motoring along as part of the N-11, yet another distilled concept. It stands for the “next 11” emerging economies.

The multitrillion-dollar global question remains: Is the emergence of BRICS a signal that we have truly entered a new multipolar world?

Yale’s canny historian Paul Kennedy (of “imperial overstretch” fame) is convinced that we either are about to cross or have already crossed a “historical watershed”, taking us far beyond the post-Cold War unipolar world of “the sole superpower”. There are, argues Kennedy, four main reasons for that: the slow erosion of the US dollar (formerly 85 per cent of global reserves, now less than 60 per cent), the “paralysis of the European project”, Asia rising (the end of 500 years of Western hegemony), and the decrepitude of the United Nations.

The Group of Eight (G8) is already increasingly irrelevant. The G20, which includes the BRICS, might, however, prove to be the real thing. But there’s much to be done to cross that watershed, rather than simply be swept over it willy-nilly: the reform of the UN Security Council, and above all, the reform of the Bretton Woods system, especially the International Monetary Fund (IMF) and the World Bank.

On the other hand, willy-nilly may prove the way of the world. After all, as emerging superstars, the BRICS have a ton of problems. True, in only the past seven years, Brazil has added 40 million people as middle-class consumers. By 2016, it will have invested another $900bn – more than a third of its GDP – in energy and infrastructure, and it’s not as exposed as some BRICS members to the imponderables of world trade, since its exports are only 11 per cent of GDP – which is less than the US.

Still, the key problem remains the same: lack of good management, not to mention a swamp of corruption. Brazil’s brazen new monied class is turning out to be no less corrupt than the old, arrogant comprador elites that used to run the country.

In India, the choice seems to be between manageable and unmanageable chaos. The corruption of the country’s political elite would make Shiva proud. Abuse of state power, nepotistic control of contracts related to infrastructure, the looting of mineral resources, real estate property scandals – they’ve got it all, even if India is not a Hindu Pakistan. Not yet anyway.

Since 1991, “reform” in India has meant only one thing: unbridled commerce and getting the state out of the economy. Not surprisingly then, nothing is being done to reform public institutions, which are a scandal in themselves. Efficient public administration? Don’t even think about it. In a nutshell, India is a chaotic economic dynamo and yet, in some sense, not even an emerging power.

Russia, too, is still trying to find the magic mix, including a competent state policy to exploit the country’s bounteous natural resources, extraordinary space, and impressive social talent. It must modernise fast as, apart from Moscow and St Petersburg, relative social backwardness prevails. Its leaders remain uneasy about neighbouring China (aware that any Sino-Russian alliance would leave Russia as a distinctly junior partner). They are distrustful of Washington, anxious over the depopulation of their eastern territories, and worried about the cultural and religious alienation of their Muslim population.

Then again, the Putinator is back as president – with his magic formula for modernisation: a strategic German-Russian partnership that will benefit the power elite/business oligarchy, but not necessarily the majority of Russians.

Dead in the woods

The post-World War II Bretton Woods system is now officially dead, totally illegitimate, but what are the BRICS planning to do about it?

At their summit in New Delhi in late March, they pushed for the creation of a BRICS development bank that could invest in infrastructure and provide them with back-up credit for whatever financial crises lie down the road. The BRICS know perfectly well that Washington and the European Union (EU) will never relinquish control of the IMF and the World Bank. Nonetheless, trade among these countries will reach an impressive $500bn by 2015, mostly in their own currencies.

 BRICS nations to establish new bank

However, BRICS cohesion, to the extent it exists, centres mostly around shared frustration with the Masters of the Universe-style financial speculation that nearly sent the global economy off a cliff in 2008. True, the BRICS crew also has a notable convergence of policy and opinion when it comes to embattled Iran, an “Arab Sprung” Middle East, and Northern Africa. Still, for the moment, the key problem they face is that they don’t have an ideological or institutional alternative to neo-liberalism and the lordship of global finance.

As Vijay Prashad has noted, the global north has done everything to prevent any serious discussion of how to reform the global financial casino. No wonder the head of the G77 group of developing nations (now G132, in fact), Thai ambassador Pisnau Chanvitan, has warned of “behaviour that seems to indicate a desire for the dawn of a new neo-colonialism”.

Meanwhile, things happen anyway, helter-skelter. China, for instance, continues to informally advance the yuan as a globalising, if not global, currency. It’s already trading in yuan with Russia and Australia, not to mention across Latin America and in the Middle East. Increasingly, the BRICS are betting on the yuan as their monetary alternative to a devalued US dollar.

Japan is using both the yen and yuan in its bilateral trade with its huge Asian neighbour. The fact is that there’s already an unacknowledged Asian free-trade zone in the making, with China, Japan, and South Korea on board.

What’s ahead, even if it includes a BRICS-bright future, will undoubtedly be very messy. Just about anything is possible (verging on likely), from another Great Recession in the US to European stagnation or even the collapse of the eurozone, to a BRICS-wide slowdown, a tempest in the currency markets, the collapse of financial institutions, and a global crash.

And talk about messy, who could forget what Dick Cheney said, while still Halliburton’s CEO, at the Institute of Petroleum in London in 1999: “The Middle East, with two-thirds of the world’s oil and the lowest cost, is still where the prize ultimately lies.” No wonder when, as vice-president, he came to power in 2001, his first order of business was to “liberate” Iraq’s oil. Of course, who doesn’t remember how that ended?

Now (different administration but same line of work), it’s an oil-embargo-cum-economic-war on Iran. The leadership in Beijing sees Washington’s whole Iran psychodrama as a regime-change plot, pure and simple, that has nothing to do with nuclear weapons. Then again, the winner so far in the Iran imbroglio has been China. With Iran’s banking system in crisis, and the US embargo playing havoc with that country’s economy, Beijing can essentially dictate its terms for buying Iranian oil.

The Chinese are expanding Iran’s fleet of oil tankers, a deal worth more than $1bn, and that other BRICS giant, India, is now purchasing even more Iranian oil than China. Yet Washington won’t apply its sanctions to BRICS members because, these days, economically speaking, the US needs them more than they need the US.

In Chinese eyes

Which brings us to the dragon in the room: China.

What’s the ultimate Chinese obsession? Stability, stability, stability. 

The usual self-description of the system there as “socialism with Chinese characteristics” is, of course, as mythical as a gorgon. In reality, think hard-core neoliberalism with Chinese characteristics led by men who have every intention of saving global capitalism.

At the moment, China is smack in the middle of a tectonic, structural shift from an export/investment model to a services/consumer-led model. In terms of its explosive economic growth, the past decades have been almost unimaginable to most Chinese (and the rest of the world), but, according to the Financial Times, they have also left the country’s richest one per cent controlling 40 – 60 per cent of total household wealth. How to find a way to overcome such staggering collateral damage? How to make a system with tremendous inbuilt problems function for 1.3 billion people?

Enter “stability-mania.” Back in 2007, Prime Minister Wen Jiabao was warning that the Chinese economy could become “unstable, unbalanced, uncoordinated, and unsustainable”. These were the famous “Four Uns“.

Today, the collective leadership, including the next prime minister, Li Leqiang, has gone a nervous step further, purging “unstable” from the party’s lexicon. For all practical purposes, the next phase in the country’s development is already upon us.

It will be quite something to watch in the years to come.

How will the nominally “communist” princelings – the sons and daughters of top revolutionary party leaders, all immensely wealthy – lead China beyond the “Four Modernisations“? Especially with all that fabulous wealth to loot.

The Obama administration, expressing its own anxiety, has responded to the clear emergence of China as a power to be reckoned with via a “strategic pivot” – from its disastrous wars in the Greater Middle East to Asia. The Pentagon likes to call this “rebalancing” (though things are anything but rebalanced or over for the US in the Middle East).

Before 9/11, the Bush administration had been focused on China as its future global enemy number one. Then 9/11 redirected it to what the Pentagon called “the arc of instability”, the oil heartlands of the planet extending from the Middle East through Central Asia. Given Washington’s distraction, Beijing calculated that it might enjoy a window of roughly two decades in which the pressure would be largely off. In those years, it could focus on a breakneck version of internal development, while the US was squandering mountains of money on its nonsensical “Global War on Terror”.

Twelve years later, that window is being slammed shut as the US declares itself back in the hegemony business in Asia. Doubts that this was the new US path were dispelled by Secretary of State Hillary Clinton’s November 2011 manifesto in Foreign Policy magazine, none too subtly labelled “America’s Pacific Century“. (And she was talking about this century, not the past one.)

The mantra of the US is always the same: “American security.” Whether in the oil-rich Gulf, where Washington “helps” allies Israel and Saudi Arabia because they feel threatened by Iran, or Asia where similar help is offered to a growing corps of countries that are said to feel threatened by China, it’s always in the name of US security. In either case, in just about any case, that’s what trumps all else.

As a result, if there is a 33-year Wall of Mistrust between the US and Iran, there is a new, growing Great Wall of Mistrust between the US and China. Recently, Wang Jisi, dean of the School of International Studies at Peking University and a top Chinese strategic analyst, offered the Beijing leadership’s perspective on that “Pacific Century” in an influential paper he co-authored.

China, he and his co-author write, now expects to be treated as a first-class power. After all, it “successfully weathered … the 1997-98 global financial crisis” it believes was caused by “deep deficiencies in the US economy and politics. China has surpassed Japan as the world’s second largest economy and seems to be the number two in world politics, as well … Chinese leaders do not credit these successes to the United States or to the US-led world order”.

The US, Wang adds, “is seen in China generally as a declining power over the long run … It is now a question of how many years, rather than how many decades, before China replaces the United States as the largest economy in the world… part of an emerging new structure”. Think: BRICS.

In sum, as Wang and his co-author portray it, influential Chinese officials see their country’s development model providing “an alternative to Western democracy and experiences for other developing countries to learn from, while many developing countries that have introduced Western values and political systems are experiencing disorder and chaos”.

Put it all in a nutshell and you have a Chinese vision of the world, in which a fading US still yearns for global hegemony and remains powerful enough to block emerging powers – China and the other BRICS – from their 21st century destiny.

Eurasian wet dream

Now, how do the US political elite see that same world? Virtually no one is better qualified to handle that subject than former national security adviser, BTC pipeline facilitator, and briefly Obama ghost adviser, Dr Zbigniew (“Zbig”) Brzezinski. And he doesn’t hesitate to do so in his latest book, Strategic Vision: America and the Crisis of Global Power.

If the Chinese have their strategic eyes on those other BRICS nations, Dr Zbig remains stuck on the Old World, newly configured. He is now arguing that, for the US to maintain some form of global hegemony, it must bet on an “expanded West”. That would mean strengthening the Europeans (especially in energy terms), while embracing Turkey, which he imagines as a template for new Arab democracies, and engaging Russia, politically and economically, in a “strategically sober and prudent fashion”.

Turkey, by the way, is no such template because, despite the Arab Spring, for the foreseeable future, there are no new Arab democracies. Still, Zbig believes that Turkey can help Europe and the US in far more practical ways to solve certain global energy problems by facilitating its “unimpeded access across the Caspian Sea to Central Asia’s oil and gas”.

Under the present circumstances, however, this too remains something of a fantasy. After all, Turkey can only become a key transit country in the great energy game on the Eurasian chessboard I’ve long labelled Pipeline-istan if the Europeans get their act together. They would have to convince the energy-rich, autocratic “republic” of Turkmenistan to ignore its powerful Russian neighbour and sell them all the natural gas they need. And then there’s that other energy matter that looks unlikely at the moment: Washington and Brussels would have to ditch counterproductive sanctions and embargos against Iran (and the war games that go with them) and start doing serious business with Tehran.

Dr Zbig nonetheless proposes the notion of a two-speed Europe as the key to future US power on the planet. Think of it as an upbeat version of a scenario in which the present eurozone semi-collapses. He would maintain the leading role of the inept bureaucratic fat cats in Brussels now running the EU, and support another “Europe” (mostly the southern “Club Med” countries) outside the euro, with nominally free movement of people and goods between the two. His bet – and in this he reflects a key strand of Washington thinking – is that a two-speed Europe – a Eurasian Big Mac – still joined at the hip to the US could be a globally critical player for the rest of the 21st century.

And then, of course, Dr Zbig displays all his Cold Warrior colours, extolling an American future “stability in the Far East” inspired by “the role Britain played in the 19th century as a stabiliser and balancer of Europe”. We’re talking, in other words, about this century’s number one gunboat diplomat. He graciously concedes that a “comprehensive American-Chinese global partnership” would still be possible, but only if Washington retains a significant geopolitical presence in what he still calls the “Far East …w hether China approves or not”.

The answer will be “not”.

In a way, all of this is familiar stuff, as is much of actual Washington policy today. In his case, it’s really a remix of his 1997 magnum opus The Grand Chessboard in which he once again certifies that “the huge Trans-Eurasian continent is the central arena of world affairs”. Only now reality has taught him that Eurasia can’t be conquered and Washington’s best shot is to try to bring Turkey and Russia into the fold.

Robocop rules

Yet Brzezinski looks positively benign when you compare his ideas with Hillary Clinton’s recent pronouncements, including her address to the tongue-twistingly named World Affairs Council 2012 NATO Conference. There, as the Obama administration regularly does, she highlighted “NATO’s enduring relationship with Afghanistan” and praised negotiations between the US and Kabul over “a long-term strategic partnership between our two nations”.

Empire: BRICS – The new world order

Translation: Despite being outmanoeuvred by a minority Pashtun insurgency for years, neither the Pentagon nor NATO have any intention of rebalancing out of their holdings in the Greater Middle East. Already negotiating with President Hamid Karzai’s government in Kabul for staying rights through 2024, the US has every intention of holding onto three major strategic Afghan bases: Bagram, Shindand (near the Iranian border), and Kandahar (near the Pakistani border). Only the terminally naïve would believe the Pentagon capable of voluntarily abandoning such sterling outposts for the monitoring of Central Asia and strategic competitors Russia and China.

NATO, Clinton added ominously, will “expand its defence capabilities for the twenty-first century”, including the missile defence system the alliance approved at its last meeting in Lisbon in 2010.

It will be fascinating to see what the possible election of socialist François Hollande as French president might mean. Interested in a deeper strategic partnership with the BRICS, he is committed to the end of the US dollar as the world’s reserve currency. The question remains whether his victory throws a monkey wrench into NATO’s works, after these years under the “Great Liberator of Libya” Nicolas Sarkozy.

No matter what either Dr Zbig or Clinton might think, most European countries, fed up with their black-hole adventures in Afghanistan and Libya, support Hollande on this. But it will still be an uphill battle. The destruction and overthrow of Muammar Gaddafi’s Libyan regime was the highpoint of the recent NATO agenda of regime change in MENA (the Middle East-Northern Africa). And NATO remains Washington’s plan B for the future, if the usual network of think tanks, endowments, funds, foundations, NGOs, and even the UN fail to provoke what could be described as YouTube regime change.

After going to war on three continents (in Yugoslavia, Afghanistan, and Libya), turning the Mediterranean into a virtual NATO lake, and patrolling the Arabian Sea non-stop, NATO will be, according to Hillary, riding on “a bet on America’s leadership and strength, just as we did in the 20th century, for this century and beyond”. So 21 years after the end of the Soviet Union – NATO’s original raison d’etre – this could be the way the world ends: with NATO, in whimpering mode, still fulfilling the role of perpetual global Robocop.

We’re back once again with Dr Zbig and the idea of the US as the “promoter and guarantor of unity” in the west, and as “balance and conciliator” in the east (for which it needs bases from the Gulf to Japan, including those Afghan ones). And don’t forget that the Pentagon has never given up the idea of attaining Full Spectrum Dominance.

For all that military strength, however, it’s worth keeping in mind that this is distinctly a New World (and not in North America either). Against the guns and the gunboats, the missiles and the drones, there is economic power. Currency wars are now raging. BRICS members China and Russia have cordilleras of cash. South America is uniting fast. The Putinator has offered South Korea an oil pipeline. Iran is planning to sell all its oil and gas in a basket of currencies, none of which are dollars. China is paying to expand its blue-water navy and its anti-ship missile weaponry. One day, Tokyo may finally realise that, as long as it is occupied by Wall Street and the Pentagon, it will live in eternal recession. Even Australia may eventually refuse to be forced into a counterproductive trade war with China.

So this 21st century world of ours is shaping up right now largely as a confrontation between the US/NATO and the BRICS, warts and all on every side. The danger remains that somewhere down the line it turns into a Full Spectrum Confrontation. Because make no mistake, unlike Saddam Hussein or Muammar Gaddafi, the BRICS will actually be able to shoot back.

Pepe Escobar is the roving correspondent for Asia Times, a TomDispatch regular, and a political analyst for RT. His latest book is Obama Does Globalistan (Nimble Books, 2009).

A version of this article first appeared on TomDispatch.