Introduction:
The rise of the BRICS and the decline of the G7
The world is witnessing a profound shift in the balance of economic power, as the emerging economies of the BRICS countries (Brazil, Russia, India, China and South Africa) are challenging the dominance of the G7 countries (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States).
The BRICS countries represent a diverse group of nations that share common interests and aspirations for development, cooperation and reform of the global economic order. They are an alliance of five emerging economies that have been cooperating since 2001 to pursue common interests and aspirations in the global economic order and governance. The G7 countries, on the other hand, are the traditional leaders of the industrialised world that have shaped the rules and institutions of the global economy for decades.
In this presentation I analyse the rise of the BRICS and the decline of the G7 as the world’s economic superpowers by 2050. I examine the economic performance and potential of the BRICS countries, their challenges and opportunities for cooperation among themselves and with other developing countries, their impact on the global economic order and governance, and their implications for the G7 countries and their relations.
We will also explore the scenarios and prospects for the BRICS and the G7 by 2050, taking into account the uncertainties and risks posed by factors such as geopolitics, technology, climate change and pandemics.
It is significant at this juncture to state that the BRICS countries have already surpassed the G7 countries in terms of economic power measured by purchasing power parity (PPP). That is a mathematical fact. What remains is to ponder whether they will also overtake them in terms of nominal GDP by 2050. As it stands it seems only a matter of “when” not “if.”
The BRICS countries have also become more influential in shaping the global agenda and institutions, offering an alternative model to the G7 countries and there is talk of a BRICS forming a bank to rival the international Monetary Fund (IMF) and World Bank, a gold backed reserve and the expansion, China’s cross Border Interbank Payment System (CIPS), a rival payment to Society for Worldwide Interbank Financial Telecommunications (SWIFT).
Needless to say, there are several countries queuing up to join the BRICS union. The list will show most are countries in Africa and countries most disgruntled with economic sanctions, or threat of these sanctions. These sanctions are implemented through the current commerce system with payments through SWIFT, United States dollar reserves and the Breton Woods institutions as global monetary overlords. The resent blitz by G7 leaders scurrying to African countries in the last six months is quite telling in itself. But that will be the subject of another day altogether, together with the existential threat to the US dollar value.
However, the BRICS countries also face significant challenges and constraints that limit their cohesion and effectiveness as a group and these we will expand on below. Equally, the G7 countries are not a write off as it is. They have lost some of their relative economic weight and leverage in the global economy, but still retain significant advantages in terms of innovation, human capital, soft power and alliance networks.
Thus the future of the global economy will depend on how well the BRICS and the G7 countries can adapt to the changing realities and cooperate with each other on common challenges.
The economic performance and potential of the BRICS countries
The BRICS countries are poised to be the economic superstars of the 21st century. They have defied the odds and achieved spectacular growth rates that have seen them at least abreast of the G7 countries, if not better. They have also become more influential in shaping the global agenda and institutions, offering an alternative model to the G7 countries (China brokering talks between Iran and Saudi Arabia is a case in point).
Let us examine the economic performance and potential of the BRICS countries, using various indicators such as GDP, trade, investment, innovation and human development.
GDP: The BRICS countries have already surpassed the G7 countries in terms of economic power measured by purchasing power parity (PPP), which adjusts for differences in price levels across countries. According to the International Monetary Fund’s (IMF) World Economic Outlook Data Base, the BRICS countries accounted for 31.5% of the PPP-adjusted global GDP in 2022, while the G7 countries provided 30.7%.
However, in nominal terms, which do not adjust for price levels, the BRICS countries still lag behind the G7 countries. Nonetheless, they are expected to overtake them by 2050.The IMF projects that the BRICS countries will have a nominal GDP of $95.6 trillion by 2050, compared to expected $87.8 trillion for the G7 countries.
Trade: The BRICS countries have also become major players in global trade, both as exporters and importers. They have diversified their trade partners and products, and increased their share of world trade.
According to the World Trade Organisation (WTO), the BRICS countries accounted for 22.6% of world merchandise exports and 23.9% of world merchandise imports in 2020, up from 15.5% and 14.9%, respectively, in 2010.
The BRICS countries have also expanded their trade among themselves, forming a dynamic intra-BRICS market. According to a report by Oxford Development Studies, intra-BRICS trade increased from $93 billion in 2001 to $323 billion in 2018. Note that this is still a far cry from around $4 trillion intra-trade between G7 nations.
Investment: The BRICS countries have also become major sources and destinations of foreign direct investment (FDI), which reflects their attractiveness and competitiveness as economies.
According to the United Nations Conference on Trade and Development'S (UNCTAD) World Investment Report 2021, the BRICS countries received $277 billion of FDI inflows and made $145 billion of FDI outflows in 20204. The BRICS countries have also established their own lending institution, the New Development Bank (NDB), which aims to support infrastructure and sustainable development projects in the BRICS and other developing countries. The NDB has approved 82 projects so far worth $30 billion since its inception in 2015.
Be on the watch for my future analysis piece on NDB, which I will present in the coming weeks.
Innovation: The BRICS countries have also invested heavily in innovation, which is essential for enhancing productivity and competitiveness in the global economy. They have increased their spending on research and development (R&D), improved their patenting activity, and boosted their scientific publications and citations.
According to the World Bank’s World Development Indicators, the BRICS countries spent 2% of their GDP on R&D in 2018, up from 1.3% in 2010. According to the World Intellectual Property Organisation’s (WIPO) Global Innovation Index 2021, China ranked 12th among 132 economies in terms of innovation performance, while India ranked 46th, Russia ranked 49th, Brazil ranked 62nd and South Africa ranked 63rd.
Human development: As of 2021, the estimated total population of the BRICS nations is approximately 3.4 billion people. Here's a breakdown of the population for each of the member countries:
- Brazil: The estimated population of Brazil is around 213 million people.
- Russia: The estimated population of Russia is around 145 million people.
- India: The estimated population of India is around 1.39 billion people.
- China: The estimated population of China is around 1.4 billion people.
- South Africa: The estimated population of South Africa is around 60 million people.
Simply, about half the world’s population lives in BRICS nations. With more countries joining, you can surmise where I am going with this…
The BRICS countries have already made significant progress in human development, which measures the well-being of people beyond income. They have improved their health outcomes, education levels, gender equality and environmental sustainability.
According to the United Nations Development Programme’s (UNDP) Human Development Report 2020, China ranked 85th among 189 countries and territories in terms of human development index (HDI), which combines life expectancy, education and income per capita. India ranked 131st, Brazil ranked 84th, Russia ranked 52nd and South Africa ranked 114th. So as a bloc, and individually, there still is some way to go to be considered top class in terms of “human development.”
The challenges and opportunities for cooperation among the BRICS countries
From all measures, and all manner of testing, it has been surmised that politics and economics are only but inverse sides of the same coin. In that vein, the BRICS countries are not only emerging as economic superstars, but also political ones as well besides being partners.
Among themselves, they have established a platform for dialogue and cooperation on various issues of common interest and concern, such as trade, finance, development, security, health and climate change. They have also created their own institutions and mechanisms, such as the New Development Bank, the Contingent Reserve Arrangement mainly gold backed, the BRICS Business Council, the BRICS Vaccine Centre and militarily, as witnessed by various joint military exercises. We must not be surprised if, behind the scenes, there is also a flurry of intelligence exchange within this bloc.
With others they have also engaged developing countries and regions through the BRICS Plus and BRICS Africa initiatives. Lately, with the advent of military conflagration in Ukraine and other geopolitical friction points around the globe, we have seen the alliance, via its constituent members like China and South Africa, mediating and/or advocating politically. For instance China about Iran-Saudi Arabia relations, South Africa about Palestinian subjugation by Israel, and Brazil about the Cuban blockade.
Be that as it may, the BRICS cooperation is not without challenges and limitations. Lets us turn our focus on these inhibitions and outright predicaments as well as opportunities for cooperation among the BRICS countries, using various indicators such as institutionalisation, cohesion, effectiveness and legitimacy.
Institutionalisation: The BRICS cooperation has evolved from an informal grouping to a more institutionalised one over the past decade. The BRICS countries have held annual summits since 2009, established various ministerial and working group meetings, and set up permanent secretariats and liaison offices. They have also adopted various declarations, action plans and memoranda of understanding to guide their cooperation.
A significant omission is that the BRICS cooperation still lacks a clear legal framework and a binding dispute settlement mechanism. The BRICS institutions also face challenges of coordination, representation and accountability. This may be traced to that union members have young or questionable democracies, local institutions that are not as autonomous as they should be, and a level of opaqueness in administration that does not augur well for nations that what to be recognised as global leaders.
Cohesion: The BRICS cooperation is based on the principle of consensus and respect for diversity. Their countries share common interests and aspirations as emerging economies and developing countries that seek a more equitable and inclusive global order. They also face common challenges such as poverty, inequality, terrorism and what I would term mid-term democracies” as each can hardly count five democratically elected leaders since each’s autocratic rulers.
As it turns out, the BRICS countries also have significant differences in terms of their political systems, economic models, regional contexts and strategic priorities. They also have divergent or conflicting interests on some issues such as trade disputes, human rights, cyber-security and regional conflicts. Which may yet accentuate fissures between them over time.
Effectiveness: The BRICS cooperation has achieved some notable outcomes and impacts in various fields of cooperation. The BRICS countries have contributed to the reform of global governance institutions such as the IMF and the World Bank, increased their voice and representation in international forums such as the G20 and the UN, provided financial assistance and technical support to other developing countries through the NDB and other mechanisms, enhanced their trade and investment relations among themselves and with other regions, promoted innovation and digitalisation through joint projects and platforms, and coordinated their responses to global crises such as the COVID-19 pandemic.
This does not necessarily mean it is all rosy in this BRICS garden. Cooperation faces challenges of implementation, monitoring and evaluation of their commitments and initiatives. Not to speak of that the coalition’s cooperation has limited influence on some key global issues such as nuclear non-proliferation, human rights protection and climate change mitigation, where the G7 countries continue to hold sway.
Legitimacy: The global space and control of who dictates the pitch and directions of proceedings has always been a contested arena. In the backdrop of such pugnacity, the BRICS cooperation has still gained some recognition and support from other actors in the international community.
The BRICS countries have engaged with other developing countries and regions through outreach mechanisms such as the BRICS Plus and BRICS Africa. They have also cooperated with other multilateral institutions such as the United Nations (UN), the World Trade Organisation (WTO), the World Health Organisation and the SCO - the Shanghai Cooperation Organisation. It is a regional intergovernmental organization founded in 2001 by the leaders of China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan. The SCO aims to promote cooperation on security, economy, culture, education, and other areas among its member states).
To this end, they have sought to enhance their public diplomacy and communication strategies through various channels such as media forums, academic forums, think tank networks and civil society dialogues.
Inherent in all these engagements is that the bloc’s cooperation faces impediments of perception, representation and participation. The BRICS cooperation is often seen as a self-serving, and indeed anti-Western union by some actors in the international community.
They also face difficulties in representing and accommodating the interests and needs of other developing countries in their cooperation agenda. The BRICS cooperation also lacks sufficient involvement and consultation of various stakeholders such as parliaments, businesses, academia and civil society.
The main postulation of this chapter is that the BRICS cooperation has both challenges and opportunities for enhancing its role and contribution in global affairs.
This can be tested mathematically to this averment with the following formula that compares the degree of institutionalisation (I), cohesion (C), effectiveness (E) and legitimacy (L) of the BRICS cooperation with a hypothetical optimal level (O) as follows:
d(BRICS) = sqrt[(I(BRICS) - O)^2 + (C(BRICS) - O)^2 + (E(BRICS) - O)^2 + (L(BRICS) - O)^2]
The smaller d(BRICS) is, the closer the BRICS cooperation is to its optimal level. At current calculations, it is that individualism and personal objectives still reign supreme within this union, which may yet undo all the ground they have cover so far.
The impact of the BRICS on the global economic order and governance
The BRICS countries are not only economic partners, but also political challengers. They have questioned and contested the existing global economic order and governance, which they perceive as unfair and unjust. They have also proposed and pursued alternative visions and models, which they claim as more equitable and inclusive.
Reform: The BRICS organisation has advocated and achieved some reform of the global economic order and governance, especially in the areas of finance and development.
They have pushed for more voice and vote in the International Monetary Fund (IMF) and the World Bank, which they regard as dominated by the G7 countries. Over and above that, they have established their own financial institutions, such as the New Development Bank (NDB) and the Contingent Reserve Arrangement (CRA), which aim to provide alternative sources of financing and support for the BRICS and other developing countries.
They have also contributed to the creation of new development frameworks, such as the 2030 Agenda for Sustainable Development and the Paris Agreement on Climate Change, which reflect their priorities and perspectives.
Representation: This alliance has increased their representation in the global economic order and governance, both individually and collectively. They have gained more seats and shares in the IMF and the World Bank, as well as other multilateral institutions such as the World Trade Organisation (WTO), the World Health Organisation (WHO) and the United Nations (UN).
They have also enhanced their participation and leadership in various international forums such as the G20, the UN Security Council, the UN General Assembly and the UN Human Rights Council. They have also formed their own platform for dialogue and cooperation on various issues of common interest and concern, such as trade, finance, development, security, health and climate change.
Regulation: On the matter of influencing and shaping aspects of the global economic order and governance, the BRICS countries have done their bit. Especially in terms of resetting norms and standards. They have promoted their own values and principles, such as sovereignty, non-interference, multi-polarity, diversity and democracy.
Advocated their own approaches and models, such as state-led development, South-South cooperation, inclusive globalisation and green growth isn’t without its own challenges. But they have trudged on, nonetheless. They have also disputed some of the existing norms and standards, such as human rights, intellectual property rights, market liberalisation and environmental protection.
Are they right? Well, at least they are offering an alternative which if it is wrong, helps the world confirm the existing model is the best, which we can not do currently without an alternative competing view.
Resilience: The world has increasingly been beset with a myriad of crises and shocks in the global economy in recent years, such as the global financial crisis of 2008-2009, the European debt crisis of 2010-2012, the COVID-19 pandemic of 2020-2021 and the US-China trade war of 2018-2021. The purple patch on this mosaic tapestry of economic perplexities has been the BRICS countries. They have demonstrated some resilience in the global economic order and governance, especially in terms of coping with said crises and shocks.
- Their strong domestic markets and consumption, which have helped them to maintain economic growth and reduce their dependence on external demand.
- Their diversified trade partners and markets, which have enabled them to mitigate the effects of trade disruptions and protectionism.
- Their investments in infrastructure and sustainable development projects, both within their national boundaries and across their regions, which have enhanced their connectivity and competitiveness.
- Their establishment of new institutions and mechanisms of cooperation, such as the New Development Bank (NDB) and the Contingent Reserve Arrangement (CRA) backed by gold, which have provided them with alternative sources of financing and liquidity support.
- Their commitment to multilateralism and reform of the global governance system, which have given them more voice and influence in shaping the rules and norms of the international political economy.
The impact of the BRICS on the global economic order and governance can, too, be tested by a mathematical formula that compares the degree of reform (R), representation (P), regulation (N) and resilience (S) of the BRICS countries with a hypothetical optimal level (O):
i(BRICS) = sqrt[(R(BRICS) - O)^2 + (P(BRICS) - O)^2 + (N(BRICS) - O)^2 + (S(BRICS) - O)^2]
The smaller i(BRICS) is, the closer the BRICS countries are to their optimal level of impact. So far it is average, hovering in the middle.
The implications of the BRICS for the G7 countries and their relations
The relationship between the BRICS and G7 nations has increasingly become a factitious one and characterised by rivalry. Nonetheless, the inescapable fact is that these two axes are very much dependant on each other.
Indeed, they have also sought and explored some opportunities for cooperation and dialogue with each other as blocs and individually on issues of mutual interest and concern.
Competition: The two blocs have consistently competed for markets, resources, technology and influence in various regions and sectors of the world economy right from 2001 at BRICS’ inception with the new player instantly challenging the dominance and legitimacy of the G7 countries in setting the rules and norms of the global economic order and governance.
The new kid on the bloc has, by its very existence, offered alternative visions and models of economic development and integration, such as the Belt and Road Initiative, the Regional Comprehensive Economic Partnership and the African Continental Free Trade Area. This can only be a good thing.
Conflict: The BRICS countries have encountered some conflict with the G7 countries in various areas of political interest, such as security, human rights, democracy and climate change. These two have clashed over some regional and global issues as well, such as, Syria, Iran, Venezuela, Hong Kong, Taiwan, and poignantly, the currently raging Ukrainian war.
As stated earlier in this presentation, the appearance of BRICS and their deliberate policies are severely giving mortal blows to the US dollar and the US economy as it is, through their deliberate and, not so subtle, actions. That will be the subject of a future piece.
Cooperation: Needless to say, the BRICS countries have pursued some cooperation with the G7 countries on some issues of common interest and concern, such as health, terrorism, nuclear non-proliferation and financial stability.
They have participated in some multilateral forums and mechanisms, such as the G20, the UN Security Council, the UN General Assembly and the IMF. They have also initiated some bilateral or trilateral dialogues and partnerships with some of the G7 countries on various topics and sectors.
Communication: Cooperation has necessitated the need for communication between these two opposing behemoths, regardless of their suspicion of each other. The communication is mainly on some matters of mutual interest and concern, such as trade disputes, cyber security, vaccine distribution and climate action.
They have exchanged some views and information through various channels and platforms, such as summits, ministerial meetings, working groups and media forums. They have also expressed some willingness and readiness to enhance their communication and understanding with the G7 countries on various issues.
This communication not only needs to be maintained, but also improved in quality and quantity, as the world would not need any miscommunication between these nuclear powers, for obvious reasons…
Conclusion:
The prospects and scenarios for the BRICS and the G7 by 2050
The BRICS and the G7 countries are likely to face different prospects and scenarios by 2050, depending on their economic performance, political cooperation, social development and environmental sustainability. In this conclusion, I will outline some possible scenarios for the BRICS and the G7 by 2050, based on four dimensions: growth, governance, inclusion and resilience.
Growth: The BRICS countries are anticipated to grow faster than the G7 countries in terms of GDP, trade, investment and innovation by 2050. According to Price Waters Coopers's (PwC) "World in 2050" report, the BRICS countries could account for 41% of the world GDP in PPP terms by 2050, compared to 18% for the G7 countries.
The report goes on further and states that the BRICS countries could also account for 28% of world merchandise exports and 29% of world merchandise imports by 2050, compared to 15% and 16%, respectively, for the G7 countries. The BRICS countries could also increase their spending on R&D to 2.5% of their GDP by 2050, compared to 2.3% for the G7 countries3.
However, the growth prospects of the BRICS countries are subject to various uncertainties and risks, such as demographic transitions, institutional reforms, technological disruptions and geopolitical tensions, and the spectre of war - what with sabre rattling between North Atlantic Treaty Alliance (NATO) and Russia and between USA and China.
Governance: The BRICS countries are expected to challenge and change the global economic order and governance by 2050. They are likely to demand even more voice and vote in the existing global institutions, such as the IMF, the World Bank, the WTO and the UN that the concession they have already got. We can not rule out a scenario where they completely withdraw from these institutions and form rival institutions of their own because they are currently strengthening their own parallel institutions and mechanisms, such as the NDB, the CRA, the BRICS Business Council and the BRICS Vaccine Centre.
They are also likely to promote their own values and principles, such as sovereignty, non-interference, multi-polarity and diversity. However, the governance prospects of the BRICS countries are subject to various constraints and limitations, such as institutional capacity, policy coordination, norm compliance and stakeholder participation.
Inclusion: I have observed with bewilderment at the rate and amount of countries, particularly from the “developing world,” who are queuing up and clamouring to join the BRICS alliance. The quality and quantity of nations that will be admitted will undoubtedly determine or dispute all the number projections we, finance practitioners, have been making about the BRICS, in relation to G7 group.
However, the internal inclusion prospects of the BRICS countries are subject to various challenges and gaps, such as social protection, quality of services, civic rights and public accountability and there is still a big chasm that the bloc needs to cover if it is to be spoken of in the same breath as G7 in this regard.
Resilience: The BRICS countries are envisaged to increase their capacity to cope with crises and shocks by 2050. They are likely to diversify their economic structures, strengthen their financial systems, enhance their technological capabilities and boost their scientific collaborations. They are also likely to provide support and assistance to other developing countries that are affected by crises and shocks, regardless they have joined the group, or they are still operating on the fringes.
According to a report by Oxford Development Studies, intra-BRICS trade could increase from $323 billion in 2018 to $1.5 trillion by 2050. According to a report by Goldman Sachs, the NDB could lend out up to $500 billion per year by 2050. This is such a significant chunk the globe’s poorest nations, which are likely to align with BRICS, will feel the positive impact the most.
Whether the BRICS nations will maintain a neutral business relationship with these poor countries indefinitely or they will attempt western style conditions based approach will be intriguing to observe as the bloc may alter its conceptualisation if its influence becomes more entrenched.
Either way, I am convinced this competition for African friendship could lead to better trade deals and more respect for African autonomy as there is a real alternative to G7 in the horizon in form of the BRICS union which, by most indications, is promising to be the wealthier and bigger option of the two in the not so distance future as it is projected to topple G7 as the world’s economic superpower by 2050.