Holding Pattern

BRICS

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The Labor Party’s draft national platform 2023 makes no mention of BRICS. The platform does not need to mention everything and too much detail is frowned upon nowadays. But the emergence and likely expansion of BRICS is an important development.
The BRICS is an association of Brazil, Russia, India, China, and South Africa. These countries collectively produce about 25% of world GDP and represent 40% of the world’s population. BRICS holds summits to discuss various aspects of cooperation and pursue common goals in areas such as trade, finance, technology, and sustainable development.
Some 19 other countries have applied or expressed interest in joining BRICS. These include Algeria, Argentina, Bahrain, Egypt, Indonesia, Iran, Saudi Arabia, and United Arab Emirates. Some of these countries are already members of a ‘Friends of BRICS’ group. BRICS does not currently have a fully developed process for inducting new members. But it will soon develop one.
Many of these countries voted to condemn the Russian invasion of Ukraine but did not participate in the imposition of economic sanctions against Russia.
The Indian news platform and media organization “First Post’ says that the pandemic and the Ukraine War have undermined globalisation- leading to the development of two political blocks- the US and NATO and Russia and China. First Post says that the countries interested in joining BRICS want to maintain aspects of globalisation that have benefitted them and to avoid having to “choose sides” especially in their economic or trading relationships.
First Post says that although China and Russia are both members of BRICS they have not sought, or been permitted to, dominate its agenda.
BRICS will meet next in Johannesburg between 22 and 24 August. French President Emmanuel Macron has stirred the pot by asking for an invitation to attend.
The BRICS has established the Shanghai based New Development Bank and the Contingent Reserve Arrangement which can be seen as either complementing, or providing an alternative to, the Western created organisations of the World Bank and the IMF.
BRICS is neither a military alliance nor a political alliance in the sense that it is aims to promote a particular political system. Its ideology, insofar as it has an ideology at all, is based on the idea that peace is better promoted through economic development, economic interconnectedness, and balance of power rather than through promotion of liberal democracy that, in practice, has invariably become linked to US hegemony.

During its unipolar moment US foreign policy was that it could and should intervene to promote liberal democracy and human rights everywhere and anywhere it deemed warranted. It did this through military intervention, economic sanctions, or in the case of China, (until recently) constructive engagement. This was not always or necessarily malignly intentioned. But international law, and especially article 2 of the UN charter (which requires members to refrain in their international relations from the threat or use of force) is based in concepts of territorial integrity and sovereign equality, rather than on whether a country practices enough liberal democracy. So, in practice US unipolarity created a gap between legality and legitimacy.

BRICS does not seek to divide the world into “us and them” camps based on what the US President thinks, often quite selectively, about whether a particular country practices enough liberal democracy. BRICS does not seek to promote peace based on political allegiance but through economic ties.

So, does BRICS pose a challenge the West economically? In some ways no. But in some ways yes.

The US, the EU and NATO confidently predicted that the unprecedented economic sanctions against Russia would weaken, even destroy, it’s war machine and would hopefully lead to the demise of Putin’s regime. But the sanctions did not have this effect. Like it or not, a major reason for this was the refusal of the BRICS countries, and the rest of the global South (which includes the countries that are apparently interested in joining BRICS) to apply them. This included countries a large majority of which had voted to condemn Russia’s invasion in the UN general assembly.

An article by David Milibrand, reviewed here, analyses the reasons why the Global South did not apply sanctions against Russia in more detail.

The other thing that the BRICS countries have in common is the desire to create alternatives, or supplements, to Western economic institutions- the World Bank, IMF, and the supremacy of the US dollar. As my post from yesterday mentions BRICS has already started on the first two of these. The last, challenging the supremacy of the US dollar in the international financial system, is complex, is a longer term aim.

Recently BRICS was briefed by the New Development Bank about alternative currencies to the US dollar for the conduct of international trade.

Currently, the world’s central banks hold about 60% of their foreign exchange reserves in US dollars. Governments hold foreign reserves to support their currency and provide stability to their financial system and to manage their international transactions, such as paying for imports or servicing their foreign debt.
The US Fed estimates that between 1999 and 2019 the US dollar accounted for 96% of trade invoicing in the Americas, 74% in the Asia-Pacific region, and 79% in the rest of the world. Banks used the greenback for around 60% of all international deposits and loans.
The US dollar’s status as the most predominant reserve currency can lead to developing countries’ foreign debt being denominated in US dollars, which can create risks and challenges for these countries. When developing countries borrow in US dollars, they are exposed to exchange rate risk, which means that if the value of their currency declines relative to the US dollar, the cost of servicing their debt increases.
So, what does Labor think about BRICS? Is the absence of any reference at all to BRICs in the draft platform an oversight or is it deliberate? Does Labor see the emergence of BRICS as a positive or unwelcome development? BRICS is not going away fast, its development is significant, and eventually the West will need to come to terms with its agenda.