WHAT MARKED GLOBAL ECONOMIC GOVERNANCE IN THE POSTWAR ORDER WAS THAT it was built in the image of the United States. As John Gerard Ruggie smartly dissects, "It was less the fact of American hegemony that accounts for the explosion of multilateral arrangements than it was the fact of American hegemony." (1) Whatever one might think of America's international behavior and its frequent backroom dealing to sacrifice legitimate governments or flout rules whenever convenient, the United States invested a great deal in making the global governance viable. In any case, this was a system that developing countries found difficult to sidestep. Brazil, Russia, India, China, and South Africa (BRICS) were the first collective post-Cold War contest to global economic governance. Now that growth has slowed, while Brazil and South Africa have fallen from grace, what is left after the frenzy? Do they retain an aptitude to reorder global relations? Are they still valid contenders to American hegemony?
When Goldman Sachs put together the BRIC family comprising Brazil, Russia, India, and China in 2001, it genuinely looked far-fetched that an asset class for investors wanting a dip into far-flung exotic markets could become a contending group. But as the years went by and events unfolded, the idea that the global order could be less dominated by the West gained traction. From a mere asset class, the BRICS (BRIC joined by South Africa since 2010) jostled with high stakes in consumer, energy, and financial markets. Russia is a critical provider of energy to Europe while it has made no bones about being a contending military power with willingness to act, particularly since the ascent of Vladimir Putin in 2012, Russia provides (and receives) active support from the BRICS and values the grouping as a lever to contain NATO expansion. Brazil's expansion was related to the booming prices of commodity exports, a large part of which was shipped to feed China. India has benefited from outsourcing of labor-intensive services at the heart of the global economy. All of this has led to a chain reaction that contributed to the shared buoyancy of the BRICS. They never belittled their stake in keeping the bicycle running smoothly.
The 2008 global financial crisis marked a turning point. As they shuddered from the fallout, a shared sense settled in that a continued reliance on the dollar was foolhardy. As a group, they were jolted into taking steps to diversify options. Almost a decade later, Xi Jinping's staunch defense of globalization in Davos in January 2017 was not all that surprising but it signaled a turn to a more assertive role and even a claim to take up leadership. This is the novelty. A line was drawn from working by stealth within the cracks to assertiveness on stage. It is a contention of my essay that the China-assisted BRICS grouping marches steadily to coshape norms, wooed by China's credit power. Financial cooperation has moved on four tracks: the quest for greater influence in the Bretton Woods order; resistance against US financial sanctions against Russia; the creation of new financial institutions; and, last but not least, collaboration to support internationalization of China's currency. (2) These are the tracks where financial cooperation stands out, going all the way from struggling to change or resist received rules to strategizing for new ones.
To better assess how the group maneuvers, one needs to look closely at its inner workings. Coalition building seems an obvious route to greater influence. One of the distinctive features about the emergence of the BRICS lies in the lack of geographical connections. In fact, there is an aspiration to use funds to create geography and to explore like-mindedness in that expanse. Understanding the patterns of cooperation in the making of geography and of agendas requires an analytical approach that takes into account how rebalancing of power works from the sides and from the corners to the center.
This essay unfolds as follows. First, I examine the reasons for taking these countries as a group. I analyze their gradual, albeit pragmatic, political construction; in particular, the budding of the New Development Bank (NDB). Then, I examine how the BRICS grouping has laid the ground to measure forces, aiming to expand influence in existing economic institutions, the Group of 20 (G-20), and the World Trade Organization (WTO). I show the topics in which they have been able to keep a common stance and the issues in which cooperation has fallen short. Finally, I underline how mutual cooperation has evolved over the past decade to assess the impact of policy-changing events.
Finance: A Concerted Plan
To some, the fact that contending powers claim larger slots in established institutions while upholding solidarity with the Global South is dismissed as developing country rhetoric or even an indication of double standards. Think of the United States when, after World War I, it rose to be the major creditor country. Its ambivalence was neither scoffed at nor explained away. Decades later it inspired the pioneering study of Charles Kindleberger, who, when analyzing the causes of the Great Depression, identified the lack of will and ability to stabilize the world economy. (3) In similar fashion, most other countries struggle with the trade-offs between the costs and benefits of international influence. The global financial crisis was a wake-up call for the BRICS; it changed this balance of trade-offs, exposing their shared external vulnerability to bubbles and financial excesses. It offered political momentum. The dollar ceased to be seen simply through rose-tinted lenses. Instead, the blowout exposed the dysfunction of right of the United States to mint the world's major international currency. The phenomenon of the BRICS cannot be understood without perceiving the grouping as a coming together of countries in need of reducing financial vulnerability and...