Somewhat surprising news has been coming out of some of the BRICS, concerning their diminished rates of economic growth in recent times. Of course, from our standpoint, everything is relative, and a growth rate figure that one country considers an unfortunate decline, may be viewed by another as welcome progress. So while many Caricom countries’ economies are straining at the leash to achieve between three to four per cent growth, the BRICS are, in some cases, lamenting declines to those same figures, and in some cases lower.
The so-called Asian tigers – China and India – seen recently as among the high performing BRICS, have been experiencing declines in growth that have been somewhat unexpected. Interestingly, the declines are not necessarily being attributed to the recent weaknesses of the United States and many European economies, but instead, are being blamed on domestic policy errors or deficiencies.
In India for example, where economic growth has slid from 9.3% in March last year, to what would be for us (and indeed for India two or so decades ago) a respectable 5.3%, there is now talk of doom and gloom in terms of future prospects for the economy. Much of the responsibility for the decline is being placed on the government led by Prime Minister Manmohan Singh – widely praised not long ago as an economic policy genius – and Mrs Sonia Gandhi, the leader of the Congress Party who is increasingly described as being more concerned with the party’s survival in her family’s hands in the short run, than with maintaining economic growth in the medium term.
To take only one example, Manmohan Singh, given great credit for liberalizing what was once seen as a slow growth, mainly state-controlled, economy, and leading it into an era of rapid growth rates, has been unable to push through a further phase of economic liberalisation that would have permitted more external investment. He has had to bow to some private sector entrepreneurs whose sphere of dominance and lobbying abilities have been protected by the state and the Congress. Added to this, as in some other BRICS, are widespread complaints by those excluded, about some entrepreneurs having privileged access to state projects, or in the liberalisation line-up. These phenomena are now increasingly described as a return to the extensive corruption of the slow-growth era.
In Brazil, where newly-elected President Dilma Rousseff has been tempted to pursue some further liberalization of that once-state dominated economy in the face of powerful domestic interests there too, and to use the country’s growth successes to influence the dominance of the North Atlantic countries in the councils of the WTO, the surprise has also been a sudden decline in the growth rate experienced under President Lula. It has moved from 7.5% in 2010 to 2% in 2011, with projections for just above 1% this year. There is concern too that a strong exchange rate and high interest rates have been privileging importers, rather than local manufacturers.
In perhaps the country seen as the leader of the BRICS in terms of economic growth, that is China, there is now increasing concern that a decline from 8.9% in the last quarter of 2011, and 8.1% in the first quarter of this year could suggest a weakening of the country’s historic growth rates of the last decade, with lower rates in the future. The recent prestige of China in global affairs has been attributed to what was perceived as almost unprecedented expertise in economic management. And that reputation has allowed the Chinese to resist persistent demands from the United States in particular, to further open the economy, and place it on the kind of level playing field that other industrialized countries have accepted in terms of the rules of the WTO, into which China negotiated entry in 2001.
But of course, both the North Atlantic economic powers, as well as other BRICS, now see themselves as having vested interests in the continued dynamism of the Chinese economy, a recipient of both the West’s high technology exports, and the commodity exports of not only Brazil and Argentina in Latin America, but of many African states. For the Latin Americans and Africans, this relatively new development has given them some leverage vis-à-vis the European Union in particular, which has hitherto held the whip in the determination of, in particular, the Africans’ export prospects.
Any drastic reduction in the outward-looking character of the Chinese economy, either in terms of its growth rate fuelled by its export trade, or its opening of new export arenas for African states, would not only weaken the latters’ own growth prospects, it would also diminish the growing confidence which they have in negotiating new terms of trade and production with the European states (away from the old EU-ACP formula). And for the Latin Americans, it would certainly mean less capacity for sustaining a meaningful presence now (Mexico, Brazil and Argentina) in the G20.
And then there is Russia, where a year ago, then Prime Minister Putin felt confident about returning to the presidency, and further advancing the prestige of Russia in his country’s dealings particularly with the wider Europe, joining other states contesting the dominance of the EU-US duo in international trade policy. While Russia, as the Soviet Union, had developed a substantial technological capability, its recent economic growth has been dominated by the commodities’ demand (in Russia’s case for oil) by the growth leaders and Europe in the last two decades. High oil prices have been good for Russia in the last few years. It is the major contributor to the economy, and has certainly helped sustain a growth rate of 4% in 2011.
But there is much disquiet at the recent turn of events in Russia, just before and then following Putin’s election to the presidency. There is doubt, in some investor circles, as to whether there will be sufficient political stability in the next few years to allow Putin to pursue the successful economic policies that characterized his first two terms as president. Of course, Putin’s political abilities are not to be underestimated, reared as he was in the Bolshevik style of governance. Yet, there are signs that he recognizes an increasing role being played by what, in the West, is called civil society, and the openness of contemporary societies world-wide to popular insistence on the creation and maintenance of liberalised societies.
In a global context, the current difficulties of some of the BRICS is paralleled by the difficulties of economic management in Europe and the United States. The OECD powers are beginning to recognize the significance of the BRICS, led by China in effect, in the management of what, for them, is a fragile state of the global economy. In that sense, they now recognize too, the integral nature of these and other, once called Third World economies, to the recovery of their own economies.
In that sense, the BRICS are not alone in coping with their present uncertainties and discontents – a major change from earlier times.
