World Geostrategic Insights interview with Dan Steinbock on the current state of global governance, the pressures of the BRICS toward a more equitable world order, the grievances of the “South”, how a reorganization of international institutions, including financial institutions, could be envisioned, whether the BRICS can be considered an anti-Western or anti-American bloc, and the actual role of China within the group.
Dr Dan Steinbock is the founder of Difference Group Ltd, which helps governments, businesses and organizations navigate a new multipolar world economy. Previous affiliations: Research Director of International Business, India, China and America Institute (USA) Visiting Fellow, Shanghai Institutes for International Studies (China) Visiting Fellow, EU Center (Singapore).
Q1 – From the Yekaterinburg summit in Russia in 2009 to the Johannesburg summit in August 2023, the BRICS countries (Brazil, Russia, India, China, and South Africa) have moved with surprising rapidity from symbolic political cooperation to the formation of a collective strategic force. The expansion of the BRICS bloc envisioned at the Johannesburg summit has attracted different potential candidates who seem to share the same will to reshape a world order that, in their view, disadvantages them. More than 40 Asian, African and Latin American countries, likely dissatisfied with the West, have already expressed interest in joining BRICS, and of these, nearly 20 have formally applied for membership, while at the end of the Johannesburg summit the group have already welcomed six new members-Ethiopia, Egypt, Argentina, Iran, and Saudi Arabia.
The stated goal of the BRICS countries is to transform the Western-centric structure of the current world economic order into a polycentric or multipolar international system, a new world order. According to a number of analysts, the emergence of the BRICS is one of the most important phenomena in international relations in recent decades, a harbinger of radical changes in the world order. Meanwhile, according to others, the BRICS do not seek, and are not even capable, of disrupting the existing structures of global governance, but can only aim to rebalance them. What is your opinion? Is global governance really still primarily in the hands of the Western highly industrialized and developed countries?
A1 – Yes, it is. These countries still dominate the global economy, international relations, and military might. They control global finance and technology. And they enjoy high incomes. But it is their past that accounts for their present power. The future no longer belongs to them exclusively. The future will have to be shared.
The peak of the advanced countries’ global economic power was in the 1980s and ‘90s. That’s the era of Kenichi Ohmae’s Triad Power, when the United States, Western Europe and Japan still ruled the world. Despite continued absolute expansion, their relative erosion is deepening, however.
In 2000, the economies of the major advanced nations of the West, as reflected by the G7, were still almost ten times bigger than the BRICs. However, the 2008 global crisis sped up their relative erosion. Today, their lead has shrunk to about a third. By the early 2030s, it will decrease to a tenth. And by the mid-2030 or so, the aggregate economic power of the BRICS will exceed that of the G7 – assuming the international status quo will remain relatively peaceful, which is no longer assured.
Q2 – Could a new, more equitable world order really take shape under the pressure of the BRICS?
A2 – Yes, and only by the pressure of the BRICS; and more broadly, by the large emerging economies.
In 2009, I had a conference talk with Goldman Sachs’s Jim O’Neill, who coined the BRIC term. In his original analysis, he’d predicted that the BRIC economies would surpass the size of G6 by the early 2040s. My data showed that this milestone would happen already in the 2030s; O’Neill said the GS team had just reached a similar conclusion. Now, he wrote his original piece after 9/11 when he had been on a conference call with a colleague in the World Trade Center. At the time, I was in mid-Manhattan on the way to the Center, or what was left of it. O’Neill wrote his piece to show the potential of peaceful globalization. 9/11 came to him as a surprise. By contrast, I supported inclusive globalization, but was more skeptical about financial globalization. And I had waited for something like 9/11 since the ‘70s when I first witnessed an aftermath of terrorism. But we both agreed that the West-led global economy could ignore the rise of the large emerging economies only at its own peril.
Now, O’Neill used the BRIC term to refer to the secular economic potential of these countries. With South Africa added, the BRICS heralded the nascent geopolitical mobilization of the Global South. It wasn’t a disruptive, but continuous development. Just like the 1955 Bandung Conference, I felt it represents hope for an alternate, more inclusive and hence more humane international status quo.
In 1955, the focus was political. Now it is on economic development. The interest on the BRICS has increased progressively since the early 2000s. However, dissatisfaction with the West has accelerated with the G7 protectionism, proxy wars and interventionism.
Q3 – Decisions on the structure and functioning of the world order, including its institutions, have in the past been the preserve of the major European powers and the United States, while the Asia-Pacific region, Africa, the Middle East and Latin America have been sidelined. This situation no longer seems sustainable. “Current global governance structures reflect yesterday’s world” said UN Secretary-General Antonio Guterres at the BRICS summit, adding that these institutions “need to be reformed to reflect contemporary economic realities and power logics.” In fact, countries of the “South” are increasingly disillusioned with the current structure of the international system, and are looking to the BRICS, as a counterweight to Western powers, and organizations such as the G7. What’s your view?
A3 – UN Secretary-General Antonio Guterres is absolutely right. Even today, global governance reflects neither the faces nor the interests of those it claims to represent. Gaza is a casebook example. When Guterres condemned Hamas’s actions, while noting rightly that the brutality did not rise in “vacuum,” he was quickly condemned by many in the West. Nonetheless, history and context matters, both in Gaza and in the Global South overall. Furthermore, this gap between the Global North and the Global South has progressively deepened since the mid-2000s, when China and, to a lesser degree, India have contributed more to global growth prospects than the US or the major European economies.
The great multilateral development institutions that were created after 1945 – including the World Bank, the International Monetary Fund and the World Trade Organization – remain dominated by the high-income West. In geopolitics, the U.S. has continued to lean on major Western economies and Japan, but in the international economy it has retained its unipolar role. Hence, the central role of the US in the asset bubbles and their global reverberations in the 1980s, early ‘90s, early 2000s and in 2008 when China’s central bank governor Zhou Xiaochuan urged major Western economies to “reform the international monetary system.”
In 2008, the G7 could no longer surpass the financial crisis without the support of the BRICS. In return, great pledges were made in Brussels, Washington and Tokyo. The idea was to “reform global governance,” to make it more multipolar, more multilateral, more equitable. Yet, nothing much happened. That’s when the BRICS moved ahead on their own. Hence, the efforts by the large emerging economies at complementary development institutions and infrastructure, including the BRICS New Development Bank (NBD), the Asian Infrastructure Investment Bank (AIIB), the Regional Comprehensive Economic Partnership (RCEP), Bridge and Road Initiative (BRI), coupled with the quest for new currency arrangements.
Q4 – Are the complaints of the “South” well-founded? In the current period of heightened geopolitical tensions between the United States and its Western allies, on the one hand, and Russia and China, on the other, is it really possible to envision a reorganization of international institutions, including financial institutions?
A4 – Yes, those complaints are well-founded. Even though lumping together China and Russia or some other large BRICS economies is more typical to the West’s agenda (the nuclear plans to decimate China, with or without any reason, stem from the late 1950s) than to actual realities.
Yet certainly, as I have argued, it is possible to imagine alternative arrangements that would be more inclusive and equitable. The West can’t and won’t build such institutions for the Global South. Ever since the onset of modernity in the 15th century, the West has engaged in colonialism, industrialization and globalization, all of which have had violent, unequal repercussions, to say the least. By contrast, the Global South has been colonized, forced into industrial dependencies and global subjection.
In order to balance this status quo, the Global South has to outline its own path for the future. The West should be part of it, and both sets of countries desperately need a peaceful and stable trajectory. However, only the emerging economies can determine their own future.
Q5 – Can the BRICS be considered a potentially anti-Western bloc, or is this a somewhat simplistic and erroneous definition?
A5 – It is simplistic and erroneous. Worse, it is often both, purposefully. Since the aftermath of the 2008 financial crisis and the rise of the large emerging economies, Western geopolitics has engaged in questionable imperial nostalgia. Take for instance the much-touted idea of the “G-Zero World.” Ian Bremmer’s idea depicts a breakdown in global leadership, which it then attributes to a decline of Western influence and the inability of other nations to fill the void. It laments the perceived shift away from the pre-eminence of the G7 industrialized countries. Nostalgically, it seems to miss the “good ol’ days” of Imperial Britain in the 19th century and what some call the American Empire more recently. But things look very different from the perspective of the Global South. No country that has been oppressed by Imperial Britain or America misses its suppression.
In fact, we do not live in a G-Zero World. We have always lived in a multipolar world. The difference is that until the late 20th century, a few nations in the West relied mainly on their geopolitical muscle to suppress the polycentricity of the world economy, while seeking to monopolize their benefits from it. Most apologists of these past unipolar orders have a vested interest in such nostalgia. The clientele of Bremmer’s Eurasia Group and GZERO Mediafirm feature US government departments and agencies, the Pentagon and other Western organizations. After its 2015 partnership with Nikko Asset Management, the Group has also diversified into emerging market investment funds. It contributes to futures that can be cashed on. The revolving doors between think-tanks, executive branches and Big Defense are turning even geopolitics, initially defined by the elusive concept of “national interest,” into a global financial race for higher margins.
Neither the BRICS nor the large emerging economies overall want to “subvert” the world order. Rather, they seek to foster one, vis-à-vis economic, political and defense diversification. Current global arrangements must not reflect just the interests of the West that represents about a tenth of the world population. They must also reflect the aspirations of the multipolar world in which global growth prospects are driven by the large emerging economies.
Excluding one set of countries at the expense of the other is a dead-end.
Q6 – Many analysts, particularly in the West, have often described the BRICS as an organization that has achieved nothing for years, economically stagnant and whose sole aim is to be ostensibly anti-American.
A6 – Often such analysts have vested interests and represent think-tanks that rely on funding by energy interests, neoconservative hawks and Big Defense. The rhetoric is largely flapdoodle. In reality, these analysts fear that the BRICS will actually walk the talk. Just as Sovietologists found themselves unemployed after the Cold War, such analysts need conflicts to thrive. In reality, the peace and stability that the BRICS desire for their economic development is vital to the West as well – and never as much as today, due to their secular stagnation.
One example is the decline of the US dollar as the major international reserve currency. During the Ukraine proxy war, the dollar was weaponized in the name of the international community but without the broad support of international consensus. That put trade invoicing and settlement, foreign corporates, financials and central bank reserves at risk. Yet, the West should not fear the rise of the BRICS. It is a positive process that could support global prospects in the foreseeable future, particularly through diversification.
What the BRICS offer is not simple “de-dollarization,” as Western media often claims. Rather, the goal is not to eliminate the dollar. The realities are a bit less scandalous and more nuanced. The BRICS have little to do with rogue states seeking covertly to subvert international order. Rather, like asset managers who seek to maintain appropriate diversification in their portfolios, the BRICS’ strategic objective is to diversify and recalibrate international order so that it would better reflect the ground realities.
In a multipolar era, a unipolar currency is a recipe to hollow booms and destructive bubbles.
Q7 – In fact, there are strategic differences between BRICS members when it comes to the organization’s objectives. China seems want to forge useful alliances to support it in its rivalry with the USA and for the establishing a different world order, while India simply wants to reform existing structures, mainly through concrete changes in the view of the IMF, the World Bank, the WTO and the UN Security Council, and convince the nations of the South to resist China’s geopolitical agenda. India and China, as well as other BRICS members, also have military and territorial disputes. What do you think is the BRICS’ real potential? Are they still just a coordination forum, or have they really taken on the status of a global strategic bloc? What is China’s effective role within the group?
A7 – There are not just strategic but other – economic, political, defense, and so on – differences among the BRICS. But what unites them is their role as large emerging and developing economies, with lower living standards but high structural growth potential. Hence, their hope to focus on economic development, predicated on peace and stability.
Furthermore, I am not entirely sure that India only wants to reform existing structures. If that were the case, it would stay away from the BRICS and other complementary institutions. Rather, India seeks to hedge its bets. It, too, seeks to work through both groups. Predominantly “incremental” changes don’t work.
And let’s be real. China did not seek rivalry with the US. It was Washington that labeled China a “strategic rival.” Nor does China seek a different world order. It seeks more diversified institutions for a more diversified world. The first major foreign policy initiative of the Xi era was the quest to institute “a new type of great power relationships” in the early 21st century, to preempt and avoid costly trade protectionism and arms races that would trigger unnecessary bilateral tensions between the US and China. There was great excitement about this initiative in China in the early 2010s. And there remains a strong desire to avoid geopolitical distractions that have proved so destructive in the West in the past.
Nonetheless, the Chinese initiative was not just neglected and misrepresented in the West. The US response was the military pivot to Asia, the major foreign policy initiative of the Obama era, coupled with the quest to suspend China from regional geography through the “Indo Pacific“ alliances; and the new Cold War against China. These moves were compounded by geopolitical alignments, such as QUAD and AUKUS, that serve to militarize and potentially nuclearize the region and endanger the promise of the “Asian Century.” Global economic prospects rely on sustained growth in Asia. But thanks to bad geopolitics, those prospects are no longer assured.
Q8 – Can BRICS be seen as a resource for China’s foreign policy and economy and as a platform for China’s participation in global governance?
A8 – China is projected to contribute 35 percent of global economic growth in 2023. India’s current contribution is about 15 percent. In the early 21st century, China is the largest emerging economy among the BRICS. Over time, its role could be coupled with India’s rising economic potential (and when that happens, India, too, is likely to be targeted with the kind of rule-and-divide policies that now target primarily China).
However, the quest for global development hasn’t been easy. In each case – from China’s trade with LDCs to AIIB, RCEP, BRI and so on – the West has engaged in efforts to divide these blocs to check China’s rise, through client states and proxies. These developments are causing huge unwarranted damage in the Global South. Let me explain why. Over a decade ago, Helmut Reisen’s team at OECD Development Center was among the first to show that the impact of China’s growth on the low- and middle-income countries grew significantly in the 2000s. About 1 percent change in China’s growth rates would boost expansion by 0.3 percent in low-income countries and 0.4 percent in middle-income economies.
Here’s the implication: if external headwinds reduce China’s growth by 1 percent, the ensuing adverse effect would be especially damaging to emerging and developing economies. Now, the OECD report was released when China was still a smaller aggregate economy and well before China further strengthened trade ties with and through the mentioned complementary arrangements. Today, these impacts – positive and negative – would be far, far more severe.
Unwarranted trade wars and geopolitics to contain China undermine development and the rise of the Global South overall, as evidenced by the cold realities of de-globalization, the rise of far-right and xenophobia, series of new wars, and the soaring numbers of the globally displaced. Hence, the need for more humane BRICS futures.
Dr Dan Steinbock – Founder Difference Group Ltd