The BRICs, US ‘Decline’ and Global Transformations

There is a growing perception that the international order is undergoing a process of transformation. There are two closely related (but far from identical) contentions used to back up this assertion: first, recent years have seen the growth of emerging powers, which is part of a more generalized rise of the South (OECD 2010a; World Bank 2011a; UNDP 2013); second, and not unrelated to the first point, the United States has entered a period of decline (Moran 2012). The force of these arguments has actually intensified since the onset of the global financial crisis of 2008, based on a contrast of two worlds, “a resurgent South…where there is much human development progress, growth appears to remain robust and the prospects for poverty reduction are encouraging, and a North in crisis where austerity policies and the absence of economic growth are imposing hardship on millions of unemployed people and people deprived of benefits as social compacts come under intense pressure.” (UNDP 2013: 1) The rise of the so-called emerging powers, and the BRICs in particular is in many respects undeniable (O’Neill 2001, 2007; Young 2010). Brazil, Russia, India, and above all China have enjoyed high rates of growth both prior to and after the financial crisis, and their share of global output has increased while the US’ has declined.

This chapter develops further one of the themes of the introduction and provides a more in depth account of the rise of the South and related arguments. The first section provides a basic narrative account about the rise of the South, and of the BRICs, firstly focusing on the OECD report Shifting Wealth (2010a), and then the work of Jim O’Neill and other researchers at Goldman Sachs, the investment bank that first used the term. Other works produced by Goldman Sachs’ rivals will also be briefly examined. Following on from the discussion in the introductory chapter, this section mainly focuses on the developmental rise of the South and the question of transformation through convergence. The second section then looks at the development of the BRICS (Brazil, Russia, India, China and South Africa) as a geopolitical actor in the international system, outlining the development of various themes at a number of summits since 2008. This section thus focuses on the question of transformation through geopolitical change. In both sections, the treatment of the rise of the South and of the BRICs (or BRICS) will be quite sketchy, as much of this is developed in a more systematic and critical fashion in later chapters.

This chapter examines the rise of the South, and more specifically the larger BRIC countries, by focusing on the development policies which facilitated their rise. It particularly focuses on the question of states and markets and their respective roles in the rise of the BRICs, and what lessons this might have for the South as a whole. The chapter starts by examining the argument that the rise of various parts of the South is less a challenge to, and more a triumph of, the West, and specifically the market friendly policies recommended by international institutions like the World Bank, International Monetary Fund (IMF) and the World Trade Organization (WTO). This is done through an assessment of the case made for ‘neo-liberal’, ‘globalization friendly’ policies in the last thirty years. This section suggests some reasons why this case is problematic, which leads on to the second section, which examines the argument that the rise of the BRICs represents both a developmental and geopolitical challenge to the West. This is because of the rise of a state capitalist, Beijing-led alternative to the Washington Consensus. The third section examines this case in more depth, through an investigation of development in Brazil, Russia, India and China, particularly focusing on the role of the state and the market in these countries in recent years.

The last chapter argued that the rise of the South has less to do with the adoption of neoliberal policies than it does with ‘state capitalist’ policies based on guiding the market. However it was also argued that we cannot fully analyse the rise of the South without examining the international economy. This chapter’s focus is therefore on the South in the international economy from the early 1990s through to the eve of the Great Recession in 2007–08. It does so in three sections. First, the emerging markets boom and the globalization of the 1990s is outlined. This section examines the foreign investment boom in this period, alongside the rise of manufacturing, in the developing world. But it also investigates the darker side of the era, suggesting that the boom was exaggerated and that, albeit with some exceptions, it was also an era of relatively slow growth, and regular financial crisis. This latter point was most clear when the dot-com boom in the US came to an end in 2001, and the policy response to this in the US was central to the changes in the 2000s which gave rise to talk of convergence and the resurgence of the South. This is discussed in the second section, which examines the specific international conditions which facilitated the boom in the 2000s. The third, more analytical section, focuses on the reality of the boom, but also its limits, suggesting that the conditions that facilitated it are unlikely to be repeated, and also that these conditions were factors that led to the Great Recession in 2008–09, the subject of the next chapter.

This chapter examines the causes and consequences of the financial crisis that hit world markets in 2008. It examines both the immediate and longer term causes, and relates these back to the discussion in the previous chapter. It then uses this discussion to reflect on the consequences of the crisis, for one of the outcomes of the crisis has been a strengthening of the argument that we are witnessing a global redistribution of power, away from the West and the US, and towards China, the other BRICs and the South. But to examine this question properly we first have to understand the causes of the crisis which, the last chapter suggested, are inextricably linked to the booms and financial crises after 1992 and especially after 2001. The chapter examines these issues in three sections. First, the immediate causes of the crisis are examined through a broad narrative account. Second, the causes are examined more deeply through an analysis which, instead of focusing so narrowly on interest rates and the US housing market, puts international factors at the centre of the analysis. The third section then uses this analysis to critically examine — and question — the claims that the outcome of the crisis is a further shift away from US power towards the South. This will involve some further discussion of the reasons for the boom that preceded the crisis, the limits of the rise of the South, and the question of US decline.

This chapter further develops a theme explored in the conclusion of the last chapter, namely the question of inequality, specifically in relation to the rise of the South. It undertakes this task first by examining different measures and manifestations of inequality. It starts by focusing on the question of inequality between countries, examining the evidence as to whether or not this is increasing or diminishing. Second, it then examines inequality more widely, looking at the questions of inequality within countries, and global inequality — that is, inequality between people across countries. This section will also include an analysis of poverty in the international order. This discussion is then used as the basis for a third section, which provides a more detailed examination of current manifestations of global inequality. Two areas in particular will be addressed: first, the global food crisis and how and where the rise of the South fits into this phenomenon; and second, the question of a new international division of labour. Finally, in the conclusion the chapter will return to the question of inequality and the wider question of the rise of the South.

This chapter shifts the focus from political economy to geopolitics, and addresses the question of whether the ‘new South’is transforming the international order, and if so, in what ways. It does so by first examining the ‘rise and fall’ of the Third World since 1945, discussing as background to the current period the Bandung Conference in 1955 and formation of the Non-Aligned Movement in 1961, the formation of UNCTAD in 1964 and the oil price rises of 1973–74 and calls for a new international economic order in 1974–75. While the mid-1970s are often regarded as being the height of the period of Third World solidarity, this argument is treated with some scepticism and it is shown how this supposed apex quickly gave rise to the decline of ‘Third Worldism’ in the context of the debt crisis of 1982, neoliberalism and the lost decade of development in the 1980s. The chapter then moves on to discuss the rise of what has been called the ‘new South’ (Alden et al 2012), which is associated with the rise of new international organizations and summits, including the BRICS. Finally, the chapter then addresses the question of what the transformation of the international order might actually mean, whether it be the rise of new hegemonic challengers, a new era of multi-polarity, or simply a new era of South-South cooperation.