Limits of Globalization and BRICS Economic Cooperation
Alexander SALITZKI | 14.01.2014 | OPINION

Limits of Globalization and BRICS Economic Cooperation

At the beginning of December 2013 the Russian Ministry of Economic Development (MED) hosted an international conference: BRICS: Prospects for Cooperation and Development, organized by the Department of Asia and Africa of the MED, Russian Foreign Trade Academy (RFTA) and the Russian office of Project Support of the United Nations Development Programs (UNDP). The event brought up a number of interesting proposals. It also proved that the existing notions about globalization and polycentrism are rather blur. 

The very coming into existence of BRICS (initially the triangle of Russia - India - China) goes back to the well-known event when then Russian Prime Minister Evgeny Primakov turned the plane around in 1999 as he was flying to the United States for a visit at the very time NATO started to bomb Yugoslavia. There was a feeling the time was right to set limits for globalization in politics (the way it was implemented by the West by the end of the XX century) as its economic aspects were coming under harsh criticism after the crises of 1997-1998… That’s why it would probably serve the purpose to accept the initial definition of BRICS as a kind of «negative consensus» (1), a collective rejection of the unipolar world that was taking shape at the turn of new century, as many believed those days. Large countries of periphery and semi-periphery were too big to depend on the nucleus of global system. The «nucleus» was failing in the efforts to impose its will, so it was hardly an occasion it moved to violent methods (the 1999 bombings of Yugoslavia). The years have passed since then to prove that a polycentric world structure is a real and useful counterweight. On the one hand it does not reject globalization itself. On the other hand, it offers collective criticism of the West-oriented version and the strengthening of national sovereignty of large states that don’t belong to the West or regional groups formed with their participation. 

The advent of polycentrism in the new century coincided with significant economic achievements of BRICS members against the backdrop of slowdown and signs of crisis surfaced in the developed countries. The growing economic and political clout of BRICS, which became especially tangible after the crisis of 2008-2009, is not enough to enable these countries to drastically change the world order. They are too small to change, big enough to improve. That’s why their main objective could be defined as maintaining the economic growth big enough to tackle important infrastructural, social, technological and ecological problems. The growth should be oriented on strengthening polycentrism in microsystem. Polycentrism includes individual features of BRICS member-states. 

The individualism is inconceivable without independent social-economic projects. Nonstandard decisions are what should be pursued by those who are responsible for the strategy of economic cooperation of BRICS. The decisions should not be as much targeted at using to the utmost the interaction links (trade, investments etc.) but rather providing for sustained independence. The goal is defined by the positions of BRICS members, looks like none of them is going lead a regional integration group of the West (the same negative consensus). 

There is also a positive consensus among BRICS countries. Sustained independence is needed to maintain real polycentrism or the role of responsible regional powers. Their economic growth is of outstanding importance for small neighbors which often don’t have alternative markets to sell their products. It is expedient to adopt the principle of interchangeability and regionalism in the relationship with neighboring and adjacent states. There is something quite different that is worth mentioning in regard to the relationship between BRICS member-states (potentially two of them are larger any of the known regional groups). For instance, the trustworthy coordination of long and middle – term development projects. The ideas to abstain from inflicting damage on regional partners and collective global actions etc. are fruitful. 

Two aspects serve as the main conceptual constraining factors determining the development of economic cooperation strategy. One is the fact that globalization will continue and it’s important not to let the BRICS cooperation process «lag behind». It spurs different proposals on introduction of mutual preferences and the search for a kind of «globalization of new type». At that, the postulate that globalization will continue is not indisputable. There is a feeling that the process is slowing down or even coming to the end having reached its limit. It is confirmed by the data on direct investments in recent years and rather sluggish dynamics of world trade, one third of which falls on the recurring count of goods circulation along the global value chains, which, according to different estimates, account for 60-80 percent of global trade (is it not the limit?). 

The authors of the United Nations Conference on Trade and Development (UNCTAD) 2013 report say directly that the return to the pre-crisis strategy focused on export is not possible due to the stagnation of consumer demand in developing countries. The alternative is giving impetus to internal and regional consumer demand in the developing countries which are lagging behind and providing incentives to the growth of national industries oriented towards these markets. That’s what many programs (insourcing, reshoring) of developed countries are devoted to. In fact these programs substitute for imports. 

One more factor determines the globalization’s fizzling out. Services account for larger share of consumer demand as the economy grows. The major part of services (unlike commodities) cannot be involved into international turnout because of the links to national language, culture etc. It’s not excluded we’re at threshold of the border line between two big waves of world economic development, perhaps it is the beginning of the phase focused on internal not external development. Even having a look at the two transoceanic projects sponsored by the United States one can see a desire to stockade off from some global trends. 

One of the reasons explaining the fading of globalization are wide gaps between the development of regions inside states, what is especially acute for BRICS members. That’s why it is not necessary to accelerate the cooperation inside BRICS making it move along the old «global» rails, it even could turn be pernicious in a way. 

Besides, the «new globalization» inside BRICS means a preferential treatment of China by other member - states at the time the consequences of its external economic expansion are not studied thoroughly enough as yet – the phenomenon is too new, the country’s competitively is high and relentless, if I could say so. Little is known to partners about the China’s currency and financial policy goals. Perhaps these delicate issues should be discussed at the BRICS level to come up with additional measures to protect the development of internal markets demand. 

The second aspect imposing conceptual constraints on the BRICS economic development strategy is the need for creating organizational structures in parallel with different kinds of global entities. This doubling is hardly justified. 

While sharing the discontent with the effectiveness of global institutes, especially the financial bodies, one can add other questions. Isn’t it taking responsibility away from the existing global structures? Another question: will the institutes created within the BRICS framework in parallel to the global ones narrow the gap between the financial economy and real economy sectors? The majority of experts believe this is the main drawback of credit financial systems in many countries. The experts of the United Nations Conference on Trade and Development believe that to it essential to review the role of central banks in development patterns, in particular, getting away with their independent status so that the gap could be narrowed. 

National (intraregional) independence and narrowing the gaps (including those between national «portals» of globalization and internal periphery) could be a solid basis for reaching a positive consensus on further economic cooperation between BRICS members, as well as defining its ideology and criteria for concrete projects. Collective support of the group is desirable for corresponding plans of individual members, for instance, the eastern project of Russia or the development of western parts of China. 

(1) This is a good definition offered by Brazilian scholar Renato Naumann.

Tags: BRICS  China  India  Russia  South Africa