In 1944, two financial institutions were borne out of a summit conference between 43 nations held at Bretton Woods, New Hampshire. The World Bank and the International Monetary Fund (IMF) were established. Supposedly, their aims were to help rebuild a shattered post-war economy and to promote international economic cooperation among nations. The creation of the World Bank and IMF came at the end of World War II and were based upon the ideas of three key figures—U.S. Treasury Secretary Henry Morgenthau, his chief economic advisor Harry Dexter White, and British economist John Maynard Keynes. They claimed that it was their intention to establish a postwar economic order based on notions of consensual decision-making and cooperation in the realm of trade and economic relations. The leaders of the allied countries, particularly the United States and Britain, contended that a multilateral framework was needed to overcome the destabilizing effects of the previous global economic depression and trade battles.
All these years later, what ended up happening was the United States gained hegemony over the economy of the world, making the U.S. dollar the world’s reserve currency, pegging the currencies of all other nations to it. In 2001, a group of countries calling themselves the BRIC nations came together to form an alliance. They decided to form their own bank, the New Development Bank (NDB). The purpose of the NDB was to make loans to nations with emerging economies without having to rely on Western influence. In 2010, the countries decided they needed to spread their influence into the continent of Africa and thus, they asked South Africa to join. At that point, they became the BRICS nations.
These 5 countries comprise nearly half of the world’s population, one fourth of the world’s land mass, and one fifth of the gross domestic product (GDP). At the forefront of the 5 countries is China who passed the U.S. to become the largest trading country in the world. Of the 30 fastest growing economic areas in the world, 10 of them are in India. Brazil is rich in oil and iron. Thus, in 2012, it reached the status of 6th largest economy. Although Russia has experienced some economic difficulty in recent years, China’s booming economy has compensated for it. Overall, the BRICS has had significant growth in recent years.
To illustrate a better picture of the BRICS, let us look at each country individually.
BRAZIL
Brazil is the world’s eighth largest economy by nominal GDP and the eighth largest by purchasing power parity. Brazil’s economy is characterized by a mixed economy that relies on import substitution to achieve economic growth. The country has an estimated $21.8 trillion worth of natural resources, including vast amounts of gold, uranium, iron, and timber. As of 2010, Brazil’s economy is the largest in Latin America.
RUSSIA
At 17,125,200 square kilometers (6,612,100 sq. mi.) Russia is the largest country in the world by area, covering more than one-eighth of the Earth’s inhabited land area and the ninth most populous with about 146.8 million people as of 2019. Russia’s economy ranks as the twelfth largest by nominal GDP and sixth largest by purchasing power parity in 2015. Russia’s extensive mineral and energy resources are the largest such reserves in the world, making it one of the leading producers of oil and natural gas globally. The country is one of the five recognized nuclear weapons states and possesses the largest stockpile of weapons of mass destruction.
INDIA
India has both a developing and mixed economy. It is the world’s sixth largest economy by purchasing power parity. Since 2014, India has been the world’s fastest growing economy with growing rates averaging 10% over 30 years.
CHINA
China is the world’s largest manufacturing economy and the largest exporter of goods. It is also the world’s fastest-growing consumer market and second largest importer of goods. It is the largest trading nation and plays a prominent role in international trade.
SOUTH AFRICA
The economy of South Africa is the second largest in the continent of Africa. It is second only to Nigeria. Since 1996, at the end of over twelve years of international sanctions, South Africa’s gross domestic product almost tripled to peak at $400 billion in 2011 but has since declined to roughly $295 billion in both 2016 and 2017.
After listening to several video clips from international news programs, the opinions of the pundits are mixed on the future success of the BRICS nations’ New Development Bank. Anyone who is reading about the world economy can clearly see that the United States is not going to willingly give up its domination of world markets. In my humble opinion, it will do whatever it deems necessary to see that the BRICS nations are unsuccessful. However, what will happen if more countries join the BRICS as they are expected to do? More importantly, how much longer can a fiat currency such as that of the United States continue to be the world’s reserve currency when it is backed by absolutely nothing?
