Wanting More for BRICS Than BRICS Wants for Itself

The Western press and puditocracy have done a brilliant job of enforcing the Bush and now default US position, “You’re with us or you’re against us.” So it seems necessary to state that I am not against BRICS; I am against fuzzy headed and unduly optimistic thinking about BRICS. While it is gratifying to see Tony Blinken and the State Department breaking a sweat over the fact that their hegemony-enforcing “rules based order” is no longer getting a positive reception in many corners of the world, intellectual resistance falls well short of meaningfully advancing a new multipolar order.

This humble writer is of the view that if BRICS supporters were more realistic about the obstacles it faces, they would be better able to float useful proposals and pressure officials to take more definitive steps to turn BRICS’ lofty aims into reality. We’ll look at some general conundrums and then the IMF as an illustration.

However, there are some fundamental issues that will forever and seriously limit BRICS unless some of its members compromise meaningfully on its objectives. The harsh reality is that small and medium-sized countries cannot go it alone. They need at a minimum reliable trade (resource!) relations with bigger countries, including to weapons systems, which require investments in training and maintenance infrastructure. Along with the latter goes security arrangements, whether formal or informal.

Recall that a key to Assad’s downfall that multiple times, he refused economic support from Russia and China, as well as stronger military backing from Russia and Iran (reportedly even after the HTS attack had started), bizarrely thinking he could get adequate protection from his Gulf State sort-of neighbors Qatar and the UAE.¹ One has to think that Assad’s reluctance to have great or regional powers have influence over Syria was a, if not the, cause of Assad’s increasing efforts to align more with Qatar and the UAE, and accordingly pull back from Russia and Iran. But that “greater independence” desire which contributed to Assad’s overthrow is (allegedly) a guiding principle of BRICS.

Now admittedly, in political consensus building, it’s common to agree on general, necessarily vague, and often aspirational goals, and then try to translate those into concrete measures. And there’s a romantic swagger to the idea of BRICS opposing colonialist powers and the member states assuming their long overdue day in the sun, much like Bryon fighting and dying alongside Greeks to throw off Ottoman rule.

But others have also pointed to the same sort of fundamental contradictions at the high concept level to the BRICS initiative and express reservations similar to ours. Consider this article, The World Majority:² Growing Significance but Inadequate Agency, published at Russia in Global Affairs, and also apparently featured at the prestigious Valdai Discussion Club. Professor Ivan Safranchuk wrote (emphasis ours):

The present relative passivity of the World Majority has various causes. Smaller countries must be cautious, as excessive revisionism can easily lead to losses. Additionally, much of the Majority probably dislikes the choice being demanded of them by Russia (seeking an order that is fair and legitimate) and the U.S. (warning of the consequences of the present order’s collapse). Some may be unable to make such a choice between fairness and order….

The Majority can form and express opinions on others’ actions, with consequences in the international information environment, and it can collectively reject overly assertive actions, but it does not actually support the actions of anyone….

It also lacks institutions for communication and cooperation between its members, it lacks leaders, and it forms opinions rather quickly and spontaneously. It is more like a natural phenomenon that must be taken into account (as it determines the conditions for success) than like an agent with which one can consciously interact.

The efforts of the U.S. and Russia to awake agency in the World Majority, albeit in different ways, may not yield the expected results….

Importantly, the World Majority’s limited agency may be a permanent characteristic. The future will likely see the emergence of middle powers that are ready for more decisive and independent policies, but such actors will likely distance themselves from the World Majority.

John Helmer’s paragraph by paragraph reading of the Kazan Declaration confirms the yawning chasm between grand goals and commitments. His article designated the discussion of various topics as rag-picking (“extracting value from rubbish”) versus pom-pom waving. On the rag-picking side, Helmer found only:

Committing to continuing to have the IMF as lead actor in the financial safety net (paragraphs 11 and 12). Helmer designated as a win for Russia’s oligarchs, not BRICS:

The BRICS consensus, led by President Putin and his Central Bank Governor Elvira Nabiullina, aims to preserve the IMF as a bank with Yeltsin-era objectives

Condemnation of Israel’s genocide and a call for an immediate ceasefire (paragraphs 20 and 30). Rated as a rag-picking win for countering Putin’s position, evidenced by him trying to claim the clear language of this section meant other than what it says.

Enhancing financial cooperation among BRICS members via more efficient payment mechanisms using local currencies and studying the formation of a clearing entity and a reinsurance entity (paragraphs 66 and 67). Helmer saw agreeing to carry on with negotiations as a substantive win due to big difference between China and India on Doing Anything, but this is a long way away from establishing a financial architecture.

A rejection of protectionism (paragraph 83). Per Helmer, a serious position, but there’s no corresponding action hints.

Defending free trade in rough diamonds and acknowledging the formation of the Informal BRICS Cooperation Platform to support it (paragraph 91). OK, so this is one action advancing Paragraph 83 above.

Defending open participation in sporting events (paragraphs 123 and 124). Helmer deemed this to be “a strike against the politicization of the Olympic Games and of the World Anti Doping Agency (WADA) and the sanctions and boycotts which have resulted”

This seems like awfully thin gruel, particularly in light of all the excitement over the Kazan Declaration. There are admittedly some handwaves later in the document about the New Development Bank, but even former senior officers have said its established mode of operation and culture (slow and risk averse) are so ill-suited to its mission that it needs to be shut down and a new institution built in its place.

Michael Hudson agreed that Kazan had not accomplished much. From a recent discussion on Dialogue Works:

NIMA ALKHORSHID: The current statement of what it is about is October 2024 Kazan Declaration.

MICHAEL HUDSON: Well, you’ve put your finger on the problem. They haven’t spelled out the aims at all. They haven’t spelled out what is a policy? And how are you going to have a policy for BRICS just by saying we want prosperity? Okay. We want our economic independence and sovereignty. But what are the aims going to be specifically? And how are you going to get a widely politically diverse set of countries to have a common set of aims? Well, it’s pretty obvious to see just empirically what the aims logically would be. The first aim is you need to cope with the foreign debt problem. There is no way that the BRICS countries can grow and at the same time pay the foreign debts that they’ve been saddled with for the last 100 years and especially since 1945 by the neoliberal philosophy that’s been pushed by the United States and the International Monetary Fund and the World Bank….

But on the other hand, the money of the holders of the debts and supporting of the dollar and opposing de-dollarization are their own vested interests. So the vested interests in many of the BRICS countries are not favoring the national interests. That’s the big conflict you have between the fact that these countries are bifurcated between a U.S.-centered elite and the country as a whole. Well, that’s one of the two issues that the BRICS will have. The second is what are you going to do about the fact that as a result of the debt crisis, these countries have been driven by the World Bank and the International Monetary Fund and U.S. policy to sell off their oil, mineral rights, their natural resources, their natural monopolies of public infrastructure to foreign investors.

As you may have noticed, Helmer is on the same page as Hudson as depicting BRICS seeing a continued alpha role for the IMF as favored by domestic oligarchies.

Needless to say, there is nothing approaching that level of recognition of the foreign debt stranglehold that keeps countries, even those in the West, in thrall to financiers, in the Kazan Declaration (recall among others, Greece, Spain and Ireland required IMF rescues in the wake of the Global Financial Crisis). This comes after a year plus of alarms from development experts like Jomo Kwame Sundaram about looming debt crises all over the Global South, and a very strong dollar intensifying the pressure.

A new article, Crippling Conditions: The IMF and Global Inequality by Zach Berg, provides more detail on the power that the IMF, and through it, the US wields:

When a country is on the brink of defaulting on its debt or plunging into economic catastrophe, to whom does it turn? …Ultimately, many countries turn to the lender of last resort: the International Monetary Fund (IMF). Dozens of countries every year receive IMF loans after exhausting other options, and as of April 2024, over 90 countries still need to pay the IMF back for the loans they received. Given that countries often lack alternatives and that the IMF is under no contractual obligation to provide a loan to any country, it holds immense power in deciding who gets money and how that money is used.

The IMF’s Internal Power Structures

Given the global economic sway of the IMF, it is important to understand who holds power within the organization. Since voting shares within the IMF are allocated based on wealth, Global North countries dominate the voting share… With over 15 percent of the vote share, the United States has veto power over major policy decisions. As of March 2022, the United States has contributed US$161 billion to the IMF, and this economic power is transferred into power to shape the global economy. Crucially, the fact that the United States is single-handedly able to block major changes to the IMF means that the institution is vulnerable to instrumentalization in the pursuit of US interests abroad. For example, the United States has resisted the revision of voting shares—which were last updated in 2010—to avoid giving China more say in the IMF; China accounts for about 19 percent of the world’s economy but only six percent of the IMF vote share. Moreover, the very countries that have little power in the IMF often receive support from the IMF. Therefore, the internal power structures of the IMF make it difficult to ensure that loans are fair to both parties.

Given that the United States is the largest shareholder in the IMF, it is incentivized to enact loan conditions that are conducive to loan repayment. Thus, the IMF has conditioned its loans on practices that are conducive to short-term economic productivity but do not set the building blocks for long-term growth. IMF structural adjustment programs cut funding for critical industries vital to the everyday lives of citizens of recipient countries. By enacting wage and personnel caps, for example, the IMF has restricted the ability of clinics and hospitals to hire enough staff to fulfill the population’s needs.

Those who followed the 2015 Greek bailouts have an idea of how they give priority to “structural reform: as in crushing labor prices and bargaining power.

Hudson does have a remedy, but its odds of being implemented seem vanishingly small. From his talk with Nima:

How on earth can they grow if all of their national patrimony and all of the revenue, the land rent, the raw materials rents, the monopoly rents from this national patrimony is paid to foreigners? Well, you could look at the BRICS countries in very much the same way as Russia under the kleptocrats. Russia did have a solution to the kleptocrats. And that solution was a rent tax. Suppose that you take the kleptocrats who bought the nickel, Noros nickel, or Gazprom, Russia could have recovered all the revenue from nickel, oil and the other raw materials, diamonds, the other raw materials being sold off to say, well, we’re going to let you make profits on your capital investment. I think their capital investment was maybe 100 rubles, maybe a couple of dollars, and you’ve got billions.

So you can make profit on that, but all of the natural resource rent, that’s going to be taxed away…

So, if the BRICS economies said, we’re going to recover our natural patrimony from the kleptocrats, not our own kleptocrats only, but the foreign companies that have bought our oil and glass, we’re going to use that as our natural, our fiscal base. And that we’re going to use that fiscal base to finance our own economic development…

And there’s a third aim that the BRICS countries should have, and that has to be to raise living standards and raise labor productivity. Because you can’t have a class war against labor and expect labor to be highly educated, well-fed, well housed, and productive. If you want productive labor, you’re going to have to raise living standards. And the vested interests in most of these BRICS countries want to keep wages low….

But what we’ll do is have the government pick up many of the costs of living for labor. The cost of education, the cost of health care, the cost of low-priced transportation, communications. And so that you don’t have to pay labor high enough wages to pay for its own health care, education, and all of that.

Putin has made progress in this fight, partly taming the oligarchs in the early 2000s and among other things, preventing the transfer of a substantial in Yukos to foreign investors. And even thought the economic sanctions against Russia forced the oligarchs to reinvest more in Russia and stop exporting capital, making them more loyal to Russia and thus increasing Putin’s power, he still has to mindful of their interests. There’s a dearth of Putin-level leaders to wage this sort of war against entrenched and economically potent domestic groups.

So while BRICS is a positive development, it truly having some influence looks more dependent of the self-destruction of the Collective West’s hegemony that pro-active measures by BRICS.

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¹ This line of thinking obviously failed the “Tell me how many divisions the Vatican has” test.

² We posted recently on a short study showing that “Global Majority” so far is a Russia-only label, as in no or almost no official documents in other countries have taken up the label. It is notably absent from the Kazan Declaration.