Presidents and prime ministers from the Brics (Brazil, Russia, India, China and South Africa) are meeting from Sunday till Tuesday (September 3-5, 2017) in Xiamen for the group’s 9th annual summit.
The session — coming soon after a significant security spat between China and India, which chilled bilateral ties — sees Egypt, Kenya, Tajikistan, Mexico and Thailand also joining as guest countries.
Beijing’s invitation to these key emerging markets has prompted speculation about a potential new “BRICS-plus” approach to expand the bloc.
However, host countries have invited different countries to the summit for some time now, and China’s approach this year is only different in that a global spectrum of states are attending — whereas other hosts have tended to invite only neighbouring countries.
One key reason why there is some opposition within the bloc to expanding its membership is that it has become a prestigious group by virtue of its small size.
23% of global GDP
Moreover, there is a perception that the club — as it now stands — already has significant clout and dynamism accounting for 23 per cent of global gross domestic product in 2016 — up from 12 per cent a decade ago.
If the group could previously be dismissed as just another ‘alphabet soup’ global institution, today its importance is growing.
And in the process the partnership has generally deepened between the five nations.
Beijing hopes that the recent border tensions with New Delhi — just the latest example of adversarial relations between the two countries — will not spoil the atmospherics of the meeting.
China’s theme for the event — ‘Stronger Partnership for a Brighter Future’ — will discuss measures for how Brics could become an even bigger player and help spearhead a campaign for greater economic globalisation.
Beijing’s advocacy of this agenda reflects, in part, the fact that it has been a big beneficiary of globalisation, with International Monetary Fund (IMF) data since 2014 showing that the country’s economy is now larger than the United States on a purchasing-power parity basis.
Brics to overtake G7?
China is also keen to showcase its international leadership credentials, and help fulfil the prediction of economist Jim O’Neill — who had originally coined the "Brics" concept — that the bloc will overtake the G7’s collective economic output by 2035.
The future growth potential of the Brics is pertinent given that the world is at a potentially pivotal moment in the battle in global economic history.
World Bank research, co-authored by Branko Milanovic and Christoph Lakner, indicates that, for the first time in some two centuries, overall global income inequality — one of, but not the only measure of economic inequality — appears to be declining.
Brics, which accounts for more than 40 per cent of world population, has been the key driver of this historic movement towards greater overall global income inequality.
The collective economic growth and very large populations of India and China, in particular, have lifted a massive amount of people out of poverty.
Growing income inequality
At the same time, however, there is an opposing force: Growing income inequality within many countries.
These countervailing pressures, like tectonic plates, are pushing against each other.
While the net global trend for the past 200 years has been toward greater overall income inequality, there is now significant, growing evidence since the turn of the Millennium that the "positive effect" of growing income equality between countries — spurred by the development of the global South, is superseding the "negative effect" from increasing inequality within nations.
Monumental as this could be, however, the picture is not yet clear cut.
In part, this is because data sources on income across the world are inevitably imperfect — which means conclusions are hedged with uncertainty.
While more proof is, therefore, needed to judge whether this economic phenomenon is robust and sustainable, what is certain is that the overall lot of the South has improved dramatically, as exemplified by the Brics over the last generation.
Asia's 'new' middle class
The most prominent beneficiaries have been a much heralded ‘new’ middle class — estimated to be as large as a third of the world’s population — disproportionately located in key Asian emerging economies.
The World Bank research also indicates that much of the bottom third of the global income hierarchy have also generally benefitted too.
As in China, many other hundreds of millions of people have transitioned from absolute poverty.
However, not all the South has shared fully in this success story, to date at least.
Much of Africa, and some of Latin America, for instance, have generally not benefited as much as Asia.
With the current economic challenges that some key emerging markets, including Brazil and South Africa, are experiencing, it is unclear whether the development of the global South has enough momentum to keep driving forward a more equitable world order.
This will depend, largely, on the same twin issues of whether emerging markets generally continue growing robustly, and also whether the trend toward rising income inequality within countries is sustained.
Shift towards the South
On the first issue, the trajectory of the global economy will very likely continue to shift towards the South, and for foreseeable future, many key emerging markets will probably remain robust.
However, the recent remarkable wave of emerging market growth of the last generation appears now to be decelerating, and the global transformation it has produced in recent years may not be repeated again.
On the latter, it is not set in stone that ever-growing income inequality within countries will continue, especially if there is political and popular will to address it.
However, the debate over what long-term reform agenda should be undertaken to tackle this problem is contested by the Left and Right across much of the world.
Overall, Brics is helping drive what could be the first period of sustained movement towards greater global income equality in two centuries.
Yet, the fragile process could yet go into reverse if emerging market growth decelerates faster than anticipated and/or income inequality within countries accelerates, undercutting efforts to foster inclusive growth.
— Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics
