2023-08-24 20:45:53
Time.news – From 1 January 2022 i BRICS (Brazil, Russia, India, China, South Africa) will include six other countries: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates. A massive expansion that worries the West above all from an economic point of viewafter the dots on the ‘i’ placed, in triumphal tones, on the announcement of the new ‘purchases’ by Brazilian President Lula da Silva: the BRICS+6, he stated, “will represent 36% of world GDP and 47% of population of the entire planet”.
But only for now: about twenty other emerging economies, Lula added, have already knocked on the door asking for possible entry. The enlargement, especially for Beijing and Moscow, has as its objective economic competition (with the dollar) and political-financial competition (in recognized international institutions such as the IMF and the World Bank) with the West.
Who are the two blocks in contention? Is it really possible to compare them?
BRICS and G7, the story
I BRICS: born in 2001, with the acronym coined by the economist Jim O’Neil of Goldman Sachs to easily indicate four economically ‘attractive’ destinations for investments: Brazil, Russia, India, China. In 2006, the foreign ministers of the four countries, on the sidelines of the United Nations General Assembly in New York, formalized the BRIC group which would meet annually.
In 2010, with the entry of South Africa, the group “to strengthen coordination and consultations between the five main developing countries” and to make the world order dominated by the West more representative, officially became BRICS.
G7: the Group of Seven, or rather the 7 largest economies on the planet (Canada, France, Germany, Japan, Italy, United Kingdom and United States) was born in the mid-1970s as an informal economic and financial coordination forum, in the wake of the Bretton Woods system crisis (based on fixed exchange rates between currencies on the centrality of the dollar) and the 1973 energy crisis.
© Dominika Zarzycka / NurPhoto / NurPhoto via AFP
The G7 was institutionalized later, in the 1980s, with the entry of Canada and the EU as permanent envoys to the meetings. Its mission is to facilitate macroeconomic initiatives shared by the Group, define rapid responses in the event of economic crises, monitor global developments. The economic, financial, military, political and industrial weight of the G7 is historically considered to be of crucial importance on a global scale.
Populations compared
The BRICS: according to available statistics (statistica.com, 2021 data) the The combined population of the BRICS is 3.24 billion people (about 40% of the world population). In demographic terms, the weight of China and India, both with over 1.4 billion people, make up the lion’s share. The BRICS, with the exception of Russia, are also the countries with the highest birth rates on the planet.
From 2024, with about 404 million inhabitants of the new member countries, the population of the enlarged BRICS will reach over 3 billion and 600 million individuals, almost 48% of the 8 billion who inhabit the planet. The G7: the population of the seven largest economies does not even reach 700 million individuals stopping, exactly, at an altitude of 772 million (World Bank data, 2020), not even 10% of the global population. Of the Group, some members such as Italy and Japan are in full demographic decline.
Their economies
BRICS: according to IMF/statistica.com data, the current BRICS economies are worth in aggregate terms about 32% of global GDP (20 years ago they weighed just over 15%). However, it should be noted that the Chinese GDP alone weighs more than that of the other partners combined. At a nominal level, the combined GDP is 26 trillion (2022 data) or 60% of the combined GDP of the G7, which makes the feared ‘overtaking’ of the BRICS still a long way off.
BRICS+6 the new members will add another 3 trillion to the GDP of the BRICS bringing the total figure to almost 30 trillion dollars or. To measure the relative weight of the new group at a glance, suffice it to say that the IMF has estimated world growth at the end of 2023 at 105 trillion dollars. The US alone should be confirmed as the world’s largest economy this year, with an expected GDP of $26.9 trillion, and China should remain in second place with an expected GDP of $19.4 trillion. According to estimates, the only certain overthrow would be that of New Delhi, a candidate to become the fifth world economy, over London.
G7: according to ISPI calculations based on data from the World Bank, the combined GDP of the leading economies still accounts for at least 46% of all global GDP (a decade ago, however, the G7 alone accounted for around 66% of global GDP ). However, the contraction in the relative economic weight of the big companies over the decade does not obscure the data from the IMF according to which the nominal GDP of the G7 amounts to 45.1 trillion dollars, while that of the BRICS stops at 27.8 or about 30 trillion, again according to IMF estimates, after the 2024 enlargement.
Overtaking?
Statistics and, in general, numbers can be read in different ways and interpreted according to different objectives. Comparing the two blocks on the basis of nominal GDP, it is evident that overtaking remains a medium-long term prospect, at best. Experts on the subject recognize that the BRICS+6, especially if they continue their purchasing campaign, will have to be followed with great attention.
“If coordination works, its critical mass, at a political level, could play an increasingly decisive role in guiding the decisions of international organizations such as the UN, the IMF or the WTO”, as observed by Gianni Castellaneta former Italian Ambassador to the USA .
Considering GDP at purchasing power parity (again according to IMF data), however, the photograph would definitely change its characteristics because in this case the BRICS, even without the new six members, have already contributed to 31.5% of global GDP , compared to the G7’s share of 30%.
Economists underline, however, that GDP at purchasing power parity is useful for analyzing the growth of an economy with respect to its domestic market, based on its own inflation rates, but not for weighting it against other countries, especially in light of the fact that today’s economies are ‘open’.
A New World Order, End of the Dollar?
They are part of the BRICS+6 countries with very different growth patterns and different political and economic visions. Today’s five, and even more tomorrow’s 11, also differ on the great objectives to be pursued. Chinese President Xi has called for a reform of international finance suggesting that the time is ripe to institutionalize another hard currency besides the dollar, a sort of single currency of the new BRICS.
But even on this issue, supported with varying intensity by the BRICS themselves, the Gotha of economists has been rather ‘tranchant’: the too different structures of the emerging economies would make the idea of a single currency or the internationalization of the Chinese renminbi. In the light of China’s economic difficulties, the overt contraction of Moscow’s GDP, Argentina’s debt and galloping inflation (just to name a few “fragility” factors) make even the hypothesis of replacing the dollar as the currency for international exchanges.
Last but not least, again according to ‘main stream’ thinking, the prospect of a possible economic and financial integration of the five, today, or of the eleven, tomorrow, is little more than a chimera.
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