Neymar and the debt
The BRIC nations think it is in their interests to prevent the US and European economies lurch into a new recession
While Real Madrid and Barcelona bid millions to bring to Spain a rising star of world soccer, the Brazilian striker Neymar, Brazilian Economy Minister Guido Mantegna said that his country, along with others (China, India, Russia) were prepared to help Europe climb out of the quicksand-like sovereign debt crisis.
Such is the tale of our time. While Western companies are still going to the emerging countries as great conquerors of markets, the world's center of gravity has been shifting eastward and southward. Globalization has dispersed power - concentrated until so recently in the US and its environs - throughout the whole international system, in favor of the above countries and others such as South Africa and Turkey. The Great Recession has changed this characteristic of previous crises, which spread from the periphery toward the center. Now the epicenter has been the US, and within it Wall Street, and the main scene of contagion, Old Europe.
This week, coinciding with the IMF assembly, the BRIC countries (Brazil, Russia, India and China) will be meeting in Washington. Their usual obsessions remain the same: reduce the dollar's hegemony as a reserve currency, substituting it with a basket of currencies; speak with a single voice in multilateral organizations; demand that the appointment of directors of these depart from the traditional role-casting (a European for the IMF, an American for the World Bank). To these they now add a concern about the European and American economies. This is mere self-interest: if these economies go into a new recession, cease to pay their public debt, or if their banks face problems of solvency, the exports of emerging countries will be hurt, and their extraordinary currency reserves will shrink in value: these being the two pillars on which their economic success has rested in the past decade.
We cannot expect any collective action from the BRIC (since April of this year South Africa has been counted among them and the acronym accordingly altered to BRICS, which reads better as a plural) or even a joint decision on Europe. Each emerging country will study the opportunities, and the economic map of each European country. Not all of the emergents are equally subjects of the same objects of desire: it depends on each one's interest in investing, and on the capacity of its reserves.
In the case of China these are almost bottomless: $3.2 trillion. The others are ample, but limited. Russia, $540 billion; Brazil, $350 billion; India, $300 billion. China, which is neither a democracy nor strictly a market economy, is the most courted for the potential of its sovereign funds (public companies whose capital consists in reserves obtained by trading in raw materials and in export manufactures) and for its advance - often silent - into regions such as Africa and Latin America... besides the US and Europe.
While the BRICS (half the world population, a quarter of world GDP, 40 percent of total land surface, the source of 65 percent of world growth in recent years) keep scaling new rungs in the absolute classification of countries by value of their economies, in relative terms they still look more like developing countries than rich ones.
China, which in 2010 supplanted Japan as the second-ranking world economy, still comes 90th in per-capita income. The BRICS have huge problems of poverty; of inequality between social classes and between rural and urban communities; of insufficient infrastructure; of technological and human capital; while their systems of social protection, if they exist at all, are manifestly capable of huge improvement. They are not exactly examples of quality and efficiency in these areas. So then, why are they prepared to help Europe and the US instead of investing in the interior of their own countries?