Tuesday, July 26, 2011

Signing out

I have used this blog for about four years now and it is time to give it a rest for multiple reasons. For one, I am migrating to a new platform (comment if you wish to follow!). Secondly, I feel that many of these articles show a more emotional character and are not as well-argued. Over the years, I have developed past opinions to evidence and I wish that my new blog not be tainted by my past baggage. Hence, I shall strive to write more professionally and perhaps even check my some of my biases at the keyboard! Third, given certain developments in my life, I wish to start blogging using my name instead of the pseudonym I had appropriated all this time.

In any case, I hope to see anyone following this blog on my new one. Thanks for reading.

[Special note to Amit: I read your comment on a post I have now removed and I the answer is yes, I have read what you mentioned. The point you raise is significant and I will not discuss it in a reply but will post on the issue soon at my new blog. Please let me know how I can forward you the new url and such. Thank you for reading.]

Tuesday, April 19, 2011

BRIC(k)S for Brains

The formation of a loose cabal by Brazil, Russia, India, China, and South Africa (joined in April 2011) was, I hoped in my naiveté, the sign of a political power base in the international arena that would bring the much required checks and balances on American hyperpower and unilateralism. Unfortunately, the bloc has been a sore disappointment in what seems to be its political weltanshauung in its short presence as a notable actor. To be fair to the countries involved, the term BRIC was coined in 2001 by then-head of global economic research at Goldman Sachs, Jim O’Neill, and the countries did not come together of their own accord to form an organisation. Nonetheless, these countries have now come together to work for a 21st century that would be more equitable for themselves, converting their growing economic power to greater geopolitical clout.

BRICS undoubtedly offers many opportunities for India. Although no formal treaties linking the five countries exist as of yet, Brazil, Russia, and South Africa make up the raw materials component of the association, while China and Brazil are the manufacturing hubs. In a jab to economic theorists, India seems to have moved from an agricultural phase directly to the services phase of economic development without a clear industrial phase and India remains the service provider in BRICS. Any free trade agreement or economic treaty between these countries would involve about 25% of the world's landmass, 40% of the world population, and an economic footprint (in terms of PPP-adjusted GDP) of $18.5 trillion (nearly twice that of the United States), a consumer pie unrivalled in economic history. Other countries, such as Turkey, Mexico, Nigeria, and Indonesia from the N-11, aspire to become members of this economic behemoth soon, making it larger, richer, and more powerful. In a 2007 revised report, Goldman Sachs predicted that from 2007 to 2020, India's GDP per capita in US$ terms will quadruple", and that the Indian economy will surpass the United States by 2043. It states that the four nations as a group will overtake the G7 in 2032. The total BRICS economic output accounted for 18 percent of the total global economy output in 2010 and is expected to pass the G-7's output by 2035.

All this seems to be remarkably good news for those who wish to see the balance of power shift from the Atlantic to the Indian and Pacific oceans and hope for the resurgence of Indian power after almost four centuries (or nine, if one accepts Sangh politics). However, India has some treacherous waters to navigate through before it wholeheartedly embraces the BRICS agenda. Of course, there are a few questions looming about the BRICS dream in the first place. For one, it is entirely possible that one or more of these countries do not live up to the projections in the future due to political or other circumstances. Secondly, Russian and Chinese disregard for human rights may become more of an international issue in the future – while this augurs well for other BRICS members, any formal grouping of these nations is bound to be tainted by Russian and Chinese actions. Third, the demographic advantage of a youthful population enjoyed by Brazil and China may fade in three decades. Furthermore, it is uncertain how the increasing gender imbalance in China (and India) will affect their economies and social structures. Fourth, the imbalance between BRICS countries themselves – China accounts for about 70% of the combined BRICS GDP – basically makes BRICS into a Chinese bloc. Admittedly, the countries have the independence to act on their own when it serves their interests, but this still raises the question of what BRICS can offer to Brazil, Russia, India, and South Africa. As analyst David Rothkopf wrote in Foreign Policy, “Without China, the BRICs are just the BRI, a bland, soft cheese that is primarily known for the whine that goes with it. China is the muscle of the group and the Chinese know it. They have effective veto power over any BRIC initiatives because without them, who cares really? They are the one with the big reserves. They are the biggest potential market. They are the U.S. partner in the G2 (imagine the coverage a G2 meeting gets vs. a G8 meeting) and the E2 (no climate deal without them) and so on.” [BRICS statistics]

Moving to my reservations about India in BRICS, it seems to me that India is by far the most pro-America country in the group – in a 2004 worldwide poll, India was only behind the Philippines in seeing Bush and the United States as a positive force in the world. India has much to gain from closer ties with the United States for at least the next two decades. The Next Steps in Strategic Partnership and the Indo-American nuclear deal have cleared the way for significant cooperation in technology that India's ailing defence efforts and energy sectors need. The recent condemnation of the NATO-enforced no-fly zone over Libya came in for criticism from BRICS when India had no geostrategic advantage in such a move. Even if we look past politics and to morality (which is a risky endeavour), there is no doubt that Muammar Qaddafi is not a benevolent leader. Libya's past attempts at making nuclear and chemical weapons, and its support of terrorism should give pause to any Indian statesman in seeking better ties with the country, for who should be the targets of such terrorism if not the United States and India? Libya's ties, or rather Qaddafi's ties, not surprisingly, are strongest with China among the BRICS (although Europe dominates trade with about 64%).

It is heartening to note that India has in the past broken with BRICS on issues vital to her security environment. For example, in a IAEA vote in March 2011, India voted in favour of the British Nuclear Fuel Assurance plan meant to ensure continuous supply of nuclear fuel or low-enriched uranium to countries desirous of developing nuclear power for peaceful uses even in the face of adverse political developments between the donor and recipient country.

Despite the oft-stated benefits of BRICS, India is yet to get an endorsement from the group for a permanent seat in the UN SecurityCouncil – China has not supported India to date and the support from BRICS for South African and Indian candidacy for the UNSC has diluted India's position. Although a joint statement issued at the end of the recently concluded BRICS summit in Sanya declared that Russia and China would like to see India play a larger role in the UN, there was no indication that China would back India's bid for inclusion into the UN sanctum sanctorum.

Meanwhile, China has extracted BRICS support for its currency, the yuan, to be one of the currencies in the basket underlying the special drawing rights of the IMF. This is despite the devalued currency hurting exports from India and Brazil. The Sanya summit also resulted in a pact in which the five countries pledged to use their own currencies in giving credit and loans to each other rather than the dollar. Although this challenges the power of the almighty dollar, its main beneficiary is China as it holds trade surpluses with all the other BRICS. The pact could, forseeably, position the yuan as an alternative to the dollar. Even if trade is not impacted by this initially, holdings of the yuan will funnel more trade to China as China stands the most capable of giving massive lines of credit to its trading partners.

The inclusion of South Africa into BRICS, though in some ways a welcome move, threatens to undermine the purpose of IBSA, the India-Brazil-South Africa business consortium. Arguably, South Korea, Mexico and Turkey, popularly known as the “growth economies” (each accounting for about 1% of global GDP) have a better claim than South Africa to join BRIC. The South African economy of $285 billion compares poorly with South Korea’s ($830 billion), Turkey’s ($615 billion) and Mexico’s ($875 billion). But South Africa has one distinctive asset: it is the “gateway” to an entire continent for trade and investment – and for making geopolitical forays. Its other asset is that it has China as its largest trading partner. By bringing South Africa into the BRIC orbit, China challenges the US to rework its Africa strategy. How do you patrol the “global commons” in the Indian Ocean without a grip on the Cape of Good Hope? To be fair to China, the challenge is of diplomatic suppleness with no trace of hard power - yet. China's overture to South Africa can only be seen as a long-term move. Bringing South Africa into BRIC bought China goodwill with its largest trading partner in Africa and gives it a significant advantage in its rivalry with India in Africa.

Thus, although BRICS may have some advantages for India, so far it seems simply an exercise in vanity to be included in a group of the most promising emerging economies by as famous a company as Goldman Sachs. There are many kinks in the BRICS framework that India needs to be wary of. Although BRICS certainly has the potential to challenge American hyperpower and create a Concert of Europe writ large, its significant Chinese component may make us prefer the devil we know.