‘An economist is an expert who will know tomorrow why things he predicted yesterday didn’t happen today’, said Laurence J. Peter. Indeed, the fickle discussion of economic speculation is presently ripe, with distinct question marks hovering around the longevity of the global economy as countries continue to swirl in the Covid-19 pandemic cycle.
Above all others, there is a group of economies experts would be wise to keep their eye on.
The BRICS countries
Jim O’Neill was the first to speak of the BRIC collective. This is a four-country group noted to be at similar stages of rapid economic development, comprising: Brazil, Russia, India and China. In later years, South Africa joined the clique, creating the BRICS. Economists are intrigued by projections on who will fall out of and rise into the upper echelon of economies, with the BRICS being frequent objects of speculation. However, the depth, or lack thereof, of this listless speculation can be worrisome. The United States is a stark example that an economy with plenty of zeroes behind it does not equate to an equal or well-regulated economy. Early signs make it apparent that these germinating economies seem destined to end up the same way.
Brazil was once a beacon of South America, and on a purely numerical basis it remains so, but when examined closer the light appears to be progressively diminishing. Corruption has moulded the modern political landscape of Brazil, and continues to loom over the Bolsonaro administration. In the Oscar-nominated documentary, The Edge of Democracy, filmmaker Petra Costa elaborated on the allegations of judicial misconduct surrounding Sérgio Moro, who served simultaneously as a prosecutor and a federal judge and was hired into the Bolsonaro administration before resigning over alleged interference from the President. Corruption is more than a flaw of society; it has vast economic repercussions too — often limiting GDP (if not slashing it) and decreasing annual investments. Worse yet, President Bolsonaro has no plans to ‘greenify’ the economy, meaning any economic growth of the country lacks long-term sustainability. Were it not for the President’s outward hostility towards the Amazon, one pragmatic approach could be to follow in the footsteps of the Norwegians; usage of natural resources can fund investment into a greener economy of the future. Instead, the Bolsonaro administration is tainted by a lackadaisical response to the pandemic, and the absence of any long-term environmentally conscious economic plans.
The situation looks no brighter in Russia. According to a 2014 Credit Suisse report, Russia had (and still does) such flagrant inequality that, by some accounts, it has already blazed past the United States. Accompanied by curtailed freedoms and a history of power being concentrated amongst billionaire oligarchs, as well as the potential shift into a Putin-led quasi-dictatorship, and already the current state of the country makes for ample concern. If an economy is already overwhelmingly unequal before it has transcended from developing into developed, there is the possibility this inequality will be carried, if not catalysed, into the next phase. Existing divisions simply widen, and as wealth trickles up in value, it is filtered into the pockets of the few.
Consider India too. As recently as 2018, The Economist was asking where the Indian middle class was. Economists and speculators had been optimistic about India’s growth, and investment amounts in the mid 2010s reflected as such. But recent consumer spending, more so after the turbulence of the pandemic, does not mirror these investment amounts. Growth of e-commerce is minimal, and the efforts of global conglomerates like McDonald’s have not yet made the predicted returns. The story is bleak for plenty of regular citizens too, and it is a familiar one. The economy grows but it is not the working mass that benefits from the growth — a sorry outcome made worse on the scale of an almost 1.5 billion population.
The BRICS have also made attempts at group unity, which may fall apart due to ongoing territorial conflicts between the two biggest contributors. Historically tumultuous, Sino-Indian territorial disputes, some of which have lasted for over one hundred years, have been highlighted as a potential weak spot of the collective as early as 2012. These conflicts may become the next big global danger. They also have the potential to be more disastrous than any that have come before when dealing with two superpowers, as geographical proximity increases opportunities for physical clashes — something that has in fact recently reoccured.
Amongst this group, China appears more successful than its peers with a legitimate eruption of the middle class and an economy growing almost too quickly for its own good. An enviable banking sector, a sturdy inventory of natural resources, a vast labour force and a world-famous capital. China has it all. Well, so long as it tackles the growth of loose shadow banking (a prominent exacerbator of the 2008 Great Recession), and prepares to navigate the middle-income trap in which developing economies grow rapidly, only to slow and stagnate before they are able to become advanced. China also must commit to tackling its impact on climate change as its industrialisation expands, lest it repeat the mistakes of the UK and the US. There is also the scepticism amongst economists who distrust government figures, as well as the growing list of criticisms against the government which includes: human rights outrage surrounding the slave labour of Uighur Muslims, the aforementioned territorial disputes, and the exploitation of the global free market to decimate international steel competition.
Last comes South Africa, and the prognosis continues to be troubling. Though data shifts, South Africa is rated as having one of the highest Gini coefficients, a measure of income inequality, in the world. With some ranking it as the worst. Raw economic data is enough to scare away potential investors, such as the economic shrinkage even before Covid-19, and accelerating youth unemployment that has been worsened by poor educational standards.
Already, Business Insider projects that South Africa will stagnate as the 27th largest economy by 2050. This alone is not to be scoffed at, but the projection says nothing about whether its inequality crisis will have been solved. Nationals also report there to be essentially a culture around sexism and racism, thus dashing hopes that the country has abandoned its apartheid past. What remains the primary surprise, however, is that South Africa was ever added to the BRIC collective. Could it feasibly be expected to meet the development rates of its BRIC peers when its labour force is much smaller and its education system still lacks fundamental improvements?
A bleak future for the BRICS economies?
It is a shame the BRICS share a common denominator of poor standards of economic equality, thus already showing symptoms that have defined prior history. BRICS projections are the epitome of why this trend could be so disappointing. One would hope the emerging economies do better than those of the past. This would require learning from mistakes and being born not out of colonialism and exploitation, but innovation and through powerful labour forces.
Instead, it looks like these new economies are simply taking their turn at a game we’ve already seen played many times before. On this point, there circulates a misconception that economies will be expected to resolve their social issues before they become powerhouses. But says who? Nothing in economics, besides potentially sanctions, serves as a stop sign for economic growth if the economy in question is founded on cheap labour and drastic inequality. Actually, if the US has taught us anything, these types of economies often tend to be rewarded.
But the rewards cannot be permanent. Income inequality can serve as a lurking iceberg for dismissive economies. The productivity of poorly paid workers with dismal aspirations is apt to collapse eventually, with the threat increasing in potency year after year. One can only watch and hope, for the sake of these economies, that the respective governments are envisioning plans to avoid the iceberg whose silhouette only continues to grow.