In this week’s round-up, we delve into the evolving dynamics of the BRICS nations and their impact on global economics and politics. From Thomas Piketty’s call for Western countries to seriously consider a minimum tax on the world’s wealthiest, to the unlikely challenge BRICS pose to the petrodollar’s dominance, and the mixed opportunities and threats their expansion brings to South African business. We also explore the group’s growing share in global GDP and the implications of their expansion with new members set to join in 2024, reflecting a shift towards a more multipolar world order.
Thomas Piketty: ‘It’s time for Western countries to take the BRICS seriously’
In his column, the French economist argues that a minimum tax should be introduced on the world’s most prosperous players, with a redistribution of revenues between all countries, to share power and wealth.
Expanded BRICS unlikely to challenge the petrodollar soon
Despite the expanded BRICS group’s significant global economic presence, analysts doubt its ability to challenge the U.S. dollar’s dominance in oil trade soon. Key hurdles include the dollar’s entrenched role in global finance, currency pegs to the dollar by major oil exporters, divergent monetary policies among BRICS nations, and reluctance from countries like India to move away from dollar transactions. Additionally, Saudi Arabia shows no intention of shifting from dollar-based oil payments.
BRICS expansion holds threats and opportunities for SA business
The expansion of the BRICS bloc (Brazil, Russia, India, China, and South Africa) to include new members Argentina, Egypt, Ethiopia, Iran, the United Arab Emirates, and Saudi Arabia from 2024, is seen as a strategy to enhance the group’s global influence and aid in transitioning to a “multipolar world”, partly by challenging the US dollar’s dominance. This expansion is expected to give the group more political clout. However, it also introduces complexities and potential tensions due to geopolitical issues among the new and existing members, such as the Grand Ethiopian Renaissance Dam dispute, Middle Eastern rivalries, and ongoing tensions between India and China
A World Made of BRICS
In 2001, Brazil, Russia, India, China and South Africa—the emerging-markets group known as the BRICS—accounted for 19% of global gross domestic product in purchasing power parity terms. Today, including countries set to join the bloc, the share is 36%. We see this rising to 45% by 2040, more than double the weight of the Group of Seven major advanced economies.
The BRICS are expanding
When the BRICS meet in Russia in October 2024 they will need a bigger stage than ever. Leaders of the five countries that gave their name to the bloc—Brazil, Russia, India, China and South Africa—will be joined by those from an additional six. The admission of Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates will reflect how geopolitics is changing: the world is becoming more multipolar and middle powers more assertive in challenging the Western-led order. But the summit will also show the limits of what a heterogeneous “global south” can achieve.
