At NewsMax: “BRICS Is Sinking Like One”
Instead of realizing their dream of surpassing the old world economic powers, most of BRICS’ economies are dropping faster than a falling brick.
BRICS stands for the association of the economies of Brazil, Russia, India, China, and South Africa. They have a general history of being large but poorly performing economies.
However, they encompass 42% of the world’s population, offer tremendous investment opportunities, and their economies have experienced rapid growth over the last decade. As a result, the BRICS nations formed an association to seek mutually beneficial cooperation.
For example, they pledged to cooperate to increase trade, multilateral swaps, business opportunities, and cultural exchanges.
But it was political and economic cooperation that sent shock waves across the developed world. Tired of having to play second fiddle to what they believes were a fading United States, Europe, and Japan, BRICS started the New Development Bank to rival the IMF and World Bank. China also upped the ante by starting the Asian Infrastructure Investment Bank to rival the western dominated Asian Development Bank.
What a difference a year makes. Brazil’s economy fell into deep recession and Brazilians have taken to the streets in protest. Russia’s economy is significantly contracting, triggered by low oil prices. China’s economy is cooling off despite the government’s best efforts. South Africa’s economy has weakened with decreasing GDP and rising unemployment. India’s economy is the only one that is maintaining momentum.
While each country has unique circumstances that have contributed to their declining economies, there are a number of commonalities.
Each of the poorly performing economies experienced huge capital inflows from U.S. investment. Those investments were made by financial institutions investing cheap Fed stimulus dollars in emerging markets after there was little demand for loans and investments in the mediocre US economy. But when the Fed ended QE, over $1 trillion of investment capital have left emerging markets. As Margaret Thatcher once said, socialism works until you run out of other people’s money.
Further, each of the poorly performing economies are centralized governments. With huge welfare states, less freedom, big government, more regulations, and high taxes, they are all hitting the upper limits of what state-run economies can do. That is why the largest democracy in the world, India, continues their momentum.
The West’s fragile economies are not in the position to bail out BRICS. And it’s likely the motivation is not there especially since BRICS burned a lot of bridges by getting way ahead of itself claiming the mantle of the future of global leadership.
If BRICS is going to turn around their sinking economies, it will need to be done by cutting back on their welfare states, giving their people more freedom, shrinking the size of their government, making their regulations less onerous, and cutting taxes. Otherwise the West will continue dominating global affairs for the foreseeable future.
Originally Posted on Newsmax.com
Tags: Brazil, China, Economics, India, Rusia, South Africa
Categorised in: News