G7 vs BRICS — Off to the Races
By Scott Ritter
March 23, 2023:
Information Clearing House
-- "Consortium
News" -
Last
summer, the Group of 7 (G7), a self-anointed
forum of nations that view themselves as the
most influential economies in the world,
gathered at Schloss Elmau, near
Garmisch-Partenkirchen, Germany, to hold their
annual meeting. Their focus was punishing Russia
through additional sanctions, further arming of
Ukraine and the containment of China.
At the same time,
China hosted, through video conference, a
gathering of the BRICS economic forum. Comprised
of Brazil, Russia, India, China and South
Africa, this collection of nations relegated to
the status of so-called developing economies
focused on strengthening economic bonds,
international economic development and how to
address what they collectively deemed the
counter-productive policies of the G7.
In early 2020,
Russian Deputy Foreign Minister
Sergei Ryabkov had predicted that,
based upon purchasing power parity, or PPP,
calculations projected by the International
Monetary Fund, BRICS would overtake the G7
sometime later that year in terms of percentage
of the global total.
(A nation’s gross
domestic product at purchasing power parity, or
PPP, exchange rates is the sum value of all
goods and services produced in the country
valued at prices prevailing in the United States
and is a more accurate reflection of comparative
economic strength than simple GDP calculations.)
Then the pandemic
hit and the global economic reset that followed
made the IMF projections moot. The world became
singularly focused on recovering from the
pandemic and, later, managing the fallout from
the West’s massive sanctioning of Russia
following that nation’s invasion of Ukraine in
February 2022.
The G7 failed to
heed the economic challenge from BRICS, and
instead focused on solidifying its defense of
the “rules based international order” that had
become the mantra of the administration of U.S.
President Joe Biden.
Miscalculation
Since the Russian
invasion of Ukraine, an ideological divide that
has gripped the world, with one side (led by the
G7) condemning the invasion and seeking to
punish Russia economically, and the other (led
by BRICS) taking a more nuanced stance by
neither supporting the Russian action nor
joining in on the sanctions. This has created a
intellectual vacuum when it comes to assessing
the true state of play in global economic
affairs.
It is now widely
accepted that the U.S. and its G7 partners
miscalculated both the impact sanctions would
have on the Russian economy, as well as the
blowback that would hit the West.
Angus King, the
Independent senator from Maine,
recently observed
that he remembers
“when this
started a year ago, all the talk was the
sanctions are going to cripple Russia.
They’re going to be just out of business and
riots in the street absolutely hasn’t worked
…[w]ere they the wrong sanctions? Were they
not applied well? Did we underestimate the
Russian capacity to circumvent them? Why
have the sanctions regime not played a
bigger part in this conflict?”
It should be noted
that the IMF calculated that the Russian
economy, as a result of these sanctions, would
contract by at least 8 percent. The real number
was 2 percent and the Russian economy — despite
sanctions — is expected to grow in 2023 and
beyond.
This kind of
miscalculation has permeated Western thinking
about the global economy and the respective
roles played by the G7 and BRICS. In October
2022, the IMF published its annual
World Economic Outlook (WEO),
with a focus on traditional GDP calculations.
Mainstream economic analysts, accordingly, were
comforted that — despite the political challenge
put forward by BRICS in the summer of 2022 — the
IMF was calculating that the G7 still held
strong as the leading global economic bloc.
In January 2023 the
IMF published
an update to the October 2022 WEO,
reinforcing the strong position of the G7.
According to Pierre-Olivier Gourinchas, the
IMF’s chief economist, the “balance of risks to
the outlook remains tilted to the downside but
is less skewed toward adverse outcomes than in
the October WEO.”
This positive hint
prevented mainstream Western economic analysts
from digging deeper into the data contained in
the update. I can personally attest to the
reluctance of conservative editors trying to
draw current relevance from “old data.”
Fortunately, there
are other economic analysts, such as Richard
Dias of Acorn Macro Consulting, a self-described
“boutique macroeconomic research firm employing
a top-down approach to the analysis of the
global economy and financial markets.” Rather
than accept the IMF’s rosy outlook as gospel,
Dias did what analysts are supposed to do — dig
through the data and extract relevant
conclusions.
After rooting
through the IMF’s
World Economic Outlook Data Base,
Dias conducted a comparative analysis of the
percentage of global GDP adjusted for PPP
between the G7 and BRICS, and made a surprising
discovery: BRICS had surpassed the G7.
This was not a
projection, but rather a statement of
accomplished fact: BRICS was responsible for
31.5 percent of the PPP-adjusted global GDP,
while the G7 provided 30.7 percent. Making
matters worse for the G7, the trends projected
showed that the gap between the two economic
blocs would only widen going forward.
The reasons for
this accelerated accumulation of global economic
clout on the part of BRICS can be linked to
three primary factors:
-
residual
fallout from the Covid-19 pandemic,
-
blowback from
the sanctioning of Russia by the G7 nations
in the aftermath of the Russian invasion of
Ukraine and a growing resentment among the
developing economies of the world to G7
economic policies and
-
priorities
which are perceived as being rooted more in
post-colonial arrogance than a genuine
desire to assist in helping nations grow
their own economic potential.
Growth
Disparities
It is true that
BRICS and G7 economic clout is heavily
influenced by the economies of China and the
U.S., respectively. But one cannot discount the
relative economic trajectories of the other
member states of these economic forums. While
the economic outlook for most of the BRICS
countries points to strong growth in the coming
years, the G7 nations, in a large part because
of the self-inflicted wound that is the current
sanctioning of Russia, are seeing slow growth
or, in the case of the U.K., negative growth,
with little prospect of reversing this trend.
Moreover, while G7
membership remains static, BRICS is growing,
with Argentina and Iran having submitted
applications, and other major regional economic
powers, such as Saudi Arabia, Turkey and Egypt,
expressing an interest in joining. Making this
potential expansion even more explosive is the
recent Chinese diplomatic achievement in
normalizing relations between Iran and Saudia
Arabia.
Diminishing
prospects for the continued global domination by
the U.S. dollar, combined with the economic
potential of the trans-Eurasian economic union
being promoted by Russia and China, put the G7
and BRICS on opposing trajectories. BRICS should
overtake the G7 in terms of actual GDP, and not
just PPP, in the coming years.
But don’t hold your
breath waiting for mainstream economic analysts
to reach this conclusion. Thankfully, there are
outliers such as Richard Dias and Acorn Macro
Consulting who seek to find new meaning from old
data.
Scott Ritter is
a former U.S. Marine Corps intelligence officer
who served in the former Soviet Union
implementing arms control treaties, in the
Persian Gulf during Operation Desert Storm and
in Iraq overseeing the disarmament of WMD. His
most recent book is Disarmament in the Time
of Perestroika, published by Clarity Press.
Views expressed in this article are
solely those of the author and do not necessarily
reflect the opinions of Information Clearing House.
in this article are
solely those of the author and do not necessarily
reflect the opinions of Information Clearing House.
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