The Political Economy of the BRICS Countries. Группа авторов
and the use of bank credit. He finds that between 2011 and 2017, most of these measures have witnessed a discernible rise. Illustratively, 66% of Chinese individuals had a formal finance account in 2011, which increased to nearly 80% by 2014 and has remained at that level. Only 56% of individuals in Brazil and 54% in South Africa had a formal account in 2011, which increased by nearly 14 percentage points in both countries in 2017. The situation is very much different as regards the use of formal credit. Just around 14% of the individuals in Russia reported having obtained formal credit in the past year in 2017 (the highest in the sample), the global average being 11%. In India, only 7% of individuals borrowed from a financial institution in 2017, the lowest among the BRICS. In his econometric analysis, he finds that GDP per capita and domestic credit to private sector turn out to be significant determinants of access to formal finance.
In the final chapter of the volume, Aparajita Gangopadhyay considers the case of social programs in Brazil, particularly the Bolsa Familia program, a conditional cash transfer program, which is often held out as an example of successful government intervention to reduce inequality and improve health and education outcomes. She finds that though the amounts transferred are low, it has guaranteed a minimum quality of life for its recipients. However, it has not been successful at moving them out of poverty. She also points to a major factor that has enabled the program to continue despite the dominance of elites in the Brazilian political system. The amount of resources that is spent on these programs does not threaten the entitlements of the rich or the middle class, and this reduces elite opposition to such resource transfers. She concludes that unless the political system evolves to such an extent that this elite dominance of the Brazilian political system can be effectively countered, the future of these programs will always remain uncertain.
The chapters in this volume discuss different dimensions of the political economy, economic growth, and its inclusivity across various matrices. While being exuberant about the growth potential of these countries, all the chapters remain skeptical about two aspects of this growth process — the internal cohesiveness of BRICS as an economic and political bloc, and concerns regarding the inclusiveness of the growth process. How these five countries resolve their internal contraction in future years remains to be seen. Unless they address the various challenges described in the chapters, the effectiveness of BRICS as a bloc will be seriously constrained.
CHAPTER 1
BRICS: The Political Economy of Non-Inclusive Growth
Biju Paul Abraham
Public Policy and Management Group, Indian Institute of Management Calcutta, Kolkata, India
Introduction
The growth of the BRICS group of emerging economies (comprising of Brazil, Russia, India, China, and South Africa) as a power bloc, similar to the G7 and G20, in global politics has been one of the most important geo-political developments in international affairs since the 2008 financial crisis. At first glance, these five countries might seem unlikely partners in a bloc. They vary widely in geographical size, size of their GDPs, internal political systems, and international influence (Armijo, 2007: 8–9). However, what seems to unite them is their belief that they are ‘punching below their weight’ in international affairs and are thus being prevented from playing a more influential role globally by existing great powers, particularly the G7 countries, which remain deeply reluctant to accommodate emerging powers meaningfully in the existing international system. This new bloc could be seen as a symbol of assertion by countries who feel marginalized in global politics despite their strong economic growth and future potential. The group’s declared objective of reshaping the existing international political and economic order, by significantly reforming the ‘Bretton Woods’ institutions, is undoubtedly an attempt to challenge the dominance of the G7 in international political and economic affairs (Hou, 2014).
While the declared objective of reshaping the international political and economic order might seem a natural demand from a group of countries whose economic growth has made them a significant part of the global economy, the achievement of these objectives depends on four critical factors — maintenance of relatively higher rates of economic growth when compared to the G7 economies, much deeper integration into the international economic and trading system, greater cohesion among members of the bloc in both articulating and pressing their demands for significant reform of international economic institutions, and finally domestic political stability that would underpin greater assertiveness abroad.
This chapter will consider the last of these critical factors from a political economy perspective. It will be argued that while all five economies are undoubtedly becoming more significant in the global economy, their ability to exert greater global influence is undermined by critical domestic fault lines. In particular, the political economy of growth in these countries has led to inequitable and non-inclusive growth that could potentially undermine both political and economic stability. This is likely to have a significant impact on their ability to act cohesively as a group and bring about significant changes in the way international institutions and agencies work.
The chapter is divided into five parts. The first part looks at the emergence of BRICS within the context of international relations theory. It will be argued that rather than neo-realist approaches, neo-classical realist approaches which consider domestic factors that could undermine states’ ability to act decisively abroad might be better at explaining both the emergence and future potential of BRICS. This is followed by a discussion of three aspects of the growth strategy followed by the BRICS countries which make their growth non-inclusive. These three aspects are critical for understanding both their current status and the hurdles to them fulfilling long-term potential. First, the initial growth paths that all five countries followed is discussed to explain the different contexts within which each of these five emerging economies have developed. The persisting social and economic inequalities in all five countries is discussed next. The third part discusses the impact of corruption and political capture on growth policies and how they hinder radical shifts in growth policy. A concluding section will consider the impact of non-inclusive growth on domestic stability and its impact on the ability of BRICS countries to play a more influential role in international affairs.
Domestic Stability and International Influence
International relations theory has for long tried to explain differences in state behavior within the international political system. The attempt has been to identify factors that would explain differences in the behavior of states.
Three approaches have dominated such analysis. The first is Innenpolitik which seeks to explain state behavior as being affected by domestic political ideology as well as domestic economic and social interest groups (Zakaria, 1992). This approach, for example, suggests that democracies will not go to war with each other because democratic states are primarily interested in peace and stability (Ray, 1998). However, the major criticism of this approach has been that it does not explain why countries with similar domestic systems behave differently abroad (Rose, 1998: 148).
The second analytical approach, neo-realism, postulates that international relations is an ‘autonomous realm’ where states leverage their capabilities to seek greater recognition and influence within the international system (Koslowski and Kratochwil, 1994). This approach does not concern itself with domestic politics in these countries or its impact on their domestic stability. Neo-realists argue that in an international system that is anarchic, states make choices in terms of their international behavior based on their belief that they can survive only if they follow patterns of behavior set by existing major powers. The limitations of this approach was most evident in neo-realist analyses of the Soviet Union’s behavior before its collapse in 1991 which failed to take into account the impact of domestic economic decline and could not foresee its longer term implications for Soviet influence abroad and also global power politics (Wohlforth, 2001).
The third approach, neo-classical realism, while accepting that emerging states do try to imitate existing great powers to increase their influence in world affairs also