It’s getting completely subsumed by the much more dramatic and, I’ll freely admit, much more interesting story going on in Iran, but the rather odiously named “BRIC” summit that happened in Russia this week deserves a brief comment. (If you must relate it to the Iran story, Ahmadinejad flew off to the same place for a security summit earlier in the week.) BRIC is an acronym that stands for Brazil, Russia, India, China. It was coined in 2001 by a guy at Goldman Sachs to refer to big countries that had very promising economies and were likely to become major economic players in their own right someday. It’s a formulation that’s just clever enough that it became a fashionable buzzword for internationally minded people (think readers of publications like The Economist) and now the countries themselves have adopted it as a mark of pride.
While the “group” itself exists in only the loosest and most informal of ways, that doesn’t make it completely meaningless. The usual criticism of it is that the countries that make it up don’t have all that much in common, hence the idea of a summit is kinda silly. But they’re highlighting an important trend that otherwise gets very little attention. Namely that the economic institutions of the world have been very slow to adapt to an increasingly flat global economic playing field. Their main concern, one that the summit addressed only obliquely, is that it’s simply unfair for the dollar to be the world’s currency reserve.
It’s a fair complaint. Having the dollar as the world’s favorite currency shields America (to some extent) from its own economic stupidities by imposing some of the negative effects on other countries. (Imagine what professional lunatics like, oh, Michelle Bachman, would say if the reverse were true.) The problem that the BRIC countries, and others, face is that there isn’t a good alternative, nor can one be manufactured.
It’s not as though the current system was devised with the overarching goal of American advantage. It was setup the way it was setup because everyone trusts the US government to pay its debts. Even after eight years of catastrophic mismanagement and scandalous squander US Treasuries remain the safest investment on the planet and the dollar remains supreme. Why is that? Because the alternatives are worse.
The Euro is hamstrung by the fact that no one really knows that the EU is, or is going to be in five, ten or twenty years. As for the BRIC countries, Russia defaulted on its debt a little more than a decade ago. China is an authoritarian state answerable to no one. Brazil emerged from military dictatorship just a quarter of a century ago and has been a roller coaster ever since. India has a relatively stable government, but its economy and its society are anything but.
It’s always dangerous to speak in grand generalizations like these. Innumerable issues get swept up and obscured and so gross inaccuracies are very possible. However, the main point here stands pretty firm. The financial system upon which the world economy depends is largely a Western, and specifically an American, creation. That cannot go on indefinitely.
This isn’t an immediately pressing issue which is why for once I’m not complaining about something important getting lost in the shuffle. But it does serve to highlight an issue which will probably need to be reconciled sometime in the next couple of decades. This is only the most tentative of beginnings of that reconciliation, but it cannot be postponed forever.
