In 2001, Goldman Sachs chief economist Jim O'Neill coined an acronym which became so popular and gained prominence that five nations actually organised themselves as a group and held their first summit in 2009.
The acronym was BRIC. O'Neill had argued that that since the four BRIC countries (Brazil, Russia, India and China) were developing rapidly, by 2050 their combined economies could eclipse all the economies of the richest countries in the world. His paper titled, 'Building Better Global Economic BRICs' tried to show that the world cannot be run properly without getting these countries involved.
South Africa joined the bloc later and it became BRICS from BRIC.
About two years later, he tried to explain that the combined GDP of BRIC could become bigger than the G7 around 2037. He expected the countries to grow faster than the developed countries and to play an increasingly important role in the world.
Despite the group surpassing O'Neill's expectations, mainly because of China's expansion, it seems that BRICS has failed to get its act together, according to The Global and Mail. The optimism that emerged soon after the group's first meeting has dulled to a low degree and the hope that BRICS will shape global economies and politics has turned to doubt.
It has been fading as an investment story and fails to represent a united political voice. They have also failed to speak in one voice about important economic and financial challenges.
While in 2009, O'Neill was vehemently opposed to the idea of dropping any of the countries from the bloc, he suggested in 2015 that recession-ravaged Brazil and Russia no longer belong to the club with India and China. In the same year, Goldman Sachs closed its BRIC investment fund after assets reportedly declined in value by 88 percent from 2010.
The economic turmoil in all of these nations is damaging the reputation and trust for success of the bloc, according to Business Day.
While the problems plaguing the countries is very different, they collectively affect the relevance of the group. Russia and Brazil have both fallen into a recession while China has seen a sharp decline in economic activity, The Guardian stated.
Here's a look at how the economies of the BRICS nations are faring:
Brazil is mired in economic problems, which have been exacerbated by political scandals. In the first three months of 2017, the GDP of the country grew by one percent after two consecutive years of negative growth, reported BBC.
A record 14 million people are unemployed according to official figures. The corruption scandal surrounding President Michel Temer has thwarted whatever economic reforms he planned to initiate.
Russia is another country which has significantly brought down the relevance of the bloc. It has slipped into recession following the collapse in oil prices and the sanctions that have been imposed on it. The United States government is mulling even harsher sanctions on the country.
President Vladimir Putin's alleged involvement in the 2016 US elections is also denting his image. The GDP in 2015 was negative 2.8 percent, according to Focus Economics. The 2014 US sanctions on Russia coupled with a crash in global oil prices has cut deeply into the country's revenue. This drop in revenue led to a collapse of the Russian economy.
South Africa isn't faring any better. Domestic growth prospects have deteriorated following the GDP contraction in 2017. The economy has recorded two quarters of negative growth, CNBC reported.
Apart from this, President Jacob Zuma is himself embroiled in corruption allegations. The GDP in 2015 was slightly better than Russia and stood at 1.3 percent.
India is doing way better than most of its BRICS counterparts. While the collapse in global oil prices sounded the death knell for Russia, Paul Cashin, head of IMF mission for India said, "It is a large windfall gain for India."
Capital Economics pegs India's real growth rate at 6 percent in 2016 and at 6.5% in 2017. However, according to Business Day, ratings agencies have ruled out the possibility for an upgrade in the foreseeable future, citing vulnerabilities stemming from the country’s low per-capita income, high debt-to-GDP ratio and bad assets of its banks.
The latest GDP reading pegged China’s first-quarter growth at 6.7 percent on an annual basis. The problem that analysts warn against is that the figure may not bear much resemblance to reality. According to them, the country is growing at no more than 4 or 4.5 percent.
China's crackdown on public debates, lawyers, dissidents among others bespeak regimes nervous that corruption and economic slowdowns could turn their populations restive, according to Foreign Policy.
With all these nations recording low economic growth, the hope that the bloc will challenge the Western world and lead the global economy seems to be in disarray. After years of trying to gain significance and materialise the concept ideated by O'Neill, the purpose behind the formation of the group seems lost.
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Updated Date: Jul 29, 2017 18:14:00 IST