/ 5 January 2017

The odds are stacked against the Brics

The Brics bloc’s relations could well destabilise to the break point.
The Brics bloc’s relations could well destabilise to the break point.


The weeks following an underwhelming Brics (Brazil, Russia, India, China, South Africa) mid-September summit in Goa and the United States presidential election in November have unveiled ever-widening contradictions across the bloc.

Thanks to blatant corruption, presidential delegitimisation has reached unprecedented levels in both Brazil and South Africa; ruling-party degeneracy in India also included an extraordinary bout of local currency mismanagement; and sudden new foreign-policy divergences may wreak havoc between China and Russia. The Brics bloc’s relations could well destabilise to the break point.

Even before the next major world recession arrives, probably within two years, intrabloc conflict will be apparent at the September 2017 Brics summit in Xiamen, China. Most obviously, the Brasilia, Moscow and New Delhi governments are shifting towards Washington while those in Pretoria and Beijing are spouting well-worn, anti-imperialist rhetoric, just as United States president-elect Donald Trump and his chaotic mix of populists, paleoconservatives, neoconservatives and neoliberals take power on January 20.

US President Barack Obama’s legacy set the stage for the worst of Trump’s coming policies — economically empowering the top 1% at the expense of the vast majority, the continuation of a belligerent foreign policy, a $1-trillion planned expansion of nuclear weapons with terrifying “first-strike” ambitions, the promotion of corporate interests around the world, the denial of civil liberties especially to refugees and prisoners, and the construction of a vast surveillance capacity by Washington’s “deep state”.

Even before Trump, Chinese President Xi Jinping faced greater conflict with Washington than at any time since China-US frictions of the early 2000s. Geopolitical tensions in the South China Sea began rising in 2011 with Obama’s “pivot to Asia”. This meant, according to journalist John Pilger, “that almost two-thirds of US naval forces would be transferred to Asia and the Pacific by 2020. Today, more than 400 American military bases encircle China with missiles, bombers, warships and, above all, nuclear weapons. From Australia north through the Pacific to Japan, Korea and across Eurasia to Afghanistan and India, the bases form “the perfect noose”, according to one US strategist.

China’s pivot to Eurasia is a testing ground because of increasing investments in Chinese infrastructure (perhaps amounting to $160-billion) in the “one belt, one road”, based on Russian-Chinese energy co-operation. On the other hand, US capital is extremely exposed in China through direct investment, supplier relations, research and development contracts and consumer markets. And Beijing still owns more than $1.3-trillion in US treasury bills, although that has not increased since 2012.

Always exhibiting opportunistic deal-making instincts, after taking a controversial congratulatory phone call from Taiwan’s President Tsai Ing-wen last month, Trump explained: “I don’t know why we have to be bound by a One China policy, unless we make a deal with China having to do with other things, including trade.”

Washington had recognised One China since 1979, as had the United Nations General Assembly since 1971.

A Chinese state mouthpiece, the Global Times, threatened that, if Trump “openly abandons the One China policy, there will be a real storm. At that point, what need does mainland China have for prioritising peaceful unification with Taiwan over retaking the island by military force?”

War is one scenario but an economic blockade is more likely, given Taiwan’s reliance on China, especially sending world-leading semi-conductors to the dependent West via eastern mainland China’s high-tech assembly facilities. One Beijing official told Reuters: “We can just cut them off economically. No more direct flights, no more trade.”

Trump blames trade competition — specifically, subsidised Chinese exports and currency devaluation, as well as alleged Chinese commercial computer hacking — for US deindustrialisation. Advised by the notorious Sinophobe economist Peter Navarro, Trump’s answer is localisation policies that will allegedly benefit the US manufacturing industry by increasing protection from foreign imports with what may be a 45% tariff on China and 10% on goods from other overseas sources.

The prospects of a trade war reminiscent of the protectionist Smoot-Hawley Act of 1930, which is credited with contributing to the Great Depression, reminds us that the major question linking the 1930s and 2010s is in which direction will populist sentiments channel working-class politics. The momentum in most countries is towards right-wing leaders: Trump in the US; the UK Independence Party and Brexit supporters in Britain; the National Front led by Marine Le Pen in France; the Alternative for Germany in Germany; and the Party of Freedom led by Geert Wilders in the Netherlands. France, Germany, the Netherlands, and Italy, where the Five Star Movement led by comedian Beppe Grillo also has right-wing populist support, will hold elections this year.

Trump promises to lower US corporate taxes from 35% to 15% and rapidly inject what might be called “dirty Keynesian” spending on airports, private transport infrastructure and petroleum industry expansion (to hell with the climate), heralding a new boom in US state debt. Along with the US Federal Reserve’s rise in interest rates, this in turn will at least initially draw more of the world’s liquid capital back into the US economy, similar to the 2008-2009 and post-2013 shifts of funds that debilitated all the Brics currencies aside from the Chinese yuan.

But one 2017 winner may well be the Russian economy, as a result of loosening sanctions and the higher oil prices that are likely to result from last month’s Organisation of Petroleum Exporting Countries agreement. At rock bottom last February, the price per barrel had fallen to $27 (from its 2008 peak of $145), but by year’s end was $55.

Other economic dangers reside in massive Chinese industrial overcapacity, unprecedented global corporate debt, while profit rates continue falling, worsening stagnation and rising financial meltdown risks emanating from weak European banks such as Germany’s Deutsche Bank and several Italian ones.

Trump’s election has heralded a period in which the Brics’ dubious claim of building a counter-hegemonic world politics will falter and unravel ever faster. Two leaders — Brazil’s President Michel Temer and India’s Prime Minister Narendra Modi — have strong ideological affinities as conservative nationalists.

But the constitutional coup of Temer’s government, installed in May, suffers ongoing popular delegitimisation, in part among unions that had supported the predecessor Workers’ Party. When Temer imposed a 20-year austerity policy, his closest allies — Renan Calheiros and Eduardo Cunha, who arranged former president Dilma Rousseff’s downfall in the Congress, and six of his Cabinet ministers — were ousted for corruption, thanks in part to plea bargain confessions by 77 officials of the Odebrecht construction companies involved in political bribery.

In India, six weeks before hosting the 2016 summit, Modi suffered a strike by an estimated 180-million workers demanding both higher wages and an end to his neoliberal (austerity-oriented, pro-corporate) economic policies. Although his Hindu nationalism assures him a strong base, Modi soon attracted the ire of the nonsectarian working class and poor (among others) because of his banning of large currency notes (500 and 1 000 rupees), which make up 86% of the money in circulation. This left many rural areas virtually without cash and hence without economic activity, and banks were compelled to restrict fund withdrawals to small, daily amounts.

President Jacob Zuma, meanwhile, seems to require Brics anti-imperialist myth-making to shore up his internal legitimisation, as part of the ANC’s so-called “Error! Hyperlink reference not valid” tendency. For example, last November Zuma explained the “very powerful” Brics to party activists in Pietermaritzburg: “[Western countries] want to dismantle this Brics. We have had seven votes of no-confidence in South Africa.”

The following week in Parliament, Zuma was asked which countries he meant, and replied: “I have forgotten the names of these countries. How can he think I’m going to remember here? Heh, heh, heh, heh!”

Such theatrics will continue, as witnessed by Pretoria mayor Solly Msimanga’s scuffle with the ANC over an investment-hunting trip to Taiwan.

Finally, Russia President Vladimir Putin was accused by Obama and by the defeated Democratic Party presidential candidate Hillary Clinton of assisting Trump to win last November’s election by hacking emails. US intelligence agencies have failed repeatedly to make the case. Even on December 29, Obama still could not provide conclusive evidence of wrongdoing when he expelled three dozen Russian diplomats. WikiLeaks founder Julian Assange denies he had access to leaked emails from any direct Russian source.

Putin’s critics remind him that his government is being successfully prosecuted for widespread doping of Olympic athletes, a charge once denied but now confessed. Given Putin’s hatred of the US state department — for valid reasons, such as its role in the 2014 Ukrainian regime change and prior destruction of Iraq, Afghanistan and Libya — there is no question that he both favoured the election of Trump and had the spy-craft capacity to intervene.

Trump’s prolific personal business interests interlock with Russia and the appointment to the position of secretary of state of the pro-Russian ExxonMobil chief executive Rex Tillerson — who had negotiated a $500-dollar Siberian oil deal with Putin before the sanctions — leaves another dilemma: whether his own party and the Democrats, conditioned to despise Putin for more than a decade, will let the Trump wedge be driven through both US and Brics politricks.

Patrick Bond is a professor of political economy at the University of the Witwatersrand