Brics meet at key point in battle against global inequality
Foreign ministers of the Brics (Brazil, Russia, India, China, and South Africa) met on Monday in Beijing in advance of the group’s 9th annual summit of presidents and prime ministers in September.
The Beijing meeting unveils China’s agenda for this year’s event in Xiamen, which will build on the 2016 summit in India that focused on institution building to deepen and sustain Brics co-operation.
At last year’s Goa summit, reform of the global financial architecture was a key agenda item, including expanding the role of emerging economies in the International Monetary Fund, and the Brics agreed to set up a new credit rating agency. The group also called on the Brics New Development Bank to focus on funding specific development priorities, and set up research centres in areas such as agriculture and railways.
The Beijing session, chaired by Chinese Foreign Minister Wang Yi and feature foreign ministers except India sent the minister of state, comes at a potentially pivotal moment in the battle against global economic inequality. World Bank research indicates that, for the first time in some two centuries, overall global income inequality - one of, but not the only measure of economic inequality - appears to be declining.
The Brics nations, which account for more than 40% of world population and just under 40% of global gross domestic product, have been the key drivers of this historic movement toward greater overall global income inequality.
The collective economic growth, and very large populations of India and China, have lifted a huge number of people out of poverty — an estimated 600-million between 1981 and 2004 in China alone.
This has helped catalyse what Branko Milanovic, who co-authored the World Bank research with Christoph Lakner, asserts is the “profoundest reshuffle of individual incomes on the global scale since the Industrial Revolution”.
At the same time, however, there is an opposing force: growing income inequality in many countries, and this issue has become increasingly politically salient. It is the rising inequality in developed markets that gets most attention and this has fuelled an occasionally wild political period in some Western countries. Take the United States, for instance, where concerns over inequality and stagnant living standards have led to surging support for populist and nationalist politicians, with Donald Trump powering his rise to the presidency last year.
These two opposing forces, like tectonic plates, are pushing against each other. Although the net global trend for the past 200 years has been toward greater overall income inequality, there is now significant, growing evidence since the turn of the millennium that the “positive effect” of growing income equality between countries, spurred by the development of the global South, is superseding the “negative effect” from increasing inequality within nations.
The picture is not yet clear. In part, this is because data sources on income across the world are imperfect, which means conclusions are hedged with uncertainty.
Althouth more proof is needed to judge whether this economic phenomenon is robust and sustainable, what is certain is that the overall lot of the South has improved, as exemplified by the Brics over the last generation. The most prominent beneficiaries have been a much heralded “new” middle class — estimated to be as large as a third of the world’s population — disproportionately located in key Asian emerging economies such as China, India, and other key countries including Indonesia.
The World Bank research also indicates that much of the bottom third of the global income hierarchy have also generally benefited. As in China, many other hundreds of millions of people have shifted from absolute poverty.
But not all the South has shared fully in this success story. Much of Africa and some of Latin America have generally not benefited as much as Asia.
With the current economic problems that China and other key emerging markets, including Brazil and South Africa, are now experiencing, it is unclear whether the development of the global South has enough momentum to keep driving towards a more equitable world order. This will depend, largely, on the same twin issues of whether emerging markets generally continue growing robustly, and whether the trend toward rising income inequality in countries is sustained.
On the first issue, the trajectory of the global economy will probably continue to shift toward the South, and fmany key emerging markets will remain in robust shape. But the recent wave of emerging market growth of the last generation appears to be decelerating, and the global transformation it has produced in recent years may not be repeated again.
On the latter, it is not set in stone that ever-growing income inequality in countries will continue, especially if there is political and popular will to address it. But the debate over what long-term reform agenda should be undertaken to tackle this problem is contested by the left and right across much of the world
Andrew Hammond is an associate at the Centre for International Affairs, Diplomacy and Strategy at the London School of Economics