BRICS Group Evolves as Alternative Economic Model

BRICS, the economic group initially formed by Brazil, Russia, India, China and South Africa, has evolved significantly since its inception. Now expanded to include five additional members, the group has grown from modest beginnings into an influential model for alternative international relations.

Critics argue that BRICS lacks formal governance structures, as well as a clear set of principles and objectives. The absence of a permanent secretariat is often cited as evidence of its limited institutional capacity. However, this flexibility is actually a key source of BRICS’ strength and relevance today. Its effectiveness stems from its ability to cultivate practical cohesion while recognizing differences. Instead of imposing a uniform identity, BRICS seeks to amplify each member’s unique priorities through flexible alignments and coordination, achieved via minimal institutional structures and a consensus-based approach.

BRICS is an ethos in which the conduct and interactions of member states are shaped by mutual respect and acceptance of differences, as well as a shared commitment to identifying and addressing common challenges. BRICS isn’t a rigid organization but a living network. This is evident in how it approaches economic development.

Global economic development has been constrained by the outsized influence of the Bretton Woods institutions. The World Bank and International Monetary Fund (IMF) have long been governed primarily by the United States and Western European nations, limiting their responsiveness to developing countries’ needs.

The continued exploitation of developing nations’ natural resources is also an issue of concern. For example, a study by Angus Elsby found that African coffee is now re-exported from Europe at an average markup of over 300%, compared to just over 50% in the 1970s and 1980s. This trend has squeezed small-scale producers while highlighting the growing dominance of European agribusiness firms in the global food supply chain.

These industry structures and practices, along with global financial institutions, perpetuate uneven development patterns. Exploited by corporations of advanced economies, these resources earn modest export incomes for developing countries, and the value-adding remains controlled by advanced economies.

The role of the U.S. dollar is another issue for the Global South, including the BRICS countries. As recent research from Gaston Nievas and Alice Sodano at the World Inequality Lab (2024) reveals, the U.S. dollar dominance has led to an income transfer from the poorest to the wealthiest nations. This transfer is equivalent to 1% of GDP for the top 20% of countries and 2% of GDP for the top 10%. Additionally, it has reduced the GDP of the bottom 80% of countries by about 2-3%.

Uneven exchange is the basis of balance of payments crises, opening the door for consolidated financial servitude to Western creditors.

BRICS has been playing an increasingly important role in addressing these issues. On trade, it has been working to craft a cross-border payments system to reduce the need to use the U.S. dollar in trade settlements. Enabling trading nations to settle in national currencies minimizes the risk of balance of payments problems that result in debt crises. Using national currencies also reduces the risk of unilateral sanctions, exchange rate risks and the subordination of national monetary policies to U.S. monetary policy priorities.

Any moves by BRICS at Kazan to progress the development of a consolidated group cross-border payments platform will strengthen the sovereign capacity of member nations to pursue economic development. A BRICS payments system will streamline existing systems that enable national currency-based payments.

The role of the BRICS bank – the New Development Bank (NDB) – is also expected to grow in the deliberations on national currency-based payment systems. The NDB plays an understated but pivotal role in the evolution of the global financial architecture. In terms of scale, it remains dwarfed by the institutions of the IMF and other multinational development banks. However, the NDB embodies the ethos of BRICS and is expanding its ability to provide development finance in the national currencies of member states. The ongoing shift to national currency trade settlements only reinforces the role of national currencies in driving national economic development.

BRICS’ approach to development contrasts with the prevailing model that has sought to reduce public finance in favor of mobilizing private capital over the past three decades. In his upcoming book, The Rise and Fall of Public-Private Partnerships, World Bank veteran James Leigland details the failure of World Bank efforts to mobilize private capital for development purposes. For decades, the infrastructure funding gap in developing countries persisted, while financial institutions in New York and London profited handsomely from global capital flows.

Those expecting dramatic announcements are often disappointed by the measured approach of BRICS and its members. Yet, addressing global systemic and institutionalized inequities requires time and sustained commitment to purpose-driven reform. Forging shared solutions requires careful consensus-building while respecting each nation’s sovereignty.

This is the BRICS ethos. The Kazan summit will likely embody this style as member states and observers continue their crucial work in shaping an emerging multipolar world order and safeguarding their development rights and interests.

Warwick Powell is an adjunct professor at Queensland University of Technology and a senior fellow at the Taihe Institute.