The divide between the West and the BRICS countries over the conflict in Ukraine is the latest indication that the world might be entering a new era of bipolarity.
While the Group of Seven (G7) further isolates Russia with talks of broader western sanctions, the BRICS have been constructing their own institutions to counter western dominance. The recent series of actions from the West to stand up to Russian aggression in Ukraine have been followed by a set of calculated reactions from Russian President Vladimir Putin that, while largely symbolic, signal that Russia and other BRICS countries are willing and ready to band together and build an alternative option to the Western model that would challenge institutions like the IMF, the World Bank, and the G7 in coming decades. How the West reacts to this challenge will determine how fractured or united the world’s economic political landscape will be in the future.
The G7’s meeting in Brussels marked a stark dichotomy between a western consensus and Russia. This line in the sand could perpetuate an alarming trend that has politically banded the BRICS countries closer together in recent months. It is understandable for the G7 countries to call for the deceleration of Russian forces and illicit arms trades over the Ukrainian border, but it has also accelerated an already growing trend, one that pits the BRICS against the West.
Emerging economies are pushing back on western hegemony by strengthened political and economic relations among themselves. Nowhere has this been more apparent than in the evolving relationship between Russia and China. In the midst of creating a western-led sanctions regime to counter Russian aggression in Ukraine, Putin and Chinese President Xi Jingping signed into law a multi-billion dollar Sino-Russian gas deal. As the countries of the G8 dumped Russia, becoming the G7, a Sino-Russian currency deal aimed at undercutting the usage of the US dollar in international transactions was agreed upon. Most recently, talks between Putin and Xi to create a new credit rating agency that would directly cater toward the BRICS countries were publicized by the Chinese and Russian news media. And there is surmounting consensus, first proposed by India, for the BRICS countries now to create a BRICS development bank to directly rival the World Bank and IMF institutions. The compositions of these fledgling institutions and pacts have yet to be decided, but momentum is building.
All the while, Western economic dominance is waning, and a demographic decline looms. By 2030, the OECD projects that China and India will grow to be as large as 28 percent and 11 percent of global GDP, while the US and Euro area will decline to 18 percent and 12 percent. Ageing populations in the developed countries of the EU and US will stagnate living standards or even reverse them within 16 years, while all emerging economies will increase standards of living within this time period.
The West needs to address this growing trend and find diplomatic solutions, where emerging economies can feel on equal footing to the countries of the OECD in international institutions. The Group of Twenty (G20) provides the most hope for international cooperation, and provides a 21st century model for dialogue between the developed and emerging countries that will together shape the global landscape of the future. The G20 takes into account the rebalancing of economic power and has since its formation proved to build international consensus on important global issues all economies face. This sort of institution is exclusive enough to be effective and inclusive enough to ascertain global consensus. Given its appeal as an effective forum, the G20 could actually provide a lasting solution to creating global consensus and standards outside of just financial agendas and economic growth. It has potential to expand its reach into areas like the construction of a global sanctions regime to address the onset of transnational conflicts, or create a framework for a global response to natural disasters or civil conflicts. A rethink for the way the West is handling the emergence of the BRICS should start with stronger cooperation with the BRICS. Otherwise, the West could have to face an increasingly bipolar world order and risk a fractured global economy riddled with rivalries.
Chrismer is assistant director of the Atlantic Council's Global Business and Economics Program.