Business, Finance & Economics

Thick as a BRIC


The door of the American century – held ajar a few extra years by the bubble-headed financial policies of the past decade — hit Barack Obama pretty hard as it slammed shut at the end of 2008. The global economic crisis has put the United States on the defensive, both economically and politically, and looming behind everything Washington does on the world stage these days is a historic question: Is this the beginning of the end of the American juggernaut?

In Moscow, many hope the answer is “yes.” Indeed, Russia can reasonably be viewed as the head cheerleader of the “America in decline” section, as if somehow Russia’s own problems would be solved if only the American empire suffered the same fate as the Soviet one.

That’s a sad statement about a country being lumped together with Brazil, India and China as part of the BRIC powers, which some feel will play a major role in shaping the coming decades. But if Russia has a leadership role in the world economy, it has yet to earn it. In fact, alone among the BRICS, only Russia seems to view its economic prospects in direct opposition to American power, and rule of law as merely an annoyance.

Increasingly closed off from international investors (IKEA is the latest to announce it will leave Russia), and reliant on brute force and energy blackmail to get its way in the world, Russia has less in common with its fellow “BRICs” than it does with single-commodity countries like Venezuela or Algeria.

The recession has hit Russia particularly hard. Gross domestic product fell 11 percent between May 2008 and May 2009.

Russia’s sovereign wealth fund — all the money it built up selling oil at high prices — is dropping precipitously month-by-month as the government tries to prop up the economy. Contrast that with slower but still significant growth in China, India and Brazil, and you have to wonder if the future of global economics might belong to the “BICs,” not the BRICs.

Look at the other BRICs and you see wise, long-term thinking overriding nationalist reflexes in almost every case. Brazil, a major beneficiary of U.S. trade, charts a careful line between Washington and Latin America’s other pole, Venezuela’s Hugo Chavez. India knows a good deal of its transformative foreign capital inflows are due to an open and relatively transparent relationship with the U.S. corporate sector.

Then there is China. One might think the world’s largest country, coming into its own economically after two centuries of turmoil, might naturally want to throw its political weight around, too. But if China’s leaders are cynical, they’re not stupid. America remains the nation that puts the sweet and sour sauce on the Chinese egg roll. Without American retail and industrial consumption, China has had to pour state funds into its domestic economy to keep growth from dipping below the point where unrest becomes a serious risk. Put simply: China needs America too much to act childish. It would be against China’s national interests.

This is not the case in Moscow. To some extent, Russia’s President Dmitri Medvedev (and his sponsor, Prime Minister Vladimir Putin) still act as if to annoy America proves Moscow still has clout. It is as if Russian leaders worry that, without something petty to argue about, Washington might not pay attention to Russia.

In rational foreign policy establishments, creating economic and political relationships that don’t need constant, high-maintenance attention is the goal. U.S. ties with complicated partners like the European Union, or even with China itself, rarely go through the kind of turbulence generated by Russia.

It did not have to be so. When the term BRIC was coined by a group of Goldman Sachs economists back in 2003, Russia still looked to many like a giant slowly picking itself up off of its back. Even at that late date, in Vladimir Putin’s third year as president, it was possible to hope Russia would eventually join the World Trade Organization, enforce protection of foreign investment inside its borders, and agree to stop cutting off natural gas supplies to its neighbors every time a contract needs to be negotiated.

Alas, that is not the world we live in. Russian economic policy has ensured it has no place anytime soon in the European Union. Meanwhile, Moscow has begun reasserting its suzerainty over former Soviet republics, and recently decided not to take Washington up on an offer to help it join the WTO. Instead of accepting the inconvenient rules on transparency and trade that would cause, Russia announced it will lead its own customs union with Kazakhstan and Belarus.

At some point, with decisions like that one clearly based on politics rather than economics, the world has to take a new and more serious look at the mortar that makes up the BRICs.

Read more on Russia:

The crisis hits a one-factory town

Georgia: The frontline of a new Cold War?

Next stop: Moscow