“Brics” and “Brickbats”: Shaping the Next Phase of Economic Development

2013-08-29 by Kenneth Maxwell

The word “brickbat” was first used in England during the 16th century. It referred to a piece of broken brick thrown at others hoping to injure them. It also means blunt criticism.

“Brics” is of more recent origin. It refers to the developing countries of Brazil, Russia, India, China, and South Africa. It was coined originally as a term of approbation.

But this has changed as domestic constraints have emerged and conditions in the global economy have become more challenging.

These involve in particular the constraints imposed by corruption.

In economics, BRIC is a grouping acronym that referred to the countries of Brazil, Russia, India and China, which are all deemed to be at a similar stage of newly advanced economic development. It has been replaced by BRICS since the 2010 inclusion of South Africa in the bloc. Credit: Wikipedia

China has just witnessed the extraordinary show trial of Bo Xilai, erstwhile Chongqing communist party secretary. It featured video testimony from Bo’s imprisoned wife, Gu Kailai, and the former police chief of Chongqing, Wang Lijun. The case originated in the cyanide poisoning of Neil Haywood, a British businessman, by Gu Kailai. Wang Lijun’s subsequent flight to the US consulate in Chengdu in February 2012 made it difficult to cover up the scandal.

The trail revealed much about Bo Xiai’s and Gu Lailai son, Bo Guaqua, a former student at British private schools and Oxford. As well as at Harvard’s Kennedy School of Government where he was know for his lavish expenditures. Hayward was involved with the Bo family through various offshore companies. Xu Ming, a billionaire plastics magnate, also picked up the travel and hotel expenses to China for 40 of Bo Guaqua’s university class mates.

In Russia “Pussy Riot” supporters have released a new song online and music video asking what happens to Russia’s vast old wealth, reckoned at about US$ 215 billion this year. It is a good question.

Russia ranks 133 out of 176 nations in the corruption perceptions index. Corruption it is claimed costs Russia US$240 billion a year. President Vladimir Putin and the Russian parliament meanwhile are busy criminalizing gays.

India has the emerging world’s largest current account deficit. Total short term external debt has risen to US$170 billion. Prime Minister Manmohan Singh is facing general elections next year, but he has not tackled crony capitalism or the endemic backscratching within the major political parties.

The Aam Aadmi  (“common man’s”) anti-corruption party has adopted a brush as its electoral symbol. But not out of any homage to the Brazilian “vassoura” (brush) evoked by Janio Quadros.

Janio Quadros had been mayor and governor of Sao Paulo during the 1950s and was elected the populist president of Brazil, taking office in January 1961.  He banned bikinis on Brazilian beaches and outlawed gambling, and he re-established relations with the Soviet Union ad Cuba. But after only seven months he unexpectedly resigned, claiming foreign and domestic pressures, and precipitated the political crisis, which eventually led to the military coup of 1964. He was later re-elected mayor of Sao Paulo in 1985, defeating Fernando Henrique Cardoso, and he served until 1988.

India and Brazil meanwhile are committing billions of dollars to prop up their currencies. South Africa does not have the means to do so. President Jacob Zuma has faced corruption charges in the past. According to Transparency International 83% of the people see the South African police as corrupt.

And Brazil?

At least corruption here is bipartisan. In Brasilia the “Mensalao” case (the monthly payments to obtain support in the congress, a scam run by the Workers Party leadership) continues before the Supreme Court.

And in Sao Paulo the Metro cartel scandal has now come to public attention. Largely this is due to its foreign ramifications. Siemans, the German engineering giant, based in Munich, notified the Brazilian authorities in order to avoid criminal proceedings of alleged involvement in a railway price fixing cartel in Sao Paulo where the company is involved in construction, fitting, and maintenance of the Metro.

It is believed that the bids were raised by between 10% and 20% above the market rate. Brazil’s major opposition party has long administered Sao Paulo.

The BRICs all need to tackle corruption issues urgently as they shape the next phase of their economic development and to ensure a more effective global role. 

Editor’s Note: For our look at the PRC’s challenge in making the next economic transition see our Strategic Inflection Points report which can be read in flip book format below:

http://sldinfo.com/flipbooks/StrategicInflectionPoints%20May%202012/

"If everyone is thinking alike, someone isn’t thinking."

—General George Patton Jr.

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