New world economic order: Brics growth threatens US supremacy

The first step towards a new world order has been taken with the admission of three leading oil producing countries into the Brazil, Russia, India, China and South Africa (Brics) forum, announced on the last day of body’s 15th summit yesterday, according to experts.

Political analyst Dr Levy Ndou said the admission of Saudi Arabia, United Arab Emirates and Iran to Brics was a game-changer for the world economic order and threatens US domination of the world economy.

He said Brics had been a threat to American and European dominance and the decision by Brics to take three Gulf old giants on its side threatened to alter the West-dominated economic world order.

“This means it is possible that Africa and the global south could get oil from these countries at a cheap price. This is good for the economy of the poor and developing countries,” Ndou said.

Other analysts said the three top Gulf oil producers could fasttrack Brics’ stature as the future leading economic hegemon threatening to overtake the West.

Political analyst Professor Ntsikelelo Breakfast said Saudi Arabia, United Arab Emirates and Iran were offered membership because of their oil riches and this was a “strategic move” to address the oil demand of the global south.

However, Breakfast said the US dominance of the world economy and the influence of the Bretton Woods institutions, including the World Trade Organisation (WTO), would remain for some time.

“But Brics growth does pose a threat to the US economic dominance. At the same time, I don’t think the dominance of the US as a country that created the current world order, will go away, meaning liberal democracy as ideological pillar of the current order, will not be done away,” Breakfast said.

Saudi Arabia, United Arab Emirates, Argentina, Ethiopia and Egypt were officially admitted as new members to the Brics group of developing countries.

Their membership would come into effect from January 2024. At least 20 members had applied to join the forum and the fate of others was not made clear.

It’s believed Argentina was admitted merely for its geographic location in South America, while Egypt was considered for being the second-largest economy in Africa after Nigeria, followed by South Africa in terms of gross domestic product (GDP).

Ethiopia was admitted for it being the seat of the African Union located at its capital Addis Ababa and for its close economic ties with China.

Recently, Brics global GDP jumped from 30% to 32% to eclipse the Group of Seven countries’ (G7) GDP, which stood at 31%.

Brics, founded in 2010 with its Shanghai head-quartered New Development Bank established in 2015, aimed for 50% global GDP.

Before the six new members joined, Brics constituted onethird of the world’s population and was set to grow to 60%.

Brics’ potential growth economically was confirmed by the World Bank and the International Monetary Fund in their various reports.

As Brics chair, President Cyril Ramaphosa read the Johannesburg II declaration. It praised the use of local currencies in international trade and financial transactions between Brics and their trading partners.

“We also encourage strengthening of correspondent banking networks between the Brics countries and enabling settlements in the local currencies,” he said.

On a Brics single currency for trading, Ramaphosa said finance ministers and central bank governors of the member states were tasked “to consider the issue of local currencies, payment instruments and platforms and report back by the next summit”.

In the declaration, Brics called for comprehensive reform of the United Nations (UN), including to increase membership of the UN Security Council for developing countries.

They demanded an inclusive, equitable and rules-based multilateral trading system with special and differential treatment for developing and least developed countries by WTO.

The multilateral financial institutions and international organisations should “play a constructive role in building global consensus” on economic policies and prevent systemic risks of economic disruption and financial fragmentation.

“We call for the restoration of a well-functioning two-tier binding WTO dispute settlement system accessible to all members by 2024, and the selection of new appellate body members without further delay,” Ramaphosa said.