The new world order is moving from theoretical abstraction to geopolitical and economic reality.
Tomorrow in the central Russian city of Yekaterinburg, president Dmitry Medvedev will host counterparts from Brazil, India and China, marking the first time the leaders of these emerging powers will assemble for talks.
The summit, scheduled for one day, turns an academic grouping by an economist in 2001 to highlight the hyper-development of the biggest emerging markets into a real geopolitical force to rival the richer developed countries that dominate the Group of Eight.
It is unlikely leaders as diverse in their priorities as Mr. Medvedev and Brazil's Luiz Inacio Lula da Silva will make any significant decisions in one meeting. Still, the political will necessary to make common cause shows these countries will demand a greater role in the global economy, a stance that could influence everything from trade flows to the supremacy of the U.S. dollar.
“They needed to show the eight that they can meet,” said Paul Heinbecker, a distinguished fellow at the Waterloo, Ont.-based Centre for International Governance Innovation and formerly Canada's representative at the United Nations. “It is a signal on the part of the five to the others that they can meet separately and look after some of their issues separately.”
Instead of another G formation, this group has come to be known as the BRIC – Brazil, Russia, India and China – countries, a term coined by Goldman Sachs economist Jim O'Neill.
The agenda of tomorrow's meeting reflects what unifies these countries: growing economic clout. The leaders intend to discuss the global recession, overhaul of the financial system and alternatives to the U.S. dollar as the world's reserve currency. Lower on the work plan are issues such as nuclear non-proliferation and climate change.
The financial crisis has highlighted the economic strength of emerging markets and robbed the United States and other developed countries of the moral authority to lecture poorer countries because the recession is rooted in failures of the U.S. and European banking systems.
China's economy will expand 6 per cent this year, even as world GDP contracts and the U.S. economy shrinks by 2.8 per cent, according to the International Monetary Fund.
India's GDP is projected to rise 4.5 per cent and the IMF estimates that Brazil's economy will contract 1.3 per cent, which isn't bad for a country that is so dependent on trade and commodity prices. Canada's GDP, for example, is on track to decline by 2.5 per cent.
Goldman Sachs's Mr. O'Neill now estimates that the combined gross domestic product of the BRIC countries will surpass the $30.2-trillion (U.S.) GDP of the Group of Seven industrial countries by 2027.
The G7 includes the U.S., Japan, Germany, Britain, France, Canada and Italy. That group includes Russia for political discussions, forming the G8, but finance ministers have resisted granting their Russian counterparts full status to discuss the global economy and markets.
“The rebalancing of relative economic power is not only alive but gaining momentum,” Mohamed El-Erian, chief executive officer of Pacific Investment Management Co. – which manages the world's largest bond fund – said last week, according to Bloomberg News. “Average investors need to make sure that they are not hostage to an outdated conventional wisdom that underexposes them to this phenomenon.”
The BRIC countries are already capable of making waves in financial markets, as they have shown recently through their willingness to present an alternative to U.S. and European supremacy.
Brazil and Russia joined China last week in pledging to shift some $70-billion of reserves into bonds issued by the IMF, moves that place further pressure on yields for U.S. Treasuries because emerging markets, led by China, represent the U.S. government's largest creditors.