Will Malaysia S Participation In Brics Solve Our Economic Problems Opinion

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By
Prof Nazari Ismail
Faculty of Business and Economics
University of Malaya
Recently, the Malaysian government announced plans to join a grouping of countries called BRICS. It is an abbreviation for the countries that established this coalition: Brazil, Russia, India, China, and South Africa. The original name was BRIC, a word introduced by an economist named Jim O’Neill from the investment banking firm Goldman Sachs in 2001 to draw the world’s attention to the economic potential of the above countries to increase. Russia was interested in the idea because it saw it as a grouping that could challenge the dominance of Western countries in the world economy, especially the dominance of the United States.

Russia then started the initiative to create a coalition of countries identified by Jim O’Neill, and therefore, there was an informal coalition called BRIC in 2009. At the end of 2010, South Africa decided to join this coalition, and thus, the letter `S’ was added, leading to a slight change in the name of the grouping to BRICS.
On August 22-24, 2023, the leaders of the BRICS countries held a summit in Johannesburg, South Africa, to discuss how to strengthen their alliance further. They also agreed to expand BRICS membership further by inviting Saudi Arabia, Iran, Ethiopia, Egypt, Argentina, and the United Arab Emirates (UAE) to become BRICS members. Many other countries have also expressed interest in joining this coalition. They include Iran, Algeria, Bolivia, Indonesia, Cuba, the Democratic Republic of Congo, Comoros, Gabon, and Kazakhstan.
Some believe that the potential of BRICS is very bright because the population of the member countries is enormous, accounting for more than 40% of the world’s population. Meanwhile, the size of the economy of the member countries is also substantial at around 25 per cent of the size of the world economy. In reality, this factor does not contribute to the significance of BRICS. After all, another grouping of countries called APEC or Asia Pacific Economic Cooperation has 21 member countries, a total population of 2.95 billion people, an economic size of around 62 percent of the size of the world economy and 48 per cent of the total world trade. However, until today, APEC has not shown any significant benefit for member countries even though its members are far more potent because they include the United States, Canada, Japan, Russia, China, South Korea, and Singapore.
The most significant aspect differentiating BRICS from APEC is that the member countries of BRICS have a stronger sense of purpose, which, as stated earlier, is to counter the hegemony of the United States and other Western countries. This sense of purpose stems from the feeling that the current world economic order is in favour of the Western countries and oppresses other countries, especially those from the `Global South’. The belief is that a strong BRICS can potentially help the poor and the weak worldwide against the hegemony of the US and the Western powers.
The above picture is, in reality, rather simplistic because the oppression of the poor and the weak is also happening in Western countries, including the US. Many people in the US and Western European countries are living miserable lives due to severe poverty. In the US, in 2024, the poverty rate is 11.5 per cent, where 37.9 million of the population are classified as living in poverty. In the United Kingdom, the poverty rate in 2024 is much higher at 18 per cent, which is much higher than the poverty rate in Malaysia in 2022, which is less than 7 per cent.
Similarly, the homeless situation in the United States is also high, which is 582,000 people or 18 per 10,000 people. The homeless problem in the United Kingdom is also dire, with 271,000 people, of which 123,000 are children. One report states that one in 208 people in England are homeless. In other words, the living conditions of people in Western countries are very bad or worse than in some BRICS countries.
The leading cause of suffering in the US and other Western countries is a debt-based economic system fueled by loans given by commercial banks, which generate new money every time a loan is given to bank customers. As the Bank of England explained in 2014 in one of its quarterly bulletins, new money is created whenever banks issue loans. They are then recorded as deposits in the customers’ accounts. In other words, deposits are created when banks give loans to bank customers and are not necessarily obtained when customers deposit their money in their accounts. That is why it is straightforward for banks to provide loans to customers; banks do not have to wait for sufficient deposits to give loans.
As a result, large sums of money are continuously created when banks provide loans to all sectors of the economy: government, corporations, and households. At the same time, this results in a large amount of debt in the economic system and reduces the value of money in the long term, thereby reducing its purchasing power. Another name for it is inflation.
At the same time, the enormous debt will be a financial burden to all sectors, forcing employers, whether from the government or private sector, to find ways and means to reduce costs. Employers from the public and private sectors will only be willing to hire new employees if they can prove they can add value and profitability to the organisation. When employers are also very reluctant to raise wages, whilst prices of goods and services increase, a severe cost of living problem will occur. Incidences of poverty will also be high. The continuous expansion of the banking sector is why the US and Western European countries cannot solve their poverty and unemployment problems.  
We must remember that all BRICS countries adopt the same monetary system. Although they criticise American hegemony, their monetary system is the leading cause of their economic problems. The more advanced their financial sector is, the more serious the cost-of-living problem.
The situation is worse if speculative activities drive debt growth in the economy. In that case, an “asset bubble” situation may occur, followed by a financial crisis like in Southeast Asian countries in 1997 – 2000. What makes it worse in some BRICS countries is the severe corruption problems, which lead to increased external debts obtained from American banks.
Some have stated that BRICS will help the process of `de-dollarisation’ or the reduction of the use of the US dollar currency in business between BRICS members, as well as weaken the power of America. Although this is possible, it will likely be a while because many BRICS countries, such as Brazil and South Africa, still depend on the dollar in international trade. Even Saudi Arabia, invited to become a member recently, has issued dollar-denominated bonds expected to amount to 12 billion. Saudi Arabia and the United Arab Emirates still peg their currencies to the US Dollar.
The reality of the current situation is that influential people, mainly from the financial and political elites, oppress the poor and the weak everywhere, whether in the West or BRICS countries. These elites are responsible for creating and maintaining a financial system that oppresses the poor and the weak and enriches the rich and the elites.
In conclusion, the long-term solution to any country’s economic problems is not becoming a member of BRICS but reforming the economic and financial system so that it is no longer dependent on the debt-for-profit industry. As long as this industry grows, economic problems will never be solved. They will get worse despite periodic changes in government.
Prof Nazari Ismail is an Honorary Professor at the Faculty of Business and Economics, Universiti Malaya.
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