Tuesday, July 15, 2014

India might buck the Brics’ downward trend

15 Jul 2014 | Tony Leon  | Original Publication:  BDlive

In contrast to other members of the Brics club, India has promised to revive business and investor confidence through less reliance on the state and more liberalisation of labour laws, writes Tony Leon

LEO TOLSTOY wrote: "All happy families are alike; each unhappy family is unhappy in its own way." This could be the working description for the Brics summit as its member states — Brazil, Russia, India, China and SA — gather on Tuesday at a summit in the northeastern Brazilian resort town of Fortaleza. Each of the one-time developing world darlings is contemplating the challenges of low or slowing economic growth and social dislocation and their own unique political problems.

Not that the rest of the world is doing much better. The eurozone has ageing populations and unfunded entitlements for its seniors; London’s future as the centre of the financial world has two question marks against it — one from homegrown antiEuropeanism and the other from Scotland. The US, whose economy is showing some signs of recovery, is in political gridlock as the Republican Party blocks the president’s agenda, forcing him to use executive orders of doubtful constitutional validity. Its armed forces are set to be reduced to their lowest levels since the 1930s at the very moment that Iran is going nuclear, Japan is militarising and the Middle East is imploding.

If the subtext for Brics is a desire to reset the global world order, it is worth looking at one of the outliers in this unhappy snapshot — Poland. If the Brics nations have a collective sense of victimhood at the cards history dealt them, Poland has some aces of its own. Joseph Stalin and Adolf Hitler first divided Poland between their dictatorships and then fought over it and Eastern Europe.

Poland, which accounted for 4-million of the 6-million Jews who perished in the ensuing Holocaust, was then placed under the dead hand of socialist economics for nearly 50 years after 1945. It seemed an unlikely place to mount an economic renaissance. Yet, as the Economist recently wrote, it is "Europe’s unlikely star". Its economy has grown since the collapse of communism by more than any other in the European Union (EU) and it is the only member state of the European club to have avoided a recession during the global financial crisis.

As Brics is strictly a non-European venture, Poland will not be represented at Fortaleza. Doubtless, the venue was chosen by Brazilian President Dilma Rousseff because it was one of the showpiece venues for the just concluded Soccer World Cup. She could not have contemplated that her storied soccer team would be ingloriously bundled out of the tournament. But if her side didn’t win, neither has her economy done anything except move downward. In 2010, Brazil was careering along at 7% growth in gross domestic product. Today, that figure has fallen to about 1%. The cost of doing business in bureaucratic Brazil has risen just as its current account deficit has widened, inflation has risen and business confidence has fallen.

But even its growth rate sparkles in comparison to Russia’s, which, according to a recent International Monetary Fund forecast, will be about zero this year. That is the cost of invading neighbouring Ukraine and the bite of sanctions imposed by the US and EU.

If Russia simply drove a tank through public international law, SA’s jousting with the rule of law has a more local context, equally unsettling for investor confidence at home and abroad. The constitution here favours the public protector with significant powers to interdict maladministration. Yet another arm of the state, the public broadcaster, simply rides a coach and horses through her report on the unfitness for office of its chief operations officer, Hlaudi Motsoeneng. The board’s chairwoman is subsequently revealed to have misrepresented her own qualifications. The North Gauteng High Court recently ordered the arrest of the three top generals and officials of the South African National Defence Force for contempt of court for defying a previous court judgment. And so it goes.

In 1928, US Supreme Court Judge Louis Brandeis warned of the consequences of governments not leading by example: "If the government becomes the lawbreaker, it breeds contempt for the law; it invites every man to become a law unto himself; it invites anarchy." Amen to that.

China, the objective economic giant of the club, is also the least democratically credentialed of the Brics quintet. But when it offered Hong Kong a "special status" 17 years ago with rule of law and quasi-democratic processes unknown in the mainland, it appeared to reaffirm that the rule of law — the cornerstone of its business-friendly environment — would be preserved. Recent events suggest this could be in peril.

India is the other big anchor of Brics and the world’s largest democracy. In contrast to other members of the club, new Prime Minister Narendra Modi has promised to revive business and investor confidence through less reliance on the state and more liberalisation of labour laws, less protectionism and greater competitiveness. Contrary to Tolstoy, perhaps this giant will yet prove to be "happy in its own way".

Leon is the author of Opposite Mandela (Jonathan Ball) Follow him on Twitter: @TonyLeonSA OR on Facebook: facebook.com/TonyLeonSA


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