POLITICS AND WORLD AFFAIRS
What is BRICS and why is it challenging the hegemony of the USA?
A brief introduction to the US-led world order, the petrodollar, and BRICS as a rising political bloc
BRICS stands for Brazil, Russia, India, China, and South Africa. Almost half of the human population is found in just these 5 nations. In principle, BRICS could be a serious force in world affairs.
Over the last 10–15 years, BRICS has become a more coherent geopolitical bloc. One of their goals is to create a new currency, but why? The answer explains a lot about world affairs and modern-day power struggles.
Why create a new currency?
If you want to trade or do business internationally, you need to have at least some US dollars. There’s a lot of history behind this, but the most important factor is currently that the Saudis only sell oil to people who pay in US dollars. This deal is known informally as the petrodollar.
For now, everyone needs oil. Since that’s the case, the petrodollar means everyone has to maintain a supply of US dollars in order to buy oil. And because everyone has US dollars, it makes sense to use them for international trade and business. This is why the US dollar is used as the reserve currency of the world.
This system grants enormous privileges and influence to the US. It privileges the US by artificially propping up the value of the US dollar, with carry-on effects that stabilise its economy.
This system also gives the rest of the world an incentive to care about the health of the US. This is because the rest of the world either owns US debt or US dollars. As a result, an economic downturn in the US would mean that the rest of the world loses as well. Like Thanos, the US has tried hard to make itself inevitable.
The world’s reliance on American dollars also makes it easy for the US to throw its weight around with sanctions and other economic weapons. With no comparable power to oppose it, the US can do more or less whatever it wants. It also helps that the UK and EU usually support Washington on everything.
Changing this system is why BRICS want to create a new currency. This has been in the works for some time, and may soon be a real thing. It’s impossible to say what will happen, but a new currency, backed by almost half the world’s population, could be a major challenge to the financial hegemony of the US.
Other challenges to US hegemony
Recent news reports also indicate that the Saudis may soon no longer require people to pay for oil with US dollars. If the Saudis push forward with this, that will end the petrodollar. (Although, the Saudis have threatened this in the past and not gone through with it.)
Consequences are hard to predict, but if this occurred, the US dollar’s time as the world’s sole reserve currency could be over. That would be a shock to the US dollar and its economy, and the outcome is anyone’s guess.
The other obvious threat to US power is China. Through its belt and road initiative and investment in Africa, China is building its own commercial network to challenge US-dominated systems.
China is also playing a prominent role in international affairs. Just recently, China helped to negotiate peace between the Saudis and Iranians, without any US involvement. Given America’s supposedly close ties with Saudi Arabia, and ongoing tensions with Iran, this was an embarrassing incident for the US.
The embarrassment continued when Syria was just readmitted to the Arab League, despite vocal US objections. Not long ago, the US could reliably treat the Middle East like its 51st state, but things are changing quickly.
Key points
There’s a lot to say about power games and international affairs, but as an example, BRICS is very instructive. Regulating markets for their own benefit is a central goal of every powerful state. This was two-sided during the Cold War, but has been one-sided since the USSR dissolved in 1991.
Since the end of WWII, even when opposed by the smaller superpower of the USSR, the US used its dominance to great personal advantage. This went to new heights after it became the sole superpower in 1991, but it seems the era of US hegemony may be ending.
The rise of competing power blocs, such as BRICS, or even just China itself, marks a shift in global affairs. The US is struggling desperately to contain its challengers, but it’s overextended and becoming increasingly unpopular, even among its friends.
Until recently, this sort of opposition to US supremacy was unthinkable, but no one stays on top forever. It seems the next 50 years will see us change from a unipolar world, reigned over by the US, to a multipolar world with several major centres of influence. So much for the Pax Americana.
