An economist digging below the surface of an IMF report has found something that should shock the Western bloc out of any false confidence in its unsurpassed global economic clout.
G7 leaders meeting on June 28, 2022, at Schloss Elmau in Krün, Germany. (White House/Adam Schultz)
BRICS Surpasses G7 in PPP-Adjusted Global GDP
By Scott Ritter
Special to Consortium News
Last summer, the Group of 7 (G7), a self-anointed forum of nations that view themselves as the most influential economies in the world, gathered at Schloss Elmau, near Garmisch-Partenkirchen, Germany, to hold their annual meeting. Their focus was punishing Russia through additional sanctions, further arming of Ukraine and the containment of China.
At the same time, China hosted, through video conference, a gathering of the BRICS economic forum. Comprised of Brazil, Russia, India, China and South Africa, this collection of nations relegated to the status of so-called developing economies focused on strengthening economic bonds, international economic development and how to address what they collectively deemed the counter-productive policies of the G7.
In early 2020, Russian Deputy Foreign Minister Sergei Ryabkov had predicted that, based upon purchasing power parity, or PPP, calculations projected by the International Monetary Fund, BRICS would overtake the G7 sometime later that year in terms of percentage of the global total.
(A nation’s gross domestic product at purchasing power parity, or PPP, exchange rates is the sum value of all goods and services produced in the country valued at prices prevailing in the United States and is a more accurate reflection of comparative economic strength than simple GDP calculations.)
Then the pandemic hit and the global economic reset that followed made the IMF projections moot. The world became singularly focused on recovering from the pandemic and, later, managing the fallout from the West’s massive sanctioning of Russia following that nation’s invasion of Ukraine in February 2022.
The G7 failed to heed the economic challenge from BRICS, and instead focused on solidifying its defense of the “rules based international order” that had become the mantra of the administration of U.S. President Joe Biden.
Miscalculation
U.S. President Joe Biden in virtual call with G7 leaders and Ukrainian President Volodymyr Zelenskyy, Feb. 24. (White House/Adam Schultz)
Since the Russian invasion of Ukraine, an ideological divide that has gripped the world, with one side (led by the G7) condemning the invasion and seeking to punish Russia economically, and the other (led by BRICS) taking a more nuanced stance by neither supporting the Russian action nor joining in on the sanctions. This has created a intellectual vacuum when it comes to assessing the true state of play in global economic affairs.
It is now widely accepted that the U.S. and its G7 partners miscalculated both the impact sanctions would have on the Russian economy, as well as the blowback that would hit the West.
Angus King, the Independent senator from Maine, recently observed that he remembers
“when this started a year ago, all the talk was the sanctions are going to cripple Russia. They’re going to be just out of business and riots in the street absolutely hasn’t worked …[w]ere they the wrong sanctions? Were they not applied well? Did we underestimate the Russian capacity to circumvent them? Why have the sanctions regime not played a bigger part in this conflict?”
It should be noted that the IMF calculated that the Russian economy, as a result of these sanctions, would contract by at least 8 percent. The real number was 2 percent and the Russian economy — despite sanctions — is expected to grow in 2023 and beyond.
This kind of miscalculation has permeated Western thinking about the global economy and the respective roles played by the G7 and BRICS. In October 2022, the IMF published its annual World Economic Outlook (WEO), with a focus on traditional GDP calculations. Mainstream economic analysts, accordingly, were comforted that — despite the political challenge put forward by BRICS in the summer of 2022 — the IMF was calculating that the G7 still held strong as the leading global economic bloc.
In January 2023 the IMF published an update to the October 2022 WEO, reinforcing the strong position of the G7. According to Pierre-Olivier Gourinchas, the IMF’s chief economist, the “balance of risks to the outlook remains tilted to the downside but is less skewed toward adverse outcomes than in the October WEO.”
This positive hint prevented mainstream Western economic analysts from digging deeper into the data contained in the update. I can personally attest to the reluctance of conservative editors trying to draw current relevance from “old data.”
Fortunately, there are other economic analysts, such as Richard Dias of Acorn Macro Consulting, a self-described “boutique macroeconomic research firm employing a top-down approach to the analysis of the global economy and financial markets.” Rather than accept the IMF’s rosy outlook as gospel, Dias did what analysts are supposed to do — dig through the data and extract relevant conclusions.
After rooting through the IMF’s World Economic Outlook Data Base, Dias conducted a comparative analysis of the percentage of global GDP adjusted for PPP between the G7 and BRICS, and made a surprising discovery: BRICS had surpassed the G7.
This was not a projection, but rather a statement of accomplished fact: BRICS was responsible for 31.5 percent of the PPP-adjusted global GDP, while the G7 provided 30.7 percent. Making matters worse for the G7, the trends projected showed that the gap between the two economic blocs would only widen going forward.
The reasons for this accelerated accumulation of global economic clout on the part of BRICS can be linked to three primary factors:
- residual fallout from the Covid-19 pandemic,
- blowback from the sanctioning of Russia by the G7 nations in the aftermath of the Russian invasion of Ukraine and a growing resentment among the developing economies of the world to G7 economic policies and
- priorities which are perceived as being rooted more in post-colonial arrogance than a genuine desire to assist in helping nations grow their own economic potential.
Growth Disparities
It is true that BRICS and G7 economic clout is heavily influenced by the economies of China and the U.S., respectively. But one cannot discount the relative economic trajectories of the other member states of these economic forums. While the economic outlook for most of the BRICS countries points to strong growth in the coming years, the G7 nations, in a large part because of the self-inflicted wound that is the current sanctioning of Russia, are seeing slow growth or, in the case of the U.K., negative growth, with little prospect of reversing this trend.
Moreover, while G7 membership remains static, BRICS is growing, with Argentina and Iran having submitted applications, and other major regional economic powers, such as Saudi Arabia, Turkey and Egypt, expressing an interest in joining. Making this potential expansion even more explosive is the recent Chinese diplomatic achievement in normalizing relations between Iran and Saudia Arabia.
Diminishing prospects for the continued global domination by the U.S. dollar, combined with the economic potential of the trans-Eurasian economic union being promoted by Russia and China, put the G7 and BRICS on opposing trajectories. BRICS should overtake the G7 in terms of actual GDP, and not just PPP, in the coming years.
But don’t hold your breath waiting for mainstream economic analysts to reach this conclusion. Thankfully, there are outliers such as Richard Dias and Acorn Macro Consulting who seek to find new meaning from old data.
Scott Ritter is a former U.S. Marine Corps intelligence officer who served in the former Soviet Union implementing arms control treaties, in the Persian Gulf during Operation Desert Storm and in Iraq overseeing the disarmament of WMD. His most recent book is Disarmament in the Time of Perestroika, published by Clarity Press.
The views expressed are solely those of the author and may or may not reflect those of Consortium News.
What do you expect if you cede Imperial Foreign Policy to a Bronze Age Death Cult?
As usual Scott is spot on. What is important is the level of contentment of the citizenry of each and every country. We are all entitled to live in peace and have governments which are trustworthy, don’t steal from us, and submit to the changing of power on a regular basis via free and open elections. The list of the top 20 happiest countries contains the normal “suspects”: Finland, Norway, Sweden, Denmark, Iceland, Australia, Canada, Israel, Netherlands, Luxembourg, New Zealand, Canada, Ireland, Germany, Belgium, US, Britain, and for the first time ever – a former Soviet republic – Lithuania. Not one BRICS member, and not one country with corrupt kleptocratic rulers who cling to power for life.
What difference does it make whether certain economic “blocs” have more or less this or that? What is important is that each and every country strives to live in peace with its neighbors, and use the resources it has at its disposal to better the lives of its citizens. And that it do so via governments which are honest, not corrupt, and submit to regular change of leadership in free and open elections. The indicator I prefer to look at it is the index of happiest nations on earth. What better measure than whether a country’s citizens are happy? To that end, have a look at the top 20 in the recently-published list. Not one BRICS country present. The normal suspects are at the top: Finland, Sweden, Denmark, Iceland, Norway, Australia, Austria, Switzerland, Canada, etc. Something to be said for free, open societies with democratic elections and leaders who are not corrupt kleptocrats who cling to power for decades.
“…growing resentment among the developing economies of the world to G7 economic policies and
priorities which are perceived as being rooted more in post-colonial arrogance ”
Not to mention the reminder of rancid western mainly white minority world hypocrisy provided by the 20th anniversary of the Iraq War.
Everyone here doesn’t understand the US has plans to weaken any perceived threat to our global dominance.
I wouldn’t for one second be surprised at escalation involving sanctions, war, or nuclear weapons.
The crazy, aggressive actor generally gets saner people to back down, and I doubt any country on earth could handle our aggressive nature, especially if we start losing our dollar based advantages in the world.
I doubt we give up any hegemony peacefully.
The thing I see happening, is that the US military suppliers, manufacturers, corporations, (and the Wall st financier cowboys) have hollowed out the US itself. There is little economic power remaining, because the US has been looted and hollowed out, to pay for wars which have never benefited anyone but the super-wealthy. Everyone in the lower 90% of the US socioeconomic system is struggling to keep what small wealth they have. Billionaires doubled or tripled their wealth in the last few years, even during a pandemic, whilst the majority suffered bad losses.
I recently re-watched the whole Eisenhower farewell speech, from 1961.
The US has become an MIC, and it is not a nation which just “has” an MIC.
The US can’t even get fresh water to it’s people, and it does not give a sh**, or the problem would have been solved.
The US can however, send weaponry to proxy wars around the world, because that is profitable for a few plutocratic owners, who have more political power than the bulk of the population. Warmongers rule the US, not just politically, but economically.
An outbreak of peace and love and cooperation, internationally, would destroy the US economy in it’s present form. This will not be allowed.
Peace would not be a bad thing, if it wasn’t for the fact that the poor in the US and their vassal states will be made to pay to ensure the warmongers don’t have to take the slightest loss of private wealth.
So it goes. The GDP graph must go up, and if that means other nations must be destroyed, to allow market expansion and resource extraction, so be it. That’s the US, as it is.
Things are that bad now.
I like this fresher, wider view by ArtCosta.
Weaponization of the US Dollar is also a factor. First Oil purchase by China using Yuan a few weeks ago. Proposal to have a trading currency backed by commodities (rather than USD fiat).
The World is changing and I worry that my family and I will get stuck on the losing side.
That is a concern Rob. Those of us in the west who have not contributed to the insane rhetoric and policies of the governments, will have have to suffer alongside those who did. Sad but true.
“the IMF’s chief economist [said] the ‘balance of risks to the outlook remains tilted to the downside but is less skewed toward adverse outcomes than in the October WEO.’”
So for the IMF, the prospect that the BRICS population* of four times that of the G7** might achieve gross economic parity is
an “adverse outcome”. Nice to know. (Let’s not even talk about per capita incomes.)
* 3,222 million for BRICS, ** 778 million in the G7, as reported at
hxxps://en.wikipedia.org/wiki/List_of_countries_and_dependencies_by_population
Marine Math works!
I know that GDP is skewed upwards by the inclusion of financial fees, interest payments, and so on. Michael Hudson sees these kinds of economic activity as subtrahends rather and additions to an economy. Does PPP simply ignore these financial costs or subtract them from economic activity as they should be?
One must assume that all that Mr. Ritter has written is well known to the movers and shakers of the U.S. They are supremely educated and experienced in state craft. It’s not that they have denigrated this knowledge and experience for no perceivable gain, but have betrayed the posterity of their citizens. Yet, with all this they have elected to double down on a failing proposition and ignore the obvious.
They’re “supremely educated and experienced in statecraft?” I see very little evidence of that, especially any knowledge of state craft. The reason they’re doubling down on bad ideas and general stupidity is precisely because of their astounding hubris and arrogance and stupidity.
As we all know the West lumps finance into its goods and services measurement of GDP so I believe the disparity is even greater. That and a huge part of Western GDP is from the MIC, I hardly call that productive.
Also wrt sanctions we must look at what they do, not what they say. Sanctions are always about demand destruction too and the US knew exactly what effect they would have, “Fuck the EU” was my first clue. Huge increase in LNG sales to Europe for the US is another.
I believe it is obvious that the Rus-Ukie thing is more about tying them up militarily while other things are in the works.
As I see it the crazies of the West have shot their wad on warfare and belligerence over the last half century while BRICS has been focused on building economic prosperity. Unless the West starts facing reality it is going to continue to fall.
While the West is out to weaken its competitors it weakens it self even more.
G7 – full of wealthy filth who will hopefully implode from the inside – smug SOBs need to be brought to their knees groveling…
Perhaps the more pertinent question is: where can we buy Y(aun)Bills?
Since WWll, there has not been a country responsible for more death and destruction in the world than the USA. Not even close. …… For the sake of global stability, the collapse of the US empire can not come soon enough.
I take a much broader view of the so-called East/West and this so-called multipolar world view or alignment.
Before I get to that, the PPP (Parity Purchasing Power) does indicate that nations with lower per capita incomes and with technological advancement will produce at a much lower cost than those with higher per cap income. Why else would US manufacturing and high tech move to those nations (most specifically China)? You must also realize that about 1/3 of China’s labor force are migrants from rural areas paid a extremely low wages. They are the engine of China’s “miracle” economy.
The broader view I take is not the simplistic notion of East versus West or multilateralism, but that we have authoritarian managed societies where for the most part it is the people who are the main targets, regardless of versions of touted ideologies. The source of the problem is the aged old culture of obedience to authority. All of this geopolitical talk is not about the people of China, the US, Europe, Russia, Ukraine. The people are fodder to be managed, to be used, and in many cases to be used up.
Playing strategic chess with the planet has gotten us here, a hell on earth, where so much beauty has existed.
You don’t seem to be looking at the same stats as I find, or perhaps we are drawing our data from different decades (centuries?)
Take a look at the trajectory of PPP in the peculiar assemblage of countries or continents you have singled out for comparison.
I’m trying to think of countries, regions or continents where people are NOT fodder (plant-derived food?) “to be managed, to be used, and in many cases to be used up” and I’m coming up with nomadic herders. It’s a general description of an advanced economy. Not the point you are trying to make, I think.
This is a mass of confusion. Would you care to specify the prior Golden Age when things were different and better? The last ice age, perhaps. Mammoth hunters?
Chess? More like checkers.
Winston Churchill is supposed to have stated that, “You can always depend on the Americans to do the right thing, after they have tried everything else.”
As the one and only Yogi Berra is to have said “It’s like dejavu all over again!” Well not exactly, but the day is coming.
Yes Sir Mr. J Tracy we are in that time. Think not? I wholly recommend You find this story and read it:
Israel transfers 1 billion $$$$$ from SVB, Silicon Valley Bank to Banks in Israel, more specifically Bank Leumi and Bank Hapoalim. Just google it, the news is everywhere in the banking industry. The high tech banking arm of Leumi Bank facilitated the work.
The truth and nothing but the truth, I swear on my DOG DOG.
Everybody have fun yet!
Thanks CN
Aw , come on now we were only trying to bring you democracy and amuse you all to death.
Would be interesting if the next seismic shift involved a large scale divestment from the dollar, Tbills and the Western banks which have seized national bank deposits like those of Russia, Iran, and Venezuela. Are we in a time when what has gone around is coming around?
If I base my opinion on history, I would say that USA is worst war monger, regime changer, interferer of other countries politics in the entire world. The world is fed up with our interference. There is global climate change to face with money spent on war. USA government is psychologically insane and full of war criminals.
Seems some nations see the world economy, despite their history of trying to control others, as one based on cooperation rather than coercion. It must be so since entire world is threatened by climate change and probably these masters of the universe will continue to decide who lives and who dies, since we have not addressed climate change ahead of climate catastrophe.
You are not alone. Know that. We are many.
When our cultural dictators try to tell us we are doing well, and we know we aren’t, stand by your integrity.
Psychologically, lots of people who are under-informed want to just side with the group, but when the group is portrayed as being in support of the plutocrats who are killing the world, the many end up thinking the view of a tiny group of plutocrats is largely supported. It isn’t. Private media and corporate systems act to enforce a narrative which is not true.
Not sure what we can do about this. The rest of the world is leaving the old US empire behind, they are sick and tired of war and debt repayments which don;t make sense. The people in charge of that empire will take your food away before they accept change to their detriment is necessary. Our people cannot afford to have billionaires anymore. It’s just not working out for anyone. Their private wealth is a luxury we cannot afford anymore.
The world is being killed because of the private profit motive, and the people are being conned into participating in that death spiral. We are ruled by psychopaths, but the systems we have, which we are told can enact systemic change, are bullsh**.
I don’t know what to do next. Protest is speech, and the rulers heard us, but they just don’t care about us, at all. They beat us and spray us with chemical weapons, they arrest us and make our voices illegal.
N@zis did these things. What do we do next?
Democracy is like a shovel, it is a tool to get things done, but when the democracy/shovel is taken away and buried, we can’t use the shovel to dig up the shovel. We can’t use democracy to get democracy back. How do we change a plutocracy of psychopaths who use violence against us, and others, for private profit, if we have no legal means to act in our interests, and the interests of the life support systems of the whole f***ing planet?
What do we do next? I don’t know.
Millions of people agree with you, Paula. Many millions.
Just to remind people about Angus King: He popped up in the Twitter Files asking that Twitter remove posts by anyone opposing him, including the absolutely not-going-to-elected Republican candidate who ran against him last election. As Matt Taibbi said, if Dick Nixon had been sniffing glue, this is what his enemies list would have looked like [Angus King’s]. What I want to know is, When is there going to be an ethics investigation about King? What is it about the U.S. Senate that turns people into petty, vindictive little turds?
Eventually and probably within the next three quarters of a century, Africa (not including the largely Arab north) and South America will too emerge as individual economic super power regions, shaking the by then absolutely weakened BRICS and G7 as climate change wreaks its mounting damage to all and results in a totally new world, and exercises its economic muscle, even as all is collapsing. Not even war(s), short of nuclear extinction, will alter this evolution, especially as international borders change, with, I suspect, America having divided into two or three distinct nations and the European Union region having dissolved into the fractious nations they have always been in the past. Of course, due to climate change and significantly shrinking birth rates, even in Africa by then, there will be billions less of us inhabiting the planet, something some progressive thinking intellectuals already understand as inevitable, meaning the earth will again devolve into a planet of the battling military rulers, and throwing us back to being the ecology destroying brutes humans have generally been since our species discovered fire, spears, and agriculture. The future, it appears, is less than favorable for humans. Of course, before then we might by accident have seen great leaders emerge and halt this disastrous probability, but history shows that collapse is inevitable after such leaders die, unless, of course, Artificial Intelligence evolves to the point where it prevents such things happening, and adopts us mechanically and biologically so that everything, including other species, become similar with a common goal that not even the World Economic Forum can dream of, never mind create. Etc., etc.
Very good piece, Scott. But PPP is not everything, just a basket of goods and the adjustment is made through the exchange rates.