Rarely has an acronym led such a charmed life as BRICS. Casually invented by former Goldman Sachs Group Inc. economist and Bloomberg View columnist Jim O’Neill to label emerging markets of promise, it actually brought together leaders from the disparate countries of Brazil, Russia, India, China and South Africa. Last week in Brazil, they took a decisive step toward building institutions that could plausibly challenge the long geopolitical and economic ascendancy of the West.

The New Development Bank, headquartered in Shanghai, would finance infrastructure and development projects. This would be the biggest rival yet to the World Bank and the International Monetary Fund, as well as the economic architecture designed by the U.S. in Bretton Woods in 1944.

There are good reasons why China is working hard to establish it. The BRICS countries contain more than 40 percent of the world’s population and account for a quarter of the world’s economy. China itself may shortly bypass the U.S. to become the world’s biggest economy (based on domestic purchasing power). Yet leadership of the World Bank and the IMF remains the exclusive preserve of the U.S. and western European countries.

The promised reforms to these institutions have not materialized; China now clearly wants to build its own global system with the help of the BRICS. A new “special relationship” with its closest economic partner in the West ― Germany ― and the recent establishment of Frankfurt as a clearinghouse for the renminbi is part of the same Chinese attempt to break the hegemony of the dollar as a payments and reserve currency.

It is also understandable why China’s poor and often resentful BRICS cousins are willing to assist its global self-assertion. India and South Africa need easier access to one of the biggest reservoirs of savings in the world; Russia, ostracized after its annexation of Crimea and cynical maneuverings in eastern Ukraine, seems keen for the respectability endowed by international forums.

Russian President Vladimir Putin’s posturing in Brazil just hours before a Malaysia Airlines jetliner was shot down in Ukraine is not the only indication of the BRICS’ inability to offer an acceptable moral and political alternative to Western hegemony. South African President Jacob Zuma, who has been accused of rape as well as corruption, and India’s Narendra Modi, the new prime minister of the country billed as the world’s largest democracy, don’t raise many hopes, either. Modi flew to Brazil shortly after elevating his consigliere to the presidency of his ruling party: a man who, as Bloomberg News reports, is “on trial for ordering three murders, kidnapping witnesses, running an extortion racket and hiring criminals to shoot up a rival’s headquarters.”

Leaders such as Putin and Modi rely on the dismally well-attested fact that those who possess power can obscure, even justify, all manner of crimes. Nevertheless, it is far from clear that power, let alone moral advantage, has shifted, as is commonly claimed, from the West to the East.

Russia today displays all the political and economic risks of a parasitic dependence on fossil-fuel exports. South Africa has yet to triumph over the basic Third World problems of corruption and labor unrest. Brazil is stuck with a faltering economy and a disaffected middle class.

The achievements of India in computer hardware and software, or of Brazil in aerospace and defense, are impressive, but they cannot begin to compete with those of the U.S. Tata Group’s highly leveraged takeovers of such iconic companies as Jaguar Land Rover and Corus disguise the failure of even a single Indian brand name to achieve global recognition.

Only China, with its consistently high trade surplus and gross domestic product, seems a convincing rival to the U.S. It ranks in the top five in a variety of sectors, including banking, insurance, construction, real estate, telecommunications, trading companies and transportation.

Still, it’s instructive to compare China with Japan, the most serious challenger yet to the West’s economic domination. Such brands as Sony and Panasonic that became household names internationally were products largely of Japanese innovation, research and development, and investments. China, even though it is the world’s biggest exporter of electronics, can boast of no comparable achievement (unless you count the iPhone, whose variously sourced components are assembled by Taiwan-owned Foxconn in China, as a Chinese product).

Japan became an economic superpower in the days when capital wasn’t very globalized. Today, the growth of GDP, an antiquated measure of national economic power, is substantially the work of foreign investors and manufacturers. This is particularly true of the BRICS countries.

It is partly why China still looks to the U.S. as the driver of world economic growth and Brazil and India grow anxious at the smallest sign that the tap of cheap money will be turned off.

Commodity booms and cheap credit in the 2000s ushered Brazil, India, South Africa and Russia into a period of easy growth. The biggest beneficiaries in these countries ― the “neo-middle class,” as Modi calls them ― became more significant in domestic politics and more visible internationally (and helped make a certain kind of boosterish speculation about the “rise of the rest” very trendy).

The financial crisis of 2008 was the first sign that the East’s own era of irrational exuberance could not last. The political and economic challenges before the BRICS have multiplied since then.

Even China, which was not intoxicated by its imminent superpowerdom and possesses more conditions for sustained economic expansion than any other BRICS country, still has to move from its old model of investment-led growth to domestic consumption. Until this mammoth task is accomplished, China’s own attempt to change the status quo will not work, and the acronym BRICS will continue to denote extravagant ambition rather than genuine ability.

By Pankaj Mishra

Pankaj Mishra, a Bloomberg View columnist, is the author of “From the Ruins of Empire: The Intellectuals Who Remade Asia.” ― Ed.

(Bloomberg)