The New Masters of the Earth's Resources?
The last instalment showed that the BRICS are not a marginal player. But what actually feeds this weight? The mainstream answer is simple: raw materials and cheap labour. That, however, is only the surface. The question is not who owns what lies beneath the ground, but who can turn it into value — and who will be working in 2050.
Say "BRICS" to a geopolitical analyst or an economist and, in most cases, oil, natural gas and Chinese manufacturing dominance spring to mind. That picture is as distorted as judging a tank battle by whose tank is bigger, without asking who can refuel it, who can drive it, and whether it even has ammunition. Raw material, by itself, is not power. Power comes from the ability to exploit that material through market forces, and from whether a society's structure — its demography — makes that possible. Let us look at the two great dimensions: what lies beneath the ground, and what lives above it.
The treasury beneath the ground — who produces the world's energy?
According to data from the US Energy Information Administration (EIA), the BRICS together extract more than 35 million of the roughly 100 million barrels of oil consumed worldwide each day. That is over a third of the global total. Russia and Saudi Arabia rank among the world's top three producers; Iran, the United Arab Emirates and Brazil sit in the top ten too. But it is not only about oil. Rare-earth elements — without which there are no smartphones, electric cars, wind turbines or precision weapons — see 60–70% of global extraction coming from China. In terms of natural gas reserves, Russia alone holds nearly a quarter of the world's proven reserves, and if Iran is added, the two countries together account for close to 40% of global gas wealth.
This does not mean the BRICS "rule" the world. It does mean that if these countries decide to supply elsewhere, on different terms or in a different currency, most of Western industry could be paralysed within days. After 2022, this no longer needs proving: the shortage of Russian natural gas triggered an energy crisis in Europe, bringing price rises the continent had never seen. Anyone who thinks Western economies have "detached" themselves from BRICS raw materials need only look inside their own car, their phone and their gas boiler.
What are rare-earth elements, and why do they matter?
Rare-earth elements are the collective name for 17 chemical elements (e.g. neodymium, lanthanum, ytterbium). Despite their name, they are not necessarily rare on Earth, but they are difficult to mine and even harder to separate from one another. Without them, modern technologies do not function: the motors of electric cars, the magnets in wind turbines, the loudspeakers and vibration motors in smartphones, and the guidance systems in precision missiles all rely on them. China provides 60–70% of global extraction, which is in itself a strategic monopoly — but the real power lies in processing. China dominates 85–90% of the refining and processing of rare-earth elements. Australia or the United States also mines these metals, but the polluting and extremely costly refining process has already been outsourced to China. That is why owning the raw material is not enough: whoever controls the processing dictates the terms.
The workers of the future — who will be working in 2050?
According to the latest projections from the UN Population Division, by 2050 India's working-age population — 15 to 64 years — will grow from 990 million to 1.13 billion. That is roughly a 14% expansion. China, over the same period, will plummet from 984 million to 745 million — a 24.3% decline. Russia and Brazil can expect stagnation or a slight fall, while Africa and Southeast Asia face further explosive growth.
This means that by 2050, the BRICS demographic engine will have shifted from China to India. But there is a catch: labour, by itself, is not economic strength. A young society only produces value if there is capital, technology and the rule of law, with which to put that labour to productive use. Without adequate education and infrastructure, a youthful population becomes a time bomb rather than a demographic dividend. It is precisely for this reason that China was able to become the world's factory within thirty years: it paired its vast workforce with capital accumulation and technology transfer. The question for India is whether it can repeat this without political bureaucracy and the knowledge problem squandering the opportunity.
Trade dependencies — who lives off whom?
The BRICS countries do not merely produce; they also consume. China is the world's largest importer of raw materials and, simultaneously, the largest exporter of manufactured goods. This creates a two-way dependency: the West depends on BRICS raw materials, while the BRICS depend on Western markets and, in part, on Western technology. Bilateral swap agreements are one attempt to resolve this: two countries' central banks agree to hold reserves of each other's currency, so that trade settlement can bypass the dollar. Between Russia and China, commerce already takes place almost entirely in roubles and yuan.
Yet swap agreements, by themselves, do not mean independence — they are merely a stopgap for the weaknesses of the dollar system. As long as the BRICS countries' technology — chip manufacturing, precision machinery, software — depends significantly on Western imports, the raw-material monopoly is only a half-truth. The reality is that world trade has not split into two camps; it is a network in which everyone depends on everyone else. The BRICS' strength lies not in independence but in the ability to shift where its dependencies lie.
What is a swap agreement?
A swap agreement — a currency-swap arrangement — works as follows: two countries' central banks agree to build up reserves of each other's currency at a predetermined amount and exchange rate. If, for example, a Hungarian company wants to pay a Chinese supplier in yuan but has none, the Hungarian central bank can provide it from the swap facility without touching the dollar. This reduces foreign-exchange risk and dollar demand, but it does not mean the complete replacement of the dollar — it merely opens an alternative channel.
Ownership is not enough — the arithmetic has to work
There is a deeper economic truth that the raw-material myths obscure: raw material, in itself, is worthless. Value comes from who can process it, where it can be shipped and at what price it can be sold. Ludwig von Mises, the 20th-century economist, made one of his most important contributions in identifying what we call the "calculation problem": central planning can never correctly estimate whether a raw material is worth extracting, and if so, at what cost. Only the market price mechanism — the meeting of supply and demand — yields that information.
That is why the BRICS' raw-material monopoly, by itself, is no guarantee of success. Russia has plenty of oil, but drill bits and some refining technology still rest on Western patents. China mines and refines rare-earth elements, but the highest-level processing industry is no longer confined to China. Moreover, BRICS raw-material extraction is overwhelmingly carried out by state monopolies — Gazprom, Saudi Aramco, Petrobras — which subordinate economic efficiency to political objectives. Where a central bureaucracy decides the quantity and price of extraction, political calculation takes the place of market calculation, which inevitably leads to capital misallocation and a loss of efficiency. Whoever owns the raw material is only halfway there. The other half is the ability to sell it through market processes — and for that, ownership alone is not enough; the capacity for market calculation is also required.
The calculation problem — why are raw materials not enough?
The "calculation problem" means that a central bureaucracy can never accurately calculate what a raw material is worth, where it is worth shipping and what it is used for. Only market prices can show this: if something is expensive, many want it and little is available; if it is cheap, the reverse holds. If a government decides that "we will determine how much oil we produce and to whom we give it", it will probably decide badly, because it does not know local demand, technological shifts or consumer preferences. That is why a raw-material monopoly, by itself, is not economic power — it only becomes so when market participants are free to decide what to do with it.
What does the future hold?
The BRICS, then, do not "merely" own raw materials, and they do not "merely" command a vast labour force. But neither, in itself, is world power. The value of raw materials is set by processing and the market price; the value of labour is set by the capital and technology with which it works. By 2050, India may be the world's largest labour reserve, but without sufficient investment and the rule of law, that will only be demographic misery, not an economic explosion.
In the next part, we shall look at how the BRICS tries to shape this raw-material and demographic advantage into institutions and financial power — or rather why it does not succeed without a common currency, a common bank and a common set of rules.