Fifty years ago, the government finance heads from the UK, West Germany, France, and the U.S. met informally in the White House’s ground-floor library to discuss the international monetary situation at the time. This is the origin story of the G7.
This initial group quickly expanded, adding Japan, Italy, and Canada, to solidify a bloc of the biggest non-communist economies at the time. As industrialized countries that were reaping the benefits of the post-war productivity boom, they were economic juggernauts, with G7 economic output historically contributing around 40% of global GDP.
However, as Visual Capiutalist's Pallavi Rao details below, the more recent emergence of another international group, BRICS (Brazil, Russia, India, China, and South Africa), has been carving out its own section of the global economic order.
This animation from James Eagle uses data from the International Monetary Fund (IMF) and charts the percentage contribution of the G7 and BRICS members to the world economy.
Specifically it uses GDP adjusted for purchasing power parity (PPP) using international dollars.
Charting the Rise of BRICS vs. G7
The acronym “BRIC”, developed by Goldman Sachs economist Jim O’Neill in 2001, was used to identify four fast-growing economies in similar stages of development. It wasn’t until 2009 that their leaders met and formalized their relationship, later inviting South Africa to join in 2010.
ℹ️ Russia was at the time also a member of the G7, then the G8. It was invited to join in 1997 but was expelled in 2014 following the annexation of Crimea.
While initially banded together for investment opportunities, in the last decade, BRICS has become an economic rival to G7. Several of their initiatives include building an alternate global bank, with dialogue underway for a payment system and new reserve currency.
Below is a quick look at both groups’ contribution to the world economy in PPP-adjusted terms.
A major contributing factor to BRICS’ rise is Chinese and Indian economic growth.
After a period of rapid industrialization in the 1980s and 1990s, China’s exports got a significant boost after it joined the World Trade Organization in 2001. This helped China become the world’s second largest economy by 2010.
India’s economic rise has not been quite as swift as China’s, but by 2022, the country ranked third with a gross domestic product (PPP) of $12 trillion. Together the two countries make up nearly one-fourth of the PPP-adjusted $164 trillion world economy.
The consequence of using the PPP metric—which better reflects the strengths of local currencies and local prices—is that it has an outsized multiplier effect on the GDPs of developing countries, where the prices of domestic goods and services tend to be cheaper.
Below, we can see both the nominal and PPP-adjusted GDP of each G7 and BRICS country in 2023. Nominal GDP is measured in USD with market-rate currency conversion, while the adjusted GDP uses international dollars (using the U.S. as a base country for calculations) which better account for cost of living and inflation.
By the IMF’s projections, BRICS countries will constitute more of the world economy in 2023 ($56 trillion) than the G7 ($52 trillion) using PPP-adjusted GDPs.
How Will BRICS and G7 Compare in the Future?
China and India are in a stage of economic development marked by increasing productivity, wages and consumption, which most countries in the G7 had previously enjoyed in the three decades after World War II.
By 2028, the IMF projects BRICS countries to make up one-third of the global economy (PPP):
BRICS vs. the World?
The economic rise of BRICS carries geopolitical implications as well.
Alongside different political ideals, BRICS’ increasing power gives its member countries financial muscle to back them up. This was put into sharp perspective after the 2022 Russian invasion of Ukraine, when both China and India abstained from condemning the war at the United Nations and continued to buy Russian oil.
While this is likely concerning for G7 countries, the group of developed countries still wields unparalleled influence on the global stage. Nominally the G7 still commands a larger share of the global economy ($46 trillion) than BRICS ($27.7 trillion). And from the coordination of sanctions on Russia to sending military aid to Ukraine, the G7 still wields significant influence financially and politically.
In the next few decades, especially as China and India are earmarked to lead global growth while simultaneously grappling with their own internal demographic issues, the world order is only set to become more complex and nuanced as these international blocs vie for power.