BRICS Might Shatter Global Economic Hegemony

By N. GUNASEKARAN

The conclusion of the Sixth Summit of BRICS countries (Brazil, Russia, India, China, South Africa) in Brazil has rekindled the hope of change for many progressives who aspire for the righteous place for poor countries in the world community of nations. 

The grand inauguration of two institutions is a cause for celebration. A Contingency Reserve Arrangement (CRA), with an initial capitalization of $100 billion, will assist BRICS members in need of funds, and the New Development Bank (NDB), with a total authorized capital of $100 billion, is open to all members of the United Nations. By this endeavor, the BRICS became an economic alliance challenging the US- and European-dominated International Monetary Fund (IMF) and World Bank. Both new institutions, CRA and NDB, have the potential of breaking the global North’s stranglehold on finance and development. The BRICS Bank will be based in Shanghai, China’s financial hub, and it will be operational in about two years.

However, different perceptions exist among the enthusiasts of these institutions. Asserting that the NDB would not to challenge the existing multilateral financial institutions like the IMF and the World Bank, Raghuram Rajan, the Governor of Reserve Bank of India, the central banking institution controlling the Indian Monetary Policy, said, “… but it certainly is saying, look, we have plenty of money ourselves, why don’t we put some of this money to use in a way that benefits us rather than necessarily depending on the multilateral institutions to change which is taking much more time than anybody thought of.” His rationale for the BRICS bank was that it could provide risk capital to long-term projects.

This view represents the outlook of practical economist bureaucrats. Anyway, from the point of view of practical requirements of the developing nations, and from the long term perspectives on altering international economic relations as well, the formation of NDB will be a welcome development. One could hope that such regional institutions would help the developing countries to attain self-sufficiency by reducing their dependence on the big powers for economic assistance.

It is now an established truth that the so-called Structural Adjustment Programs that the World Bank and IMF imposed upon their borrowers ruined the economies of poor and developing countries.

Contrary to the claims that those nations would see economic development in the long run, the stringent conditions like the currency devaluation, austerity measures, market liberalization and privatization of state-owned companies, etc., robbed decent livings from working people across the world.

The details regarding the approval of loans by NDB are still unclear. The BRICS’ heads of state declared that the loans will have fewer restrictions and delays than those of the World Bank. It is said that nations can withdraw up to 30% of their quota without being subjected to IMF conditions. The currency of the loans has not been officially announced. However, it is believed that the loans will be given in Chinese Renminbi. One would hope that it would make significant impact on the process of ending the hegemony of “dollarization” in international economy.

Another ray of hope is that the democratization of international financial and economic relations may be accelerated by the BRICS grouping. But there are many pitfalls in this long journey. As Russian Foreign Minister Sergei Lavrov described it, “…NATO always votes as a single bloc everywhere. Who are Russia’s allies? We have many allies. These are the members of the Collective Security Treaty Organization, our partners on Eurasian integration projects, the Shanghai Cooperation Organization, BRICS. And when we’re told that our allies in the CSTO don’t always vote together with Russia in unison, then we don’t make any type of tragedy from that. As opposed to NATO, where any step in a different direction or any demonstration of a difference of opinion is punished.” So, BRICS has to deal with the challenges from the countries which enjoy global dominance.

The West and the US have been stalling all efforts for democratization of international institutions. They seek to dominate in the World Bank with their voting power. The US and Western Europe enjoy too many disproportionate voting rights as compared with their economic authority. The shared dissatisfaction with present global economic structural design and the simmering dissatisfaction over the existing power arrangements around the Bretton Woods twins — the World Bank and the IMF – have actually gave birth to this BRICS bank.

Another hurdle for the success of BRICS bank comes from the constituents themselves. The mode of integration for most of the BRICS countries into the international economy was through domestically implementing the export-oriented manufacturing based on the exploitation of hundreds of millions of workers. Overcoming this hurdle depends on the peoples’ resistance against the neoliberal policies of the ruling elites in these countries.

The other regional groupings in today’s world could augment success for BRICS experiment. The Bolivarian Alliance of Latin America (ALBA) consisting of Nicaragua, Bolivia, Venezuela, Ecuador, Uruguay, Dominica, Trinidad/Tobago, Cuba, St. Vincent, Antigua etc., had already strengthened itself. The consolidation of 33 countries known as CELAC — the Community of Latin American and Caribbean States — was referred to as the second independence of Latin America, and many other regional groupings including the Shanghai Cooperation Organization, are trying for liberation from global domination led by the US.

With the existence of groupings like the Union of South American countries (UNASUR), BRICS/CELAC, etc., one could hope for such outcomes like democratization of the United Nations and the greater accountability of US foreign policy.

A widening gap between rich and poor countries, depletion of natural resources, the catastrophic climate change, unsustainable consumption, unending warfare and serious economic crisis in many regions are all the basic issues affecting the people across the world. Notwithstanding the temporary measures to solve these issues, a vision is necessary. A fundamental shift toward a more equitable redistribution of wealth between North and South and ultimately the socialization of the means of production to encourage social, economic and political equality are all the essential ingredients of such vision. BRICS and other regional cooperation may help to achieve this vision. 

N. Gunasekaran is a political activist and writer based in Chennai, India.

From The Progressive Populist, November 15, 2014