Can the BRICS Dominate the Global Economy?
08/12/14
Matthew P. Goodman
BRICS,
"Brazil, Russia, India, China, and South Africa have thrown down the gauntlet at the feet of the West."
Brazil,
Russia, India, China, and South Africa have thrown down the gauntlet at
the feet of the West. Last month these five emerging economies launched
a New Development Bank - nicknamed the "BRICS Bank" - that combines
features of the World Bank and International Monetary Fund (IMF).
Meanwhile, China has proposed an Asian Infrastructure Investment Bank
(AIIB) that could compete with the Asian Development Bank (ADB). These
initiatives represent the first serious institutional challenge to the
global economic order established at Bretton Woods 70 years ago this
summer. The psychology behind them is clear, as advanced countries have
damaged their own credibility as responsible economic stakeholders in
recent years and have failed to fully accommodate the rise of the new
powers. Less clear is how much of a substantive improvement these new
institutions will make to global governance - or even to the interests
of the countries championing them.
At first blush, it is difficult to take the new BRICS
Bank seriously. The five founding members were brought together by
little more than a clever acronym and a shared desire to send a message
to the West. The differences among the five in economic heft, political
orientation, and geostrategic
interests are cavernous. Moreover, the initial paid-in capital of only
$10 billion is a drop in the bucket compared to the development
challenges the bank is intended to address.
But
the BRICS Bank reflects a real grievance on the part of the emerging
world about the state of global economic governance, including the
recurring financial crises emanating from the United States and Europe
in recent years and the failure of advanced countries to reallocate
"shares and chairs" to emerging economies in existing institutions such
as the IMF. Moreover, if managed well, the BRICS Bank could make a
useful contribution to global development. Yet it could also undermine
the global rules-based system that has largely served the economic
interests of the BRICS well over the past seven decades.
Read full articlehttp://nationalinterest.org/blog/the-buzz/can-the-brics-dominate-the-global-economy-11063
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