On July 15th, 2014, the BRICS nations, Brazil, Russia, India, China & South Africa signed the long-anticipated document to create the $100 billion BRICS Development Bank and a reserve currency pool worth over another $100 billion. Both will help to counter the influence of Western-based lending institutions and the dollar. While the New Development Bank is seen by conservative western economists and policy advisors as an unwelcome competitor to the World Bank and IMF, some in the left politics consider it as beneficial. Fidel Castro in particular wrote favourably of the bank for its potential to assist the development of third world countries. This move by the five major emerging economies might be a signal that the uni-polar world of almost 25 years is coming to an end paving the way for a multi-polar world with developing nations having more freedom, choice and more flexibility in trade, diplomacy and development, which is a desirable state of affairs.
Some international media houses are claiming that the New Development Bank is born out of a political gridlock. They might not be far off the mark!
Some geopolitical experts view this as a move to counter the prejudiced praxes of the IMF such as appointing a European Managing Director since its inception, or using the non-revised quotas for assigning voting power. It may be imperative to note that the USA holds 17% of the IMF’s voting power and its nod is necessary to get the 85% supermajority to bring about radical reforms. Interestingly, the proposed reforms would only dilute the U.S. voting power to roughly 16.5%, still enough voting power to veto any future IMF proposals that require a supermajority.
Thus, it may be aptly inferred that the BRICS nations, which represent 40% of the world population & 18% of the World Economy have actualized an appropriate alternative to the World Bank & the IMF. The new Development Bank may also help the BRICS nations in advancing political agenda in the way the World Bank & IMF do for the US and simultaneously weaken the ability of the US & the European Union to control the politics and economies of other nations.
So, the creation of the New Development Bank may be considered as throwing down the gauntlet at the feet of the West as it is the first serious challenge to the global economic setup established at Bretton Woods some 70 years ago.
These steps taken by BRICS nations might be tiny & tentative but display their desire to transform the global economic scenario in their own interest as they advance in economic clout. As, predicted by many financial experts, this group of diverse nations is quickly moving up the ranks on the global economic chessboard aiming for the bull’s eye, i.e. dominance of the global economic setup keeping in mind the benefit of emerging economies looking for financial assistance.
But, all this might only be possible when the BRICS nations first deal with the serious economic problems at home. The new Indian regime under the leadership of Mr. Narendra Modi would be hard-pressed to implement reforms to boost the stalled national economy. While China has held up a consistent growth rate, Brazil, Russia & South Africa are growing sluggishly. If these countries drag themselves out of the slowdown pit, and all their initiatives get off the ground, they will surely create a new future for the world economy in which they would be the crown princes, the benevolent saviours of the third world countries and the challengers who broke away from the shackles of and overthrew the Western dominated Economic establishment to create multi-polar world having a more diluted power distribution.
