Mark Weisbrot, co-director of the Center for Economic and Policy Research in Washington, DC and president of Just Foreign Policy, explained to Radio VR that it is actually intended to be an alternative to the IMF and the World Bank. The joint development bank and the reserve fund are supposed to be analogues of these institutions which reflect the post-World War II economic and political order, with the United States being the only standing industrial power in the world. The BRICS leaders, he said, “will try to create something that represents most of the world.”
“The details are not clear yet,” he said. “So, that has to be worked out. I think it is interesting that they are actually committing to something this big. I mean this is very big. A hundred billion dollars is probably more that the IMF lent to countries outside of Europe in the last year or in any recent year. Most of the IMF lending is in Europe now, no longer in developing countries. That has changed with the euro-zone crisis.”
But, he adds, the decision to create the bank is a politically motivated move.
“Everything is political in the sense that we have this world order dominated by the United States and Washington-based institutions,” he said. “Even the WTO, for example, is dominated by the rich countries, not as much as the IMF and the Bank because the developing countries form blocks and negotiate there more than they do in the fund of the Bank when they are really run by the US and its allies.”
“So, these are the major institutions and it is the G20 which is still dominated by the rich countries. So, from the G7 you can see how the US and its allies control everything. So, these are the major institutions of global economic government. They don’t have a voice, the IMF and the Bank in particular don’t have a voice for the majority of the world. And now this is a new period, I mean it is a more multipolar world. This is what BRICS is helping to give birth to. It is long overdue. China is the biggest economy in the world right now on a purchasing power-parity basis. So, it is silly to have these institutions operating and managing as if we were living in the world of 1946.”
And Vivan Sharan, an expert on BRICS with the Observer Research Foundation in India, is convinced that there are at least two objectives behind the move. The first is that each of the BRICS’ countries is at a critical stage of socio-economic transformation. India, for instance, is tempting to transition from being a low-middle income country to a middle income country, which requires a number of infrastructure initiatives aimed at development. And similarly in other BRICS countries. So there is an effort through the BRICS development bank to supplement some of the world that has already been funded through other multilateral banks.
The second nuance is to create, through this development intervention, in BRICS, as well as other developing countries, an alternative narrative to the one that has been in place for the last 50 to 60 years since World War II, which was put in place by The Bretton Woods institutions and has essentially stayed unchanged, even though the world has changed significantly since then.
But Ms. Memory Dube, senior researcher in the Economic Diplomacy Programme, working on the global economic governance project, argues that the goal actually is not exactly to challenge the World Bank, but to complement to what the World Bank is doing with slightly different focus on developing countries.
“Even that this bank has been established by the BRICS, there is some indication that they will open it up to other developing countries and may be developed countries as well, in terms of contributing to the fund,” she told Radio VR. “We are still yet to get more details – where the bank is going to be based, where its headquarters are going to be, what its structure is going to be. But the indication is that the bank, its infrastructure and investment primarily is going to be focused on developing countries. At a certain point those will be the BRICS countries themselves.”
Ms. Memory Dube is convinced that the bank is set to give substance to the group. It is kind of a process consolidating themselves as a group. She says that the idea is politically motivated. And the politics is about forcing other institutions – IMF and the World Bank to reform.
“The new development bank is in fact a way of challenging the world institutions – the World Bank, the IMF – not being something that will compete with these institutions, but forcing reforms in those institutions. So, if the IMF does not reform in the way the BRICS want them to reform, they will have an alternative. And this alternative might force the IMF to start implementing the reforms that they have been talking about over the past years. “