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Cape Town - The establishment of the Brics - Brazil, Russia, India, China and South Africa - Development Bank (BDB) is perhaps the most definitive signal thus far that this emerging group of important economies intends to continue to ratchet up its challenge to the prevailing Western financial hegemony that has been a feature of the post-World War II world.
Symbolic or otherwise, the Brics together with many other developing nations have consistently expressed their dissatisfaction with the role of the International Monetary Fund and World Bank as purveyors of Western interests and dictates.
Following the end of the Cold War, both Russia and China (as well as others) have increasingly become more assertive in their rejection of the neo-liberal Western geopolitical paradigm, and are attempting to counter this with power plays in both the global political and economic arenas.
Few can deny that the outcome of lending by the World Bank in the past through its controversial (and sometimes damaging) ‘structural adjustment programmes’ have often left countries in a more vulnerable position than intended.
However, any new lending competitor – such as the BDB – is likely to find its own role similarly complex.
Conditionalities established by the World Bank and IMF are often the cause of most developing nations’ frustration with and disdain for the global lenders.
However, the new BDB will be faced with similar issues. In its lending to rapidly developing nations, it too will need security from its recipients of cohesive policy formulation, efficient execution and operating transparency.
Shoddy domestic policies
Some developing nations have got themselves into dire domestic economic straits simply as a result of shoddy domestic policy.
Argentina, for example, will probably come cap in hand to the new bank. However, given the BDB’s desire to lock in a host of important developing economies within its ambit (and that of the Brics), will it set a country in distress a specific set of parameters to follow in approving the loan?
Should it fail to adequately demand and monitor these concerns, it will soon find that its lending will be severely compromised.
Secondly, the new bank will need to address the real concerns of loans potentially being used for political ends. In other words, lending to problematic or dubious regimes across the world will necessitate particular scrutiny.
There remains a danger that by wishing to curry favour with developing nations in need of cash injections, the bank can overlook critical aspects of human rights issues and similar concerns about democratic accountability.
This is of particular concern given that the lions’ share of the bank’s currency reserves ($41bn) will come from China – hardly a paragon of an open and accountable democracy.
Given Russia’s recent geopolitical manoeuvres in the Crimea and Ukraine, two of the five Brics' custodians own internal political dynamics make them a less than reliable referee in the type of project or regime they might find – or prop up.
Thirdly, all is not rosy within the domestic Brics economies themselves. Russia is set to experience poor growth for the second successive year (exacerbated by Crimea-induced sanctions) while Brazil continues to feel a major hangover after the Lula years, accompanied by social unrest.
Only India bucks negative trend
China itself is starting to show slower GDP growth as a property bubble threatens performance further. South Africa will likely fail to reach its already diminished GDP targets this year. Bucking the negative trend is India, which shows some signs of promise following the election of the new Modi administration earlier this year.
Poor domestic performance across the Brics is likely to focus the countries much more on their own domestic woes than on the interests of the group as a whole.
Yes, the use of the new bank can provide additional linkages between the Brics and resource-rich developing nations to form new economic partnerships – but ultimately, should severe domestic economic pressures weigh on some Brics nations themselves, lending to others might become less of a focus.
The success of a vibrant and secure lending agency like the new BDB will still be predicated on a similar vibrancy and strength of the domestic Brics economies themselves. The direct linkage of the bank to five national economies ‘off-the-boil’ adds a vulnerability to the institution and its ability not only to lend but also enjoy global credibility.
Symbolically, the new Brics Bank has all the hallmarks of a predicted shift away from Western hegemony. However, the reality of global geopolitics and the economic vagaries of the Brics themselves make this an event on which the jury will be out for some time.
- Fin24
* Daniel Silke is director of the Political Futures Consultancy based in Cape Town and is a noted keynote speaker on the South African, African and global political economy. He is author of Tracking the Future (Tafelberg). His website is www.danielsilke.com and you can follow him on Twitter at DanielSilke.
Symbolic or otherwise, the Brics together with many other developing nations have consistently expressed their dissatisfaction with the role of the International Monetary Fund and World Bank as purveyors of Western interests and dictates.
Following the end of the Cold War, both Russia and China (as well as others) have increasingly become more assertive in their rejection of the neo-liberal Western geopolitical paradigm, and are attempting to counter this with power plays in both the global political and economic arenas.
Few can deny that the outcome of lending by the World Bank in the past through its controversial (and sometimes damaging) ‘structural adjustment programmes’ have often left countries in a more vulnerable position than intended.
However, any new lending competitor – such as the BDB – is likely to find its own role similarly complex.
Conditionalities established by the World Bank and IMF are often the cause of most developing nations’ frustration with and disdain for the global lenders.
However, the new BDB will be faced with similar issues. In its lending to rapidly developing nations, it too will need security from its recipients of cohesive policy formulation, efficient execution and operating transparency.
Shoddy domestic policies
Some developing nations have got themselves into dire domestic economic straits simply as a result of shoddy domestic policy.
Argentina, for example, will probably come cap in hand to the new bank. However, given the BDB’s desire to lock in a host of important developing economies within its ambit (and that of the Brics), will it set a country in distress a specific set of parameters to follow in approving the loan?
Should it fail to adequately demand and monitor these concerns, it will soon find that its lending will be severely compromised.
Secondly, the new bank will need to address the real concerns of loans potentially being used for political ends. In other words, lending to problematic or dubious regimes across the world will necessitate particular scrutiny.
There remains a danger that by wishing to curry favour with developing nations in need of cash injections, the bank can overlook critical aspects of human rights issues and similar concerns about democratic accountability.
This is of particular concern given that the lions’ share of the bank’s currency reserves ($41bn) will come from China – hardly a paragon of an open and accountable democracy.
Given Russia’s recent geopolitical manoeuvres in the Crimea and Ukraine, two of the five Brics' custodians own internal political dynamics make them a less than reliable referee in the type of project or regime they might find – or prop up.
Thirdly, all is not rosy within the domestic Brics economies themselves. Russia is set to experience poor growth for the second successive year (exacerbated by Crimea-induced sanctions) while Brazil continues to feel a major hangover after the Lula years, accompanied by social unrest.
Only India bucks negative trend
China itself is starting to show slower GDP growth as a property bubble threatens performance further. South Africa will likely fail to reach its already diminished GDP targets this year. Bucking the negative trend is India, which shows some signs of promise following the election of the new Modi administration earlier this year.
Poor domestic performance across the Brics is likely to focus the countries much more on their own domestic woes than on the interests of the group as a whole.
Yes, the use of the new bank can provide additional linkages between the Brics and resource-rich developing nations to form new economic partnerships – but ultimately, should severe domestic economic pressures weigh on some Brics nations themselves, lending to others might become less of a focus.
The success of a vibrant and secure lending agency like the new BDB will still be predicated on a similar vibrancy and strength of the domestic Brics economies themselves. The direct linkage of the bank to five national economies ‘off-the-boil’ adds a vulnerability to the institution and its ability not only to lend but also enjoy global credibility.
Symbolically, the new Brics Bank has all the hallmarks of a predicted shift away from Western hegemony. However, the reality of global geopolitics and the economic vagaries of the Brics themselves make this an event on which the jury will be out for some time.
- Fin24
* Daniel Silke is director of the Political Futures Consultancy based in Cape Town and is a noted keynote speaker on the South African, African and global political economy. He is author of Tracking the Future (Tafelberg). His website is www.danielsilke.com and you can follow him on Twitter at DanielSilke.
