One thing we try to do here is cover a story from the perspective of various other regions around the world. If all we want is the western mainstream media view, that is easy to access at any time. We think there is value in taking a look at how other parts of the world look at things. With that in mind, here is a recent article about the BRICS that appeared in Aljazeera America. This article is by Fullbright Fellow Micheal Pizzi who claims expertise in the Middle East and writes freelance for Aljazeera America. We'll look at his article and then offer a few comments.
Below are some quotes from this article and then a few comments. While this article is actually written by a freelance writer from New York, we can assume it carries weight in the Middle East since it is being run by Aljazeera America.
"After more than six decades of dictating development policy in much of the emerging world, the Western-led International Monetary Fund and World Bank may soon have some competition."
"The BRICS nations first announced their plans for the bank in March 2013 but struggled to reach an agreement over China’s desire to hold a greater stake in the institution. But a Brazilian government official told Reuters last week that the five members were ready to split funding and control equally, clearing the last major hurdle for a launch in 2016."
"To economists in the developing world, who have long criticized the World Bank and IMF as anathema to the countries they purport to help, the New Development Bank holds tremendous promise. Critics say the West has taken advantage of its monopoly in international lending to wield outsize influence in the economic and political affairs of developing countries, dictating development models that further entrench these countries' subservience to the West."
"When a country applies for cash from the World Bank or IMF, it agrees to a set of structural adjustment policies (SAPs) designed to close budget gaps — measures like cutting domestic spending, ending subsidies or freezing wages. Critics say these programs curtail the development and diversification of a country’s domestic industries in favor of export production to the West. Some have likened the relationship to an iteration of neocolonialism."
"At the same time, the IMF and World Bank have refused to grant the emerging world — the BRICS countries included — greater voting power to reform these institutions, even though emerging economies now contribute substantial funding. As South Africa’s former Finance Minister Pravin Gordhan put it: “The roots of the World Bank and IMF still lie in the post–World War II environment.”
"At least to begin with, the new bank will be only a minor competitor. The BRICS can’t compete with the liquidity of the $755 billion IMF or the 66 years of development experience under the belt of the World Bank. For those reasons, it may not be surprising that the World Bank president himself said he “welcomed” the unprecedented venture, calling the bank a “natural extension of the need for more investment in infrastructure” than the World Bank can provide."
"For now, said Rachel Ziemba, director of emerging markets at Roubini Global Economics, “the BRICS' goals are less about replacing the IMF and World Bank and more about supplementing them."
"But in the past few months, the West has been engaged in a tug-of-war with Russia over the crisis in Ukraine. Russia has responded by inking an unprecedented $400 billion gas deal with China to shift energy exports away from Europe. And Russia’s second-biggest financial institution announced it would bypass the U.S. dollar as reserve currency in its dealings with the Bank of China."
In light of all the talk about an emerging “rebalance” of the world order, some say the BRICS' challenge has taken on new meaning. In a column he co-authored for Project Syndicate, the former chief economist of the World Bank, Nobel laureate Joseph Stiglitz, has cited the imperative for “rebalancing” and fresh perspectives from the emerging world in arguing that the BRICS bank was “clearly needed.”
“Confessions of an Economic Hitman” author Perkins added that the bank could be the first major challenge to U.S. financial hegemony since the Soviet Union folded in 1991. “During the Cold War, countries in Africa, Latin America, the Middle East who felt bullied by the U.S. could turn to the Soviet Union, pressuring the U.S. to moderate its tactics. Today, we’re starting to see a new consciousness about the need for another balancing power.”
"But for all the charges of modern-day colonialism lobbed against the West, it isn’t clear who would be willing to align with such a diverse coalition as the BRICS. It's hard to name a country that hasn’t had a run-in of some sort with one of its members. For example, even if the BRICS bank had the funds to offer a country like Ukraine the massive bailout it recently accepted from the IMF (it doesn't), Kiev likely wouldn't want a loan that came, in part, from Russia."
"And there is rising concern about the motivations of China, which for decades has been lending easy money to many African countries that have a deep-seated wariness about Western meddling. Beijing has financed at least $128 billion in African development projects since 2000, and it has done so without interfering in domestic affairs."
"But many Africans are concerned that the relationship has begun to take a neocolonial turn as China invests in the extraction of Africa’s vast resources and opens new markets for selling its manufactured goods. The then-governor of Nigeria’s Central Bank, Mallam Sanusi Lamido Sanusi, made headlines last year when he warned Africans to shake off their “romantic view of China,” which he called “an economic giant capable of the same forms of exploitation as the West.”
“People in Latin America have been saying for years that they’d rather take loans from China than the U.S. to a large degree, because China does not have a history of overthrowing governments and assassinating leaders,” said Perkins.
“But they also know that by accepting loans they’re giving China a foothold into their countries to behave like the U.S. It just hasn’t happened yet.”
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my added comments: There is a lot of meat in this fairly well balanced article. On the one hand it notes the potential for the BRICS bank to become a serious competitor to the IMF and World Bank. But it also points out the "wait and see" attitude some nations are going to have about this new bank. Some points I take from this article are:
-Countries outside both the US/EU and the BRICS are very wary of the motivations of any global lending institution. They think these institutions have a track record of using their lending power to control other nations rather than just help them grow. And some nations are wary that this new bank may just be an Eastern version of what they don't like about the IMF and World Bank.
-The article points out that the BRICS themselves don't have a long track record of working together and have their own differences. So how well they manage those differences to work together will be watched globally. And who takes the lead within BRICS? Russia seems to take the media lead while China seems to quietly take the financial lead.
-The article quotes western leaders as acting as if they welcome the new BRICS bank and don't view it as a threat. Instead they talk in terms of it "supplementing the IMF and World Bank". The article quotes Joseph Stiglitz (former World Bank chief economist) as calling for "rebalancing" (another word for "reset"?) and that "fresh perspectives" from the BRICS are needed and a good thing.
Concluding comments: This article provides a good example of what we are trying to figure out here on this blog. Just what is the true purpose of this new BRICS bank and reserve fund? On the surface both sides seem to try and downplay that it is a confrontation between East and West (except Russia lately is openly leading an anti-US dollar campaign with the situation in the Ukraine creating tensions).
But one has to wonder what is really going on beneath the surface. Russia's recent open attacks on both the Western global institutions and its US dollar based system makes you think the real goal is to bring down and replace that system. China and the other BRICS nations would not say this publicly because that is not how the operate. Russia seems perfectly happy to be "in your face" about it.
But we also see in almost every article on this topic that the BRICS seem to want "meaningful reforms" at the IMF, World Bank, the UN, etc. Even Putin's recent comments suggest this line of thinking. Why bother with that if your goal is to eliminate and replace those institutions?
So we wait and see what happens. In time the truth will be obvious as to what the true objectives are. We will continue to follow it here. We'll try to continue to offer a variety of perspectives from around the world since western mainstream media does not bother to do that. They concentrate on presenting the western view (western banking establishment view) and not much else.
Added note: A blog reader here just sent me this article link:
This ties perfectly into this post. It shows how the Middle East and other areas not in the US/EU bloc or the BRICS bloc are being courted and are taking a "wait and see" approach. If a real competition unfolds, they can finally be consumers who have a genuine choice (like finally getting two electric companies in town :).
Mabe then we will find out if all the "nice talk" from Western sources about the BRICS bank is real or not. This is such a good and timely article we will put up a separate post later tonight for a more detailed look at it. Thank you to the blog reader who sent the link to us!
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