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The BRICS are now five years old, and the modest agreement on establishing a development bank and pooling of currency reserves moves the grouping beyond a dialogue forum to cooperative mechanisms challenging the 60 year hegemony of the undemocratic Bretton Woods Institutions. The next step must be a transition in ideas and principles to share global governance and prosperity in an interdependent world.
The BRICS have 20 per cent of world GDP, 23 per cent of the global population, 40 per cent of combined foreign reserves, but only 15 per cent voting rights in the World Bank and IMF. However, much of the collective clout derives from China’s economic miracle, which is also a quarter larger than the other four combined, but does not have the monopoly of power enjoyed by the United States at the end of World War II when it established the old international order. China must reassure the others of its commitment to a collective approach, only then will the BRICS move beyond a new version of NAM to reflect the shift into a multi-polar world.
Coined as an investment destination of a loose grouping of populous emerging economies, the BRICS also respond to anti-colonial pasts, common challenges, and shared interests and do not have the same concerns as the advanced capitalist societies. The disparity and disparate interests amongst the BRICS can be overcome by evolving a common definition of the collective future of developing countries.
The Development Bank signifies that the BRICS, and others, will not look to the West for developmental guidance and will evolve their own state-driven infrastructure led frameworks that will support sustainable development. After the financial crisis of 2008 there is a questioning of the free market ideology, or “Washington Consensus”. A new “BRICS Consensus” will have to respond to resource scarcity as the most dominant global trend, making the shift more than just a continuation of the current system, requiring new global rules based both on markets and social considerations.
The new framework should look at transformational shifts in growth pathways driven by infrastructure development with a focus on consumption, rather than production, and with human welfare measured not just in terms of economic activity but through broader criteria including ecosystem services and societal considerations. Consequently, the post-2015 agenda for the World Trade Organization and the United Nations should focus on resource use rather than on the status of natural resources to develop principles on how standards of living can be raised world-wide within ecological limits, because environmental problems, like climate change, are examples of market failure. The approach of the West giving markets free reign for economic growth and then creating new markets to clean up have led to the current global ecological crisis.
Under the current system redistribution has also been kept out of the UN, with its stress on political and human rights to the exclusion of economic and social rights, which were relegated to the non-democratic Bretton Woods Institutions with governance based on ‘one dollar one vote’ rather than ‘one country one vote’. While institutions matter, the new bank is not a ‘litmus test’ of the BRICS coming of age but a major step in reforming the World Bank, including towards infrastructure projects. Similarly, agreements on conducting trade in local currencies (expected to reach $500bn in 2015), exchange-rate stability and a rating agency will dilute and democratise the role of the IMF.
So far the BRICS countries have not taken a view of the way global rules in the World Trade Organization are now sought to be reshaped not through multilateral ‘give and take’ but through regional trading rules amongst the developed countries being imposed on the multilateral institution.
In the area of security, a permanent seat in the Security Council is a divisive issue amongst the BRICS. Sitting on the high-table with the victors of World War II has lost its relevance in a multi polar world, and the BRICS are rightly focusing on preventive diplomacy and mediation. For example, the moves to extend the collective ‘responsibility to protect’ of national populations against genocide to the potential disappearance of small-island states and food security in the Sahel should be countered by considering the longer-term future not in terms of environmental rights and duties but rather in terms of equitable access of all to sustainable development and the societal and technological transformations required. A broader definition of ‘ecological’ security will also shift the focus on promoting peace rather than managing conflict.
The success of this rebalancing, despite opposition from the US which created the present international system that plays a critical role in the perpetuation of its leadership, will depend on pragmatism in developing and setting the global agenda. For example, just as the predominant roles within the multilateral institutions were divided amongst the G7, the BRICS should consider Chinese leadership of the new Development Bank, even to internationalise the Renminbi. The think-tank of the BRICS could be located in India with its strong tradition of conservation, for charting the course of the United Nations towards a more equitable and sustainable future. South Africa could be tasked with developing rules for infrastructure development and mining, avoiding a repeat of the scramble that took place in Africa, and also monitor their implementation. Brazil could look at food security, the valuation of ecosystem services and intellectual property rights based on their use. Russia is well placed to develop global rules on long term energy access and a fair pricing mechanism to replace the current system of interference in internal affairs of energy suppliers. Clearly, the BRICS will continue to rely on a global rule-based system but with new approaches responding to new challenges, through resolutions and treaties, around the UN Economic and Social Council rather than the undemocratic Security Council and Bretton Woods Institutions.
Despite common ground on areas of importance, pitfalls remain in reforming a global system that served the natural resource and security needs of 20 per cent of the population to one that will share prosperity with all of humanity.
By Special Arrangement with The Institute for Defence Studies and Analyses (www.idsa.in)